Corporate welfare at 30,000 feet

When you think about flying what comes to mind? For me, it’s usually a combination of TSA security lines and scheming how to sneak an oversized carry-on bag past the gate agent.  What likely doesn’t come up is that the ticket you purchased is indirectly subsidizing private corporate travel and general aviation—defined as any civil aviation flight not carried out by a commercial airline.

In 2013, U.S. commercial airlines carried a staggering 739 million passengers. This translates to more than 2 million people each day on approximately 29,000 flights—more than any other country in the world. Yet, commercial aviation represents less than half of all flights on any given day. Private corporate travel and general aviation add another 35,000 flights.  These flights typically takeoff and land at smaller airports and often cover shorter distances. And while the marginal impact of any one corporate or general aviation flight may be modest, the cumulative impact is substantial.

{mosads}America’s robust aviation industry is only made possible by an integrated system of air traffic control funded and operated by the Federal Aviation Administration. This safe, efficient system does not come cheap. For fiscal year 2014, FAA’s budget for air traffic control operations was $7.3 billion.

Unfortunately, the federal government charges the most elite flyers the least for the privilege of using the national airspace. An independent analysis by PriceWaterhouseCoopers found that corporate travel and general aviation account for 15 percent of air traffic control costs yet these users pay only 3 percent of the aviation taxes that capitalize the Airport and Airways Trust Fund, or AATF.  As a result of this inequity, the burden for funding air traffic control falls overwhelmingly on the flying public. To understand how, it’s helpful to take a look at the taxes levied on aviation fuels and people.

Let’s start with people. Domestic passengers pay two taxes: a flat fee of $4 on every flight segment—defined as one takeoff and landing—and a percentage tax of 7.5 percent of the ticket price. Passengers arriving from or departing for foreign destination not subject to these charges pay a flat fee of $17.50.  Taken together, passenger taxes represent 90 percent of trust fund revenues each year. 

The remaining trust fund revenue comes from fees on air freight shipments and aviation fuels. Commercial airlines pay 4.3 cents per gallon on the more than 18 billion gallons of jet fuel they burn each year. While this is a vast quantity of fuel, commercial fuel taxes account for a modest 3 percent of AATF revenues. This leaves taxes paid on fuel used for corporate travel and general aviation flights, which also account for a modest 3 percent of trust fund revenues.

Congress is gearing up to reauthorize the Federal Aviation Administration in 2015, providing an opportunity to make changes to aviation taxes. General aviation is a transportation and economic asset. However, the time has come for these users pay their fair share.

The most economically efficient solution would be to transition away from taxing aviation fuel and passenger tickets to a tax based on the weight of the aircraft at takeoff and the distanced traveled with a minimum charge on corporate and general aviation aircraft. Research shows that a weight/distance approach would do a better job of matching the taxes levied on aircraft with the costs they impose on the air traffic control system.  Moreover, a minimum charge on corporate and general aviation aircraft would ensure greater tax equity. 

DeGood is the director of Infrastructure Policy at the Center for American Progress. He may be reached at kdegood@americanprogress.org