ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, January 3, 1996 TAG: 9601030062
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
Many airline passengers are enjoying a 10 percent break on ticket prices, thanks to the inability of Congress and President Clinton to resolve their budget impasse.
Three aviation taxes - a 10 percent tax on domestic flights, a $6 per ticket international departures tax and an air cargo tax - expired at midnight Dec. 31. Combined, the three taxes generate about $15 million a day.
They would have been extended as part of the seven-year balanced budget adopted by Congress, but Clinton vetoed it last month.
Most major airlines - including American Airlines, Delta, USAir and Continental - said they would pass along the savings to customers. But Southwest Airlines said it will continue to collect the surcharge, essentially boosting fares.
United Airlines said it would reduce its fares 10 percent only in markets where it competes with airlines that have cut fares. United and Southwest compete on the West Coast.
The Internal Revenue Service encouraged airlines to refund the ticket tax to travelers who purchased tickets before the new year for flights during the no-tax period. American and Delta had already said they would do that.
However, the industry's trade group, the Air Transport Association, said refunds are the IRS' - not the airlines' - responsibility. Some airlines may be able to handle the refunds comfortably, but others, with tight cash flow, may not.
The association complained the IRS was ``caught flat-footed'' by the expiration of the tax and has done a poor job of informing taxpayers and its own employees about refund procedures. The association said it made random calls to IRS consumer information lines, and ``a dozen calls turned up a dozen different answers.''
IRS spokesman Wilson Fadley said passengers who believe they're entitled to a refund but run into trouble collecting from their airline can file Form 8849 with the IRS to claim a refund.
Ginger Hardage, a spokeswoman for Southwest, which is bucking the trend set by other airlines, said, ``We will continue to collect the tax because we expect it will be reinstated.''
However, Bill Horn, a former IRS official and now an excise tax consultant in Edmond, Okla., said it would be difficult for Congress to renew the tax retroactively.
``I don't see how they can make it retroactive on the airlines because the airlines will have lost the opportunity to collect it from their customers,'' he said.
Aides to the tax-writing Senate Finance and House Ways and Means committees said there has been no discussion of temporarily restoring the tax while GOP leaders and Clinton negotiate over larger budget issues.
According to the IRS, the ticket tax produced $4.88 billion in the budget year that ended Sept. 30, 1995. The international departure tax produced $244 million, and the air cargo tax generated $324 million.
LENGTH: Medium: 61 linesby CNB