Obama's Proposed Airline Tax Bump Puts Jobs at Risk

With a $4 trillion deficit, the Obama administration is scrambling for solutions. Unfortunately for those in the travel industry, they have become the newest target.

With ticket prices already composed 20% of taxes, the travel industry is in an uproar over increasing ticket prices any more.

If the bill passes, ticket prices are guaranteed to rise on top of the already high prices. Smaller cities' airports are also likely to take a hit as the new bill affects those flying smaller planes more than metropolitan airport's jumbo-jets.

So what exactly is in the bill and what does it mean for you?

Take-off fee

A $100 fee is required for every corporate and commercial jet that takes off. Military planes and small piston engine planes (small planes commonly used for hobby or sightseeing) are excluded.

Regional airports and those that fly from them will take the biggest hit with this proposed tax as they often fly smaller planes. The imposed tax would certainly be passed along to consumers in ticket prices; however it would have different effects based on plane size. A 200 person jumbo-jet would only cost an additional 50 cents per person whereas a 10 person plane would cost an additional 10 dollars a person.

Regional airports are vulnerable to losses from both airlines and passengers choosing to fly from elsewhere. Smaller cities' airports fear that many airlines could cut entire routes and choose not to fly smaller planes.

It's not a question of if, it's just a question of how many would lose service, Richard Cohen, president of the Regional Airline Association, told USA Today. They might as well put the 'Closed, going out of business, not coming back' sign on every one of those communities.

Additional security fee

The proposed plan also raises the per-person security fee used to maintain the Transportation Security Administration (TSA). Currently the fee is $2.50 per leg of trip with a maximum of $5 for one-way of travel. The proposed bill would change the fee to a flat $5 fee one-way, meaning those who flew just one leg would be charged double.

The fee wouldn't stop there; between 2013 and 2017 the fee would raise 50 cents per year. By 2017 that one leg flight that used to cost $2.50 would cost $7.50, the same as multi-leg flights.

Although the fee is put in place as an additional security fee, over the next 10 years $15 billion dollars of the expected $25 billion in revenues will go to the deficit rather than security.

They're basically saying they're going to take our money and put it in another pocket, Charles Leocha, director of the advocacy group Consumer Travel Alliance told USA Today.

The White House modeled the plan after House Budget Committe Chairman Republican Paul Ryan's idea that raised fees to $5 one-way. However, Stephen Spruiell, one of Ryan's spokespersons, said the new plan of raising the tax to $7.50 in five years was too extreme.

Will it pass?

The travel industry is in an uproar over the proposed taxes. Air Transport Association of America (ATA) is calling for congress to reject the bill, as the airline industry is now taking the burden of recovering the deficit.

The U.S. government continues to use the airline industry as a cash cow, rather than seeing airlines as a growth enabler and understanding the strategic nature of aviation and what it takes to support one of our country's most critical industries, Nicholas E. Calio, ATA CEO and President, said in a speech to International Aviation Club of Washington.

It's tough to say if the legislation will pass as Republican leaders usually kill any tax increases. Yet, between the growing deficit and the security concerns, this bill may just be on its way.