2013 was a year of many changes to the U.S. tax code, and some of the most significant changes were targeted at raising taxes on high-income Americans. The fiscal cliff tax deal created a new 39.6 percent income tax...
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- Combined Effective Commercial Jet Fuel Tax Rates and Fees...
Combined Effective Commercial Jet Fuel Tax Rates and Fees by State
For this week's tax map, we take a look at combined tax rates on commercial jet fuel in each state. When fuel for airplanes is bought at airports, much as when fuel for cars is bought at gas stations, there are taxes owed on that fuel. The airline industry estimates that, for every penny increase per gallon in fuel costs, industry-wide fuel expenses rise $180 million, which means $180 million in extra costs for passengers because airlines do not presently have wide profit margins. Fuel expenses range from 20 to 40 percent of airlines’ operating costs, so these costs are a significant component driving ticket prices for consumers.
(Click on the map to enlarge it. Reposting policy)
Several types of taxes apply to jet fuel. First, there’s a federal jet fuel excise tax applied nationwide. This tax ranges from $0.219 for general aviation such as private jets to $0.044, for commercial aviation. Then there are state or local jet fuel taxes, which range widely as well, and which sometimes vary for private versus commercial aviation. Beyond that, some states include jet fuel in their sales tax base, and some states apply additional taxes (such as environmentally-related taxes) to fuel.
As with gas taxes, there is a legitimate argument to be made for some of these taxes. If they are to be levied, using fuel excise taxes to pay for airports makes sense, much as using gas taxes to pay for roads makes sense. Federal rules, in fact, require that jet fuel taxes finance airports, though some states and localities have attempted to divert fuel tax collections.
It’s also reasonable to include general jet fuel consumption in the sales tax base. However, it does not make sense for commercial jet fuel to be in the sales tax base, as commercial jet fuel is a business input. Applying the sales tax to commercial jet fuel creates tax pyramiding, especially in an industry like aviation which has large excise taxes at multiple points along the production chain.
There are 19 states that don’t include any jet fuel in their sales tax base, 16 that tax private jet fuel purchases but exempt commercial airlines, and 15 states that apply the sales tax to commercial jet fuel (though sometimes at a reduced rate). Furthermore, 28 states apply fuel excise taxes, and many states also apply various other taxes such as environmental taxes. In 13 states, tax rates can vary significantly by airport due to local add-on taxes. For those states, our data reflects the highest-traffic airport in each state. Finally, three states (New Jersey, New York, and Washington) only tax fuel estimated to be burned within their state borders, significantly reducing the burden of fuel taxes.
The highest total tax rates for commercial jet fuel are in Illinois ($0.3275 per gallon), California ($0.27), and Connecticut ($2643). The lowest rates are in Delaware, Ohio, and Texas, none of whom tax jet fuel, as well as Maryland, with only a $0.0007 per gallon effective rate due to small environmental taxes.
|State||Effective Rate||Varies by Airport?||Rate is for which airport?||Jet fuel included in sales tax base?||Business inputs exempted?||Is there an excise tax?||Is there a burn-rate adjustment?|
Read more on fuel taxes here.
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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.