Congress Shouldn’t Deputize Airlines as Tax Collectors
September 13, 2017
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  • As a conservative, it bothers me when politicians evoke conservative-sounding arguments to push for legislation that fundamentally is not conservative. One such case is a provision in H.R. 2997, the House version of the bill to reauthorize the Federal Aviation Administration (FAA). This provision would separate the nation’s air traffic control (ATC) system from the federal government and establish an independent entity. At first glance, it looks like something I would be in favor of. Except this so-called “privatization” is simply a give-away to special interests.

    If passed, the bill would create a government-sponsored enterprise (GSE), in the same vein as Fannie Mae, the U.S. Postal Service or Amtrak. While the primary benefit of privatization is competition and market pressure, ATC is a natural monopoly. There would be no competition in the system proposed, or any of the market forces and pressures that accompany a competitive market that push firms to be keep prices down, to hold their products to a certain quality standard, and to be responsive to customer feedback. This brings the worst of both worlds by removing the entity from congressional oversight and spending control, but leaving taxpayers on the hook to bail it out when it flops.

    Just like with other GSEs, we’ve been told that the new entity will be self-funded, in this case by a user fee. As always, I’m skeptical taxpayers won’t ultimately have to bail out a GSE, but with the ATC proposal, it’s really about control. Proponents have made clear that their real motivation is to shift the tax burden to other segments of the industry. Ian Adams, a proponent of separating ATC, recently argued that it would reallocate the tax burden among the “fees its users pay,” including general aviation.

    The only privatization will be that the authorization and taxing authority of Congress will be supplanted by authority of one segment of an industry to tax another with no oversight. If the airlines were granted more monopoly power and gained taxing authority from Congress, they have shown time and again they would abuse that power. They have increased their fees on passengers by over $7 billion. Now they want to phase out their fuel and excise tax for a flat user-fee tax that would get levied disproportionately at economy class passengers. I’m always in favor of getting rid of taxes, but this is a tax by another name, without the political accountability to keep it from rising in perpetuity.

    And, since there would be no accountability from anyone to stop it or make sure this entity is being managed properly, it’s a safe bet that ultimately all taxpayers will pay more in the form of a bailout. No one can seriously claim that the airlines represent a beacon and shining example of good management, after all.

    As if all of this weren’t bad though, separating the air traffic control system would actually add $100 billion to the federal deficit over 10 years, according the Congressional Budget Office (CBO).

    At least for all of this, we have solid proof that we will have substantial progress on the deployment of NextGen technology, right? Nope again. Try to ask proponents exactly how this proposal would facilitate the more rapid deployment of NextGen, what those timetables are, where exactly the costs savings will come from, and you hear crickets.

    Has there ever been another big, public-private entity that was formed to carry out a huge public mission and that was completely hamstrung by anticompetitive regulation and bureaucracy? Where we were told to just move ahead and we would figure out the details later? You guessed it, Obamacare. How is that turning out for conservatives? How did that turn out for America?

    H.R. 2997 is being sold to the public in the same way that the Affordable Care Act was. No specific explanations, with lots of promised benefits. Perhaps we should learn from the past this time around.

    Andrew Langer is President of the Institute for Liberty.