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Jet fuel tax changes looking poised to pass Senate

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A proposal by state Sen. Anitere Flores to bring some finality to a long-simmering legislative food fight between major airline carriers like United Airlines and Delta and their smaller upstart rivals operating in Florida is getting closer to taking off from the Capitol Building and landing in the Governor’s Mansion to await the approval of Gov. Rick Scott.

The legislation — which seeks to end an existing exemption to state taxes on jet fuel consumption — is currently in for a layover in the Senate Appropriations Committee, its final committee stop before facing a vote before a full assembly of the upper chamber.

To recap for those readers who don’t usually follow the internal affairs of Florida’s various airlines: the Legislature in 1996, in order to stimulate the growth of a domestic air industry (specifically, to attract a reconstituted version of Pan American World Airways) enacted a substantial tax break tailored to Pan Am’s specifications — specifically, any airline carrier that offered transcontinental jet service, was willing to increase its Florida-based workforce by 1,000 percent and offered 250 or more full-time jobs would pay zero taxes on jet fuel, or rather be reimbursed for its tax bill via a state rebate system.

Five years and a new Republican governor later, the Legislature in 2000 felt that its job in the arena of stimulating air travel supply was done and so preemptively repealed the tax exemption, though it was already set to sunset in 2001.

Then came the horrors of 9/11, among them acute concerns for many in the statehouse that tourism to Florida could be damaged by a decline in air traffic for an extended length of time. So lawmakers went back to the bill well and re-established the tax carve-out, but this time with no sunset clause — presumably engraving the tax cut into the industry forever — and with no attendant plan to enforce the requirements for workforce or travel route expansion.

In the intervening years, Florida’s air carriers have settled into two tiers as they relate to the tax exemption: long-established “legacy” carriers like the ones mentioned above, which, owing to their existence prior to the program do not receive the tax break, and smaller, fledgling carriers like JetBlue, AirTran and Spirit — not to mention mid-market giant Southwest Airlines, which does the second-most business of any carrier in the state — which do.

Flores’ SB 722 would end the exemption altogether and replace it with a unified, lower rate than is currently on the books, from 6.9 cents per gallon to 5.4 cents per gallon for all airlines.

HB 595, the House companion bill sponsored by Broward Republican state Rep. George Moraitis, has already passed the House by a count of 108-3. Democratic state Rep. Jared Moskowitz joined Republicans state Rep. Matt Gaetz and state Rep. Mike La Rosa in casting lonely “Nay” votes.

When we last caught up with the issue back in March, state Sen. Darren Soto had pulled off a sneaky coup by attaching an amendment that Flores considered “unfriendly” to the bill by a fluke-y 4-3 vote in Finance & Tax while some panel members were not present. The amendment would introduce a formula by which certain carriers are given the exemption and others are not — in an attempt to retain a competitive advantage for the small carriers whose advocates say would be hamstrung without — as well as a requirement that the Department of Economic Opportunity study intra-state air routes, which anyone who has flown into or out of Tallahassee can tell you could stand some extra attention.

Soto told Florida Politics at the time that he and Flores “have a long history of working together on issues, so I think we’ll come to a resolution that helps the small airlines that are so invested in my district in Orlando as well as one that creates a level playing field for all carriers that service Florida.”

Ultimately, Soto’s exemption-by-formula language was scrubbed from the bill and never appeared in the House version and so would appear to be sunk. What does remain, however, is a uniform tax rate for all airlines; a three-year cushion built in for the smaller carriers to adjust while the new rates are phased in; and a study on domestic air travel to be conducted by the Florida Transportation Commission, rather than the DEO.

After a long period of give and take, the legislative product now circulating is a very reasonable solution to a difficult and complex issue of market equity. The stakeholders have been heard and their arguments sussed out. The Senate should take an affirmative move and put this issue to bed by voting up on the bill in full Appropriations and again when it reaches the floor.

Ryan Ray writes about campaigns and public policy in Tampa Bay and across the state. A contributor to FloridaPolitics.com and before that, The Florida Squeeze, he covers the Legislature as a member of the Florida Capitol Press Corps and has worked as a staffer on several campaigns. He can be reached at ryan@floridapolitics.com.

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