By Kelli B. Grant
As part of a plan to help balance the federal government’s budgets, travelers may soon have to fork over an extra $2.50 each way on airfare.
The Wall Street Journal reports President Obama’s proposed budget calls for the minimum passenger-security fee — the charge initiated after the Sept. 11 terrorist attacks to fund extra airport security — to double from $2.50 to $5 per trip this year, and rise to $7.50 by 2018. The move would generate an extra $25.5 billion over 10 years, $18 billion of which will go into the general fund for debt reduction.
Tacking such fees onto travel expenses is becoming an increasingly popular way for local, state, and the Federal government to raise revenue, experts say. “The easiest kind of tax to pass at a local level is the kind of tax that falls on someone else,” says Ed Perkins, a contributing editor for SmarterTravel.com http://www.smartertravel.com. Local and state governments often levy taxes and surcharges on hotels and car rentals to build sports stadiums, repair roads and fund other projects. Last year, Hawaii, for example, increased its daily surcharge for car rentals from $3 to $7.50 to help reduce the state’s deficit. Airfare surcharges are more limited: the Federal Aviation Administration allows for airports to collect up to $4.50 per passenger for airport improvements. That revenue may also help offset funds needed from local governments, Perkins says.
But it’s unclear whether the budget proposal’s fees will stick. “Consumers are already sensitive to higher prices,” says Rick Seaney, chief executive of fare-tracking site FareCompare.com. As we’ve previously reported, taxes and fees on airfare are up 37% since 2001, and currently account for about 20% of the total cost to fly. Higher fees could also hurt airline operations, he says, leading to fewer carriers in some markets – and in turn, higher prices overall. When the government first floated the possibility of higher fees in October, the Air Transport Association of America warned it could keep some consumers from flying, leading to cuts in service and industry jobs.