tion increasing the excise tax would be neither highly regressive nor conducive to bootlegging. The American Society of Internal Medicine believes that an increase of the federal excise tax on cigarettes to 32 cents is a desirable objective, and encourages Congress to support and pass bills such as H.R. 1508, H.R. 1561, H.R. 1594, H.R. 1969, S. 874, all of which propose such an increase. H.R. 1053, which proposes to raise the tax to 24 cents, although less desirable, would also be a step in the right direction. The Society could also support as an interim measure, H.R. 236, introduced in the House by Representative Fortney Stark, which would temporarily maintain the federal excise taxes on tobacco at 16 cents, and would increase the tax each year by an amount equal to the Consumre Price Index. At the very least. ASIM hopes that Congress will enact S. 820, H.R. 844, H.R. 1200 or H.R. 1403, which would amend the rollback provision of the Tax Equity and Fiscal Responsibility Act, before October 1985, to maintain the current 16 cents excise tax. ASIM would welcome the opportunity to work with Congress in seeking the passage of these proposals, and would be pleased to answer any questions on these recommendations. Hon. DAN ROSTENKOWSKI, AIRCRAFT OWNERS & PILOTS ASSOCIATION, Chairman, Committee on Ways and Means, Frederick, MD, June 21, 1985. DEAR MR. CHAIRMAN: This is in response to committee release #13 inviting comments on various user fees proposed by the Administration. We would appreciate inclusion of this letter in the Committee's hearing record. The Aircraft Owners and Pilots Association represents the aviation interests of over a quarter of a million individuals who own and operate general aviation aircraft. Our members who utilize their aircraft for flights in and out of the United States must be statute submit themselves and their aircraft to the Customs Service upon re-entry into the United States. This process is of no benefit or value to the individual involved but is performed in the National interest. It is our understanding that the Administration will submit legislation which would empower the Treasury Department to administratively set tax levels to be imposed on aircraft operators and their passengers. We understand that this administrative user tax would initially be around $33 per aircraft. While we applaud the Administration's desire to do away with the distinction between overtime and regular hours, we are in priniciple opposed to the notion that customs inspections be performed on a cost recovery basis, particularly if those levels are set by administrative fiat rather than legislative process. International general aviation operations have already been imparied by the unfortunate, but necessary, Southern border reporting situation. Most general aviation aircraft are now required to land as designated airports immediately along the Southern border. Rather than having additional taxes levied on our members, we would prefer to see the Customs Service close low activity customs facilities which are too far from the Southern border to be designated as airports-of-entry or landing rights airports for general aviation. We are also concerned about Section 236 of the 1984 Trade Act which permits small communities to obtain customs facilities on a cost recovery basis. Inasmuch as customs services should be provided in the National interest, we believe it unfair to have government provide facilities at large airports but require small communities to provide for themselves. Finally, we beleive proposals to charge more for customs inspections could actually aggravate the deficit situation. Revenues from duties and imports will fall if trade is discouraged. Citizens who resent paying a fee for a government-mandated inspection may be less inclined to voluntarily report information to the Customs Service. This is another penny-wise and pound-foolish proposal which we hope will be rejected. Sincerely, DAVID D. SALMON, Jr., Hon. DAN ROSTENKOWSKI, ARKANSAS TOBACCO & CANDY ASSOCIATION, INC., Chairman, House Ways and Means Committee, Longworth House Office Building, Washington, DC. DEAR MR. CHAIRMAN: On behalf of the Arkansas Tobacco and Candy Association, I respectfully request that you and the members of the House Ways and Means Committee, honor earlier commitments to permit the current $.16 federal excise tax to sunset, leaving the $.08 federal excise tax in place on cigarettes. The tax burden being borne by the cigarette and tobacco industry in this country is excessive and the people who operate tobacco related businesses like the tobacco and candy distributors in Arkansas, and their employees, face declining revenues and subsequent loss of employment opportunities because of this excessive tax burden. By copy of this letter, we are asking both the Arkansas House and Senate delegations to join us in seeking the sunset of the excise tax on cigarettes. We thank you for your consideration of our position in this matter. Sincerely, WALTER SKELTON, STATEMENT OF BENJAMIN MAYNIGO, EXECUTIVE DIRECTOR, ON BEHALF OF THE ASIAN PACIFIC AMERICAN CHAMBER OF COMMERCE (APACC) Whereas, cigarette smokers already pay more than their fair share of taxes on the federal, state and local levels, and Whereas, cigarette taxation should, in our view, be the purview of states and not the federal government, and Whereas, Congress in 1982 made a promise to the American people who produce, sell and enjoy tobacco products that the temporary doubling of the federal cigarette excise tax be allowed