Senator Isakson’s Tax Fairness Provision

We could not agree more and applaud Senator Isakson for his leadership and his work to safeguard U.S. jobs from nations that are cheating U.S. Open Skies trade policy. The Senate language ends a tax exemption that applies ONLY to airlines that have income derived from the U.S. and are from nations that deny fair market access for U.S. airlines. Its aim is very hard to argue with: Play by the rules, or, pay your fair-share of taxes. No one should receive preferential tax treatment while violating trade laws and restricting their markets from U.S. companies and their employees. As written, Senator Isakson’s tax fairness provision includes both the United Arab Emirates (UAE) and State of Qatar, as well it should, as they are the biggest cheaters and the most blatant violators of U.S. trade law.

Since the overwhelming evidence was revealed almost three years ago, Americans for Fair Skies has worked diligently to share with you the facts regarding the United Arab Emirates and State of Qatar’s subsidization of their respective airlines, Emirates, Etihad, and Qatar Airways. These airlines have been provided with over $50 billion- and that’s just in the past decade alone- and this number continues to grow every day this predatory behavior goes unchecked. These subsidies have allowed these three airlines to expand at rapid rates, without regard for market demand or economics, forcing U.S. airlines off routes and restricting U.S. airlines from their own international growth. Senator Isakson’s provision would impact the UAE and Qatari carriers, as well as airlines from other closed markets, by ending their tax reward for harming U.S. jobs. The Senate language does not limit these airlines from flying to the U.S., it simply taxes the foreign airlines on their U.S. revenue when there is no reciprocity of competition. Senator Isakson’s provision would also ensure that these airlines would have to file tax returns in the United States, which would help to shed additional light on their finances, adding even greater transparency to their subsidies and Open Skies violations.

Kevin Mitchell, the leader of the for-profit Business Travel Coalition, predictably, opposes the Isakson language, as does a coalition representing airlines that profit off the UAE and Qatari subsidies. We are not sure who is paying Kevin Mitchell for his opposition to this provision and his continued support for the UAE and Qatar over the United States. But his arguments, and those of the airlines that are aligned with foreign interests over U.S. interests, are another weak attempt to distort the facts of this issue. Their attempt to muddy the narrative does not change the reality that U.S. airlines and their employees are harmed by the UAE and Qatar’s predatory expansion. The subsidized growth of the state-owned and state-subsidized carriers, Emirates, Etihad and Qatar Airways, has distorted the international aviation marketplace, thereby depriving U.S. air carriers the ability to compete equally and fairly, as Open Skies agreements intended. Kevin doesn’t attempt to dispute these facts. Instead, he uses a tired “slippery slope” argument and argues that this upends precedent and sets the stage for retaliatory action against U.S. airlines. These arguments are flawed.

When the United Arab Emirates and State of Qatar made their decisions to begin violating international trade law by subsidizing their airlines, they upended decades of international precedent. As a result of their predatory expansion and distortion of the international aviation marketplace, U.S. air carriers have been deprived of their ability to compete equally and fairly. Kevin Mitchell and others may claim that nothing stops a U.S. airline from flying to the Middle East, but those who live in the real world of business understand that government subsidies and capacity dumping undermine all principles of fair competition. Senator Isakson’s language recognizes the new reality of global aviation these foreign carriers have created with their violations of U.S. Open Skies policy and adjusts U.S. tax law accordingly, removing a tax benefit from competitors that are in violation of their international agreements and have no regard for market demand and the financial norms of profit and loss.

Senator Isakson’s provision also clearly articulates that it only impacts passenger operations. FedEx, UPS, and other cargo operations are not impacted by this provision. Any suggestion by Kevin Mitchell and others otherwise is either a misunderstanding of the facts or an attempt to muddy the narrative with falsehoods. Speculation about “retaliatory action” by the UAE is flawed. There are no U.S. passenger carriers serving the UAE or State of Qatar to retaliate against, because the U.S. air carriers already cannot compete on the un-level playing field created by the two nations with their subsidized airlines. U.S. airlines and their employees can compete with any company in the world, and win, but in these instances, they are competing against the treasuries of nations. Any suggestion by Mitchell or others that the UAE or State of Qatar would take action against other U.S. companies with operations in their nations is also a hypothetical falsehood and does not recognize the economic reality that the UAE and State of Qatar need the U.S. companies in their nations for their own self-interest given the benefits they provide. And as we’ve pointed out, if there is one thing that can always be counted on, it is that the UAE and State of Qatar will act first and foremost in their own self-interest.

It is clear that Mitchell and others who contest this provision are grasping at straws with their opposition and are doing so not on the basis of facts, but in the interest of their foreign benefactors. Facts matter. And once again, Mr. Mitchell is looking to hide the truth.

Finally, one additional fact: The non-partisan Congressional Budget Office estimates that the tax fairness provision would generate $200 million to the U.S. Treasury. That’s $200 million back to the U.S. taxpayers and away from those who are hurting U.S. jobs

This provision is a fine piece of work, Senator Isakson. Thank you.

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