A recently proposed airline tax hike intended to pay off the country’s budget deficit has airline passengers and aviation industry leaders up in arms. The increase, a whopping $3.5 billion collected annually, will further tax overburdened passengers and airlines, with the latter responsible for paying more taxes than the alcohol, tobacco, and firearms industries. Considering the advent of charging progressively more for checking baggage, lawsuits resulting from invasive search procedures at the hands of Transportation Security Administration (TSA) personnel, and increasingly strict security measures following 9/11, the airline industry can’t take any more problems.
Air travel is already expensive and becoming more so as amenities that used to be free, such as choosing to check your luggage and enjoying in-flight refreshments, now cost money. Increasing the cost of a plane ticket just adds to the estimated 20% that already goes to taxes, airport charges, and fees. Last year alone, domestic airlines and their customers paid $3.4 billion to the TSA and the Department of Homeland Security. As recently as 2002, the TSA had received $1 billion from taxes, an amount which has doubled in fewer than 10 years. At this rate, where will air travel costs be in another 10 years?
According to Nicholas E. Calio, CEO and president of the Air Transport Association of America, “Commercial aviation drives $1.2 trillion in economic activity and more than five percent of U.S. gross domestic product each year and is responsible for 11 million jobs.”
A drastic change such as this proposed tax increase could result in a loss of jobs, which is certainly a drawback considering how the overall economy continues to sputter. While the increase has been proposed as one way to help cull the nation’s debt, the measure is really just robbing Peter to pay Paul.
Increasing taxes could cause a kind of financial whiplash: Higher prices might result in regional airlines ceasing to serve small cities, which will inconvenience passengers who will have to commute to larger airports just to make their flights. In some cases, airports might even have to close, resulting in the aforementioned loss of jobs. While some will likely want to blame President Obama for proposing this increase, naysayers should keep in mind that his predecessor, President George W. Bush, recommended charging higher taxes on aircraft back in 2007. Congress did not approve the plan.
While some might not mind paying higher taxes that benefit, in part, the TSA, others will be thankful for increased security, especially in the wake of terrorist threats such as the “Shoe Bomber” Richard Reid. But there is no guarantee that prices won’t continue to increase until air travel becomes more cost-prohibitive than it already is. What may be a boon to other industries, such as those that support ground travel, may signal the death knell for the airline industry and its tarnished image.