Don't Mess With Taxes

Did you take a quick trip over the Memorial Day long weekend? If so, you probably drove.

But when it comes to longer vacation jaunts this summer, many of us will fly. Yes, despite current boarding hassles and new charges for in-flight amenities, air travel still is preferred for longer excursions.

And adding more fiscal injury to those flying insults is the possibility that we soon could be paying more for our airline tickets.

President Obama's fiscal year 2014 budget includes an increase in the aviation security fee, generally known as the passenger security tax that supports the Transportation Security Administration (TSA).

Since its creation in 2001 as part of the Aviation and Transportation Security Act, the fee has been limited to $2.50 per passenger enplanement with a maximum fee of $5.00 per one-way trip.

"This recovers less than 30 percent of the Transportation Security Administration's aviation security costs, including overhead and the Federal Air Marshal Service, which have risen over the years while the fee has remained the same," according to the Budget document.

Instead, the Administration wants to replace the current per enplanement fee structure so that passengers pay the fee only once per one-way trip. The current fee limit would be replaced with minimum fee of $5 and then increase that amount 50 cents each year beginning in 2015 and ending in 2019 when the fee tops out at $7.50. 

After that, the budget proposal would let the Secretary of Homeland Security adjust the security fee through regulation when necessary.

The White House says the increase would bring in an estimated $9 billion added money over five years and $25.9 billion over 10 years. Part of that 10-year increase, $7.9 billion, would go to pay for aviation security with the remaining $18 billion deposited in the general fund for deficit reduction.

According to calculations by Airlines for America (A4A), the trade organization for the major U.S. air carriers, the Obama budget would raise taxes on airlines and their customers by 29 percent, or $5.5 billion per year.

• A new $100 per flight departure tax,
• An increase in the passenger facilities charge from $4.50 per flight segment to $8,
• An increase in the Department of Homeland Security customs fee from $5.50 to $7.50, and
• A hike in the immigration fee from $7 to $9.

Currently, says A4A, a typical $300 round-trip domestic ticket could produce a $61 tax bill. That's around 20 percent of the ticket price.

If the budget's proposed increases are approved, A4A says that airline customers would pay nearly $75, or 25 percent in taxes, on that same ticket.

Airline tax hikes not likely to take off: In normal political times, tax increases are verboten. And while these days aren't necessarily normal in Washington, D.C., the airlines are counting on the aversion to taxes to hold.

When the fiscal year 2014 budget was released in April, A4A President and CEO Nicholas E. Calio characterized the proposal as "an unprecedented tax grab on the backs of airlines and their customers, who already pay more than their fair share of taxes."

This week, Calio told the Los Angeles Times that "our fragile economy and the millions of middle-class Americans who rely on air travel and shipping every day simply cannot afford tax increases that will drive up the cost of flying or limit service options to small communities across the country."

Yes, Calio, knows the political buzzwords. He should. Before joining the airline industry, Calio was President George W. Bush's assistant for legislative affairs.

And you'll hear those same arguments on Capitol Hill when the fiscal year budget debate finally gets underway. Tax opponents will likely be able to stave off Obama's proposed increases just as they did the last time this president put forth essentially the same airline tax proposals.

Tried before, killed then: In his September 2011 jobs/tax reform/deficit reduction plan, Obama asked for higher fees/taxes on airlines and passengers.

Back then he proposed raising the passenger security fee to $5 per travel segment, then bumping it up incrementally over several years with Homeland Security then having the ability to raise the charge even more as needed. All the other items (departure and facilities taxes, etc.) also were part of that plan.

Sound familiar? Yep, they were repackaged for the fiscal 2014 budget.

That's the one good thing for the Obama policy folk in dealing with an obstructionist Republican party. They can just take the plan the GOP has already refused to consider and just update the numbers.

Since the makeup of Congress is basically the same now as it was then, the odds are slim that the airline and passenger taxes will be accepted this time.

But you can bet the White House will emphasize the deficit reduction possibilities of the fiscal 2014 proposal.

More fliers, more possible Treasury money: In fact, A4A recently added some fuel to that argument. In its annual forecast issued May 16, the trade group said more people will fly this summer than a year ago and a record number of passengers will fly internationally.

A4A expects U.S. airlines will carry close to 209 million passengers globally from June through August, an increase of 1 percent from the same period in 2012. The system-wide summer estimate includes 27 million international passengers, a record number for U.S. airlines.

This marks the largest summer volume for U.S. airlines since 2008, when more than 210 million traveled. The all-time high was summer 2007, when more than 217 million people took to the skies on U.S. airlines. 

In case you're working out your upcoming vacation, A4A expects the busiest travel days to be Thursdays and Fridays between the middle of June and the first week of August. Plan accordingly.

Airplane photo by Sean MacEntee/Flickr

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