Speech by James C. May: Remarks on Security Tax Increase

I’m pleased to be joined by individuals representing virtually every sector of the aviation and travel industries – together we oppose this tax that threatens aviation and the U.S. economy.

Let me introduce my colleagues:

• Captain Duane Woerth, President of the nation’s leading pilot’s union, the Air Line Pilots Association;
• David Stempler, representing passengers as President of the Air Travelers Association;
• Fred Smith, President and Founder, Competitive Enterprise Institute, one of Washington’s leading policy organizations;
• Roger Dow, representing all components of the travel industry as CEO of the Travel Industry Association.;
• Debby McElroy, President, Regional Airline Association, representing regional airlines who provide air service to much of the nation;
• John Dunham, President, John Dunham and Associates. John is a noted international economist specializing in the impact of taxes;
• Caleb Tiller, Senior Manager, National Business Travel Association representing corporate travel managers and travel service providers;
• Pete Sepp, V-P Communications, National Taxpayers Union, which is a 35 year old organization dedicated to helping Americans keep what they earn;
• Art Sackler, Executive Director, Interactive Travel Services Association, a group promoting fairness in online travel; and,
• Ryan Ellis, Federal Affairs Manager, Americans for Tax Reform, a leading national tax reform organization.

This group is representative of a much larger coalition representing hundreds of thousands of Americans impacted by commercial aviation.

Earlier today, I sent a letter to the Bush Administration. In this letter, I expressed the frustration of the industry with this tax increase and the Administration’s apparent disregard for the critically weakened state of commercial aviation.

As evidenced by our unity shown here, there is truly a consensus that the tax burden is killing this industry.

Before I get into the specifics, permit me an aside.

Everybody here has been covering aviation for a long time. You know that we are frequently accused of overly complaining about government policies. But the picture we are painting today is one of stark reality.

Over the past three years, our industry has eliminated more than 123,000 jobs, and thousands more cuts are expected in 2005.

Tens of thousands more have been lost from other industry sectors dependent on commercial aviation.

Sometimes, people in Washington talk about jobs as though they are just statistics – they fail to recognize that this is 123,000 Americans who are out of work.

That’s 123,000 mortgages or rent payments that families struggle to make and tens of thousands of kids who wonder why Mom and Dad are so worried. And it isn’t over yet. We estimate that this $1.5 billion tax increase will put another 19,000 airline jobs at risk.

Treasury Secretary John Snow said it best last December:

“Economics tells us that anything you tax, you get less of. That’s why … taxes …are a bad idea – they kill jobs.”

Besides jobs, the economic destruction over the last three years has been severe. Just last year, the industry lost another $10 billion, bringing our three-year losses to a staggering $33 billion.

That is the definition of a crippled industry by anyone’s standards.

As others will attest today, this damage is not confined to commercial aviation.

When aviation is damaged, the ill effects ripple across both national and regional economies.

Just look at the total impact commercial aviation has on GDP – $800 billion annually and over 10 million American jobs.

Even though traffic is picking up, the competitive environment is keeping airfares low and the losses will continue to mount.

Our initial prediction for 2005 losses will be $5 billion. This tax increase will raise that to $6.5 billion. It’s just that simple.

Clearly, there has been a disconnect between budget policymakers in the Administration and the realities of the airline business – and that is just the point of my letter to the Administration.

The OMB has said that aviation security is a shared responsibility – if that’s so, our share is over $3 billion a year. We are doing more than our part.

Security costs need to be spread broadly because the broad economy benefits from increased air transportation. This will ensure rapid economic activity in all sectors.

The Administration knows the importance of air travel to our economy and the President put it best when he said in 2004, “If you want something to flourish – don’t tax it”.

Instead of drowning this industry with taxes, the Administration and Congress need to direct the more efficient spending of existing funds. It’s a far better solution than simply draining more taxes from airlines and passengers and killing the industry that better security is supposed to save.

Let me close with this. It is vitally important that efforts to improve our national security do not undermine our economic security in the process. And to be blunt, that is exactly what is happening today.