Issue Brief
Getting The Facts Straight About The Airlines’ FAA Bill And Its New Senate Counterpart
Reauthorization of Our Nation’s Aviation System
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The United States runs the busiest, safest and most efficient air traffic control system in the world.[i]
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The aviation system is funded largely through a mix of taxes on each aviation segment, which are paid into the Airport and Airways Trust Fund (AATF). The taxes going into the AATF are generating record revenues, and will be sufficient to fund all modernization programs.[ii]
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Congressional authorization of the existing mechanism for funding the AATF will expire in September 2007.
Both the Big Airlines’ FAA Proposal and the Senate’s New Misguided Proposal Would Harm Small Businesses and Communities
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The FAA has introduced a new funding proposal, backed by the big airlines, which would transfer billions of dollars of the carriers’ tax obligation onto the backs of small and mid-size businesses that depend on general aviation. The Senate recently introduced an alternative proposal that includes a combination of tax cuts and “user fee” tax hikes which would ultimately be just as devastating to small businesses and communities.
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The big airlines’ FAA bill allows the FAA Administrator to set user fee taxes as they see fit,[iii] while the Senate’s proposal levies a new $25 per flight flat tax user fee on all aircraft except the smallest piston-powered planes.[iv]
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The Department of Transportation Inspector General recently testified to Congress that under the big airlines’ FAA plan, the airlines would decrease their tax burden from $11.8 billion to $10.1 billion – in FY2009.[v] Industry sources calculate that under the Senate’s proposal, airlines are likely to save $500 million annually due to a complete elimination of their fuel tax requirement.[vi]
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Under the Airlines’ FAA Bill, the fuel taxes paid by small planes would triple, from the current rate of $.19 - $.21/gallon to $.70/gallon, and many flights would be hit with additional administrative charges.[vii] The Senate’s Commerce Committee has recommended that the fuel tax paid by many small planes be doubled, from $.21/gallon to $.49/gallon, in addition to requiring those same small planes to also pay the $25 per flight flat tax user fee.[viii]
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Experts and pilots have estimated that shifting the airlines’ taxes onto general aviation would ground many planes and impact the businesses and communities across the country that depend on them.[ix] The businesses and organizations that depend on general aviation provide small towns and communities with critical access to medical care, emergency evacuation, and other services.
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While 70% of airline passengers travel through the top 30 “hub” airports, general aviation flights can access some 5,000 non-hub airports - almost one per county in rural areas. The access and connectivity provided by these airports are crucial to small town and rural economies, to national security and to mobility during catastrophic emergencies.[x]
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Despite the importance of rural airports to the nation’s infrastructure, the airline-backed FAA bill slashes funding for the Essential Air Service Program and the Airport Improvement Program, and eliminates funding for the Small Communities Air Service Program, all of which are critical for the preservation of the airports. The Senate’s pro-airlines bill wisely keeps funding in place for these critical programs, but also takes advantage of them as a way to exempt airlines from paying into the new Modernization Fund.[xi]
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Many small airport operators fear that if general aviation activity decreases due to the dramatic increase in their taxes, aviation-related business activity may also decrease, thereby potentially forcing the smaller airports themselves to close.[xii]
Don’t be Fooled by What the Airlines Say About These FAA Funding Proposals
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Passengers will not benefit from either of these new funding proposals.[xiii] The last two times the aviation taxes expired, not one airline lowered its fares - in fact, a U.S. Government Accountability Office analysis indicates that they raised them.[xiv]
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The fact is, the airlines are responsible for creating the vast majority of the cost of the air traffic control system. Their hub-and-spoke network, which moves hundreds of flights through big airports, particularly at rush hour, requires a substantial amount of people, resources and infrastructure to work.[xv] The airlines would have you falsely believe that a small turboprop carrying 3 passengers and a jumbo jet carrying 300 impose the same costs on the air traffic control system. Surprisingly, the Senate’s proposal also perpetuates the same flawed logic.
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Any radical new user fees-based scheme would require a large and expensive new government collection bureaucracy, and would represent the first step on a slippery slope to privatizing the air traffic control (ATC) system and placing it under airline control.
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The airlines deny that these FAA bills are a step toward commercialization, but a representative with an organization that promotes government privatization has said the type of setup envisioned by the airlines represents “the essential precondition for commercialization.”[xvi]
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Even more egregious is the deliberate lack of Congressional oversight written into both proposals. The airlines’ chief lobbyist has said, “We need to get Congress out of this process.” In the FAA’s big airline bill, the FAA Administrator would be authorized to set user fees as he/she sees fit, effectively taking taxation authority out of the hands of Congress. In the Senate’s big airline bill, an industry-dominated Board would have budget and spending authority. The Alliance firmly believes that the federal government—not special interest boards—should control budgets and spending.
These Pro-Airline FAA Proposals Cut Billions of Dollars that Could be Used for Modernization and Safety
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Everyone agrees that we need to transition from the current ground-based air traffic control system to one built upon satellite technology. However, Administration budget documents show that the new user fee scheme in the FAA’s big airline proposal would create a budget shortfall of at least $600 million.[xvii] Industry sources expect that the Senate-proposed elimination of the commercial jet fuel tax would reap a benefit of $500 million annually for the airlines, denying the FAA needed revenue for modernization and safety.[xviii]
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The Department of Transportation Inspector General and the Government Accountability Office have testified to Congress that under the current excise tax system, forecasted revenues into the Aviation Trust Fund could cover the FAA’s anticipated cost of modernization.[xix]
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Fuel taxes are the simplest, most efficient way to pay for system use, since they are paid at the pump, and need no new government bureaucracy. If Congress believes that more money is needed for modernization, modest increases of the fuel tax could generate all of the necessary revenues, while at the same time creating incentives for fuel efficiency and environmental sensibility, following international recommendations, and protecting small towns from bearing the brunt of new government bureaucracy.
