Not sure how many of you have been paying attention to the details of the proposed aviation tax changes (details on pp 22-23) coming out of Washington, but they’re downright awful. I fully understand the need to raise revenues right now, but this is just a strange way to do it. Let’s take a look at the details and then shake our heads in confusion.
There are two pieces to the tax plan, so let’s look at each one separately. (I tend to think the second one is worse.)
Increase the Security Fee
When you travel today, you pay $2.50 every time you get on an airplane up to $5 each way solely to fund the TSA. This tax was invented after September 11, 2001 and in fact, was named the September 11 Security Fee. In the proposed tax change, it’s now known as the Aviation Passenger Security Fee instead but the point is the same. We’re supposed to be funding security activities.
This fee currently only covers 43 percent of the cost to operate the TSA, so the idea is theoretically to close that gap. But that’s not what’s actually going to happen.
The proposal is to hike the fee to $5 each way regardless of how many stops you make. (If you fly nonstop, it doubles from $2.50, but otherwise it stays the same.) But it doesn’t stop there. It’s only $5 now, but it will go up $.50 each year until it hits $7.50 each way in 2017. After that, the Secretary of Homeland Security has free reign to jack the fee up from there, but it cannot be lowered. That’s right, these numbers are minimum floors.
Let’s say you support this. We should be paying for more robust security and you think that whatever it costs is a worthwhile investment. I can understand that argument, but this will make your blood boil.
This fee is expected to bring in $24.9 billion over 10 years. Of that, $15 billion would be “deposited into the General Fund for debt reduction.” That’s right. More than half this revenue won’t help security at all. It will just go to balance the budget. If I’m paying an “Aviation Passenger Security Fee,” it better be going to making me safer. This isn’t going to do that.
A $100 Departure Tax
The second part of the equation is to raise more money by slapping on a new $100 tax every time an airplane takes off. This is supposed to help pay for the use of air traffic control services. The goal is to try to sell this to you by suggesting that it will finally get those fat cats with corporate jets to pay their fair share. That may be true, and you probably won’t hear many complaints about that from the general public.
But it also puts a huge burden on the flights that struggle the most right now – those to small cities. Think about it. A $100 tax on a 747 is nothing. If you have 400 people on an airplane, that’s a quarter per person. Pretty easy to absorb, especially on longer flights when the fares are likely to be relatively high anyway.
What about a 50-seat regional jet? Now it’s an extra $2 per ticket (assuming that plane is full). That might not sound like a lot, but on a $100 ticket, that’s a 2 percent increase and that can push a flight from black ink to red.
What about a 19 seat turboprop? Now it’s over $5 a ticket. If that airplane is half full, it’s $10 a ticket. Those communities that are currently struggling to save their commercial service are going to be dealt a severe blow in their efforts. Small communities have enough trouble keeping service as it is. This just makes it worse.
Sure, there are exceptions for recreational aircraft and air ambulances, but there is still a glaring problem here. This is a bad way to raise money because it hurts the piece of commercial aviation that’s struggling the most to survive right now.
Not smart. Not smart at all. I don’t want to get into the politics of this (though I’m sure you guys undoubtedly will in the comments). Regardless of whether you think there should be revenue increases or not, this isn’t a good way to do it.