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US Politicians Play Blame Game Over Air Ticket Tax

by Leroy Baker, Tax-News.com, Washington

05 August 2011


The disagreements over spending and tax between Democrat and Republican politicians appear to have followed them into vacation, as the United States Congress has yet to resolve a renewal of the airline passenger ticket tax and other aviation-related taxes that expired at midnight on July 22.

The US taxes which have not been extended include the 7.5% passenger ticket tax and flight segment tax of USD3.70 per passenger, together with the passenger facility charge of up to USD4.50 and a federal security charge of USD2.50. It was pointed out that, previously, Congress had extended the taxes up to twenty separate times, without controversy.

As a consequence, several Federal Aviation Administration (FAA) programmes have also expired. Many airport modernization projects across the country have been halted, and nearly 4,000 FAA personnel, many needed to oversee various aspects of these projects, were furloughed without pay, beginning on July 23.

Before the deadline date, in an attempt to protect airport subsidies included in the Essential Air Service (EAS) programmes within the legislation, the Democrat-led Senate failed to approve an extension that the Republican-led House of Representatives had already passed, and both sides then began to point the finger of blame at each other.

The extension approved by the House on July 20 would maintain current funding levels for the FAA until September 16, 2011, but would also eliminate passenger ticket subsidies at some airports, including three airports that are subsidized in excess of USD1,000 per ticket. That provision would save USD4.1m, while a limitation of EAS eligibility to communities that are located 90 or more miles from a large or medium hub airport would result in USD12.5m in annual savings.

On August 2, Jay Rockefeller, Democrat Chairman of the Senate Committee on Commerce, Science, and Transportation, issued a statement arguing that “the House Republicans’ insistence on attaching anti-worker provisions to an aviation bill has brought about a terrible stalemate that is hurting the economy. Today, Republicans once again objected to a simple, fair request — a ‘clean’ extension of funding that would maintain operations into the fall, allow the FAA to function, and restart bipartisan negotiations.”

The following day, in an apparent reply, the Republican House Speaker, John Boehner, said: “All it will take to end this crisis is for the Senate to pass the House-approved FAA extension. I respect the fact that Senators have certain objections, but they have had two weeks to respond to the House bill and done nothing, leaving tens of thousands of workers in limbo. The House has done its job, and now it’s time for Senators to do theirs.”

At the same time, President Barack Obama entered the fray, by also pointing out the tax consequences. “The airlines are still collecting these (taxes) because it’s priced into their tickets, but they’re not turning them over to the federal government, and the federal government stands to lose USD200m a week. And we don’t anticipate it’s going to be easy to get that money back. Even though the airlines are collecting it, they’re keeping it.”

“So,” he concluded, “this is a lose-lose-lose situation that can be easily solved if Congress gets back into town and does its job. And they don’t even have to come back into town. The House and the Senate could, through a procedural agreement, basically do this through unanimous consent. And they can have the fights that they want to have when they get back.”

TAGS: tax | business | air passenger duty (APD) | law | aviation | travel and tourism | legislation | United States

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