Aircraft ‘luxury’ tax resurfaces in Washington State

As Washington State lawmakers grapple in a special session with another huge budget shortfall, numerous revenue ideas have surfaced from various groups and organizations—including a luxury tax on aircraft—to bring the budget into balance.

Two plans to tax aircraft have failed in the last two years in Washington state, where aircraft ownership is already among the costliest in the nation, and AOPA remained cautiously optimistic that lawmakers would not move forward with any new aviation taxes.

“The legislature, with a desperate need for additional revenue, has already thoroughly vetted the idea of increasing taxes on general aviation aircraft,” said AOPA Director of State Government Affairs Mark Kimberling. “And, they have concluded that such an increase—with a resultant decrease in flying activity and increase in out-of-state aircraft migration—would actually do more harm than good in terms of lost jobs and an actual net loss in revenue for the state.”

On Nov. 21, Gov. Chris Gregoire presented lawmakers with a supplemental state budget containing “more than $2 billion in spending cuts, reductions to local revenue sharing and fund transfers to leave a $600 million reserve.”

“The Great Recession—which has lingered longer and resulted in more job losses than any downturn since the Great Depression—has taken an almost unprecedented toll on our economy and on state revenue collections. Over the past three years, we have had to reduce existing and projected spending by nearly $10.5 billion,” she said.

Gregoire’s three-phase fiscal plan does not include a tax on aircraft. However, she planned to review “even more ideas for reforming government” from the public, and said she would announce additional proposals in the coming weeks.

In the current charged atmosphere of street protests and continued economic stagnation, local news coverage has speculated that possible tax increases, such as a half-cent increase in the sales tax to ease the shortfall, might ultimately pass. An initiative to increase income taxes on wealthy residents of the state, backed by Bill Gates Sr., failed last year.

One group, the Economic Policy Institute, is reported to be urging scrutiny of “luxury taxes” on yachts and private aircraft, as well as estate taxes, for additional revenue production.

“Private aircraft have, unfortunately, been caught up in a lot of symbolic rhetoric emanating out of recent protests and discussions regarding income inequality. Yet, the irony is that ‘luxury tax’ proposals like these may take aim at so called ‘corporate fat cats,’ but at closer glance actually hit middle-income aircraft mechanics and other middle-class industry workers the hardest,” said Kimberling.

The defeat in February of using an aircraft excise tax as a funding mechanism for health insurance marked the second time in two years that a levy on aircraft was rejected. AOPA pointed out during that debate that the cost of aircraft ownership, maintenance, and operation in Washington state was already among the highest in the nation.

During that legislative battle, AOPA communicated with the pilot community regularly through action alerts and other updates. Kimberling credited pilots who contacted their lawmakers with getting out the message that a tax would do the state’s aviation industry even more harm.

Now, with lawmakers divided on the approach to take to plug a $2 billion gap, The Olympian newspaper reported that a sales tax increase was gaining momentum, although other lawmakers were calling for an overhaul of the state tax system.