A group of Democratic senators urged airlines to reduce their airfares and pass the savings from the temporary expiration of airline ticket taxes on to their passengers.

The taxes expired when Congress failed to pass a reauthorization bill for the Federal Aviation Administration after a dispute between Republicans and Democrats over union voting rules for air transportation employees. The Internal Revenue Service has said the airlines should refund the ticket taxes for many passengers (see IRS Says Air Travelers May Get Refund on Ticket Taxes).

The lack of reauthorization means the FAA had to furlough thousands of employees and close down many of its airport reconstruction projects. The FAA cannot collect its 7.5 percent federal excise tax for now, nor the flat fee of $3.70 per travel segment, and the international arrival and departure taxes of $16.30 per way.

Senate Finance Committee Chairman Max Baucus, D-Mont., Finance Committee members Jay Rockefeller, D-W. Va., Kent Conrad, D-N.D., Bill Nelson, D-Fla., and Ben Cardin, D-Md., as well as Senators Sheldon Whitehouse, R.I., and Kirstin Gillibrand, D-N.Y., called on the major U.S. airlines on Friday to reduce their airfares and pass the cost savings from the temporarily expired aviation taxes onto travelers. 

In a letter to United Continental, American, Delta, US Airways, Southwest and the Air Transport Association, the Senators also asked the airlines to facilitate the process of issuing refunds to travelers who flew after the taxes expired, but who purchased their tickets at full cost before the expiration of the taxes. 

The FAA was forced to stop collecting the taxes, which finance travel industry infrastructure projects like airport repairs and safety upgrades, when its funding authorization expired last week. In their letter, the Senators expressed their commitment to passing a bill to reauthorize the FAA that will put its 4,000 furloughed workers back on the job.  

“Because the federal government’s authority to collect federal aviation taxes has expired, airlines no longer have any responsibility to withhold taxes on their passengers’ behalf,” the senators wrote. “As a result, we hope that you are reducing airfares for your customers by the amount of these taxes. For some passengers, this could reduce the cost of flying by upwards of 10 percent per flight, or hundreds of dollars for frequent flyers. We also ask you to issue refunds to consumers for travel occurring while the federal aviation taxes have lapsed, as many in the industry have done whenever these taxes have lapsed in the past. It would impose large costs on the IRS—and taxpayers—if airlines were not willing to facilitate the process of issuing refunds for travel occurring while the taxes have lapsed.”

Earlier this week, Senators Rockefeller and Maria Cantwell, D-Wash., wrote to Delta Airlines CEO Richard Anderson, who chairs the Air Transport Association, about the matter (see Senators Tell Airlines to Stop Pocketing Ticket Taxes).

On Friday, Senators Dick Durbin, D-Ill., and Mark Kirk, R-Ill., sent a separate letter to Nicholas Calio, president and CEO of the Air Transport Association, questioning the fare hikes.

“Airlines should have the right to set their own prices based on the free market and current high fuel prices,” the senators wrote.  “However, when nearly every major airline increases its rates in such a short period of time at similar levels, we worry that this situation is not the result of competition-based pricing, but rather a collective effort to take advantage of federal inaction.”

Calio reportedly wrote to IRS Commissioner Doug Shulman earlier this week asking him to revise the IRS guidance so taxpayers could seek the refunds directly from the IRS, according to Bloomberg,com.

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