Legislation to expand New Jersey’s four-cent-a gallon jet fuel tax at Newark Liberty International Airport hit some turbulence at a State House committee hearing Thursday where an airline representative predicted the proposal could send passenger airfares soaring.
“Passengers want lower costs and more choices and more competition. They don’t want higher taxes. When you implement a new proposal like this — a massive tax increase like what is being proposed here — that puts upward pressure on fares. So either fares go up or service goes down, but something’s got to give,” said Sean Williams, vice president for state and local government affairs for Airlines for America.
Newark’s already the nation’s highest cost-per-passenger airport. But Jersey’s one of only three states where airlines pay tax just on the jet fuel burned during takeoff and landing. The bill would tax all jet fuel and could generate up to $40 million a year to pay for building a PATH train service extension to Newark Liberty, and other airport projects. Sixty-six percent of Newark passengers fly United Airlines, and United would end up paying about half that $40 million tax hike. They are not amused.
“I’m frankly very puzzled as to why we are here before you today, in an adversarial position on this proposal,” said Jill Kaplan, New York and New Jersey president of United Airlines. “United has been a long-standing partner in supporting New Jersey’s economic growth and driving economic vitality, but this proposal seems to forget that fact.”
Kaplan noted the airline employs 14,000 people, and creates nearly $16 billion in economic output in New Jersey. Speaking in a packed room before the Assembly Transportation and Independent Authorities Committee, she launched a very thinly veiled threat.
“So I want to be very clear: We have choices, and we are looking at our choices and we grow in areas where we are able to facilitate the focus of our growth plan,” said Kaplan.
“We cannot afford to continue to tax our businesses and ask them to shoulder the burden of funding programs and initiatives in the state,” said Anthony Perry, director of government affairs for the Commerce and Industry Association of New Jersey.
But bill backers noted that United’s net income was $2.1 billion last year.
“I’m presuming that investment you guys have made, and thank you for that, has returned money to United’s bottom line? Hasn’t it? I mean, otherwise, I don’t think you would have made the investment,” said Assemblyman Herb Conaway.
“The reality is that this airline may end up paying more because they make the most money — billions of dollars out of their six most profitable routes in the nation,” said Analilia Mejia, executive direction of New Jersey Working Families Alliance. “They want to be in New Jersey because they make money in New Jersey.”
But the bill could run afoul of federal law, which specifies all projects funded by aviation taxes must be airport-related. Might that exclude the PATH train project?
“I’m bothered by the federal law. I’m really leaning toward no, but I may give an abstention at this time,” said Assemblywoman BettyLou DeCroce.
“The way the bill’s written, if that legality is in question, this jet fuel tax would have to go to other projects that are related to the airport,” said Assemblyman Dan Benson.
The bill got voted out of committee — eight yes votes, three no votes, and one abstention. With so many questions pending, it’s headed for a bumpy passage over to the Appropriations Committee.