Will the Budget Deal Raise User Fees?

As the budget conference committee continues its work on finding a bipartisan solution to replacing a portion of the sequester with better targeted reforms, negotiators appear to be turning to user fees and related receipts as an alternative to tax revenue.

Like taxes, user fees help raise money for the government. But while taxes tend to be relatively broad and can fund a wide array of government activities, user fees represent charges for a specific transaction to help fund a service offered as a result of that transaction. For example, the federal government charges user fees for park admission to help fund the public park system, passport fees to offset the production costs, and airline fees to help offset the costs of airport security. User fees are based on the premise that firms and individuals should directly pay for the costs and services they directly benefit from, rather than the burden being imposed on the general public.

From a budgetary perspective, user fees can be classified as offsetting collections, offsetting receipts or revenue. Offsetting collections go directly into appropriated accounts, thus easing the funding burden of discretionary appropriations. Offsetting receipts, meanwhile, count as "negative mandatory spending" and these receipts, like revenue, could be used to reduce the deficit or offset the cost of sequester relief.

According to recent reports, a number of user fees have been under discussion in the budget negotiations. Press reports have mentioned possible increases in airline security fees, increases in Fannie and Freddie guarantee fees, and sales from spectrum auctions or new spectrum user fees. Below, CRFB Has compiled several different user fees and their potential savings over the next ten years.

Policy Options
Ten-Year Savings
Gradually increase aviation security fees to $7.50 per one-way trip $25 billion
Increase aviation security fees to $5 per one-way trip $10-$15 billion
Establish a $100 per flight surcharge for airtraffic control services $10 billion
Establish new fees for Food Safety and Inspection Service $10 billion
Extend current Fannie/Freddie guarantee fees $5-$10 billion
Extend current customs user fees $5-$10 billion
Allow FCC to establish fees on unauctioned spectrum licenses $5 billion
Establish an annual fee on commercial users of inland waterways $4 billion
Charge beneficiaries of trade promotion activities of the International Trade Administration $3 billion
Reauthorize special fee on nuclear facilities $2 billion
Increase fees on of hardrock minerals to restore abandoned mines $2 billion
Establish fees to offset the costs of federal rail safety activities $2 billion
Establish CFTC user fees to offset non-enforcement activities $2 billion
Impose a fee on all oil and gas leases $1 billion
Increase permit fees from the Army Corps of Engineers $1 billion

Source: CBO, OMB, rough CRFB calculations. Numbers above $5 billion rounded to the nearest $5 billion.