AMONG THE LEADING contenders for the Great Treasury Raid Award of 1978 is the airplane noise reduction bill now working its way through Congress. Through a unique back-door device, the bill would divert about $3 billion from the Treasury to the airlines during the next five years. The diversion would be fairly painless: no new taxes, no direct appropriations, no increase in federal spending. The airlines would collect the $3 billion as part of taxes that already exist but, instead of sending the money to Washington, they would spend it themselves on quieter airplanes and airplane engines.
It's a clever idea - if you happen to own an airline and need the money to meet federal noise standards or if you happen to be a member of Congress and want to give the airlines a helping hand. But it is, nevertheless, a bad idea. Anyway you analyze the proposal, it is the imposition of a federal tax for the sole purpose of helping an industry to comply with federal law. Once that precedent is set, the possibilities are endless for similar taxes to help other industries meet air-, water- and noise-pollution standards.
The idea works like this: The airlines would continue to collect an 8 percent tax on domestic tickets and a 5 percent tax on domestic air freight. They would also collect an increased departure tax on passengers leaving the country. But unlike other tax money, which goes to the government, this would be different. Each airline could keep up to 25 percent of the ticket tax, 40 per cent of the freight tax and all of the increased departure tax as long as it was spending that much money on new and less noisy equipment.
The key congressional committees that have approved this scheme had to make two decisions before they even considered it. The first was that the current level of taxes generate more revenue that ought to be spent on airports and air-safety programs; all of the money raised by these taxes is now earmarked airlines need a substantial amount of federal aid in the next few years. Both decisions may be logical, but they certainly do not compel this disingenuous result.
There are more straightforward ways of accomplishing the same thing. Congress could, for instance, keep the existing tax rates and appropriate funds directly to each airline. Or it could cut the taxes and let the airlines raise their fares. But if it did the former, voters might not like the idea of a profitable airline's getting, say, $250 million a year from the Treasury. If it did the latter, the $3 billion would not be tax exempt. It is not surprising, therefore, that the airlines and their many friends on Capitol Hill find the scheme attrative. But it is lamentable that both houses of Congress seem about to fall for it.