Loophole allows airlines, which have enjoyed record profits, to shortchange states tens of millions of dollars
NEW YORK– Elected officials in New York and New Jersey have introduced legislation that would close a loophole that has allowed airlines to avoid tens of millions of dollars in jet fuel taxes. New York and New Jersey are two of only three states in the country that allow airlines to pay these lower taxes.
The tax at issue is an excise tax to all jet fuel consumed by commercial passenger aircraft. Only New York, New Jersey and Washington limit the jet fuel excise tax to fuel burned within their state borders. All fuel burned beyond their borders is exempt from the excise tax, known in New York as the Petroleum Business Tax or PBT.
This inequity results in a significant windfall to the airlines. As a result of the low tax rates in New York, including the low PBT, the state has the seventh lowest effective tax rate on jet fuel in the country. According to the Tax Foundation, New Jersey ranks 6th lowest in the country when it comes to effective tax rate on commercial jet fuel.
“This bill is long overdue,” said New Jersey State Senator Raymond Lesniak, who introduced the bill in New Jersey, said at a press conference at Newark Airport. “There are no free riders on airplanes and we should not be giving the airlines a free ride at Newark, LaGuardia and JFK airports. The airlines claim they should get these breaks because they are economic drivers in the state but then they use low-road contractors to employ thousands of workers who are making poverty wages.”
“The time has come for the airlines to contribute to the upkeep of the airports that enable their profits. The time has come for us to catch up to the rest of the country, and close this tax loophole. Airlines are very profitable, and they don’t need these huge tax breaks as it relates to the jet fuel they need to operate,” said New York State Senator Jose Peralta. “The time has come for the airlines to stop using contractors who pay poverty wages to airport workers, who all too often must rely on public assistance to make ends meet, to just get by.”
Taxes raised from those bills would be available to New York and New Jersey for airport upkeep and renovation projects – a burden that now falls upon taxpayers. The Port Authority of New York and New Jersey has major renovation projects in store for LaGuardia and Newark airports. The agency plans to increase their passenger facility charge, a tax attached to flights, at the regions airports in order to raise $1 billion for the renovation projects.
“Airlines that are flying in and out of our airports are reaping huge benefits at the expense of all New York air travelers,” said New York City Comptroller Scott Stringer, who issued a report, Green Skies Ahead, calling for airlines to pay sales tax when they fuel up their jets in the city’s airports. “These tax giveaways let the highly profitable airlines pocket even more money, leaving behind airports in desperate need of greater investment.”
As airlines are expected to make record profits in 2016, the wealth that flows into the region through these airports has bypassed the high poverty neighborhoods surrounding the airports, where most subcontracted airport workers reside, according to a recent study by the Women of Color Policy Network.
“I have worked at the airport as a wheelchair agent for about one year and I am always struggling to get through the end of the month,” said Hemchand Harnarine who works for subcontractor PrimeFlight at JFK Terminal 5. “The cost of living is always increasing and my low pay makes it hard to pay my bills.”
The low-road subcontracting system that airlines have increasingly turned to has pushed wages down for contracted workers as airlines find more and more ways to increase profits. Meanwhile tax loopholes like New York and New Jersey’s put more of the cost of maintaining and renovating the airports back on the public rather than on the airlines who should be paying their fair share of the cost.
The new jet fuel tax bill would introduce tens of millions of dollars into the New York and New Jersey tax system. SEIU 32BJ supports legislation closing a loophole that enables airlines to avoid paying tens of millions of dollars in taxes on jet fuel, and raising the excise tax rate to align with New York’s at 6.8 cents per gallon.
With 155,000 members in eleven states and Washington, D.C., including 70,000 in New York City, 32BJ SEIU is the largest property service workers union in the country.