The recent budget agreement between the House and Senate increased the TSA per-passenger security fee from $2.50 per enplanement to a flat $5.60 per one-way trip. The fee generates revenue that pays for a portion of TSA’s $5.2 billion aviation security budget. The budget did eliminate the $420 million per year in aviation fees billed directly to the airlines since this was the amount the airlines were paying for security prior to 9/11. But the $5.60 fee will more than offset this cost reduction to the airlines. But is it accurate to call it a “tax increase,” rather than a user fee?
The airlines lobbied hard against the change, attacking it as a tax increase in disguise. Airlines for America recruited the Air Line Pilots Association, the Global Business Travel Association, IATA, Consumer Travel Alliance, and the Regional Airline Association to help fight the proposed increase.
A4A attacked the proposed increase as only adding to the tax burden on airlines and passengers, reducing (at the margin) the number who choose to travel by air. (I will leave aside the inconsistency of airlines’ significant increase in fees for things like checked and carry-on bags, which apparently don’t suppress demand.) A4A president Nick Calio’s recent op-ed in The Hill made two additional points. TSA provides some degree of security for other modes of transportation (e.g., Amtrak), but only airlines and their passengers have to pay for this; the other modes get TSA services at no charge. Also, TSA would be providing no additional services to airlines or passengers in exchange for the increased fee level.
But nowhere in any of the airline material was there any mention of what I think was the strongest argument against the proposed fee increase. Jeff Davis of Transportation Weekly pointed out the dirty little secret in his Nov. 26th issue. As he explains, the existing $2.50/segment fee is categorized as a “discretionary offsetting collection.” That means the $2 billion a year it generates is subtracted from TSA’s $5.2 billion aviation security budget, for a net budgetary cost of $3.2 billion. In other words, the $2.50 fee was in fact a user fee, not a tax. “But in order to make sure that any fee increase goes to deficit reduction, the Ryan budget assumed that the increased portion of the fee would be classified as mandatory receipts or revenues, deposited in the general fund, and could not be used to offset any TSA spending.”
Bingo—the increase was in fact a tax, not a user fee. The proceeds of the increase go into the general fund, to reduce the deficit. I know the explanation is arcane, but there it is in black and white. Both House Republicans and Senate Democrats were able to dress up a tax increase in user-fee clothing. They singled out this one industry for a special tax to reduce the deficit. The airlines and their coalition should have made this point more explicitly, rather than continuing to portray the airlines as overtaxed, when nearly all the taxes they pay are actually user taxes that support the aviation infrastructure they depend on. But they have cried wolf so often, I doubt if many people believed them in this case, when they were actually correct.
An earlier version of this article appeared in Robert Poole’s Airport Policy News e-newsletter #96.