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The New Jersey Business and Industry Association on Thursday urged the Senate Transportation Committee to reject a proposal to repeal the aviation fuel tax exemption for qualified airlines because such a move would increase carrier costs at Newark Liberty International Airport and make New Jersey less competitive.

“We are always concerned about the impact of additional taxes on business and industry in New Jersey, particularly after the recent increase in the Corporation Business Tax, which adds to the high cost of doing business in New Jersey,” said NJBIA Vice President Andrew Musick.

The bill before the committee, S-2892, would effectively raise taxes on United Airlines and the regional carriers it subcontracts with in order to help pay for an extension of the PATH train service to Newark Liberty International Airport. United Airlines and its regional partner carriers operate more than 400 daily flights out of its Newark hub and serve 14.6 million passengers a year.

“United is one of New Jersey’s largest companies and a major economic engine for our state,” Musick said. “Eliminating the fuel tax exemption will result in increased costs, specifically at Newark Liberty International Airport, which is already the highest cost airport in the country.”

If enacted, the bill would expand the state’s taxes on aviation fuel, requiring United and its regional contractors to pay 4 cents per gallon on all fuel purchased in New Jersey. Federal rules allow the state to collect taxes on fuel used during taxiing and takeoff, but not during flight. The tax revenue must be used for airport-related improvements.

Musick said New Jersey and New York currently structure their aviation fuel taxes in a similar manner and eliminating the aviation fuel tax exemption in New Jersey would put this state at a competitive disadvantage in the region.

“All told, it is the cumulative impact of these policies that contribute to the ever increasing cost of doing business in New Jersey and undermine efforts to encourage economic growth,” Musick said.

Taxation & Economic Development News

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