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STATEMENT ON CONGRESSIONAL TAX COMMITTEE ACTIONS

JUNE 25,1997

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

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

Since the additional taxes to be raised from the airline consumers willhave 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 thebudget agreement, federal funding of air traffic control development and operations andairport development will likely decline over the next five years as these taxes areincreased (unless there are changes in the budget treatment of these programs, which westrongly believe there should be).

The lack of a meaningful connection in the federal budget processbetween aviation revenues and programs is already a severe problem in terms of adequatelysupporting modernization of the air traffic control system and critical airportdevelopment. This problem needs to be corrected, not further exacerbated as this taxincrease on airline travel would do.

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

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

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

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