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Mr. MURPHY. There is no railroad trust fund. The railroads, of course, are privately owned. They own their right-of-way, so basically it is a totally private operation, with no Federal funds being spent on the railroads, except for AMTRAK.

Senator PRESSLER. So the total of taxes and customs fees are $199 million from railroads?

Mr. MURPHY. Yes, sir.

Senator PRESSLER. That is a very small looking number.

The CHAIRMAN. The argument there is that they are paying for their own right-of-way, and they are paying for their own upkeep? Mr. MURPHY. Yes, sir. They pay about 6/10 of 1 percent of their revenue to Federal taxes, compared to the truckers which are about 11 percent. But, again, the truckers are running on the interstate highway system, which is built with taxpayers' funds.

Senator PRESSLER. Then we get up here to commercial aviation. We have a total of $65 billion raised from

Let us see, we have nothing on the deficit reduction line. Passenger tickets are $4.7 billion, and so forth. Then, with the aviation fuel tax, you would raise $379 million on deficit reduction. Is that right?

Mr. MURPHY. That is our estimate. Yes, Senator.

Senator PRESSLER. So that is what you are after here?

Mr. MURPHY. Yes, sir.

Senator PRESSLER. That is the margin of difference. And then these other numbers would remain the same-$379 million and $32 million. I see. I have the picture.

So we are talking about $379 million of revenue here this morning. Is that correct?

Mr. MURPHY. That is the net to the Treasury.

Senator PRESSLER. Is there net to anybody else?

Mr. MURPHY. Well, the actual impact on travelers could be higher than that. But the airlines would be able to deduct some of that if they have income taxes to pay.

Senator PRESSLER. I see. So all these numbers are the effect to the Treasury, after the corporations have paid their income taxes? All right. That is a good chart. That lays it out very nicely.

I guess you have already answered this to some extent but, if we do not get this $379 million out of here, where are we going to get it, from your point of view? What would you recommend? Where do we go?

Ms. BEERBOWER. I think that is a decision for this Committee. The cost of the delay in the imposition of the fuels tax on the airline industry was, I think, about $1 billion, by the transportation estimates.

You can see that every year that is further delayed, you can see from Mr. Murphy's chart the revenue loss that is occurring. And I think we would consider a further subsidy to be something that is difficult to finance in this environment.

Senator PRESSLER. So in the reconciliation bill we have before us-and I know my committee is supposed to raise $15 billionhow much would this affect the Finance Committee? This would be in our reconciliation bill, would it not, Bob?

The CHAIRMAN. I am not sure.

Senator PRESSLER. How would this show up?

The CHAIRMAN. I am not sure.
Senator PRESSLER. All right. Good.
Thank you very much.

The CHAIRMAN. John, any more questions?
Senator BREAUX. No more questions.

The CHAIRMAN. Madam Secretary, thank you. Thank you for coming.

Now we will have a panel of John J. Collins, representing the American Trucking Association, Carol Hallett, representing the Air Transport Associations, Ed Harper, representing the Association of American Railroads, and Susan Perry, representing the American Bus Association.

I appreciate you all coming this morning. As you know, we have asked you to confine your testimony to 5 minutes. And we will start in the order in which you appear on the panel.

We will take John J. Collins first. He is the Senior Vice President for Government Affairs for the American Trucking Associations.

Mr. Collins?


Mr. COLLINS. Mr. Chairman, thank you very much for giving me the opportunity to testify this morning on behalf of the American Trucking Associations.

I would like to make three points, Mr. Chairman.

First, highway fuel taxes should go into the highway trust fund, and be spent on critical highway projects, especially the national highway system that the Senate overwhelmingly adopted just last month.

In particular, the 4.3 cents general fund fuel tax paid by highway users should be placed into the highway account or it should be repealed, creating a tax window for the States.

Second, in light of over $1.1 billion the Federal Government is spending in 1995 on rail passenger and freight assistance, we believe it is appropriate for railroads to continue to pay a fuel tax.

