* Kansas Democrats, Republicans see a threat to jobs
* Private-jet industry accounts for 1 in 10 jobs in region
* Conflict shows complexities of Obama call for tax fairness
By Andy Sullivan
WICHITA, Kansas, March 20 First came the
recession, throwing thousands out of work. Then came the
drought, choking crops and draining reservoirs. Then came the
president, arguing that the private-plane buyers who fuel this
city's economy benefit from an unfair tax break.
President Barack Obama's proposal to reduce that tax break
has won wide support among Democrats who see it as an example of
how the U.S. tax code is too generous to the wealthy.
But what looks like a loophole in Washington appears much
different in this prairie city of 400,000, where leaders of all
political stripes worry that Obama's rhetoric is already
undermining an industry that accounts for 1 in 10 jobs in the
"I'm certainly disappointed that he would do something of
this nature," said Wichita Mayor Carl Brewer, a Democrat who
displays Obama's portrait on his office wall. "As long as you're
doing something to threaten my aviation industry ... I'll
continue to speak out against it."
Brewer's vow could serve as an early warning for Obama and
lawmakers in Congress as they try to streamline the U.S. tax
code in order to lower rates or narrow trillion-dollar deficits.
The idea of eliminating perks in the nation's tax laws may
sound appealing in the abstract. But many changes - particularly
to provisions that have helped to create jobs - are likely to
spur bipartisan blowback from places like Wichita that are still
struggling to emerge from the country's deepest recession in 80
In Wichita, a city that bills itself as the "Air Capital of
the World," business and labor leaders are questioning why a
president who bailed out Detroit's auto industry seems less
concerned about the impact his words might have on another
manufacturing industry that employs 1.2 million people and
exported $4.8 billion worth of aircraft last year.
"It's so frustrating," said Republican Representative Mike
Pompeo, who represents the region in Congress. "All the aviation
manufacturers want is for him to stop talking down their
industry. Don't write them a check, don't give them a tax
credit, don't hand them a subsidy. Stop bashing them."
The International Association of Machinists, a labor union
with close ties to Obama's Democrats, has warned that Obama's
push to raise taxes on private-plane buyers could undermine his
efforts to boost the economy.
Obama's allies say that it is only fair to ask affluent
private-plane buyers to pay a bit more in taxes at a time when
social programs that help the poor are facing sharp cutbacks.
"These things don't exist in a vacuum, and you have to
balance the benefits with the costs," said Michael Linden,
director of tax and budget policy at the Center for American
Progress, a liberal think tank. "Why should (jet tax breaks) be
prioritized over, say, nutrition assistance to low-income
families and pregnant women?"
A HOME-GROWN INDUSTRY
Aviation has been a central part of Wichita's economy since
the first commercially built aircraft in the United States were
produced here in the 1920s.
Home-grown companies such as Cessna, Beechcraft and Learjet
spurred development of the private-aircraft market after World
War II. Alongside large-plane makers such as Boeing, they
anchor a local network of more than 200 machine shops and other
Wichita now has the highest concentration of aerospace
manufacturing jobs in the United States, according to Wichita
State University economics professor Jeremy Hill.
Those jobs pay well: The industry's average annual wage of
$74,000 is nearly twice the regional average.
The city produces nearly half of all private aircraft
worldwide. According to the nonpartisan Brookings Institution,
exports account for nearly 20 percent of Wichita's gross
metropolitan product, making it the most export-intensive city
in the United States. Brewer and other civic leaders hope to
boost exports further in coming years as China loosens its
airspace restrictions and allows the country's newly minted
billionaires to fly in style.
Private-aircraft sales have always risen and fallen along
with the economy, but the 2008 recession proved especially
Sales fell by 29 percent from 2008 to 2011, and the lower
end of the market was hit especially hard as small-business
buyers were unable to get bank loans, said aviation analyst
In Wichita, Hawker Beechcraft filed for
bankruptcy and Textron Inc unit Cessna laid off 12,000
workers, two-thirds of its local workforce. The unemployment
rate climbed to 10.6 percent in July 2009 from 3.5 percent in
A SYMBOL OF EXCESS
Meanwhile, Wichita's main product was taking on unwelcome
After auto executives were widely criticized for flying
their corporate planes to Washington to ask for a bailout in
2008, the business jet came to symbolize corporate excess.
As the recession hammered Washington's balance sheet,
Republicans pressed for deep spending cuts to narrow budget
deficits that amounted to more than $1 trillion annually.
Democrats countered with a proposal to raise revenue by
eliminating some of the subsidies and breaks in the tax code
that collectively deprive the government of more than $1
trillion in tax revenue each year.
