Originally Posted by Montreal
Well, I know we all agree that the value varies depending on time of redemption, current market price of the award ticket, individual psychological value, etc. but in general we attribute 2 cents to a mile.
However, the perspective I am offering is to attrbute 2 cents * a person's marginal tax rate. An example will make my point clear. A short-haul reward ticket from Montreal to New York costs 15,000 miles on Air Canada. Suppose (and is generally the case) the same ticket can be bought for $300 (assume US$ = C$). However, the reward ticket then cannot be attributed the value of $300 or 2 cents. Because if I were to purchase the same ticket then I am using my disposable income which is short of my earned income by my marginal tax rate. So I would have to earn anwhere from $380 to $450 to purchase the ticket for $300. To keep the math simple, one can smoothen out the higher tax rate in certain countries or higher tax bracket for certain individuals and keep it a flat 30%. Than that automatically places a higher worth than 2 cents per mile or $300 for the reward ticket for which one would have to earn $390!
This could make some potential mileage runs on a pure cpm basis more economically feasible or at least attractive...just my 2 cents worth
I think you are confusing yourself in one or more ways here:
Will you earn those miles with the expenditure of pre- or post-tax $s using a credit card and/or from flying on a ticket bought with pre- or post-tax $s? You are gaining if the answer is pre-tax $s and you use the miles for personal, non-business purposes, since then your government is subsidizing your acquisition of the miles, reducing their cost to you. If instead you spent post-tax $s to accrue the miles in the first place, then there is no reduction in cost or subsequent gain in value where the miles are concerned. The miles are, and will always be, worth however much you would have otherwise spent for what you redeem with them, with appropriate discounts limitations on how and when awards can be claimed/used.
And about the "how and awards can be claimed/used" - is it 15K for a "saver" type award or a "standard" one? If a "saver" award, with its restrictions, is not the same as a less restricted purchased fare, so it may not be 15K is the equivalent of $300.