Raise those evil Corporate taxes!

[TimC]

You mean they just pass taxes onto the consumer? Say it ain't so, O!

 

Many fliers are outraged, but few are surprised, that most airlines have chosen to raise fares rather than cut ticket costs to reflect a suspension of airline ticket taxes.

 

 

Several aviation taxes expired after midnight Friday when Congress failed to reauthorize the Federal Aviation Administration, which collects the revenue. The suspended taxes could save passengers 10% to 15% on their ticket prices, but most U.S. carriers have boosted fares to the levels ticket prices would have been with the taxes still in place, allowing the airlines to take in roughly an extra $25 million a day, says Rick Seaney of FareCompare.com.

 

As of Tuesday, only Spirit and Alaska seemed to be bucking the trend, Seaney says.

 

Frequent fliers have noticed.

 

"While I respect any business' right to set prices as they see fit, this is another example of the airline 'gotcha game,'" says Steven Gordon, a sales manager who lives in Virginia Beach. "It is getting to the point that I feel better about buying a used car than an airline ticket."

 

MORE: Officials: FAA shutdown is wasting taxpayers' money

Bob Lorentzen, a crisis management consultant, says, "Hiking fares to grab what was tax money to the government is just plain nuts."

 

On Friday, American "adjusted its ticket prices so the bottom-line price of a ticket remains the same as it was before, prior to the expiration of federal excise taxes," says spokesman Tim Smith.

 

Virgin America, on the other hand, says that when the federal taxes lapsed, it initially passed "on the equivalent discount, down to the decimal, across the board … and encouraged guests to grab the exact discount through the weekend," says spokeswoman Abby Lunardini. By Monday, some ticket prices increased "given the dynamic nature of fares," she says, but some discounted prices were still available as of Tuesday.

 

Spirit, meanwhile, says its round-trip ticket prices are up to $50 lower because of the tax cuts it has passed on to fliers. And the discounted fares led to a 22% rise in sales in the first three days compared with that period last week.

 

Aviation consultant Michael Boyd says he'd rather see airlines get the money than the federal government.

 

"Consumers aren't paying any more if the carrier ups the fare to capture the tax revenue," he says, "so if a consumer isn't willing to criticize the feds for the tax charges, then he really has no call to criticize the airline."

 

But others say the fare increases are a public relations blunder by an industry already accused by many of nickel-and-diming travelers who are charged for everything from checked luggage to pillows. The industry has been grappling with surges in fuel costs just as it climbs back from a deep travel slump that eroded profits during the economic downturn.

 

"It seems greedy and tone deaf," says George Hobica, founder of Airfarewatchdog.com.

 

Seaney and others say passengers are entitled to some money back if they bought tickets before July 23, when the taxes were still included in the price, but traveled after the taxes were suspended.

 

"In theory you should be able to get a refund," he says, but "nobody knows how to collect it yet."

 

A spokeswoman for the Treasury Department confirmed that such fliers are entitled to a refund. The IRS website says details are soon to come.

[The Irish Doggy]

So lower taxes = no price break. Thanks airlines.

[Savage Beatings]

This is the first I've heard of an FAA shutdown. Is that temporary or permanent? What are the ramifications of having no FAA?

[SEC=UGA]

This is the first I've heard of an FAA shutdown. Is that temporary or permanent? What are the ramifications of having no FAA?

 

Temporary. You really don't want to know the ramifications, just get on the damn plane...

 

ETA: I'm pretty sure, though, that this means I can now smoke on the plane...

Edited July 28, 2011 by SEC=UGA

[TimC]

This is the first I've heard of an FAA shutdown. Is that temporary or permanent? What are the ramifications of having no FAA?

 

Everyone on the plane gets a turn at being pilot. Weeeeee.

[SEC=UGA]

Everyone on the plane gets a turn at being pilot. Weeeeee.

 

Except the Muslim looking guy.

[Duchess Jack]

next up, air traffic control via xbox live.

[yo mama]

So lower taxes = no price break. Thanks airlines.

Exactly, its a one-way street. They pocket the tax breaks, but (try) to pass on all tax hikes to consumers.

[Duchess Jack]

Exactly, its a one-way street. They pocket the tax breaks, but (try) to pass on all tax hikes to consumers.

anything else would be contrary to human nature. same reason why tickle-down is a fantasy.

[WaterMan]

They are smart, but why are they using their powers for evil?

 

"We care for our employees and consumers, but times are hard. When Congress raises taxes on us, we have no other choice. Our limos ain't gonna drive themselves!"

[yo mama]

anything else would be contrary to human nature. same reason why tickle-down is a fantasy.

It's true: I do fantasize about being tickled-down.

[Caveman_Nick]

I have been saying this for years. Taxing businesses makes no sense. They just pass the taxes along to the consumer.

[yo mama]

I have been saying this for years. Taxing businesses makes no sense. They just pass the taxes along to the consumer.

They can try. But fundamental economics says that, in a competitive market place, at least one business person is willing to gain market share by eating some of the tax expense by accepting lower profit margins. That business may make less profit per unit, but it makes it up through greater sales. Competing business who try to pass through 100% of all taxes through to their customers will either lose customers or have to follow suit to keep their prices competitive. In the real world, some business intentionally lose money on products, by not passing on all costs to the customers, simply to attract market share (i.e., "loss leaders").

 

The idea that ALL businesses merely pass ALL taxes through to the customers requires us to assume that the businesses are cooperating in that regard. That would likely violate anti-trust law.

 

I think your point is far more applicable to markets that are not truly competitive - a monopoly, for example.

