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Proposed US Airport Passenger Tax Hike Causes Concern

by Mike Godfrey, Tax-News.com, Washington

31 March 2015


Conflicting opinions are being expressed over a proposed sharp increase in the Passenger Facility Charge (PFC), a fee paid by users of US airports, which would significantly raise the cost of air travel for passengers.

PFC fees of up to USD4.50 are presently collected for every boarded passenger at commercial airports controlled by public agencies. According to the Federal Aviation Administration (FAA), US airports mainly use these fees to fund projects "that enhance safety, security, or capacity; reduce noise; or increase air carrier competition."

However, many airports are now advocating for an almost 90 percent increase in the PFC to USD8.50. Such a hike in the fee, which is applied on both passengers leaving and arriving at airports, could be approved when the US Congress considers the reauthorization of FAA funds in September this year.

In support of the fee increase, the US Travel Association released survey results on March 25 that show that, "although travelers remain frustrated by ticket add-ons from which they derive little benefit, such as bag and change fees, … 58 percent of travelers would be willing to pay up to USD4 more per ticket to fund airport improvements projects that would enable airports to accommodate more airlines, modernize facilities or reduce delays in and around the airport."

US Travel Association President and CEO Roger Dow said: "Air passengers aren't thrilled about ancillary fees, which disappear into the airlines' pockets, or federal taxes, which disappear into Washington's pockets. But if you show them a local user fee that is tightly structured to invest in our outdated and overburdened infrastructure, they understand the difference and strongly support it."

"The trouble is," Dow added, that the PFC "hasn't been indexed for inflation in a decade and a half, while our air travel infrastructure falls further behind the rest of the world."

However, Americans for Tax Reform (ATR) President Grover Norquist sent a letter on March 26 to members of Congress urging against an increase in the PFC that would "represent an unnecessary and unfair burden to airline passengers."

"Airports have argued that an increase in the PFC is needed in order to continue making infrastructure investments to better serve passengers," he wrote. "However, it is entirely possible for airports to continue making important infrastructure improvements without increasing the cost of flying."

"According to 2013 financial reports filed with the FAA," Norquist continued, "US airports had almost USD11.4bn in unrestricted cash and investments on hand. In addition, the Airport and Airway Trust fund is at its highest level since 2001, boasting an uncommitted balance of USD6bn. Even if airports were facing a shortfall in investment funding (which they are not), nearly every US airport enjoys investment-grade credit ratings, meaning that they can easily secure additional revenue through the bond market."

"Not only is increasing this fee unnecessary," he added, "it is also unpopular." He quoted a recent study from Airlines for America in February this year that found 65 percent of respondents thought the PFC to be a tax; 48 percent considered its present level to be "about right;" and 82 percent opposed its doubling.

Norquist pointed out that "air passengers are already overburdened by government taxes and fees – taxes make up 21 percent of the cost of an average domestic flight, and passengers paid USD20.5bn in taxes last year. While airports are requesting a seemingly modest USD4 increase in the PFC, this proposal represents a USD2.8bn annual tax increase on air passengers."

TAGS: individuals | tax | business | air passenger duty (APD) | aviation | fees | travel and tourism | United States | revenue statistics | construction | Travel | Tax

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