Maryland urged to defeat luxury tax

March 28, 2012

Maryland would “lose out” if the state adopts a luxury surtax on sales of aircraft, said two AOPA advocacy staff members in testimony before a legislative committee.

Greg Pecoraro, AOPA vice president of airports and state advocacy, and Mark Kimberling, AOPA director of state government affairs, recently appeared before, and offered testimony to, the House Ways and Means Committee on House Bill 1345. The bill would add a1-percent luxury surtax on purchase sums above $36,000 on “motor vehicles, boats and planes.” The surtax would be $350 plus 2 percent of amounts above $90,000.

Drawing on comments received from Maryland general aviation pilots, Pecoraro and Kimberling offered examples of how the bill could place Maryland’s aviation businesses at a competitive disadvantage with counterparts in other states. The tax also would cause pilots to refrain from buying aircraft, eroding aviation business activity.

Pecoraro shared a letter from a Rockville, Md., pilot who has been shopping for a single-engine aircraft but has not taken action because of uncertainty caused by the pending legislation.

One of the pilot’s options would be “purchasing and basing the aircraft in one of our neighboring states—as many others will certainly do—as no state in the region (or country) charges a comparable luxury tax on aircraft,” Pecoraro said. “Whether he chooses to buy and base elsewhere, or forgoes purchasing his planned four-seat, propeller-driven Cessna 182 altogether, Maryland loses out.”

AOPA estimated that the deferred purchase would cost the state $23,886 in sales taxes, based on 6 percent of a purchase price of $398,100.  Maryland would also “lose out on about $462 per year in fuel taxes, and employment and sales taxes resulting from about $1,500 in annual maintenance.”

Kimberling, a Maryland native and pilot, emphasized in testimony that aircraft are “mobile assets” that owners would not hesitate to relocate to escape onerous taxes. He listed numerous Maryland airports that could lose tenants—and service revenue—to nearby airports across state lines in Delaware, Pennsylvania, and West Virginia.

“Other potential aircraft owners, who don't necessarily have a convenient option for relocation, become significantly less likely to buy aircraft all together. This may sound like hyperbole, but there are countless aircraft owners already running on very thin margins, as this inherently fragile industry re-emerges from the recession,” he said.

Kimberling added that no state legislature has moved forward with luxury tax proposals such as HB 1345 after consideration of its ramifications. He also offered to guide any lawmakers on a tour of their local airport “to see general aviation in action.”

Dan Namowitz

Dan Namowitz | Aviation Writer

Dan Namowitz is an aviation writer and flight instructor. He has been a pilot since 1985 and an instructor since 1990.