United States Department of Transportation
i
Airport and Airway Trust Fund: Issues Raised by Proposal To Replace the Airline Ticket Tax
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1996-12-05
[PDF-196.78 KB]
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TRIS Online Accession Number:00734630
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NTL Classification:NTL-AVIATION-Airports and Facilities;NTL-AVIATION-Aviation Economics and Finance;
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Abstract:The Airport and Airway Trust Fund (Trust Fund) was established by the Airport
and Airway Revenue Act of 1970 (P.L. 91-258) to finance the Federal Aviation
Administration's (FAA) investments in the airport and airway system. The act
further provided that FAA's operating cost could be financed from the Trust Fund.
The Trust Fund's primary source of revenue has been a tax on domestic airline
tickets. While relatively easy to administer, the ticket tax has been challenged
by the nation's largest airlines as unfair in a deregulated environment where
other competing airlines often charge much lower fares. In May 1996, a
coalition of the seven largest U.S. airlines proposed replacing the tax with user
fees, which they believe would more accurately charge each airline for the
costs that its operations impose on the airport and airway system. Congress
asked the General Accounting Office (GAO) to examine the issues raised by the
coalition's proposal, including (1) whether the ticket tax should be replaced
by a different fee system, (2) what the potential competitive impacts of the
fees proposed by the coalition airlines would be, and (3) what factors need to
be considered if a new fee system were to be developed. This is the response to
that request. The GAO also updated its April 1996 assessment on the status of
the Trust Fund, including the implications on FAA's budget of reinstating or not
reinstating the taxes that finance the Trust Fund. 20p.
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