applied to aviation gasoline and from the Federal tax on aircraft tires and tubes, not be included in the trust fund. H. R. 10660 affects the airlines in the following manner. It retains at the present 2-cent level the tax on gasoline used by them in the operation of their aircraft. The 1-cent increase does not apply to this gasoline. It retains at the present 5 cents per pound level the tax on aircraft tires. Finally, it exempts from the proposed new tax of 3 cents a pound on tread rubber, the material used in recapping or retreading aircraft tires. A reading of the explanation of the Ways and Means Committee. regarding the tax provisions of H. R. 10660, contained in House Report No. 2022, indicates that the House of Representatives intended that the new taxes proposed in the bill should apply only to highway users. Since gasoline used by airline aircraft, and tires and tubes used on such aircraft, are not consumed on the highways, the bill quite properly does not make the tax increases apply to them. Perhaps the clearest explanation is contained in the following statement by the Ways and Means Committee: Limitations are imposed * ** which for the most part have the effect of restricting the application of these new or increased taxes to cases involving vehicles used on, or suitable for use on, highways (H. Rep. 2022, p. 39). Section 209 of the bill establishes a highway trust fund. That section also allocates to the trust fund the receipts from all of the new or additional highway user taxes imposed by title II of the bill. This allocation is certainly consistent with the principle approved by the House of Representatives that the users of the highways constructed under this legislation should pay for them. However, section 209 also allocates to the highway trust fund the receipts from certain existing taxes which cannot by any stretch of the imagination be regarded as highway-user taxes. I am referring specifically to the present 2-cent tax on aviation gasoline and the present tax on aircraft tires and tubes. In the manner in which it is now drawn, section 209 (c) (1) would allocate the total amounts of the tax receipts from these sources to the highway trust fund. It is clear to us that this is not only an improper allocation, but that it is contrary to the intention expressed in the statement of the Ways and Means Committee on the trust fund provision. The Committee's statement reads, in part, as follows (p. 48): Title II of H. R. 10660, also allocates to the highway trust fund the equivalent of the revenue derived from certain existing high-use taxes. As recommended by the President, the present 2-cent tax on gasoline and other motor fuels is allocated to the highway trust fund. In addition, beginning July 1, 1957, the bill allocates for the use of the highway program an amount equal to the collections from the present 5-cent-per-pound tax on tires and from the present 9-centper-pound tax on inner tubes. The Committee on Ways and Means believes that it is proper to use the existing taxes on tires and inner tubes to aid in the financing of an expanded hi"hway program, since they are just as clearly highway-user taxes as are the motor fuel taxes which Congress has traditionally recognized as such. [Italics added.] It is clear that the Ways and Means Committee intended that the recipts from the gasoline tax and from the tax on tires and tubes, collected from highway users, should be assigned to the highway trust fund. It is equally clear that it was intended that the receipts from these taxes, as applied to gasoline consumed in aircraft, and tires and tubes used on aircraft, should not be assigned to the trust fund. Airline aircraft fly on Federal highways but they are highways of the sky-the Federal airways system. The taxes the airlines pay to the Federal Government on aviation gasoline and aircraft tires and tubes are their payment for the use of the Federal airways system. According to official Government statements the federally provided airways system costs approximately $75 million a year. The military agencies are the predominant users of these airways. The airlines are next in line, and all other civil avaition constitutes the remainder. At the present 2-cent rate, the airlines will pay approximately $20,500,000 in Federal gasoline taxes in 1956, an estimated $22,700,000 in 1957, $26 million in 1958, and $29,200,000 in 1959. Corresponding increases are produced for future years. The airlines pay approximately $100,000 per year in Federal taxes on aircraft tires and tubes or $1,600,000 over the 16-year period covered by the highway trust fund. A careful study of the relative use of the airways system by the three clases of users I just mentioned, indicates that the airlines. through the Federal gasoline tax and the tax on aircraft tires and tubes, are paying their fair share of the cost of the airways system. It would be unfair and inequitable, and contrary to the underlying