On Budget Conference Committee, Even Small Proposals Generate Arguments

WASHINGTON, DC - OCTOBER 29: House Budget Committee Chairman Paul Ryan (R-WI) listens to testimony from Centers for Medicare and Medicaid Services Administrator Marilyn Tavenner during a hearing of the House Ways and Means Committee in the Longworth House Office Building October 29, 2013 in Washington, DC. In the wake of the troubled launch of the Healthcare.gov website, Tavenner testified about the implementation of the Affordable Care Act, also known as Obamacare.
National Journal
Sarah Mimms
Nov. 25, 2013, 12:59 p.m.

Both Re­pub­lic­ans and Demo­crats on the budget con­fer­ence com­mit­tee agree that if the pan­el reaches an agree­ment at all, it is likely to be a small one. And so far, they’re not kid­ding.

One of the few ideas to leak out of the com­mit­tee in­volves user fees, the small costs that the fed­er­al gov­ern­ment tacks onto activ­it­ies ran­ging from com­mer­cial air­plane flights to duck hunt­ing.

The fees are of­ten just a couple of dol­lars per trans­ac­tion — the es­sence of small budget­ing tools — yet even that is gen­er­at­ing some ar­gu­ment.

As the com­mit­tee con­tin­ues to mull a deal that would fund the gov­ern­ment for the rest of fisc­al year 2014 and po­ten­tially fisc­al year 2015 as well, Demo­crats in­sist that new rev­en­ues must be a part of any deal. While Rep. Paul Ry­an of Wis­con­sin, the pan­el’s Re­pub­lic­an co­chair­man, in­sists he will not con­sider any deal that raises taxes, he has shown an open­ness to in­creas­ing user fees and find­ing non-tax rev­en­ues as a po­ten­tial area for com­prom­ise.

But the pro­pos­als have drawn cri­ti­cism al­most from the start. Some say that rais­ing user fees is just a tax in­crease by an­oth­er name. Oth­ers say the fees won’t be enough to make up for the kinds of deep spend­ing cuts Re­pub­lic­ans want.

Take for ex­ample, a pro­posed $5 fee for air­line pas­sen­gers that was in­cluded in both Pres­id­ent Obama’s budget pro­pos­al and the House Re­pub­lic­ans’ spend­ing plan for FY2014.

Un­der cur­rent law, air­line pas­sen­gers already pay a $2.50 Trans­port­a­tion Se­cur­ity Ad­min­is­tra­tion fee every time they board a plane, up to a max­im­um of $5 per trip. The White House has pro­posed a $5 flat charge for each one-way trip, that would in­crease by 50 cents every year un­til 2019, when it would cap out at $7.50. The Of­fice of Man­age­ment and Budget es­tim­ates that such a change would bring in an ad­di­tion­al $25.9 bil­lion over 10 years, which would be split to cov­er costs for the TSA and po­ten­tially re­duce the de­fi­cit by $18 bil­lion.

That’s where the plan earns cri­ti­cism from tax-fair­ness groups. User fees are in­ten­ded to take funds from the be­ne­fi­ciar­ies of a spe­cif­ic ser­vice and use the money to pay for that ser­vice. The money taken from air­line cus­tom­ers and put in­to the gen­er­al fund may not ne­ces­sar­ily be­ne­fit the fre­quent fli­ers that paid for it. That’s what Tax­pay­ers for Com­mon Sense Vice Pres­id­ent Steve El­lis calls a “gim­mick.”

“When you start gen­er­at­ing rev­en­ue from these and put­ting it some­where else, it be­comes a lot more like a tax,” El­lis said.

