CO-AUTHORS: Chuck Collins directs the Program on Inequality and the Common Good at the Institute for Policy Studies, where he also co-edits Inequality.org. His most recent book: Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth Home, and Committing to the Common Good. Other reports and books by Collins include Reversing Inequality: Unleashing the Transformative Potential of An More Equal Economy and 99 to 1: How Wealth Inequality is Wrecking the World and What We Can Do About It. Collins co-founded the Patriotic Millionaires and United for a Fair Economy. Josh Hoxie directs the Project on Opportunity and Taxation at the Institute for Policy Studies and co-edits Inequality.org. He co-authored a number of reports on topics ranging from economic inequality, to the racial wealth divide, to philanthropy. Hoxie has written widely on income and wealth maldistribution for Inequality.org and other media outlets. He worked previously as a legislative aide for U.S. Senator Bernie Sanders. Graphic Design: Kenneth Worles, Jr. Acknowledgements: We received significant assistance in the production of this report. We would like to thank our colleagues at IPS who helped us throughout the report development process, especially Jessicah Pierre and Sam Pizzigati. The Institute for Policy Studies (www.IPS-dc.org) is a multi-issue research center that has been conducting path-breaking research on inequality for more than 20 years. The IPS Inequality.org website (http://inequality.org/) provides an online portal into all things related to the income and wealth gaps that so divide us, in the United States and throughout the world. Subscribe to our weekly newsletter at Inequality.org or follow us on Twitter and Facebook: @inequalityorg Institute for Policy Studies -National Office 1301 Connecticut Ave NW, Suite 600 Washington, DC 20036 www.ips-dc.org, Twitter: @IPS_DC Facebook: http://www.facebook.com/InstituteforPolicyStudies Institute for Policy Studies New England Office 30 Germania Street, Building L Jamaica Plain, MA. 02130 Email: [email protected] and [email protected] © 2017 Institute for Policy Studies 1 CONTENTS KEY FINDINGS 3 INTRODUCTION: TALE OF TWO FLYERS 4 PRIVATE JETS ARE ALREADY HEAVILY SUBSIDIZED 5 THE PRIVATE JET CARVE OUT IN THE TRUMP TAX CUTS 6 COMMERCIAL AIRLINE PASSENGERS FOOTING THE BILL 7 PRIVATE JET LOBBY FLEXING ITS MUSCLE 8 PRIVATE JETS THREATEN OUR SECURITY 9 MASKING OWNERSHIP OF PRIVATE AIRCRAFT 11 PRIVATE JETS, PUBLIC ENVIRONMENTAL COSTS 12 SOLUTIONS 13 CONCLUSION 14 2 KEY FINDINGS This report examines the ultimate excess in modern society, the private jet, including how they are publicly subsidized, the security threats they pose, and the detrimental environmental impact they present. This report follows the work of a report released by the Institute for Policy Studies in 2008 of the same title. Some major takeaways: • The private jet lobby spent $56 million lobbying over the past ten years to save more than $1 billion in annual taxes they avoid due to preferential tax treatment. • The tax cut package under consideration in the Senate maintains and expands the private jet tax carve-out, while the Republican budget plan increases fees on commercial airline passengers. • Private jets contribute less than one tenth of the resources they use from the Federal Aviation Administration Trust Fund. Commercial airline passengers heavily subsidize private jet passengers. • Commercial jets are taxed at up to 40 times the rate of private jets on the exact same route despite identical needs in terms of transportation infrastructure. • Private jets threaten our national security as owners can obscure their identity and passengers face zero security screening. • A single private jet trip burns more greenhouse gases than the average American does in a whole year. Solutions: • End the private jet tax carve-out and tax private jets at the same rate or higher than commercial air travelers. Don’t make it more expensive to fly commercial while subsidizing private jet travel. • Close the security loopholes in private jet travel and tax carbon emissions effectively to account for the environmental impact of private jets. 3 Introduction: Tale of Two Flyers Nothing symbolizes the growing concentration of wealth and power as much as the private luxury jet, flying high above the rest of us. The private jet lobby –and their super-wealthy passengers –have created a parallel universe of perks and privileges that would shock most commercial passengers if they knew about them. In both tax policy and homeland security, the high flyers have used their power to create one set of rules for themselves and another set of rules for the rest of us. As wealth has concentrated in the hands of a few, so has the demand for private jets. The Forbes 400, all of them