Proof: Lower taxes do not equate lower prices for conmsumers

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Airlines Not Passing On Savings Of Not Having To Pay FAA Taxes
By Ben Popken on July 26, 2011 10:00 AM

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When Congress failed Friday to extend a bill that would have kept the Federal Aviation Administration (FAA) running, they handed airlines a $25 million a day gift. Without the extension, the FAA doesn't have the authority to collect taxes. But rather than pass on the savings, nearly all airlines actually raised fares to about the same amount as the federal taxes. Most consumers won't notice because prices are the same, even though it's effectively a price hike.

The taxes include a 7.5% levy on domestic tickets, $3.70 for each segment of the fight, and a $16.30 tax on international arrivals and departures. Spirit and Alaska Airlines were among a small clutch of airlines to not pocket the bonanza.

"The consumer should have saved anywhere from $25 to $50 round trip," Rick Seaney, CEO of FareCompare told NYT. "Instead, it's a windfall for the airlines."

"Basically, consumers are now paying the same as they did last week," Jean Medina, a spokesperson for the Air Transport Association, responded rather unhelpfully.

But what about people who bought their tickets before Saturday? They already paid the federal taxes, but now, during the period during which they're flying, no one has the authority to collect them. How about a refund?

That will probably happen. JetBlue has already said they would give out refunRAB to flyers who asked for them. Virgin America told customers that they might be able to get one from the IRS. Most airlines are probably going to wait for guidance from the FeRAB on what to do, once they are authorized to pick up their pencils again.

A Bonanza for Airlines as Taxes End [NYT]

http://consumerist.com/2011/07/airlines-not-passing-on-savings-of-not-having-to-pay-faa-taxes.html
 
have the costs incurred by the airlines not been rising under the obama economy? I am sure jet fuel has been steadily decreasing from the time obama took office until now.
 
Not to mention added security by TSA. I'm sure they all work for free.

Not to mention all those Union workers, not just in the TSA, but the pilots, ground crews, etc, etc.
 
It appears that the supply of airline seats is perfectly inelastic. With inelastic supply, the incidence of the tax falls entirely on producers; conversely, all the benefit of the tax cut is enjoyed by producers. In response to a change that is expected to be very temporary, airlines might be reluctant to adjust the quantity of seats supplied. That is, the assumption of inelastic supply might not be so bad.

If the tax cut were to persist, however, the larger profit margins would encourage a supply response. In that case, some of the tax cut, perhaps most of it, would be passed on to consumers.
 
And receive billions every year from the federal government so they can stay in business. Not to mention the numerous times airlines have had to be bailed out over and over again.
 
It's not about the profit, it's the principle of the matter.


2% flat tax rate accross the board. No one pays more than that. A pipe dream I know I'll never live to see.
 
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