Slipping under the radar last month was news that the federal government sued NetJets, a company owned by Warren Buffet’s Berkshire Hathaway, for some $366 million in unpaid taxes and penalties. The legal question, as with most tax cases, is complex.
NetJets basically manages private jets that are owned by others.
At the heart of the tax battle is whether NetJets and a sister division should have collected a special transportation tax — often called a “ticket tax” — from the fractional owners of its fleet. (Fractional owners own a stake in a private jet, entitling them to a certain number of flight hours a year, in a way that’s similar to someone owning a time-share vacation property.)
You and I — the rest of us who fly commercial — pay a federal excise tax when we fly (7.5 percent of the ticket price plus $3.80 for each leg of travel.) People who own an entire plane outright have not been subject to the same tax since, ostensibly, there is no ticket to buy.
The air gets a lot foggier when it comes to fractional owners.
And thus, the dispute.
Our tax code is a Gargantuan collection of of oftentimes incoherent and inconsistent laws. Lawyers and accountants reap large incomes from proclaiming to understand it. Congress and the President reap large campaign donations from creating even more incoherent and inconsistent tax loop holes.
But, Warren Buffet taking advantage of a tax loop hole is most disturbing.
Today, President Obama is in South Florida speaking to yet another group of college students and once again trying to sell what he calls the Buffet Rule. This rule, in the interest of “fairness”, will make sure that millionaires, inspite of the language in our tax code, will pay a specified “effective tax rate”, which, according to Mr. Buffet, must be higher than the “effective tax rate” paid by his secretary.
Has anyone ever asked Mr. Buffet how he knows what his secretary’s “effective tax rate” is? Do you even know what your “effective tax rate” is?
My Mom always says that a woman who would tell her age would tell anything. Can the same now be said about revealing one’s “effective tax rate”?