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Florida Consumers Stand to Lose (More) from Airport Tax Hike

April 23, 2019 - 8:00am

Despite record-setting revenues, billions in reserve accounts, and promising industry forecasts, U.S. airports are lobbying Congress to increase the passenger facility charge (PFC), a move that would make flying more expensive for the more than 90 million air travelers who board planes in Tampa International or Miami International Airports, or elsewhere in Florida every year.

Currently, airports are allowed to collect a $4.50 PFC from every enplaned passenger to help fund infrastructure projects. A maximum of two PFCs can be charged on a one-way trip, bringing the round-trip cost to $18 per traveler. In 2017, airports generated a record-setting $3.29 billion from these taxes.

Since the PFC cap was last increased in 2001, passenger growth has sent PFC collections soaring. Revenues in 2017 were more than double what they had been in 2001, and more than $1 billion higher than if they had merely kept up with inflation over that period.

Liam Sigaud
Liam Sigaud
Still, some lawmakers are pushing to substantially increase the PFC, which could result in a family of four paying more than $100 in PFCs alone to travel round-trip -- and that’s before any other government taxes, fees, or airfare are factored into the cost of the trip. There’s even talk of eliminating the PFC cap altogether, exposing consumers to potentially billions of dollars in additional airport fees.

These higher costs would have an immediate impact on price-conscious consumers. In a recent analysis by the American Consumer Institute, we calculate that raising the PFC would reduce the number of air passengers in the U.S. by 7.5 million in 2019 and cause an annual $3.1 billion decline in consumer welfare. Another study by the International Air Transport Association found that a higher PFC would destroy 52,000 jobs due to a drop in demand for air travel, bringing down U.S. GDP by $5.1 billion. With four of America’s 30 busiest airports located in Florida, these harmful consequences would disproportionately impact the Sunshine State’s economy and its residents.

What makes the prospect of a PFC hike especially egregious is that airports have plenty of money to cover their capital needs. Airport revenues broke records in 2017, reaching nearly $30 billion, and the growth in revenue since 2000 has outpaced the increase in passengers, flights, and inflation. Airports also have nearly $15 billion of unrestricted cash and investments on hand, a 49 percent increase since 2010. The federal aviation fund is growing rapidly and is expected to have an uncommitted balance of $ 47.7 billion by the end of the decade, giving Congress ample resources to allocate to airport funding.

America’s 30 largest airports have invested more than $165 billion in infrastructure projects that have been completed, are underway, or have been approved in the last decade alone.

Not only do airports not need additional PFC revenue, but the local government entities that oversee nearly all commercial airports have a long history of misusing their revenue. Since 2008, an estimated $5.4 billion in taxes and fees collected from air travelers has been siphoned away and absorbed into city and county budgets.

In 2006, an audit of the Greater Orlando Aviation Authority revealed that officials had diverted $1.7 million of airport revenue over a five-year period to spend on other programs. Given weak federal oversight, airports essentially control how PFC revenues are used; Congress and taxpayers have no say in the process, removing accountability and encouraging waste.

Contrary to their claims of financial peril, airports in Florida and around the country have ample resources to support infrastructure improvements now and in the future. Imposing a higher PFC would only make it more expensive to fly, reducing consumer welfare and hurting the economy. Floridians deserve better.

Liam Sigaud works on economic policy and research for the American Consumer Institute, a nonprofit educational and research organization. Visit the Institute here.

Comments

With Republicans in charge ... consumers and working people ALWAYS "LOSE". The Dems are for regular working people; the GOPpers are now and always have been for the fatcats. Regular people and working people who vote Republican are ALWAYS voting against their own best interests. It's an inscrutable fact of American politics ... especially in the south.

When AOC and the rest of the Demwits get control, there won’t be any air travel, hence no consumer air travel fees. That’s a real WIN for consumers and working people!

Well said!

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