Don't Double Air-Travel Fees. Raise Them Tenfold.
Representative Paul Ryan and Senator Patty Murray arenear a deal that makes the federal government's sequestration budget cuts a bit more bearable by tweaking spending and raising a bit more revenue. Yet they aren't planning tax hikes. Or tax reform that rolls back the code's various deductions and exemptions.
No, they're doing it with fees -- to be specific, the $2.50 you pay the federal government every time you fly. Ryan and Murray want to double that. It's a good idea, except for one thing: We shouldn't double the fee. We should increase it tenfold.
Congress created the fee after Sept. 11, 2001, to cover the expected costs of increased airport security. It raises about $2 billion a year, according to the Congressional Budget Office. One reason to increase it is simply because $2.50 doesn't cover even half the actual security costs. The reason why we should push the decimal place once to the right, though, isn't security. It's climate change.
Commercial air travel is responsible for 2 percent of U.S. greenhouse gas emissions. That doesn't sound like much until you realize that commercial air travel counts for just 0.3 percent of gross domestic product. The average dollar spent on your flight tickets produces seven times more pollution than the average dollar spent in the U.S. economy.
The case for raising the air-travel fee, then, is merely that travelers should pay the pollution costs of air travel. And that expense, by almost any reckoning, is far greater than $2.50.
Suppose, dear Bloomberg reader, you're flying solo from Newark to Heathrow in an economy seat. (Both the tickets and the pollution are more expensive in business class or first, mind you.) A rough calculation suggests that you should pay something near $22 for your part in the pollution. Tack on the full costs of aviation security, and you're well over $25.
The CBO's numbers suggest that a $25 fee would raise $20 billion a year. You could cut corporate tax rates 10 percent across the board with that kind of money. If something like this had any chance of happening -- and, to be sure, it doesn't -- it would be worth smoothing out the crudeness of a flat fee by varying the charge with the distance of the trip.
It's worth writing about these never-gonna-happen policies because they show how embarrassingly little actual thought goes into policy making now. The line against Ryan and Murray's decision to include air-travel fees in their deal will surely be that this is budget gimmickry -- indeed, the Heritage Institute has already called it just that.
If this is a gimmick, then I don't know what good policy is. The best sources of revenue are those that avoid (or, as in this case, fix) distortions in the economy. Economists on the left and the right agree that a carbon tax swap -- and higher air-travel fees are just a carbon tax in disguise -- would be one of the best tax-policy plays the U.S. could ever make.
Raising the air-travel fee 10 times over would be a great idea. Tax policy is simply far too afraid of unfamiliar destinations.
(Evan Soltas is a contributor to the Ticker. Follow him on Twitter.)
I'm assuming a few things: (1) Per the International Civil Aeronautic Organization's calculator, the flight produces 392 kilograms of carbon dioxide per person; (2) the optimal carbon tax rate is $21 per metric ton, following the most thorough review of research; and (3) emissions at airplane altitude are 2.7 times more damaging than ground-level emissions, according to the Intergovernmental Panel on Climate Change.
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