Wednesday, July 27, 2011

Airlines Impose ‘You’re Not Taxed’ Tax After FAA Shutdown: "
In case you haven’t heard, there’s a stalemate in Congress. Not that one. On Friday Congress adjourned without extending the Federal Aviation Administration’s authorization. The F.A.A. has operated without a long-term authorization plan since 2007 through a series of 20 extensions. But the twenty-first time was the charm for Congress, and what had been a routine matter before turned into a partisan debate that ended in a partial shutdown of the country’s aviation authority.

Now the vast majority of airline passengers, particularly those who don’t write for infrastructure sites, won’t notice anything new during their air travel. Safety operators, including air-traffic controllers, will continue to show up for (and hopefully not sleep through) work. But about 4,000 federal workers placed on immediate furlough will certainly feel a change, as will construction workers connected to dozens of airport projects — worth “hundreds of millions of dollars,” writes Transportation Secretary Ray LaHood — that have been halted by stop-work orders.

As Secretary LaHood explained in a PBS interview, the stalemate turned on two provisions that “weren’t in any of the other 20 extensions.” The first is a subsidy for rural airports known as the Essential Air Service program. The House-approved version of the F.A.A. extension disqualifies 13 airports from the program — some that receive more than $1,000 per passenger, others considered too close to major hubs. All told the cuts produce a federal savings of more than $16 million.

If savings were the House’s true motive things might not be so bad — but it’s not, according to Transportation Nation. Senator Jay Rockefeller, chair of the Transportation Committee, told TN that the real hold-up is a provision that would make it harder for airline workers to form unions. Rockefeller says the Senate considers any bill that includes either provision a “non-starter.”

So where does that leave air travelers? Theoretically with a bit more change in their pockets. The F.A.A. shutdown means the government can no longer collect the federal taxes that accompany flight tickets — roughly $25 each way. But instead of passing the savings on to travelers, most airlines (with the exception of Spirit) kept fares the same and pocketed the difference, writes the New York Times:

Last week, evidently in anticipation of the tax’s expiring, some airlines quietly began raising fares — on average, roughly by the same amount as the federal taxes. Others did the same over the weekend, and most of the rest joined in on Monday.

Economists probably have a name for this sort of unrealized savings-expectation that explains why it should feel acceptable. In reality it’s not much different from the “Radioactive Man” episode of the Simpsons, in which producers filming in Springfield are forced to leave town because they only have $1,000 left, and Mayor Quimby, upon hearing this, imposes a $1,000 “leaving town” tax. In this case airlines are imposing a “you’re not taxed” tax.

Image: via Wikipedia

Eric Jaffe is on Twitter


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