I've been told that I have a mind like a steel trap - it's just that sometimes, it won't open (somehow, I don't think that was intended like a compliment). But this talk about a tax or corporate jets has been stirring around in my mind lately and it has sounded vaguely familiar. After a little research using my favorite search engine, I found the Omnibus Budget Reconciliation Act of 1900 (OBRA-90).
Republicans and Democrats will remember OBRA-90 as the bill where President George H. Bush broke his "No new taxes" promise. According to this Connecticut Law Tribune article, it included "a new luxury tax on luxury autos, aircraft, jewelry and yachts." The thinking at the time was we can stick it the rich and make them pay dearly for those luxuries. After all, it would be fair, they have more money, why should they be spending it on frivolous items, when poor people can't buy gas and food? Not only would it stick it to rich, it would provide more tax revenue for the government to give to the folks who could buy gas and food.
However, the luxury tax didn't work out quite as well as expected - it "took in less than one half of the projected income." People who previously could afford these luxuries simply stopped buying them or - even worse - bought them overseas. "Boat Builders ... were particularly hard-hit with yacht sales dropping 77 percent and builders laying off an estimated 25,000 people." Wait a minute! A tax increase caused job losses? 25,000 of them? I thought the luxury tax was supposed to stick it to the rich? Instead, 25,000 boat builders, average middle class people, lost their jobs? Who'da thunk it?
Any new taxes on corporate jets is likely to have the same effect. Anyone who proposes these taxes needs to look back to recent history and explain why they think this time will be any different. Oh, by the way, OBRA-90 also "included the Budget Enforcement Act of 1990 which established the "pay-as-you-go" or "PAYGO" process for discretionary spending and taxes." (source) and we all know how well that has worked.
Side notes: I found out that none-other than Lion of the Senate Ted Kennedy supported the luxury tax (no surprise), then when his home state of Massachusetts was affected, tried to reverse course with the Kennedy Boat Building Investment Act of 1999. (can anyone say flip-flop?). I do not know if he was successful. I also found this George Will commentary written in 1999. In it, he said "But perhaps every quarter-century or so government--it cannot help itself--must go on a fairness bender, the memory of the hangover from similar misadventures having faded." - Let's see, the last time was 1990, this is 2011 - that's only 21 years. Maybe the cycle is shortening due to Global Warming....
In full disclosure I have to document that I have never owned a luxury car or yacht and never owned a corporate jet. I did own a canoe for a few years, but after it flipped on me once I decided to sell it. I think I had a net loss of $50 on the purchase/sell over a 3 year period. I did not claim the loss on my taxes.
