There are times when a decision solves one problem and leads to another. Oftentimes, the loophole leads to unintended consequences that are as bad or worse than the original situation.
Such is the case with the airlines. U.S. carriers collected a record $6.4 billion in fees in 2014*, an ever-escalating category of revenue for them.
Why have fees become so commonplace in the past five years? Because in 2009, the IRS ruled that “ancillary fees” (bags and ticket changes) are not subject to taxation**. Of course, the airlines are going to focus on fees. Such practices generate not only big bucks, but it is even more lucrative revenue as the $6 billion is tax-free!
I am not sure why Congress or the IRS itself isn’t acting swiftly to change this, but it seems that the one lobbying for restructuring is the U.S. Travel Association. This group is promoting the exchange of five passenger taxes with one passenger facility charge to “remove the airlines’ incentive to shelter mass amounts of revenues in fees.”*
As households and businesses across the country are looking for nickels and dimes in their operating budgets, it seems unconscionable that the government knowingly lets such taxation revenue slip away.
I’m sure the original law enacted in 2009 had noble intentions, but it seems time to develop a new flight path that lands at the IRS.
* Travel group calls for aviation changes by Gregory Karp for the Chicago Tribune in the Telegraph Herald, June 6, 2015, p. 4B
** U.S. airlines collected a record $6.4 billion in bag and change fees in 2014 by Dan Peltier for Skift.com, May 4, 2015, 5:00pm.