BACKGROUND
Amidst the ongoing “user fee” dialogue, it might be useful to reflect upon how the cost of aviating is funded
In 1927, legendary United States Supreme Court Justice Oliver Wendell Holmes characterized “[taxes [as] what we pay for a civilized society”. In context, taxes are what we pay for ATC, airports and airways – the privilege of “civilized” flight.
Aviation pays its own way, through the imposition of federal excise (and, at the State level, both sales and excise) taxes, “earmarked” for the Nation’s public use airports, facilities, infrastructure and services. At the federal level, they are retained in the Airport Agency Trust Fund (AATF).
The lion’s share of these monies fund air traffic control in the National Airspace System (NAS). They are generated through one of two forms of excise tax; viz., Transportation and Fuel.
THE TICKET TAX
Domestic Passenger Ticket Tax
An ad valorem excise tax (7.5%) on the purchase price of air carrier (Part 121) and/or charter (Part 135) tickets for flights originating and ending in the United States (or ending inside the “225-mile zone”; that is, that portion of Canada and/or Mexico, not more than 225 miles distant from the continental United States).
Domestic Flight Segment Tax
A lump-sum excise tax (currently, $4.00 per segment, indexed for inflation) on each domestic flight segment (takeoff and landing). It is imposed in addition to, and on the same operations as is, the domestic passenger ticket tax.
International Arrival and Departure Head Tax
A lump-sum excise tax ($17.80 per international flight; $8.90 per flight between the continental U.S. and Alaska or Hawaii) on all flights originating within, and terminating outside of, the “lower 48” (at points beyond the “225 mile zone”).
THE FUEL TAX
Of greatest significance to G.A. are the excise taxes on Fuel; that is: 4.4¢/gallon on commercial use jet fuel; 21.9¢/gallon on non-commercial use jet fuel; and, 19.4¢/gallon on avgas. G.A. pays “at the pump”. The tax is thereby collected by the FBO from the end user (you and I), in reimbursement of its payment to its supplier, who, in turn, has paid the tax at the terminal.
The efficiency of the system is exquisite: (1) certainty of collection at source; (2) remittance (on IRS Forms 720) directly to the United States Treasury; and, (3) administration and enforcement (backed by an elaborate array of civil and criminal penalty provisions) by the IRS.
In marked contrast, were user fees to be implemented, an entirely new, unnecessarily costly, redundant, and much less efficient, bureaucratic structure would be required.
CONCLUSION
Collectively, for FY 2015, the AATF provided 14 billon (92.77%) of the FAA’s total 15 billion dollar budget. Through this funding, the Agency rightfully boasts the largest, most complex, yet, most efficient and safest air traffic control system in the world.
There are still some functions that government does best; air traffic control is one of them. The excise tax structure is, similarly, the most efficient, cost-effective way through which to fund it.
The author gratefully acknowledges the able assistance of Sabrina Strand, Esq., an associate in the law firm, in the preparation of this article.
