The IRS decided in 2002 that taxing air miles was too difficult: https://www.irs.gov/pub/irs-drop/a-02-18.pdf , but I wonder if this might change in the future if airlines continue to shift towards programs that reward dollars spent rather than miles flown + ticket class.
Some countries have specific legislation to exclude air miles.
That announcement is really depressing. It isn't saying "airmiles aren't taxable". It says "we promise not to enforce laws about tax on airmiles".
As a law abiding citizen, I now have a moral dilemma. Pay tax as the law says, or don't pay tax because the government promised not to punish me?
Where will the latter lead? It's fine to do other crimes as long as you know the government usually won't prosecute? It's fine to write overly broad laws because we will only enforce them against the truly bad guys?
Perhaps it wasn't clearly articulated, but I see some moral dilemmas here.
1) Competing goods: obeying the law (civic virtue; collectivism) vs. personal happiness (hedonism; individualism).
2) Competing concepts of civic virtue regarding laws that won't be enforced: Is it better to (a) vigorously oppose such systems, because e.g. they lay the groundwork for tyranny, or (b) accept that some enforcement sloppiness is beneficial for various reasons, and should therefore be accepted?
On the one hand, you could argue that taking advantage of the IRS deciding not to bother with air miles is wrong.
On the other hand, if you decided to include air miles as taxable on your return, you might be obeying the letter of the law.
This reminds me of the central plot point of The Good Place, which I won’t spoil here, but will paraphrase indirectly: “at what point (if any) is it acceptable to stop considering the second- and higher-order consequences of our actions or inactions?”
I tend to hew toward your 2(b). If even the IRS isn’t going to bother, why would I if it won’t meaningfully matter?
I'd just make a new law targeting schemes to enable/encourage tax evasion.
It would hit airlines who sell $$$$ worth of tickets each year, but then hand out discount vouchers/points/miles to customers (many of whom bought the original tickets on business expenses, but take the vouchers/points/miles personally, thereby evading tax). The tax authority would be able to estimate the 'value' in vouchers handed out (not the book cost or stated face value, but what customers value them at), the percentage of those vouchers that represent tax evasion, and then fine the airline 3x the lost taxes.
I can understand not spending resources trying to focus on collection if it is to complicated, but coming right out and saying you aren't going to enforce it seems ill conceived. Wouldn't this promote the creation of more and more complicated schemes to allow for tax evasion?
But quietly choosing not to enforce the law still leaves citizens in the dark about what they are supposed to do. It sounds like the IRS would like to be able to say "air miles are not taxable", but they probably don't have the legal power to amend or override whatever law it is that gives rise to the suggestion that they are. I'm not a US tax expert but I've seen other regulators take a similar approach.
Some countries have specific legislation to exclude air miles.