Following a two-week partial shutdown of the Federal
Aviation Administration, President Barack Obama on Aug. 5 signed a six-week
funding extension. The U.S. Senate and House of Representatives, which for
years have failed to agree on a long-term FAA reauthorization, now have until
Sept. 16 to get a deal done or pass yet another extension.
The extension allowed FAA to resume tax collection on
airline tickets and returned 74,000 transportation and construction workers to
airport and related projects that were halted during the shutdown.
In the two-week period when many taxes were not applied to
airline tickets, the federal government lost nearly $30 million each day. That
money essentially went to airlines, which raised fares commensurate with tax
reductions, meaning travelers paid about the same as they would have for
airfares.
Once federal taxes again were levied on airfares, airlines
rolled back those fare increases. "Simply leaving fares unchanged would
translate into a healthy 10 percent fare increase, but rarely has the industry
raised fares by this magnitude in a single effort (with 1 percent to 3 percent
fare increases being more common)," according to a recent report issued by
J.P. Morgan analysts.
Passengers who booked flights before the July 23 expiration
of FAA taxing authority but flew during the subsequent two weeks "are not
entitled to a refund of the airline ticket excise tax," according to the
Internal Revenue Service, citing a "retroactive reinstatement of the
law."
"This does not really surprise me," according to
an update posted on FareCompare.com by co-founder Rick Seaney, "especially
considering the hassle involved in providing refunds, but it's disappointing
nevertheless."
Despite that retroactive reinstatement, however, IRS
explained that it is "providing relief for airlines and taxpayers who
purchased tickets during that two-week lapse. This means the IRS will not be
retroactively collecting the tax since it was not collected and paid during
this two-week period."
The extension agreed on by Congress cut $16 million in
funding for rural airports located less than 90 miles from a medium or large
airport hub, an item favored by the Republican-controlled House but initially
rejected by the Democratic-controlled Senate.
After the Senate ultimately approved the House extension
bill and Obama signed it, House Transportation Committee chair John Mica
(R-Fla.) issued a statement indicating that "if the Senate refuses to
negotiate on the few remaining issues, they can be assured that every tool at
our disposal will be utilized to ensure a long-term bill is signed into
law."
Senate Democrats, however, issued statements on receiving
"assurances" from Transportation Secretary Ray LaHood that air
services in rural communities would be protected. Six of them—Senate majority
leader Harry Reid (D-Nev.), Max Baucus (D-Mont.), John Rockefeller (D-W.Va.),
Barbara Boxer (D-Calif.), Bill Nelson (D-Fla.) and Maria Cantwell
(D-Wash.)—called on House Speaker John Boehner (R-Ohio) to appoint conferees
"to devise a bipartisan, long-term solution" before the Sept. 16
expiration.
"More than 120 days ago, a bipartisan group of Senators
was appointed to the conference committee between the Senate and House FAA
bills," the senators wrote in a letter to Boehner dated Aug. 9, "but
their House counterparts have not been named more than four months after the
House passed their FAA bill. With another deadline for an FAA extension looming
in just a few short weeks, we encourage you to use your authority to appoint
House conferees during the pro-forma session."