ing indebtedness of the Trust Fund which reached $1.5 billion by the end to FY 1981.

The 1981 Amendments were enacted to increase the revenues to fund the Black Lung Disability Trust Fund and to reform the eligibility standards to make the program more similar to a standard workers; compensation program. The amendments also transferred to the Trust Fund the obligations of responsible operators for certain liabilities that could not be anticipated which were created by the amendments to the program in 1978, thus transferring liability from individual coal operators in these cases to the industry as a whole.

Although the 1981 Amendment produced the intended goals of increasing tax revenues and making the adjudication of newly filed claims more consistent with traditional workers' compensation concepts, the Trust Fund deficit has continued to grow. Currently, the deficit exceed $2.5 billion, even though that deficit is $1 billion less than it would have been without the enactment of the 1981 Amendments. The primary reasons why the 1981 Amendments have not fully met their intended objectives to reduce and eventually eliminate the Trust Fund deficit are: the failure of coal production and prices to rise as rapidly as was expected in the 1970's; the increased longevity in the beneficiary population; the associated growth in medical costs, which are expected to rise more than 50 percent from FY 1983 to FY 1986; and continued high interest rates.

Coal tax revenues now equal roughly 85 percent of current outlays for income maintenance, medical and administrative costs; however, the Trust Fund must continue to borrow from the U.S. Treasury to meet the shortfall in current obligations as well as to cover the cost of interest on past borrowings. Those interest costs will reach $270 million this year and are expected to exceed $300 million next year.

To prevent further escalation of the Trust Fund indebtedness, the Department's proposed legislation would phase in a graduated increase in the coal tax and temporarily cap benefit payments at current levels. The combined effect of these changes would be to halt further borrowing from the Treasury by the end of FY 1989 and make possible total retirement of the Trust Fund indebtedness by the end of the century. Thereafter, lower taxes on coal will be sufficient to fund the remaining ongoing obligations of the Trust Fund.

The Department's proposal was arrived at after the careful consideration of several options, ranging from the taking of no action on the deficit, to the imposition of an immediate doubling of the coal tax. Taking no action, however, runs the risk of a steadily escalating deficit which we believe will reach at least $30 billion by the year 2010, while an immediate doubling of the excise tax could have an adverse effect on the industry. We have therefore concluded that neither extreme would be consistent with our responsibilities as administrators of the Trust Fund, and are instead recommending an approach which combines a phased increase in taxes with a temporary freeze on benefit levels.

Specifically, as I mentioned earlier, we are proposing a 50 percent increase in the tax to begin January 1, 1986, with an additional 10 percent increase on January 1, 1991. The tax would begin to revert to lower levels on January 1, 1996. Benefits levels would be frozen for the first two years, rise 1 percent in the third year and then rise at the same rate as the general Federal pay scale thereafter.

This proposal is based on an econometric forecasting model. We have made many runs with the model using a wide variety of assumptions concerning coal production, prices, tax rates and revenues as well as various projections concerning the size of the beneficiary population and the levels of income maintenance and medical care costs. These runs are used to produce expected dates for eliminating the need for borrowing by the Trust Fund and completing the process of repayment to the Treasury. The validity of these dates is, of course, dependent upon the reliability of key economic projections, including future coal production and interest rates.

A number of industry and labor groups have been briefed on the condition of the Trust Fund and what changes could be made to achieve and maintain solvency. They have also been briefed about the structure and operation of the forecasting model. In addition, they have been provided, upon request, with a full explanation of all aspects of the model and the computer code necessary to observe its internal workings.

The Administration is currently reviewing the Department's proposed legislation and we expect to transmit it to you formally in the very near future. We hope that our legislative proposal will be considered by the Congress so that we can begin the process to make the Trust Fund solvent. Further delay in getting a legislative solution enacted will simply further exacerbate the indebtedness of the Fund.

Let me emphasize again that although we have presented a specific proposal here today, we are open to discussion of its provisions. Our objective is to resolve the

problem of the Trust Fund's growing indebtedness in a responsible manner. Mr. Chairman, we believe that this proposal will serve to focus and move forward discussions on the matter and aid in arriving at an appropriate solution.

Mr. Chairman, this concludes my prepared statement. My colleagues and I will be pleased to answer any questions you or other members of the Committee may have. Mr. GIBBONS. Mr. Duncan.

Mr. DUNCAN. Thank you, Mr. Chairman.

I would like to thank the committee. I have just one question. Is it fair to require taxpayers to pay the cost of interruptions which are frequently the result of the IRS's failure to issue regulations clarifying existing law which require these requests for interpretations?

Mr. Owens or Mr. Schaffer, do you want to comment?

Mr. OWENS. Mr. Duncan, there is no fee schedule now where the taxpayer is required to pay anything.

