August 15, 2010

Ground new airline taxes

This op-ed was originally published in the Orange County Register.

As airline profits nosedived this past decade, new fees on headphones, seat selection and checked baggage have travelers flustered. Congressional Democrats are making a bad situation worse by declaring their intention to extend the tax on airline tickets to the new fees for extra onboard services.

Ironically, the newly imposed fees are an effort by airlines to lower the base-level ticket price. The cost of amenities was traditionally bundled into an all-inclusive ticket price, but now airlines are being more transparent, charging less for a bare-bones ticket but setting fees for extras. This is good news for bargain-hunting passengers, but new taxes are not good news for anyone.

The federal excise tax already adds 7.5 percent to the price of a ticket, with revenue earmarked to a trust fund supposedly dedicated to airport projects, employment and maintenance. Sen. Jim Webb, D-Va., last week introduced the so-called “Airline Baggage Transparency and Accountability Act,” which would extend the FET to blankets, headphones and every other optional accessory on airplanes – an unjustified money grab by the federal government.

A passenger who decides to watch a movie, purchase headphones or buy a blanket does not use any more runway space or air traffic control services than the fellow in the next seat who doesn’t buy any extras. Therefore both should pay the same tax to support airport operations.

The FET is not a general revenue raiser like a sales tax and shouldn’t be applied like one. Especially if the add-on services “do not use the infrastructure that the tax is intended to pay for,” Spirit Airlines Inc. President Ben Baldanza said in testimony at a House transportation subcommittee hearing last month.

Government taxes on airline travel have been accumulating for years. Three government agencies, the FAA, the EPA and the DHS already have their hands in the cookie jar with 17 “special aviation taxes.” Fortunately, not every aviation tax is a shameless revenue grab, but that’s what this new extension of the FET would be.

Airlines are trying to rebound from 2008’s high jet fuel prices and low passenger demand. Major airlines American, Continental, Delta, United and US Airways lost a fortune in 2008 and 2009. They desperately need a robust national economic recovery.

In California, particularly, the airline industry is a major engine of the economy, accounting for 9 percent of total economic activity in the state and employing 1.7 million people. The July traffic statistics from Orange County’s John Wayne Airport were gloomy. In the past year, the passenger count dropped by almost 2 percent, continuing a trend that started in 2007. Cargo is down over the same period, say FedEx and UPS.

Consumers want cheaper fares, and raising taxes is not the answer. If Congress is serious about focusing on jobs and the economy, it should help lay the foundation for a new takeoff strategy by holding off on its expansion of the airline ticket tax.