Airplane Tax Hurting Kentucky Economy, Critics Say

Published February 1, 2007

A tax on tangible personal property that is being collected in only four Kentucky counties is harming the state’s economy and holding down employment, according to a state senator and economic development advocates.

State law allows local governments to collect an optional tax on personal property. In four counties–Boone, Fayette, Jefferson, and Warren, which include the Lexington, Louisville, and Bowling Green areas–local school districts have begun levying the tax on private airplanes owned by corporations.

The result, according to state Sen. Richard Roeding (R-Lakeside Park), whose district includes all of Boone County, has been a loss of existing jobs and tax revenues, and difficulty attracting new businesses to Kentucky.

“This tax has been chasing the private aircraft industry out of Kentucky,” Roeding said. “Corporate jets are going to Ohio, Tennessee, and other border states.”

One Plane’s Bill: $32,000

The tax can be steep. One Lear jet at Bowling Green-Warren County Regional Airport had a local property tax bill of $32,000 in 2006, said Rob Barnett, airport manager and president of the Kentucky Aviation Association.

“These taxes are a huge obstacle for airport operators who are trying to attract a corporate operator,” Barnett said. “We have several corporate aircraft. All those registered in Kentucky received a bill like that. You can imagine the uproar we’re hearing from these folks.

“Local school boards had not assessed that tax in many years,” Barnett noted. “Many aircraft owners were not aware of it. I’m not sure why they’ve started levying the tax.”

Barnett confirmed the tax is chasing airplane operators away. “Here in Bowling Green, we’re 20 to 30 miles from the Tennessee border,” Barnett said. “Up in Lexington and northern Kentucky, planes are going into Ohio.”

More Revenue and Jobs

Barnett said the airports benefit from the presence of corporate jets because revenues from items such as additional hangar leases and fuel sales increase. Jobs at the airport also increase for support staff such as airplane mechanics.

In addition, funding from the Federal Aviation Administration depends on airport usage. The more planes that use an airport, the greater the funding, Barnett said.

Roeding said the tax brings in about $2 million a year in the four counties. Local school districts in the four counties oppose giving it up.

“A couple of liberal lawmakers won’t even talk about it. They say you’re helping the rich and hurting the poor,” Roeding said. “I say this is an economic development issue. Getting rid of the tax will help people.”

Four Hundred Jobs Missed

Roeding cited a recent conversation with Dan Tobergte, chief executive of the Northern Kentucky Tri-County Economic Development Corporation, who said consumer products company Procter & Gamble considered expanding in Kentucky and moving seven corporate jets there in 2006.

The company decided to expand in Ohio and keep the jets there.

Four hundred jobs that would have been created in Kentucky did not materialize, Tobergte noted.

“We’re not certain we would have won them, but this tax did put us at a disadvantage,” Tobergte said. “Most states have eliminated this tax for corporate jets. Ohio, across the river from us, eliminated it a while back.”

Tobergte said he and other economic development officials plan to lobby lawmakers for legislation mandating the elimination of the tangible property tax on aircraft.

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.