The proposed quarter-cent sales tax increase in Mecklenburg County would have no impact on American Airlines if state legislators extend a cap on fuel sales taxes – or completely exempt airlines from the taxes, an American official said Tuesday.
The fuel cap, which refunds to airlines fuel taxes paid over $2.5 million, is set to expire Jan. 1, 2016, said Tracy Montross, American’s government affairs director, at the regular Tuesday lunch of the Rotary Club of Charlotte.
Airlines serving North Carolina, she said, are urging lawmakers to extend the cap or pass the exemption to keep the state competitive with other states such as South Carolina and Texas where total exemptions are already in place.
If lawmakers do neither, North Carolina would be the fifth-most expensive state to buy fuel, Montross said. Consequently, a quarter-cent hike in the local sales tax rate would add more “taxation pressure,” she said.
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The industry, she said, is already overtaxed, noting that 21 percent of the average plane ticket goes to federal taxes.
“North Carolina needs to be competitive for air service and airline investment,” Montross said in an interview.
In June, county commissioners voted 5-4 to put the sales tax referendum on the November ballot. Most of the added revenue, 80 percent, would go to raising pay of Charlotte-Mecklenburg Schools employees, and 7.5 percent would raise pay at Central Piedmont Community College. The Arts & Science Council would get 7.5 percent and the balance would go to public libraries.
Shortly after the vote, American expressed concern that a quarter-cent increase could cost the company $500,000 a year for fuel costs. Yet Montross clarified Tuesday that the rate increase would have no impact on the airline if the cap is kept in place or if the airline isn’t taxed on fuel.
She said the airline isn’t opposed “to the reasoning behind the quarter-cent increase.”
“We are not opposed to raising teacher pay, we’re not opposed to raising revenue for the arts and libraries, but we have to be sensitive to the dialogue about how we are taxed,” Montross said.
“We are working on exempting the sales tax on jet fuel permanently through legislation. Until that is in place, any increase in the sales tax impacts our services.”
American and US Airways merged into the world’s largest airline in December. Its hub at Charlotte Douglas International Airport is the airline’s second busiest among nine hubs, with more than 650 daily American departures. American accounts for more than 90 percent of daily flights at Charlotte Douglas, making it by far the most important tenant at the airport and one of the most prominent companies in Charlotte.
Montross said that Charlotte Douglas is attractive to the airline because the airport has some of the lowest costs for airlines of any major hub. The airport is the country’s eighth largest in number of passengers.
Montross fell short of saying that the hub could be threatened if state legislators don’t extend the cap or grant a total fuel tax exemption.
“That’s not my decision,” she said in an interview. “My job is to make sure this community knows just how important the American Airlines hub is at the airport and how taxation on our industry can impact the status of air service in the state.” Staff writer Ely Portillo contributed.