FAA stops collecting airfare taxes -- and the airlines cash in
by Grant Martin
Jul 23rd 2011
Recent budget woes in the legislative branch of our US government have been creating a cascade of disruptions, and the most recent hiccup involves the Federal Aviation Administration (FAA). Without proper agreement on a fiscal plan moving forward, the government has been forced to shut down a portion of the agency, most notably the section that collects taxes on our domestic airplane tickets.
Those taxes account for a modest percentage of each flight, roughly between 5 and 10%, and when travelers caught wind that the taxes would be discounted, they saw the silver lining of the shutdown as being a temporary sale on domestic tickets.
As planned, the FAA shutdown took place at midnight this morning, but the savings have barely matured. What happened?
Turns out, some of the airlines also realized the gap in price difference and decided to make that up by increasing their fares. So rather than passing the tax savings along to customers, they're greedily taking the margin for themselves.
Not all airlines have reached into our wallets, however, apparently Virgin America has not only refused to increase fares but they've turned the event into a bit of public promotion. Last night the airline had a countdown to tax-free bookings on their sites and as promised, the fares have stayed low. Similarly, United appears to be keeping its fares in place.
On the flip side of the coin? US Airways, American and JetBlue seem to be the leaders in ripping off their consumers.
http://www.gadling.com/2011/07/23/faa-stops-collecting-airfare-taxes-and-the-airlines-cash-in/
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I hope people realize that this is exactly what will happen if taxes and fees are reduced or eliminated on businesses. Very little if any of the savings will actually 'trickle-down' to the American people. Instead, it will end up in the hands of the CEO's and Wall Street in the form of larger bonuses and bigger dividends based on the higher profit margins.
OCU
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