However, our money is being put into the Trust Fund. To be equitable with our position, we certainly would support putting their monies into a separate trust fund where funds could be spent only on railroad purposes.

Third, regarding changes in the diesel fuel tax, maybe we are a little unusual on this. We are largely supportive of what the Treasury and IRS have done. We think it has resulted in increased revenues, and has cut a lot of the cheating out of the supply system that we saw before.

However, there are some detailed problems that we see with the regulations that are described in my written testimony.

will not read my statement. Your time is too valuable. What I would like to do is just highlight a couple of points.

ATA is the national association of the trucking industry. Trucking is a $345 billion industry, composed of large and small companies which, together, represent about 5 percent of the gross domestic product.

Trucking moves about 79 percent of the Nation's freight. This dependence of the economy on trucking makes the financial and competitive condition of the trucking industry all the more important. With a profit margin that barely reached 22 percent, even in our boom year of 1994, the trucking industry cannot afford to absorb fuel tax increases, especially ones that are applied unequally. Highway users are currently subject to general fund fuel taxes totaling 6.8 cents per gallon. That represents 37 percent_of the total Federal tax on gasoline, and 28 percent of the total Federal tax on diesel fuel. In my written statement, I have a chart that lays this out.

These are extremely heavy burdens for an industry with a profit margin as small as trucking.

In 1993, Congress did approve moving 22 cents from the general fund into the Highway Trust Fund, effective October 1, 1995. Now we think it is time to take the next step. That is, either place the 4.3 cents into the Highway Trust Fund or repeal the 4.3 cents, and give the States a window to create their own State highway taxes.

How much money should go into the Federal highway account? According to the experts, the Federal Highway Administration, part of U.S. DOT, there is $290 billion of unmet highway and bridge needs in the United States.

The decision on how much Congress is willing to spend on highways needs to balance the overall spending picture of the Federal Government, as you decide whether to repeal the 4.3 cents or redirect it into the highway account.

The second major point I would like to make is that ATA opposes spreading across all transportation users the 14 cents of the tax that railroads pay right now into the general fund.

The 14 cents paid by the railroads in fiscal year 1995 will raise about $36 million. In contrast, in last year's DOT appropriations bill, which applies this year, the Federal Government is spending over $1.1 billion on passenger and freight rail activities. I would be happy to go through those in detail if you want, but I will not take your time now.

The $36 million that the railroad industry will pay through the 14 cents tax is really but a drop in the barrel, compared to the spending that is going on.

However, we certainly support fairness across all modes. Our money is put into the Highway Trust Fund. That is what we want. We think it is appropriate that the people who pay the rail tax ought to get the benefits of it. So there should be a rail account within the trust fund structure.

The third point I would like to make, Mr. Chairman, is that the diesel fuel tax administration has been good, but fairer, final rules are needed.

The new procedures appear to have paid off. According to Treasury numbers, diesel fuel tax receipts rose dramatically in 1994, with perhaps a billion dollars more being raised because of increase fuel tax compliance.

That is a win-win situation for us, because that means that the people who were not paying the tax before were imposing costs on other people and competing unfairly. And the money we needed to

improve the infrastructure was not being put into the Highway Trust Account.

There are, however, several unresolved issues that need to be finalized in the regulations. IRS was supposed to have issued the regulations last June. We have not seen them yet. We urge this Committee to direct IRS to finalize those regulations as quickly as possible. There are three specific issues that I have raised in my testimony, which I will not go into here.

Mr. Chairman, that concludes my testimony.

Thank you very much.

The CHAIRMAN. Let me ask you a quick question to think about before I go to Ms. Hallett.

You talked about the $290 billion in necessary bridge repairs. If Congress were to decide that deficit reduction is more important than bridge repairs, what is wrong with taking the money from the 4.3 cents, and using it for deficit reduction?

