This letter is being sent to all members of the Senate Commerce Committee as they plan to introduce their version of the FAA Reauthorization Bill that will set the rules for airline travel for the next six years. Travelers United is the only consumer group actively fighting to keep taxes and fees lower for airline passengers.
TO: Members of the Senate Commerce Committee
SUBJECT: CONSUMERS WANT NO NEW AIRPORT TAXES AND FEES
• No increases in taxes and fees should be included in the FAA Bill
• Government taxes and fees charged airline passengers are extraordinary
• Localities enjoying the benefits of airports should pay their fair share
Let us be absolutely clear. Consumers want no new airport taxes and fees. Airline passengers are being unfairly singled out for an undue tax burden — our TSA security fees have increased and the immigration and agriculture inspection fees have gone up. These are mandatory fees that single out aviation consumers — those taking other modes of transportation don’t pay security fees, and those arriving across the border by car, train or bus don’t pay inspection fees.
Consumers are paying more than enough. Localities have a responsibility to pay for infrastructure that supports their community, real estate investments and businesses. These costs should not be borne solely by airline passengers.
Taxes on passengers are extraordinary
Currently, consumers pay more taxes for the pleasure of flying than for almost any other activity in the country. Every passenger on a one-stop, round-trip flight has to fork over $11.20 for the TSA Security Fee. Passengers then pay $4.50 for each takeoff — adding up to $18 for a connecting round-trip flight. In addition, a US Federal Segment Fee adds $4 to every take-off on a domestic flight — $16 for a connecting round-trip flight.
Today, passengers are paying $45.20 before they even pay the 7.5 percent transportation excise tax that is included in the airfare.
For a family of four spending $200 apiece on airfare, that means an excise tax of $60 plus $45.20 — a total of $105.20 in taxes. By the time the taxes are figured into the cost of travel, the effective tax rate is 21 percent on average.
Worse, according to Uncle Sam, passengers aren’t paying enough. The President, in his budget, and other businesses that work with airports, think passengers should pay even more!
The passenger facility charge and others: The current rate is $4.50 per boarding; however, the airports and the administration are asking that this fee be increased to $8 per boarding or more.
Should this happen, passengers will be paying $32 in passenger facility charges for every one-stop round-trip. That, added to the security fee, adds up to $43.20. And, don’t forget the $16 in segment fees. Then, when the excise taxes are figured into a $200 airfare, the total tax ends up being $59.20 for an individual and $232.80 for a family of four. All this is before even a penny in airfare is added.
Travelers United has heard advocates for the tax increase say, “It’s only a small increase in tax.” However, that assumes flights are all one way. Since most travelers like to come home, this means the fee (tax) is doubled. These tax advocates also assume that the flights are non-stop. However, most flights on network carriers stop at one of the major airline hubs. The $3.50 or $4 increase is really a $14 increase where one stop and a round trip are involved. If legislators think about a family of four, the increase is $56, a serious chunk of change for the average American family.
Do not rubber-stamp an increase in PFCs or other fees
When mandatory taxes and fees are increased by more than 75 percent in one fell swoop, legislators need to take a second look.
The first tax- and fee-payer reaction is, “Enough is enough!” But, the public citizen in us realizes that airports don’t function without investments and that many economic benefits flow to cities and towns because of a well-functioning aviation network. So, Travelers United took a deeper look at whether the airports really needed this money.
Airports benefit the community — localities should pay their fair share. They don’t.
Another consideration is the benefit that an efficient and busy airport brings to a community. Everyone benefits from new airport construction. But, only the passengers are paying.
Though airports are financed with municipal bonds, the bonds are paid for in a large part by using passenger facility charge incomes. The April 2015 GAO study entitled “Information on Funding Sources and Planned Capital Development” states that airports plan to spend 74 percent of their PFC revenues on debt service.
In other words, even supposed local bonds are paid for using passenger funds. That is simply not fair to the flying public. The localities that are enjoying the economic spillover from successful airports should be forking over their fair share.
Airports and localities have plenty of access to funding
For all of the weeping and wailing about the need for more taxes, Travelers United found an airport financial ecosystem flush with cash. Unlike our highway systems, where potholes are not filled and bridges crumble, the airport system is state-of-the-art, with fancy architectural masterpieces, massive road and rail access, and surrounded by millions of dollars of commercial buildings, warehouses, and freight handler offices that pay plenty of taxes — just not directly to airports.
• Most of the the big terminal construction projects are jointly financed by airports and airlines together.
• Most of the airports have high A-rated bonds that make borrowing money easy, and at low interest rates.
• Airport infrastructure bank accounts are enormous, with an uncommitted balance of about $11.4 billion of unrestricted cash and investments. (Even if not one tax is collected next year, the nest-egg would support almost every planned airport construction project.)
• Other federal programs that support airport construction and safety enhancements are also enjoying plenty of cash. The Airport and Airway Trust Fund has $6 billion in the bank for future airport construction spending.
• The airports just collected more than $24 billion in revenues in 2014.
• The average collection per passenger has far exceeded the inflation rate over the past 15 years.
At the same time, the income of average Americans has been flat. If consumer incomes had increased by 52 percent over the past decade — like the income of airports — travelers wouldn’t be so concerned. However, as the economy has grown, incomes of the general public have been lagging.
Travelers United can understand why chambers of commerce and local tourism officials are all supporting the increase the passenger facility charges — it is free money for them to pour into local jobs. But, for passengers taking off and landing at those airports it is an unfair subsidy and an unnecessary one.
Travelers United firmly rejects any need for any increase in airport or other government aviation-related taxes and fees. We are already paying more than our fair share.
Sincerely,
Charles Leocha
Chairman, Travelers United
Charlie Leocha is the President of Travelers United. He has been working in Washington, DC, for the past 14 years with Congress, the Department of Transportation, and industry stakeholders on travel issues. He was the first consumer representative to the Advisory Committee for Aviation Consumer Protections appointed by the Secretary of Transportation from 2012 through 2018.