Aviation Fuel Tax Fund LEAK must be fixed NOW

aviation fuel tax fund
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Airport & Airway Trust Fund Tax Dollars
Diverted to Highway Trust Fund

Aviation safety abhors leaks in the fuel systems; the cracks or holes can lead to fires or exhaustion of the source of energy for flights. Congress, either inadvertently or intentionally, allowed a puncture to the source of the Airport and Airway Trust Fund tax dollars. Not a small leak, but over 10 years between $2B and $4B lost, according to the Government Accountability Office study. To compound this offense, the lost/diverted tax dollars went to the Highway Trust Fund.

aviation fuel Trust Fund

Dr. Dillingham made the following definitive conclusion:

GAO estimates that, since fiscal year 2006, between $1 billion and $2 billion, or more than half of tax receipts for sales of noncommercial jet fuel, have not been transferred into the Airport and Airway Trust Fund from the Highway Trust Fund, based on analysis of Federal Aviation Administration (FAA) and IRS data…These trends suggest that more than half of jet fuel used in noncommercial aviation was taxed at an effective rate of $0.244 per gallon and that as a result, between $1 billion and $2 billion in noncommercial jet fuel tax receipts have not been transferred to the Airport and Airway Trust Fund because no credit or refund, which would trigger a transfer, has been claimed by vendors for these sales.

The GAO report made no recommendations as to how to plug this huge diversion or even whether the illegal transfer should be corrected. The political pundits at The Hill postulated the “why” this has been continued to be ignored:

“Lawmakers have struggled to come up with long-term funding solutions for the ailing Highway Trust Fund. The federal gasoline tax hasn’t been raised in over 20 years, while Congress opted to finance last year’s highway bill through a series of budgetary gimmicks.”

While the Highway Trust Fund’s balance has been decreasing over the previous fiscal years, the closing balance is registered at $19,459,942,733 (according to an FHWA report). In contrast, at the beginning of FY 2016, the Airport and Airway Trust Fund had a cash balance of $14.071 billion.

NBAA, which asked Rep. Pompeo to refer this problem to the GAO, commented:

“After an extensive and unbiased investigative process, the GAO’s findings validate our belief that the current system is fundamentally flawed, and not structurally aligned with the intent of either the highway or aviation trust funds,” said NBAA Chief Operating Officer Steve Brown.”

The NATA very pointedly criticized this insipid statutory provision which almost encourages fraud:

Andrew Priester, Chairman of the NATA Board of Directors, praised the report stating, “NATA deeply appreciates the work of Dr. Gerald Dillingham, GAO’s Director of Physical Infrastructure Issues, and his team. The report quantifies the dramatic impact of this revenue diversion that is undermining the viability of the Airport and Airway Trust Fund. The amounts lost to the Trust Fund as revealed today by the GAO are simply staggering. Consider how many new runways, instrument approaches, or additional air traffic control towers could have been built, had this money been available for its intended purpose.” 

NATA Senior Vice President William R. Deere added, “The GAO report lays bare the fact there was never much utility to the provision – either then or today. In 2005, the policy change was justified by a belief the 2.5-cent per gallon difference between the highway diesel and jet fuel tax rates somehow incented truckers to use jet fuel. This ignores the fact that in 2005 the average price of highway diesel was $1.30 less than jet fuel. Today, the disparity between those prices is even greater. Further, the GAO report validates NATA’s assertion that using jet fuel in modern diesel engines is harmful to those engines.”

“The report also highlights how the situation was exacerbated by its implementation. The GAO has demonstrated the mechanisms that were intended to allow for the transfer of tax revenues to the aviation fund simply do not work,” Deere continued. “The FAA presciently predicted at the time the refund process would create ‘a new and significant administrative burden’ that would harm the Airport and Airway Trust Fund.”

Priester concluded, “By accelerating work on this report through its inclusion in the 2015 highway bill, Representative Pompeo provided aviation taxpayers with an invaluable tool for reclaiming money that rightly belongs to the users of the aviation system. We call on Congress to repeal the 2005 provision that triggered this diversion of aviation tax dollars and return these funds to the important work of modernizing our nation’s aviation infrastructure.”

aviation fuel Trust FundThe Department of Transportation was created in order to balance the priorities of each mode. The DoT, FAA, Congress and the industry have struggled to find an equitable way to fund the ATC. With the facts of this GAO report, Secretary Foxx should use the remaining time at the helm to fix this egregious hole in the aviation fuel tax barrel!

 

 


ARTICLE: Aviation trust fund losing billions because of fuel fraud law
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1 Comment on "Aviation Fuel Tax Fund LEAK must be fixed NOW"

  1. Of course, because jet fuel is the largest expense of airliners.

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