Regarding the IRS tax issues, part of the problem is how to value the freebie (i.e., full-fare coach vs. discounted coach is all I'd actually pay for a ticket. But the bigger problem is that even the IRS realizes the FF miles are only taxable to the extent that somebody else (your employer) paid for the original ticket. For our own personal travel, the FF miles operate as a rebate, the same as clipping the UPC code for $10 (or whatever) back. All my travel is paid by myself now that I've stopped work, but back when I was working the IRS would have had a heck of a time figuring out how much was "work" generated and how much was "personal". Add to that the problem with 100% PremEx bonus (which I wouldn't be getting on work travel alone or personal travel alone, and you begin to see the headaches involved.

BTW, I read years ago that the airlines' biggest fear is that the IRS will announce taxability "effective such-and-such date." Can you imagine the rush to cash in miles? They'd much rather a sudden "taxability now" announcement!