Proposed Tax Hike on Air Travelers Meets Stiff Opposition

Published April 1, 2005

The Bush administration’s proposed fiscal 2006 budget includes a massive tax increase on every American who uses air travel.

The tax, estimated to raise $1.5 billion annually, would go to the Homeland Security Department’s Transportation Security Administration (TSA) to offset airport security costs.

According to the Air Transport Association of America, in 2005 the federal government will collect $3.2 billion in homeland security taxes on flights. The total tax burden represents 26 percent of a typical $200 ticket.

Security Tax Doubles

The TSA proposal would hike total taxes on airplane tickets by 47 percent, to $4.7 billion in 2006. For the average traveler, the security tax portion of a ticket for one-way flights would go up by 120 percent and on round-trip flights by 60 percent. The federal security tax would rise to $5.50 per flight from $2.50 each way and would cap multiple-leg flights at $8 each way instead of the current $5.

“This is a lethal tax. It will kill jobs and further rob U.S. airlines of the vital revenue needed to restore their financial health and stability,” said the Air Transport Association on February 15 in an official statement to the Senate Committee on Commerce, Science, and Transportation.

The organization’s statement also said, “We face a situation today where efforts to improve our national security are undermining our economic security. Bluntly put, current government policies imposing excessive taxes on the airline industry are crippling a vital segment of our economy.”

Bush administration officials defend the proposal by calling the tax a user fee and saying it will improve airport security.

TSA Labor Costs Soar

The TSA was created in the wake of the 9/11 terrorist attacks to centralize and improve airport security. TSA has experienced one of the fastest-growing costs of labor of any government agency. In its first two years of existence, airport screener labor costs have grown by an average of 10 percent a year.

The airline industry is irritated by the degree to which TSA continues to look to that industry, rather than the general population of Americans who benefit from enhanced security, to fund its bureaucracy. Air Transport Association President James May said at a February 10 news conference on the tax increase, “[It is] said that aviation security is a shared responsibility. If that’s so, our share is over $3 billion per year. We’re doing more than our part.”

Of the total TSA budget request for 2006, 74 percent is expected to be paid for by taxes on airlines and air travelers.

TSA Policies Criticized

In February in a joint statement with 14 other organizations opposed to the tax hike, Grover Norquist of Americans for Tax Reform said, “it was a dangerous idea to give a government agency carte blanche to raise taxes whenever it wanted to. TSA, despite having a needed role in safeguarding our nation’s security, is feathering its nest like any other government bureaucracy.”

TSA is exempt from competitive sourcing rules that apply to other federal government departments. Prior to 9/11, most airports had hired private screeners to inspect luggage and passengers.

On February 10 Fred L. Smith, president of the Competitive Enterprise Institute, raised this issue at a news conference hosted by the Air Transport Association.

“The Transportation Security Administration lacks incentive to ask whether an additional ‘safety’ factor does or does not make a meaningful contribution to air safety,” Smith said. “Like all ‘precautionary’ agencies, their bias is to ensure against risks for which they, the bureaucrats, are responsible.

“To put ‘risk’ in perspective,” Smith said, “there’s no such thing as risk-free travel; there can only be safer travel. Airlines, data consistently show, offer a safer mode of travel compared to most alternatives, even taking into account any terrorist threat.

“Moreover, lawmakers who want to improve homeland security should re-examine whether the current balkanization of our nation’s air travel network is a good system,” Smith said. “Wouldn’t it be better to allow airport managers and airline owners to work together to coordinate operational decisions, including better security?

“It’s time to bring together an appropriate mix of both private sector and government measures that ensure a proper balance of safety, convenience, and affordability,” Smith said.

Ryan Ellis ([email protected]) is federal affairs manager at Americans for Tax Reform.