Tuesday, March 11, 2014

Guest Blogger Nathan Brooks, Tea Party in Boston? Sorry, I won’t make it because I can’t afford the airline ticket

Nathan Brooks has worked for over 15 years in the travel business, with stints in airlines, hotels and travel agencies. He is also a 2008 graduate of the Kelley School of Business MBA program, despite the best efforts of Dr. Davidson.

When I was in the third grade, my sainted history teacher, Mrs. Smith, began to regale us with the story of the Boston Tea Party from the American Revolution. Being the excellent student I have always been (just ask Herr Doctor Davidson if you don’t believe me), I immediately raised my hand and asked “Why on earth did they waste all that tea? Shouldn’t they throw it at the British instead?”. As I was on to the principal’s office, I immediately learned the lesson of taxation without representation.

As a member of the travel industry, I am reminded about this concept every single day in the amount of taxes consumers are obligated to pay when booking an airline ticket, hotel room or rental car in the United States. If I decided to recreate the cinematic classic that is “The Hangover” today and went out and bought an airline ticket to Las Vegas, then decided to buy a case of Jack Daniels, a carton of cigarettes to wash the regret, and a shotgun to hide the evidence of my bender, I would pay more in taxes on the airline ticket than I would on all 3 other items combined. Airlines are one of the most taxed industries in the US, with taxes higher than any of the traditional “sin tax” industries.

When you buy an airline ticket, you get to pay for all sorts of taxes, regardless of where you are going and how much you paid for your ticket. In an average $300 domestic US round trip ticket (with a connecting flight each way) you will pay about $66 in taxes (22% in taxes).

Type of tax
Excise tax
7.5% x $300
Segment fee
$3.90 x 4 segments
Passenger facility charge
$4.50 x 4 segments
TSA ("Sept. 11th") fee
$2.50 x 4 segments
Grand total


Car rental taxes can even be worse, depending on where you rent your car. Particularly in airport locations, legislators are sure of two things: You don’t own a car in that city and you can’t vote them out of office for raising their taxes. If you have ever looked at your car rental receipt, you release that you have probably paid for someone else’s sidewalk repairs, the city Holiday party and the mayor’s new in-ground swimming pool at his house. As a longtime resident of the Phoenix area, I would like to personally thank each and every one of you for the fabulous 8 new spring training ballparks, all built with rental car taxes collected at the airport. Next time you are in town, be sure to go down to city hall and ask the mayor for a free hot dog to take to the ballpark.

In some cities, the taxes and fees can actually be more than the actual cost of the rental car. In most cities, it is actually cheaper to find a local pick-up location for a rental car and take a taxi to that location from the airport than to pay the “You’re a tourist, please take a barrel and head towards the falls” tax.
So, what can we do, other than figure out how to smuggle a crate load of English Breakfast tea past the TSA agents? We need realistic taxes on the travel industry, which are driven towards creating necessary improvements in the infrastructure. Next time you are sitting at the airport bar during a delay, simultaneously wondering how your flight from Indianapolis to Dallas can be delayed because of weather in Los Angeles and how is it possible the guy next to you can sit be upright after 8 Jack Daniels, realize that the air traffic control system hasn’t fundamentally changed in 70 years. This money, which is critical for growing the industry and adding more flights, cars and hotel rooms, is instead paying for baseball stadiums, convention centers and shopping malls.

However, the odds of politicians giving up tax revenue from folks that have no say in the matter ranks right up there with the Los Angeles Angels finally returning my calls about playing left field for them. As budget pressures continue to rise on cities, states and countries, these taxes will continue to rise and get more and more creative. All you can do is understand why these are occurring, sit back, raise your mug of tea and smile.


  1. James had trouble publishing this himself so I am doing it for him -- this is James' comment.....I agree 100%. I now rent my car off site and take a bus to and from. The revised cost is usually 50% less. The tax on airline travel is huge with no benefit. The airlines have take 1” away from Economy Seats and given it to Economy comfort seats. I think they are admitting to something and charging us for the truth…not sure. I live in a tourist town which thrives off of major events like minor league baseball, NASCAR, Motorcycles and spring break. During those time prices skyrocket on all local commodity goods and services to the levels of California. The tax is a % of the total price so the governments benefit and encourage more such events at the risk of driving away industrial development and decent paying jobs.

    If the locals add up their tax and their income tax without any property tax, it is approaching 40% or slightly less than what the Europeans pay but with far less benefits.. One has to ask why does the government constantly need more to do less?

  2. James, I hope you understand that the airlines do not get one red cent from those taxes. That all goes to the feds except for the state tax portion, of course. The one-inch reduction in seat space has nothing to do with the tax. What it does do is allow the airline to add one or two more seats in coach thereby increasing revenue potential. Now, the 11% or 12% "hotel occupancy" tax goes to the local municipality. Atlanta and the surrounding area are notorious for jacking up those taxes to pay for local projects as in the new Braves stadium in Cobb

  3. We go to Phoenix each year to visit my mom and I have them pick me up from the airport and drive me to an offsite rental car location. I save 50% by doing so. Incredible.