[Congressional Record Volume 143, Number 155 (Friday, November 7, 1997)]
[Senate]
[Pages S12013-S12014]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MURKOWSKI (for himself, Mr. Akaka, Mr. Stevens, and Mr. 
        Inouye):
  S. 1424. A bill to amend the Internal Revenue Code of 1986 to modify 
the air transportation tax changes made by the Taxpayer Relief Act of 
1997; to the Committee on Finance.


                aviation taxes modification legislation

  Mr. MURKOWSKI. Mr. President, today, along with Senators Akaka, 
Stevens, and Inouye, I am introducing legislation that will provide a 
measure of relief to the citizens of Alaska and Hawaii who must rely on 
air transport far more than citizens in the lower-48.
  When Congress adopted the balanced budget legislation last summer, 
one of the provisions of the tax bill re-wrote the formula for 
calculating the air passenger tax for domestic and international 
flights. As part of this formula change, Congress adopted a per 
passenger, per segment fee which disproportionately penalizes travelers 
to and from Alaska and Hawaii who have no choice but to travel by air.
  Th legislation we are introducing today would reinstate the prior law 
10 percent tax formula for flights to and from our states. In addition, 
the $6 international departure fees that are imposed on such flights 
would be retained at the current level and would not be indexed. I see 
no reason why passengers flying to and from our states must face a 
guaranteed increase in tax every year because of inflation. We don't 
index tobacco taxes, we don't index fuel taxes; why should government 
automatically gain additional revenue from air passengers simply 
because of inflation?
  Mr. President, this legislation requires that intrastate Alaska and 
Hawaii flights will be subject to a flat 10 percent tax if such flights 
do not originate or terminate at a rural airport in our states. In 
addition, the definition of a rural airport is expanded to include 
airports within 75 miles of each other where no roads connect the 
communities. In many towns in Alaska, air transport is the only viable 
means of transportation from one community to another. There is no 
reason these airports should be denied the benefit of the special rural 
airport tax rate simply because our state does not have the

[[Page S12014]]

transportation infrastructure or geographic definition that exists in 
most of the lower-48.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1424

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. MODIFICATIONS TO AIR TRANSPORTATION TAX CHANGES 
                   MADE BY TAXPAYER RELIEF ACT OF 1997.

       (a) Elimination of Inflation Adjustment for Tax on Certain 
     Use of International Travel Facilities.--Section 4261(e)(4) 
     of the Internal Revenue Code of 1986 (relating to inflation 
     adjustment of dollar rates of tax) is amended--
       (1) in subparagraph (A), by striking ``each dollar amount 
     contained in subsection (c)'' and inserting ``the $12.00 
     amount contained in subsection (c)(1)'', and
       (2) in subparagraph (B)(ii), by striking ``the dollar 
     amounts contained in subsection (c)'' and inserting ``the 
     $12.00 amount contained in subsection (c)(1)''.
       (b) Modification of Rural Airport Definition.--Subclause 
     (I) of section 4261(e)(1)(B) of the Internal Revenue Code of 
     1986 (defining rural airport) is amended by inserting ``(or 
     is so located but is not connected to such other airport by 
     paved roads)'' after ``clause (i)''.
       (c) Imposition of Ticket Tax on Segments to and from Alaska 
     or Hawaii or Within Alaska or Hawaii at Rate in Effect Before 
     the Taxpayer Relief Act of 1997.--Section 4261(e) of the 
     Internal Revenue Code of 1986 (relating to special rules) is 
     amended by adding at the end the following:
       ``(6) Segments to and from alaska or hawaii or within 
     alaska or hawaii.--Except with respect to any domestic 
     segment described in paragraph (1), in the case of 
     transportation involving 1 or more domestic segments at least 
     1 of which begins or ends in Alaska or Hawaii or in the case 
     of a domestic segment beginning and ending in Alaska or 
     Hawaii--
       ``(A) subsection (a) shall be applied by substituting ``10 
     percent'' for the otherwise applicable percentage, and
       ``(B) the tax imposed by subsection (b)(1) shall not 
     apply.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect as if included in the amendments made by 
     section 1031 of the Taxpayer Relief Act of 1997.

