Transportation & Logistics

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Proposed Elimination of Five Air Travel Taxes to Offset Other Charges

9 Jun, 2015

By: Tracey Schelmetic

Travelers already know (and need no primer on) what it is like to be socked with taxes and fees each time they book a flight. For starters, there’s the Passenger Facility Charge (PFC), a federally approved program that allows commercial airports controlled by public agencies to collect up to $4.50 for every boarded passenger. Airports use the money from these fees to fund FAA-approved projects designed to enhance safety and security, improve capacity, reduce noise and increase air carrier competition. There’s also the Domestic Passenger Ticket Tax, the Domestic Flight Segment Tax, the International Arrival and Departure Tax, the General Aviation Fuel Tax, taxes to cover flights to and from rural airports, and more. Add to these the various fees for baggage, overweight baggage, check-in, unaccompanied minors, priority boarding, last-minute ticketing, itinerary changes and more, and passengers are finding they’re paying nearly as much in taxes and fees as the air travel itself.

The U.S. Travel Association, the trade association for the American travel industry, is proposing a way to clean up the tax situation, at least a little. The association has proposed the elimination of five current passenger aviation taxes. That’s the good news. The bad news is that the eliminations are being proposed as a way to offset a proposed increase to the Passenger Facility Charge (PFC). These changes were proposed by U.S. Travel in a presentation to Congress last week in advance of the September expiration of the FAA legislation that limits the PFC to $4.50 per passenger.

The association told Congress that the changes are needed to “fix the country's struggling air travel infrastructure and promote a healthy, well-functioning passenger aviation system” and finance infrastructure projects for some of the nation’s crumbling airports, reported Travel Weekly. In addition to infrastructure projects, the money would be used to overhaul the nation’s air traffic control resources and protect the so-called “Open Skies Agreement” that are designed to foster competition in air travel.

"Because Congress has not authorized a PFC increase for 15 years, the value of PFCs has dropped by more than 50 percent just due to the effects of inflation,” wrote the USTA in its report. “This has significantly reduced the financial capacity of airports—a principal reason why many U.S. airports have not been modernized. In addition, it has forced many airports to commit their existing PFCs for the foreseeable future, limiting their ability to add capacity and renew their infrastructure over the next decades.”

The five taxes the association proposes to eliminate include the Domestic Passenger Ticket Tax: (7.5 percent excise tax on tickets), the Tax on International Arrivals and Departures (currently set at $17.70 per passenger), the Tax on Flights between the Continental U.S. and Alaska and Hawaii ($8.90 per person), the Domestic Commercial Fuel Tax (4.3 cents per gallon) and the Tax on Mileage Awards (7.5 percent of value of miles).

The group estimates that the cut to five taxes to offset the increase in PFCs would have a net effect of lowering most airfares, resulting (for example) in a reduction of between $9.50 and $25.50 on an average base airfare of $340.

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