Don't Let the EU Tax US Air Travel

By Pete Sepp

President Obama made it clear since his first days in office how much he supports an all-encompassing cap-and-trade energy program. Luckily, despite the administration’s most strenuous efforts to see one enacted, Americans have not been forced to accept such a policy or the economic burdens that come with it -- such as higher energy prices, fewer long-term job opportunities, and less business activity. That could all change, however, thanks to a recent power-grab by the European Union (EU).

The EU has long set its sights on industries that still require the use of fossil fuels. The passage of the EU Emission Trading Scheme (ETS) in 2005 gave eco-bureaucrats their first taste of sweeping regulations. Since then, the EU has expanded the continent’s cap-and-trade system each year to cover as many different business sectors as possible. Energy-intensive industries were hit first (and hardest) as new rules forced them to limit their carbon dioxide emissions or else pay a hefty government fine.

Many Americans remain unaware of these new carbon schemes since they’ve mostly stayed on the other side of the pond, but those days are over. The EU’s newest target for taxation is air travel, and officials in Brussels would love nothing more than to collect money from passengers on any flight landing in an EU member country. Indeed, the ETS would tax passengers for the entirety of their flight, no matter where it originates.

While the legality of this policy is questionable, there’s little doubt the effect on American travelers would be harmful. Senator John Thune of South Dakota recognized this and subsequently sponsored legislation preventing the EU from expanding its tax program to our domestic airlines. He conservatively estimates as much as $3.1 billion in higher costs would be passed down to American consumers, while as many as 40,000 American jobs could be at stake between now and the year 2020. With the U.S. economy still sputtering, we must be especially wary of a policy that creates higher fees for consumers and further hurts a struggling airline industry.

It is up to the federal government to take responsibility and act. The U.S. House of Representatives did its part last fall by passing Representative John Mica’s European Union Emissions Trading Scheme Prohibition Act of 2011, which ensures that domestic airlines and their passengers are not burdened with new European taxes. In the U.S. Senate, Thune’s bill is out of committee, and with bipartisan support it looks as if it will come up for a vote in the near future.

Outside of the U.S., the ETS hasn’t been any more popular. Acknowledging it as a unilateral move to benefit Europeans at the expense of non-Europeans, leaders from countries around the world are digging in their heels. At the front of the pack are China and India, whose governments are standing firm against the EU by preventing the release of any national airline emissions information, while threatening to tax and penalize Europeans traveling within their countries. Russia, meanwhile, continues to warn that it will instigate a full-fledged trade war against the EU if the policy is not revoked. Such actions, while predictable, would only worsen worldwide economic conditions.

Which leads us to President Obama: will he do what’s best for Americans (and travelers from elsewhere) by backing this legislation or will he pander to the radical part of his base and veto it?

Statements from members of his Administration have offered anything but clarity. After denouncing the EU’s emissions trading system as a “lousy, bad policy,” U.S. Transportation Secretary Ray LaHood has more recently said he is “not prepared to support” the Congressional mandate to block U.S. air carriers from participating in the system. This is unacceptable. 

For the sake of our air travelers who are already overburdened by domestic taxes, as well as the jobs of tens of thousands of American airline workers, the president needs to lead on this issue and prevent the European Union from reaching into the pockets of American citizens who have done nothing wrong. Many other taxpayers around the world will thank us too.

Pete Sepp is Executive Vice President for the 362,000-member National Taxpayers Union (ntu.org), a nonpartisan citizen group founded in 1969 to work for lower taxes and limited government at all levels.

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