Taxes in the sky above

Press, 21 August 1989, Page 12

Taxes in the sky above

WISCONSIN’S Tax Appeals Commission pondered philosophical questions. Does the air above Wisconsin belong to Wisconsin? Yes. But what about the air above • Wisconsin’s portion of Lake Michigan? Yes, again. The questions were not epistemological. They were part of a down-to-earth appeal from Republic Airlines (which is now part of Northwest Airlines) against a bill from the state for nearly $U569,000. Wisconsin says the money (and SUS2I,OOO in interest) is owed to it in taxes on drinks and food served by the airline to its

passengers between 1981 and 1984. The service was not on flights landing in or taking off from the state, but on flights that were just flying over it. The appeals commission dismissed Republic’s argument that taxing in-board services on such flights is an undue burden on interstate trade. So the issue has now moved to the courts where it will doubtless attract the interest of other airlines, including international carriers.

Republic was picked as a test case because it had been registered as a Wisconsin company before it was swallowed up. But

there is nothing in the state’s interpretation of its law to stop it from assessing taxes on any airline — domestic or foreign — flying overhead. Credit Wisconsin for being creative. Americans are a bit abstemious when it comes to drinking on domestic flights. Others are not so fussy. Passengers on Britannia Airways, Europe’s leading charter company, spent more than SUS 7 per head per flight in 1988, most of it on alcohol. How can Wisconsin tempt British charter flights to the state? Or at least over it.

Copyright—The Economist