Georgia (U.S) Governor Resolves Jet Fuel Tax Controversy Amid ‘NRA Discount’ Affair, Sales Tax Dropped Effective Wednesday

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Back in March Delta Air Lines management has found itself in a battle with the government of their home state of GA after lawmakers voted to cut down an exemption on jet fuel taxes as part of retribution for Delta’s discontinuation of an ominous NRA discount.

The states Governor has now signed an executive order to stop collecting sales tax on jet fuel effective Wednesday, August 1st 2018.

What happened back in March was that airlines among other businesses have announced publicly that they would stop supporting the firearm industry in any capacity and end ‘discounts to the NRA’ yet so far none of the airlines actually outlined in numbers what the discounts really were to begin with.

Apparently Delta Air Lines, United Airlines as well as a couple of rental car companies ended a relationship with the National Rifle Association (NRA) in the United States which allowed the members of said group to get certain discounts with the companies.

Here is Delta’s Tweet from last week that started the whole avalanche:

Apparently the discount in question wasn’t an individual discount code for members but rather a rebate for group convention travel to an annual conference. Many organizations and conventions receive such rebates and often they’re tied to having a group of people traveling together.

Based on this Associated Press article legislators in Georgia (Delta is based in Atlanta) were furious about this and voted to strike out a tax exemption on jet fuel from new tax legislation.

Pro-gun Republicans in the Georgia legislature have easily approved a tax bill that strips out a sales tax exemption on jet fuel. Delta, based in Atlanta, would have been the primary beneficiary. Republican Gov. Nathan Deal calls the dispute an “unbecoming squabble.”

Lt. Gov. Casey Cagle and other Republicans vowed to kill the Delta tax break after the airline announced it would no longer offer discounted fares to NRA members.

Lawmakers voted 44-10 Thursday in favor of a tax proposal that had been stripped of a provision exempting jet fuel from sales taxes. Atlanta-based Delta would have been the prime beneficiary.

Fast forward to this week, USA Today (access here) reported now that the Governor has signed an Executive Action to stop charging the sales tax on jet fuel.

Georgia Gov. Nathan Deal signed an executive order Monday to stop collecting sales tax on jet fuel effective Wednesday, a tax the legislature kept in place this year to penalize Delta Air Lines.

The Georgia legislature debated dropping the 4% sales and use tax on jet fuel this year as part of a broader tax overhaul. But lawmakers kept the tax in place in retaliation for Delta halting a discount program with the National Rifle Association.

Deal noted that Georgia airports generate $62 billion in economic activity each year, with flights at Hartsfield-Jackson Atlanta International Airport supporting $11 billion in investment and 42,000 jobs across the state.

The 4% tax on jet fuel is among the highest in the country, behind only Illinois, California and Michigan, Deal said. Delta pays an estimated $40 million per year. Other states impose little or no tax on jet fuel, putting Georgia at a disadvantage behind Florida, New York, North Carolina and Texas, Deal said. …

Delta CEO Ed Bastian thanked Deal for helping the airline with a hub at the busiest airport in the world for remaining competitive in the global economy.

“With 33,000 employees in Georgia, we are honored to call this our home state, and proud of the $58 billion in economic impact that Hartsfield-Jackson Atlanta International Airport creates statewide every year,” Bastian said. “The savings will allow us to invest additional flights into Georgia in the years to come. We look forward to continued growth of our service in Georgia and the job creation that will accompany it.”

This is good news for Delta as jet fuel is one of the primary cost factors of an airlines operation and fuel prices dictate where the price for tickets move as we have noticed in the past decades. I’d be highly surprised though if this is going to be noticeable by the customer in any way as I doubt Delta is discounting their tickets to reflect the savings.

For an airline that always decried and rallied against the Middle East carriers over subsidies (especially fuel subsidies) Ed Bastian sure jumps high and displays his joy over the upcoming 4% savings.

Conclusion

This entire matter has been a petty political affair on both ends of the aisle. Delta should have made their decision about changing these discount policies in a less public manner by simply not renewing it next time and then be done with it. Taking on a controversial organization in such a way is a bad choice as you automatically alienate a large base people. In the end the discount doesn’t really affect single, everyday customers and as mentioned I’d be surprised if many people even used it to begin with.

For politicians to go after a major contributor to the local economy, an ‘Atlanta Icon’ just as Coca Cola, for partisan issues isn’t reasonable. That being said I’m not a big fan of subsidizing an industry that currently drives record profits while ‘nickel and diming’ customers wherever possible. Delta isn’t going to add additional flights or hire more employees because they now don’t have to pay fuel tax. At the same time it distorts the market as competitors from other hubs are clearly at a disadvantage here. For example in New Jersey, Jet Fuel is subject to a state excise tax of 13.5 cents per gallon plus .04 cents per gallon PGRT plus .02 cents per gallon Airport Safety Tax (according to Sales Tax Handbook).

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