RottenBrains

After decades of the Wright Amendment crippling Love Field in Dallas, it appears that an end may finally be in sight. Senator Kay Bailey Hutchinson’s plea for the involved parties to come up with a local solution instead of dragging the fight into the US Senate seems to have finally yielded fruit: last Thursday (June 15th), American Airlines, Southwest Airlines, Dallas, Fort Worth, and the DFW Airport signed an agreement that represents a truce among the parties. Admittedly, this is just the first step in what will be a very long process (it needs to be okayed by Dallas and Fort Worth as well as the DFW Airport board, and then needs to pass through US Congress before December), but it is rather promising.

The good news is that, if everything goes well, the Wright Amendment is going away.

The bad news is that Southwest will still largely suffer under the same restrictions for another 8 years. Apparently, American Airlines, being unused to any sensible competition in the Dallas area, needs that long to plan a strategy that allows them to compete with an airline that can afford to charge about half as much.

Examining the finer details of the agreement: Southwest is immediately allowed to ticket connecting flights to non-Wright amendment states. In other words, you can now fly from DAL to SJC on a single ticket and check your luggage all the way through; but you’ll have to stop in an allowed destination (like El Paso) on the way.

Also, the City of Dallas will be forced, at taxpayers’ expense, to demolish 12 of the 32 gates at Love Field. Of the remaining 20 gates, Southwest will be allowed to use only 16. And if Southwest chooses to fly out of any airport other than Love in the DFW area, they lose those gates as well.

The important thing here is that American Airlines’ insistent and unattractive plea for the federal government to continue to save it from honest competition has failed. Within 8 years, there is significant promise that the cost of flights from Dallas will drop from 48% above the national average to something more in line with it. And really, that’s good news for everyone — at least, everyone who hasn’t been profiting from ridiculous, government-protected price gouging for the past 30 years.

Apparently, there are changes to the tax code for 2004 which allow deduction of state and local sales tax from federal tax returns if you itemize deductions. In practice, you must choose to deduct either state and local sales tax or state income tax. For most people in most states, it’s going to make more sense to choose state income tax. For those of us who live in states without an income tax — Florida, Texas, Washington, New Hampshire, and a few low-population states — it’s a true no-brainer.

Backing up to the logic around this — and keeping in mind that one of the main proponents of this provision in the House was from Texas: the rationale here is undoubtedly that states need money to run; some states choose income taxes, while others choose sales taxes; and that the federal tax burden falls unevenly on those who live in states without income taxes (since the amount of money those people pay to run their states is itself taxed to run the federal government). So, the change sounds equitable in a world where states are run purely on sales tax or purely on income tax.

In a world where many states split the tax burden across income and sales tax, however, this change the whole issue of fairness on its ear. Under the new system, those states in which funding comes rather equally from state and sales tax are shouldering more of the tax burden than everyone else. Take, for example, Kansas; state income tax in Kansas is 3% to 6% for all non-poverty-level incomes, and sales tax ranges from about 6% to 8%, depending on where you buy stuff. The amount of money that your average Kansan pays for sales tax and state income tax will be within the same order of magnitude.

So, with the new laws, places like Delaware and Oregon (no sales tax) can deduct the entire cost of running their state; places like Texas and Washington (no income tax) can deduct the entire cost of running their state; yet there is still an artificial provision that prevents places like Kansas from deducting the entire cost of running their state.

I’m not necessarily saying that reduction of taxes is inherently good or bad (and it’s not clear that this means reduced taxes anyway, just a different distribution) — but equitable distribution of taxes is… well… equitable, which seems to be one of the most important aspects of any valid tax system. So, this provision is obviously a step in the right direction — it has narrowed the range of inequity caused by taxation of the monies used to run individual states — but it seems to go out of its way to get it only half right.