Why Politicians Keep Jacking Up Taxes on Travelers

  • Share
  • Read Later
Virgin America Handout / AP

Politicians are addicted to taxes that they swear aren’t really taxes—not ones paid by locals anyway.

In the near future, one of the many taxes paid by air travelers could double. In the aftermath of 9/11, the government began tacking on a security fee for each flight sold: $2.50 per nonstop flight, and a maximum of $5 on a connecting flight. A proposed increase to the fee, which has been receiving bipartisan support in Congress, could mean that all airline passengers pay $5 per flight, or $10 for a round trip, starting as soon as next year.

A $5 fee hike may not seem like that big of a deal, but for travelers tired of encountering fees at every turn, the prospect of yet another charge is enough to make them queasy. In fact, in early December Airlines for America, a trade association that supports the airline industry, began handing out leaflets and air sickness bags with special messages at Washington Reagan National Airport to get just that point across. “Are high taxes on air travel making you sick?” the barf bags read. “Fasten your seat belts because Washington wants you to pay even more.”

According to the association’s Stop Air Tax Now! campaign, there are currently 17 different federal taxes and fees assessed on aviation, and U.S. airlines and passengers paid $2.3 billion to the TSA in fees and taxes in 2012, double the amount paid in 2002. Roughly 20% ($61) of the cost of a $300 round-trip flight now goes to taxes and fees.

(MORE: The Fee-Crazed Airline Travelers Love to Hate)

Yet a CNN Money story summed up why politicians of all persuasion are in love with such fees, and why they’re prone to increase them when budget shortfalls arise:

The Republicans can say that they guarded against any tax increases because higher user fees simply count as more revenue — i.e., not an actual income tax increase on wages or investments. And Democrats can say that they avoided deeper cuts in domestic programs as well as changes to Medicare and Social Security.

“The needle that Republicans are trying to thread is being against new tax increases while still finding a way to raise revenue,” Airlines for America’s Sean Kennedy explained to Bloomberg News. “They’ve come up with a semantic argument that fees are not the same thing as taxes.”

Airline and airport user fees are hardly the only taxes passed along to travelers. Hotel and rentals car bills are chock full of ever-escalating fees and taxes. Rental car fees are often introduced to pay for special projects—typically, improvements to airports and tourism infrastructure, but sometimes for things like new sports stadiums—and once the fees are in place, they pretty much never go away. Earlier this year, per the Orlando Sentinel, the Orlando airport board approved the extension of a $2.50 per day car rental tax, which was supposed to expire in 2017, for more than another decade. One of the board members voted against extending the tax not because she thought the charge was unfair, but because she hoped for that another, higher tax on rental cars would be approved, and the current tax’s existences hurt its chances of success.

A CNBC post published this past summer rounded up several of the recent tax increases on hotels and rental cars. In many big cities, the average tax burden on a traveler adds up to more than $30 per day.

(MORE: 6 Outrageous Fees the Airlines Haven’t Thought Of … Yet)

Whereas flight user fees are justified by politicians as not being taxes at all, local authorities own up to the fact that taxes on hotels and rental cars are indeed taxes. But they sell the idea to their constituents with the explanation that these are taxes on outsiders, not local residents.

Critics say this argument is flawed, especially in the case of rental cars. In early 2013, the Indianapolis city council approved an increase of the local rental car tax, from 4% to 6%. Combined with state and county taxes, the new tax rate on rental car customers effectively shot up from 12% to 17%. Rental car supporters described the tax hikes as “discriminatory and unfair” to the Indianapolis Business Journal. And because so many cars are rented by not tourists but locals, the idea that these new costs are only passed along to outsiders is misleading at best. The nation’s coalition of rental car companies has estimated that more than half of rental car revenues come from local customers and companies.

Bear in mind that in recent years travel companies have embraced the nickel-and-dime fee model, with cruise lines, rental car companies, hotels, and of course airlines adding fees and/or raising existing ones on a regular basis. It’s just that these companies would prefer that they, rather than the federal government, be the beneficiaries of fee hikes.