One item on their list: reducing the tax benefits given to
those who buy planes for business uses.
Obama has framed the choice in the starkest possible terms.
"Are Republicans in Congress really willing to let these
cuts fall on our kids' schools and mental healthcare just to
protect tax loopholes for corporate jet owners?" he asked in a
radio address on Feb. 23.
Such rhetoric initially caught industry officials by
"The first time we heard 'corporate jet loophole' we
couldn't figure out what they were talking about," said Ed
Bolen, who heads the National Business Aviation Association.
The U.S. tax code treats private aircraft as it does
bulldozers, computers and other business equipment: Companies
that buy them are allowed to deduct the cost from their tax bill
over five years. The deduction applies only to planes used for
The depreciation schedule has been in place for decades. It
is supposed to reflect how long a product will be useful to a
business. But private planes and factory machinery can be used
for decades, while computers and mobile phones can become
obsolete before the five-year depreciation period expires.
Obama and his Democrats say the depreciation schedule for
corporate jets should be stretched out to seven years, to treat
private-aircraft purchases like commercial airliner purchases.
That would effectively raise the cost of buying a private
plane because customers would be able to deduct just 14.29
percent of the price from their tax bill in the year of
purchase, rather than the 20 percent that current law allows.
The change would generate an additional $300 million in tax
revenue each year, about as much as the U.S. government spends
in 45 minutes.
Republicans are eyeing an overhaul of the tax code as well
to try to lower corporate and personal income tax rates. That
could lead to a longer depreciation period for business-plane
buyers, but industry officials and advocates said they wouldn't
necessarily object as long as their sector were not singled out.
"They're perfectly prepared to be part of a solution for
corporate tax reform," said Pompeo, who ran an aerospace parts
supplier before his election to the U.S. House of
Representatives in 2010.
WOULDN'T HELP, BUT MIGHT NOT HURT
Analysts say the business-plane industry probably wouldn't
see much change if Congress stretched the five-year depreciation
schedule to seven years, because taxes are only one factor that
businesses consider in buying planes. The change also wouldn't
apply to the 60 percent of sales that are made abroad.
"It can help, but it certainly doesn't make or break the
industry," said aviation consultant Brian Foley.
Others say that Obama already has hurt the industry even
though his tax proposal hasn't advanced in Congress.
As he strolls through the repair bays and passenger lounges
at Yingling Aviation, a truck stop of sorts for private planes
next to Wichita's Mid-Continent Airport, owner Lynn Nichols says
Obama's rhetoric has led some of his customers to park their
jets to avoid stigma.
Decisions like that translate into less maintenance work
for Yingling, fewer plane sales for manufacturers and lower
sales at area grocery stores, he said.
"I think Obama's been able to demonstrate to everybody he's
a pretty good politician, but I just wish he'd be more mindful
of the hurt that he creates," Nichols said.
While Obama has argued that business-plane buyers should pay
more taxes, he has backed other tax breaks that could help the
He has extended a temporary recession-fighting measure four
times that would allow businesses to write off 50 percent of the
cost of new capital purchases in the first year - a much more
dramatic break than would otherwise be granted under the tax
code. Plane manufacturers say they see an uptick in sales toward
the end of every year as customers decide that the enhanced tax
break provides enough incentive to make a purchase.
Obama also has proposed additional tax breaks for domestic
manufacturers, though that measure has not become law.
The president's overall message is "a bit schizophrenic,
isn't it?" said Brad Thress, Cessna's senior vice president of
Obama allies say the tax breaks favored by the president
make more sense because they seek to boost economic activity as
The five-year depreciation schedule, by contrast, amounts
to a special break for private-plane buyers who can afford to
pay a bit more to help reduce the deficit, they say.
"If you can afford to buy a private jet, you can afford to
depreciate it over seven years," Linden said. "Show me any
mom-and-pop hardware store that owns a corporate jet, and I have
a bridge to sell you in Brooklyn."
Chuck Pierson doesn't run a hardware store. But the Wichita
dentist says it would be much harder to keep up with new
developments in his field without his propeller-driven Cessna
421, which he has flown to out-of-the-way places like Bozeman,
Montana, to examine new equipment and learn how to train his
staff on new techniques.
Pierson said tax benefits were a factor when he was deciding
whether to upgrade from a smaller aircraft in 2011. Aircraft
purchases shouldn't be treated differently from the other
equipment he and his partners have bought to improve their
practice, which employs 30 people.
"They might think that it's a luxury, that we like to go
around on Saturday afternoons and buzz fields or something, but
it's a vehicle just like any other type of transportation for
us," he said.