NEWS RELEASE
WASHINGTON, December 20, 2004 – A leading airline group today protested a $680 million tax increase on travelers and airlines. Carriers said the new tax increase was imposed without public review under an obscure federal regulatory process within the Department of Agriculture.
The Air Transport Association today questioned why the federal government was increasing the Agriculture and Plant Health Inspection Service (APHIS) fees by 61 percent, substantially hiking the cost of international passenger travel and aircraft inspections. The new tax increase means international travelers will pay an additional $1.85 per flight, an increase from $3.10 to $4.95 per flight. For carriers, aircraft inspection fees will increase from $65.25 to $70, with more increases to come in future years. Because U.S. airlines have limited ability to pass through taxes in today’s competitive environment, most of $680 million in federal tax increases will be borne by airlines at a time when many are struggling to protect jobs and service routes.
“When Congress created the Department of Homeland Security, it was clearly anticipated that the consolidation of airport inspection services into one federal department would result in efficiencies, savings, and a more reasoned approach to the way these taxes are levied. Sadly, there is no consolidated tax policy and these savings show no sign of materializing,” ATA President and CEO James C. May said.
Airline travelers, shippers and U.S. carriers are expected to pay as much as $16 billion per year in federal fees and user taxes in 2005, far and away the biggest federal tax burden of any major mode of transportation. The ticket taxes alone represent 26 percent of a typical $200 round-trip ticket and this burden continues to grow unchecked, undermining any sort of financial recovery by U.S. airlines.
This most recent federal tax increase amounts to $680 million dollars over a six-year period through 2010, raising ticket costs for travelers and agriculture inspection costs for U.S. carriers. The tax was disclosed on Dec. 9 as part of an obscure “interim final rule” by the Department of Agriculture, without prior public comment or congressional review.
Over the last three years, U.S. airlines have cut annual costs $21 billion, and have shed 127,000 jobs, one out of every five employees, ATA said. These self-help measures have dramatically improved productivity, but not without substantial disruption to hundreds of thousands of airline employees. To put this $680 million tax increase in perspective, this new federal tax represents what U.S. carriers would spend to employ 8,830 airline workers in 2005.
“Our government tax burden continues to grow unchecked,” May said, calling for an immediate roll-back of the $680 million tax increase. He noted the new tax increase conflicts with last week’s statements made by Treasury Secretary John Snow and other government leaders who assert lower taxes are essential for economic growth. “There are clearly some government leaders who get it; lower taxes do drive economic growth and jobs. We are hopeful that this is some sort of bureaucratic snafu and that the administration will take immediate corrective action.”
ATA represents leading U.S. passenger and cargo airlines.
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