One of the things that kept America poor during the Great Depression was the constant fear of new laws and taxes. According to The Forgotten Man it was Adolf Hitler, not FDR, who finally put Americans back to work after about 10 years of unemployment and despair. Our governor here in Massachusetts, Deval Patrick, is apparently trying to channel the spirit of FDR. Every year he proposes to install a new sales tax on aircraft and aircraft maintenance (see this story about his attempt in 2010). Every year businesses draw up plans to move operations and employees to the adjacent tax-free state of New Hampshire (10 minutes away by jet; savings on a Gulfstream would be $3 million, which pays for a lot of 10-minute hops) or develop a more exotic legal structure that will avoid the tax. Every year, so far, the legislature fails to enact the new tax.
The Aircraft Owners and Pilot’s Association calculates that when the tax was repealed eight years ago the result was a 40 percent increase in the number of aircraft based in Massachusetts, which meant that the state was able to collect payroll, income, and property tax from the pilots and mechanics associated with those aircraft as well as fuel taxes and property taxes on new hangars that were constructed.
No doubt it would be delightful if a company bought a $50 million Gulfstream and happily wrote a $3 million check to the Commonwealth, but that is not what happened historically. Companies instead set up flight departments and built hangars in tax-free states and brought the Gulfstream down to Massachusetts when necessary. Companies would lease airplanes from owners based in tax-free states. Companies would charter planes from air carriers based on tax-free states.