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STATEMENT ON CONGRESSIONAL TAX COMMITTEE ACTIONS

JUNE 25,1997

The National Civil Aviation Review Commission was established last year by the Congress to make recommendations on how best to finance and reform the budgeting of the Nation’s aviation programs. The Commission’s purpose, in part, is to develop a consensus on how much funding is actually needed over the next several years for development and operation of the Nation’s air traffic control system, the safety and security programs of the Federal Aviation Administration, as well as airport capital development, and how best to secure a dedicated, stable, and adequate source of funding for these programs.

While the Commission will be making its recommendations for aviation financing in approximately a month, it is extraordinarily clear that the steps taken by the Congressional tax writing committees over the past two weeks will make it extremely difficult to make the necessary changes in the aviation financing system. Congress appears to be poised to dramatically increase taxes on airline passengers in order to accomplish other changes in tax policy, without assuring that the revenue raised will be dedicated to safety and capacity improvements which are critically needed.

Since the additional taxes to be raised from the airline consumers will have absolutely no relationship to the programs that these taxes are supposed to support, there will be no benefit to the aviation system from these increases. In fact, under the budget agreement, federal funding of air traffic control development and operations and airport development will likely decline over the next five years as these taxes are increased (unless there are changes in the budget treatment of these programs, which we strongly believe there should be).

The lack of a meaningful connection in the federal budget process between aviation revenues and programs is already a severe problem in terms of adequately supporting modernization of the air traffic control system and critical airport development. This problem needs to be corrected, not further exacerbated as this tax increase on airline travel would do.

As we move toward and past the turn of the century, the revenues from this consumer tax increase will not be available to invest in additional modernization of the air traffic, navigation, and communication systems. Without this investment, passenger delays will grow very rapidly and the safety of the system will be diminished.

Increasing the taxes, while making no connection to the programs that they are supposed to support, will result in a ballooning of the balances in the Aviation Trust Fund. Historically, high Trust Fund balances have been viewed as an indicator of financing and budgeting systems not working well. Larger than ever future Trust Fund balances will be seen in the same light.

Soon, the Commission will recommend a future financing mechanism for the Nation’s aviation programs. But it is clear to us that increasing the taxes that were originally instituted to fund certain programs without connecting those revenues back to those programs in a meaningful way would make an already bad situation far worse.

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