President Obama has a history of complex legislative proposals with details that are not revealed right away. Some things can’t be known before a bill is passed, such as which infrastructure projects would meet the “shovel-ready” requirements of the 2009 Stimulus Bill. Other items are specifically written into legislation, but we do not hear about them until after the bill is signed into law. An example is a provision (later repealed) in the Healthcare Reform Bill that all businesses file IRS form 1099 for any payments they make over $600. (Aside from this being hidden, one might ask what this has to do with healthcare?)
We are in the same situation with the President’s debt reduction plan. While Mr. Obama flies around the US lobbying for his Jobs Bill, his debt reduction plan is not getting much attention. But some of his revenue generating ideas are beginning to get publicity.
One is a proposal for a $100 fee on each commercial and corporate jet flight. Mr. Obama wants corporate jet owners to pay “their fair share”. Currently they pay fewer taxes per flight than commercial airliners. That is partly justified because corporate jets carry fewer passengers. But if the goal is to have taxes and fees spread fairly across the spectrum of air travelers, the President could just propose a fee for corporate jets and not for commercial flights.
There is no doubt this cost will be passed on to commercial air passengers. On large airliners with capacities of around 200, passengers will not notice a 50 cent increase in ticket price. But smaller regional carriers will have to raise prices more. I have flown 6 connecting flights this year across three different regions of the US on small planes that can seat 35-60 passengers. Not all of those flights were full and, in one case, there was no other way to the destination except charter plane or boat. In areas where planes typically do not fly at full capacity, the average portion of the $100 fee could be $4-5 per passenger. (Will taxpayers subsidize the tax on flights already subsidized by the federal Essential Air Services program, such as flights out the airport in Ely, Nevada?)
A $5 increase in airfare may not seem like much, but that is not the only increase proposed by the White House. If President Obama’s debt reduction plan is passed, there would also be an increase in the per-passenger security fee. It is now $2.50 per flight segment, maximum $5 one way. The proposal is to raise the fee to a flat $5 one way immediately and an extra 50 cents each year starting in 2013 to a total of $7.50 by 2017. There is a provision that allows the Homeland Security Department to increase it more.
Right now, passenger security fees cover 43% of TSA’s expenses. It might seem reasonable that passengers pay for all TSA costs. But every government service cannot be user-financed. Your local fire department does not charge an individual home owner for putting out a house fire. The police do not impose a fee on each person involved in an auto accident or for responding to a business that has been robbed. The FBI does not send a bill to a family after recovering a kidnap victim. Protecting the health and safety of citizens is a basic government service that needs to be maintained through general tax revenue. An entire community pays taxes for law enforcement although not every individual has direct contact with officers/agents. Airport security is of value to the general public as well as to airline passengers.
But the essential point here is that using the need to better fund TSA as a justification to increase the security fee is a sham, because about three-fifths of the money predicted to be raised would be diverted to debt reduction! And that is probably a sham too. Unless the funds are required to go into a specific debt reduction fund, they will go into the general treasury and just be more money for the government to spend.
A debt reduction plan should be mainly spending cuts, not mostly increased taxes and fees. Anyone who flies frequently, especially on regional carriers, should consider writing their Congressional representatives and telling them to drop the fee increases on commercial air travel. About 20% of our airfare is taxes and airport fees. At our destination, we pay a 12-14% local tax on our lodgings. Those taxes are money we cannot spend on food, activities, etc. in the cities we visit. As travelers criss-cross the US, they “spread the wealth” which is good for the economy. It seems to be in the best interest of the country for the federal government to make it easier and less expensive for Americans to travel.
Many of the facts and figures in this post were found in USA Today, September 29, 2011, section B, page 1, “Proposed airline ticket tax bump has tempers soaring”.