Beware of Misleading CBO Score of the AIRR Act

The AIRR Act (H.R. 4441), the FAA reauthorization bill in the House, contains badly needed reforms of U.S. air traffic control. See my FAQ on what this reorganization is all about. Today, the Congressional Budget Office (CBO) released its cost estimate, or score, of the AIRR Act. It concludes that the bill would add $19.8 billion to the deficit through 2026. Before conservatives blow a gasket on this supposed budget buster, note that the CBO report relies on some nonsensical assumptions to derive this misleading figure.

CBO assumes aviation taxes will remain the same following the spinoff of the FAA’s Air Traffic Organization into the new independent nonprofit ATC Corporation. This is because the House Ways and Means Committee, which has tax-writing jurisdiction, has not yet contributed its tax title to the bill. As a result, per CBO procedure, the taxes authorized under the current law were included in the score because a change has not yet been formally proposed.

While there is a simple logic to this internal scoring policy, in this case it fails to reflect reality. This is because it assumes Congress will keep tax rates constant to support an FAA budget that is now nearly two-thirds smaller due to air traffic control responsibilities being transferred to the ATC Corporation, and then adds those taxes on top of the user fees projected to be charged by the ATC Corporation. It treats the expected ATC fees as new taxes and calculates that adding the fees on top of the existing taxes will result in a reduction in the base of income and payroll taxes. So, the score is the result of completely unrealistic assumptions about how reform would actually be enacted.

CBO acknowledges this problem on pages 16 and 17:

The estimated changes in direct spending and revenues under H.R. 4441 reflect CBO’s assessment of the budgetary impacts of enacting H.R. 4441 as a stand-alone measure. Ultimately, however, the net budgetary impact of activities related to air traffic control under H.R. 4441 would depend on the details of subsequent legislation that lies beyond the scope of this cost estimate. CBO cannot predict whether such additional legislation will be enacted pursuant to H.R. 4441, but expects that the overall net budgetary impact of shifting responsibility for air traffic control to the ATC Corporation would not necessarily increase future deficits by the amounts reflected in this cost estimate if additional legislation consistent with H.R. 4441 was enacted….

…to reduce existing aviation-related excise taxes by amounts equivalent to new user fees that would be charged by the ATC Corporation under H.R. 4441, the resulting amount of revenues available to support air traffic control (and other aviation activities) would be largely unchanged and could continue to cover most, if not all aviation-related spending.

In other words, if the Ways and Means Committee does what it is expected to do and reduces aviation taxes to reflect the shift in air traffic control responsibilities, there is no reason why the AIRR Act’s proposed reforms must increase the deficit.

The current proponents of air traffic control reform will never support a bill that fails to simultaneously slash existing aviation taxes. But Congress has yet to do that work, so it would be inappropriate at this point for conservatives to take CBO’s score seriously and oppose the AIRR Act’s air traffic control reforms on fiscal grounds.