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The Honolulu Advertiser
Posted on: Sunday, May 20, 2007

Business jets may face a new tax

By John Hughes
Bloomberg News Service

WASHINGTON — U.S. airlines would shift about $150 million a year in taxes to corporate jet users under legislation approved by a Senate committee last week.

Costs for corporate jet and turbojet users would increase $500 million annually, under the measure approved in Washington. It calls for eliminating a 4.3 cent-a-gallon airline fuel tax and boosting the levy to 49 cents from 21 cents for corporate jets.

Airlines have been in and out of bankruptcy in recent years, said Sen. Daniel Inouye, the Hawai'i Democrat who chairs the Commerce, Science and Transportation Committee. "I don't wish to add any more to their burden," he said.

The bill partly delivers on a broader push by President Bush's administration and carriers including AMR Corp.'s American Airlines and UAL Corp.'s United Airlines. They want to tie air-traffic control costs to the level of use by various aviation segments.

USE-BASED COSTS

A use-based system, according to the Federal Aviation Administration, would raise costs for small-jet operators including General Motors Corp., Exxon Mobil Corp. and NetJets Inc., the business-jet charter company owned by Warren Buffett's Berkshire Hathaway Inc.

To make costs more use-based, the Senate proposal creates a $25-a-flight fee to finance air-traffic control upgrades. Airlines and corporate jets would pay the same fee, regardless of the number of passengers on each flight.

An amendment to strike the fee from the legislation, pushed by small-plane groups, lost on a 12-11 vote. The tally was tied 11-11 until Sen. Ted Stevens, an Alaska Republican, changed his vote from "pass" to opposition.

"We don't need a new user fee," said Sen. John Sununu, a New Hampshire Republican and co-sponsor of the amendment. "The existing system can handle the anticipated costs."

Congress is trying to pass the $65 billion, four-year FAA budget plan before existing taxes and fees that finance the agency expire on Sept. 30.

The Senate plan cuts fees for the commercial carriers and raises them for corporate jets, much less than Bush proposed. The administration sought to cut airline taxes by $1.68 billion, shifting about half that to corporate jet and turbojet users.

Users of small piston-engine propeller planes, who would face higher fuel taxes under the Bush plan, are exempt from gas- tax and user-fee increases under the Senate plan.

WHAT'S NEXT

The legislation now goes to the Senate Finance Committee. The Commerce Committee has recommended fuel-tax changes. The Finance Committee has the authority to enact them.

The Senate plan rejects a push by airports to raise an airline fee for construction projects to $7.50 from $4.50. It lets pilots fly until age 65, and it requires airlines to let passengers leave ground-delayed planes after three hours unless carriers have plans for such situations.

House Transportation Committee lawmakers haven't yet introduced their version of the FAA budget bill. House and Senate lawmakers will need to work out differences in their two proposals before sending one to Bush for his signature.