Airlines say passengers are overtaxed

Columnist April 5, 2012

To say that air travelers spend as much time complaining about fees and surcharges as they do flying might not be much of an exaggeration. And now the airline industry wants you to add another complaint to that list: taxes.

Air travelers are overtaxed, say the airline trade organization Airlines for America and a coalition of other interest groups. In a campaign cleverly timed to coincide with this month’s deadline for filing federal income tax returns, they’ve called on Congress to “reform” the way the government taxes U.S. fliers.

“We face a uniquely bad tax environment,” says Steve Lott, an A4A spokesman. “The aviation industry and our passengers currently pay 17 separate federal taxes and fees, a hodgepodge thrown together and added to over the years without any guiding rationale or consideration for their overall impact on demand or affordability.”

To illustrate its point, A4A posted a chart on its Web site showing taxes on air travel from 1972 to 2012. The number of taxes jumped from five in 1972 to 11 two decades later to 17 today. Those taxes, which can raise the cost of a round-trip ticket by 20 percent or more, include such charges as the $2.50 Sept. 11 fee for airport security and the $3.80 flight segment tax, assessed each time you take off and land.

More taxes might be on the way. The administration’s deficit reduction plan includes increasing the passenger security fee, now between $5 and $10 per flight, to $15, with possible future increases. Of the $24.9 billion the fee would raise over the next decade, $15 billion would be funneled toward reducing the national debt.

Back in October, when the administration proposed the idea, I sided with critics who called it unfair, and I suggested that air travelers — and airlines — were overburdened by taxes.

But the airline industry’s latest push for lower taxes probably has more to do with another recent government action: the Transportation Department’s requirement that airlines quote a fare that includes all government taxes and fees. Consumer advocates say that the regulation makes fares more honest, but airlines complain that it conceals the extent of government levies.

“There are two big issues with government taxes,” says Michael Miller, a vice president at the American Aviation Institute, a think tank that often takes industry-friendly positions. “First, the total amount of taxes is higher than for nearly all other consumer products. And second, the government keeps adding to the consumer burden, never replacing older taxes. New rules hiding government taxes in your ticket price make it even easier to add new taxes.”

Air travelers don’t seem as quick to judge. After more than two decades as a consumer advocate, I can count on one hand the number of airline tax complaints I’ve heard, and those usually involve an allegation that the airline is miscalculating taxes or profiting from them.

For example, when Kenneth Babineaux checked his Virgin America itinerary from Dallas to San Francisco a few weeks ago, he noticed a suspicious surcharge: a $33 “international” tax. Last time he checked, San Francisco was part of the United States. What’s more, he says, a supervisor he reached by phone was rude and dismissive when asked about the fee. “I have no confidence in Virgin America now,” says Babineaux, who works for a college near Houston. “And I haven’t even flown them yet.”

I contacted Virgin. It said that the fee had been incorrectly labeled because of a computer problem but insisted that Babineaux’s fare was correct.

Jeremy Branham, a budget-travel blogger who has researched taxes and air travel, says that when travelers become aware of taxes, they quickly conclude that they’re paying too much. “In some cases, taxes and fees can account for as much as 50 percent of the total airfare price,” he says. And that has a ripple effect, limiting air travel and making American air carriers less competitive.

He’s right. In a poll I posted on my Web site, I asked readers whether they thought that they were paying too much in government taxes and fees. More than nine in 10 said yes. I’m inclined to agree.

But the real problem isn’t taxes. It’s the source and the timing of the latest tax outrage.

Let me put it this way: If you take the Obama administration’s misguided budget-reduction proposal off the table and delete the DOT’s new “all in” fare rule, would airlines still be pushing so hard to tell us that we’re overtaxed? It’s unlikely.

I’m more inclined to believe that the airline industry, worried because its fares used to look 20 to 50 percent lower, is trying to figure out a way to keep us buying tickets.

Ironically, while finding religion about “hidden” taxes, airlines continue to engage in pricing legerdemain by making it as difficult as possible for passengers to discover extra fees for baggage, seat selection, telephone help, food, pillows, blankets — basically anything that isn’t attached to the plane.

If the airline industry can’t overturn the full-fare advertising rule legislatively, its Plan B is tax reform. The source of the air travel tax dissatisfaction matters. If it’s a nonissue to passengers , then lowering these taxes will be about as hard as persuading an airline to eliminate or even disclose its fees and surcharges. In the past half-decade, those add-ons have multiplied at an even more alarming rate than any taxes.

Elliott is National Geographic Traveler magazine’s reader advocate.

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