Recent news that the White House and Congressional Democrats seem intent on pursuing a large infrastructure package has the rest of Washington speculating on what the details of such a plan would look like.
Not surprisingly, this activity has amplified an ongoing discussion in the aviation space over whether to increase or completely abolish the federal cap on the Passenger Facility Charge that helps to fund certain airport projects (which NTU has cautioned about previously). A recent joint letter to policymakers from several free market, fiscally conservative organizations in favor of such a policy is one example, but the groups' statement also describes a different path that should be more encouraging for public officials as well as taxpayers.
NTU has been aligned with many of our friends signing the pro-PFC letter on other infrastructure issues, including modernization of the air traffic control system under a user-accountable, user-funded model as well as the vehicle miles traveled concept as an alternative to fuel taxes. But as an analysis appearing here just a few weeks ago noted in detail, NTU has concerns with this approach, among them:
- Even though past increases in the PFC for larger airports have been intended to offset some of their federal Airport Improvement Program grants, lawmakers can’t seem to resist boosting overall outlays for AIP (most recently with a 2018 supplemental appropriation).
Airport cash flows and construction financing have not significantly lagged increases in passenger traffic over the past 15+ years, even though the PFC amount has remained unchanged. However, overall government-directed taxes, fees, and charges have increased during that time, to the point where they can amount to more than 20 percent on a typical airline ticket.
Non-legacy carriers are not uniformly in favor of boosting the PFC, which has been touted as a way of giving them more access to gates (and thereby more effective competition).
Despite these and other stated reservations from NTU to eliminating the PFC cap, yesterday's letter in favor of this step contains the seeds of consensus in stating that “ideally” Congress could instead repeal “the Anti-Head Tax Act of 1973 that led to the PFC’s development in the Reagan and Bush administrations.” We just might be on to something here.
As NTU and others in the free market space have noted, this law, originally designed to limit arbitrary tax burdens on air travelers, has been outstripped by modern administrative developments that could do away with the current cumbersome PFC system – one which puts the federal government in charge of administering a local tax for airports that airlines, rather than the airports themselves, have to collect.
Among the basic principles of true user fees are that they should be paid as close to the point of service as possible, and charged by the entity providing the service. That's why legislation for user-funded Air Traffic Control entity that NTU and others supported in the previous Congress made so much sense – but those principles also inform NTU’s concerns that the PFC concept can and should be re-tooled.
To be certain, Congress would need to carefully consider each aspect of the Anti-Head Tax Act before repealing the entire law. For example, provisions that proscribe oppressive gross receipts taxes, or which prohibit taxes on businesses located at airports (or on air carriers) that are discriminatory or used for non-airport purposes, are sensible safeguards in line with statutory precedent. Public officials must also be wary of creating unduly harsh burdens on interstate commerce, especially targeted at those who can’t vote in the jurisdictions creating those burdens. However, other parts of the Anti-Head Tax Act, which effectively put Washington in charge of local-project levies and allow their beneficiaries to shift the blame for charges to another part of the air travel network, ought to be revisited. As we have explained elsewhere, consumer payment technologies are gradually evolving that can make on-airport collection of charges to passengers less onerous.
To reiterate our words from earlier this Spring (when the House of Representatives last held hearings on airport finance), if Congress is willing to consider such a drastic expansion of the PFC, it can certainly consider better solutions that serve taxpayers and the entire commercial aviation sector more efficiently. Maybe, just maybe, we have arrived at that starting point.