The tax break that President Obama blasted in his press conference today was created by his own stimulus bill:
The chief economic culprit of President Obama’s Wednesday press conference was undoubtedly “corporate jets.” He mentioned them on at least six occasions, each time offering their owners as an example of a group that should be paying more in taxes.
“I think it’s only fair to ask an oil company or a corporate jet owner that has done so well,” the president stated at one point, “to give up that tax break that no other business enjoys.”
But the corporate jet tax break to which Obama was referring – called “accelerated depreciation,” and a popular Democratic foil of late – was created by his own stimulus package.
Bottom line: when push comes to shove, these guys won’t even stand up for their own economic theories. They say they believe in Keynesianism, but they don’t really, at least not enough to favor it over class warfare. Their devotion to Keynes is really just an excuse to spend a lot of money.
UPDATE: According to Matthew Yglesias, Obama was not referring to the bonus depreciation provision in the stimulus bill, but to a 1987 tax provision that allowed private jets to be depreciated over five years, while commercial jets are depreciated over seven years.
I’m not necessarily going to take Yglesias’s word for it, but let’s stipulate that he is right. That means that Obama is complaining about a 24-year-old provision that allows private jets to be depreciated at a rate of 20% per year instead of 14.3%. Meanwhile, his own stimulus plan lets the same jet be depreciated by 50% in one year instead of 20%, and he has no problem with that. Does that make any sense at all?
In fact, the objection is even more nonsensical than that. The tax code is ripe with myriad rules that dictate various different depreciation periods for various things. Generally vehicles are depreciated over five years (except for railroad cars (seven), tractors (three), or ships (ten)) and that includes planes.
But wait, it’s more complicated than that. There are many, many exceptions that apply depending on how assets are used. For example, assets used to breed cows, sheep, or goats depreciate over five years, but ones used to breed pigs depreciate over three years. Ships used for commercial transportation are depreciated over 15 years instead of 10. And, on point, planes used for commercial transportation are depreciated over seven years instead of five.
I’m not going to claim that this mosaic of rules and exceptions makes sense. Obviously it was the result of legislative horse trading. But President Obama is going into the middle of this decades-old nest of rules, picking out just one, and saying that the exception should apply in place of the general rule. (And even that change would matter much less than the bonus depreciation provision in his own stimulus bill.) This makes no sense on any basis other than political demagoguery.
(Via TaxProf Blog)