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TAX RELIEF FOR AIRLINES PROPOSED

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The financially ailing airline industry pays too much in taxes, a federal commission said today as it moved toward proposing broad tax relief for the carriers.

"The federal government imposes a large and disproportionate tax burden on the airline industry that impedes its return to financial health," the National Commission to Ensure a Strong Competitive Airline Industry said in a preliminary report."Airlines, which historically have made low profits and now suffer large losses, can no longer be viewed as revenue-generating machines for the government," the commission said.

The commission, appointed by President Clinton and congressional leaders, said its conclusions were preliminary and hoped to have a final report within a month.

The major U.S. airlines have lost more than $10 billion in the last three years and were particularly hard hit by the Persian Gulf Warand rising jet fuel prices.

In its preliminary report, the commission said that ticket and cargo taxes on the airlines should be rolled back to pre-1990 levels; the airlines should be exempted from the proposed transportation fuel tax a House-Senate conference committee is studying, and airlines losing large amounts of money should be exempt from the so-called alternative minimum tax on income.

The commission also said it favors a new formula to provide crude oil from the Strategic Petroleum Reserve when jet fuel prices rise more than 10 percent in any 12-month period. The proposal would free enough oil from the reserve to ensure that jet fuel prices do not rise more than 5 percent.

Former Virginia Gov. Gerald L. Baliles, the commission chairman, said the proposals were tentative but likely would form the basis for the panel's final report.

The commission also is considering other proposals, including reducing or eliminating various federal regulations on the airline and aerospace industries.

But the commission's draft report said the industry must share the blame for its problems.

"The industry itself, primarily by taking on excessive debt, must bear its fair share of the burden for its current state," the commission said. The panel noted that the industry's debt burden is at its highest level in history and that only Southwest Airlines, which is making a profit, enjoys a favorable bond rating.