to "sunset" on September 30, 1985, and Whereas, many of the more than 3,000 businesses who comprise the Asian Pacific American Chamber of Commerce (APACC) include convenience stores, groceries, restaurants and other small businesses that rely on cigarette sales to be profitable, and Whereas, not allowing the federal cigarette excise tax to sunset would do little if any to reduce the nation's $220 billion budget deficit projected for 1986, and Whereas, the average state tax on cigarettes has risen from $0.03 to almost $0.16a-pack since 1951, when the original $0.08 rate was imposed, and Whereas, in 1984, all governments-federal, state and local collected $10.4 billion in cigarette tax revenues, a 567 percent increase over that which was collected in 1951, and Whereas, one segment of society should not be singled out to bear the burden of excessive government spending deficits, and be it Resolved, That the Asian Pacific American Chamber of Commerce believes that Congress should allow the $0.16 federal cigarette excise tax to sunset back to its former $0.08 per pack rate on September 30, 1985. JOINT STATEMENT OF WILLIAM H. DempseY, PRESIDENT, ASSOCIATION OF AMERICAN RAILROADS; AND CHARLES I. HOPKINS, JR., Chairman, NATIONAL RAILWAY LABOR CONFERENCE SUMMARY OF COMMENTS AND RECOMMENDATIONS The testimony relates only to the proposal, in the President's FY 1986 Budget, that certain tier 1 railroad retirement benefits be taxed (under the federal income tax) as if they were private pension benefits rather than on the same basis as other tier 1 railroad retirement benefits and social security benefits. It is recommended that the proposal be rejected. The Congress less than two years ago, in 1983, enacted legislation that has fulfilled its objective of placing the railroad retirement system on a sound financial basis. That legislation was supported by OMB on behalf of the Administration as well as by railroad management and railroad labor, and represented a carefully crafted compromise acceptable to each. This proposal would upset a significant aspect of that compromise legislation, would increase the income taxes payable by early retirees and occupational disability annuitants under the railro retirement system, and at least after FY 1988 would decrease the revenues utilized to fund railroad retirement benefits. Nothing has happened since 1983 to justify such a change in legislation that then had the support of the Administration as well as of the railroad industry and the Congress. JOINT STATEMENT William H. Dempsey is, and since April 1, 1977 has been, the President of the Association of American Railroads. The Association represents almost all of the nation's Class I railroads in a wide variety of matters, including legislative matters, that concern the railroad industry. Charles I. Hopkins, Jr., is the Chairman of the National Railway Labor Conference, succeeding Mr. Dempsey in that position on April 1, 1977. The Conference represents almost all of the nation's Class I railroads in national collective bargaining with the unions representing their employees and in regard to other matters concerning labor-management relations in the railroad industry, including negotiations with the unions upon recommendations to the Congress about proposed changes in the railroad retirement system. We are making this statement because of the importance of the railroad retirement system to the railroad industry in general and to railroad labor-management relations in particular. In Press Release #13, dated June 6, 1985, Chairman Rostenkowski announced that hearings would be held on, among other things, certain of the revenue proposals in the President's Fiscal Year 1986 budget, including a proposal that "those tier I Railroad Retirement Benefits which are not identical to social security benefits would be taxed under the rules that apply to all other payments under the Railroad Retirement system." Item 6 on page 2 of the Release. We understand this to refer to the proposal described on pages 4-11 and 12 of the FY 1986 Budget as follows: "Under current tax law, a portion of social security equivalent benefits provided under railroad retirement is subject to the Federal income tax. Payments received from the rail industry pension plan are subject to the Federal income tax to the extent that they exceed previously taxed contributions. However, some rail industry pension benefits are being taxed under the social security equivalent benefit rules. The administration is proposing that effective January 1, 1986, these pension payments be taxed under the same rules that apply to all other payments received under the industry pension plan. This proposal is estimated to increase receipts by $0.1 billion in both 1987 and 1988.” The railroads oppose that proposal which would upset a significant aspect of a carefully crafted series of compromises enacted, on August 12, 1983, by the Railroad Retirement Solvency Act of 1983 (P.L. 98-76) with the support of railroad management, of railroad labor, and of the Office of Managment and Budget (through the testimony of Director David Stockman) on behalf of the Administration. In order fully to comprehend that proposal and the reasons for our opposition, it is useful to review certain basic aspects of the railroad retirement system as restructured by the Railroad Retirement Act of 1974 (P.L. 93-445) and as revised by the 1983 Solvency Act. The 1974 Act essentially established two levels of benefits payable to railroad retirees, which commonly are referred to as "tier 