WHEN CONGRESS failed to extend the legislation keeping the Federal Aviation Administration fully operational last week, the federal government lost its ability to collect the taxes it levies on airline tickets. Ever since, US airlines have faced a choice: pass the tax savings on to the passenger, or raise their baseline ticket prices and keep the money for themselves. Predictably, most carriers chose to keep the money, hoping consumers wouldn’t notice. They did.
This week, consumer advocates and government officials have been calling on the industry to make sure passengers, and not airline companies, benefit from what is, in effect, a tax holiday. But their proposed solution - that airlines lower prices to pre-tax levels and offer refunds to those who have already purchased inflated fares - ignores the reason why ticket taxes exist in the first place: to help pay for our transition from an antiquated radar-based air traffic control system to a digital GPS-based system. This upgrade will make flying safer and more efficient for everyone.
In the long term, airlines could benefit passengers - and themselves - by continuing to collect the fees and holding them in an escrow account. That way, the federal government would continue to have money for its technology upgrades, no matter how long the FAA is crippled.
Of course, a better solution would be for Congress to end its stalemate over FAA funding, which boils down to a dispute over union organizing rules. In addition to the ticket tax mess, the clash has sidelined nearly 4,000 FAA personnel in already uncertain economic times. With the larger debt crisis looming, Congress should extend the FAA’s funding, and leave the partisan labor dispute for another time.