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Article published Jun 15, 2004
Industry misleads over bite of taxes

If death and taxes are the only certainties in life, then scratch airline ticket taxes from the tax side of that certainty ledger.

A new study shows airline passengers pay only 15 percent in ticket taxes, and not the 26 percent figure often cited by the industry.

Daniel Webster College professor Joakim Karlsson and Massachusetts Institute of Technology professor Amedeo Odoni determined this after studying the ticket records of 8 million domestic flight passengers.

“As far as I know, we haven’t come across any other study like this, that looks at ticket taxes in a representative way,” Karlsson said in a telephone interview last week.

The Daniel Webster-MIT team concluded that ticket taxes add about 15 percent to the average domestic fare. The professorial duo conducted the study not to dispute the 26 percent claim of the airline industry, but rather to produce the “best, scientifically based estimate of the current impact” of U.S. airline taxes, Karlsson said.

The results differ from claims made by several airline executives and the Air Transport Association, said Karlsson, who pointed to four statements by industry officials claiming taxes from 24 to 26 percent.

Airline representatives arrive at this figure by choosing what they call an average ticket that really doesn’t represent average travel, Karlsson said. They assume an “unrealistically low” airfare, that the passenger makes a connection, and that the maximum passenger facility charge of $4.50 at every airport on the itinerary will always be assessed, he said.

“Each time they make that assumption, but it does not reflect what each passenger is doing,” Karlsson said. “It distorts results.”

Only about one-third of passengers make a connection, Karlsson said. This is significant because most ticket taxes are charged each time the passenger boards an airplane, he said.

Also, some airports collect less than $4.50 and some collect no charge at all, he said. And the $200 pre-tax fare used as an example by the airlines is lower than the true average ticket price paid by travelers, which was $290 in 2002, the year of the study, he said.

This creates a clear overstatement of ticket taxes, Karlsson said.

Karlsson and Odoni analyzed a hearty 10 percent of airline tickets submitted into a database before the end of the second quarter of 2002. The system contained 3 million to 4 million tickets, Karlsson said.

Karlsson said he can’t explain why the airlines use these estimates. But he speculates that it is a strategy to avoid additional taxes in the future.

“If the airline industry representatives can convince the public that the airline industry is already heavily taxed, then it will be much more difficult for the administration or Congress to levy any additional taxes,” Karlsson wrote in an e-mail message.

“And don’t get me wrong: 15 percent is still a fairly high tax, but it’s clearly much lower than the 26 percent figure represented by the airline executives and the Air Transport Association.”

Karlsson hopes the study will assist Congress in its policy deliberations on air travel.

Chances are, if Karlsson flies to Washington to testify on Capitol Hill, he will at least know how much tax he’s paying on his ticket.