EU Energy Tax Would Hike U.S. Airfares Even Higher

The United States needs to prevent European Union carbon taxes on passenger flights.

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Pete Sepp is executive vice president of the National Taxpayers Union.

Despite an early push from the Obama administration on behalf of a "cap-and-trade" carbon energy control scheme, Americans have so far been spared from the heavy burdens that this de facto national energy tax would impose on our economy. But as a Congressional hearing held today demonstrates in stark detail, a cap-and-trade regime from abroad now threatens to boost prices and deflate job prospects here at home.

As part of its continuing war on consumers who depend on traditional energy to travel, nations in the European Union enacted an Emissions Trading System (which stemmed from a 1997 pact) requiring various industries to scale back output of carbon dioxide or eventually face stiff fines for failing to meet government dictates. But what do the European Union's affairs have to do with the price of airline tickets in Anytown, USA? Plenty. Recently the European Union's court affirmed that the multinational government based in Brussels can impose these carbon taxes on any passenger flight landing in an EU country—even if the flight originated in the United States and largely followed a path over the Atlantic Ocean.

Although Internet users have seen their share of "spam" E-mails thundering about global tax conspiracies, truth has sometimes proven stranger—and scarier—than fiction. Over the past several years various bodies of the United Nations have proposed global online taxes and Internet governance strictures, while my organization has been warning about United Nations-backed "development taxes" on air travel since 2006.

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Yet, the European Union's rules pose a much more immediate problem for American air carriers. According to Sen. John Thune, a Republican of South Dakota who has authored legislation blocking the European Union from shaking down our airlines for emissions trading revenues, as much as $3.1 billion in higher costs (passed along to consumers) and as many as 40,000 industry jobs are at stake in the United States between now and the year 2020. Several other countries' airlines from outside the European Union are in the same, well, boat.

Last year a coalition letter signed by 15 organizations across the American aviation sector warned that if unilateral emissions schemes, such as the EU Emissions Trading System, are allowed to proliferate, scarce capital in the aviation industry will be siphoned into foreign governments' general funds inhibiting the industry's ability to improve our mutual goal—fuel efficiency.

Neither the airlines, which have been especially hard hit by the economic slowdown, nor their customers, can easily absorb another financial blow from a league of countries thousands of miles from our shores.

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U.S. travelers are all too familiar with state and local governments' attempts to "export" tax burdens onto people who can't vote in the jurisdiction doing the taxing. These include out-of-towners hit by rental car fees or hotel bed taxes (even though local residents on close-to-home vacations pay through the nose too). Washington often makes matters worse, for example by serving as an enabler for airport passenger facility charges.

That's why federal leaders now have a special responsibility to protect Americans from an unwelcome "export" manufactured by a European supra-national government. The House of Representatives has already enacted Republican Rep. John Mica's European Union Emissions Trading Scheme Prohibition Act of 2011, which marshals the resources of the federal government to ensure that U.S. civil aircraft operators are held harmless by the EU's emissions power-grab. Senator Thune's similar bill (S.1956) is poised to move through his chamber. Congress must get a final version of this legislation to the president's desk for his signature as soon as possible.

For its part, the Obama administration has commendably opposed the European Union's current actions. The Wall Street Journal reported that "[t]he U.S. has stated its 'strong legal and policy objections' to the move, and this month Secretary of State Hillary Clinton and Transportation Secretary Ray LaHood warned that Washington 'will be compelled to take appropriate action' if the EU doesn't back down."

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The White House should maintain this strong stance and avoid the temptation to cut a deal that would pander to the cap-and-trade impulses it peddled in 2009 and 2010.

Equally important, both ends of Pennsylvania Avenue need to support more constructive approaches to U.S. aviation reform. This includes reducing the tax burden on air travel, which can often exceed the typical effective rate that a middle class American pays on his or her 1040 income tax form. Redesigning the nation's air traffic control network—where users fund the operations through a private-sector-driven system while the Federal Aviation Administration oversees safety—would be a win-win for everyone. By encouraging investment in nonground-based air traffic control technologies, routes can be made more efficient, saving airlines fuel, saving passengers time, and reducing emissions in the process.

Fuels from oil and natural gas remain critical to our transportation web and the mobility of our entire economy. Policymakers need to take a smarter approach to ensuring these resources are put to work for the emerging recovery in a responsible manner. That path should begin by ruling out the European Union's dash for cash from American travelers.

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