United Airlines has threatened to abandon its Newark hub if New Jersey lawmakers follow through on a proposed tax increase at Liberty International Airport that would only affect United.
Currently, New Jersey only taxes the fuel on a plane burned during taxi and takeoff. Lawmakers are now considering taxing all fuel…but only for United Airlines.
United is New Jersey’s largest airline, carrying 28 million passengers per year. No other airline carries more than two million. United has invested more than $400 million in Newark the last two years and more than $2 billion since 2000. The new tax would implicate only airlines which carry more than eight million passengers per year.
Jill Kaplan, United’s President for New York and New Jersey, warned lawmakers of the consequences of increased taxes:
So we have choices as to where we will grow. 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.
She warned that if this tax is imposed, “United might have to consider transferring the bulk of its operations to one of the other hubs.”
She also claimed the tax increase would be illegal, noting that fuel taxes could only be used for aviation purposes. Lawmakers want to use the increased tax revenue to fund an extension of the PATH commuter train to Newark Airport.
I’m not so sure about that argument. New Jersey is one of the few states with a fuel tax exemption (limiting it to taxi and takeoffs only). Removing it would place the Garden State in a similar position to United’s other hubs. Furthermore, the definition of what defines “aviation spending” has historically been broad. Therefore, the PATH extension to the airport, which certainly has at least a tangential effect on aviation, would probably clear any legal challenge. That doesn’t speak to the wisdom of such a tax increase.
I’m trying remain unbiased here. Both sides make valid points. I am sympathetic to United’s point that it is essentially being punished for its investment in New Jersey, which is substantial. And whether out of spite or actual financial advantage, Newark will be hurt if this tax is imposed. Less routes hurts consumers, employees, and the state’s tax base. On the other hand, infrastructure like public transport systems are in great need of upgrade, refurbishment, and expansion. Those who benefit from such systems should pay for them. Presumably making access to EWR easier from New York would increase traffic and help airport employees.
What do you think about the new tax? Fair or not? Wise or not?