NCPA - National Center for Policy Analysis

PROPOSED TAX HIKE ON AIR TRAVELERS MEETS STIFF OPPOSITION

May 5, 2005

The Bush administration's proposed fiscal 2006 budget includes a massive tax increase on every American who uses air travel, says the Heartland Institute.

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:

  • Total taxes on airplane tickets would increase 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.

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

According to observers, TSA continues to look to the airline industry -- rather than the general population of Americans who benefit from enhanced security -- to fund its bureaucracy, says Heartland:

  • The biggest problem is TSA's exemption 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.

Fred Smith, president of the Competitive Enterprise Institute, says it would be better to allow airport managers and airline owners to work together to coordinate operational decisions, including better security.

Source: Ryan Ellis, 'Proposed Tax Hike on Air Travelers Meets Stiff Opposition,' Heartland Institute, April 1, 2005.

 

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