high-flying billionaires, have more wealth combined than the bottom 64 percent of U.S. households combined.1 There are over 12,000 private luxury jets in the U.S. and industry analysts project that over the next decade over 9,000 new jets will be built, worth over $270 billion. These jets are owned and used by the wealthiest people on the planet. According to Wealth-X, the typical private jet owner is a 63 year-old male with a net worth of $1.6 billion.2 What It’s Like to Fly Private The plight of the ordinary U.S. commercial air traveler has become unquestionably grimmer over the last decade. The indignities of air travel include longer security lines, going shoeless and beltless through multiple security checks, evaporating legroom, lost baggage, and (if you’re lucky) stale peanuts or pretzels. In the last few years, commercial airlines have calibrated as to how much mistreatment customers can tolerate, in the form of shrinking seats and miscellaneous fees for every component of travel. Meanwhile, down at the general aviation center –where passengers board their private jets - the times have never been better. High flyers drive to small terminals, usually far away from the bustle of commercial passenger hubs. These terminals may be located at major airports, but have separate entrances and parking areas. Often, drivers are permitted to bring VIP passengers right up to the plane, where their unscreened luggage can be loaded directly into the cargo hold. Passengers greet their pilots and flight attendants and board the aircraft with their pocket knives and water bottles. Private flyers don’t have to bother with little plastic bags with three-ounce containers of shampoo or strangers rifling through their undergarments. No one dumps their personal items and water bottles into a trash bin or frisks their bodies. A weather delay doesn’t lead to compounding cancellations or passengers marooned for days. Flights might be pushed to a later window, but are rarely cancelled. 4 Waiting time? Instead of showing up 2 hours early, you only need to show up about 15 minutes before your private jet departure.3 Does this great inequality in flying experiences matter? After all, private jet flyers pay a steep premium for their privileges. Most people would love to avoid the hassle of commercial travel and bask in the luxury of private jet travel. But there are real costs to ordinary citizens and other travelers as a result of the growth in private jet travel. As this report shows, the rest of us pay to subsidize the private jet sector. And their lobbyists use their political clout to win tax breaks for the private jet set and fee increases for commercial travelers Private jet security is a joke –and the private jet lobby has worked to ensure that private jet passengers are not subject to any of the security scrutiny that regular commercial flyers must face. And the environmental costs of private jet travel are enormous. The carbon footprint per passenger of private jets is several times greater than flying on a commercial aircraft. Private Jets Are Already Heavily Subsidized Nothing reveals the power of the private jet lobby more than its ability to deliver the goods for its privileged customers, now in the form of privileged tax status. Private jets are already heavily subsidized and if the Senate passes the tax package currently under consideration those privileges will be further engrained in our tax code, at the expense of everyone else. To understand the private jet tax break under consideration in the Senate, one first has to grasp just how lopsided the tax structure is for private jets compared to commercial airline passengers. Private jets pay just a single tax, 21.8 cents per gallon of jet fuel or 19.3 cents per gallon for aviation gasoline. This fuel tax is higher than the fuel tax rate commercial airlines pay, but commercial flights more than make up for it with other taxes. Commercial airline passengers, by comparison, pay a 7.5 percent federal excise tax on tickets, a $5.60 federal security surcharge, a $4.10 Federal Flight Segment Tax, and $4.50 Passenger Facility Charge. And that’s just on flights in the continental United States. International flights are subject to an $18 in international arrival and departure tax while flights to Hawaii and Alaska are subject to a $9 tax. Also, if you happen to use frequent flyer airline miles to buy your ticket, you’ll pay a 7.5 percent tax on those miles.4 5 Some of these taxes, like the passenger facility charge and the segment tax, are on each leg of the flight meaning they’re charged multiple times on flights with layovers. All told, taxes make up more than 20 percent of the typical price a commercial airline traveler pays on their ticket.5 These are just the taxes and fees placed on passengers.