An August 2017, PricewaterhouseCoopers study shows Texas has dropped from 2nd to 8th in the nation for aerospace and aviation manufacturing competitiveness. The major reasons include tax policies and a workforce skills gap.
General aviation alone accounts for $14.6 billion in total economic impact annually in Texas. Texas could realize a significant increase in aviation jobs, facility expansions and overall economic impact if the legislature addresses the following two tax impediments to job growth and investment:
a) Aerospace & Defense contractors are penalized with added franchise taxes under the Federal Acquisition Regulation (FAR) program. Companies face a unique challenge because their contracts with the U.S. Department of Defense require not only manufactured goods but also the services that support those products. Texas franchise tax deductions are not permitted on both expense categories when calculating “cost of goods sold.”
b) 26 other states have a sales tax exemption for aircraft parts and labor. Texas laws currently limit the exemption to “commercial carriers” only, which excludes many Texas aviation employers. Texas is a leading state for corporate and general aviation aircraft, but unfortunately most general aviation aircraft must leave Texas for maintenance service, repairs and other work – taking high-paying aviation jobs to those other states, as well.