Tax expenditure data point of the day: Flight Simulators

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It looks like the editorial boards of some of the state’s largest daily newspapers are starting to pay attention to a proposal to close specific tax expenditures that would generate $300 million in extra revenue for the state each year.  As we discussed here and here this just seems like a good idea at a time when the state is so cash strapped. Lots of these tax expenditures have never been looked at since they came into existence. That’s why the proposal being pitched by The Center for Community Solutions, The Buckeye Institute, and Greater Ohio should be applauded for also asking for the creation of a committee to review all current tax expenditures to determine their value and merits.

With that in mine I wanted to take a look at just one of the proposed tax expenditures that the report suggests that the state should do away with. So, with hopefully the first in a series of posts, here is your tax expenditure data point of the day.  Drum roll please…..flight simulators.

That’s right, since 2008 you dear reader could have purchased a flight simulator and been exempt from paying any sales tax on the item. Not only is the initial purchase of the simulator tax free but so is the cost of repair, replacement parts, and maintenance service. OBM projects that this tax expenditure will cost the state $1.6 million each year in foregone revenue.

Now, I can say with almost 100% certainty I don’t know anyone with a flight simulator. (If you do though please leave a comment at the end of this, I have a lot of questions.) Considering that I imagine that flight simulators cost a lot of money to purchase I think it is safe to say that the people who are purchasing these can probably afford the sales tax on them. Or what I imagine is more likely, corporations or universities are purchasing these to offer them as a service, in which case they can cover the cost of the sales tax on them as well.

For the record, I don’t have anything against flight simulators, the companies that make them, or the people that buy them.  I do have a problem with the fact that when the state is in such a cash strapped situation as now does offering a tax break to very wealth people or institutions to purchase flight simulators sound very fair? Especially when, as the Akron Becon Journal pointed out over the weekend, this budget slashes $3 million from a program that offers critical drugs to HIV/AIDS patients in Ohio. I would argue, not really.

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  1. Part of this proposal cites the $20 personal income tax exemption as being – ‘no longer necessary’…

    ‘Income tax rates have been lowered substantially over five years, and income tax brackets and personal exemptions are indexed to inflation. This credit is no longer needed.’

    It should be noted that this personal exemption, costing the state some $165 million, impacts low-income taxpayers substantially. That is why it was placed into law by Democrats in the early 1980’s. By shifting more tax breaks to the lowest income earners, it virtually wiped out state income taxes owed by the lowest earners with the least abilty to pay and put more money into their pockets. Many of these lower income workers don’t avail themselves of other tax breaks available to and used by higher income taxpayers.

    I’m shocked to see this on the list.

    • It should be further noted that taxpayers for a few years were given the option of taking the $20 personal credit, or the increase in the personal exemption depending on which created the larger savings on their state taxes – both legislated together at the time. The option was removed, but the $20 credit remained for all. The intent of the credit was a direct write-off from their tax bill that shifted a great deal of tax breaks ($40 to 50 million at the time, I believe) to lower-income taxpayers, as opposed to the impact on the rate they might have paid on their tax bill.

      The differences lie in the impact of an exemption vesus a credit.

      It was a simple and direct way to lessen the impact of state taxes on low income taxpayers.

  2. The flight simulator tax break was put into law specifically as an incentive for NetJets, before its financial meltdown, to build a major training center at Port Columbus. The language was supported by the Strickland Department of Development.

    I think I lost my flight simulator in the garage somewhere.

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