Luxury surtax targeting aircraft resurfaces in Maryland

March 13, 2013

A Maryland lawmaker has proposed to levy an additional sales surtax on a list of items, including all general aviation aircraft, categorized as supposed “luxury” items. A similar proposal died in committee last year.

AOPA told legislators in a March 8 committee hearing that such an added tax burden could create a real “business exodus” and/or suppression of Maryland’s aviation industry. The association backed up the assertion by offering a real example of how even the lingering threat of the extra tax, coupled with the already higher-than-average cost of owning an airplane in the state, caused a lifelong Maryland resident to move his aircraft to Delaware to save money. This type of exodus, they emphasized, could certainly occur on a large basis if this bill were enacted, given the state’s small geography and close proximity to neighboring state airports.

“This measure was truly the proverbial straw that broke the camel’s back, in finalizing his decision to choose Delaware, depriving Maryland of all the revenue they would have collected from this owner,” AOPA Director of State Government Affairs Mark Kimberling.

“The reintroduction this year only reaffirms the decision,” he added.

House Bill 1162 would impose the luxury surtax on the sale of a “motor vehicle, motorcycle, boat or plane” with a taxable price greater than $50,000. A 1-percent surtax would be applied to amounts above $50,000, with the surtax increasing to $700 plus 2 percent of a price above $120,000, and $6,300 and 3 percent on amounts above $400,000.

The surtax—to be tacked onto Maryland’s 6-percent sales tax and a bevy of other state GA taxes and fees—was sponsored by House Ways and Means Chair Sheila Hixson (D-District 20).

Kimberling and AOPA Eastern Regional Manager Sean Collins appeared before the Ways and Means Committee to make the case that a luxury tax would actually reduce, rather than enhance, state revenue in the long term in direct contradiction to the very intent of the bill to garner additional general fund revenue.

Given the history of the measure, which lacks co-sponsors in either house, and the fact that the bill was previously considered without any seeming intent among the committee to move forward with it, they called on the panel to table it permanently, arguing that the continued specter of the tax alone would only serve to suppress the state’s GA economy.

“As long as this measure lingers, even without advancing, it only perpetuates a troubling, and uncertain tax picture for Maryland aircraft owners, which combined with the litany of other aircraft cost concerns can truly impact the psyche of aircraft purchasers with the decision making of where to take delivery of a new plane or whether to buy it at all,” said Kimberling, a pilot and Maryland native. “And, in my view, if even one more Maryland resident decides to take delivery of a plane in one of the four bordering states based merely on the perception of this bill—justified or not—it’s a big loss for Maryland.”

Dispelling misperceptions

On the same day that the committee held the luxury surtax hearing, the panel heard testimony on an unrelated bill that would allow Civil Air Patrol members to subtract $3,500 from their federal adjusted gross incomes as members of a volunteer fire, emergency, or medical service, for state tax purposes.

AOPA seized this opportunity to highlight the Civil Air Patrol members in attendance as a real example of the type of flying that typifies Maryland aviation, as opposed to the “luxury jets hopping to the Bahamas” image that the lone bill proponent in attendance sought to put forth, Kimberling said.