The Airline Ticket Tax Debate

[funguy2]

The Air Transport Association has, not surprisingly, come out against the proposed increase in Security taxes.

15 Groups Protest Budget Proposal to Double Aviation Security Taxes

Among the interesting notes from this article:

Group leaders also argue that the federal government is breaking its 9/11 promise to pay for aviation security as a matter of national defense. U.S. airlines and travelers already will contribute $15.8 billion through 14 different federal taxes and user fees in 2005. The total tax burden represents 26 percent of a typical $200 roundtrip ticket, up from 7 percent 20 years ago.

This is significantly more than the 15% mweiss suggested in another thread. And again, 25% tax on an airline ticket seems very high, relative to other products and services.

 

[BoeingBoy]

Don't worry, funguy. Mweiss will be along after he gets off work to have a lively debate with you. I'd love to be here to enjoy it, but have to go off and earn a living for a few days....

Jim

 

[mweiss]

Jim

Naturally, the 26% number is carefully culled for effect. The 15% number is based on the mean ticket price, not the median or mode price.

As I said in the other thread, it's valuable to determine where the money goes, and for what.

The groups assert the new security tax will kill jobs, economic growth and jeopardize local air service to small- and medium-size communities.

Unless the new tax goes into a hole in the ground, it will also create jobs. Will it create more than it destroys? Depends on too many variables. Will it stifle economic growth? Depends on its impact on jobs, which depends on too many variables.

Will it jeopardize local air service to small- and medium-size communities? Not EAS communities, that's for sure. Perhaps for a few locations that are already marginal.

14 different federal taxes and user fees

I love these statements. As if they wouldn't complain if the feds consolidated it all into a single tax, but still raised it to the new projected levels.

This is the same amount airlines would spend to employ about 60,000 people or put in place 360,000 flights to U.S. communities.

Except that we as a society have decided that it's more important to have security be as speedy and unobtrusive as possible. Hiring 60,000 people to search through everyone's belongings would be untenable to the flying public, which would have a far greater impact than $3 per passenger will.

The new tax increase will raise those losses to $6.5 billion, because airlines can't pass along these new taxes due to competition.

Patently false. The prices are set by those with the lowest cost. They're going to pass it on, because it's fiscally in their best interest to do so. Margins are lower than they were a couple of years ago; they'll pass it on.

Many cities have already seen a decrease in flights as airlines were forced to eliminate service because of higher security taxes and fees

As if that were the reason that US has been pulling back so much lately. Puhleeze.

From the passenger ticket tax, to passenger facility charges, to flight segment fees, to airline security fees, international flight taxes, and immigration, customs, and agriculture fees...

Almost all things that would have been baked into the base price in any other industry. Do you know who lobbied to keep them separated in the first place?

A near doubling of the aviation security tax will only discourage travelers from flying for business and pleasure.

Some for pleasure, but almost none for business. We're talking about three dollars. A business isn't going to make a go/no go on $3 in fees. A family might.

I think I've said enough.

 

[FWAAA]

I'm hard pressed to think of another industry that sends a higher percentage of the cash collected from the customer (off the top) to various governments, other than the sin sector, like alcohol and tobacco. Those are habits that society wants to discourage, and if demand isn't discouraged too much, then society wants to profit handsomely from those taxes.

Of course there's the oil industry. A sizable portion of the retail price of gasoline is remitted to the federal and state governments. Experience has shown us that as much as people hate paying for expensive gas, they do it nonetheless. The demand for gasoline has proven to be fairly inelastic. Most people buy into the idea that the gasoline taxes are an acceptable form of user fee for highways, as well. The more you drive, the more you pay. And lately, oil companies don't seem to be hurting. Record profits and no major oil company in Ch 11.

Local service station franchisees and lessees continue to complain, but they have always complained (much like farmers).

But air travel is something different altogether. PFCs go to specific airports which are supposed to use the fees collected only for certain items. Fair enough. Don't like the PFC, fly to/thru a different airport. And they are limited to $4.50 per.

The federal excise tax and the accompanying anti-WN segment tax are less defensible. Especially given their annual increases.

But the September 11 Security Fee, capped for now at $10 per round trip, was Congressional lunacy of the highest order. Weeks after handing out $5 billion in cash to compensate for the shutdown in the entire air travel system, Congress turns around and imposes a brand new $10 "user fee" for their new security agency which now spends more than 8 times what airlines previously spent on screening. Whether we get good value from the TSA's huge spending is for another thread.

No other item of national defense is charged to retail consumers as airport screening is charged to pax. Taxing air travel to pay for the TSA makes as much sense as taxing auto makers to pay for the highway patrol or state police in each of the 50 states.

I guess I should be happy. At least county governments haven't caught on and tried to charge me $10 to go thru the checkpoint to enter the courthouse.

When government wants people to consume more of something, government typically subsidizes it. When government wants people to consume less of something, government typically taxes it.

Why is the government trying to discouage airline travel? Why is Congress hellbent on making air travel even more expensive and causing even more financial distress among airlines?

 

[mweiss]

I'm hard pressed to think of another industry that sends a higher percentage of the cash collected from the customer (off the top) to various governments, other than the sin sector, like alcohol and tobacco.