principle on which the Ways and Means Committee statement is based, to allocate any part of this tax payment to the highway trust fund. To summarize, we strongly support title II of H. R. 10660, with the reservation that section 209 should be amended to exclude from the highway trust fund the receipts from the Federal gasoline tax as applied to aviation gasoline, and from the Federal tax on aircraft tires and tubes. I should like to file with the clerk a draft of an amendment which would accomplish that result. (The draft of the amendment is as follows:) ATTACHMENT TO TESTIMONY OF AIR TRANSPORT ASSOCIATION ON TITLE II OF H. R. 10660 Amend section 209 (c) (1) (A) by adding immediately before the comma in line 5 on page 51, the following: "except taxes on special motor fuels sold or used for the propulsion of airplanes," and by adding immediately before the semicolon in line 6 on page 51, the following: "except the tax on gasoline sold or used as fuel for the propulsion of an airplane." Amend section 209 (c) (1) (E) by adding immediately before the parenthesis in line 20 on page 51, the following: ", except aircraft tires and aircraft tire inner tubes." Mr. TIPTON. That concludes my statement, Mr. Chairman. Senator FREAR. May I ask just one question? Would your association accept a proposal that all taxes, including the 2 cents as well as the additional 1, and the increased tax on tires, in lieu of any subsidy of the Federal Government to the airlines, use that part as a subsidy? Mr. TIPTON. We would accept the return of the gasoline tax that we pay? Senator FREAR. Yes. Mr. TIPTON. In lieu of subsidy? Senator FREAR. Yes. Mr. TIPTON. At the present time in the domestic United States the subsidy for airlines goes largely and almost entirely to the local service airlines and to the helicopters. The total for the domestic operation would be somewhat higher, but not very much higher than the present Federal gasoline tax collections. I would have to study that so as to be able to make a reply to your question. Senator FREAR. I wish you would. We would like to have it. The CHAIRMAN. Thank you very much, Mr. Tipton. In lieu of appearing, the statement of Mr. George W. Anderson, executive vice president of the American Transit Association, is submitted for the record by counsels Lynn Howell and Raoule Desvernine. (The statement of George W. Anderson, executive vice president of the American Transit Association, submitted by counsels Lynn Howell and Raoule Desvernine, is as follows:) STATEMENT OF GEORGE W. ANDERSON, REPRESENTING THE AMERICAN TRANSIT ASSOCIATION IN RE REVENUE PROVISIONS OF H. R. 10660 Mr. Chairman and gentlemen of the committee, my name is George W. Anderson, executive vice president of the American Transit Association, 292 Madison Avenue, New York, N. Y. On July 12, 1955, I appeared before the Committee on Public Works of the House of Representatives to present the transit industry's position with respect to the revenue provisions of the highway legislation then under consideration, and on February 20, 1956, I appeared before the Committee on Ways and Means of the House of Representatives and offered similar testimony with reference to the revenue provisions of H. R. 9075. Subsequently I was afforded an opportunity to work closely with the technical staff of the Committee on Ways and Means, with particular reference to the language which is now contained in section 208 (b) (L) of H. R. 10660, beginning on page 48, line 16 of title II of the bill. The entire transit industry is gratified that H. R. 10660 gives recognition not to only the present financial position of the industry, but the equally important fact that transit vehicles are basically nonusers of the Federal system of interstate and defense highways covered by H. R. 10660. Such recognition is found not only in the aforementioned section of the bill, but also in the provision exempting certain transit-type buses from the $1.50 per 1,000 pounds tax on highway motor vehicles having a gross weight of more than 26,000 pounds. This exemption is found in section 4483 (c), beginning on page 40, line 19 of title II of the bill. The American Transit Association is a voluntary trade association whose 275 operating members transported about 80 percent of the 9 billion transit riders taken last year by 85 million people. Obviously, I am not authorized to speak for the 85 million people who ride transit vehicles in the United States each year. However these people ultimately pay any increased taxes levied upon transit. Transit companies operate buses, trolley cars, streetcars, rapid transit cars, or various combinations thereof in cities and towns of various sizes throughout the United States, including the major cities. The surface operations of most of these companies are confined to city streets which are generally not part of the Federal-aid highway system or the proposed National System of Interstate and Defense Highways. About 42 of