As noted in “Young, Gifted, and Black In Massachusetts”, our governor has finally accomplished something. It seems that the sales tax on aircraft, aircraft rental, and aircraft parts is returning. Massachusetts prior to 2002 experimented with trying to collect a fat sales tax on $50 million Gulfstreams and $3 million Pilatus PC-12s. What happened? Planesense set up shop in Manchester, New Hampshire (tax-free) and NetJets based all of their Gulfstreams in Hartford, Connecticut (tax-free). The state lost thousands of jobs in hangar construction, flight dispatch, maintenance, pilots, sales, etc.
A Republican initiative in 2002 resulted in a repeal of the sales tax and encouraged growth in communities such as Worcester and Springfield where a big seldom-used airport was their only asset aside from widespread availability of crack cocaine. During a period when general aviation activity declined nationwide and population growth lagged sunbelt states, Massachusetts enjoyed a 40-percent rise in the number of based aircraft. Governor Deval Patrick has been working for months to reverse this trend.
According to the Worcester Telegram, the governor’s plan to export jobs to New Hampshire and Connecticut has succeeded. Massachusetts will attempt to collect tax on new aircraft and aircraft maintenance. People will set up their new aviation businesses in Connecticut and New Hampshire (only a 5- or 10-minute flight away in most cases). Airplane owners in Massachusetts will take their planes to these other states for service (we already take our Cirrus to Groton, CT for most of its service).
Flight schools in Massachusetts are going to suffer an additional crippling blow. Their competitors in sunbelt states pay $1-2 gallon less for fuel and can defray fixed costs much more easily due to the perfect weather.
Perhaps the lesson here is to beware of politicians whose campaign slogan boils down to “I’m black and make people feel good, so elect me.” Being inspired is nice, but it is also nice to have a job.
[Update: I ran the numbers and figured out that the 5% Massachusetts sales tax would be enough, for most jets, to pay an entire year of operating costs. You could base the plane in New Hampshire, hire a crew to fly it down to meet you anywhere in Massachusetts whenever you needed it, and the 5% tax would just about pay for the salary of the crew, fuel, hangar, insurance, etc. Subsequent years wouldn’t be quite as advantageous, but you’d be able to get employees in New Hampshire at a lower cost because (a) they wouldn’t have to pay income tax, (b) they wouldn’t have to pay sales tax, and (c) housing is much cheaper in New Hampshire.]