While it may dent the state’s coffers, Gov. Nathan Deal believes the long-term benefit of removing a 4 percent sales tax on jet fuel is well worth the temporary cost.
The governor is lobbying for House Bill 821 partly because it will help the state’s corporate giants better compete by making new routes more cost-effective for airlines, driving the launch of more nonstop international flights.
“Georgia and our businesses are global competitors; we need direct air travel to provide our companies with immediate access worldwide. By removing the sales tax on jet fuel, we can level the playing field for our airports and airlines to compete,” Mr. Deal said in a statement Feb. 6.
The bill, which more broadly ensures that the state revenue code conforms to changes outlined in the recent federal tax reform, would also make permanent a previous exemption that was ended in 2015.
Critics argued that the exemption, put in place a decade ago to ease the post-bankruptcy struggles of Delta Air Lines Inc., had run its course.
Delta, which occupies nearly 80 percent of the capacity at the world’s busiest airport, has roared back to record profitability in recent years. The airline is the state’s largest private employer.
In a statement, Delta lauded the new bill, saying the governor understands well the role of the airport as a catalyst for $58 billion in regional economic impact:
“Of the 21 states that are home to large hub airports in the U.S., Georgia imposes the fourth highest state tax on jet fuel. The governor’s proposal to exempt sales tax on jet fuel will level the playing field with other states, position Hartsfield-Jackson Atlanta International Airport for continued growth and benefit companies throughout the state whose businesses depend on global air service, all of which will keep Georgia competitive for the years ahead.”
Airlines for America, a trade group that lobbies against jet-fuel taxes, said Delta’s assessment aligns with its analysis. Georgia has the eighth highest sales tax rate for jet fuel in the nation overall. Within the top eight, only four states — Illinois, Michigan, California and Georgia — have major hub airports.
In a letter to the Georgia General Assembly Feb. 5, the group urged quick passage of the bill, noting that the sales tax doesn’t square with Georgia’s designation as the No. 1 state in the nation for business.
“If H.B. 821 were enacted into law, we believe that while our member airlines would see an immediate financial benefit, the state of Georgia would also see long-term benefits in the form of more flight options, lower fares and greater opportunity for growth,” wrote Sean Williams, vice president for state and local government affairs.
Mr. Williams pointed to the example of North Carolina, which saw a 4 percent increase in flights in the first year after removing its sales tax.
While he acknowledged that many factors are at play, he noted that airlines base long-term decisions on cost. Fuel is their No. 2 input, and oil prices are rising.
Airlines may be his constituents, but Mr. Williams ended his letter saying that supporting the bills about the broader health of the economy.
“Please support H.B. 821, not just to help the aviation industry in Georgia, but to help those companies that use the air industry to connect with the world.”
The newest foreign airlines coming into Atlanta — Turkish Airlines and Qatar Airways — arrived in 2016, without the benefit of the exemption Delta had previously enjoyed.
Read the full text of the bill here.
See the full letter from Airlines for America below:
A4A GA General Assembly Ltr.
The Pendleton Group is the presenting sponsor of Global Atlanta's Economic Development Channel. Subscribe here for monthly Economic Development newsletters.
