Calling it a ‘tax cut’ helped jet-fuel measure clear Ga. Legislature

Delta Air Lines is expected to make about $40 million a year from the Georgia Legislature’s decision during last week’s special session to stop jet-fuel taxes. KENT D. JOHNSON

Delta Air Lines is expected to make about $40 million a year from the Georgia Legislature’s decision during last week’s special session to stop jet-fuel taxes. KENT D. JOHNSON

Legislative backers of a tax break for air carriers such as Delta Air Lines made all the same arguments in last week’s special session that they did in February, when the General Assembly rejected the proposal because the company had broken marketing ties with the National Rifle Association.

But they added a new one guaranteed to win the hearts and minds of lawmakers: that continuing Gov. Nathan Deal’s July suspension of jet-fuel taxes for Delta and others was, in fact, a tax cut.

And, conversely, that if they didn’t continue the tax suspension, which happened in July without their blessing, it would amount to raising taxes.

The bill continuing the suspension of collections sailed through the General Assembly in the five-day special session, with the final vote coming in the Senate during a rare Saturday session. To the last, backers declared they'd cut taxes, even if most Georgians won't notice.

Brian Kemp was officially certified as Georgia's new governor.

"I believe this is a tax cut," state Sen. Jeff Mullis, R-Chickamauga, told colleagues before the final vote.

"To vote yes is a tax cut," added state Sen. Larry Walker, R-Perry, who carried the measure for the governor.

Even some of those who supported the bill had to roll their eyes a little.

State Senate Minority Leader Steve Henson, D-Stone Mountain, who voted for the tax break, said, "It is not my expectation people are going to see a significant reduction in fares."

Delta officials confirmed that they hadn’t promised state officials lower fares if they backed the tax break.

State Sen. Josh McKoon, R-Columbus, who opposed the measure, said, "It's not a tax break any of us are going to see."

Delta officials did say, in a statement, that it would help the industry continue to grow. Estimates have put the tax break’s value at about $40 million a year for Delta and millions more for other airlines and other users of jet fuel.

“The General Assembly’s vote to support Governor Deal’s executive order to suspend the tax on jet fuel will level the playing field with other states and position Georgia airports for continued passenger and cargo growth,” the company said.

Delta CEO Ed Bastian said in October, “We’re also going to be able to use the investment dollars that it gives us to grow more service here in Atlanta.”

Last week’s special session was called to approve a $470 million package of aid for southwest Georgia, which was devastated by Hurricane Michael in October.

But because lawmakers were brought back into session, they also had to take up executive orders Deal had signed since the last session ended in March. Deal leaves office in January.

Lawmakers had eliminated a decade-old jet-fuel tax break in 2015 when Delta got crosswise with the General Assembly. The company began a new lobbying effort to get the jet-fuel tax break for all airlines and users in 2017, before this year's regular session. Delta hired Deal's former executive counsel and, later, a firm that includes state House Speaker David Ralston's son, to push the measure.

Maintaining that most other states with major airline hubs had either lower or no jet-fuel taxes, their efforts to eliminate the levy appeared poised for passage in February.

But then Delta broke marketing ties with the NRA, a move guaranteed to cause trouble in an election year. The air carrier's decision followed the mass shooting at a Parkland, Fla., high school that left 17 people dead.

Delta's action infuriated some conservatives and prompted each of the leading GOP candidates for governor to oppose the tax exemption. Lt. Gov. Casey Cagle, the Senate's president and one of those candidates, was the most aggressive: His vow to block the legislation effectively killed it, despite Deal's objection.

The governor made two moves after the session in response: The state stopped collecting the local portion of the jet-fuel tax on July 1, and then later in the month, the governor signed an executive order suspending collections of the state portion of the tax.

The General Assembly didn't need to meet to provide funding for southwest Georgia storm relief: A committee of House and Senate leaders could have done that. But without a $40,000-a-day session, it would have had to wait until January to consider Deal's executive order.

The Friday before the special session, Ralston voiced skepticism about the measure’s chances.

“My view is any time we do a preferential tax, the burden is on that entity to make the case for why it is necessary and why it is good for the overall economy,” the speaker said. “To be a candid with you, I haven’t had that case made yet. I think it is going to have a tough row to hoe.”

Less than a week later, with Deal's floor leader making virtually the same case voiced during the regular session — along with the idea that it was a "tax cut" — the House overwhelmingly passed the measure. And Ralston said, "I think the Delta team in particular has done a good job of laying out the competitiveness argument."

The bill lawmakers approved last week only suspended jet-fuel taxes until June 30, so lawmakers will have to consider re-upping the break again when they meet in January. Ralston likes the chances of that happening. “I think the argument they used is one that will be equally valid then,” he said.

State Rep. Scot Turner, R-Holly Springs, who has been critical of some special-interest tax breaks in the past, said he could support the measure because it would benefit all jet-fuel users.

“It’s not the Delta jet-fuel exemption, it is the airline jet-fuel exemption,” Turner said. “This is a tax they are currently collecting, they are passing it on to their consumers. By voting for this, we are absolutely lowering taxes on the flying public.”

When it got to the Senate, the measure ran into a little more turbulence. Supporters said much the same thing as their House colleagues, that Georgia's tax rate put it at a "competitiveness disadvantage" against lower-tax states. They called it a tax cut. State Sen. Brandon Beach, R-Alpharetta, said that Delta had added routes since Deal suspended jet-fuel collections, although he didn't say they were directly related to that action.

State Sen. Bill Heath, R-Bremen, tried to amend the bill so the tax break would only run through Dec. 31. The General Assembly, he said, could reconsider it next year.

"We're all about helping those who need help most," Heath said, before citing statistics pointing to Delta's strong financial health. The company reported a profit of $1.3 billion for the third quarter of this year, despite higher fuel costs and a $30 million hit from Hurricane Florence.

Cagle, who played a major role in killing the tax break in February, ruled Heath’s proposed amendment “out of order,” so it never got a vote.

In the end, the Senate backed the measure 43-9.

McKoon, serving his last session, said before the vote that fighting such a corporate tax break was like being on the wrong end of a game between the Harlem Globetrotters and their perennial fall guys, the Washington Generals. He knew what the outcome would be before the debate began, and he knew he was on the losing side.

“It is a tax break targeted to a particular industry that has the benefit of a robust lobbying operation, the support of the most powerful trade group at the Capitol and the support of a former employee of the governor,” McKoon said. “I would love for the aviation industry to come back and demonstrate that ordinary people receive a benefit, even in the price of a ticket. I don’t think we are going to see that.”

General Assembly special session

Lawmakers backed all three major elements of Gov. Nathan Deal’s call for a special session:

  • A $270 million package of spending to clean up and repair areas of southwest Georgia devastated in October by Hurricane Michael
  • A 10-year, $200 million tax break for farmers and landowners designed to get them to replant trees in the region
  • A continued suspension of the collection of jet-fuel taxes through June 30, a measure that could save Delta Air Lines $40 million