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Airline Ticket Taxes Lapse as Congress Fails to Extend Them

1 min readBy: Joseph Bishop-Henchman

At 12:01 AM Saturday morning, the Federal Aviation Administration (FAA)’s congressional authorization lapsed, furloughing 4,000 FAA employees without pay. Operations personnel continue working.

The expiration of authorization also means the expiration of the various federal airline ticket taxes:

Operators should not collect the 7.5 percent transportation excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. (TET), segment fees, international facilities fees, Alaska/Hawaii fees or 6.25 percent cargo taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. for transportation that occurs during the lapse in FAA reauthorization beginning at 12:01 a.m. on Sat., July 23, 2011.

Most travelers are unlikely to see price reductions from this expiration:

By Saturday night, nearly all the major U.S. airlines had raised fares to offset taxes that expired the night before.

That means instead of passing along the savings, the airlines are pocketing the money while customers pay the same amount as before.

American, United, Continental, Delta, US Airways, Southwest, AirTran, and JetBlue all raised fares, although details sometimes differed. Most of the increases were around 7.5 percent.

For consumers who wanted to shop around, only a few airlines were still passing the tax break on to passengers Saturday night, including Virgin America, Frontier Airlines, and Alaska Airlines.

Congress returns from its weekend break on Monday and may take action to reauthorize the FAA. Observers expect this lapse in airline taxes, which will reduce federal revenues by $200 million per week, will be temporary.