Thursday, February 18, 2010

And Now for Something Completely Unrelated to Language

I got an e-mail from Hawaiian Airlines to enter a sweepstakes to win 1 million miles on that airline. The second prize is a five-night stay, sans airfare, at an Outrigger resort.

I would like either of those things very much. I entered. Then I read the rules.

The grand prize is valued at $25,000, on which the winner has to pay taxes. The e-mail said that 1 million airline miles could equal 25 round trips from the mainland. If you're in the 25% tax bracket and you use all the miles, each of those tickets valued at $1,000 costs you about $250. But instead of paying it a few months before you go and paying it directly to the airline, you're paying it to Uncle Sam, probably years before you'll ever cash in on the benefits.

From the West Coast, fares to Hawaii sometimes get as low as $280. Right now, Hawaiian Air has fares starting at $360. From the East Coast? Well, Hawaiian doesn't fly to the East Coast. So it's not like some lucky winner could be enjoying an $800 New York-to-Kona flight in exchange for a $250 tax burden.

The tax benefits for the airline, however, seem kind of sweet: an instant $25,000 write-off on earnings that would put (I'm guessing here) perhaps $8,000 or more directly in their pockets in return for just a commitment to sometimes let some winner occupy some seats on a plane.

Oh, and that five-night stay at an Outrigger Resort? Well, the official rules value that at just under $3,300 -- that's the amount you have to claim to Uncle Sam. That comes to about $660 a night. If you're in a 25% tax bracket, that's $165 a night you pay up front in the form of taxes.

Outrigger Reef on the Beach, one of their better properties and a place I'd very much like to stay, can be booked select nights in March for $169 a night.

So, when you take into account the taxes, neither prize seems like much of a prize.

Don't get me wrong: I'm not siding with that dude who flew his plane into an IRS building today. On the contrary, it seems to me that corporationsn with fancy accountants could be having a bigger impact on my bottom line than the IRS is. (After all, somebody has to pick up the tax slack to maintain all those roads that lead into and out of the airports served by Hawaiian.)

Of course, that's just from reading some of the fine print in one document. Maybe other documents affecting every other corporation's tax obligations don't contain anything so conveniently self-serving.

So what would I do if I won 1 million free miles on Hawaiian? I honestly don't know. It'd be hard to say no thanks. But it's quite possible I'd decline the second-place prize.

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