User Fees in the Bipartisan Path Forward

Among the many proposals in Alan Simpson and Erskine Bowles's new plan, “A Bipartisan Path Forward,” is the increased presence of user fees for many government services. With some spending only benefiting select groups, the beneficiaries of those programs could better pay for the services they use, rather than having the funds come out of general revenue. As they write in their report:

The federal government subsidizes a large number of industries or individuals either through direct payments, discounted services, or direct provision of various activities. In some cases, it would be sensible for the government to reduce its role and leave more to the private sector. In other cases, however, the government could charge (or increase) user fees in order to recoup its costs.

The plan identifies $15 billion in savings from making the Fannie Mac and Freddie Mae Mortgage Guarantee Fees permanent, making the U.S. Customs merchandizing fees permanent, and indexing all government user fees to inflation, using the plan's preferred measure, the chained CPI. Indexing user fees was one of the recommendations proposed by the original Fiscal Commission report, which Simpson and Bowles co-chaired.

Another $20 billion in savings is achieved from increasing Transportation Security Administration (TSA) fees and adding a new fee to for air traffic control services. Currently, the user fee structure for TSA services is complicated and fails to reflect the cost of services. The House budget proposes a $5 flat fee per flight (raising over $15 billion), while the President’s budget proposes both a flat per flight fee (begin at $5 and to rise to $7.50 by 2019) and well as an air traffic control fee per flight. While the Senate budget does not list specific user fee changes, some of these changes are likely included in the $76 billion in other mandatory savings.

The rest of the savings could come from a combination of new fees or reforms, among which Simpson and Bowles list subsidized public utilities, receipt sharing for energy minerals, fees for health and food inspection, and assessments on nuclear utilities as possibilities.

There are many opportunities to pay for government subsidies or services through user fees and given our fiscal outlook, they may be one of the easier choices lawmakers will have to make. By dedicating a revenue stream to these programs, harmful cuts that could limit effectiveness can be avoided.

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