Christopher Elliott pointed to an article suggesting that you’re the one, as a taxpayer, covering the cost “for luxury transportation enjoyed by corporate millionaires..”
Let’s see if the claim holds water, and I can’t wait to hear what you think in the comments.
Premium class and last-minute travel is expensive — and, tax deductible for the rich traveling on business.
Most such travel is written off for hefty tax deductions. Business class and first class get written off together with such things as deluxe hotels, fancy restaurant meals and Super Bowl tickets. Not only are such perks all but exclusively enjoyed by the rich and big business, but the resulting lost revenue to the government means the rest of us, the 99 percent, make up the difference.
…When tickets are written off as business expenses all of that cost doesn’t fall directly on taxpayers. However, the taxes saved by the rich and big corporations don’t go into the nation’s coffers. In a world of continuing budget deficits, the money has to be made up in some way. The general taxpayer eventually gets the bill for these big business deductions for which most citizens do not qualify.
When the working class citizens end up helping to pay for luxury transportation enjoyed by corporate millionaires, something seems out of whack.
First, it’s a mistake to lump “last minute” and premium cabin travel. Last minute travel is anything but a luxury for the business traveler. Coordinating meeting and opportunities isn’t like coordinating Thanksgiving with the family, however arduous that may be. Adopting a rule that last minute travel was somehow not deductible would be a shot in the bow across entire portions of the economy.
That distinction aside, let’s look at premium cabin travel. And taxation.
“The rich” aren’t the ones primarily flying in premium cabins, the rich don’t have to travel for business as much as people have to travel to see them. Domestic first class is populated significantly by upgrades, which are given to heavy travelers that are mostly middle managers. The skies are filled with middle managers. And they’re filled with fairly well paid but very much middle class senior managers. And for them flying actually kind of sucks.
The depiction of the rich, for populist outrage purposes, isn’t really accurate. But it’s true that there are people who travel in premium cabins and those that don’t and those that don’t would probably like to (at the same price point). So there’s envy there.
But really, what’s to be envious of?
Business travelers travel a lot. And they have to go to meetings when they land. Arrivals lounges exist to freshen up after a flight, press a suit, go straight to a meeting. You try to get whatever sleep you can, and go straight to work. The alternative is more expensive for a company, of lost days or wasted trips from too-weary travelers.
And most travel, even in premium cabins is far from glamorous. You wouldn’t find employees, or at least the talented employees you want, if you made travel even more grueling. Fly long haul regularly, away from family and friends, away from your home. Long days, takes a toll on your body, no matter what I post about first class flights a bed onboard isn’t as good as my bed at home.
The IRS allows businesses to deduct those expenses that are ordinary and necessary for the conduct of business, so that taxes are based on income earned after these expenses. Taxing the gross would completely distort business accounting and lead to far less economic activity (since many businesses not yet profitable wouldn’t be able to invest at all, and indeed even money-losing enterprises would owe taxes for which they may have no cash).
The theory here, I think, is that there’s somehow a treat or perk that’s being given to employees that is going untaxed. Back before mid-1980s tax reform you regularly saw big perks at big businesses that were effectively compensation avoiding the IRS. The corporate dining room, subsidized and with extravagant meals, was a way for companies to engender both loyalty and provide pay (all meals were deductible to the employer but not taxable to the employee).
I remember being in junior high and reading one of Lee Iacocca’s books and his telling a story about the corporate dining room at Ford, why he could never get a hamburger as good anywhere else, adn the chef explained that they started with the finest steak and ground that up…
But the IRS doesn’t really let that happen anymore. And even when corporate cafeterias are legitimately culture-enhancing, the IRS has been saber rattling recently (against the likes of Google and Yahoo).
Government travel is far more arduous than it used to be with only the very longest trips allowed in premium cabins, but there are trips where it’s permissible. Corporate America has cut down on premium cabin travel quite a lot, the days of media companies based in New York (like ABC) allowing paid first class on flights over 4 hours are long gone.
And paid premium travel becomes the province of those whose opportunity cost is especially high, and where productivity on arrival is crucial to the organization.
Not in every case of course but you don’t make tax policy on the basis of outliers.
Changing the tax code wouldn’t provide real benefits, but it would hobble businesses, all in the name of spite.
Tax law changes and IRS rules have already cracked down on most of the perks of corporate America. What’s left are the things that do, for the most part, bear a real relation to the conduct of business. You can always second guess an individual purchase (are corporate offices too nice? are employees getting a perk out of a better chair at their desk than necessary? is that part of compensation, should be taxed, and not taxing it means we all have to pay more otherwise?).
That’s ultimately a problem of a complicated tax code. If these things trouble you consider waging a battle for tax simplification rather than populist envy. The renowned scholar and Democratic technocrat Larry Summers has long argued against the effects of taxes on capital, period. During Obama’s first term he had proposed lowering the corporate income tax rate in exchange for simplification.
You can’t really tax corporations per se, the incidence falls on shareholders, employees, and suppliers. So increasing that burden falls back on the very people the piece seems to suggest are getting hosed by way of their jobs and retirement accounts.
Eliminate the corporate income tax entirely and you solve whatever tax incentives may exist to overinvest in premium cabin travel, and leave only those parts that are important to the success of a firm…. which I suggest is most of the premium travel that exists now, anyway.
But throw your fists in the air if you wish as you travel into the coach cabin knowing that those premium cabin fares are making the airline’s sell of empty seats at the margin possible in the first place, and award seats possible too (because without those fares the flights themselves wouldn’t exist for the airlines to offer the excess inventory on points).