1" and "tier 2" benefits. The tier 1 benefits generally are equivalent to what the social security system would pay if railroad employment were covered by that system while the tier 2 benefits generally are comparable to the benefits provided in other industries through private pension plans. (Under the Railroad Retirement Tax Act, Chapter 22 of the Internal Revenue Code, railroad retirement taxes similarly are divided between tier 1 and tier 2 taxes.) While the Congress in the 1974 Act conformed the level of tier 1 benefits to the amounts that social security would pay, the Congress generally retained the eligibility requirements (for both tier 1 and tier 2) that had been developed in prior versions of the Railroad Retirement Act. Those requirements nonetheless for the most part are identical in substance to social security eligibility requirements, but there are both some circumstances where railroad retirement pays a benefit while social security does not and some circumstances in which social security pays a benefit while railroad retirement does not. Under a financial interchange between the two retirement systems, the railroad retirement taxes equivalent to social security taxes (i.e., tier 1 taxes) are turned over to the social security system and that system reimburses the railroad retirement system for the cost of railroad retirement benefits that are equivalent to social security benefits, so that the social security system is placed in the same financial position it would be in if it covered the railroads and their employees. The tier 1 benefits that are payable in circumstances where social security would not pay a benefit sometimes are referred to as "unrecompensed tier 1 benefits" in that the railroad retirement system is not recompensed for the cost of those benefits through the financial interchange with the social security system. It is those unrecompensed tier 1 benefits together with tier 2 benefits that we understand the OMB to refer to in the FY 1986 budget proposal quoted above as payments received under the railroad "industry pension plan," and it is those unrecompensed tier 1 benefits that we understand to be the sole subject of that tax proposal. The principal such unrecompensed tier 1 benefits are those payable because railroad employees with 30 or more years of railroad service and their spouses may elect early retirement at age 60 while attaining age 62 is necessary under social security, or because railroad employees may be eligible for disability benefits (if they have a current connection with the railroad industry and either 20 years of railroad service or are age 60 or older) if disabled for work in their regular railroad occupation even if not disabled for all work as is required under social security. In those two exceptional circumstances where no benefit would be paid by social security, the employee is deemed to meet social security eligibility requirements (i.e., to have attained age 62 or to be disabled for all work) and the tier 1 component of the benefit is computed under social security formulas. Section 121 of the Social Security Amendments of 1983 (P.L. 98-21) amended the Internal Revenue Code to include up to one-half of social security benefits and of tier 1 railroad retirement benefits in taxable income for purposes of the federal income tax. Revenues from the tax on tier 1 benefits were made payable into the Railroad Retirement Account, just as revenues from the tax on social security benefits are payable to the social security trust funds. Section 501 of the Railroad Retirement Solvency Act of 1983 established a separate Social Security Equivalent Benefit Account in regard to those benefits and taxes that are equivalent to what social security provides, and directed that the revenues from the income tax on tier 1 benefits be transferred to that Account to the extent that those revenues "are attributable to social security equivalent benefits." In effect, therefore, revenues from the tax on unrecompensed tier 1 benefits are paid into the Railroad Retirement Account and revenues from the tax on all other tier 1 benefits are paid into the Social Security Equivalent Benefit Account. In addition, Section 224 of the 1983 Solvency Act amended the Internal Revenue Code to make the provisions regarding income taxation of benefits under private pension plans applicable to all tier 2 railroad retirement benefits. Through FY 1988, revenues from that tax up to an $877 million cap are payable into the Railroad Retirement Account and such revenues thereafter (or above the cap) are payable into the general fund of the Treasury. Those various tax provisions were significant parts of the legislative programs under which the Congress undertook to restore the financial solvency of both the social security and the railroad retirement systems. Railroad management and labor had strongly urged that all revenues from the tax on tier 2 benefits should be paid into the Railroad Retirement Account, and their eventual support of the FY 1988 cutoff and the $877 million cap was a major concession to the position of OMB that would not have been made if OMB had not supported other aspects of the compromise legislation including taxation of all tier 1 benefits on the same basis as social security benefits with the revenues being paid into the railroad retirement system. The 1983 Solvency Act achieved its objective of placing the railroad retirement system on a sound financial footing. Yet, less than two years later, OMB on behalf of the Administration