Edited July 28, 2011 by yo mama

[tonorator]

we have one of the highest corporate tax rates in the world. we shackle our own bread and butter from competing with foreign companies and hinder our ability to create jobs and reward american workers. i hope we wake up soon and knock this down by double digits.

[yo mama]

we have one of the highest corporate tax rates in the world. we shackle our own bread and butter from competing with foreign companies and hinder our ability to create jobs and reward american workers. i hope we wake up soon and knock this down by double digits.

Hogwash, I say. American businesses are sitting on trillions of dollars in surplus cash, afraid to spend it or create jobs. Lowering tax rates would merely makes those piles of cash bigger. The most significant barrier to job creation isn't tax rates, its creating reasons for businesses to start spending their cash surpluses here at home.

 

You want legit an incentive to American job creation? Create tax holiday on repatriating foreign earnings that are used to hire American workers and build stuff here.

[Duchess Jack]

I have been saying this for years. Taxing businesses makes no sense. They just pass the taxes along to the consumer.

wait.... isn't this the opposite? taxes lowered, prices raised?

[bushwacked]

They just pass the taxes along to the consumer.

 

If it was truly this simple then shareholders in businesses wouldn't spend considerable resources in lobbying for lowering taxes and minimizing regulatory loopholes that don't enhance profits.

Edited July 28, 2011 by bushwacked

[tosberg34]

Hogwash, I say. American businesses are sitting on trillions of dollars in surplus cash, afraid to spend it or create jobs. Lowering tax rates would merely makes those piles of cash bigger. The most significant barrier to job creation isn't tax rates, its creating reasons for businesses to start spending their cash surpluses here at home.

 

You want legit an incentive to American job creation? Create tax holiday on repatriating foreign earnings that are used to hire American workers and build stuff here.

 

They are sitting on it because of the current guy in office, not for the sake of sitting on it. Have you heard the Steve Wynn rant? Wynn isn't no where near being a conservative either.

 

He sums it up quite nice about those "trillions of dollars in surplus cash".

Edited July 28, 2011 by tosberg34

[yo mama]

They are sitting on it because of the current guy in office, not for the sake of sitting on it. Have you heard the Steve Wynn rant? Wynn isn't no where near being a conservative either.

 

He sums it up quite nice about those "trillions of dollars in surplus cash".

We can debate the reason corporate America is sitting on piles of cash. But that reason does not affect my point that lowering tax rates for domestic business will merely add to those piles of cash. The primary solution to job creation will be found elsewhere.

[Ursa Majoris]

We can debate the reason corporate America is sitting on piles of cash. But that reason does not affect my point that lowering tax rates for domestic business will merely add to those piles of cash. The primary solution to job creation will be found elsewhere.

Exactly. Corporate cash is not a barrier to job creation because they are sitting on trillions. The problem is demand because every other f***er is broke.

[tonorator]

Exactly. Corporate cash is not a barrier to job creation because they are sitting on trillions. The problem is demand because every other f***er is broke.

 

i'm sorry, tell me again why american companies full of cash is a bad thing? you know they don't just sit on it. if they do, they die. they innovate and they grow. you can't take those risks when your own government is waiting around the corner to take the fruits of your labor. thus, we limit growth and the rate of progress. i'm all for incentives to invest here at home, but tht's a small part of the puzzle.

Edited July 29, 2011 by tonorator

[WaterMan]

i'm sorry, tell me again why american companies full of cash is a bad thing? you know they don't just sit on it. if they do, they die. they innovate and they grow. you can't take those risks when your own government is waiting around the corner to take the fruits of your labor. thus, we limit growth and the rate of progress. i'm all for incentives to invest here at home, but tht's a small part of the puzzle.

 

Looks to me like this pyramid is about to topple over.

 

http://www.rogerknecht.com/uploads/2011/05...ome-Pyramid.jpg

[Yukon Cornelius]

Looks to me like this pyramid is about to topple over.

 

http://www.rogerknecht.com/uploads/2011/05...ome-Pyramid.jpg

[Caveman_Nick]

They can try. But fundamental economics says that, in a competitive market place, at least one business person is willing to gain market share by eating some of the tax expense by accepting lower profit margins. That business may make less profit per unit, but it makes it up through greater sales. Competing business who try to pass through 100% of all taxes through to their customers will either lose customers or have to follow suit to keep their prices competitive. In the real world, some business intentionally lose money on products, by not passing on all costs to the customers, simply to attract market share (i.e., "loss leaders").

 

The idea that ALL businesses merely pass ALL taxes through to the customers requires us to assume that the businesses are cooperating in that regard. That would likely violate anti-trust law.

 

I think your point is far more applicable to markets that are not truly competitive - a monopoly, for example.

 

The price of any good must cover the expense that go into producing it or the business is doomed to fail. The businesses might accept lower profits at times when they have to, but the end user is always paying the taxes as a part of their purchase price. It's really as simple as that.

[i_am_the_swammi]

So lets see...airlines in the past couple years modified their inventory (i.e reduced flights) to get the ideal blend of full planes and fares which people would pay to travel. The worst case scenario for airlines is half-full planes...waste of wages, wear and tear, and costly gas. Its called "revenue mangement" in the hotel business, and the airlines practice it, too.

 

So if the airlines have their model perfected, and, for example, have determined that the most cost effective price for full planes and happy travellers for a round trip from NYC to LA is $400.....why reduce to fare just because the government tax is missing? They have already determined that customers (leisure and businesses) have the ability to pay that amount, and are comfortable with it based on the full flights. Why not put the difference in their pockets until the consumers tell them otherwise by refusing to buy tickets?

 

No-brainer