Barf Bag? Airline Industry is Sick of Obama’s Proposed Tax Hike

Airlines are now handing out air-sickness bags, or barf bags, to passengers and lawmakers in order to clearly demonstrate their feelings on Obama's proposed airline tax bump.

The bags read Sick of taxes? with a large arrow pointing to the top. Stop new airline taxes from driving up costs and reducing service.

The bags will be handed out to both passengers and lawmakers in hopes of swaying the vote against the tax hike. The air sickness bags are just one of the tools the industry will be using against Capitol Hill in its major advertising campaign.

The airline industry feels as though it is being unfairly targeted by a Congressional super-committee that is in charge of reducing $1.2 trillion of the national deficit by Thanksgiving. 20% of ticket prices are already composed of taxes.

Nick Calio, President of Air Transport Association (ATA), used an appearance at Washington Aero Club on Oct. 18 to speak out against the proposed hikes.

It makes absolutely no sense for the Administration - or the Congress - to propose two huge new taxes on aviation, a key creator of jobs growth that is among the least profitable industries and pays among the highest federal taxes while other profitable industries and transportation modes are left untouched, Calio said in his speech.

The proposed bill raises the per-person security fee used by the Transportation Security Administration from $2.50 per leg (maximum $5 for one-way travel) to a flat $5 one-way fee. This means that those only flying one leg would be changed double. The fee would also be raised by 50 cents for five years, between 2013 and 2017. By 2017 the one-leg flight tax that used to cost $2.50 would then cost $7.50.

The taxes don't stop there; a $100 take-off fee would be required for every corporate and commercial jet. This tax would also certainly be passed along to consumers in ticket prices. Small regional airports and their customers would be hit the hardest by this bill, as they often fly smaller jets. A small plane carrying 10 passengers would be affected more ($10 per person, for example) than a 200 passenger jumbo-jet (50 cents per person). Regional airports are often vulnerable to losses as airlines will often cut routes or passengers will choose to fly from major hubs.

Although the fee is put in place as an additional security fee, over the next 10 years $15 billion dollars of the expected $36 billion in revenues will go to the deficit rather than security.

Paying more doesn't necessarily mean safer travel, said Calio. There is no clear plan of how security will be increased, nor is there any accountability for whether the additional resources are used efficiently or effectively. More to the point, the bulk of the new tax increases would go to deficit reduction, not security.

The ATA does not believe tax hikes in the airline industry are the solution to the deficit, as it will only hurt the economy further through decreasing ticket sales and the resulting loss of jobs.

Economists from Oliver Wyman consulting firm estimate that airlines will cut nearly 10,000 jobs if the bill passes. Furthermore, as a result of the tax, 181,000 jobs will be at risk in manufacturing and supporting services.

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