Friday, April 16, 2010

Carry on Luggage: A Lesson in Corporate and Government Behavior

This video is instructive. It is an apparent example of how tax policy affects behavior, (tax evasion is illegal, but tax avoidance is not.) As reported in this story, it seems that airlines pay taxes based on airfares charged, but do not pay taxes at the same rate (if at all) for charges on carry-on luggage. The airlines need revenue, but they would rather not pay taxes on that revenue because it eats into the profits they need to invest in new equipment and employees.

But what is also noteworthy is the bold arrogance of Chuck Schumer (D), New York. He, like too many of his Senate and House colleagues, seems to think that it is up to him to fix this problem. Rather than impose more regulations, fees and taxes, how about if you just lower tax rates on airlines, Mr.Schumer? Maybe if airlines can make a higher profit margin, they can lower fares, compete more freely, and make air travel more affordable.

No comments: