New Jersey Legislature Toying with Unconstitutional Tax Bill Likely to Harm Consumers

Guest Column By:

By Kirk Shaffer, Esq.
Attorney, United Airlines

A bill sponsored by New Jersey Senate President Steve Sweeney proposes a diversion of jet fuel tax revenue to non-aviation uses in violation of federal law and policy and undercuts our system of airports. The proposal – A-4392/S-2892– places New Jersey at a competitive disadvantage regionally and nationally and is both foolhardy and illegal.

The bill proposes using jet fuel tax revenue to fund the proposed extension of the PATH railway from Newark Penn Station to the Newark International Airport Rail Link Station and beyond. The bill also places the Port Authority of New York and New Jersey at direct risk of losing tens of millions of dollars in federal airport funding it receives each year and risk of having its prior federal grants “clawed back,” not to mention substantial penalties and higher costs to the flying public.

This proposal is bad for business and bad for passengers. Newark International is one of the busiest airports in the country. It is a self-supporting economic. Air service is growing, and airlines are investing millions of dollars in New Jersey to upgrade facilities and provide better services to New Jersey’s flying public. It would be a grave error to do anything which would make the aviation partners who serve our state less competitive, especially when states like New York and Pennsylvania are holding the line on fuel taxes and other states are reducing or eliminating them. New Jersey is surrounded by states (except Connecticut) which have low or no jet fuel tax. By comparison, data available from air carriers serving Newark International indicates that the Senate President’s proposal would increase the tax burden by a multiple of almost 20. This tax increase would not only make our state less competitive, but more importantly, the flying public in New Jersey would be left picking up a hefty tax bill. To offset the significant tax increase, the airline would be forced to pass the cost of doing business in the state to its residents making travel more expensive and preventing New Jerseyans from flying out of the state.

Federal law dictates that revenue generated on certain airports like Newark International including aviation fuel tax revenue must remain on the airport and be used for aviation purposes. Enforcement of this requirement has been a particular focus of the Federal Aviation Administration in recent years in light of the age-old temptation to take airport revenue “downtown” for purposes unrelated to aviation. Airport revenues may be used only for the capital and operating costs of an airport, the local airport system, other local facilities owned or operated by the airport owner or operator, or the state aviation program and directly and substantially related to the air transportation of passengers or property. While there are some narrow exceptions to this rule, they are inapplicable to the PATH extension as proposed.

Further, a close reading of this legislation and the environmental assessment for this project clearly reveals that the true objectives of this legislation are urban renewal of the South Ward of Newark and enhancement of travel to employment centers in Newark, Jersey City, Manhattan, and throughout the region. These are admittedly worthy community goals, but the connection to aviation appear to be only coincidental at best or, at worst, a cover to commit aviation revenue to illegal uses. This is not the first time in recent years that New Jersey has attempted an illegal legislative diversion of airport revenue. A 2016 attempt would have diverted airport revenue to repair and maintenance of local roads and gutters. This bill singles out one airline and its regional partners, and is thus unlawfully discriminatory in violation of the Commerce and Equal Protection Clauses of the United States Constitution.

The cost of major transportation infrastructure projects in New Jersey has risen dramatically while much infrastructure has crumbled. Repairs and maintenance have been deferred, and expansions have gone unbuilt. Fixing these problems should be a very high priority, but funding them with a massive new tax on passengers is not the way to accomplish that goal.

Kirk Shaffer, an attorney, is the former associate administrator for airports at the Federal Aviation Administration. Shaffer was a member of the FAA’s executive management team, responsible for the safety, standards, planning, financing, certification, and compliance of airports throughout the United States