New CBO Direct Spending and Revenue Estimate Highlights ATC Reform’s Tax Cut

CBO did not determine ATC reform would boost deficit by $100B in its plainly incomplete analysis excluding discretionary spending.
Demian Brady
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August 18, 2017

The Congressional Budget Office issued a new estimate of the direct spending and revenue effects of the Aviation Innovation, Reform, and Reauthorization Act of 2016. The analysis is obviously not comprehensive, as it leaves out changes in discretionary spending. Despite this missing data, the Aircraft Owners and Pilots Association used the report to claim that the legislation would increase the deficit by nearly $100 billion. The legislation would reform the air traffic control (ATC) system by transferring those responsibilities from the Federal Aviation Administration (FAA) to an independent, non-profit corporation. Current aviation-related excise taxes, which would no longer be needed, would be reduced and there would be significant savings in the discretionary budget of the FAA – savings that were not reflected in CBO’s latest analysis. Moreover, there is good reason to question the assumption of whether the spending performed by a private non-profit is equivalent to government spending by FAA.

The chart above reflects the changes in direct spending in CBO’s latest report, with the changes in discretionary spending from its previous estimate of the legislation.

  • From 2022 through 2027, roughly $70 billion dollars would be removed from the FAA’s budget as the new Corporation takes over ATC responsibilities.
  • Outlays would rise as the Corporation is supposed to increase spending on upgrading and implementing NextGen technology and communication systems. Annual spending would rise from $11 billion under current law to $15 billion in FY 2027.

The table above reflects the revenue and user fees effects in the CBO’s analysis.

  • The user fees collected by the new Corporation would fully-finance its spending and put the future of ATC financing on a stable path, independent from the year-to-year vagaries of congressional action.
  • This new report, unlike previous analyses, includes an estimate of reducing existing ATC-related excise taxes after the new Corporation begins assessing and collecting user fees. CBO determined there would be a net tax cut of $11 billion.
  • These reductions would then have a stimulative effect on employment, boosting payroll and income taxes receipts by $3 billion.

This proposal would reduce unnecessary outlays, eliminate unnecessary taxes, and provide much needed efficiency to our current ATC system. Moreover, since the activities of the new, independent entity are not inherently governmental, there is good reason to question whether it should be included in the budget at all.

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