In the U.S., our tax system has been widely criticized as overly complex, unfair, and having a negative impact on growth. While the looming expiration of the Bush tax cuts and the scheduled “sequester” in 2013 have captured most of tax and budget discussion, many have also called on Congress to undertake a more comprehensive evaluation of the overall structural problems within our tax code and provisions that have an adverse effect on economic growth.
In this context, it should be noted that the airline industry leads all others in America with 17 unique taxes and fees from the federal government. The federal tax rates paid by airlines are higher than federal “sin” taxes paid on alcohol, tobacco, and firearms, which were originally intended to discourage use. In fact, on a typical domestic $300 ticket, taxes comprise about 20% of the total ticket price with the effect of discouraging commercial air transportation use and impeding the industry’s ability to grow and expand the U.S. economy. This of course directly affects employment and the careers of professional pilots and other airline employees.
Of particular concern is that twice recently, first as part of a proposal to reduce the federal budget deficit and then again as a part of the executive branch’s 2013 budget proposal, the administration proposed a new $100 per departure tax on every flight and proposed to triple the passenger security tax. In addition, the Senate Appropriations Homeland Security Subcommittee has voted to increase TSA security fees, although that proposal was rejected by the House. The current structure of the industry’s taxes and fees needs to be reviewed and reformed to help make the industry financially sound and competitive in the international marketplace.