Mr. DUNCAN. I can't hear you, sir.

Mr. OWENS. I am sorry. I said, there are currently no established fees for either the Service to pay a taxpayer or for the taxpayer to pay the Service under those circumstances.

Mr. DUNCAN. But you are proposing it, aren't you?

Mr. OWENS. Yes; we are proposing the fees-

Mr. DUNCAN. My question was, Is it fair when the interruptions are frequently the result of IRS's failure to issue regulations clarifying the existing law?

Mr. OWENS. I think the answer is that it is a different issue all the way around in terms of the regulations versus the letter rulings, and the letter rulings and determination letters are what the administration proposes to charge for. The regulations, I think, are a different issue. We have had a tremendous amount of legislation in the last few years which, more and more, requires more interpretation and more regulations from us. I think those two issues are distinctly different.

Mr. DUNCAN. On another subject, would you care to respond? When a judicial decision is rendered in a judicial district in a Federal court in one State and/or even the court of appeals in an area, then the Service doesn't, if it is adverse to the Service, appeal the case. Do you think that that should be followed in all the jurisdictions of the United States?

It is not being followed and I always thought that was unfair that people living in one jurisdiction would benefit from the court ruling but the people in the others would not.

Mr. OWENS. I think what happens in those cases, Mr. Duncan, is that when we have a court opinion in one particular jurisdiction and the Service does not agree with that opinion—that is, we think that reasonable people can differ-there is an effort made to continue to litigate that issue until we get more than one jurisdiction which decides the case, which gives us some additional guidance. Mr. DUNCAN. Don't you think that it is incumbent upon the Service to at least issue an appeal on that? If they fail to issue an appeal, then the people living in my district would suffer as a result of that, but the people in that district would benefit by it. Mr. OWENS. No question that it may be characterized as being unfair, although the difficulties we have with the interpretations of the code, I think, make it imperative in terms of us trying to get

general guidance. It is not infrequent that we have different opinions by different jurisdictions.

Mr. DUNCAN. I am hopeful that this year we will do something about that because I think it is patently unfair to taxpayers in parts of the country and not to others. I think if the Service wants to appeal it, fine, and I might help you along the way if I could, but when you don't, then I think that people in one jurisdiction ought to benefit, to get the same benefits that people in another district get.

Thank you very much.

Thank you, Mr. Chairman.

Mr. PICKLE. Mr. Owens, if we did adopt your recommendation of $100 for the request letters and rulings and determination letters, what amount of revenue do you estimate would be raised if it went to that figure?

Mr. OWENS. I think that the amount that is included in there is somewhere in excess of $40 million per year.

Mr. PICKLE. Have you had contact with national organizations such as CPA's or the American Bar Association-would they favor, have they recommended or taken a position on this recommendation?

Mr. OWENS. To my knowledge, Mr. Pickle, they have not taken a formal position on that. I am not aware of any specific meetings where we have met to discuss it although it has come up in a number of our discussions.

Mr. PICKLE. Do you think the CPA organizations or the American Bar Association would approve of this recommendation?

Mr. OWENS. I would not hazard a guess as to what they might formally do. I think there is mixed opinion within the ranks as to whether it is a good proposal or not.

Mr. PICKLE. They pay nothing now for a letter ruling.

Mr. OWENS. That is correct.

Mr. PICKLE. And if you go from nothing to $100, they may raise a question, wouldn't you think?

Mr. OWENS. That is correct. But in terms of the total cost, as a general rule, where an organization has already incurred substantial legal fees for professional advice, I don't think the $100 is a significant amount.

Mr. PICKLE. Thank you, Mr. Chairman.

Mr. GIBBONS. Thank you.

Mr. Stark? Mr. Jones. Mr. Pease.

Mr. PEASE. Thank you very much, Mr. Chairman.

I have a couple of questions for Secretary Meisinger. Is that the correct pronunciation?

Madam Secretary, you were here a few minutes ago when Secretary Mentz testified on behalf of the Treasury that the administration is opposed to tax increases. Would you consider these increases in the tax on coal to be tax increases?

Ms. MEISINGER. It is an increase in the current level of tax, yes, but it is a tax on the industry that is responsible for the illness and the disease that is being compensated, so it is in effect a user fee. Mr. PEASE. You are calling the coal tax a user fee. I don't see you make any reference to that in your testimony. You keep calling it a tax in your testimony.

Ms. MEISINGER. That is my error, then.

Mr. PEASE. You really consider it to be a user fee; is that right? Ms. MEISINGER. Yes, sir.

Mr. PEASE. Have you considered at all the impact on the competition, the competitive position of U.S. coal in the export markets of increasing the cost per ton by roughly $1?

