Biden Takes Aim at SpaceX’s Tax-Free Ride in American Airspace

Every time a rocket soars into the sky carrying satellites or supplies for the International Space Station, air traffic controllers on the ground must take crucial steps to ensure that commercial and passenger aircraft remain safe.

The controllers, hired by the Federal Aviation Administration, close the airspace, provide real-time information on rockets and their debris and then reopen the airspace quickly after a launch is completed.

But unlike airlines, which pay federal taxes for air traffic controllers’ work for each time their planes take off, commercial space companies are not required to pay for their launches. That includes companies like Elon Musk’s SpaceX, which has launched more than 300 rockets over the past 15 years that often carried satellites for its Starlink internet service.

The Biden administration is looking to change that. President Biden’s latest budget proposal, released last month, suggests that for-profit space companies start paying for their use of government resources.

Commercial space companies are exempt from aviation excise taxes that fill the coffers of the Airport and Airway Trust Fund, which pays for the F.A.A.’s work and will get roughly $18 billion in tax revenues for the current fiscal year. The taxes are paid primarily by commercial airlines, which are charged 7.5 percent of each ticket price and an additional fee of about $5 to $20 per passenger, depending on the destination of each flight.

Mr. Biden’s budget proposal vows to work with Congress to overhaul the tax structure and split the cost of operating the nation’s air traffic control system. His promise is based in part on an independent safety review report commissioned by the F.A.A., which advises that the federal government update the excise taxes to charge commercial space companies.

“Whenever SpaceX launches a flight, it requires massive air traffic control resources to clear the airspace for hours around the launch window,” said David Grizzle, an author of the safety report and the former chief operating officer of the Air Traffic Organization, an agency within the F.A.A. that hires the controllers. “And again, it pays zero.”

SpaceX did not respond to multiple requests for comment.

Mr. Biden’s call for revising the decades-old excise tax structure is part of his push to make richer Americans and wealthy corporations “pay their fair share.” In his State of the Union speech last month, Mr. Biden also called for raising taxes on private and corporate jet users, including increasing the tax that they pay on jet fuel to $1.06 per gallon from 21.8 cents per gallon over five years. That tax on fuel currently makes up around 3 percent of the annual revenue of the trust fund, which depends heavily on what commercial airlines and its passengers pay.

Yet commercial space companies do not contribute to that fund or share any of the cost that the public bears when rockets are launched, said William J. McGee, a former F.A.A.-licensed aircraft dispatcher and a senior fellow at the American Economic Liberties Project, a consumer advocacy group.

“This is a question of fundamental fairness,” Mr. McGee said. “It would be the equivalent of having a toll system on a highway and waving through certain users and not others.”

Rocket launches are a time-intensive process for the F.A.A., former air traffic controllers say. The agency has to create a detailed plan outlining the exact airspace to close and reroute planes before a launch. Controllers must also respond quickly if anything goes awry.

“Consider a space launch to be similar to a hurricane making landfall,” said Michael McCormick, a former air traffic controller who worked for the F.A.A. for more than three decades and now teaches at Embry-Riddle Aeronautical University.

Hurricanes disrupt plans, shutting down airports and forcing planes to be rerouted. Rocket launches require equally intricate planning from controllers, Mr. McCormick said.

“In Florida — which is also one of the densest commercial aviation traffic corridors — you can start to see some very real impacts on the system,” said Michael P. Huerta, who was the F.A.A. administrator during both the Obama and Trump administrations and is the chairman of the safety review board that wrote the report. Commercial rockets now fly mostly out of Vandenberg Space Force Base in California and Cape Canaveral, Fla., near Orlando.

The number of space launches has increased dramatically in recent years, led by SpaceX, which puts dozens of satellites into the Earth’s orbit every month. In recent years, parts of NASA’s missions have also been contracted out to commercial space companies that carry supplies to the International Space Station.

In 2023, the F.A.A. oversaw 117 launches, a significant jump from a decade earlier when there were only 15 flights. More than 30 rockets have been launched so far this year, putting 2024 on pace to surpass last year’s number. The launch count includes U.S. rockets that took off from New Zealand, whose space agency has been regulating launches on its soil with the F.A.A.

The increase in launches is also prompting the F.A.A. to devote more resources to the oversight and permitting of space activities, which is separate from the work of air traffic controllers. The administration is requesting $57 million for authorizing and licensing for the commercial space industry for the 2025 fiscal year, an increase from the roughly $37 million spent in 2023. The F.A.A. added 33 new employees to its licensing and oversight office for the industry last year.

Commercial space companies reject the Biden administration’s suggestion that they pay aviation taxes. Members of the industry argue that it is still in a nascent stage, when most enterprises struggle to break even. They also point out that rockets need only about 15 seconds to fly through the airspace and that the volume of rocket launches is still negligible compared with around 16 million flights that the F.A.A. handles annually.

Taxing the industry is “not appropriate at this time,” said Karina Drees, the president of the Commercial Spaceflight Federation, the industry group representing more than 80 companies and universities. “The commercial space industry, in close partnership with its F.A.A. regulator, continues to improve coordination of launch activity and avoid unnecessary impacts to” U.S. airspace.

But Mr. Huerta and Mr. Grizzle said that Congress should start looking for ways to tax the industry in anticipation of a boom in launches that is already beginning.

More rocket launches are adding pressure to the air traffic control system already marred by inadequate funding, staffing shortages and overworked personnel, the authors of the independent safety report said. Dozens of near collision events reported last year — in which commercial aircraft came dangerously close to each other — have demonstrated that the F.A.A.’s safety margins have already become thin.

The combination of staffing shortages and insufficient funding for new equipment “presents a perfect storm for more serious events occurring,” Mr. Grizzle said. The situation “will only get worse, as the proliferation of new entrants who pay no tax at all” continues.

The F.A.A. said in a statement that the agency is “committed to safely handling rapidly increasing space operations while minimizing disruption to the flying public.”