We Need Real Modernization: Fully Funding the FAA and Preserving Accountability
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Fully fund the FAA.
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Move forward with a comprehensive modernization plan that includes timelines and cost estimates.
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Enhance accountability by increasing transparency and retaining strong Congressional oversight.
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Maximize industry tax dollars by retaining an ultra-efficient tax system that doesn't require a huge new bureaucracy or dilute the FAA's focus on safety.
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Retain a General Fund contribution that reflects the public benefit inherent in a strong national air transportation system.
[i] “You could fly commercially every day for 22,000 years and not lose your life in an accident.” White House Report on Air Traffic Control Reform, December 7, 2000, http://clinton6.nara.gov/2000/12/2000-12-07-white-house-report-on-air-traffic-control-reform.html.
[ii] Hearing, Committee on Transportation and Infrastructure, Subcommittee on Aviation, U.S. House of Representatives, March 21, 2007.
[iii] NextGen Financing Reform Act of 2007 (Reauthorization), Title II, http://www.faa.gov/regulations_policies/reauthorization.
[iv] Aviation Investment and Modernization Act of 2007, Section 106, http://commerce.senate.gov/public/_files/FAAauth12.pdf.
[v] FAA’s Financing Proposal, Statement of Calvin L. Scovel III, Inspector General, U.S. Department of Transportation,before the Committee on Transportation and Infrastructure, Subcommittee on Aviation, U.S. House of Representatives, March 21, 2007, http://www.oig.dot.gov/StreamFile?file=/data/pdfdocs/FAA_Financing_Testimony_Final.pdf.
[vi] Rockefeller-Lott Bill Seeks to Lighten Burden on Airlines, The Hill, May 2, 2007, http://thehill.com/business--lobby/rockefeller-lott-bill-seeks-to-lighten-burden-on-airlines-2007-05-01.html.
[vii] NextGen Financing Reform Act of 2007 (Reauthorization), Sections 201 and 901, http://www.faa.gov/regulations_policies/reauthorization.
[viii] Press Release: Rockefeller, Lott Introduce Aviation Modernization Bill, May 3, 2007, http://rockefeller.senate.gov/news/2007/pr050307.html.
[ix] Statement of Phil Boyer, Aircraft Owners and Pilots Association, before the Committee on Transportation and Infrastructure, Subcommittee on Aviation, U.S. House of Representatives, March 21, 2007, http://www.aopa.org/whatsnew/newsitems/2007/070321funding-testimony.pdf.
[x] National Plan of Integrated Airport Systems (NPIAS), 2007 – 2011, Federal Aviation Administration, September 29, 2006, http://www.faa.gov/airports_airtraffic/airports/planning_capacity/npias/reports/.
[xi] Aviation Investment and Modernization Act of 2007, Section 106, http://commerce.senate.gov/public/_files/FAAauth12.pdf.
[xii] FAA Proposal Threatens Small Airports,” WLBT – Jackson, MS, March 21, 2007, http://www.wlbt.com/Global/story.asp?S=6261018&nav=2CSf. See also, “FAA Proposes Gas Tax Increase,” KAIT – Jonesboro, AR, March 29, 2007, http://www.kait8.com/Global/story.asp?S=6272372&nav=0jsh.
[xiii] “Look, if our tax burden weren't so high, there wouldn't be as much pressure to raise fares,” [Southwest Airlines Senior Vice President Ron Ricks] said. “At the very least, we could keep fares the same and make more money.” Airlines to lobby for revamp of FAA funding next year, Ft. Worth Star-Telegram, December 26, 2006, http://www.star-telegram.com/.
[xiv] Summary Analysis of Federal Commercial Aviation Taxes and Fees, Briefing for the Subcommittee on Aviation, Committee on Commerce, Science, and Transportation, U.S. Senate, U.S. General Accounting Office, March 12, 2004, http://www.gao.gov/new.items/d04406r.pdf.
[xv] Airport and Airway Trust Fund: Issues Related to Determining How Best to Finance FAA, Testimony before the Subcommittee on Aviation, Committee on Transportation and Infrastructure, U.S. House of Representatives, U.S. General Accounting Office, February 5, 1997, http://www.gao.gov/archive/1997/rc97059t.pdf. See also, Testimony of John Carr, President of the National Air Traffic Controllers Association before the U.S. House of Representatives Transportation and Infrastructure Committee Aviation Subcommittee Hearing on Airline Delays, September 28, 2000, http://www.natca.org/legislationcenter/testimony-detail.aspx?id=192.
[xvi] “Shifting from aviation taxes to direct payments to the ATC provider for services rendered (user fees) is the essential precondition for commercialization.” Business Jets and ATC User Fees: Taking a Closer Look, Robert W. Poole, Jr., The Reason Foundation, August 2006, http://www.reason.org/ps347_business_jets_atc.pdf.
[xvii] The Budget of the United States Government, Fiscal Year 2008 - Appendix, http://www.whitehouse.gov/omb/budget/fy2008/pdf/appendix/dot.pdf.
[xviii] Rockefeller-Lott Bill Seeks to Lighten Burden on Airlines, The Hill, May 2, 2007, http://thehill.com/business--lobby/rockefeller-lott-bill-seeks-to-lighten-burden-on-airlines-2007-05-01.html.
[xix] Hearing, Committee on Transportation and Infrastructure, Subcommittee on Aviation, U.S. House of Representatives, March 21, 2007.
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