Press Release
Setting the Record Straight on FAA’s Recent Claims
For Immediate Release
Wednesday, April 25, 2007
Washington, DC – This week, the FAA released a “fact sheet” aimed at curbing some of the backlash that the agency and the airlines have received since introducing their proposal for FAA reauthorization. However, this is just the latest round of rhetoric that has been put out by the FAA and the commercial airlines since the introduction of their proposal, which would purposefully transfer billions of dollars of the airlines’ tax burden onto businesses and communities that rely on small planes.
Here are the real facts:
FAA CLAIM: The FAA claims that general aviation drives 16% of the costs of air traffic services, yet only contributes 3% of the taxes.
REALITY: FAA’s own documents show that GA currently contributes 8.6 percent of the taxes that flow into the Airport and Airway Trust Fund.[1}
The FAA has been using the same economist-accepted cost allocation methodology since 1973 – that is, until now. In the last properly-done cost allocation study in 1997, the FAA reported that General Aviation was responsible for 6.7% of the cost of air traffic control.[2]
FAA CLAIM: The FAA’s fact sheet claims that the FAA accounts for the fact that the major airlines drive more of the costs of our air traffic control system.
REALITY: The reality is that the FAA’s cost allocation study treats all turbine aircraft the same, whether it is a turbo-prop that seats eight passengers or a 747 that seats 400 passengers.
In addition, the fact remains that the extensive cost of our air traffic control system is driven by specifically by the airlines’ hub and spoke system. When the airlines insist on shoehorning the vast majority of air traffic into only 30 hub airports, the FAA must provide increasingly complex and expensive traffic control. [3]
FAA CLAIM: The FAA claims that small planes will not be decimated by the FAA/big airlines tax hike proposal.
REALITY: The FAA proposal would increase taxes on GA by a whopping 334%, according to the Inspector General of the Department of Transportation. [4] In addition, if the proposal were not devastating to GA, why would users say the following: [5]
“User fees will wound, then slowly kill general aviation.”
– Stephen Coonts, Charleston, WV
“User fees will tax an important American industry out of existence.”
– Drew Coats, Houston, TX
“User fees are going to be like a cancer.”
– Michelle Jackson, Raymond, MS
According to Phil Boyer, president of the Aircraft Owners and Pilots Association, 9 out of 10 AOPA members have said that if the tax on aviation gasoline is increased by 50-cents per gallon, they will reduce or curtail their flying.
FAA CLAIM: The FAA claims that small planes will be exempt from user fees.
REALITY: The Administration’s bill clearly designates in black and white that user fee taxes may be administered on any aircraft flying through Class B or any other type of terminal airspace, including small planes:
“(c) EXCEPTIONSÉ (2) GENERAL AVIATION OPERATIONS. – Except for fees established for operations in terminal airspace [defined in (i)(3) as including Class B] for a large hub airport under subsection (b)(2), no fees may be established under this section for air traffic control and related services provided to [general aviation paying a fuel tax]. The exception provided by this paragraph shall cease to be effective if the rate of tax for fuel under section 4081 (a)(2) is lower than 70.0 cents per gallonÉ” [6]
The FAA’s proposal purposefully includes exemption language that provides them the ability to impose user fees on all aircraft, including GA, at their own discretion.
FAA CLAIM: Administering the new user fee system will not require a large new bureaucracy.
REALITY: The FAA may be confident that it can collect fees with a minimum of bureaucracy, but the fact is that all user fee based systems have required large, costly collection administration. This is the case with service providers around the world – why should we expect that the largest air traffic control system in the world would be any different?
Further, the FAA’s own proposal calls for $1.36 billion to be appropriated for services to collect user fees in the first 60 days!
FAA CLAIM: The FAA repeatedly claims that we need to overhaul our entire funding mechanism for collecting revenue in order to modernize our air traffic control system.
REALITY: The Inspector General of the Department of Transportation and the U.S. Government Accountability Office have agreed that modernization can be paid for under the current financing system. [7]
FAA CLAIM: The proposal would not remove Congressional oversight.
REALITY: Regardless of FAA claims, their own proposal clearly states that user fee rates would be set without Congressional approval. Further, the only legal review of the user fees system would not be Congressional, nor in fact judicial, but administrative: [8]
“(4) É the Administrator may periodically modify the [user] fees established in this section either on the Administrator’s own initiative, based on the requirements of the agency or the users of the National Airspace System É (3) Any person who is subject to fees established in this section or section 45306 of this title, and who objects to the establishment or amount of such fees may appeal that decision exclusively to the Secretary of Transportation.”
The Inspector General of the Department of Transportation and the U.S. Government Accountability Office also agree that the proposal weakens Congressional oversight. [9]
FAA CLAIM: The FAA proposal would benefit consumers.
REALITY: The proposal is about reducing the tax burden on airlines and shifting it on to small planes – this is a clear tax break of 11% to the airlines. The U.S. Government Accountability Office warned Congress in 2004 that airlines do not in fact pass on tax savings to their passengers, so any improvement would likely be to airline profitability, not passenger ticket costs. [10] Airline management and their lobbyists have even said publicly that they are looking to improve their bottom line by supporting this proposal.[11]
FAA CLAIM: User fee taxes are an effective way to collect revenue.
