Study: Airlines Get $1 Billion in Fuel Tax Breaks Per Year

A new report released on Tuesday found that the US airline industry receives nearly $1 billion in tax breaks annually from states for jet fuel.

The study, conducted by UNITE HERE International Union, a labor union that represents 270,000 workers in the United States, 33,000 of whom work in the airport and airline industries, noted that the airlines received tax breaks on more than 12 billion gallons of jet fuel in 2013 through obscure tax codes in 37 states.

The analysis, which was posted on a new website, 12billion.org, that the labor union launched on Tuesday, shows how varied the tax breaks are by state. In some states, airlines only pay tax on fuel used during takeoff, while other states exempt airlines’ fuel from environmental taxes or for multileg flights that originate domestically and continue abroad, according to a 12billion.org press release.

Since 2012, Georgia, Minnesota, and Indiana all increased the value of tax breaks given to airlines on jet fuel – with breaks in those three states alone worth nearly $100 million to the airlines, the group stated.

Commercial airlines received $384 million in fuel tax breaks from California in 2013, the highest of any state. The estimated number of gallons for which the airlines receive a tax break from the state was 2.26 billion, according to the study.

“If a plane goes from Los Angeles to New York, the airline pays sales tax on the Los Angeles to New York fuel. But if that plane then continues to London, the airline doesn’t pay sales tax on the Los Angeles to New York fuel,” the report states.

The second-highest state was Washington, which offered airlines $123 million in tax breaks on fuel, followed by New York with $115.3 million, and Illinois and Ohio, both of which provided $85 million in tax breaks.

“This is a lot of money states are giving away in tax breaks … happening at the same time that airlines are saying they are actually overtaxed and are pushing for new tax breaks,” said Adam Yalowitz, a union research analyst focused on airline tax policy and author of the study, according to an August 26 Chicago Tribune article. “It’s just a lot of money that taxpayers are losing out on.”

The press release on the study also noted that an airline industry lobbying group is pushing for an increase of up to $27 million in the airlines’ tax break for jet fuel in Michigan, having already passed out of committee and onto this fall’s state Senate docket. The group also said American Airlines on August 12 asked North Carolina lawmakers to extend or expand the state’s airline tax break on jet fuel, which expires on January 1, 2016.

According to an August 26 article by The Hill, Airlines for America, the industry trade organization for the leading US airlines, said in a statement that airlines help create 11 million jobs and $1.5 trillion in economic activity. The group also contends that when the airline industry is financially healthy, employees and customers win because more money can be invested in benefits, training, planes, and other customer amenities.

“No one wins when the industry, our customers, and our employees are forced to shoulder higher taxes,” Airlines for America stated, according to the article. “Today, our customers pay more than $60 in taxes on a typical $300 roundtrip ticket.”

Legislatively, Airlines for America is pushing for a national bill that would allow airlines to prominently advertise fares without including government fees, saying this would highlight how much the industry is taxed, according to the Chicago Tribune article.

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