Foundation

Air Traffic Control Reform Would Reduce Taxes and Spending, Improve Efficiency

by Demian Brady / /

President Trump held a White House event yesterday morning to showcase the importance of air traffic control (ATC) reform. His budget includes a proposal to transform the current system managed by the Federal Aviation Administration (FAA) into an independent, nonprofit corporation. The initiative is modeled after legislation introduced in the previous Congress, the Aviation Innovation, Reform, and Reauthorization Act of 2016. The new corporation would focus on much needed modernization of ATC to improve services, facilities, and costs for travelers. Despite billions of dollars spent by the FAA to roll outs its NextGen technology upgrade, the program has been mired in delays.

Some who oppose the plan have argued that the reform would increase deficits. We saw this last year after a very questionable cost analysis by the Congressional Budget Office. This view represents a misunderstanding of the proposal and the impact it would have on the federal budget.

As ATC responsibilities would be transferred to the new entity in FY 2021, related federal taxes and spending would be reduced. A portion of existing excise taxes would be retained to continue to fund the Airport Improvement Grant Program at its current size of $3.35 billion. Otherwise, the budget forecasts that taxes would be reduced by $115 billion from FY 2021 to FY 2027. The FAA’s budget for ATC would be reduced by $70 billion, leaving the agency to focus on regulating aviation safety.

As can be seen in the chart above from the President’s budget figures, the aviation excise taxes collect more each year than are appropriated for aviation functions, and with the budget’s optimistic outlook for economic growth over the next decade, the revenues are likely on the high side. The ATC reform initiative would not only improve aviation, it would lead to an important realignment to set taxes at a rate sufficient to cover what is needed for the services it finances.

At the conclusion of the event, President Trump signed a decision memo and legislative principles documents on the initiative. Thursday will mark another important phase in the process to advance ATC reforms to the President’s desk as Department of Transportation Secretary Elaine Chao will provide testimony to the House Transportation and Infrastructure Committee hearing on “Building a 21st Century Infrastructure for America: Federal Aviation Administration Authorization.”

 


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