Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, August 7, 1995 TAG: 9508070081
SECTION: NATIONAL/INTERNATIONAL PAGE: A-3 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The 4.3 cents-per-gallon tax, set to take effect Oct. 1, will cost USAir $50 million each year and the industry more than $500 million.
Freshman Sen. Rick Santorum, R-Pa., has made repealing the tax a top priority. Sen. Arlen Specter, R-Pa., has signed onto the proposal, and six Republicans and five Democrats from Pennsylvania have backed a similar effort in the House.
``We're talking thousands of airline jobs, manufacturing jobs and tourism dollars,'' Santorum said.
Rep. Mike Doyle, Democrat from suburban Pittsburgh, called it ``one more nail in the coffin'' for a financially struggling airline.
USAir, with hubs in Pittsburgh and Philadelphia, employs nearly 15,000 in Pennsylvania and contributes about $10.9 billion to the state's economy each year.
Because the airline operates many short-distance flights, which consume relatively more fuel, the impact of the tax will be greater on USAir than on airlines with longer-distance routes, Santorum said.
Last month, USAir reported second-quarter earnings of $112.8 million, an increase of nearly eightfold from the same time in 1994. The company attributed the recovery to improved industry conditions and financial and cost-saving measures adopted by the airline.
But the airline said it is far from offsetting years of financial losses, and the new tax would ``reduce the ability to continue the recovery,'' USAir spokesman Paul Turk said.
He said airline ticket prices already were competitive, and the tax burden could not simply be passed onto passengers.
``This just puts pressure on the cost side of the house,'' he said. ``There will be an effect on service, an effect on jobs.''
In testimony presented to the Senate Finance Committee last month, Deputy Assistant Treasury Secretary Cynthia G. Beerbower said the airlines' improved financial performance made the tax ``less burdensome than it would have been in 1993,'' when the tax was passed.
She said a repeal would unravel a 1993 budget agreement between President Clinton and Congress.
A tax was imposed on all transportation fuel in 1993 as a deficit reduction measure, but fuel used in commercial aviation was exempted for two years because of the airlines' poor economic condition.
Rep. Phil English, an Erie Republican on the tax-writing House Ways and Means Committee, said the committee's staff was exploring several options to replace revenue that would be lost with a repeal. English said he might try to close a few tax loopholes to generate replacement revenue.
Rep. Robert Borski, a Democrat from Philadelphia, questioned whether the fuel tax really would generate additional revenue. Any revenue gained would be offset by losses in passenger ticket levies or other taxes, he said.
by CNB