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article imageAviation industry's concerns mount over proposed tax hikes

By Leigh Goessl     Nov 11, 2011 in Travel
As the Thanksgiving deadline looms for the Congressional Super Committee to finalize a deficit-reduction deal, many groups are concerned over the proposed cuts and tax hikes that have been placed on the table.
The LA Times reported, "Talks continue behind closed doors as smaller groups of lawmakers from the largely secretive 12-member panel try to strike a deal to reduce deficits by $1.5 trillion over the next decade."
Many will be undoubtedly be affected by any fiscal decisions made, but one group which is actively making voices known is the aviation industry. The air industry has been increasingly concerned over the tax increases the White House has proposed to impose.
A press release was issued on Oct. 27 which described how the aviation industry is uniting to form an industry coalition of close to 30 organizations to oppose the proposed tax increases. If these go through, the industry says there will be many detrimental economic effects which will directly impact the air industry, but also ripple effect to others as well.
The release stated,
"As part of its debt-reduction plan, the White House is proposing - and the Congressional Super Committee is now considering - two new initiatives on airlines and their passengers and general aviation. The first would add a new $100 departure tax - disguised as a fee - to all flights, and the second would double the existing passenger security tax to $5 per one-way trip in 2012, and triple the tax to $7.50 by 2017."
In addition, a website has been established, called Stop Air Tax Now, which outlines the proposal and the effects any additional tax levied would have. The group says "The proposal will cost passengers and the industry $36 billion over the next 10 years, $15 billion of which would be diverted for deficit reduction, rather than to any investment in security."
Various organizations are saying if this tax is approved, it will result in limited service and higher fees to travelers, particularly those traveling out of smaller airports.
Travelers using U.S. Airways service recently found inserts in the pocket located in front of their seat, penned by Doug Parker, U.S. Airways chairman and CEO [online version can be found here]. The page outlined the industry concerns and included a statement from Nicholas E. Calio, CEO and president of the Air Transport Association (ATA) which was given at a conference back on Sept. 27 to the International Aviation Club.
Calio said, "Airlines are the physical Internet connecting people, products and the world, driving the global economy and creating millions of jobs. To further burden the already financially challenged industry is both illogical and a job destroyer. The results will be devastating to the U.S. economy."
From an economic standpoint, a ripple effect could occur. For instance, commerce could decrease if people and/or businesses, which use air travel, decide the fees are too much to absorb. If the projected job cuts occur, this would impact many in a time where unemployment remains at a high.
The estimates given in the U.S. Airways insert said that if these tax hikes are approved, 181,000 jobs would be lost by 2012 and 329,000 by 2021.
Additionally, local economics can be hurt when jobs are wiped out. Another consideration is how other businesses would be affected by limited services and delays if airline cuts were to happen. Then there are the tourist destinations to consider which may receive fewer visitors if people travel less frequently because they don't want to pay additional taxes.
The aviation industry maintains they are the least profitable, but most penalized in terms of taxes. Stop Air Tax Now website says, "The U.S. airline industry’s tax burden is skewed relative to other industries. Our customers pay more in federal taxes for air travel than they do on alcohol, tobacco or guns -- industries whose products are taxed at levels designed to discourage their use."
Current reports say the committee is far from a deal at this time, and with the deadline around the corner, decisions need to be made. While the future is still tentative, one thing that is certain is that many airlines across the country are united over this situation.
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