Washington state considers new aircraft 'luxury' tax

The amended S.B.5801 applies a variety of new transportation taxes and was passed by the Senate March 29 on a 31-18 vote. The bill's 10-percent tax on the proceeds of noncommercial aircraft sales above $500,000, or the market value of leased aircraft exceeding $500,000, was added by state Sens. Marko Liias (D-District 21) and Curtis King (R-District 14) during the amendment process, days before the Senate voted.

With a House committee hearing yet to be scheduled, AOPA's Government Affairs team issued an alert to members in the state on April 2, encouraging them to contact their representatives and express their opposition to the bill, particularly Section 217. The amendment offered by Liias and King imposes "an additional 10 percent luxury aircraft tax on the sale of a noncommercial aircraft" if the sale price or market value exceeds $500,000. The bill, as currently written, would apply the tax only "to the portion of the selling price in excess of $500,000, or in the case of a lease requiring periodic payments, the fair market value of the noncommercial aircraft in excess of $500,000 at the inception of the lease."

AOPA advised members that the pending legislation could devastate general aviation in the state. The bill threatens aircraft and aircraft component manufacturers by adding to the overall tax burden, and history has demonstrated that luxury taxes do more harm than good. The U.S. Omnibus Budget Reconciliation Act of 1990 imposed a 10-percent luxury tax on the first retail sale of certain high-value items that devastated the industries and caused the loss of many jobs related to manufacturing or maintaining aircraft, boats, and other vehicles. The law was soon repealed.

AOPA noted several reasons to oppose the legislation:

• Job losses are likely if the Washington Senate bill is ultimately passed.
• Reducing demand and discouraging the purchase and registration of aircraft in Washington state will reduce tax revenue and is likely to result in lower net tax revenue.
• A luxury tax on aircraft would negatively impact rural communities that rely on GA for medical flights, emergency services, and transportation. Noncommercial aircraft used for public benefit missions (such as medical transport, animal rescue, and disaster response) would be subject to the tax.
• The luxury tax would put the state's aircraft manufacturers at a disadvantage.
• The bill encourages aircraft registrations in tax-friendly jurisdictions, including neighboring states Oregon and Idaho.
• Similar taxes have a history of reducing demand.
• The tax would make the state less appealing to aviation businesses.

The Washington State Standard reported that Gov. Bob Ferguson said on April 1 that the tax proposals as currently written are a nonstarter: "We cannot adopt a budget with anywhere near the level of taxes in the House and Senate plans." The first-term Democrat urged lawmakers to "immediately move budget discussions in a different direction," and said that he would not sign a budget that depends on substantial revenue from a new and untested tax that faces "the real possibility of being overturned," though he did not rule out supporting an amended wealth tax.

AOPA Alaska and Northwest Mountain Regional Manager Brad Schuster said the proposed bill is based on a flawed premise:

"The assumption that because aircraft are expensive and therefore 'a luxury item' reflects a grossly uninformed understanding of how noncommercial aircraft contribute to our society," Schuster said.

AOPA members in Washington can expect another advocacy alert when the bill is taken up by the Washington House Transportation Committee, including advice on contacting lawmakers and talking points against the bill.

If something at your airport is of concern, consider reaching out to your AOPA regional manager or airport support network volunteer. If your airport does not have an ASN volunteer, consider joining our ranks to engage with, promote, and protect your airport today at aopa.org/asn.

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