By: Dylan Weed - Airfare Expert
Update - October 2: A temporary continuing appropriations bill was passed by Congress and signed by the President, extending the taxes until November 17th. We will continue to provide updates as the FAA Reauthorization Act makes its way through Congress.
Even though there may be other aspects of travel that are more exciting, we’d like to talk a little about taxes this week since there are some interesting tax-related events going on. In particular, there’s a possibility that two of the major airfare taxes will be allowed to expire without being extended.
Travelers currently pay a 7.5% excise tax on the total price of an airline ticket, a $3.40/segment segment tax, and several other facility and security taxes. On September 30, 2007, the excise and segment taxes are scheduled to expire. Legislation to temporarily extend the taxes is currently in the House and Senate pipeline, and a bill extended the taxes has passed the House. Both the Senate and the President are unhappy with parts of this bill, however, and it’s unclear whether a compromise will be able to be reached before the expiration date.
Should the taxes be allowed to expire, the taxes on a $400 airline ticket would be reduced by around $35. Logic suggests that this would result in a corresponding $35 reduction in the total price.
Unfortunately, it’s not that simple. Even if the taxes are reduced, airlines might raise prices to make up for part of the difference. So that $400 ticket could sell for $365, $380 or even $400. (There’s precedent for this. Similar taxes expired in 1996 and 1997: One provoked a price increase from the carriers, the other did not.)
What does this mean if you’re buying a ticket? It means there’s a little bit of uncertainty. Our algorithms are good, but they can’t predict the actions of the House and the Senate. It will also be tough to tell how carriers may respond to this exceptional event. We’ll post more information about how this tax situation works out as we see it, and we recommend checking pricing and price histories on Monday to see if the price of your favorite itinerary has changed.
[...] John Rauser wrote a fantastic post today on “Airfare Tax Changes Possible”Here’s ONLY a quick extractBy: Dylan Weed - Airfare Expert. Even though there may be other aspects of travel that are more exciting, we’d like to talk a little about taxes this week since there are some interesting tax-related events going on. … [...]