Tax Increase on Air Travelers: Bad Idea at the Wrong Time

With Americans’ suffering from two years of President Biden’s soul-crushing inflation, few things have been hurt as bad as travel plans. If you haven’t flown anywhere recently, take a moment to check how much prices have gone up since the last time you did.

Indeed, travel costs are rising higher than even the overall inflation rate, according to a recent survey by NerdWallet.

Of those NerdWallet surveyed, 16% said they weren’t travelling anywhere this summer because inflation has made life too expensive. Of those who said they’ll still travel, 23% said they wouldn’t go anywhere that requires a flight because of inflation: airline fares are up 17.7% as of March, according to the Bureau of Labor Statistics.

And in the midst of all this, we have an otherwise great Republican suggesting we need to make flying more expensive.

Rep. Thomas Massie (R-Ky) recently introduced an amendment to the House’s FAA reauthorization bill to nearly double the Passenger Facility Charge (PFC). The PFC is one of 17 unique taxes that get slapped on airline tickets. It’s one of the reasons that the ticket price gets so expensive between the time when you click on it and when you check out.

It’s a federal program that allows commercial airports to charge up to $4.50 per flight segment. Airports use these fees to pay for projects that “enhance safety, security, or capacity; reduce noise; or increase air carrier competition,” according to the FAA website.

So if a Kentucky family of four flies to Disney World with a layover somewhere, that’s an extra $72 round trip: $4.50 x four fliers x two segments x both ways. But Massie’s amendment would allow airports to charge up to $8.50, almost doubling it, increasing the cost of this trip to $136 for our family, at which point they start thinking about a fun weekend at the Louisville Slugger museum instead.

Massie couches his proposal as a free-market solution, but a government-sponsored fee increase is actually called a tax. And if an extra tax prompts people to fly less, or find other solutions — like, say, taking the bus — then these airports will actually end up with less money.

At least that’s what the Government Accountability Office, which forecast that even just a 1% increase in airfare leads to a 0.8% decrease in passenger volume Citing the GAO in a very thorough dismantling of the PFC, the Cato Institute wrote:

That means that although increasing the PFC cap would increase PFC revenues, it would also lead to lower passenger volume. That, in turn, would result in lower ad valorem tax revenue, an important source of income for other funds the FAA allocates to airports.

Airlines also make a lot of what’s called non‐​aeronautical revenues from fliers. This includes money from concessions, parking fees, car rentals, hotels and on and on. These monies increased from $5 billion in 2000 to $10.6 billion in 2018, the Cato report continued, and will likely keep going up. Scare fliers away and you leave money like this on the table.

Moreover, because a PFC increase hurts those flights with more connections, it is likely to disproportionately affect trips to and from small and rural communities. The other group most likely to be impacted is small businesses, which are still reeling from the damage from the lockdowns.

Airports also aren’t struggling quite as bad as they might like us to think. PFC collections come out to about $3.5 billion every year, which is already a nice sum. Congress just wrote them a check for $20 billion in COVID relief funds, plus another $20 billion in federal grants under the Infrastructure Investment and Jobs Act (IIJA). A record $21.6 billion was spent on capital-improvement projects on airports in 2021, and the 2022 figures will likely be higher once we get them.

Massie otherwise has a great, conservative record, but he’s wrong on this one.

While advocates of a higher PFC cap argue it must keep up with inflation, actual airport revenue per passenger has been on a steady increase since the PFC was created. Rather than look for ways to increase pressure on travelers, lawmakers should decrease the crushing pressure put on everyone right now.

America invented the airplane, and widespread access to air travel has been a luxury of the robust American economy. Let’s conserve that idea rather than throw it under the bus.