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Air travel tax could pinch small cities

By Brett Snyder, Special to CNN
updated 9:02 AM EST, Mon November 21, 2011
Proposed federal fee increases could raise fares and limit service in some places.
Proposed federal fee increases could raise fares and limit service in some places.
STORY HIGHLIGHTS
  • A government proposal to reduce the deficit would raise air taxes
  • The plan calls for an increased security fee and takeoff taxes for airlines
  • Small cities could lose already limited service

Editor's note: Brett Snyder is the founder of air travel assistance site Cranky Concierge, and he writes the consumer air travel blog The Cranky Flier.

(CNN) -- It's the holiday season, and that means air travelers across the United States have shelled out good money to spend time with their families. With record fuel prices squeezing airline margins, travelers may have paid more than they expected this year. And if the government has its way, you might be paying even more next year for less frequent flights, especially to small cities.  

As we all know, the federal government is short on revenue, and it has been trying to find a way to reduce costs as well as increase money coming in the door. A small part of that plan involves the airlines.

The plan being put forth has two tax changes. One would see the security fee increase from $2.50 per segment to a flat $5 each way. With proposed yearly increases, it will hit $7.50 each way by 2017 and may climb from there. (The rule only specifies that it can't go below $7.50, but the Department of Homeland Security can continue to bump the tax up).

Would this help pay for better security? Not so much. About 60% of the revenue from this would be directed solely toward deficit reduction and not toward security at all.

The other tax would slap a $100 fee on every single airline departure. That might sound like peanuts in the scheme of things, but it could have some pretty negative impacts, especially on small cities that are already hurting for service. Small cities are served by small aircraft, so a $100 fee per airplane has a much higher impact per passenger on smaller planes.

Unsurprisingly, there are multiple sides to this issue. On the one hand, we have the anti-tax people saying taxes should never be raised on anything. They don't like this plan. On another side, we have those arguing for shared sacrifice, saying that every person and every industry needs to do its part to improve the financial situation in this country.

There also are many more nuanced positions that don't automatically oppose taxes but do oppose these.  One of those groups, supported by the airlines themselves, is StopAirTaxNow.com. The argument here is that the airline industry provides a very large number of jobs, and this would help kill a large chunk of them.  

Another, the American Aviation Institute, just completed a study showing that the annual impact of this tax increase would be $9 billion, because of an expected drop in air travel when the cost of travel goes up.

So what's the right stance here? Air transportation is tied to economic growth, so lower fares and more flights are certainly a good thing. High fuel prices have already pushed airlines to increase fares significantly, so the last thing travelers need is another increase in the cost of a flight.

Even worse than an increase in cost, however, is the disappearance of flights altogether. This new $100 per departure tax proposal has me particularly concerned about small city service. Small cities have already suffered a great reduction in service over the years.

Think about a community that's served by a 19-seat aircraft. This tax would add more than $5 per seat to the cost.  If it's only half full, which is often the case on these routes, then it's more than $10 per passenger.

So while an argument can be made for increasing taxes on any industry, the way this is set up isn't pretty. If you have to travel to small towns, you can look forward to fewer flights where flights are already pretty sparse. Some cities might lose service altogether. Good luck getting home for the holidays then.

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