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9 Mar, 2014

White House plans US$1 billion in new aviation taxes in FY 2015 budget

WASHINGTON-March 05, 2014-(BUSINESS WIRE)–Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, today opposed the FY2015 White House budget proposal, which calls for an additional $4.2 billion in new and higher taxes on airlines and their customers, calling it an unprecedented cash grab that will hurt jobs, service to small communities and the economy.

A4A urged Members of Congress to say no to this proposal, and recognize that commercial aviation is a key enabler of job growth and U.S. economic activity that could contribute at an even greater level, if not impeded by excessive taxes and regulations.

On a typical $300 roundtrip domestic ticket, customers today pay $61 in federal taxes, or 20 percent of the ticket price. That number will go up in July when the Transportation Security Administration fee more than doubles, costing passengers an additional $1 billion. If the Administration’s proposed budget is approved, taxes on that $300 ticket will increase to 26 percent or $77. The tax burden on aviation and its customers has more than tripled since 1998 to more than $19 billion annually.

“Enough is enough: the White House needs to understand it can no longer use airlines and their passengers as its own personal ATM without consequences,” said A4A President and CEO Nicholas E. Calio. “It’s like playing a game of whack a mole on Groundhog Day because the same ill-conceived proposals keep popping up no matter how many times Congress and airline passengers and shippers knock them down. Coming on the heels of a 125 percent increase in the TSA tax on passengers to offset the deficit, this proposal is particularly egregious.”

Specifically, the FY2015 budget proposes to:

  • Increase the Transportation Security Administration tax from $5.60 per one-way trip (in July) to $6, costing passengers more than $217 million per year.
  • Raise the passenger facilities charge (PFC) from $4.50 per flight segment to $8, costing passengers and airlines an additional $2.2 billion annually.
  • Reinstate the Aviation Security Infrastructure Fee, which Congress eliminated last year, costing $420 million.
  • Increase Department of Homeland Security (DHS) customs fee from $5.50 to $7.50 and immigration fees from $7 to $9, costing $318 million annually.
  • Add an 18th unique tax on aviation–a new mandatory $100 per flight departure tax–costing $1 billion annually.

Calio noted that increasing the PFC cap is unwarranted, as airport revenues hit a near-record level of $23.9 billion last year, including $2.8 billion in revenue from PFCs, just below the all-time high. Congress has previously rejected proposals to increase the PFC cap, recognizing that it would cost passengers billions of dollars annually while discouraging airlines from maintaining existing or growing service levels to local communities.

“Raising the PFC will drive up the cost of flying for millions of Americans who rely on air travel, cost jobs, limit service options to small and medium communities and ultimately harm the U.S. economy,” said Calio. “Passengers, airlines and the U.S. economy simply cannot afford higher taxes on air travel and we urge Congress to hold the line by rejecting the unnecessary PFC hike and other tax increases.”

Annually, commercial aviation helps drive more than $1 trillion in U.S. economic activity and more than 10 million U.S. jobs. A4A airline members and their affiliates transport more than 90 percent of all U.S. airline passenger and cargo traffic. America needs a cohesive National Airline Policy that will support the integral role the nation’s airlines play in connecting people and goods globally, spur the nation’s economic growth and create more high-paying jobs.