Airlines take advantage of government failure to continue tax
There seems to be no quick end to the implications of the US Congress' failure to renew funding for the Federal Aviation Administration. The result:
- It is costing the US government about US$30 million a day.
- But instead of passing savings to the public, most airlines are simply pocketing the difference.
The result: the public and politicians are perhaps equally outraged.
Air travel has continued normally with traffic controllers still guiding the system but last week, when the US Congress failed to pass a bill to fund the agency, the result was layoffs for more than 4,000 FAA employees and the suspension of more than 100 airline-related contracts.
The later meant up to 90,000 construction workers were laid off, according to estimates from the Association of Flight Attendants.
“Working American families are suffering as a result of this shutdown,” Veda Shook, international president of the AFA, told the Huffington Post.
The total value of the suspended projects is about US$2.5 billion dollars in blocked FAA grants.
There is also a cost to taxpayers.
The Las Vegas Journal-Review recently noted that unfinished construction at McCarran International Airport could cost up to $8,700 a day.
In addition to the halted construction, the shutdown means that the government can’t collect the standard tax on tickets, which comes to about $30 million a day, or $200 million every week. Ordinarily, the ticket tax amounts to 7.5 percent of the base ticket price.
Without the mandatory tax, some airlines such as Virgin, Alaska and Frontier have kept their base fares the same, says the Associated Press.
But others including Delta (which was among airlines making the list of the US’s “20 Most Hated Companies,” also kept their base fares at the same level.
Airlines such as Delta which raised their base fares did not bother to notify customers that they might get a tax refund because of the higher fares.
The IRS said that it “has asked the airlines to provide refunds to eligible passengers when requested.” It goes on to say that “passengers who are unable to obtain a refund from the airline may obtain a refund by submitting a claim to the IRS.”
Transportation Secretary Ray LaHood has said that the $30 million in uncollected taxes each day is money that could be going to the US Treasury.
LaHood said airlines shouldn’t have raised fares by the amount of excise taxes they stopped collecting July 23, when the Federal Aviation Administration's revenue-raising authority expired.
“They’re collecting this money and it’s going to their bottom line and I think that is not right,”
Lawmakers have also complained that the airlines should not profit as a result of the stalemate.
Before the shutdown can be resolved, lawmakers will have to reach an agreement on a number of issues, including a possible elimination of service to a number of rural airports, and a push amongst House Republicans to make it harder for airline employees to unionize.
By David Wilkening
David
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