A bill packed with incentives to attract new businesses to North Carolina includes one provision designed to make sure one of the state’s biggest stays in Charlotte.
The measure extends the sales tax cap on fuel for American Airlines, the largest carrier at Charlotte Douglas International Airport. The cap – at $2.5 million – currently expires in January.
Supporters see the provision as crucial to Charlotte’s status as one of the nation’s largest airline hubs.
But opponents call it an unfair tax break.
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Unite Here, a union that represents 33,000 airport and airline workers, has taken aim at aviation fuel tax breaks, calling the issue a question of economic fairness. In a recent study, the group estimated that such tax breaks net airlines about $1 billion a year nationwide.
States differ widely in how they apply jet fuel taxes, the group said. Texas doesn’t tax such fuel, while California does, but gives tax breaks worth $384 million to make up for it.
Unite Here called for state lawmakers to let the tax break expire.
Though the bill would extend the cap until 2020, it falls short of the complete sales tax exemption sought by American and other airlines.
“What’s in the bill will benefit Charlotte Douglas International and American Airlines, which is the major hub operator in Charlotte,” Rep. Bill Brawley, a Matthews Republican, said Wednesday.
Supporters of the bill, which is expected to get its first hearing on Tuesday, say the cap extension should be easier to pass than the complete elimination of the sales tax. American, which merged with US Airways, joined Delta, United and other airlines to seek an industry-wide exemption. That would cost the state millions.
An American spokesman said the airline will continue talking to lawmakers.
“We appreciate the legislature’s effort to address the competitive tax environment in North Carolina,” said spokesman Matt Miller. “We look forward to continuing to discuss with legislators the economic benefits the airline industry provides the state.”
Fuel is typically an airline’s biggest single expense. The push for a new tax exemption comes as fuel costs have plummeted and airline profits soar to new records. Last month, American Airlines reported a $597 million profit for its fourth quarter.
And for the coming year, American said it expects to pay $1.73 a gallon for fuel in the coming year. That’s down from $2.91 last year and $3.08 in 2013.
But Airlines for America, a coalition of American and other carriers, has called fuel “by far the industry’s largest and most volatile cost,” accounting for more than a third of its operating expenses. It said without legislative action, North Carolina will have the nation’s fifth-highest jet fuel tax in 2016.
Vaughn Jennings, a spokesman for the lobbying group, has said that without action on the sales tax, North Carolina will be at a disadvantage to neighboring states such as South Carolina, which doesn’t tax jet fuel.