the approximately 1,600 transit companies operating in the United States are publicly owned and operated including those serving some of our major cities such as New York, Chicago, Detroit, Cleveland, Boston, San Francisco, and Seattle. These publicly owned systems are specifically exempted from the payment of any of the present or proposed excise taxes on fuels, oils, tires, tubes, retread material, new motor vehicles, or parts and accessories for these vehicles. Now I would like to discuss briefly the financial condition of the industry. Since 1940 despite a 24-percent increase in urban populatiton throughout the country, transit riding has declined about 13 percent and the riding per capita has decreased about 30 percent in that period of time. Last year we had about a 30-percent decrease in riding on a per capita basis compared to 1940. Our problem stems largely from the competition of automobiles. About twothirds of all the automobiles are owned by people living in urban areas. Since the urban streets and highways comprise about 8 percent of our total roads, we have the problem of approximately two-thirds of our vehicles being operated on a very small percentage of our highways. This creates traffic congestion. It has meant that transit vehicles have been slowed down, our riding has suffered, and we are striving earnestly to overcome that problem. What has happened in many of the cities is that we have had a greater number of vehicles eutering the downtown area with fewer people and it is people and not vehicles that make downtown areas prosperous. Therefore, we are encouraged to find that planners, city officials, retailers, real-estate people, and many other groups are becoming increasingly aware that our problem in downtown congested areas is trying to move people and not vehicles. I am not saying that because the automobile is our competitor that the automobile should be eliminated or barred from the downtown area. It would be ridiculous for me to make such a contention. However, we do feel that a better balance between the use of the automobile and the public vehicle in the downtown area should be restored. It is encouraging to note that the several planning groups I referred to are becoming increasingly aware of the important part that transit must play in relieving congestion in the downtown area. Unlike some of the other forms of transportation the automobile is practically our only competitor. We do not compete with the railroads, the airlines, or the intercity buses. In fact, with very few exceptions, the transit companies do not even compete with each other. Generally speaking, a metropolitan area is served by one system. What has been the trend of the industry's finances since 1940? Although its revenues have increased 96 percent, operating expenses including depreciation are 115 percent above their 1940 level. Last year the industry as a whole earned something like 1.75 percent on its investment. That is an industry average. Some companies are doing better than others, but many small transit companies have been forced out of business. The situation has become so critical that commissions have been appointed to study the bus operations in the States of Massachusetts, New York, and Wisconsin. Tax relief to transit on a statewide basis has been granted recently in Wisconsin, Michigan, Texas, and Illinois. I think it is interesting to note that quite recently six closely related associations of municipal officials formed a national committee on urban transportation and are studying all phases of tax problems, attention being given to transit vehicles as well as to trucks and automobiles. Our financial problem is aggravated by the fact that it has become increasingly difficult to pass on higher costs to our riders as we must ultimately do. I think many of the members of this committee are familiar with some fairly small transit operations where the fares have reached 15 cents and in some cases 20 cents. If costs are further increased, fares in many cases must be raised with the possibility of further loss of riders. I mentioned a moment ago that generally it is purely coincidental when a transit operation involves use of Federal-aid highways. In St. Louis, for example, the company that serves the general metropolitan area of St. Louis has made a study, and 2 percent of their operations involve Federal-aid highways and I think that is fairly typical. If we are required to pay higher taxes in increasing amounts, the transit rider who is generally a member of the low-income group is forced to subsidize some of these other highway users. In most instances you will find that private transit operations pay all of the local taxes that other businesses pay and in a great many instances an additional gross receipts tax. I am very happy to state that there is a considerable movement today to relieve companies of many of those taxes, but what I am trying to point out here is that the