NJ could raise taxes on United Airlines by $20 million
TRENTON — A state Senate committee Thursday advanced a plan that would hike taxes on United Airlines by $20 million, despite warnings that it could raise airfares or reduce routes at Newark Liberty International Airport.
New Jersey only taxes the fuel a plane burns during taxiing and take-off. A bill sponsored by Senate President Steve Sweeney, S2892, would instead tax all fuel – but only for United Airlines, which accounts for two-thirds of Newark’s air passengers.
Sean Williams, senior vice president for state and local government affairs for the industry group Airlines for America, said Newark is already the costliest airport in the nation and that this change would raise United’s fuel tax 20-fold.
“That is a major tax increase,” Williams said. “And so that puts you all at substantial risk of causing costs to go up on passengers and possibly airlines to cut routes. I mean, something has to give here.”
“It comes with a consequence. Every action that you take has a consequence,” he said. “And a major tax increase like this will undoubtedly have consequences for passengers.”
The revenues would be used to help fund a PATH train extension to the airport, including a stop in Newark’s South Ward. Williams and United say that wouldn’t be legal if the money is not used for aviation purposes.
Jill Kaplan, the United Airlines president for New York and New Jersey, said the company has invested $400 million at Newark Airport in the last two years, and more than $2 billion since 2000, but could focus more on its six other hubs, including one at Dulles Airport near Washington, D.C.
“So we have choices as to where we will grow,” Kaplan said. “And if this additional and discriminatory tax scheme becomes law, it is my profound concern that this will impact our ability and stunt our ability to invest in future investments at Newark and in turn New Jersey.”
No other airlines would be affected, as the bill only affects airlines with 8 million passengers a year in New Jersey. United has more than 28 million. No other airlines have more than around 2 million.
Zakiyy Medina, baggage handler for United Airlines at Newark Liberty, said it takes him about 2 hours to commute back and forth from work on NJ Transit – and that despite the cost, it’s his only option.
“A jet fuel on United could easily fund the extension of the PATH trains to Newark Airport,” Medina said. “That would make it affordable for the 6,000 airport workers who live in New Jersey to get to work. It would make Newark Airport more accessible for the 43 million passengers who travel through our airport each year.”
Kevin Brown, a vice president for the SEIU 32BJ union in which Medina is a member, said the Tax Foundation ranks New Jersey 45th in the country for its combined jet fuel tax rate.
“The rest of the country has higher jet fuel taxes for a reason. They support our local economies,” Brown said. “There is no reason to provide such extensive tax breaks to the airlines when it comes to jet fuel.”
Labor unions weren’t unanimously behind the bill. Inez Garcia-Keim, lead customer service agent for United Airlines at Newark Airport and president of the AFL-CIO’s New Jersey State Council of Machinists, said it would hurt United and aviation employment in the region.
“Simply stated, higher taxes on jet fuel would significantly drive up costs and would have a negative impact on our customers and our jobs,” Garcia-Keim said.
Business groups warned that the change would encourage United to shift flights to airports in New York. State Sen. Bob Singer, a Republican from Lakewood, said if the tax goes up and fares rise with it, Central Jersey residents will look south.
“From where I am in Jersey, it’s just as close to go to Philadelphia Airport as it comes to Newark,” Singer said. “If it’s going to cost me more to go to Newark than Philadelphia, I’m going to go to Philadelphia.”
The bill was advanced by the Senate Transportation Committee, though with the rare but nonbinding qualification that it was reported “without recommendation.”
Singer and state Sen. Nicholas Sacco, D-Hudson, voted no. Democrats Sandra Cunningham, Patrick Diegnan Jr. and Vin Gopal voted to advance the bill.