FAA shutdown shows tax savings not passed down to consumers?

In a move reminiscent of the Extended Unemployment Benefits debacle/crisis here in N.C., our national legislative leaders have decided to hold the FAA hostage for their own political games. In both situations, what is usually a bipartisan reauthorization becomes a hardheaded stand-off (with the whole debt-ceiling thing going on in the background, no less).

You can read all about the background of FAA issue in all the major news outlets, blogs, twitter, google plus, etc.

What’s interesting to me is how the “tax holiday” becomes a test case of how private businesses handle visible tax breaks.

There’s some buzz that with the FAA shutdown, normal taxes/fees that go the agency will not be collected. How do the major airlines handle that? Will the savings get passed down to the consumers as many fiscal conservatives have pronounced tax breaks to businesses will do?



Apparently the answer is no… and yes…, depending on the company. If you are purchasing from major airlines like American, Continental, Delta, United, (even Southwest, my personal airline of choice…), then that would be a resounding no. They will all be raising their fares so you will be “paying the same” as if they were still collecting the taxes. Other airlines like Frontier, Spirit, Virgin America, on the other hand, will be passing the savings to the consumers.

The result? Well, if you look at the list of those who will raise their fares, these are the major airlines that serve the most routes. So for the majority of those flying today, it sends the message that businesses could care less whether they get taxed less, they will charge you more anyway. (If they will keep the price hikes and how they might act on a more permanent change in tax rates is certainly another story, but this test case gives us a sense of the major airlines’ attitudes towards consumers during our current economic climate.)

So while our legislators and airlines are having a field day, for consumers and workers, we’re the ones suffering the consequences. So here’s another one for Jeff Jarvis’s hashtag on twitter.

Update: USA Today reports that Virgin America and Frontier may both now have hiked their fares as well. And with that, Spirit, Hawaiian and Alaska are the only ones not pocketing the difference. Good time for a trip to Oahu?

Image above from Wikimedia Commons, used under the Creative Commons Attribution-Share Alike 3.0 Unported license.

6 Comments

  1. [...] The Progressive Pulse [...]

  2. [...] HolidayWall Street Journal (blog)Airline tax break won't trickle down to fliersMarketWatchThe Progressive Pulse -Baltimore Sun (blog) -The Consumeristall 1,122 news [...]

  3. [...] HolidayWall Street Journal (blog)Airline tax break won't trickle down to fliersMarketWatchThe Progressive Pulse -Baltimore Sun (blog) -The Associated Pressall 1,398 news [...]

  4. RNB

    July 25, 2011 at 2:34 pm

    “There’s some buzz [sic] that with the FAA shutdown, normal taxes/fees that go the agency will not be collected.” And if the Congress decides to collect those ‘holiday’ taxes retroactively after reauthorizing the FAA? Will you be receptive if your airline calls up and says, ‘Pony up some more money for that flight you took last week’? I didn’t think so…

  5. Ricky

    July 25, 2011 at 3:02 pm

    That’s an interesting point about retroactive taxes. Though, it’s doubtful that they would seek retroactive taxes, in my personal opinion. The Treasury is currently working with airlines to get people tax refunds for those who purchased tickets earlier and paid taxes up front, because the government doesn’t get the money from the taxes until the plane takes off. But with this Congress, who really knows?

    Did I spell buzz wrong?

  6. carly

    July 25, 2011 at 4:17 pm

    Any surprise here? the airlines will do anything to increase their take. Of course passengers almost always seem to lose. Taxes increase, passengers lose. Taxes decrease passengers lose. I found anew site to discuss travel experiences and more at airlineslodgingetc com Seems like a good place to vent about things like this. :-)