A Tax By Another Name

It would appear that Congress has finally done its job and will pass a budget. The House passed the legislation last week before adjourning for the holidays while the Senate will do so this week.  While we might hail the bipartisan effort to avoid another government shutdown for the next two years, there are still many problems with this budget deal.  Though I could write an article on the hits and misses of this new budget deal, I’ve decided to focus on one particular part of it.

The budget deal eliminated $45-billion in sequester cuts (equally on military and non-discretionary spending) that were set to take place at the beginning of 2014, and also another $18-billion that were set to hit in 2015.  Sequester cuts were left in place beyond 2015.  To help make up the loss of this money, they needed to get additional income, and that comes in the form of an increase in airline fees.  Specifically, it targets the 9-11 security fee.

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Currently, the 9-11 security fee is $2.50 for a nonstop flight and $5 for a flight with stops.  There is also a cap at $5 so that a consumer cannot get charged more than that.  The new budget increases the fee to $5.60 regardless if it is nonstop or not and eliminates the cap.  It also takes the money generated out of its own account where it can only be spent in certain ways and places it in the general fund.  This allows Congress to spend the additional revenue wherever it sees fit.

And while you might think to yourself that $2.50 or even $5.60 might not seem like a lot, it’s because you haven’t taken into account the rest of the taxes and fees that are associated with that ticket.  A $700 plane ticket might have almost $200-worth of taxes and fees in the price.  When you start adding up all the “little” taxes and fees, you suddenly realize that you’ve been “nickled-and-dimed” out of a lot more.

So what exactly are all the taxes and fees that are included when you by a plane ticket? (per person)

  • Domestic Passenger Ticket Tax: 7.5% of the base ticket price.
  • Flight Segment Tax: $4 per connection (this increases $0.10 each year)
  • International Travel Tax: $17.20 which is a departure and arrival tax
  • Passenger Facility Charge: $4.50… airports have been wanting this increased
  • September 11 Fee: Currently $2.50 and will be raised to $5.60

Those are some of the bigger taxes and fees, but there are still lesser ones that add to that ticket price.

  • Frequent Flyer Tax: 7.5%
  • Cargo Waybill Tax: 6.25%
  • Commercial Jet Fuel Tax: $0.04
  • Aviation Security Infrastructure Fee: Varies
  • APHIS Passenger Fee: $5
  • APHIS Aircraft Fee: $70.75
  • Customs User Fee: $5.50
  • Immigration User Fee: $7.00

And just like with all of these other taxes and fees, the increase in the 9-11 security fee will be passed on to the consumers despite the billions in  profits of the major airlines and the already high costs of a plane ticket.  In an article on The Hill, Delta Airlines CEO Richard Anderson stated that he would be doing just that… passing along the increase to the consumer.  According to the Memphis Business Journal, Delta Airlines profits increased 18% in 2012 to $1-billion.

Airlines want more people to fly but yet they continue to raise prices for whatever reason they come up with… which does include when the government includes a tax on them.  As prices rises, more and more people are not able to afford the ticket prices and are therefore left out.  In 2007, a ticket to London could cost about $750.  That same ticket in 2013 cost about $1500, per person.  There will be cost of living increases during that time, but not to the point that it doubles prices.

Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI) have repeatedly said that the new budget does not raise or include new taxes.  Though that may be true in terms of income taxes, they apparently aren’t counting the increase in the 9-11 security fee.  Just because something is a fee doesn’t mean that it’s not a tax.  A fee is a tax by another name.  So yes, this budget does increase taxes.  They should have just let the sequestration cuts stay in place and just allowed the different departments to structure the cuts how they wanted.  There is enough waste in the budget as it is to accommodate the minuscule amount of cuts that the sequester had in place.

SOURCE:
Taxes and Fees provided by MarketWatch and Airlines.org

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2 Responses to A Tax By Another Name

  1. Young Maxwell says:

    while buying my flight ticket recently, it showed airport charges, federal segment charge and the 9/11 security fee…..what is it for? What purpose does it serve…or is it just another way for the airline to generate money?

    • James S. says:

      The segment charge is a fee that is placed on your ticket for each connection you have to make between your departure airport and your final destination. The 9/11 security fee is to help pay for the extra security/screening in the airport that is required before boarding the plane and also money to maintain a federal database of people who should not be flying as they are (or might be) a security threat. Most of the fees/taxes are from the government and not the individual airlines.

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