Ways to pay for tax extenders grows
IRA compliance issues cost U.S. millions

Tax proposed on carry-on bag fees

A group of Senators and Representatives want to tax airline carry-on bag fees.

But don't worry travelers. This tax isn't aimed at you.

Rather, it would be levied against the airlines who collect the added charges.

Currently, airlines pay a 7.5-cent federal excise tax for every dollar they collect in fares. No tax, however, is collected on charges for "non-essential" services.

Guess what? The Treasury Department has deemed our overhead compartment or under-seat bags are non-essential for air travel.

In fact, all luggage, per Treasury, flies tax-free.

So airlines are off the tax hook when it comes to any revenue collected in connection with these pieces of luggage.

And that tax quirk also explains why the airlines didn't just add all their blanket and pillow and food fees to the cost of a ticket.

BAG Fee battle: "Airline passengers have always had the right to bring a carry-on bag without having to worry about getting nickel and dimed by an airline company," said Sen. Charles Schumer (D-N.Y.) in announcing the introduction of S.3205, the Block Airlines' Gratuitous Fees Act or the BAG Fees Act.

Schumer and six Democratic colleagues crafted the bill after Spirit Airlines announced last month that it would charge customers $45 for carry-on luggage. There is concern that other airlines might institute a similar policy. A companion BAG Fee Act was introduced in the House by Rep Timothy Bishop (D-N.Y.)

The lawmakers say their bills are designed to "rein in the airlines and keep air travelers from being gouged every time they board a plane."

Wrong ruling by Treasury: I'm not sure a tax will stop the airlines from squeezing every last cent they can from passengers. They'd likely just jack up the fees to cover the extra payments due Uncle Sam.

I do, however, appreciate Schumer, Bishop and their fellow legislators for at least taking a stand on this issue and Treasury's egregiously incorrect ruling.

The Treasury has a technical point that such ancillary flight accoutrements aren't crucial to getting us from point A to point B, so they are "not reasonably necessary to the air
transportation itself."

But let's get real.

Obviously, Treasury folks have never flown with medicines or contact lens material or an emergency change of clothes in case the airline loses checked suitcases.

Or, as cosponsor Sen. Ben Cardin of Maryland noted:

"Carry-on luggage is where people keep items essential to their health, work, and safety like laptop computers, medications, food to eat on the plane, baby formula, eye glasses and other items that need to be kept close at hand. These are personal items that airline passengers should not be charged to keep with them in the cabin.  When we tried to include such a ban in the FAA Reauthorization last month, we were blocked and told it was improbable airlines would ever charge for carry-on bags. Well, so far one airline has announced their intention to make fees for carry-on bags a reality. We cannot allow these flood gates to open."

Cardin also sponsored another bill that would impose an outright ban on carry-on fees.

As we near the start of the busy summer vacation season, the two BAG bills are pending in the House Ways and Means and Senate Finance Committees.

If other airlines do start charging carry-on fees, the legislation will likely start getting some attention.

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