July 2010 Archives

Should airlines be taxed on all those fees they charge passengers? Airlines made at least $3 billion in service fees last year for things like checking bags and in-flight meals.

But much of that money wasn't taxable because the IRS considers those services separate from "transportation of a person," according to a report this month by the Government Accountability Office. Airlines pay an excise tax on all transportation-related revenue into the Airport and Airway Trust Fund, which goes toward capital costs and helps fund the FAA.

Service fees make up an ever-increasing share of airline revenues, growing from less than 1 percent in 2007 to more than 4 percent in 2009, the GAO report found. Lawmakers, who already want airlines to be more transparent about what they're charging, say applying the excise tax to all these fees could be an option. Airlines argue that taxing more services would hurt the customer and that "a la carte" pricing offers consumers more choice.

Should these fees be taxed? Does the current IRS rule make sense? Which would be greater, the benefit to passengers and the trust fund or the harm to the airlines? Is there another option that helps everyone?

4 responses: Steve Van Beek, Greg Principato, James C. May, Bob Poole

Would it be a good investment for all concerned if state and local governments borrowed federal money for transportation projects up front and paid it back over time?

Los Angeles Mayor Antonio Villaraigosa last fall floated a plan for getting 30 years' worth of transportation projects built in 10 years: Borrow now to fully fund the projects and pay back the loan using the special tax already approved by L.A. voters. Villaraigosa has been attracting support since then with the argument that the 30/10 plan will save money in the long run, put vital projects in use sooner, create jobs and help the environment. It isn't so far off from the idea of a national infrastructure bank, and President Obama reportedly called it "a template for the nation."

Is it? Discuss the benefits and costs of having the federal government front money for transportation projects. How much is there to gain from getting must-have projects built sooner, and how would you determine what makes the cut? Does the short-term outlay make sense in the current spending climate? Will the return on investment be enough? What have we learned from the Recovery Act that should guide any further decisions about getting the feds involved in infrastructure spending?

7 responses: Michael A. Replogle, Geraldine Knatz, James Corless, Emil H. Frankel, Ken Orski, Tom Madigan, Phineas Baxandall

With John Pistole's recent confirmation as chief of the Transportation Security Administration, the agency finally has a full-time leader under President Obama. The 17 months TSA went under interim management were anything but quiet, and the two months since Pistole was nominated have given him more to think about. Two reports from the Government Accountability Office have faulted the implementation of TSA's behavioral detection program and questioned the agency's ability to meet Congress' August deadline for screening all incoming passenger air cargo. TSA has also taken over 100 percent of terrorist watchlist screening on domestic passenger flights. There's even a question of collective bargaining for transportation security officers.

What advice would you give Pistole? Where should he guide TSA? Where should he turn his attention in the short term? Do you see any new or emerging problems in transportation security that the agency will have to reckon with in the near future?

6 responses: Tom Madigan, Robert L. Crandall, William Millar, Bill Graves, Bob Poole, Greg Principato

Does a recent report by the U.S. Conference of Mayors touting the economic benefits of high-speed passenger rail put to rest questions about HSR's value as a business engine?

The report focused on four hub cities: Albany, N.Y.; Chicago; Los Angeles; and Orlando. Despite the differences of these hubs, the report found that high-speed rail networks had similar effects in all of them, including expanding markets; making business travel more efficient; and encouraging mixed-use development. Among its conclusions, the report argued for looking at these networks "in the broader context of a changing economy" that includes more long-distance tourism and business travel, and ever-wider markets and supply chains.

In 2035, the report says, high-speed rail networks around these four hubs could generate as much as $19 billion in new business.

What are your thoughts on the economic potential of high-speed rail? Will it generate the bang for the buck that the report says? Are there more cost-efficient ways to link cities?

12 responses: Emil H. Frankel, William Millar, Patrick J. Natale, P.E., Parris N. Glendening, Anthony E. Shorris, Ken Orski, Gabriel Roth, Bob Poole, Peter Gertler, Geoff Anderson, Mortimer L. Downey, Rep. James L. Oberstar, D-Minn.