How is this plan going to work?

I always wonder how Congress comes up with its idea of what motivates people or corporation to do things.  Now that Spirit Airlines is going to charge $45 for carry-on luggage that is stowed in the over head bin, Congress has come up with a solution that I think is pretty stupid.

Airlines currently pay 7.5 cents to the federal government for every dollar they collect in fares, but no tax is imposed on fees collected for nonessential services, the senators said. They said the Treasury Department last January ruled that carry-on bags are not essential for air travel.

“As a result, airlines can impose fees on these bags without paying any tax to the federal government on the revenues they collect,” the senators said. “This creates a tax incentive for airlines to try to bilk consumers in the form of fees rather than by increasing the fares.”

So the airline is not going to impose a fee of $45 now because the lose that extra $3.38 per item put in the overhead bin.  The airline will still gain $41.62 for each item in the bin.  If they drop the charge, which is the concept here, and just roll it into the fare, then everyone will assume they are paying extra if they don’t use the overhead bins.  It would make sense for Spirit to still collect the fee minus the $3.38 tax, because if they raised fares by $45, they would still have to pay that $3.38 tax.

The reality is that Congress should look to a smarter remedy to solve the problem of the fee happy airlines, legislate one free carry on in the overhead bin and one free checked bag.



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