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NTU to Congress: Time to Restructure Aviation Taxes

by Pete Sepp / /

The Honorable Kevin Brady, Chairman
The Honorable Richard Neal, Ranking Member
Committee on Ways and Means
United States House of Representatives
Washington, DC 20515

Dear Mr. Chairman and Mr. Ranking Member:

On behalf of National Taxpayers Union’s (NTU’s) supporters across the United States, I sincerely commend you, your colleagues, and members of your staff for the tremendous progress you have made toward developing comprehensive tax reform legislation. Working in thoughtful collaboration and in consultation with stakeholders, you have begun to resolve numerous technical matters surrounding this undertaking and, I am certain, will surmount many other challenges in days to come.

As you know, many facets of federal law affect the lives of everyday taxpayers, not all of which are confined to income and payroll taxes. One such specific, and increasingly timely, matter pertains to a plan for transforming the nation’s air traffic control (ATC) system into a non-governmental user-funded entity. The Ways and Means Committee’s assistance in facilitating this transformation is critical.

ATC reform has been one of NTU’s top transportation policy priorities for nearly two decades. Splitting away this service function from the Federal Aviation Administration (FAA), and leaving that agency to concentrate on safety regulation, has advocates across the ideological spectrum. From NTU’s viewpoint, however, it is the benefit to the taxpaying traveler that most recommends this structure. A middle-class American is likelier to pay a higher tax burden (over 20 percent) on an airline ticket than on a 1040 tax return, owing to a plethora of levies and charges. Much of these proceeds are poured into a technologically inferior ATC system, whose modernization is chronically over budget and behind schedule.

Vesting the future stewardship of this system with a nonprofit entity accountable to users is a proven model for fiscal stability and cost control. For example, to our north, ATC fees charged by Nav Canada are today actually 45 percent lower than the original taxes under the government-run structure prior to reform. As a coalition of 13 free market organizations and policy advocates noted last year in a statement of support for this approach, “To us it is an axiomatic economic principle that user-funded, user-accountable entities are far more capable of delivering innovation and timely improvements in a cost-effective manner than government agencies.”

With the House Transportation and Infrastructure Committee soon to mark up FAA reauthorization legislation containing this reform plan, Americans are coming closer to finally realizing lower taxes, falling fees, and better service. Your leadership is needed now to ensure this process advances smoothly. As part of its continuing oversight of air travel taxes, the Ways and Means Committee is essential to building the future  shape of aviation activities. This means:

  • Ensuring the laws are properly revised to phase out those aviation taxes that contribute to ATC, as the new system begins – thereby avoiding windfalls to the government.

  • Designing a simpler tax and fee schedule to help cover remaining non-ATC functions of the FAA (primarily safety regulation).

  • Protecting taxpayers from heavier burdens than they would currently pay for those non-ATC functions. While the Committee cannot control the funding decisions of appropriators, it can create revenue-collecting structures that are transparent and resilient, so as to reduce the risk of unaccountable, unjustified demands for resources.

The President’s Budget for Fiscal Year 2018 noted, “The Budget estimates assume the ticket tax will end, but the precise tax rates for the remaining aviation excise taxes have not yet been developed.  The Administration will work with Congress to establish successor tax rates.” Such tasks require the expertise and aplomb that only you and your colleagues on the Committee possess. And while comprehensive federal income tax reform is a central concern for you (and NTU) in this Congress, we also recognize the transformational opportunity ATC reform has for taxpaying travelers and our economy.

Toward this end, we urge you to work with the Transportation and Infrastructure Committee on legislation that will ensure an orderly shift of tax policy as a new ATC system is phased in. We humbly offer you and your talented staff our assistance in this endeavor. Thank you for your consideration of our views.

Sincerely,
 
Pete Sepp
President