Airlines Oppose White House Tax Hike on Passengers

white houseAirlines for America (A4A) cautioned that if the current White House budget proposal is enacted, it will increase the cost of air travel, cost jobs, limit air service options to small and medium communities and ultimately harm the U.S. economy.

The FY 2014 Budget proposal increases five aviation taxes, imposes new departure tax, costing airlines and their customers an additional $5.5 billion per year, A4A reports.

The FY 2014 budget would raise taxes on airlines and their customers by 29 percent or $5.5 billion per year, in addition to the $19 billion they already pay in federal aviation taxes and fees, A4A says. 

Specifically, the White House Budget proposes tripling the Transportation Security Administration passenger security tax to $7.50 for each one-way trip by 2019, adding a new $100 per flight departure tax, raising the passenger facilities charge (PFC) from $4.50 per flight segment to $8, increasing Department of Homeland Security (DHS) customs fee from $5.50 to $7.50 and hiking the immigration fee from $7 to $9.

Even without the proposed increases, air travel is already taxed at a federal rate that exceeds those for alcohol and tobacco, products that are taxed to discourage their use, A4A says. On a typical $300 roundtrip domestic ticket, customers could pay $61, or 20 percent of the ticket price, in taxes. Under the President’s proposal, customers would pay nearly $75 or 25 percent on that same ticket, A4A estimates.

“The President’s budget represents an unprecedented tax grab on the backs of airlines and their customers, who already pay more than their fair share of taxes,” said A4A President and CEO Nicholas E. Calio. “Adding $5.5 billion per year to the industry’s tax burden completely ignores the vital role airlines play as a driver of our economy and jobs."

"Instead of using the U.S. airline industry and its customers as a piggy bank for deficit reduction, this Administration should view airlines as the engine of economic growth they are. 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.”

Calio also urged both Congress and the Administration against replacing the FAA War Risk Insurance program with a co-insurance private program starting in FY 2015.

“Ending the War Risk Insurance program undermines the economic viability of the U.S. airline industry,” said Calio. “The administration’s proposed changes are unwarranted and could cost airlines hundreds of millions of dollars, result in inadequate insurance protection and prompt further service reductions – we urge Congress to instead focus on doing what is in the public interest and extending the existing program by three years," Calio said.