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The budget deal that both houses of Congress are trying to pass by the end of the week eliminates about half of the harsh automatic spending cuts known as the sequester. In order to do that, lawmakers want to raise revenues elsewhere.
The plan would make new federal government hires pay more into their pension funds, and make air travelers pay higher fees. The House Budget Committee says those fees shouldn’t be considered taxes.
But tax policy analyst Roberton Williams disagrees. He joins Here & Now’s Meghna Chakrabarti to explain why.
MEGHNA CHAKRABARTI, HOST:
From NPR and WBUR Boston, I'm Meghna Chakrabarti in for Robin Young.
JEREMY HOBSON, HOST:
And I'm Jeremy Hobson. It's HERE AND NOW and let's get to Washington where both the houses of Congress are trying to pass that budget deal by the end of the week. It eliminates some of the harsh automatic spending cuts known as the sequester, and so lawmakers are looking to raise money elsewhere, through higher pension contributions and fees on plane tickets.
CHAKRABARTI: Republicans in the House insist that these are not new taxes, so for a view on what they really are, let's turn to Roberton Williams. He's a senior fellow with the Urban Institute's Tax Policy Center and he joins us now. Bob, so let's begin with those airline tickets. How much more will people be paying and why isn't it a tax?
ROBERTON WILLIAMS: Well, most people will pay higher fees. The fee currently is $2.50 for each airplane ride you take. They're raising that to $5.60 for one trip. In total, it brings in about $12 billion over the next 10 years to the federal revenue.
CHAKRABARTI: And the House Budget Committee is really taking care to say that this is a fee for those people who choose to fly around the country and therefore it is not a tax. Do you agree with that?
WILLIAMS: Well, technically it is a fee. It's a charge for flying, but it looks an awful lot like a tax. If you compare it, say, with the tax we pay in gasoline, I choose to drive my car and I choose to pay that tax. What's the difference between that and choosing to fly and pay the TSA fee? They look a lot alike to me even though technically they are different.
CHAKRABARTI: Now, the proposed deal would also raise fees for Customs users and conservation planning. There's also a proposal to make employers pay more into the Pension Benefit Guarantee Corporation. How much and why would that help?
WILLIAMS: The PBGC backs up private pension plans sponsored by businesses and to cover the cost of that, businesses pay a fee. Those fees will go up, bringing in not quite $8 billion in additional revenues for PBGC over the next 10 years, and that's important, because the PBGC is not rolling in money. It's short of cash to cover the failed pension plans and this addition of revenue there will help. It also helps bring the federal government's budget closer into balance.
CHAKRABARTI: Now, is this going to be imposed on every employer in the United States regardless of size?
WILLIAMS: It looks like it'll be affecting anyone who's participating in the PBGC and that's most employers across the country.
CHAKRABARTI: Okay. Let's talk for a moment about the plan to have new federal employees pay more into their pension funds. Now, is this a tax on them or is it something else?
WILLIAMS: Well, it's not a tax because it really is a direct contribution to their retirement plan. Currently they pay a little more than one percent of their pay into funding their retirement later on. This will raise that by a little more than three percentage points to about four and a half percent. For them it'll look like a three percent reduction in their take-home pay, which seems a lot like a tax, but very clearly it is contributing to a program from which they'll later benefit.
The more they put in, the more they're likely to get out.
CHAKRABARTI: Is this part of the plan going to contribute a sizeable amount of revenue?
WILLIAMS: It will bring in additional $6 billion over the next 10 years. That's a sizeable chunk of cash, yes.
CHAKRABARTI: Okay. When you look at the revenue side of the budget proposal overall, do you think it's a good set of recommendations?
WILLIAMS: The important thing with the budget is to make it easier to deal with the across-the-board budget cuts that were passed two years ago. Those have been very draconian and hit pretty willy-nilly across different parts of the budget, and what they're trying to do is put more money into that area and offset the costs by raising some more money and by cutting spending in other ways.
It makes it a much more rational way to deal with our budget deficit. It doesn't solve the deficit problem. We've still got a big deficit and it gets worse over time, but this is one way of making things a little more rational for a couple of years.
CHAKRABARTI: And finally, what's one idea or proposal that you think Congress should have really taken up to take a big chunk out of that deficit problem, but that they didn't?
WILLIAMS: Well, as a tax guy, I'd say they missed a big chance to make our tax system a lot more efficient and rational. We've got a very large and complicated method of collecting taxes across the board. It could be made more efficient, easier to comply with, and bring in more revenue and help offset the deficit over time.
Of course there are lots of things on the spending side to be done as well; in particular you'd like to get rid of these across-the-board spending cuts that we've had, the sequesters, because they are very much a meat-axe approach to reducing spending and not a rational let's see which programs make sense and which ones don't and make adjustments to those.
CHAKRABARTI: Well, Bob Williams is a senior fellow with the Tax Policy Center. Thanks so much for joining us today.
WILLIAMS: It was my pleasure. You're welcome. Transcript provided by NPR, Copyright NPR.
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