Often, taxpayers need to lobby for better tax treatment under the current tax codes (e.g. the Federal, state and local tax codes). Lobbying has a bad reputation because of abuses. On the other hand, there is no way to get a better tax treatment than to go before the representatives and senators at the Federal and state level, to show why the industry makes economic sense and also results in fairer treatment for taxpayers. In one case, the airline industry suddenly became subject to “flyover” nexus. “Nexus” is the legal term for having sufficient economic activity to allow states and cities to require the filing of returns and payments of taxes. This is clearly a completely impractical regulation to enforce. It says that an aircraft which flies over a jurisdiction without stopping/landing is subject to tax. The legal basis of this was quite weak yet certain states, particularly Wisconsin and Pennsylvania, pushed their interpretation quite vigorously. Representatives of the industry, including attorneys, showed members of Congress how difficult and expensive this interpretation by the states would be for passengers. Ticket prices would have to rise sufficiently to cover this increased cost. Congress solved the problem, under the Commerce Clause, and the industry, which was undergoing severe economic stress, was able to avoid the losses which would have resulted had the Supreme Court sustained the state’s ruling.
Another issue is modal equity. The industry has lost on this issue for almost 100 years. Highway users do not begin to pay for new and renewed highways out of gasoline taxes. Refunds to the Highway Trust Fund reports show that over $140 Billion had been transferred from the General. There are several problems here:
1) When railway tracks get worn so that they require maintenance work, the costs of this work is paid by all taxpayers, whether or not they use it. The Federal income taxes which railways pay on their net taxable income go in part to pay repair expenses which should be paid by users, who are the persons who caused the damage. The railway companies pay for their track repairs out of their own pockets. Where’s the equity here?
2) Highways, being owned by various government units are exempt from property taxes. Railways are not exempt from property taxes on their properties. Again, where is the equity?
3) Railroads have invested for, in some cases over 150 years in their properties, and have considerable funds tied up in their infrastructure. Highway users have spread their costs over non highway users. Often, as in the case of overflights and/or property valuation issues, the only way to economically get relief is by lobbying local officials. An example is a case in point. The CFO had lost his temper while meeting with the Assessor and local officials. Needless to say, the atmosphere was quite tense. I got nowhere until I asked the facility manager to give me an idea of the possible economic impact. Together, we showed that the employer was making a significant impact. This facility had the second highest payroll in the area and the company was providing high tech jobs, so that employees had a real choice in employment opportunities.
Once I had explained this to the city council and mayor, the atmosphere became noticeably friendlier and the company’s property tax bill went down materially. The company was seen as an asset to the community and I no longer had to make weekly trips to the city. I paid for my entire career out of the tax savings I got in that jurisdiction.
In another case, the state of Michigan was aggressively enforcing a sales/use tax law. The major airline was unable to make any headway in getting relief for the industry. I looked for the local representative and persuaded him that the industry was providing good paying jobs. As a result, approximately six months later, we got a bill to grant the industry an exemption on aircraft. The industry had been unable to make progress; however two one-on-one meetings were all that was required to break the log jam and overcome the Treasury’s vigorous opposition to the exemption.