Aviation Finance: Observations on Potential FAA Funding Options Page: 28 of 50
This report is part of the collection entitled: Government Accountability Office Reports and was provided to UNT Digital Library by the UNT Libraries Government Documents Department.
Extracted Text
The following text was automatically extracted from the image on this page using optical character recognition software:
Passenger Segment Tax
plane spends in the NAS and fuel consumption, the extent to which fuel
consumption correlates with costs imposed on FAA has not been
established. First, there may be a relationship between time in the system
and en-route control costs, but the relationship between time in the system
and the costs of other FAA activities, such as terminal costs, is not
obvious. Second, even if the fuel tax were limited to funding en-route
costs, the connection between fuel consumption and those costs appears
to be incomplete. For example, since heavier planes burn more fuel per
mile than lighter planes, they would be required to contribute more for
spending the same amount of time in the system.
As with equity issues, the potential for a fuel tax to address efficiency
issues appears limited because the connection between revenues and
costs is incomplete. A fuel tax can create an incentive for operators to
minimize their fuel consumption (e.g., by flying at off-peak times to avoid
congestion delays) and, therefore, their time in the NAS. To the extent that
time in the system correlates with costs imposed, this incentive can lead to
improved efficiency. However, any relationship between time in the
system and costs imposed on FAA appears to be limited to en-route
control costs.
A second option that represents a modification of the current system is to
increase the current passenger segment tax to replace revenues lost by
eliminating the current passenger ticket tax. Under this option, all other
current excise taxes would remain unchanged, implying no change to
revenues collected from cargo carriers and GA operators. This option
would likely increase the tax differential between passengers traveling on
one-stop (or more than one-stop) flights and those traveling on nonstop
flights on the same route. As a result, there might be a shift in travelers'
demand toward more nonstop service, which might, in turn, lead airlines
to operate more nonstop service. Because there is a partial link between
the number of segments an airline operates and the cost of the services
FAA provides to that carrier, this option might have some advantages over
the present tax structure in terms of revenue adequacy, efficiency and
equity. However, because there is no link to the cost of some of the other
services that FAA provides, these advantages are limited.
Compared to the present funding structure, this option might address
concerns about revenue adequacy over time, but many of the concerns
associated with the current system would likely remain. One way in which
a passenger segment tax might better correlate to FAA's workload is that
commercial flights that include a stop require more terminal services from
FAA than nonstop flights, and taxes based on the number of passengerGAO-06-973 Aviation Finance
Page 24
Upcoming Pages
Here’s what’s next.
Search Inside
This report can be searched. Note: Results may vary based on the legibility of text within the document.
Tools / Downloads
Get a copy of this page or view the extracted text.
Citing and Sharing
Basic information for referencing this web page. We also provide extended guidance on usage rights, references, copying or embedding.
Reference the current page of this Report.
United States. Government Accountability Office. Aviation Finance: Observations on Potential FAA Funding Options, report, September 29, 2006; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc299352/m1/28/: accessed April 25, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.