WASHINGTON -- Fifteen leading airline, business and labor groups today urged Congress to reject a federal budget proposal that would double aviation security taxes, costing travelers and U.S. carriers $1.5 billion.
Groups opposing the new security tax include the AFL-CIO's Transportation Trades Department, Air Line Pilots Association, Air Transport Association, Air Travelers Association, Americans for Tax Reform, Cargo Airline Association, Competitive Enterprise Institute, Gerchick-Murphy Associates, Interactive Travel Services Association, J. Dunham and Associates, National Business Travel Association, National Taxpayers Union, Regional Airline Association, Travel Business Roundtable, and Travel Industry Association of America.
What's Wrong With The Airline Security Tax?
The groups assert the new security tax will kill jobs, economic growth and jeopardize local air service to small- and medium-size communities. Group leaders also argue that the federal government is breaking its 9/11 promise to pay for aviation security as a matter of national defense. U.S. airlines and travelers already will contribute $15.8 billion through 14 different federal taxes and user fees in 2005. The total tax burden represents 26 percent of a typical $200 roundtrip ticket, up from 7 percent 20 years ago.
Of the $15.8 billion in total federal taxes and fees, U.S. travelers and airlines pay more than $3.2 billion in aviation security taxes. The new $1.5 billion security tax proposal, which raises the 9/11 security fee for air travelers from $2.50 to $5.50, would increase total security tax burden to $4.7 billion. This is the same amount airlines would spend to employ about 60,000 people or put in place 360,000 flights to U.S. communities. U.S. carriers are estimated to have lost $10 billion in 2004.
In a press briefing, ATA predicted airlines will lose $5 billion in 2005. The new tax increase will raise those losses to $6.5 billion, because airlines can't pass along these new taxes due to competition. In the last three years, U.S. airlines have lost $33 billion, laid-off 123,000 employees, about one in five airline jobs, and shaved $12 billion in operating costs. The groups assert the airline industry can't absorb any new tax or fee increase without substantial job losses and less airline service.
Groups Speak Out Against New Airline Security Taxes
"We believe this $1.5 billion tax proposal will put another 19,000 airline jobs at risk and jeopardize up to 115,000 flights to small- and medium-size communities," said James C. May, president and CEO, Air Transport Association, who also released a letter today to the secretaries of Commerce, Treasury, and two top economic advisors with the Bush Administration, protesting the new tax increase. "It's vitally important that efforts to improve our national security do not undermine our economic security in the process. And to be blunt, that is exactly what is happening now."
"Sometimes, policy makers in Washington talk about jobs as though they are just statistics -- but there are a lot people in DC who fail to recognize there are 123,000 airline people who are out of work. That's 123,000 families up late worrying about the future; 123,000 mortgage and rent payments that out-of-work or under-employed families struggle to make and hundreds of thousands of kids who wonder why Mom and Dad are so worried," May added.
"Small communities will be particularly hard hit by tax and fee increases. Many cities have already seen a decrease in flights as airlines were forced to eliminate service because of higher security taxes and fees," said Deborah McElroy, president of the Regional Airline Association. "Regional airlines provide the only air service for 72 percent of U.S. cities. The proposed tax increases will make it even harder to continue to fly to many of these small- and medium-sized communities."
"Pilots have invested billions in concessions to help airlines restore a healthy bottom line and our efforts will fail under the weight of this exorbitant taxation," said Captain Duane E. Woerth, president of the Air Line Pilots Association. "Securing our air transportation system not only protects passengers, crew and cargo; it safeguards the U.S. economy and protects American jobs."
"The proposed fixed fee also hits low fare travelers hardest since it represents a higher percentage of lower fares," said David Stempler, president of the Air Travelers Association. "In that regard, it is a very regressive fee from an administration that prides itself on tax cuts and being very progressive on taxes. As passengers, we have been taxed, charged, and 'fee'd' to an excess. From the passenger ticket tax, to passenger facility charges, to flight segment fees, to airline security fees, international flight taxes, and immigration, customs, and agriculture fees, all of which can add up to more than 20 percent of a ticket and can rise to almost 50 percent of highly discounted fares. The administration's newly proposed security fee increase just adds insult to financial injury."
"A near doubling of the aviation security tax will only discourage travelers from flying for business and pleasure. This will also harm hotels, attractions, resorts, car rental firms and other travel industry companies and destinations that depend on these travelers for their economic livelihood," said Roger Dow, president and CEO of Travel Industry Association of America (TIA).
