Airline Industry Fights New Jersey Lawmakers’ Fuel-Tax Increase

  • Carriers’ trade group says the plan may illegally divert tax
  • Proposal would raise money to replenish state’s roadwork fund

A group representing major airlines is battling a plan by New Jersey lawmakers to increase the state’s tax on jet fuel to help fix a near-broke transportation-spending fund.

The bipartisan plan would raise the 4 percent tax to 7 percent and remove a restriction that levies the rate only on fuel used in taxiing and takeoffs. The move would bring in more than $140 million annually, according to the nonpartisan Office of Legislative Services.

New Jersey senators proposed the fuel-tax increase as part of a 10-year transportation-spending plan. Unless legislators act, the most densely populated U.S. state can’t borrow for new road and rail projects as of July 1. The proposal, by Republican Senator Steve Oroho and Democratic Senate Budget Chairman Paul Sarlo, also includes a plan to boost the tax on gasoline by 23 cents per gallon.

“Aviation is not a piggy bank for the legislature to use to solve their highway infrastructure problems," Sharon Pinkerton, senior vice president of legislative and regulatory policy for Airlines for America, said Wednesday in a conference call with reporters. "Airlines for America is seriously considering what our legal options would be if the legislature moves forward."

Kirk Shaffer, former associate administrator for airports at the Federal Aviation Administration, said the plan may violate FAA guidelines against so-called revenue diversions requiring money generated at airports to go back into improvements to the facility or nearby transportation systems. He said as a result, if the money goes into the statewide road system, airports in New Jersey could lose grant money.

Pinkerton said the group, which is composed of carriers including American Airlines, United Continental Holdings Inc. and FedEx Corp., represents an industry that brings $22 billion a year in economic activity to New Jersey and employs 150,000 people. Other states have moved to pare back or eliminate aviation fuel taxes, she said.

She said anti-collusion laws prevent the members from collectively discussing business plans and declined to say whether any companies are threatening to scale back operations in New Jersey if the plan goes through as introduced.

"New Jersey is completely out of sync with what we are seeing in other states," she said. "Certainly no other state has attempted to raise the tax and apply it to a broader transportation trust fund."

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