Do you think there are enough taxes (and fees) on this airfare?

by Charlie Leocha on August 15, 2012

Boston_Logan_©Leocha
I just looked at my ticket from Washington, DC, to Calgary, Canada, and was stunned at the list of taxes and fees. Before the Department of Transportation (DOT) developed its full-fare advertising rule, requiring airlines to advertise the full price for airline travel, including mandatory surcharges, taxes and fees, I don’t remember such stark listings of the mandatory taxes and fees.

If there were taxes, they were hidden in the fine print or not mentioned at all until the final bill came your way. Today, the airlines are using this new DOT requirement to highlight how much they pay (well, passengers pay) in taxes and fees on every airfare.

Surprisingly, what began as a consumer-friendly regulation designed to keep airlines from engaging in a form of bait-and-switch marketing has become a mini-billboard for the anti-tax movement within the aviation community. The listing of taxes and fees certainly got my attention.

Here is the actual printout of the taxes and fees that I paid for my trip to Calgary.

I did the arithmetic. Taxes and fees come to 23 percent of the airfare. Wow!

What other activities are taxed at 23 percent?

“There are a few industries — and their customers — that pay more than their fair share: alcohol, tobacco, gambling and airlines,” says Nicholas Calio, president and chief executive officer of Airlines for America. “Yes, airlines.”

For airlines that, ironically, fought the full-fare requirement, the full-fare rule may turn out to have a silver lining. Now, the surprising litany of air transportation system taxes and fees are more in the face of consumers than under the old advertising rules. Consumers are noticing.

I know that rental car companies face a multitude of state and local taxes. The listings of those taxes can sometimes double the original rental car rate. But they are small potatoes when it comes to overall economic impact like airlines.

Honestly, I’m just beginning to think about this. Are these taxes too high? Should we pay for the airline system when we fly? Should we pay for all of it? What about the cargo carriers? Does air freight pay as much? Or, more? What about the communities that get jobs from companies that set up in their towns because of good airline connections? Should they pitch in too?

All I know is that I was surprised at finding out that the tax on my flight added up to 23 percent. It seems like I’m shouldering more than my fair share of this air transportation system burden.

And you? Do you feel airline taxes are too high? Are they about right? Do they only serve passengers? Or, do flights serve communities and businesses that create jobs and raise the total tax base for the cities, towns, states and the country?

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  • Anonymous

    I suppose the questions you SHOULD have felt obligated to answer, Charlie, are these: (1) Which of these taxes should be cut or dropped? (2) Why? (3) How do you propose that the services they go toward be funded instead?

  • http://twitter.com/johntbaker John Baker

    Someone would have to show me the numbers before I believe that airline customers pay more than their fair share. Until taxes on airfare more than cover the cost of the US air traffic control system, the cost of federal subsidies to US airports and the cost of ports of entry located at airports, I wouldn’t define the taxes paid as more than their fair share but that’s just me.
    The outlined taxes are all “use” taxes and designed to cover the government’s cost in providing the service. Its money that has to be paid. Far better that the users of the system pay it than everyone else.

  • Graham

    For Petes sake, you’ve been complaining for long enough how “fares” go up when you try and buy them and you’ve recognised that the extra is these taxes, fees and charges and you’ve only just managed to work out that hike is 23%? If it’s 23% to Canada, work out how much it is to London, then you’ll get a real shock.

    And, here’s a thing, they aren’t all “taxes”. They are a mix of taxes, fees and charges levied by the goverment (taxes), government agencies and airports (fees) and the airlines (charges).

  • BobinRDU

    I think it’s more complicated than just deciding who pays for these things if passengers don’t. Just what are these “things?” Why a customs fee and an immigration fee–isn’t that the same agency? Why are we still paying a Sept 11th tax, almost 11 years later? Is it to pay for those fancy scanning machines that don’t really keep us any safer, but certainly make for compelling theater? Do we still pay that tax because no politician is going to suggest revoking a tax with such an emotionally charged name? Does it really cost $7.50 a ticket to maintain that system? Does it really cost $5 a passenger to monitor the entry of plants on flights into the US? Or $44 a passenger to maintain the Federal air transportation system? What passenger facility am I being charged $13.50 to use?

    I think Charlie is right: this process will shed some sunlight on an aspect of air travel that’s been in the dark for too long.

  • Anonymous

    In fact, this is a pay-as-you-go system. Congress, in trying to balance the budget, has decided that airfare taxes should relate to the costs involved of subsidizing airport terminals, security, airport runways, the ATC system overhaul, etc.

    Drivers pay for roads through gas taxes. Flyers should pay for the security services, airports and traffic control through taxes.

    Remember security also includes the air marshalls who fly with you as a deterrent and real in-person protection.

  • Anonymous

    You are just paying attention to these now? BTW, some are taxes, some are fees. You don’t have to fly, but if you do, you pay for the priviledge, just like with driving and the taxes on gas.

  • Tim

    “Drivers pay for roads through gas taxes.” This used to be the case, but with the poor conditions of the roads here in the US, it is obvious the lawmakers have used the gas taxes for anything but the road infrastructure.

    If the taxes and fees on my airline tickets actually go to what they advertise and nothing else, I would be more accepting of them. The next discussion would then become if the taxing authorities/fee recipients are using the money efficiently.

  • http://astro.dur.ac.uk/~gelbord/ Jonathan_G

    “What other activities are taxed at 23 percent?”

    Lots of them. Have you ever heard of a little thing called the Value Added Tax? It works a lot like a sales tax in the US, but the rates are generally much higher. In the UK: 20% on most purchases. In Ireland it’s 23%. In Hungary, 27%. (For others, see http://en.wikipedia.org/wiki/Value_added_tax#Tax_rates ).