proposes to upset a significant aspect of the compromise which it supported in 1983 together with railroad management and railroad labor. We note that OMB asserts, in the passage from the FY 1986 budget quoted above, that its "proposal is estimated to increase receipts by $0.1 billion in both 1977 and 1978." Any such increase should be payable into the Railroad Retirement Account, unless and until the $877 million cap is exceeded. But however that may be, the unrecompensed tier 1 benefits that OMB proposes to tax on the same basis as private pension benefits do not differ in kind from social security benefits. In essence, they are payable in the amounts that social security pays to beneficiaries having generally similar qualifications with the only differences being a difference in qualifying requirements. The result of the proposal would be to impose an income tax increase upon early retirees and occupational disability annuitants, and at least after FY 1988 to reduce the receipts of the Railroad Retirement Account. Nothing has occurred since 1983 that would justify this proposed departure from the program whereby the Congress-with the support of OMB as well as rail management and rail labor-restored the solvency of the railroad retirement system. Consequently, we oppose that proposal on behalf of the railroad associations we represent and their member railroads. BILLIG, SHER & JONES, P.C., Hon. DAN ROSTENKOWSKI, Chairman, Committee on Ways and Means, DEAR MR. CHAIRMAN: On behalf of 28 ocean common carriers ("liner carriers") 1 we write to strongly oppose legislation which would authorize or impose so-called port "user fees". The particulars of the carriers' views are set forth in detail in the enclosed statement, but they key points of the statement may be summarized as follows: (1) Liner carriers generally and strongly oppose port user fees. Indeed, while liner carriers do not oppose new port improvement projects if the price of port improvements, particularly very deep draft (deeper than 45 feet) dredging, is user fees on liner carriers, the carriers would rather do without; and (2) Liner carriers particularly oppose user fee proposals which would (a) allow liner vessels (which do not draw 45 fee of water) to be taxed to finance dredging to depths greater than 45 feet; or or (b) Allow fees to be imposed on vessel operators on an ad valorem basis; (c) Impose a Federal user fee on vessel operators. In response to the Committee's request for comments on the Administration's port user fee proposal, the liner carriers state that they are unalterably opposed to itnot only because it is contrary to most of the principles noted above, but because it contemplates fees at astronomical levels. We also note that, in statements previously submitted to the Public Works and Transportation Committee and the Merchant Marine and Fisheries Committee, we have advised those Committees of the carriers' support for the port legislation developed by those Committees (H.R. 6 and H.R. 45, respectivley). Those bills would not authorize or impose port user fees on liner carriers and reflect an appreciation of the fact that the public at large benefits from liner carriage. We respectfully request that this letter and the enclosed statement be made part of the record of the Committee's June 19-20, 1985 hearing on user fee issues (per the rules set forth in the Committee's June 6, 1985 press release, we enclose six copies of this letter and enclosure. If you have any questions on this matter, please do not hesitate to advise. Sincerely, MARC J. FINK, Attorneys for the 28 Carriers. Note-Several of the concerns represented herein are foreign-based; Billig, Sher & Jones, P.C. has registered with the Department of Justice pursuant to the Foreign Agents Registration Act with respect to its representation of foreign concerns. Enclosure. STATEMENT OF TWENTY-EIGHT OCEAN COMMON CARRIERS OPPOSING PORT USER FEES Mr. Chairman and Members of the Committee: This statement is submitted on behalf of 28 ocean common carriers of freight (generally referred to as "liner" carriers) serving the foreign commerce of the United States.1 Collectively, these carriers serve virtually all major U.S. ports and fly both U.S. and foreign flags. They are representative of the entire class of liner foreign flags. They are representative of the entire class of liner carriers serving the U.S. foreign commerce and we believe that their views on port legislation reflect those of the liner carrier industry. This statement is submitted to make clear to the Ways and Means Committee our (the 28 carriers') strong opposition to legislation which would impose or authorize the imposition of taxes on liner carriers to finance harbor and channel dredging (socalled "port user fees”), including our unalterable opposition to the Administration's 1A.P. Moller-Maersk Line; Achille Lauro; Atlanttrafik Express Service, Ltd.; Barber Blue Sea Line; Barber West Africa Line; CIA Venezolana de Navegacion; Columbus Line; Compania Trasatlantica Espanola, S.A.; Constellation Lines, S.A.; Costa Line; d'Amico Societa di Navigazione per Azioni; Dart-M.L., Ltd.; Farrell Lines, Inc.; Flota Mercante Grancolombiana, S.A.; HapagLloyd, AG; Italia Societa' Per Azioni di Navigazione; Jugolinija; Jugooceanija; Lykes Bros. Steamship Co.; Nedlloyd Lines; Nordana Line-Dannebrog Lines AS; Pace Line; Prudential Lines, Inc.; Sea-Land Service, Inc.; The National Shipping Co. of Saudi Arabia; United Arab Shipping Co.; Waterman Steamship Corp.; and Zim Israel Navigation Co. |