But this is a specious argument. What matters is how much of the customers' money goes to various targets, whether through direct or indirect taxation.

The federal excise tax and the accompanying anti-WN segment tax are less defensible.

Ironically, the segment tax was pushed by the legacies...look how far it got them. <_<

Whether we get good value from the TSA's huge spending is for another thread.

Only if you're not going to complain about the fees that go to the TSA. :huh:

Taxing air travel to pay for the TSA makes as much sense as taxing auto makers to pay for the highway patrol or state police in each of the 50 states.

Um, no. Your analogy would mean that Boeing was paying the TSA. They're not.

When government wants people to consume more of something, government typically subsidizes it. When government wants people to consume less of something, government typically taxes it.

That's a gross oversimplification. Yes, it's true in many areas, but there are other reasons the government taxes and subsidizes things.

 

[JS]

It's not $3, it's $6 (unless you are moving or driving one way).

I would like to know what we get for our extra six dollars. It will be the same thugs behind the counter reading our personal papers in our checked luggage, the same thugs at the security checkpoint rifling through our belongings, and the same thugs sitting in First Class ordering people not to use their cell phones or cameras.

Our safety in the air will be exactly the same as it was 3.5 years ago when the passengers on UA 93 unanimously voted to do away with our old policy of "cooperate with hijackers and everyone will be OK" but we will be an additional six dollars ($16 total) poorer.

 

[mweiss]

I would like to know what we get for our extra six dollars.

[post="247154"][/post]​

So would I. I suspect that a portion of it will go toward better system integration, and new equipment. Probably some will go to pay for renovations of checkpoint areas where there is insufficient room to handle the passenger throughput necessary to keep lines from stretching too far.

But I'm just guessing.

 

[whlinder]

I would also like to know where the additional money is earmarked to go. From reading a couple of news articles about it the money will go toward 'homeland security' which could be all kinds of things, none of them related to aviation.

 

[funguy2]

So would I. I suspect that a portion of it will go toward better system integration, and new equipment. Probably some will go to pay for renovations of checkpoint areas where there is insufficient room to handle the passenger throughput necessary to keep lines from stretching too far.

But I'm just guessing.

[post="247172"][/post]​

None of which actually enhances security...

I have to agree with FWAAA on this...

Going back to politically motivated items...

1) The government pledged post 9/11/01 that airline security would now be treated as a matter of national defense. No other national defense program is supported by a subset of Americans.

2) The Aviation Security trust was set up in the early '70's to fund capital improvements, however today, 76% of the FAA's operating budget comes from the trust fund (in other words is diverted away from the capital investments). So, by the late '80's, when the airports were busting at the seems, and could not tap the trust fund for the capital improvements for which it was created, a second tax had to be imposed, the PFC.

And mweiss, you have got to be kidding me about the tax creating jobs. Even if it does, it will surely not create more jobs than the 123,000 aviation professionals already furloughed, and its easy to predict rising prices leads to decreased demand leads to more furloughs.

And some of the cash, will go down a black hole of pork barrell spending. Its not hard to imagine that currently, the TSA costs come from the general fund. By decreasing the amount of TSA costs from the general fund, that frees up cash to be spent on other things, which will surely include some of the garbage that our government is known to be spending money on.

 

[mweiss]

None of which actually enhances security...

Au contraire! When the lines get long and the passengers get irritated, the short-term pressure is for the screeners to temporarily reduce the stringency of examination. The mid-term pressure comes from the airlines, who have delayed flights or invols driving up their costs. The long-term pressure comes from passengers, via various channels in DC, to reduce the stringency of examination.

Adding security capacity enhances security because it precludes these other pressures from forming.

1) The government pledged post 9/11/01 that airline security would now be treated as a matter of national defense. No other national defense program is supported by a subset of Americans.

And perhaps this should be revisited. Of course, I don't believe for a minute that the primary goal of airport security should be national defense. It should be a goal, but not the primary goal.

2) The Aviation Security trust was set up in the early '70's to fund capital improvements, however today, 76% of the FAA's operating budget comes from the trust fund (in other words is diverted away from the capital investments). So, by the late '80's, when the airports were busting at the seems, and could not tap the trust fund for the capital improvements for which it was created, a second tax had to be imposed, the PFC.

Who should pay for the FAA? Seems reasonable for the money to come from those who actually use the services.

And mweiss, you have got to be kidding me about the tax creating jobs. Even if it does, it will surely not create more jobs than the 123,000 aviation professionals already furloughed,

Really? Where's your evidence?

and its easy to predict rising prices leads to decreased demand leads to more furloughs.

Yes it is. Now predict how much.

And some of the cash, will go down a black hole of pork barrell spending.

Pork barrel spending creates jobs. That's why members of Congress like it. The money doesn't disappear into thin air.

By decreasing the amount of TSA costs from the general fund, that frees up cash to be spent on other things, which will surely include some of the garbage that our government is known to be spending money on.

[post="247218"][/post]​

It will probably also include some of the stuff that our government should be spending money on. There's an awful lot of national infrastructure that is falling apart. But that's really beside the point; nowhere did anyone say anything about this decreasing the TSA's drain on the general fund.