THAT WAS A STRANGE set of taxes the House of Representatives approved last week on airline tickets, air freight and passengers who leave the country. Unlike other taxes, these are not designed to raise funds to pay for government programs. Instead, they are designed to raise funds to help the airlines buy quieter airplanes engines. That is a unique use of the federal taxing power, and it should be rejected by the Senate.
The scheme works like this: Each airline will continue to collect an 8 percent tax on domestic tickets and a 5 percent tax on domestic air freight. In the past, that money went into the Airport and Airway Development Fund, which pays the bills for safety programs and other projects approved by Congress. Under the new plan, however, part of that tax money will go into a special fund where it will be mixed with the proceeds of a new tax on international air freight and an increased departure tax on international passengers. Once the money gets into the new fund, the Treasury will send a portion of it back to the airline that collected it - about a third of the airline's expenditures for quieter airplanes and engines. This bookkeeping transaction - moving the money to Washington and then sending it back - is apparently designed to get around constitutional objections to a tax imposed to support something other than a government.
Behind this complex arrangement lie the problems that the airlines face in complying with the federal noise standards that go into effect in 1985. The airlines say it will cost $6 billion to $8 billion to modify or replace their present noisy aircraft. They claim - with some justification - that this is an unreasonable burden for the government to impose on their profits and stockholders. The standards, after all, are retroactive, because the planes met existing standards when they were bought, and the outlays necessary for modifications are substantially greater in relation to profits than those imposed on most other industries by other environmental requirements.
That is an argument for direct federal aid, if we ever heard one, and it seemed to sell well when it was made on the floor of the House last week. Members were told, time and again, that the government has to do something to help the airlines meet this heavy financial burden. But the legislation the House approved doesn't provide direct federal aid. Nor does it even provide indirect federal aid, as does other legislation giving various tax breaks to other industries for their anti-pollution spending. All the new legislation really does it to require airline users to pay for the new equipment through a tax. Without the tax, they would pay for it through price increases.
We can understand why the airlines prefer it this way. It puts the onus on the government, instead of on them, for increasing the cost of international travel and freight and for not decreasing domestic prices. And it spreads the costs of meeting the new standards across the airline industry. If Congress simply eliminated the taxes that the House wants to put into this new fund and told the airlines to raise their prices an equal amount, those airlines with the most noisy planes to modify or replace would be at a competitive disadvantage because they have to raise the most money. In other words, using a tax instead of a price increase to do the same job penalizes the airlines whose planes make the least noise now.
If Congress wants to help the airlines, it ought to do so either directly through grants or indirectly through tax mechanisms like those already developed for other industries. If it thinks airline users should pay the bill for the anti-noise equipment, it can recoup the expenditures or tax losses through new ticket and freight taxes. But it should not meld those two processes by creating taxes that, in effect, transfer money directly from taxpayer to airline, with the government being merely a switching station rather than a controller.
Once a precedent like that is established, it is not hard to think of what could follow. How about a tax on new-car sales, instead of price increases to pay for catalytic converters? Or a tax on gas and electric bills to pay for scrubbers? Or a tax on chemicals to pay part of the cost of cleaning up industrial wastes? The possibilities are endless. The Senate should cut them off before they arise by refusing to go along with the airline "taxes."