Some might consider it a relief not to be offered airline food on flights leaving Salt Lake City.
But others - particularly the 345 local workers who would lose their jobs preparing the much-maligned cuisine - would consider it a major inconvenience.That's the warning Delta Air Lines voiced to a state commission considering the elimination of a tax break on airline food sales.
Delta, which employs more than 4,300 Utahns and spent nearly $440.5 million at its Salt Lake hub last year, didn't threaten to fold up its hangar and leave. But spokesman Danny Quillen said the airline would consider changing the city where meals are loaded or eliminate meals on flights out of Salt Lake City to save $1 million a year in sales taxes.
"Both of these options will reduce the amount of benefits derived by Utah, and be a regrettable, but necessary, disservice to our Utah passengers," he told the Tax Review Commission Friday.
The commission is in its second year of examining state sales-tax exemptions and recommending to the Legislature which ones are unjustified or outdated and should be repealed. The extra revenue would go toward building more schools.
Private research firm Bonneville Research Group recommended repealing the tax on airline food, which would reap $1 million annually, noting four surrounding states do the same and the economic impact would be minimal.
Meanwhile, the state should retain the exemption on sale of aircraft parts and equipment, which costs the state $650,000, to preserve Utah's potential as a center for aircraft maintenance, the research firm said.
While Quillen agreed with the aircraft maintenance recommendation, he said repealing the exemption on airline food could cost the state more than the extra revenue it would generate.
Speaking for other airlines serving Salt Lake City International, Quillen said commercial air carriers would alter operations here if forced to pay the tax. While the amount appears tiny per meal - about 30 cents - it's significant in the current industry climate of slashing costs to compete, he said.
Its Salt Lake hub lost money in the past 12 months, Quillen said, primarily due to competition cutting airfares. He explained that Delta does not make money on its discount $59 flights and is looking at every avenue to cut costs and maintain market share.
"Although carriers in the past have absorbed these added costs to maintain market share, we can no longer suffer the burden of these costs and operate routes at a sustained loss," Quillen said. "Thus, service reduction is a viable alternative to cover any added expense."
He noted that Delta moved a distribution operations out of state after the State Tax Commission ruled its use should be taxed.
Quillen said Salt Lake International ranks third, behind Atlanta and Los Angeles, as Delta's most costly in terms of tax-cost per passenger. Delta pays property taxes, fuel taxes and some sales and use taxes.
Finally, Quillen noted the sizeable investments Delta and other airlines have made in Utah based in part on the tax breaks granted by the state. "To repeal this exemption now that investments have been made and objectives have been met will set an unfavorable precedent that business will consider when weighing future investments in Utah," he said.
At its September meeting, the commission will hold a public hearing on the sales-tax exemption granted to newspapers, cable television and telecommunication services.
The tax break for newspaper sales costs the state $800,000 annually, while it forgoes $4.4 million by not charging sales taxes for cable television subscriptions and $19.6 million for not taxing telecommunication services.