"We now know that travel security is national security, and it should be funded as a program that protects all Americans," said Bill Connors, executive director and COO, National Business Travel Association. "But travel is an essential gear in the American economic engine. It should not be discouraged by higher taxes. This proposed fee hike would cost businesses more than $400 million per year. Such an increase is likely to suppress demand among price- sensitive businesses travelers and create a negative impact on the nation's economy."
"Security is important, but will Americans be safer if Congress and the administration drive up the cost of air travel?" said Fred Smith, president of the Competitive Enterprise Institute. "Smacking an extra $1.5 billion tax on air travelers and sending it to a government agency isn't the most cost- effective way to improve airport security."
"We are stunned that the 'anti-tax' president wants to impose a whopping $1.5 billion tax hike on airlines, their workers and the flying public," said Edward Wytkind, president of the AFL-CIO's Transportation Trades department. "This will send an industry already in crisis into an even greater financial tailspin and leave airline workers wondering why they're being asked to pay for the protection and security of our air transportation system and infrastructure."
"It shouldn't be possible to make an intolerable tax burden even worse, but the Bush administration seems willing to try by proposing fee hikes on airlines and their customers," said John Berthoud, president of the National Taxpayers Union. "Many middle-class travelers pay a higher effective tax rate on an airline ticket than they do on their 1040 tax forms. Raising that rate further is fiscal and economic folly. Rather than reducing air carriers to a state of poverty and then providing handouts, the president should strip away the government-created impediments that prevent consumers and providers from developing a workable market for air travel. Spending more money without significant reform will only bring more turbulence for airlines in the future."
"It was a dangerous idea to give a government agency carte blanche to raise taxes whenever it wants to," said Grover Norquist, president of Americans for Tax Reform. "TSA, despite having a needed role in safeguarding our nation's security, is feathering its nest like any other government bureaucracy."
"One must question the wisdom of imposing an additional substantial burden on a financially beleaguered U.S. aviation industry, by doubling the security fee," said Patrick V. Murphy, Jr., partner in Washington D.C.-based Gerchick- Murphy Associates and former DOT Assistant Secretary of Transportation for Aviation and International Affairs. "U.S. airlines face unprecedented stress, with five now in bankruptcy and all but two operating at a loss last year. At this juncture, adding new costs to this fragile sector could speed the demise of weakened carriers, and so undermine the competitive benefits of the aviation system for passengers and consumers, and industry workers."
"Any increase in the excise tax on airline tickets will cost not only airline jobs, but will be felt in lower employment and payrolls in all of the industries that rely on air travel," said John Dunham, president of John Dunham and Associates and noted international economist specializing in excise taxes. "Such a proposal, at a time when the U.S. airline industry is going through a painful restructuring, will likely cost American taxpayers and businesses much more than the $1.5 billion that the president is looking for. A fair and equitable tax requires that the tax burden be shared proportionately among taxpayers. Organizations like the National Conference of State Legislatures have suggested that excise taxes on air travel are not broad based, are not equitable, are not stable revenue sources and are narrowly targeted over one specific type of economic activity. In short, they are not sound financing mechanisms."
"The airline industry, which has been hemorrhaging red ink since 9/11, will unlikely be able to pass much of the proposed increased security taxes of $1.5 billion on to its customers," said Daniel P. Kaplan, director LECG, LLC. "The industry is not well-equipped for this additional obligation. In the aftermath of 9/11, demand for air travel has fallen while the price of jet fuel, a major input, has skyrocketed. Airlines have been shedding employees, cutting wages, reshaping operations and passing pension obligations on to the PBGC as they struggle to cope with the new environment. The industry, its employees, and its customers should not be forced to shoulder even more of the nation's homeland security obligations."
"Security funding is a concern for the entire aviation industry -- including the all-cargo carriers," said Cargo Airline Association President Stephen A. Alterman. "We firmly agree that airline security is a national security issue and should be funded by all Americans, not merely those who happen to fly on aircraft. Federal funding of aviation security is necessary to help ensure the continued economic viability of the nation's airlines as they provide the vital personal and business link to the outside world."
"ITSA members agree that more than doubling the security tax on airline passengers is ill-advised," said Art Sackler, executive director, Interactive Travel Services Association. "As our industry has seen in other areas, raising taxes suppresses demand for travel and tourism services. The airlines, which are critical to the nation's economic well-being, are facing extraordinary, unprecedented challenges and this tax will harm them further."