Owners of private jets are among those set to benefit from a major tax bill passed by the US Senate in a late-night vote, a result Donald Trump said was a major win for “millions of hardworking families”.
The Republican Senate’s version of the Tax Cuts and Jobs Act passed by just two votes and specifically exempts maintenance costs of private jets, and any flight expenses, from tax increases.
Sweeping reform of the US tax code has been rushed through in the past weeks, the US House of Representatives passed its version last month, and now the two bills will go into “reconciliation” to set the final deal.
Donald Trump has tweeted his intention to approve the final draft before Christmas, and claimed the Senate bill passing as a victory for the middle classes.
But the Democrats said the bill was a “gut punch” for families and would chiefly benefit Republican big business backers.
Currently the US levies an excise tax on support activities, including costs of training pilots and crew, maintenance, and administrative services like flight scheduling and safety compliance.
These are levied in the ticket price of commercial flights and the Internal Revenue Service has said they should be paid for private jets.
But the Senate Bill says: “No Tax shall be imposed by this section or section 4271 on any amounts paid by an aircraft owner for aircraft management services related to: maintenance and support of the aircraft owner’s aircraft, or flights on the aircraft owner’s aircraft.”
It will also preserve tax benefits for private equity firms, allow drilling for oil in the Arctic, and ley churches to get involved in political campaigning while keeping their charitable tax-free status.
Republicans have said the bill will introduce around $1.4 trillion (£1 trillion) in tax cuts, with the greatest benefit for middle income families.
Last night, Republican Senate leader Mitch McConnell said in a broadcast the bill would: “Make America more competitive, prevent jobs being shipped offshore, and provide substantial relief to the middle class.”
An earlier evaluation, by the independent Tax Policy Center, has said in general “higher income households receive larger average tax cuts” under the plan, with those in the top 95 per cent to 99 per cent benefiting most.
The Tax Policy Center has also said that these cuts for wealthy Americans are not paid for by reduced public spending and this is likely to increase the US budget deficit by $1.2 trillion by 2017.
This would fall foul of law which prohibit any legislation from increasing the deficit after 10 years.
Despite this Senator McConnell said today: “I’m totally confident this is a revenue neutral bill, I think it’s going to be a revenue producer… It’s going to kick start the American economy.”
Democrat senator Elizabeth Warren said the vote would hurt struggling families
Democratic Senator Richard Blumenthal said Trump controlled more than 500 pass-through companies that would directly benefit.
“So the president may be celebrating, but most Americans will rue this day,” Mr Blumenthal said.