Travel industry pans Obama's tax proposals

By Bill Poling
The Obama administration’s deficit-reduction plan is raising alarms in the travel industry because it proposes to increase the tax on airline tickets and could lead to the reclassification of some travel sellers from independent contractors to employees.

Airlines denounced the administration’s plan to boost the existing 9/11 security fee, which currently cannot exceed $10 roundtrip, eventually raising it to $15 per roundtrip by 2017.

Because of the magnitude of the increase, and because part of the revenue would be set aside for deficit reduction rather than aviation improvements, it has attracted scorn from the World Travel and Tourism Council.

A separate cause for concern for agents is an administration effort to “increase certainty” about worker classifications. The idea was incorporated into the administration’s 2012 budget plan earlier this year.

Under existing law, the Internal Revenue Service cannot reclassify ICs as employees if the user of the worker’s services uses a reasonable common law test to treat the worker as a contractor.

The administration plan would allow the IRS to issue guidelines on worker classification and require the reclassification of some workers.

ASTA’s vice president for government affairs, David Evans, said the plan “appears [to be] a chipping away at employers’ rights and abilities to decide how workers should be classified.”

Over 10 years, it is estimated that increased tax collections would reduce the deficit by $8 billion.

The change in the security fee on airline tickets would generate nearly $25 billion over the same decade, of which $15 billion would be set aside for deficit reduction.

Airlines also denounced a proposal for a new fee for air traffic control services, pegged at $100 per flight for private planes, corporate jets and commercial airliners. The plan is described as an effort to have private jet users pay a more equitable share of air traffic control costs.

The revenue would be used for airport and air traffic control improvements, but airlines are outraged that they are included, because their passengers already pay ticket taxes to help finance those projects.

“We oppose any new taxes on airlines or their passengers,” said Air Transport Association President Nicholas Calio, adding that “taxes and fees on a typical $300 roundtrip ticket already account for more than $60 of the total cost.”

According to the ATA, “The industry’s non-income tax burden has grown from $3.7 billion in 1993 to approximately $17 billion today. In 2010, a year in which the entire industry’s profit was less than $4 billion, U.S. airlines and their passengers contributed $3.4 billion in taxes and fees to the Department of Homeland Security, including $2 billion in taxes and fees to the Transportation Security Administration, a 50% increase over the amount collected in 2002.”
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