A couple of weeks ago I wrote about the controversial change that the New Jersey legislature was planning on making that would eliminate a significant tax exemption on fuel for airlines.
Most states tax all jet fuel that’s purchased by an airline in the state, while New Jersey currently only taxes the fuel that is consumed during the “burnout” period, which includes taxi and takeoff. The state planned to eliminate this exemption in order to fund a new PATH train extension to Newark Airport, that would cost at least $700 million.
What’s interesting is how the state was planning on introducing this. Rather than increasing the taxes on fuel burn for all airlines, the plan was to only increase it for airlines that transport more than eight million passengers per year from New Jersey.
That meant that the tax exemption would only be eliminated for United, and not for other airlines. United Airlines thought that was unfair, and even threatened to reduce their presence at Newark Airport. I can see both sides of this:
- United has invested a ton of money at Newark and is a huge employer in the state of New Jersey, so this seems like a slap in the face to them
- At the same time, the state probably knows that United isn’t going anywhere, while an airline with a smaller presence at the airport may be more likely to reduce service to the airport if this exemption was eliminated
It seems that the state has had a change of heart in terms of this policy.
As reported by Bloomberg, a new version of the bill eliminates this exemption for all airlines flying out of Newark, and not just United Airlines. The bill still has to be passed by the legislature and signed by the governor to become law, so we’ll see if it ends up happening.
Bottom line
If the state is going to eliminate this tax exemption, eliminating it for all airlines seems like the way to go about it. In the NYC-area, airlines don’t exactly have many options. Both LGA and JFK are heavily slot-restricted so unless an airline wants to stop serving the NYC-area, it’s unlikely they’d cut flights.
(Tip of the hat to Live and Let’s Fly)
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