Ms. MEISINGER. Yes, we have looked at it very closely. We are very concerned regarding impact of any kind of a tax increase and we have held meetings with representatives of the coal industry from the miners as well as with representatives of the users, the energy companies, to discuss that and ask for their input.

Our analysis to date is that there would not be an adverse impact from this increase, but we are continually soliciting input from them. We have asked them to provide us any alternative approaches to handling the problem.

Mr. PEASE. My understanding is that our coal fields are suffering considerably because they have difficulty exporting the coal as they used to, and yet you find that this increase would not have any impact on our competitive position?

Ms. MEISINGER. That is our analysis, that the price of coal fluctuates based on factors other than this kind of a tax. What is happening in the price of oil, for example. We have a deficit that is growing, and in 1977, the Congress crafted a system where the industry would be responsible for paying the price of this illness, and we are trying to come to grips with the problem in a reasonable way.

Mr. PEASE. You are imposing this increase in tax because of your concern about the deficit in the black lung trust fund?

MS. MEISINGER. Yes, the growing deficit. We are finding that the level of interest that we are paying grows each year, and with the current projections, we cannot project solvency.

Mr. PEASE. I am curious as to why the administration comes to this position regarding the black lung trust fund when it does not come to a similar position regarding the overall Federal deficit. We have an overall Federal deficit which is very large and growing very substantially, $460 billion over the next 3 years, and yet the administration is opposed to any tax increase to deal with that def

icit.

What is the difference between the two?

Ms. MEISINGER. I believe that the President's budget is intended to address that problem and it is a step in that direction. I really can't address that. I am focusing on the black lung trust fund here.

Mr. PEASE. I guess what I am suggesting is if the administration doesn't care about the overall Federal deficit enough to consider a tax increase, maybe we ought not to impose a burden of a higher tax on the coal industry, which is struggling for survival.

Let me ask one other question quickly. The administration is proposing no increase in black lung benefits for beneficiaries in 1986 or 1987; is that correct?

Ms. MEISINGER. That is in the draft proposal today. However, that draft was prepared at the same time the budget went forward to the Congress. Where the budget proposal contains a proposal to reduce Federal pay by 5 percent we are making an effort to hold black lung beneficiaries harmless because their pay level is tied to the Federal pay.

We carved that out and crafted language that would in effect result in holding them harmless until the Federal pay began to go up again from the current levels, which we determined would be a 2-year freeze plus; 1 percent in the third year. However, we realize that there is a great deal of discussion on the whole issue of Federal pay and we are not wedded to this particular proposal on the benefit levels.

Mr. PEASE. So you would be willing to consider something beyond a freeze for the next two years?

Ms. MEISINGER. We would be willing to look at all alternatives. Mr. PEASE. Thank you.

Mr. GIBBONS. All right.

Mr. Schulze? Mr. Campbell? Mr. Thomas? Mr. Daub? Mr. Gregg? Mr. GREGG. Thank you, Mr. Chairman.

I would first like to say that I think the idea of $100 for letter rulings makes some sense. It is sort of like filing requests with other agencies, especially with courts when you are trying to get an opinion, a decision on a case or even the bankruptcy court so I have no problem with that.

Relative to customs fees, if I rode a lobster boat out of Eastport, ME, and go to Yarmouth, Nova Scotia, perhaps 50 miles by sea, maybe not that far, and I come back, I land in Yarmouth. When I come back, am I going to have to pay $393 or $53 to land the lobster boat?

Mr. SCHAFFER. I think we would be receptive to looking at some adjustment to those fees. Those were annual fees also and the ones for in and out, I think we would have to look at the size of the vessel. That is why this is only a proposal. You have considerations like that.

Mr. GREGG. I think you need to look at the pleasure boat issue on Lake Champlain where you have small boats running up and down the lake, and I am sure that is true of other States, small pleasure craft, $3 for landing one of those crafts every time would be a real problem. I think it would also be a problem in Federal aviation.

A more serious problem is the automobile fee. In numerous border towns, people actually do their primary shopping on one side or the other of the border, when the shopping center for the region is an American town or a Canadian town, and they are crossing the border daily on numerous occasions.

You are going to charge them to go 2 miles to their primary shopping site $1?

Mr. SCHAFFER. That is correct. Other municipalities certainly charge-I live in Maryland and when I go to the Eastern Shore, when I cross the bridge going to the Eastern Shore, I pay coming and going.

Mr. GREGG. When you go from Pittsburg, NH, to Canada to do your shopping, which is about 5 miles, it is a necessity. When you go across the bridge to the Eastern Shore, you are probably going for something other than necessity.

I suspect there is a significant difference between going to get your groceries at the local shopping center and going across the bridge to the Eastern Shore. It would seem to me that this could be a very severe impediment not only to trade, but if I were a Canadian at the border, I would probably petition my government to put