A Tax Cut for Air Travelers

Conservatives should praise a new effort in the House of Representatives to reform the whole structure of the Federal Aviation Administration (FAA) and, hopefully, lower some taxes while they are at it. 

A Tax Foundation titled Improving Airport Funding to Meet the Needs of Passengers documents the ways the federal government hammers average Americans with tax after tax after tax.   

First they hit the passenger with a 7.5 percent Domestic Passenger Ticket Tax an then a $4.00 Domestic Flight Segment Tax (for international flights the charge is $17.70 per ticket).  There is an additional jet fuel tax and a September 11th fee that is $5.60 per segment per flight.

If you add up the domestic ticket tax and the flight segment tax, the federal government scooped up almost $9 billion in 2013 revenues with an additional amount of almost $3 billion in international flight tax revenues (this includes flights to Alaska and Hawaii).  The security fees made $2 billion for the feds. This money is supposed to go to the Airport and Airway Trust Fund and for the massive bureaucracy that was created at the Transportation Security Administration (TSA).

The problem is that the money is not well spent.  The trust fund money is not distributed on the basis of what airports are in dire need of help.  Representatives and Senators who serve on the committees that dole out the airport cash tend to favor home state airports regardless of need. 

The idea behind tax reform is to restructure the tax code so that it makes sense, is fair and results in economic growth.  If the domestic tax on tickets were to be cut, there will be money on the table to invest in refurbishing airports in need of repair.  Part of the federal tax is supposed to be set-aside for this purpose, yet the feds have a hard time distributing money in an effective and fair way.

One conservative idea that has great weight with the Tea Party is the idea of devolving federal programs to the states.  Senator Jim DeMint, now President of the Heritage Foundation, pushed the idea of devolving the federal gas tax to the states to allow the states to collect more money while the federal government eased out of the highway business.  The same idea can work with our local airports.

Cut federal taxes on air travel and allow local airports to collect more money would cut out the middleman – the feds.  This type of solution would save money for travelers and would help increase air travel. 

The Passenger Facility Charge is a local charge that airports use to collect money for the airport where the travel commences.  This local fee is capped at $4.50 per ticket and the local airports should be allowed to raise that fee while the taxes on domestic and international flights are dramatically cut.  This will convert a tax system into a more reasonable local user fee for air travel. 

The Tax Foundation report concludes “the current system of airport funding is not ideal for air travelers. The most important, most popular airports generate plenty of revenue for the government but do not necessarily get that money back to spend on their own capital expenses. Much of the funding granted by the federal government could be better spent by the airports directly.”

Remove the cap on the Passenger Facility Charge, lower federal taxes on travel and let the local airports to spend the money on their own airports.  Comprehensive tax reform should be tried on the whole federal tax code and it makes sense as a way to restore sanity, local control and free-market capitalism to the air travel market. 

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