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Nancy Badertscher
By Nancy Badertscher March 31, 2015

Delta spokesman mostly correct about jet fuel taxes in Georgia

Time is running out for the 2015 General Assembly and for state lawmakers who had a lofty goal this session of raising at least $1 billion for transportation improvements.

One of the backstories to the transportation bill (House Bill 170) has been: Will a fraction of the money -- about $23 million -- come from eliminating a controversial state jet fuel tax exemption? That tax break has benefitted hometown Delta Air lines for nearly a decade and was made permanent by that lawmakers and the governor in 2012.

To some, eliminating the exemption seems reasonable.

"The loophole is unnecessary since Delta is highly profitable and no longer at risk of bankruptcy, as they were a few years ago (when the exemption was first granted)," said Wesley Tharpe, analyst with the left-leaning Georgia Budget & Policy Institute. "Ending their special privileges at a time when we’re asking Georgians for more revenues makes sense."

Delta executives don’t feel the same. They’ve called efforts to remove the exemption "one of the most business-unfriendly moves" by the General Assembly in recent years.

Among Delta’s arguments is that the existing jet fuel taxes are already high enough and that a further increase could jeopardize Atlanta airport’s competitive status.

"If approved, this measure would put Hartsfield-Jackson Atlanta International Airport at an economic disadvantage by making aviation fuel taxes in Georgia some of the highest in the industry," Trebor Banstetter Delta spokesman told The Associated Press, referencing House Bill 175, a measure that initially would have eliminated the sales tax exemption just for Delta.

Banstetter and other Delta officials have cited information from Airlines for America, the airline trade association, that they say backs ups their claim that Georgia already has one of the nation’s highest jet fuel tax rates.

PolitiFact Georgia wondered: Could that be right? Buckle up, and let’s see where the facts take us.

The right-leaning Tax Foundation ranked states for jet fuel taxes in June 2014 based on data from Airlines for America. The foundation found Georgia was 11th nationally at 15 cents, based on its combined effective jet fuel tax rate and fees per gallon.

Illinois had the highest jet fuel taxes at 32.8 cents -- more than twice Georgia’s -- followed by California with 27 cents and Connecticut with 26.4 cents.

Three states -- Texas, Ohio and Delaware -- had no jet fuel taxes.

Of the 47 states that have some type of jet fuel tax or fee, Georgia is considered an outlier, said Victoria Day, spokeswoman for Airlines for America.

"Most states do not apply a retail sales tax to jet fuel, which makes sense because taxing business inputs creates tax pyramiding," Day said.

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Georgia’s jet fuel sales tax would go from three percent to four percent, if the exemption is eliminated.

To show how complicated the jet fuel tax computations are: 19 states don’t include any jet fuel in their sales tax base; 16 states tax private jet fuel purchases but exempt commercial airlines; and 15 states apply the sales tax to commercial jet fuel, although sometimes at a reduced rate. Finally, three states (New Jersey, New York, and Washington) only tax fuel estimated to be burned within their state borders, significantly reducing the burden of fuel taxes, the foundation’s report said.

We found another report on jet fuel costs at 12, a site run by Unite Here International Union, a group critical of tax exemptions benefitting the airlines.

The report looked at costs at the major airports. It’s data was slightly older than the association’s. It showed fuel costs at Hartsfield-Jackson Atlanta International Airport as sixth highest at 15 cents a gallon and Chicago’s O'Hare International Airport as the highest at 32.75 cents per gallon, numbers identical to those reported by the airline trade association for 2014 for Georgia and Illinois, respectively.

Commercial aviation supports more than 350,000 jobs and drives 45 billion in economic activity in Georgia, according to Airlines for America.

How the tax break came to be

Lawmakers first approved the jet fuel tax break for Delta in 2005, when the airline was headed into Chapter 11 bankruptcy reorganization. They repeatedly extended the tax exemption even as the carrier’s finances improved and its stock soared, making it permanent for Delta and any airlines in 2012.

State Rep. Earl Ehrhart, R-Powder Springs introduced House Bill 175 in January, saying it was time Delta "get off the taxpayer dime." He said the bill was retaliation against Delta officials for speaking out against a potential second airport in Paulding County or suggesting that lawmakers should not be "chicken" about raising taxes for transportation.

Delta officials said Ehrhart’s bill, as originally drafted, was illegal because federal law requires jet fuel tax revenues be spent on airports or airport improvements, not go to the general fund, a statement PolitiFact Georgia ruled as True. Ehrhart vehemently denied the bill, which stalled in the House, was illegal, saying a three-year grace period from the feds would give the state a chance to reinstate the tax and spent the money as it wants, at least temporarily.

Delta’s Banstetter said last week: "At this point, all we can say is that if the bill is passed it will be up to the FAA to decide whether the state is in compliance."

In at least two other states -- North Carolina and Illinois -- legislators are considering proposals to remove tax breaks or close tax loopholes for airlines.

Our conclusion:

Delta officials are arguing against reinstating a 1-percent tax on jet fuel, which would generate about $23 million a year, mostly from Delta fuel purchases. Delta executives say that Georgia already has one of the nation’s highest jet fuel taxes and would have an even higher rate, if the exemption were eliminated.

Georgia’s jet fuel tax is ranked 11th and is less than half of the tax in No. 1 rated Illinois.

That bit of missing context takes this one down a notch on the Truth-O-Meter.

We rate Banstetter’s statement Mostly True.

Our Sources

Combined Effective Commercial Jet Fuel Tax Rates and Fees by State, by Lyman Stone and Richard Borean on June 25, 2014

"Lawmakers May End Tax Break on Jet Fuel, to Delta’s Dismay," By The Associated Press in an article that appeared in The New York Times, March 1, 2015

"A damaging tax hike for airlines," by Holden Shannon, for The Atlanta Journal-Constitution, March 23, 2015 By Associated Press in The New York Times on March 1, 2015

Pertinent Federal statutes (see 49 U.S.C. 47107 and 47133)

Emails with Trebor Banstetter, Delta Air Lines, Corporate Communications

Email with Wesley Tharpe, analyst, Georgia Budget & Policy Institute

"Adding Up the Fiscal Notes 2011: Almost $100 Million Cost to Tax Bills; No Comprehensive

"Tax Bill Takes Small Steps in the Right Direction: More Work Needed to Achieve

Comprehensive Tax Reform," March 23, 2012 by Wesley Tharpe, Georgia Budget & Policy Institute

Another comparison of state fuel taxes




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Delta spokesman mostly correct about jet fuel taxes in Georgia

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