  Mr. INOUYE. Mr. President, I am pleased to lend my support to Senator 
Murkowski's bill that would amend Public Law 105-34, the Taxpayer 
Relief Act of 1997, with respect to domestic aviation travel to, from, 
and within Hawaii and Alaska. Hawaii, unlike any other State, save 
Alaska, does not have the transportation alternatives that are 
available to citizens of other States. Roads, bridges, trains, and 
buses do not operate between the islands of Hawaii. This geographic 
difference causes any tax imposed on the cost of flying, our citizens' 
only means of getting from one island to another, to fall 
disproportionately on our citizens.
  This bill would correct any injustice that the citizens of Hawaii and 
Alaska were, perhaps inadvertently, subjected to as a result of last 
summer's passage of increased excise taxes on air transportation. 
Specifically, the Taxpayer Relief Act of 1997's provision for the 
collection of an additional segment tax for each segment of air travel 
among the Hawaiian Islands disproportionately penalized Hawaii 
citizens.
  In addition, the current law definition of ``rural airports'' is 
under inclusive. Under the current law, Hawaii citizens traveling to 
and from an airport located within 75 miles of a high-traffic airport 
that is inaccessible to them because there are no paved roads 
connecting the two airports, are nonetheless ineligible for the reduced 
7.5 percent tax. By amending the definition of ``rural airports,'' this 
bill will afford Hawaii citizens the same tax benefits as similarly 
situated citizens of other States.
  Therefore, I support the reinstatement of the pre-act formula for 
computing taxes on domestic segments that begin or end in Alaska and 
Hawaii, which would correct the inequitable tax treatment of Hawaii 
passengers under the current law.
  It is my hope that my colleagues will support this measure during the 
second session of the 105th Congress.
  Mr. AKAKA. I am pleased to join Senator Murkowski and other 
colleagues in introducing legislation today that addresses certain 
aviation tax inequities that were enacted as part of Public Law 105-34, 
the Taxpayer Relief Act of 1997.
  Among other aviation provisions, Public Law 105-34 lowered the 
passenger ticket tax from 10 percent to 9 percent, falling 
incrementally to 7.5 percent over 3 years. In addition, the law 
established a new domestic segment fee of $1, rising incrementally to 
$3 over 5 years, which will ultimately be indexed for inflation. 
However, flights from certain small, rural airports are taxed at a 
simple 7.5 percent rate and exempted from the segment fee. Finally, 
while the existing $6 international departure tax for flights between 
Hawaii and other states is maintained, the charge is indexed for 
inflation beginning in 1999.
  Mr. President, these taxes unfairly discriminate against Hawaii 
travellers. Residents of and visitors to Hawaii are entirely dependent 
on plane service for communication among the State's eight major 
islands as well as for travel to and from the distant U.S. mainland. 
The new aviation charges make personal, commercial, and Government 
travel within Hawaii more costly and hurts our tourism-based economy by 
inhibiting visitation from other States. I understand that many of 
these problems also apply to Alaska, which has similar transportation 
concerns.
  The bill we are introducing today addresses these shortcomings. Our 
legislation would reinstate the prior 10 percent ticket tax and 
eliminate the new segment fee on flights between our States and the 
mainland as well as on intrastate flights in Hawaii and Alaska. The 
measure would also eliminate the inflation adjustment for the $6 
international departure tax to which flights to and from our States are 
subject. Finally, the bill would redefine the rural airport exemption 
in such a way that will qualify many passengers travelling within 
Hawaii and Alaska for the reduced 7.5 percent rate.
  Thank you, Mr. President. For the sake of Hawaii's and Alaska's 
unique air transportation needs, I urge my colleagues to support this 
initiative.
                                 ______