Tax somebody else!
Other than Warren Buffett, we know of nobody who believes that their tax bill is too low, and we know of few industries whose leaders believe their businesses are insufficiently taxed. Air travel is no exception.
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At the federal level, airline tickets are subject to a segment fee, an excise tax, the 9/11 security fee plus airport Passenger Facility Charges. It gets worse for international travel, and it could get worse still as governments in Europe and elsewhere continue to develop new approaches to taxing carbon emissions.
It's no wonder that "No New Taxes" is iron dogma among airlines, and it's no wonder that airlines have aggressively denounced the Obama administration's plan to include aviation taxes in its deficit reduction plan.
The plan would restructure and increase the 9/11 security fee, now set at $2.50 per segment and capped at $5 per one-way trip. According to the administration, the fee "recovers" about 43% of the Transportation Security Administration's aviation security costs.
If adopted, the plan would change the fee to a flat $5 per one-way trip, rising 50 cents per year to $7.50 in 2017. Over 10 years, this would generate nearly $25 billion, but $15 billion of that would go to deficit reduction rather than to the TSA.
If you were looking for a simple one-word description of the reaction of the Air Transport Association and IATA, "outrage" would do. The World Travel and Tourism Council called it a "raid."
Airlines are also outraged over a proposed $100 "surcharge" for air traffic control services, ostensibly designed to require private jets to pay a more equitable share of air traffic control costs, but worded in a way that also applies to airlines. It would cost U.S. airlines about $1 billion a year. Unlike the security fee, however, all the proceeds would go to airport and air traffic control improvements.
In today's partisan Washington, there's almost no chance that the administration's proposals will be adopted as drafted. They are starting points, and they're off to a rocky start.
We completely understand the airlines' reactions, but since we are not an airline, we do not necessarily share all of them, at least not yet.
At the outset, we completely agree that no part of a so-called security fee should be diverted to deficit reduction, but at this point, we think it useful to look at the overall package as a series of questions.
With respect to the 9/11 fee, some of the questions are: Should travelers pay a portion of TSA costs through a ticket tax, and, if so, is the current 43% the right amount?
Or should aviation security be deemed a national security and police function, totally paid by the government? If the government is going to assume all those costs, where is the money going to come from? And, most important, are all of the TSA's costs really necessary?
Regarding air traffic control, the first question is whether the operators of aircraft should pay any fee directly related to the air traffic control services they use. If so, is a flat fee of $100 per flight the best that we can do for putting a price on this important government service?
Tax laws are the expressions of policy choices, and rather than reflexively denounce taxes as evil (which some of them truly are), we think it's most constructive to begin these debates with the policy questions we need to answer, not the answers that we would prefer.
If we don't do that, we won't have a dialogue. We'll merely have another clash of ideologies, and we're getting tired of those.