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Passengers Lose Out Again in the Latest Senate Proposal for FAA Reauthorization
After years of government giveaways, the airlines are back for yet another handout from the Senate. The airlines have lobbied hard for another tax break as Congress considers FAA reauthorization, and according to news reports, they have succeeded in securing a repeal of the 4.3¢ per gallon excise tax they pay on jet fuel as part of the Senate’s Commerce Committee proposal. According to news reports, this could save the airlines $500 million every year. However, if history is any guidance, the Senate’s proposal to cut the airlines’ tax bill won’t amount to a penny’s worth of savings for the traveling public.
EXAMPLE AFTER EXAMPLE SHOWS THAT WHEN AIRLINES GET A TAX BREAK, THEY POCKET THE CHANGE AND RAISE FARES:
• “During the 1996 ticket tax lapse and 2003 security fee holiday, carriers generally raised “base” airfares (i.e., airfares net of taxes and fees) compared with what they were in periods before the absence of the tax or fee. The effect of this to consumers was to maintain or increase gross fares.” [Source: GAO-04-406R: Aviation Taxes and Fees, U.S. Government Accountability Office, March 12, 2004, http://www.gao.gov/new.items/d04406r.pdf.]
• “It didn't take long for airlines to figure out that the lapse of the 10 percent federal excise tax on domestic airline fares was an opportunity to raise fares. … fares across the nation since then have gone up between 5 and 20 percent, and sometimes more, according to Terry Trippler, who publishes the Airfare Report…” [Source: “Expired Air Fare Tax Has Carriers Raising Prices,” Boston Globe, April 2, 1996.]
• “For a second consecutive New Year's Day, the 10 percent federal tax on commercial airline tickets is lapsing. …The carriers, led by Continental Airlines, already have announced fareincreases equal to the anticipated tax cut on 14-day and 21-day advanced-purchase tickets.…"It's pretty clear they're going to keep the selling price the same and pocket what used to bethe tax," said Ed Perkins, editor of the San Francisco-based Consumer Reports Travel Letter. "The airlines are pretty well convinced that business is strong and they figure, 'If we can't raise fares in this climate, we'll never be able to raise fares,'" he said.” [Source: “No tax break for travelers this year: A lapsed tax on airline tickets will not bring relief for most passengers,” Honolulu StarBulletin,http://starbulletin.com/96/12/30/business/story1.html.]
• “Effective January 1, 1996, a 10% federal excise tax on all passenger and cargo base fares was eliminated due to the failure of Congress to re-enact the legislation. The tax was later reenacted in August 1996, and expired again on January 1, 1997. The tax has once again been reenacted effective March 7, 1997 and is due to expire on September 30, 1997. In each instance,Western Pacific kept its gross fares at the same level as prior to the elimination of the excise tax, effectively increasing its base fares by 10%.” [Source: Western-Pacific Airlines, WPACQ Annual Report (10-K), April 15, 1997, http://sec.edgar-online.com/1997/04/15/00/0000930239-97-000005/Section8.asp.]
EVEN THE MAJOR AIRLINES’ OWN EXECUTIVES ADMIT THAT WHEN THEY GET
TAX BREAKS, THEY ARE LIKELY TO POCKET THE CHANGE:
• “Look, if our tax burden weren't so high, there wouldn't be as much pressure to raise fares,” [Southwest Airlines Senior Vice President] Ricks said. “At the very least, we could keep fares the same and make more money.” [Source: “Airlines to lobby for revamp of FAA funding next year,” Ft. Worth Star-Telegram, December 26, 2006.]
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