REALITY: There are numerous examples of unsuccessful user fee implementation throughout the rest of the developed world, and it is clear that user fees have damaged aviation.
In Australia, for example, general aviation has decreased 28% since the implementation of user fees. Dick Smith, former Chairman of Australia’s Civil Aviation Authority, and a former user fee concept supporter, recently said, “Basically, user pays (as we call it here) or the commercialization of CASA and Airservices, has been a disaster for general aviation in Australia and I believe the same will happen in the USA if it goes ahead.” [12]
FAA CLAIM: The Administration proposal would not destroy service to small communities.
REALITY: If preservation of service to small communities was a key goal in developing the FAA’s proposal, why would their latest budget proposal decrease funding for the Essential Air Service program to its Congressionally-mandated minimum and abandon support of the Small Communities Air Service program entirely? [13]
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1 “2005 Taxes”, FY05 ATO Data Package, http://www.faa.gov/regulations_policies/…/media/FY05_ATODataPackage.xls.
Fractional Ownership Programs – 0.8%
Non-Scheduled Part 135 Passenger – 2.2%
Non-Scheduled Part 135 Freight – 0.3%
General Aviation-Turbine – 1.4%
General Aviation – Piston – 0.2%
General Aviation – Rotor – 0.0%
Commercial (Non-ETMS) – 2.0%
General Aviation (Non-ETMS) – 1.7%
2 Source: A Cost Allocation Study of FAA’s FY1995 Costs, GRA, Incorporated, 3/19/97
3 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.
4 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.
5 Commentary: Stephen Coonts: Let us not wound general aviation,” Charleston Daily Mail, March 9, 2007, http://www.dailymail.com/story/Opinion/+/200703095/Commentary-Stephen-Coonts-Let-us-not-wound-general-aviation.
“Commentary: Drew Coats: Proposed ‘user fees’ put aviation in peril,” Houston Business Journal, March 5, 2007, http://houston.bizjournals.com/houston/stories/2007/03/05/editorial3.html.
“Proposals could force some businesses to close,” Jackson Clarion-Ledger, March 29, 2007, http://www.clarionledger.com/apps/pbcs.dll/article?AID=/20070328/BIZ/703280354/1005.
6 Sections 201 and 902, “NextGen Financing Reform Act of 2007 (Reauthorization),” http://www.faa.gov/regulations_policies/reauthorization.
7 “The current funding structure has supported FAA as FAA’s budget has grown, and it can continue to do so to fund planned modernization. Excise tax revenues are forecasted to increase if the current taxes are reauthorized without change and thus could support additional spending.”
– “Observations on Selected Changes to FAA’s Funding and Budget Structure in the Administration’s Reauthorization Proposal,” Gerald L. Dillingham, Ph.D., U.S. Government Accountability Office, Testimony before the Subcommittee on Aviation, Committee on Transportation and Infrastructure, House of Representatives, March 21, 2007, http://www.gao.gov/new.items/d07625t.pdf.
“FAA’s current financing mechanism could support both FAA’s ongoing funding requirements and the potential cost of developing the next generation air traffic control system (NextGen)”
– “FAA’s Financing Proposal,” Calvin L. Scovel III, Inspector General, U.S. Department of Transportation, Testimony before the Subcommittee on Aviation, Committee on Transportation and Infrastructure, House of Representatives, March 21, 2007, http://www.oig.dot.gov/StreamFile?file=/data/pdfdocs/FAA_Financing_Testimony_Final.pdf.
8 Section 201, “NextGen Financing Reform Act of 2007 (Reauthorization),” http://www.faa.gov/regulations_policies/reauthorization.
9 “Congress would have no direct role in determining how user fees would be structured or their levels.”
– “FAA’s Financing Proposal,” Calvin L. Scovel III, Inspector General, U.S. Department of Transportation, Testimony before the Subcommittee on Aviation, Committee on Transportation and Infrastructure, House of Representatives, March 21, 2007, http://www.oig.dot.gov/StreamFile?file=/data/pdfdocs/FAA_Financing_Testimony_Final.pdf.
“Furthermore, GAO notes, user charges would reduce Congress’s role in setting revenues.”
– “Observations on Selected Changes to FAA’s Funding and Budget Structure in the Administration’s Reauthorization Proposal,” Gerald L. Dillingham, Ph.D., U.S. Government Accountability Office, Testimony before the Subcommittee on Aviation, Committee on Transportation and Infrastructure, House of Representatives, March 21, 2007, http://www.gao.gov/new.items/d07625t.pdf.
10 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.
11 “Look, if our tax burden weren’t so high, there wouldn’t be as much pressure to raise fares,” [Airline Senior Executive] 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/.
12 Statement of Phil Boyer, President of Aircraft Owners and Pilots Association, Before the Before the Committee on Transportation and Infrastructure Subcommittee on Aviation, United States House of Representatives, March 21, 2007.
13 The Budget of the United States Government, Fiscal Year 2008 – Appendix, http://www.whitehouse.gov/omb/budget/fy2008/pdf/appendix/dot.pdf.