The airline business is a tough one. Rising fuel costs. Government regulations. Mechanical breakdowns. Expensive equipment. Labor negotiations. Weather that doesn’t cooperate. Carriers are doing all they can to squeeze out profits in the face of an operating environment that is by no means easy.
Meanwhile, cities and states around the country are in a pitched battle to attract more carriers and more routes – including attractive international ones – to their airports. More airlines with sought after routes increases the overall competitiveness of a state, sending a message to the rest of the country and around the globe that you’re a market that’s open for business and leisure travel.
But if Arizona and our major airport hub, Sky Harbor International Airport, is going to become more competitive and grow its profile as an air travel powerhouse, then an important tax reform is needed.
Arizona currently levies a state jet fuel tax at the rate of .0305 percent per gallon on the first 10 million gallons of jet fuel consumed by an airline. These capped revenues are then used for state aviation-related expenses.
Phoenix, though, is different. The city imposes its own jet fuel tax at a rate of .00732 percent per gallon on all jet fuel consumption; there’s no gallon cap. And the revenues go into the city’s general fund; they’re not set aside for aviation purposes.
We can and should fix that discrepancy and bring city and state fuel tax policy into alignment.
Thanks to the work of Rep. Michelle Ugenti-Rita and Sen. Warren Petersen, legislation has been developed – via a strike everything amendment to HB 2064 – that would define the taxation of jet fuel as a statewide concern, would limit a city’s ability to tax jet fuel to the first 10 million gallons, and ensure that revenues derived from such a tax be used for aviation-related purposes.
Other major airport hub cities like Charlotte, Dallas and Washington, D.C. don’t tax jet fuel at the city level (nor do their states, for that matter), making them more attractive places to do business for airlines. The amendment to HB 2064 is the right step in keeping Phoenix and Arizona a major player in the air travel game.
The Arizona Chamber of Commerce and Industry’s Business Agenda for this year says that the Chamber will “Oppose current and future jet fuel taxes that put Arizona at a competitive disadvantage.” We encourage legislators to help rectify that disadvantage and pass an amended HB 2064.