Mr. COLLINS. Mr. Chairman, there certainly is a balancing that you have to do. I traveled this last weekend to Cape Cod for a vacation. I traveled over the Mianus bridge in Connecticut, on Interstate 95, a major thoroughfare. That big, strong bridge fell down in the 1980's because it was not properly maintained.

We take our highway system for granted because it is made of steel and concrete, and it looks like it will last forever.

It is a hard choice that the Committee has to make. But I think it is not just a black and white choice because, if Congress does not put the money back into the infrastructure, which is so important for the health of the economy, for NAFTA, for international trade, then we are really short-circuiting the future.

The CHAIRMAN. Well, that is a fair enough answer.

What you are saying, however, is that there is nothing philosophically wrong with using an excise tax for deficit reduction if we think that is a higher priority than putting it in a trust fund?

Mr. COLLINS. Mr. Chairman, the excise tax system in the highway program has worked well because it has been a fundamental contract that goes back to the 1950's with highway users.

The users have been willing to pay a tax above and beyond the income tax, above and beyond all the other taxes, because that money has been plowed into the highway construction system.

What we are concerned about, frankly, is killing the goose that laid the golden egg. Right now, about 37 percent of the taxes we pay are going into the general fund. This is really a breaking of the contract. This is really the subject of your hearing today, because, as other transportation taxpayers are exempted, it is just the highway users that are paying that tax. So it is not really a fair, broad excise tax. It is really a targeted excise tax that is being used for general purposes, but only applied to one sector of the transportation community.

[The prepared statement of Mr. Collins appears in the appendix.] The CHAIRMAN. Ms. Carol Hallett, the President and Chief Executive Officer of the Air Transport Association.

Ms. Hallett?


Ms. HALLETT. Mr. Chairman, thank you on behalf of the member airlines. We appreciate the opportunity to discuss the imposition of a new tax that is scheduled to be imposed on the airlines October 1 of this year.

My testimony also represents the views of the Airline Pilots Association, ALPA, and they will be submitting testimony as well.

This new tax would have a devastating impact on the financial well-being of the airlines. And, just as a faint glimmer is starting to crop up, the fuel tax would have a financially crippling effect on our industry.

Since 1990, the industry has collectively lost over $13 billion, laid off 120,000 airline employees, and another 125,000 U.S. aircraft manufacturing employees. In addition, nearly half of our major passenger airlines have been forced to file Chapter 11 bankruptcy. Three major U.S. airlines have ceased to exist. Many airline employees have taken substantial wage and benefit cuts, in excess of $1 billion annually.

At a minimum, a new fuel tax in excess of one half billion dollars annually would invalidate these employee concessions. They would undermine the progress made by airlines to lower these costs, and would certainly have an impact as well on the increased productivity and efficiency that has been generated.

We do not believe that some of the financially weaker carriers would be able to survive.

Unfortunately, the administration continues to push this new tax. Notwithstanding the fact that the measure of industry performance is net profitability, the administration has repeatedly mischaracterized industry performance by citing our operating profits, rather than net profits: It has drawn the conclusion, based on this inappropriate measure, that the industry can afford to pay the jet fuel tax.

During the course of the next few weeks, the airlines will be releasing their second quarter financial results. Wall Street analysts anticipate the industry will probably have a collective profit this quarter, perhaps as high as $700 million. Please let me caution your reading of these results, because it is only a drop in the buck


Obviously, we appreciate this welcome news, after 5 consecutive years of losses. And this quarterly profit, and even anticipated full year profit, does not make up for the $13 billion in losses, or the need for capital expenditures of more than $75 billion in the remaining years of this decade.

This $700 million second quarter profit is only a down payment. Frankly, we need a string of profits to make a dent in the industry's balance sheets. Any momentum toward sustained profitability will be lost if 4.3 cents per gallon of jet fuel tax is allowed to go into effect.

While good financial news is welcome, let us not prematurely claim recovery from the industry's financial illness, and assume that it can pay an increase in taxes. It cannot.

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