streets over which they operate in the main are paid for locally and they contribute their share of those payments. Hence, we do not feel that we should be required to pay Federal taxes for highways which we do not use. An investigation which we made last year, at the request of the Treasury Department, disclosed that the privately owned portion of the transit industry in 1954 consumed 403,200,000 gallons of various types of motor fuels. We estimate that the current fuel consumption of the same part of our industry to be something slightly less than the aforementioned amount. On this basis, the total amount of refunds which the transit industry would be entitled to under the present language of the bill would be something less than $4 million annually. We estimate that at present approximately 2,800 transit buses operated by the privately owned portion of the transit industry would be subject to the proposed tax of $1.50 per 1,000 pounds on vehicles having a gross weight of more than 26,000 pounds. The average gross weight of each of these vehicles would be about 30,000 pounds. On this basis, the provision exempting certain transit-type vehicles from this tax would result in a loss in revenues of only about $126,000 annually. Transit companies are strictly regulated as to rates of fare, frequency of service and other phases of their operations by a State regulatory agency in each of about one-half of the States and by a municipal body in each of the remaining States. Where a State regulatory agency exercises control, the transit company is almost invariably also subject to the provisions of a municipal franchise ordinance covering its operations. Under the standard systems of classified accounts which these regulatory bodies prescribe for use by transit, statistics regarding the vehicle mileage operated, route mileage covered, details concerning fuel consumption, and many other operating data are readily available. Because of transit's status as a regulated public utility, these items are all matters of public record. I sincerely trust that the aforementioned provisions of H. R. 10660 which were written into the bill by the House Ways and Means Committee after very careful study, will remain intact in the bill which your committee finally reports to the Senate. The relief which would result would ultimately benefit transit riders, who otherwise would be required to pay the increased taxes in the form of higher fares. The CHAIRMAN. The Chair would like to insert in the record at this point a letter from the Bottled Gas Corporation of Virginia, Mr. E. O. N. Williams, president, who is also chairman of the National Affairs Committee, Liquefied Petroleum Gas Association, Inc. (The letter and accompanying papers are as follows:) Hon. HARRY FLOOD BYRD, BOTTLED GAS CORPORATION OF VIRGINIA, Senate Office Building, Washington, D. C. DEAR SENATOR BYRD: Further in connection with my letters to you of April 17 and 27 concerning House Resolution 10660, I understand that this bill was passed by the House on April 27 without eliminating the discriminatory feature, which I feel is unfair to our liquefied petroleum gas industry. Page 6420 of the Congressional Record, House, dated April 26, specifically states that this tax is applicable to motor vehicles which are "designed to carry a load." The type of vehicle which our industry is particularly interested in in connection with this act is the industrial forklift truck used in and about warehouses. As you probably know, a forklift truck carries a load from one place in a warehouse to another on its protruding forks. Gasoline is exempted from this 1-cent increase in tax when vehicles are propelled by gasoline for off-the-highway usage. It is true that usage of LP-gas in industrial tractors at the present time is limited and the revenue derived by the Government is not substantial. However, liquefied petroleum gas usage in industrial tractors is comparatively a new utilization for our young industry and this 1-cent tax differential will present a block to our industry's development in this direction. If House Resolution 10660 is enacted into law in its present form, liquefied petroleum gas will be the only industrial lift-truck source of power paying a 3-cents-per-gallon tax. Two of the other fuels-diesel and electric-pay no tax. If it is at all possible for this discrimination to be eliminated when the bill comes before your Senate Finance Committee, I should greatly appreciate your having this discrimination eliminated. For your ready information and possible assistance, I am enclosing a copy of the portion of the Congressional Record of pages 6407 and 6420, along with the present language of House Resolution 10660 (formerly House Resolution 9075) and a copy of our proposed amendment to House Resolution 10660, which will take care of the objection of our industry. With kind regards, Sincerely yours, E. O. N. WILLIAMS, Chairman, National Affairs Committee, |