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FAA shutdown ends Airline Tax Holiday

FAA shutdown ends Airline Tax Holiday

The Federal Aviation Authority’s partial shutdown ended on Friday after Congress granted temporary funding, but the IRS has announced it will not be issuing a federal ticket-tax refund for flights booked during the two-week “tax holiday.” It is estimated that the airlines collected $400 million during the standoff, an average of $28 million a day. Delta, Southwest, US Airways, and JetBlue all said that they would grant refunds once the IRS issued guidelines. However, the IRS has said, “as a result of the bill Congress passed, passengers who purchased tickets prior to July 23 and traveled between July 23 and the date of enactment of [the August 5] legislation are not entitled to a refund of the airline ticket excise tax.” Though consumer advocacy groups have expressed their disappointment about the lack of refund, it is worth noting that the IRS is not exercising its legal right to retroactively collect tax from passengers. Airlines are required to resume charging taxes today, and it is expected they will roll back prices to accommodate the reinstated taxes. On August 5, Congress passed the 21st short-term funding extension for the FAA, which has not had a multi-year funding budget in place since 2007. The temporary funding bill will extend the FAA operations until September 16. The bill was passed during the summer recess in an almost empty Senate using “unanimous consent,” a legislative system that allows two senators to approve a bill as long as there are no filed objections. If a funding bill had not been passed before Congress’ regular session in September, the government would have lost over $1 billion. As many as 4,000 employees had been put on furlough and 200 aviation projects were temporarily stopped during the two-week partial shutdown. Travelers walking through airportThe two outstanding budget issues that lead to the partial shutdown––airport subsidies and unionization of airline workers––remain largely unresolved. Experts suspect that the political divide from the debt crisis exacerbated the partisan split on these issues. The current temporary agreement shows some progress with the airport subsidies issues. It now includes language that Democrats previously opposed regarding rural subsidies, along with a new clause that allows Transportation Secretary Ray LaHood to grant waivers to community airports that would exempt them from subsidy cuts. The union dispute remains unaddressed. Republicans objected to a recent ruling from the National Mediation Board that would only required 50 percent support from those who vote to unionize. Old rules had required 50 percent agreement of all employees. Republican have been hoping to use the FAA funding bill to retract the looser union regulations. Delta Air Lines is the main player in the airline union debate, since all of the other major airlines are heavily unionized. Currently, pilots are the only unionized group at Delta. Democrats argue that Delta has pressured the Republican party to insert the stricter union language into the funding bill.

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