The impact of bonus depreciation on general aviation aircraft manufactured and sold in the United States

The general aviation industry has commended Congress for allowing and extending bonus depreciation in its sector of the economy. Manufacturing and professional organizations claim that the 2002 and 2003 bonus depreciation incentives were a turning point for the general aviation industry. The purpose of the research is to identify those statistically significant variables that can be utilized to predict changes over time in purchases of general aviation aircraft. Additionally, the research examines whether these tax incentives differentially impact specific types of manufacturers by providing incentives for buyers to shift to more expensive aircraft.; Prior literature supporting the neoclassical theory of investment suggests that tax policies which reduce the cost of capital should increase investment spending in the economy. Research studies also indicate that short-term incentives often result in composition-shifting when the prices of higher quality assets fall relative to lower quality ones. Accordingly, this study tests the following research questions: (1) Is bonus depreciation a significant predictor of the quantities of general aviation aircraft manufactured in the United States? (2) Is bonus depreciation a significant predictor of the mix of piston and turbine general aviation aircraft manufactured in the United States?; The dissertation utilizes sample data from 1987 to 2005. The research design involves time series, least squares regression to test whether bonus depreciation and related economic control variables are significant predictors of the quantities and mix of general aviation aircraft.; The results indicate that the incentives did not contribute to statistically significant increases in the shipment of general aviation aircraft. In fact, the finding of a small but significant negative relationship does imply that shipments declined as the related depreciation allowances were increasing. On the other hand, the results indicate that the incentives did contribute significantly to a shift in the composition of the general aviation aircraft from piston to turbine. Although the bonus depreciation incentives may have played a minimal role in influencing decisions concerning whether to purchase general aviation aircraft, the incentives appear to exhibit a much larger impact when deciding which type of aircraft to purchase.