User Fees Are Not Taxes: The Case for PFCs

I've noted in the past the natural appeal passenger facility charges (PFCs) should have with fiscal conservatives. These are the user fees airports are allowed to charge passengers leaving their airports. Unlike federal Airport Improvement Program grants (funded via an array of taxes through the Airport and Airway Trust Fund) and local debt financing, PFCs offer a fair, transparent, and direct way for users to pay for the infrastructure investments from which they benefit. The monies collected by the airports are kept by the airports, who then use the funds to make Federal Aviation Administration-approved airport improvements. There are no Washington fiscal sleights of hand about which to worry and accountability remains a local matter.

Unfortunately, Congress has capped the maximum PFC at $4.50, an amount unchanged since 2000. Since then, inflation has eroded that buying power by nearly half. Major airports are lobbying Congress to raise that cap, something we at CEI believe is badly needed. Illustrating that this is beyond ideology, the White House has also endorsed raising the PFC cap.

Over at Human Events, CEI President Lawson Bader explains why those who attempt to conflate user fees with taxes (and raising the PFC cap with dreaded tax increases) are mistaken:

We teach our children words matter—both in their intent and their actual use. Unfortunately, many grow up to become politicians or bureaucrats adept at manufacturing euphemisms that hint at what they really mean but don’t want to admit. Can you count the times you’ve heard “investment” stand in for government spending? Today it’s no different when both Republicans and Democrats impose new taxes and call them “fees.”

Yet, there is a genuine difference, and it goes beyond nomenclature.

When we use a government service and pay for it, we pay a user fee. Ideally, the amount paid covers the cost of the service received. If we don’t get what we paid for, or the fee is unavoidable or redirected elsewhere, then that “fee” is really a tax.

Transparency is an integral part of the price system in a genuinely free market (witness the havoc caused in the U.S. health care system from true costs being hidden from consumers). Government, unfortunately, prefers taxation because it obscures costs and targets benefits to favored constituencies. Thus, user fees are an option in only in a few public sector areas.

Genuine user fees convey to the citizenry that nothing from government is truly “free.” So, the more government finances itself through user fees instead of taxes, the more it begins to resemble private firms operating in free markets.

Read the whole thing here.