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Americans who own private jets need to pay more in taxes, President Obama argues. So it seems odd that foreign executives riding Gulfstream jets from Shanghai to Mumbai get U.S. subsidies from Obama’s favorite export agency.
The Export-Import Bank of the United States recently announced a milestone: Under Obama, the agency has subsidized the sale of $1 billion in private jet sales to overseas customers.
The billion dollars for foreigners’ private jets highlights the nature of Ex-Im and Obama’s industrial policy: In the name of boosting U.S. jobs, the government helps big businesses and the wealthy.
Obama pretends to oppose corporate jet subsidies. During the 2011 debt-ceiling fight, for example, Obama harped on “tax breaks for corporate jet owners,” mentioning it six times in a June 29 press conference.
In his first 2012 debate with Mitt Romney, Obama asked “Why wouldn’t we eliminate tax breaks for corporate jets? My attitude is if you got a corporate jet, you can probably afford to pay full freight, not get a special break for it.”
But Obama clearly doesn’t believe that foreign buyers of corporate jets need to pay “full freight.”
Two months after Obama’s 2011 press conference about tax breaks for corporate jets, the Ex-Im board approved a $75.8 million loan to help a Chinese company called ICBC Financial Leasing buy “business aircraft” from U.S. manufacturer Hawker Beechcraft.
ICBC is a subsidiary of the state-owned Industrial Commercial Bank of China. HawkerBeechcraft was at the time largely owned by Goldman Sachs.
So, amid contentious budget debates and calls for tax hikes and spending cuts, Ex-Im loaned $75.8 million in taxpayer money, at 1.68 percent, to the Chinese government so that it could buy private jets from Goldman Sachs. Why should taxpayers have to bear the risk and float such a loan?
Ex-Im, which subsidizes exports of all sorts of American-made goods, is supposed to provide financing when the private financing is unavailable. But ICBC is a subsidiary of the largest bank in the world — with assets of about $3 trillion today — and Goldman Sachs is a fairly large and successful investment bank. If there’s any deal that shouldn’t require taxpayer financing, it might be a deal between Goldman Sachs and the world’s largest bank.
Most Ex-Im subsidies for private jets are not direct loans, but loan guarantees. For instance, Luxury Business Jets, A.S. – a Slovakian company — bought private jets from Boeing in 2013. ING Capital financed the deal, and Ex-Im provided a taxpayer-backed $48.1 million guarantee.
In an interview with Elephant Lifestyle magazine (motto: “Hit Big, Live Large”), Boeing Business Jets President Steve Taylor said, “The sort of people who can afford their own Boeing Business Jet have a completely different set of expectations about how a company will treat them, the sort of services that they will receive…”
Is one of those services U.S. taxpayer-backed financing?
In May 2012 – in-between Obama’s anti-corporate-jet press conference, and his anti-corporate-jet line in the presidential debate – Obama’s Ex-Im trumpeted a $350 million loan guarantee to subsidize Cessna jets and Bell helicopters. Cessna and Bell are owned by Textron, which now owns Beechcraft and also operates its own financing arm, Textron Financial Corporation.
Gulfstream gets its share of Ex-Im love, too. In December 2013, Ex-Im guaranteed a $300 million loan to China’s Minsheng Financial Leasing Co. to buy four G450s and four G550s, a “large-cabin,ultra-long-range business jet.” The G550’s cabin “features up to four distinct living areas, three temperature zones, and a choice of 12 floor-plan configurations with seating for up to 18 passengers.”
That Gulfstream-Minsheng deal equaled the annual size of the “tax break for corporate jets” Obama likes to rail against. It also pushed Ex-Im across the finish line. Ex-Im Chairman Fred Hochberg announced at a February 2014 air show that the agency had subsidized $1 billion in private jet sales in recent years.
These subsidies certainly help Gulfstream, Textron, and Boeing, and they probably help workers at those companies. But some of that benefit – many economists argue that most of the benefit – accrues to the foreign buyers and their customers.
That means the U.S. government is making life better for the business executives and millionaires flying around Asia, Europe and South America in their luxury jets.
There’s nothing wrong with luxury jets. Many businesses benefit from them, thus making the economy more efficient. But that doesn’t mean taxpayers should backstop the industry.
This fall, the Export-Import Bank is up for reauthorization. Obama will lobby to keep the agency open, and thus the private jet subsidies coming. Then he’ll return to his disingenuous attacks on corporate jets.
Timothy P. Carney, a senior political columnist for the Washington Examiner, can be contacted at [email protected] This column is reprinted with permission from washingtonexaminer.com.
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