WASHINGTON – The government is likely to lose more than $1 billion in airline ticket taxes because lawmakers have left town for a month without resolving a partisan standoff over a bill to end the partial shutdown of the Federal Aviation Administration.
The government already has lost more than $200 million since airlines are unable to collect taxes on ticket sales because the FAA's operating authority has expired.
The Senate recessed on Tuesday until September, erasing any possibility for quickly resolving the issue. The House left Monday night.
Caught up in the partisan acrimony are nearly 4,000 FAA employees who have been furloughed. The FAA also has issued stop work orders on more than 200 construction projects, threatening the jobs of thousands of other workers. Air traffic controllers, however, remain on the job.
The debacle could have had an upside for airline passengers because ticket taxes, which typically average about $30 on a $300 round-trip fare, are suspended during the shutdown. But airlines decided to pocket the windfall. Within hours of the shutdown on July 23, most airlines raised their fares by amounts equivalent to the taxes that disappeared.
Transportation Secretary Ray LaHood called airline CEOs to complain and lawmakers have sent letters demanding the fare hikes be reversed and the profits be placed in escrow. But their howls have largely been ignored. Airlines collectively lost about $440 million in the first six months of this year, according to the Air Transport Association.
Some passengers will be due tax refunds if they bought their tickets and paid taxes before the shutdown, but their travel took place during the time airlines no longer had authority to collect the money. Airlines and the Internal Revenue Service are quarreling over who will handle the complicated and expensive process of getting those refunds to passengers.
President Barack Obama implored Congress on Tuesday to settle the dispute before leaving town, calling the stalemate "another Washington-inflicted wound on America."
LaHood, a former GOP congressman, conveyed the same message in a series of private meetings on Capitol Hill and in phone calls to lawmakers, but was unable to clinch a deal.
Sen. Jay Rockefeller, D-W.Va., chairman of the Senate committee that oversees the FAA, held out the possibility that if the Senate were able to pass a bill acceptable to Democrats, it could still be approved by the House using obscure parliamentary procedures, and sent to the White House.
But his House counterpart, Rep. John Mica, R-Fla., ruled out that possibility. The only way left to end the shutdown is for the Senate to agree to a previously passed House bill containing $16.5 million cuts in air service subsidies to 13 rural communities that some Democrats — particularly Rockefeller — find objectionable.
"The only one holding this up now is Mr. Rockefeller," Mica said. One of the 13 communities that would lose subsidies is Morgantown, W.Va.
The entire air service subsidy program costs about $200 million a year, roughly the amount the government lost in uncollected ticket taxes in the first week of the shutdown. The program was created after airlines were deregulated in 1978 to ensure continued service on less profitable routes to remote communities. But critics say some communities receiving subsidies are within a reasonable driving distance of a hub airport.
Subsidies per airline passenger range as high as $3,720 in Ely, Nev., to as low as $9.21 in Thief River Falls, Minn., according to the House Transportation and Infrastructure Committee.
Senate Majority Leader Harry Reid, D-Nev., said Republicans were trying to force Democrats to accept policy concessions they would be unable to enact through normal legislative procedures. Democrats tried repeatedly over the past two weeks to pass a bill extending the FAA's operating authority without the subsidy cuts, but were blocked by Republican senators each time.
"Republicans are playing reckless games with airline safety," Reid said in a statement. "We should not let ideology interfere with making sure that Americans' air travel runs as smoothly and safely as possible."
Underlying the subsidy dispute, was a broader, more politically-charged dispute over a labor provision inserted by House Republicans into a separate, long-term FAA funding bill. The FAA's last long-term funding bill expired in 2007. Since then, Congress has been unable to agree on a long-term plan. The agency has continued to operate under a series of 20 short-term extensions.
Democrats said the air services cuts were being used as leverage to force them to give in to the House on a labor provision, which the White House has said Obama would veto. They see the provision as part of a national effort by Republicans, both in Congress and in state capitals, to undermine organized labor.
The provision would overturn a National Mediation Board rule approved last year that allows airline and railroad employees to form a union by a simple majority of those voting. Under the old rule, workers who didn't vote were treated as "no" votes.
Democrats and union officials say the change puts airline and railroad elections under the same democratic rules required for unionizing all other companies. But Republicans complain that the new rule reverses 75 years of precedent to favor labor unions.
"Democrats have to decide if they are going to be the handmaidens of the labor unions in every policy," Sen. Jon Kyl of Arizona, the No. 2 Senate GOP leader, told reporters. "Every now and then they should put the American people first instead of their constituency."