by Michael Milligan
WASHINGTON -- President Clinton signed a massive budget and tax
bill into law, establishing a convoluted package of graduated taxes
on domestic air tickets and a sharp increase in international
ticket taxes.
The package, which Congress claimed will generate $33 billion
from ticket taxes over the next five years, will require the
airline industry to adjust its domestic pricing annually to keep in
step. "This is not the preferred way of imposing fees and taxes,"
Jim Santini, Washington representative for the National Tour
Association, said. "It would have been much clearer and cleaner
with a straight [domestic] tax or fee." Nonetheless, Santini added,
"The industry could have suffered more egregious tax assaults than
what finally emerged."
A rundown of the new tax law follows; all changes apply to
tickets issued on or after Oct. 1.
* Domestic flights. From Oct. 1 through Sept. 30, 1998, the tax
is 9% of the fare plus a $1 fee per flight segment. From Oct. 1,
1998, through Sept. 30, 1999, the tax drops to 8% and the
flight-segment fee rises to $2. From Oct. 1, 1999 through Dec. 31,
1999, the tax drops to 7.5% and the per-segment fee rises to $2.25.
Starting Jan. 1, 2000, the tax stays at 7.5% but the segment fee
rises in 25-cent increments over three calendar years up to $3. The
segment fee is $2.50 during 2000, $2.75 during 2001 and $3 in 2002.
Beginning Jan. 1, 2003, the $3 fee will reflect changes in the
Consumer Price Index.
* Rural exceptions. The flight-segment fee does not apply to
domestic flights from or to rural airports that have fewer than
100,000 commercial passengers a year and are located more than 75
miles from another airport.
* Alaska and Hawaii. For flights between the 48 contiguous
states and Alaska or Hawaii, the portion over U.S. territory is
taxed at the domestic tax rate in effect at the time.
The current $6 departure fee, which is additional, remains
unchanged. However, the $6 fee will be indexed to the CPI beginning
Jan. 1, 1999. For example, a passenger flying in December of this
year from Los Angeles to Honolulu would be taxed at 9% of the fare
applicable to U.S. territorial miles, plus a $1 flight-segment fee,
plus $6.
* Canada and Mexico. The law does not change the 225-mile buffer
zones from U.S. borders into Canada and Mexico. Flights from the
continental U.S. to Canadian and Mexican cities within the buffer
zone still are subject to the U.S. domestic tax.
* International flights. The law raises the departure fee from
$6 to $12 and imposes an arrival fee of $12, making a total $24
roundtrip, effective Oct. 1.