Currently, U.S. federal taxes and fees account for 20 percent of a typical $300 roundtrip domestic ticket. These air taxes are even higher than products in the so-called “sin tax” category such as alcohol, tobacco and firearms, where higher taxes are actually put into place to discourage consumption.
Last month the U.S. Senate passed a budget resolution that would double the Transportation Security Administration (TSA) passenger security tax to $5 per one-way trip, and triple the tax to $7.50 per one-way trip by 2017, costing airlines and their customers $2.5 billion annually over the next 10 years.
Sabre supports airlines in opposing these excessive and disproportionate taxes, and stands on the side of consumers, who will end up footing the bill, or more ominously for the travel industry, vote with their feet and not travel at all. The demand for air travel is impacted by costs; as the total cost of air transportation rises even by small amounts, fewer people travel. Sabre is supportive of the mission of the TSA and we believe the industry paying its fair share of taxes. We would like the TSA to become more efficient with the resources it has and we think the industry should pay fair, not disproportionate taxes.
TSA is important
TSA performs an extremely important service to our country and we have been a strong advocate for risk-based security programs to help make travel security more efficient, effective and enhance the overall travel experience. We are advocates for TSA programs like Pre Check that will ease airport security lines — allowing people who pose no threat to move through expedited lanes and requiring those who are unknown to go through the regular screening process. Fostering growth of this program will, over time, require less budget, therefore lower fees for airlines and their passengers.
Travel and Tourism Taxes overall, a growing problem for our industry
Airlines are not the only sector of the travel industry you will find weighed down with onerous governmental taxes and fees. Have you ever added up the taxes and fees on your hotel or rental car statement? It is obvious the travel and tourism industry is regularly saddled with a disproportionate share of these charges compared to other U.S. products and services. The extra fees and taxes have not gone unnoticed by travelers. According to a recent U.S. Travel Association study, 49 percent of travelers say they have altered their plans due to high travel taxes, including staying at less expensive hotels, spending less on shopping and entertainment, and visiting during the off-season.
The travel and tourism industry’s position as one of the great engines of economic growth is well documented. Our industry is responsible for $2 trillion in U.S. economic output a year, supports 14.6 million jobs and generates $128.8 billion in tax revenue for federal, state and local governments.
See The Power of Travel.
So why would anyone run the risk of stalling it under a crushing load of unfair taxes which are so cumbersome that they actually run the risk of discouraging travel altogether? I think we find this “dog pile” of fees problematic for a few reasons:
- Travel and tourism is seen as a “cash cow,” an easy source for generating quick money through new or expanded taxation.
- It is easier for state and local governments to tax tourists, those just visiting, than taxing their constituents.
- Taxes bring incremental dollars to communities to build stadiums, parks, police departments and other community amenities for residents.
- Funds raised from travel and tourism taxes are often used to offset budget deficits.
Being part of the solution
Taxes are certainly a fact of life, but over-taxing travel and tourism will cripple our industry, which will suppress demand not only for airline flights, but also for cruises and rail trips, as well as for hotels, rental cars, and other travel-related services. These taxes and fees that fall on the backs of our partners and travelers can hinder the continued growth of our industry. Sabre is playing a leadership role in trying to find solutions to this problem.
Sabre President Tom Klein’s chairmanship of a WTTC (World Travel and Tourism Council) steering group called Policies for Growth and its focus on taxation is a strong example. This group is establishing principles of responsible taxation and pointing out examples of irresponsiblie, non-conforming taxes that inhibit the growth of travel and tourism throughout the world. You can take a closer look into the work being done in the WTTC annual report, and follow the link to see the 5 basic principles of intelligent taxation the committee has developed. Sabre Chairman and Chief Executive Officer, Sam Gilliland, is also playing a pivotal role as Vice Chair of the US Travel and Tourism Advisory Board. You can read the recommendations made by TTAB to the Secretary of Commerce on taxation and on aviation security, here.
Taxes are inevitable, but travel taxes should be proportionate and fair. If that’s not the case, then fewer people will travel, which will mean less economic activity and fewer jobs in one of the most dynamic industries in our country. The American statesman Benjamin Franklin once said the only things that were certain in life are death and taxes. Aren’t you glad I picked taxation to talk about for this blog?