A bill that would exempt interisland flights from the state general excise and use taxes on jet fuel - a measure that would help the state's smaller airlines - has been introduced once again by Maui Rep. Angus McKelvey.
Larger carriers, that fly from the Mainland and international destinations do not pay the general excise and use taxes, but carriers who fly only in-state do, said McKelvey, a Democrat who represents West Maui, Maalaea and north Kihei.
It's a matter of interstate commerce, which Hawaii cannot tax, and intrastate commerce, which it can, according to state House official Jason Parasco.
"This bill impacts everyone because, as an island state, we are extremely dependent on interisland air travel, especially in ensuring that the smaller rural areas in Hawaii are well-served and have access to the other areas of the state for business, as well as staying connected with loved ones," said McKelvey. "In these times of rising costs, we need to look at what we can do to benefit everyone."
The Maui lawmaker said that the measure, which he introduced two years ago without success, is aimed at leveling the playing field among airlines, increasing competition, growing flights into smaller airports and providing another delivery method for goods.
He recalled in his youth flights from Waimea on the Big Island landing at the old Kaanapali airstrip filled with flowers for the resorts for Valentine's Day.
"It's another idea to create more demand and competition for small routes and to bring them back," he said Tuesday, noting that he didn't believe he could fly directly from Kapalua West-Maui Airport to Waimea-Kohala Airport any more.
He did not have an estimate for the cost of the tax exemption but complained that legislative analysts don't take into consideration the potential economic positives in their calculations.
He added that some of his "Oahu-centric" colleagues in the Legislature don't understand the importance of air travel in the Neighbor Islands.
"Since the Superferry ceased operations, interisland transportation has once again been limited to air travel," he said in a news release about the bill. "This has coincided with a rise in fuel costs that has put the islands farther away from one another. This legislation would help reduce the costs carried on to consumers and bring the islands together."
The bill does have a sunset clause in it in case the airlines do not pass on the tax savings to the flying public, McKelvey said.
This measure would benefit airlines such as go!, Mokulele Airlines and Island Air, said Parasco.
"Anything that reduces our cost in this cost-sensitive industry is a welcome thing for us," said Michael Rodyniuk, executive vice chairman of Gavarnie Holding, parent company of Island Air, on Tuesday.
The House Committee on Veterans, Military & International Affairs and Culture and the Arts will hear the bill, HB1128, this morning.
* Lee Imada can be reached at leeimada@mauinews.com.
* This article contains a correction from the article published on Wednesday, Feb. 6, 2013. Jet fuel tax exemption. Hawaiian Airlines is exempt from the general excise and use taxes for fuel for its out-of-state flights, but it pays those taxes for fuel purchased for interisland flights, said Keoni Wagner, Hawaiian Airlines spokesman. A story on Page A3 on Wednesday provided incorrect information on the airline and its payment of general excise and use taxes for fuel due to information provided to The Maui News.
