The Obama administration's decision to single out the subsidy for corporate jets may strike conservatives as class warfare, but it's actually an apt illustration of why it's so hard to fix public policy. To varying degrees, the budget, the regulatory code, and the tax code get encrusted with special favors for businesses with political sway. The special tax treatment for corporate jets is one example. It has no public policy justification -- when you give corporate jets more favorable tax treatment than commercial jets, then you artificially create more corporate jets than market forces would dictate.

But what happens if you target the loophole for elimination? Well, one result is that conservative think-tanks will concoct phony claims to muddy the waters. (The Heritage Foundation falsely conflates the corporate jet loophole with a different tax stimulus program from 2008.)

Another thing that happens is that corporate jet manufacturers are complaining that killing their subsidy will destroy jobs:

Almost immediately, however, business leaders and some union officials criticized the president, saying such a move could jeopardize the executive-aircraft sector's still-fragile recovery.
Mr. Obama's corporate-jet challenge drew scoffs from deficit hawks for its tiny budgetary impact. But the mini-backlash from the aviation industry showed how discussion of even small, largely symbolic tax increases can provoke angst among those directly affected, complicating efforts by the White House and congressional Republicans to reach agreement on cutting the deficit and raising the federal debt ceiling....
"While such talk may appear to some as good politics, the reality is that it hurts one of the leading manufacturing and exporting industries in the United States," said a letter sent jointly to the White House on Wednesday by Peter Bunce, president of the General Aviation Manufacturers Association, and Thomas Buffenbarger, president of the International Association of Machinists and Aerospace Workers.

Now, the owners and workers in this industry make a phony comparison. They invoke a 1990 tax on expensive yachts that may or may not have hurt the yacht industry. It's not a fair comparison, because the 1990 tax was a higher levy, while what Obama proposes is merely the removal of a subsidy.

On the other hand, it is true that eliminating a subsidy for corporate jets will probably hurt the industry. That is an inevitable part of any market reform. Making the tax code neutral will mean capital is directed where markets dictate rather than where the government dictates. That decreases employment in previously-favored segments, and increases employment elsewhere. Unfortunately, it's impossible to identify where "elsewhere" might be. The losers from eliminating this subsidy know who they are, while the winners don't. And when the benefits are relatively small -- $3 billion in savings over a decade -- you can see why elected officials wouldn't bother.

Jonathan Rauch called this problem "Demosclerosis" -- the process by which special interests cumulatively overtake the government's ability to safeguard the public interest. The corporate jet saga is a depressing case study.