Are you paying for an airstrip of convenience?

by Tom Johansmeyer on

Taxpayers are paying to subsidize several airports around the country. Many don’t service commercial passengers and do very little to add to the communities in which they reside. Take Williamsburg-Whitley County Airport in Kentucky. It was built with $11 million in cash from the U.S. government and usually sees only a handful of flights a day take off or touch down – some days, the runway is empty.

The source of this largesse? A federal program that few know about. To understand what’s going on, you’ll need to think back to the last airline ticket you bought.

You know the drill, there’s the price on the screen … and then there’s the price you pay. In addition to the fare, you realize quickly that fees and taxes can mount to seemingly absurd proportions, but you have little choice in the matter. The taxes alone can hit 15 percent of what you pay for a flight. Have you ever wondered where that money goes?

(Well, now you know that a piece of it goes to Williamsburg-Whitley County Airport.)

Some of the tax money from air travel transactions is used to build new airports and maintain others – a network of 2,834 in total in the United States – that do not service passenger flights. These “general-aviation” airports are separate from the 139 commercial airports in the country that take care of almost all passenger flights.

USA Today, which deserves a hell of a lot of credit for digging into this, reviewed the first full examination of the 28-year-old Airport Improvement Program and found that $15 billion was sent to general-aviation airports. That’s a considerable amount of cash to give recreational fliers a place to land.

In all fairness, there is probably some truth to the notion that these airports can attract commercial and residential development and provide some important services around medical transport via air, as some members of Congress insist. But, is it enough to justify the expense?

To Congressmen, perhaps.

USA Today reports that that “[m]embers of Congress took 2,154 trips on corporate-owned jets from 2001 to 2006,” per a 2006 study by independent research group PoliticalMoneyLine. Again, in fairness, some of these airports actually provide access to their constituents. But, should a taxpayer in San Francisco finance an airport in North Andover, Massachusetts?

However you quantify the utility, it seems as though the cost is a lot higher than the benefit.

Jonathan Ornstein, CEO of Mesa Air Group (a regional), tells USA Today, “Congressmen are spending millions building runways at these little airports. That is just a complete waste of money.” This is especially the case, he says, when “there is a huge requirement to overhaul infrastructure at major airports.”

Click here to read the entire investigation and analysis; it’s worth it.

Increased passenger ticket fee may help pay for airport expansions

by Scott Carmichael on

Ever paid attention to the breakdown of the fees tacked on to your ticket? In addition to the $2.50 9/11 security fee, and a government tax of about $4, you also pay a passenger facility charge (PFC) of $4.50.

This PFC is how the government pays for all the horribly outdated airports in the country. That is right – proceeds from selling $9 airport sandwiches are not enough to maintain and expand airport facilities. And neither is the current PFC – which is why a proposal has been made to raise the PFC from $4.50 to $7.

I’m guessing the government saw how the airlines were raking in the cash from luggage fees, and decided they wanted a piece of the action.

The increase should bring in billions of additional Dollars – an airport like Chicago O’Hare sees 70 million passengers a year, multiply that by $7, and you have a nice chunk of change. Then again, with an upcoming $5.5 Billion expansion plan scheduled for O’Hare, they need all the help they can get.

Thankfully, this $2.50 increase is actually very modest – international airports charge far, far more for the luxury of landing at their airport. Amsterdam charges a $90 “noise isolation charge and passenger service charge”, Glasgow airport charges $145 for the UK PSC. But the real winner here is London Heathrow, with a $155 PSC.

When you fly to these airports in a premium cabin, the fees can be as high as $300. So really, $2.50 seems like a pretty good deal if you ask me (these charges are all averages – some flights can be lower, some higher).

The proposal has been approved by the house, and is currently pending before the U.S. Senate, but chances are, it will become reality very soon.%Gallery-28218%

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The newest hidden cost in travel: taxes

by Tom Johansmeyer on

Cities and states are pumping up their coffers at the expense of visitors. Unemployment has led to a fall in income taxes, and with consumer spending off, sales taxes aren’t bring in what they did in the past. So, municipalities have had to look elsewhere.

And, travel is a great place to start!

How can a city or state raise money without incurring the wrath of its own voters? You guessed it – travel taxes. Hotels and rental cars are favorites, because the likelihood of nailing a resident with the tax is low. While you’d think that these additional fees would keep tourists away, it’s not likely. There are probably a handful of tax activists out there who’d rather dump tea in a harbor, but it’s unlikely to be the minority.

Last year, hotel room taxes brought in $14 billion, but the take is expected to fall this year, even with the higher rates proposed. After all, hotel occupancy rates are at their lowest levels since 1956 – a sluggish 55.5 percent – according to PKF Hospitality Research.

Who’s getting in on the action?

Hawaii: the hotel room tax hit 8.25 percent on July 1, 2009 (up from 7.25 percent) and will go up to 9.25% a year from now.

Nevada: Las Vegas is pushing the hotel room tax from 9 percent to an insanely high 12 percent! Why isn’t Reno‘s room tax being pushed to 12 percent? It can’t … because it already is 12 percent.

New Hampshire: the “Live Free or Die” state bumped its hotel room and restaurant tax to 9 percent (from 8 percent) and has stretched it to include recreational vehicles at campgrounds.

Massachusetts: look for the ol’ “Taxachusets” jokes to come back with a 50 percent increase in the hotel tax (from 4 percent to 6 percent) and an increase in the restaurant tax from 5 percent to 6.25 percent. Cities can add another 0.75 percent to the latter if they like.

New York City: as if the March 1, 2009 hotel tax increase to 14.25 percent wasn’t enough, the city will hit internet reservations for a bit more tax revenue.

2/3 of Brit pubs to increase beer prices

by Tom Johansmeyer on

Nearly a fifth of British pub owners are increasing beer prices now, taking the national average above the current level of ₤3 a pint. Ten percent are looking to pop an extra 15 pence on every glass, with two-thirds looking to push prices higher by 5 pence to 10 pence. The price of a beer has tripled over the past 20 years, obviously making it a better investment than that Enron stock you’re hoping will bounce back.

A new 2 percent tax is contributing to the elevated cost of intoxication, though operational expenses (like updating menus and cash registers) are leading to the extra imposition.

Seven percent of pubs will absorb the extra costs until September. Ninety-seven percent don’t give a shit about your need to imbibe at a value.

Backpackers learn how to steal Australian travel

by Tom Johansmeyer on

It’s really pretty simple. Foreign backpackers go to Australia. For several weeks, they’ll wander the country, get drunk and … I don’t know … go to the opera. When the trip’s over, these visitors file fake income claims, which get them thousands of dollars in tax refunds – despite not having actually worked (and thus not having paid any taxes).

Through word of mouth, and probably a few blog posts, word has spread, and it’s really kicking Aussie authorities in the wallet. And, the government is powerless. By the time they catch up with fraudsters, there usually isn’t much money left. Off course, the amounts are known to be too small for the Australian Tax Office to pursue them overseas.

But, this is illegal. Of the hundreds of thousands of backpackers who visited Australia last year, 44 were prosecuted successfully. Knowing my luck, I would have been one of them.