"Buffett Battles Bush as Corporate-Jet Owners Fight Proposed Tax Increase"

["Stephen Irwin" <stepheni@xxxxxxxxxxxxxxxxxxxxxx>]

Monday, May 14, 2007

Buffett Battles Bush as Corporate-Jet Owners Fight Tax Increase 
By John Hughes and Jonathan D. Salant
Bloomberg News


U.S. airlines, which already share the sky with corporate jets, are pushing
to share their tax burden too. 

President George W. Bush is proposing to cut the amount passenger carriers
such as American Airlines and Continental Airlines pay in federal taxes each
year by $1.68 billion. Most of that obligation would be shifted to small-jet
operators, including General Motors Corp., Exxon Mobil Corp. and NetJets
Inc., the business-jet charter company owned by Warren Buffett's Berkshire
Hathaway Inc. 

The Bush plan has touched off a fierce battle in Congress that cuts across
partisan lines, with the carriers' trade association being outspent by an
opposition that includes groups in rural communities that rely on smaller
air-service companies. 

Lawmakers say they are being inundated with calls and letters. ``I don't
walk, breathe or move without being assaulted by very strong opinions on the
subject,'' says Representative John Mica of Florida, the top Republican on
the House Transportation Committee. 

Under current law, the government collects $2,015 in taxes every time a full
Boeing Co. 757-200 jet flies between New York and Florida, according to the
Federal Aviation Administration. A General Dynamics Corp. Gulfstream 4
business jet flying a similar route -- and requiring the same amount of
attention from air-traffic controllers -- pays $236, agency figures show. 

Sharing the Burden 

Under Bush's plan, the operators of the Boeing jet would pay $1,298, and
owners of the Gulfstream would pay $837. 

``We absolutely have been overpaying,'' says James May, 61, president of the
Air Transport Association, the Washington trade group for major airlines.
``Our passengers should not be forced to continue to subsidize corporate
aircraft.'' The eight largest U.S. airlines turned a profit last year for
the first time since 2000. 

The shift should be done for fairness, says FAA Administrator Marion Blakey:
``More small aircraft up there, fewer people in each one, and yet the costs
of the FAA are the same, regardless, when you're trying to move a plane.'' 

Passenger airlines and their customers currently pay $7.68 billion in taxes
and fees. Bush would reduce this amount by scuttling taxes that include a
7.5 percent ticket charge and introducing a fee that, coupled with other
levies, would raise only $6 billion from the airlines. 

Making Up the Difference 

To make up the difference, he would increase fuel taxes on corporate and
turbojet operators, as well as charters, air taxis and ``fractional'' jet
owners, including customers of Woodbridge, New Jersey-based NetJets. Calls
to NetJets weren't returned. Buffett, 76, didn't respond to a request for
comment made through an assistant at his headquarters in Omaha, Nebraska. 

Should Bush's proposal become law, the impact on owners and operators of the
small jets ``is going to be significant,'' says Ed Bolen, whose
Washington-based National Business Aviation Association trade group
represents more than 8,000 companies including NetJets, GM and Exxon Mobil. 

Bolen, 47, says ``a significant portion'' of small-aircraft users would cut
back on or even stop flying. Businesses' access to these planes is ``the
reason that they are able to keep their headquarters in small towns and
rural communities,'' he says. ``It's the reason they are able to locate
plants and facilities in those areas.'' 

Airline Congestion 

Bolen says the major carriers should bear the brunt of the taxes because
``the cost of the system is largely related to the congestion that the
airlines impose.'' 

The Senate Commerce Committee is scheduled to vote this week on a plan, also
opposed by Bolen's group, that would raise corporate fliers' taxes by $500
million, which is less than the Bush proposal. The Senate measure would also
cut airline fees by $150 million. 

The large airlines ``are carrying the majority of the costs'' now, says
Senator Jay Rockefeller, the West Virginia Democrat who heads the Senate
Commerce subcommittee on aviation. ``Two-thirds of the planes in the sky are
private jets. They've got to do more.'' Rockefeller, 69, and Mississippi
Republican Trent Lott, 65, are the chief sponsors of the Commerce Committee
measure. 

To fight efforts to make them pay more, business-jet users have allied with
farmers, air-ambulance drivers and rural areas that depend on small planes. 

Free Flights for Sick People 

Rol Murrow of the Tulsa, Oklahoma-based Air Care Alliance, which represents
groups that arrange free flights on small planes for sick people, says the
Bush proposal would mean fewer people could afford to donate the flights. 

Republican Representative Robin Hayes of North Carolina, a private pilot,
says higher taxes might discourage race-car drivers from using the Nascar
fleet of private jets in his district. And Representative Leonard Boswell,
an Iowa Democrat, says Bush's plan would hurt predominantly rural states. 

GM, the largest U.S. automaker, would have to trim costs in other areas,
says Janine Fruehan, a spokeswoman for the Detroit- based firm. Gantt
Walton, a spokesman for Irving, Texas-based Exxon Mobil, the world's largest
oil company, referred questions to Bolen's group. 

Opponents of the Bush plan can back up their efforts with political money.
The Frederick, Maryland-based Aircraft Owners and Pilots Association, which
represents private pilots, contributed $940,100 to federal candidates for
the 2006 elections. That's more than the combined donations of Fort Worth,
Texas-based AMR Corp.'s American, the world's largest airline; Houston-based
Continental, the fourth-largest carrier; and the major airlines' Air
Transport Association trade group. 

More Than Double 

The private pilots' group spent $11 million on lobbying in 2005-06, while
Bolen's national business-aviation trade association spent $2 million. The
$13 million total is more than double the $6 million spent by the airlines'
trade group in the same two-year period. 

The big airlines contributed $2.4 million to congressional candidates in
2005-06 and spent $32 million on lobbying, according to the Center for
Responsive Politics, a Washington- based research organization. 

The private pilots' association and Bolen's group are funding the Alliance
for Aviation Across America, made up of small-plane users and rural
interests who oppose the Bush plan. Members include the National Farmers
Union and the League of Rural Voters. 

The alliance is run by the Law Media Group, a Washington lobbying firm. Gil
Meneses, who works out of Law Media's office, helped push an effort by
consumers to enact an airline-passenger bill of rights. He says his work on
the consumer legislation was voluntary and unconnected to Law Media's
lobbying for small- plane groups. 

The private-pilots' group also hired former Transportation Department
Inspector General Kenneth Mead and the law firm of former Republican
National Committee Chairman Edward Gillespie and Jack Quinn, a former aide
to President Bill Clinton. 

Mead, 57, disputes the administration's efforts to portray its proposed
increase as a matter of fairness between the airlines and small-plane users.
``It is all about money,'' he says.

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