Air Travel to Be More Taxing in 2012

There are two new airline tax proposals included in President Barack Obama’s debt reduction plan. According to the Air Transport Association of America, such taxes could cost the industry – and passengers – $36 billion over the next 10 years.

ATA president Nicholas Calio predicts that plans to triple the security fee and add departure taxes to each flight would lead to job loss within the industry and reduced services to customers.

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“It makes absolutely no sense for the Administration – or the Congress – to propose two huge new taxes on aviation, a key creator of jobs growth that is among the least profitable industries and pays among the highest federal taxes, while other profitable industries and transportation modes are left untouched,” Calio told travelpulse.com.

Security Fee
Under Obama’s proposal, the cost per segment of the TSA security fee would go from $2.50 to $5 ($10 roundtrip) and to $7.50 per leg by 2017. Do not expect better security, though: 60 percent of the revenue generated from the fee increase will go toward deficit reduction, according to an article on CNN.com.

The current $2.50 per segment fee pays for about 40 percent of the TSA’s security costs for airline travel. The Obama Administration maintains that the fee should cover more of the agency’s costs, however in the proposal, $15 billion of the $24.9 billion generated from the fees over 10 years would be used to pay down the national debt – not for airline security.

Departure Tax
The proposal also puts a $100 flat fee on each flight departure in the country (military planes and small planes with piston engines would be excluded). This means a small regional jet holding 20 passengers must pay the same fee as a 777 holding 300 passengers.

The fee is pennies in the bucket for passengers on larger craft, who might have to fork over an extra 30 cents per ticket. But for already struggling smaller-city routes, passengers might have to pay an additional $5 or more per ticket, depending on how full the flight is (there are some regular routes that carry as few as five passengers per flight).

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According to an article in USA Today, regional airline flights make up more than half of all domestic travel passengers. For airports like Cincinnati or Des Moines, regional travel makes up more than 80 percent of flights.

Rather than pay the higher ticket costs, these smaller cities fear passengers would choose to drive to a larger city rather than taking a connecting flight. And regional airlines could choose to cancel routes altogether rather than charge a few passengers for the extra taxes.

But Will It Pass?
Time will tell whether Congress passes any debt reduction plan that involves raising taxes – with the likes of the Tea Party and Speaker of the House John Boehner refusing to vote in favor of any tax increase.

Also, the powerful airline lobby creates a thorny field for legislators to navigate. Similar proposals have failed in the house in recent years.

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However, Republican members of Congress have traditionally been willing to entertain raising aviation taxes and fees when they’re used to improve security, personnel and airport infrastructure. So the plan may still have legs, if not wings.

Considering a so-called super-committee failed to come to an agreement over the country’s debt crises, we are not holding our breath that anything will be passed in the near future.

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Published: December 12, 2011