Proposed Airline Ticket Tax Bump Has Tempers Soaring

USA Today: President Obama is asking passengers to pay a few dollars more in taxes for an airline ticket — which already is about 20% taxes and fees. And the travel industry is in an uproar about it.

Big airlines say people would buy fewer tickets if Congress approves the president's proposal to help cut the deficit and pay for the nation's aviation system. Regional airlines, which carry more than half of domestic fliers each day, say it could force them to pull out of small cities.

Small-city airports worry about that.

And some travelers and consumer groups say it's just unfair to ask passengers to pay more on top of the taxes and fees that government and airports already charge.

"We are flying on packed planes at increasingly higher rates with larded-on fees and taxes," says Adam Conrad, 45, a health care software executive from Duncansville, Pa. "I have flown over a million miles, and my next million is looking like it will cost a million."

Obama's proposal, which he spelled out last week, would:

> Impose a $100 fee on each commercial airliner and corporate jet every time they take off. Only military planes and small planes with piston engines would be excluded from the new take-off fee.

> Raise the per-passenger security fee, which helps pay for the Transportation Security Administration's airport screening, from the current $2.50 for each leg of a flight to a maximum $5 for a one-way trip to a flat $5 one way. The fee also would rise another 50 cents a year from 2013 through 2017 to $7.50. The Homeland Security Department could raise it further through regulation.

The president's goal is to raise $36 billion to help trim $4 trillion off the deficit in the next decade and get more so-called user-fee money to underwrite aviation security, airport improvement and air traffic control.

Although the increases would be passed on to passengers through ticket prices, and some of the effects of increases would be small or not felt by passengers for a while, the airline industry says they're a burden at a time the industry is struggling to make a profit.

"Aviation shouldn't be a piggy bank for every other purpose," says Roger Cohen president of the Regional Airline Association. "This was proposed, I think, based on the (bank robber) Willie Sutton theory that this is where the money is."

Small airlines, big hit
Perhaps no part of the industry is howling louder than regional airlines. They say the $100 tax on a plane every time it takes off hits them — and the passengers who fly on their planes — the hardest.

Although more than half of all domestic passengers travel on roughly 13,000 regional airline flights a day, they're flying on smaller planes with fewer fellow passengers than on a 200-seat jetliner flown by bigger airlines such as Southwest or Delta. They're often the shuttle airlines between smaller cities and larger ones, or between big cities that aren't that far apart.

Indicative of their load: About 63% of the departures at Chicago O'Hare in July were on regional carriers. It was 82% from Cincinnati and nearly 88% from Des Moines. Some of the flights, especially from smaller cities, carry only seven, nine or a dozen passengers.

Cohen estimates the tax would cost passengers $3.23 more per ticket to fly out of Springfield, Ill.; $15 from Pierre, S.D.; and $36 from Joplin, Mo.

Smaller airports would lose out, he says, because travelers would balk at the higher ticket prices and choose to drive to bigger airports rather than take a connecting flight to their destinations. "It's not a question of if, it's just a question of how many would lose service," says Cohen, whose association represents 30 regional airlines. "They might as well put the 'Closed, going out of business, not coming back' sign on every one of those communities."

Some regional airport managers fret about that, too. "Particularly for the discretionary traveler, they are very sensitive to price," says Sherry Wallace, spokeswoman for Roanoke (Va.) Regional Airport. She worries that because regional airlines have fewer seats to charge the fee, they might abandon routes altogether and "definitely affect smaller communities."

Sen. Pat Roberts, R-Kan., says flights from his hometown area of Dodge City already are struggling, although taxpayers subsidize them. If flights are canceled, passengers have to drive nearly three hours to Wichita or farther to Denver or Albuquerque.

The president is selling the tax as one on executive jets, saying corporations need to pay their share to fly. The tax would generate $11 billion over 10 years, with the money going to the Airport and Airway Trust Fund to pay for improvements to airports and air traffic control.

The White House argues that big airlines flying large commercial jetliners pay the government $1,300 to $2,000 in taxes for a flight from Los Angeles to San Francisco, while a corporate jet flying the same route and using the same Federal Aviation Administration services pays $60.

Lew Bleiweis, airport director for the Asheville (N.C.) Regional Airport, agrees that corporate jets need to contribute to air-traffic control. But, he warns, burdening commercial airlines with too many fees "could lead to a domino-effect of reduced service."

Although passengers on big jetliner flights won't pay as much, the nation's big airlines don't like the $100 tax, either. "We already pay more than our fair share of taxes — more than the alcohol and tobacco industries, whose products are taxed at levels to discourage their use," says Nicholas Calio, president of the Air Transportation Association.

The association, which represents most of the nation's big airlines such as Delta, United Continental and American, says federal taxes, fees and airport charges already make up about 20% of an average ticket for a domestic flight.

For an average $300 ticket, the association says, passengers pay about $60 in taxes, fees and charges.

Reason for raising
The security fees that passengers pay now cover about 43% of the TSA's costs of providing security in the air. The president says that it needs to better cover the agency's costs — hence the proposed increase. Passengers who routinely fly connecting trips wouldn't see an immediate price increase if Congress approves raising the $2.50 fee. But anyone who flies direct each way on a trip would see the tax double immediately. It would triple in the following five years.

"This is going to hit the middle class right in the pocketbook," says Charles Leocha, director of the advocacy group Consumer Travel Alliance.

The White House says the security fee increase is "modeled" on an idea from Rep. Paul Ryan, R-Wis., the House Budget Committee chairman. But a Ryan spokesman, Stephen Spruiell, says his boss' plan simply raised the fee to $5 for a one-way trip, rather than growing to $7.50 in five years with "this crazy provision" that Homeland Security could raise it even higher.

Some travelers don't mind paying a little more for security. Fernando Mariano, 65, who flies more than 150,000 miles a year as an advertising executive in Orlando, is one. "I positively agree with anything that means more security — including more taxes," he says. "When you're talking about the expense of a trip, it's really something you could accept."

But a big source of contention about the security-fee increase is that roughly $15 billion of the $24.9 billion it would raise over 10 years wouldn't go to the TSA. It would go straight to deficit reduction. "It's just really unacceptable," Leocha says. "They're basically saying they're going to take our money and put it in another pocket."

Tough to pass?
Although many in Congress see the merits of better financing the aviation system and are keen to cut the deficit, the lobbying power of the industry and opposition by many members to any tax increase automatically puts the Obama proposal in jeopardy.

Similar legislative proposals have met stiff opposition in the past. In 2007, former president George W. Bush proposed charging higher taxes on business and private aircraft, but Congress refused.

House Republicans, led by Speaker John Boehner, R-Ohio, have generally rejected any attempt to increase taxes. But lawmakers give a more sympathetic ear to raising aviation taxes and fees to better cover costs of security, personnel and construction at airports.

And because aviation taxes represent a single string in the tangled spending debate on Capitol Hill, they aren't necessarily dead.

Calio says Congress' so-called supercommitee, which is searching for ways to cut $1.2 trillion from the deficit in the next decade, might look at the taxes as "low-hanging fruit" because airlines collect them and forward to the U.S. Treasury without passengers always noticing they're paying them.

Earlier this year, a proposal to raise the security fee $1.50 per ticket ran into turbulence in the Senate Appropriations Committee, which narrowly kept it. "I'm not sure I like every part of it, but I think it's worthy of hearings," Rep. Sander Levin of Michigan, the top Democrat on the Ways and Means Committee that sets taxes, says of the proposal.