Is new regulation that requires that airlines disclose prices including all taxes and fees pro-consumer?

January 26th, 2012

I previously opined that I don’t think this law is a particularly good ideas:

I just see this as a way for the government to hide the fact that you are paying taxes. I like all taxes to be as prominent as possible. Theoretically, one of my biggest objections to the VAT is that people won’t see the taxes. It will just be subsumed in the price, and the government will not be involved.

Thom Lambert makes a similar point:

But how consumer-friendly is this rule?  Won’t it be easier to raise taxes and fees when they aren’t presented as a line item, when consumers aren’t “startled” to see the exorbitant amount they’re paying for government services?  Value-added taxes (VATs), which tax the incremental value added at each stage of production and are generally included in the posted price for an item, have proven easier to raise than sales taxes, which are added at the register.  That’s because the latter are more visible so that increases are more likely to generate political opposition.  While VATs are common throughout Europe, they’re virtually non-existent in the United States, in part because we Americans have recognized the important role “tax sticker shock” plays in creating political accountability.

Consumer advocates, nevertheless, are lauding the new Department of Transportation rule.  They don’t seem to realize that higher taxes are bad for consumers and that taxes are more likely to rise when the government can hide them.  They also seem to care little about consumer sovereignty.  Don’t consumers have a right to know how much they’re paying to have scads of Homeland Security officers bark orders at them and gawk at their privates?

And I got this email from Southwest (my favorite airline!):

This price advertising rule affects all airlines and requires that advertised fares include all government-imposed taxes and fees that the Customer is being asked to pay.

When you visit®, the fares displayed will now include all government excise tax, government segment fees, September 11th security fees, and airport passenger facility charges. It is important to note that fares have not increased, but that the initial fare display now includes all government-imposed taxes and fees. Customers have always paid these taxes and fees; however, previously these taxes and fees were added to the fare at time of purchase.