There are many false claims made about the U.S. airline industry, and every so often it is important to set the record straight.
Let’s correct the assertion that airlines are not taxed on the bag fees they collect. The problem is this claim just isn’t true.
With this year’s Federal Aviation Administration (FAA) reauthorization bill taking center stage on Capitol Hill, some advocates have advanced the notion that bag fees are not taxed as justification for increasing the Passenger Facility Charge (PFC), also known as the Airport Tax. It’s a convoluted argument that is full of holes and doesn’t withstand scrutiny.
When you buy an airline ticket, you pay an “excise tax” on the price of the airfare. You also pay a segment fee for each segment of your trip. Both of these taxes go to help fund the FAA, including the Air Traffic Control (ATC) system. An excise tax is a special tax on a good or service that the seller must collect and submit to the government. Because optional services like checked baggage and meals do not drive workload for the FAA (safety regulation or ATC services), they are not subject to these special excise taxes. But that doesn’t mean bag fees are not taxed. They are.
Airlines, like every person and business in this country, must pay income taxes. The revenue from checked bags, like any other source of revenue, is subject to federal and state income tax. Fortunately, airlines are profitable now and they do, in fact, pay taxes on the bag fee revenue they earn.
Those suggesting that these fees are not taxed are simply wrong and are quick to make connections on checked bags that just don’t carry their weight.
Do you want to pay more taxes when you travel? We don’t think so, and that’s why we are fighting against increasing the PFC. Learn more at StopAirTaxNow.com.