Lob­by­ists for the avi­ation in­dustry have pushed back hard on the pro­pos­al, ar­guing that even the re­in­vest­ment in TSA fund­ing does not qual­i­fy the charge as a user fee. The fee be­ne­fits a fed­er­al pro­gram, they ar­gue, while po­ten­tially cost­ing them cus­tom­ers. “Amer­ica’s air­ports think that avi­ation is a na­tion­al de­fense func­tion and it should be fun­ded as such,” said George Kele­men, a spokes­per­son for Air­ports Coun­cil In­ter­na­tion­al, North Amer­ica.

Oth­er pro­posed user fees would im­pact much smal­ler groups of Amer­ic­ans. For ex­ample, one pro­pos­al would in­crease the cost of duck stamps by $10, to $25 from $15. Hunters are re­quired to buy the stamps an­nu­ally in or­der to hunt mi­grat­ory wa­ter­fowl, and a ma­jor­ity of the funds are used as part of con­ser­va­tion ef­forts. The cost of the stamps has re­mained un­changed since 1991 and the White House es­tim­ates that a $10 in­crease would re­duce the de­fi­cit by $14 mil­lion per year.

Though user fees in gen­er­al are still on the table, Demo­crats ar­gue that some of the charges — par­tic­u­larly the TSA fee — would un­fairly bur­den middle-class Amer­ic­ans. 

Demo­crats are in­stead push­ing rev­en­ue pro­pos­als that tar­get spe­cial in­terests and wealthy in­di­vidu­als, in­clud­ing the own­ers of the na­tion’s more than 11,000 private jets. Demo­crats re­leased a hit list of po­ten­tial tax loop­holes they would like to close earli­er this month, which in­clude end­ing spe­cial tax de­duc­tions for the own­ers of cor­por­ate jets, yachts, and va­ca­tion homes, as well as elim­in­at­ing a loop­hole that al­lows busi­nesses to de­duct ex­penses for mov­ing a plant over­seas.

Though many Re­pub­lic­ans on the con­fer­ence com­mit­tee — in­clud­ing Ry­an him­self — agree that there are sev­er­al waste­ful tax loop­holes that should be closed, they ar­gue that those con­ver­sa­tions should be a part of a lar­ger tax-re­form over­haul.

Re­pub­lic­ans, and even some Demo­crats, have voiced con­cerns that clos­ing loop­holes now would pre­vent tax writers from fold­ing those sav­ings in­to a broad­er re­form plan to lower over­all rates.

Demo­crats on the con­fer­ence com­mit­tee note that Con­gres­sion­al Budget Of­fice Dir­ect­or Doug El­men­d­orf threw some cold wa­ter on that the­ory dur­ing the com­mit­tee’s last hear­ing, telling con­fer­ees that it would be pos­sible to close some loop­holes without en­dan­ger­ing a lar­ger tax over­haul.

The House Ways and Means Com­mit­tee, which is cur­rently put­ting to­geth­er a tax-re­form plan, dis­agrees. “We don’t sup­port high­er taxes for more Wash­ing­ton spend­ing, and while we ap­pre­ci­ate CBO’s opin­ion, it is only [the Joint Com­mit­tee on Tax­a­tion] that scores and provides ana­lys­is on tax policy,” a spokes­per­son for the com­mit­tee said Fri­day.

A seni­or Demo­crat­ic aide said that they still hope to get Re­pub­lic­ans to agree to close a few tax loop­holes. But bar­ring that kind of an agree­ment, the path to a deal is nar­row­er. User fees and oth­er rev­en­ues, the aide said, “likely wouldn’t be enough for Demo­crats to agree to any sig­ni­fic­ant spend­ing cuts im­pact­ing seni­ors and fam­il­ies.”

“We’re just a little per­plexed that our Re­pub­lic­an col­leagues think it’s a bet­ter idea to raise TSA fees on the Amer­ic­an pub­lic than close a tax loop­hole that ac­tu­ally cre­ates in­cent­ives for Amer­ic­an com­pan­ies to move their profits to places like the Cay­man Is­lands,” said Rep. Chris Van Hol­len, a mem­ber of the con­fer­ence com­mit­tee.

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