    Besides, as other posters have pointed out, not all these costs are taxes. The portion that are US taxes are closer to 10%.

  • http://astro.dur.ac.uk/~gelbord/ Jonathan_G

    Now that would be the start of a more interesting conversation!

  • Deb Hyte

    Hard to believe you have just noticed this!
    Unfortunately this is the way it has been for some time and in the case of international tickets to Europe, the lowest base coach fares are many times lower than the actual total tax amount. This is the reason why tickets cost what they do these days. I’ve been saying for years that something needs to be done as it’s ridiculous.

  • wiseword

    On your income tax, are these taxes deductible. Are the fees deductible?

  • Anonymous

    Your conclusions are dead wrong. In fact, because of higher auto fuel mileage and reduced driving habits, the Highway Trust Fund is headed for insolvency within two years. See:
    http://thehill.com/blogs/transportation-report/highways-bridges-and-roads/207839-cbo-reports-highway-trust-fund-headed-for-bankr

    I wish people would quit telling us government is a wild conspiracy to swallow our taxes. Like this comment, many espouse thoughts which are based on people’s own prejudices, rather than factual analysis.

  • Anonymous

    And when you purchase your international ticket and the taxes, as shown by the airlines, appear to be extremely high, remember that the airlines are now listing their “fuel surcharge” as a tax/fee, using the two letter code YQ or YR. Right now, TAP is offering a $90.00 roundtrip fare from NYC to London. If you look at the airfare as listed by the airline, it is a base fare of $90.00 and $743.00 in taxes and fees. This implies that the governments are charging $743.00 however that is grossly inaccurate. The government imposed taxes and fees come to $247.80 while the hidden fuel surcharge comes to $496.00. While the $247.80 is painful, the hidden fuel surcharge is extremely painful.

  • Anonymous

    Excellent post! And normally you buy consumer stuff with AFTER TAX money. So there’s your double whammy.

  • Anonymous

    Yes, customs and immigration are now in the same agency. But were not when the authorization was passed. Just add the two together in your head (we’ll wait).

    Sept 11 initiated security procedures which have an ongoing cost. We are still ongoing. You want a new name for it … call your senator.

    Yes, Agriculture definitely has costs involved in policing the laws. And for $44 you are getting a bargain as that includes the entire US airspace management system, FAA, and so on.

    The passenger facility charge is levied by each airport you use (including transit points). Someone has to help pay for the upkeep and operation and it’s certainly not fair for the locals to have to do it.

    Please, though, don’t go around asking about the YQ or “foreign origination” charges !

  • Anonymous

    Only your accountant knows for sure. Heck, the entire thing is deductible under certain conditions!

  • Anonymous

    This is correct. In fact, most ALL of our infrastructure is in dire need of maintenance, repair, and replacement. There are some things which government gets right and our vehicular infrastructure to date is an excellent example. The question is can we keep it that way?

  • Anonymous

    Some TA please tell me what the total tax is on hotel rooms in NYC?

  • http://www.tripso.com/author/leocha Charlie Leocha

    I added (and fees) to the title.

  • Anonymous

    Ha! I remember back in 1990, NYC raised the hotel tax to 22% if the hotel rate was over $99 a night. If it was $99 and under, it was approx 17%. I actually rebooked our stay to a rate at the hotel that came up within weeks of our arrival for $99!

  • Anonymous

    Here in CA we pay a lot of tax at the pump. The sad thing is that SAC robs from one pot to pay for another project and our road taxes are not being used correctly. Just a few weeks ago, there was an article about the east bay, in the SF area, that wants to tax all of us in the north bay for using their roads (never go there, you might get shot!), in addition to the insurance companies that are considering rating us for each mile we drive and basing our insurance on this. I guess a GPS per vehicle is being considered.

  • http://www.facebook.com/people/David-Pawson/100001223909045 David Pawson

    I’m surprised there isn’t sales tax on the total ticket. Sort of like the sales tax on the excise tax on cigarettes and alcohol…..

  • Anonymous

    The use of an airline ticket involves far more in government resource and services than the use of a Big Mac.

  • Anonymous

    That’s the “Federal Transportation Tax” Sales tax is a state thing and not levied on air transportation. (I guess because it’d be a bit tricky to decide which state got the tax money.)

  • Anonymous

    I’d say probably not (unless they are business expenses, of course.) It’s state taxes that are deductible on your federal return, and none of those are state taxes.

  • http://www.tripso.com/author/leocha Charlie Leocha

    The Federal Transportation Tax is a 7.5% excise tax that used to be hidden within the airfare.

  • Novus Ordo

    In fact, none of these are taxes. They are dedicated user fees that fund air traffic control, airport facilities, security screening, agricultural inspections, etc. If the author would like to specify whether to remove radar services or runways, we can discuss how to reduce these “taxes.”

    PS The one possible exception to the above is the $1.20 “Canada Goods and Services Tax”, which is 0.2% of the air fare.

  • dcta

    It is my practice when I have a client at my desk that I show him/her all the taxes and fees on an airline ticket. ALWAYS. I think it’s important that people should know. Charlie, I wish you’d used a return ticket to Europe as an example – often (almost always) the fees/taxes are higher than the fare itself!

  • DCTA

    Here’s an example, though I won’t break it all down:

    CLT BA X/E/MIA BA BCN M123.00OLX7Q2D1 BA X/E/MIA BA CLT
    M163.00QLX7Q2D1 NUC286.00END ROE1.0 ZP CLT
    FARE USD 286.00 TAX 7.50AY TAX 33.40US TAX 5.00XA TAX 12.00XF
    TAX 7.00XY TAX 5.50YC TAX 21.00JD TAX 4.70QV TAX 3.80ZP TAX
    496.00YQ TOT USD 881.90

    Note: the fare itself is $286.00 – total taxes and fees are $595.90.

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