Mr. Leven is president of Las Vegas Sands and a co-founder of Job Creators Network, a business advocacy organization.
Imagine your local government overspent its budget and then secretly made up the difference by adding a few dollars onto the cost of everything you purchase within your community. What if local businesses were not permitted to tell you about the higher costs you’re paying? Your local officials would be keeping the true cost of government and the advertised prices paid for groceries and everything else a secret from consumers and taxpayers.
That’s what happened on July 21 when yet another increase in the federal taxes and fees paid for airline tickets got secretly added to a growing total. Congress has rationalized tacking on these taxes in many ways. The latest one will cost consumers $1 billion more per year.
To add insult to injury, almost all of the additional revenue generated by the TSA tax hike will be used to pay down the federal government’s credit card – not to enhance aviation security or improve the flying experience. You’ll pay even more to fly for one simple reason, and it has nothing to do with the airlines: the federal government has a spending problem.
Washington’s spendthrift ways will be hidden in the overall advertised price you’re shown because bureaucrats created a rule in 2012 making it illegal for the airlines to show the cost of this new federal fee (and many others) as a separate line item on your advertised airfare.
If airlines could advertise the truth, we’d all be outraged. With this latest secret tax hike, more than one of every five dollars we pay to fly now goes directly to the federal government. The typical average domestic ticket price of $300 should be showing that $63 of the total is federal fees – only the leftovers pay for airline staff, fuel, planes, and the rest.
While Washington cannot control its costs, the airlines have been doing a terrific job. Measured against inflation, the base price of fares declined by 8 percent between 2000 and 2013, despite a choking 161 percent inflation-adjusted run-up in the cost of aviation fuel.
Doing so much correctly should translate into a stronger airline industry, more jobs created and even better service provided for passengers. But those hidden federal taxes and fees that hiked 49 percent between 2000 and 2013 ate up a lot of the benefits of airline efficiency.
A job killing public policy is bad enough, but a secret job killing policy is worse.
“Airlines have invested billions in fuel-efficient planes, employees, destinations and customer amenities, like lie-flat seats,” notes Nick Calio, President and CEO of Airlines for America, the industry’s advocacy group. “If the rising price of government prevents us from doing more, then our passengers deserve to know about it.”
One reasonable remedy is the Transparent Airfares Act, legislation before Congress that would get rid of the bureaucratic secrecy and allow airlines to clearly tell you in advertised prices how much you are paying to the federal government for your tickets.
This wouldn’t repeal any of the existing fees or taxes. But since these costs are already chewing up one of every five dollars paid by passengers, letting the customers in on the secret might make it harder for Washington to keep jacking up prices.
American Airlines CEO Doug Parker recently explained the issue to his passengers in the airline’s in-flight magazine: “By disclosing the taxes and fees, we hope to keep the increases in check.”
No business can survive by hiding prices. It is clear the federal government doesn’t have the price discipline of a business, but that should not allow it to force this bad behavior onto the airlines. Congress owes it to the airlines and their passengers to pass the Transparent Airfares Act.