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Maryland luxury tax fails, for now

Maryland’s legislative session ended abruptly April 9 without action being taken on a luxury surtax on aircraft that AOPA opposed as a loser for pilots and aviation businesses in the state.

The possibility of a special legislative session remained when the two houses of the Maryland General Assembly adjourned after complicated parliamentary maneuvering but without completing action on a revenue package that Gov. Martin O’Malley has described as critical for avoiding large budget shortfalls. Revenue measures that were shelved with the session’s end included income tax hikes and retroactive tax provisions put forth as necessary to avoid hundreds of millions of dollars in “funding reductions” to state schools and other services.

AOPA reported March 28 that House Bill 1345 would have added a1-percent luxury surtax on purchase amounts above $36,000 on “motor vehicles, boats and planes.” The added tax bill would have risen $350 plus 2 percent of amounts above $90,000.

Greg Pecoraro, AOPA vice president of airports and state advocacy, and Mark Kimberling, AOPA director of state government affairs, had testified in opposition to the bill before the House Ways and Means Committee, presenting examples of how it could place Maryland’s aviation businesses at a competitive disadvantage with counterparts in other states and drive based aircraft across state lines. They also demonstrated how the tax would have created a disincentive for pilots to buy aircraft, further eroding aviation business activity in Maryland.
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 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 Maryland’s House Bill 1345 after consideration of its ramifications—and he offered to guide any lawmakers on a tour of their local airport “to see general aviation in action.”

Dan Namowitz
Dan Namowitz
Dan Namowitz has been writing for AOPA in a variety of capacities since 1991. He has been a flight instructor since 1990 and is a 35-year AOPA member.
Topics: Financial, Aviation Industry, Taxes

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