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"Lehigh Valley airport officials worry aviation tax will be bad forbusiness"



Monday, May 8, 2017

 

Lehigh Valley airport officials worry aviation tax will be bad for business

Queen City Airport’s small plane pilots may opt for airports in neighboring states if proposed maintenance tax is passed.

By Matt Assad

The Allentown (PA) Morning Call

 

 

                             Queen City Airport’s small plane pilots may opt for airports in neighboring states if proposed maintenance tax is passed.

Lehigh Valley International Airport has dug out of its debt problem, built a multimillion-dollar savings account and is hiring more employees, but Executive Director Charles Everett Jr. is worried the latest state budget will slow the airport's momentum.

 

Gov. Tom Wolf's proposed $32.3 billion spending plan restores an aircraft tax that was eliminated in 2013, which could drive small plane pilots and aviation employees out of the state, Everett said.

 

That would reverse what's happened the past four years with the small plane industry surging in the state every year since 2013, he said.

 

"This will put us at a competitive disadvantage with all of our neighbors who don't have the tax," Everett said. "Why would we want to drive this business out of the state?"

 

Everett notes that LVIA has spent the last four years erasing a $26 million debt and recovering from the layoffs and service cuts needed to do it. With money in the bank and more employees being hired to handle Amazon.com cargo planes, the Lehigh-Northampton Airport Authority is finally focused on improving its small plane airports in Allentown and Forks Township. The aviation tax would be a step back, he said.

 

Former Gov. Tom Corbett and state legislators eliminated the 6 percent state sales tax on aircraft repairs four years ago — it's 7 percent in Allegheny County and 8 percent in Philadelphia — because most Northeast states had previously eliminated it. And aviation advocates say the numbers don't lie. In the years preceding the change, the number of pilots who based their small planes at Pennsylvania airports fell from about 4,200 in 2004 to 3,300 in 2012, according to the Aviation Council of Pennsylvania. But over the past four years the number has grown to more than 4,500, the council said. Over that period, the number based at LVIA, Queen City Airport in Allentown and Braden Airpark in Forks Township increased from 220 to 234.

 

That's another 14 plane owners paying lease fees and buying fuel from the airport, and more importantly buying service from local mechanics, Everett said. The amount may have been greater had the airport authority's flirtation with selling Braden Airpark not caused dozens of plane owners to leave that airfield.

 

That may all be true, Wolf spokesman J.J. Abbott said, but there's no way to close a $3 billion state budget hole without inflicting some pain.

 

"These special exemptions were created in a time of less daunting finances for state government and are no longer prudent given the burden that already exists for individuals and families," Abbott said. "Eliminating these special exemptions will make the tax code more fair considering the amounts of fees and taxes consumers pay related to air travel, while related business activities are exempt."

 

With more than 4,200 aviation maintenance workers in Pennsylvania, the Aviation Council argues that it would be unfair to repeal it, since most surrounding states make the repairs tax exempt or are proposing to do so. Ohio, New York, New Jersey and every New England state have varying exemptions, and though Delaware still taxes plane repairs, its state tax is just 0.38 percent. Virginia's exemption starts next year and West Virginia and Maryland legislators are drafting legislation to join them.

 

While sales tax on repairs may not seem like a deal-breaker, history shows it indeed is for hypermobile small plane owners, who can save hundreds or even thousands of dollars in tax simply by flying over the nearest state border, said Debbie Bowman, state Aviation Council executive director.

 

A typical annual inspection of a small plane costs $2,000 plus repairs, while repairs to corporate jets can cost in the hundreds of thousands of dollars, Bowman said.

 

"If they're in Pennsylvania, they're going to be a few landing strips away from avoiding the tax, and you can bet they'll do it," Bowman said. "While this would benefit the pilot or plane owner, the real damage of eliminating it will be to the small repair businesses operating at most of the 129 public use airports statewide. We'll be driving business away from them, while potentially driving them out of business. "

 

That's what David Van Allen is worried about. He invested hundreds of thousands of dollars to build Van Allen Airmotive late last year after being approved to open at Queen City. The business, run by his family and a team of mechanics, opened in February, just a week after Wolf released his budget. Business has increased fast enough to have him considering hiring, but he said the Wolf budget has him worried.

 

"We can either cut our rates to make up for the tax burden, or let people fly out of state," Van Allen said. "Either way, it jeopardizes the business. We're hoping to grow here but we need to see what happens with this."

 

If there is any good news for Van Allen and airport officials, it is that legislators will ultimately decide how much of the Wolf budget to keep, and the airplane tax is an easy line item to cut since the tax is estimated to bring in just $5.1 million next year.

 

"That's what I don't get," Van Allen said. "It's something that has such a small impact on the budget, but could potentially have a huge impact on our industry. Why?"

 

SUMMARY

 

Gov. Tom Wolf's proposes to restore an aviation maintenance and repair tax that was eliminated in 2013.

 

Against the tax: Airplane repair business and LVIA officials say it will drive small planes to neighboring states that don't have the tax.

 

For the tax: Wolf budget officials say closing a $3 billion budget deficit is painful and the tax is a special exemption that can no longer be allowed.

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