Ground the travel tax hike

The U.S. economy in May added 280,000 jobs, and job-seekers appear to be moving back into the workforce.  That’s a welcome relief, especially after the U.S. Department of Commerce reported last month that economic growth in Q1 2015 shrank by 0.7 percent.  Clearly, our economy is still fragile, and we must do more to create an environment that supports growth.

That’s why it’s puzzling that President Obama and some Republicans and Democrats in Congress would band together in an unlikely alliance to push for a massive hike on business and recreational air travelers – to the tune of $2.3 billion every year.  This is simply a tax increase on travelers by another name, which will slow airline travel, and by extension, slow economic growth. Let’s not ground the economy with an unneeded, ill-advised tax.

{mosads}If enacted, this hike would nearly double the little-known Passenger Facility Charge from $4.50 per flight segment to as much as $8.50 per segment.  So on a round-trip flight with stopovers, this would increase how much you and I pay on airline tickets from $18 per round-trip to $34 per round-trip – a whopping 89 percent increase.

If this were a gas-tax increase, and the tax we paid doubled from 50 cents to a dollar, there would be an uproar across the nation.  But because this is a hidden tax, folded into the fine-print of airline tickets, some must think that no one will notice.

Not only is this bad policy, but it will also slow airline travel, and economic growth when our nation can least afford it.  According to a December 2014 GAO report, “Economic principles and past experience dictate that any increase in the price of a ticket—even if very small—will have an effect on some consumers’ decisions on whether to take a trip or not.”

Plain and simple, a fee hike is counter-productive.  Air travel is a driver and leading indicator of economic growth.  When people travel for business, it leads to new deals, new economic activity and new jobs.  Last year, there were nearly 500 million business trips in the U.S. supporting some 7.1 million jobs.  The same is true for personal travel, which supports hotels, restaurants, entertainment and all those who work in those industries. 

The fact is that airline travelers already pay a hefty price in terms of taxes and fees on air travel.  On domestic travel, travelers already pay:

·      A 7.5 percent excise tax on their airfare within the continental United States (and certain parts of Mexico and Canada)

·      A $4.50 per segment fee applicable to flights within the continental United States

·      The aforementioned Passenger Facility Charge, currently at $4.50 per segment.  This would soar to as much as $8.50 per segment if the fee is increased as proposed.

·      The September 11th Security Fee, which is $5.60 per one-way trip with a U.S. enplanement

·      And taxes and fees are much higher for International travel – often $300 or more per round-trip. 

To be sure, our nation needs to make sure that our airline infrastructure is modern, safe, and able to keep up with rising demand for air travel.   Most air travelers I speak with are more than happy to pay their fair share to make sure that airports are efficient and secure.  However, the airports that are aggressively lobbying for this increase already have ample access to capital and resources to accomplish this mission.   

This fee hike will only cause the traveler to pay more at the (airport) pump.   

At a time when our economy is struggling to get liftoff, we should be encouraging air travel, not imposing new costs, burdens, and barriers for air travelers.  So please join me in calling, writing, texting and tweeting members of Congress and urge them to oppose the increase of the travel tax.

McCormick is the executive director and COO of the Global Business Travel Association.