Policy: Economy

Budget deal hinges on fee increases that some say are tax hikes in disguise

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Politics,Congress,Susan Ferrechio,Taxes,David M. Drucker,PennAve,Economy,Military Budget,Budgets and Deficits,Spending

A proposal to raise various government fees to offset sequester-driven budget cuts is at the heart of a pending Congressional budget deal, though some are warning lawmakers that higher fees is another way of saying tax increase.

It's highly unlikely that the new revenue raised under the deal will be described as a tax increase by the top two officials at the bargaining table, Sen. Patty Murray, D-Wash., and Rep. Paul Ryan, R-Wis.

But higher fees would generate as much as $65 billion to replace the unpopular cuts in military and domestic spending mandated under the budget-trimming sequester. Those cuts are set to take effect in mid-January.

Details of the fee hikes remain under wraps, but lawmakers have considered increasing fees on airline tickets and new mortgages, raising insurance premiums for pension funds and requiring federal civilian employees to contribute more toward their retirement.

"It's basically the same thing as a tax increase," said Dan Holler, spokesman for Heritage Action, an arm of the conservative Heritage Foundation.

Affected trade groups agree, and have appealed to lawmakers to reject fee increases, which they say are being used too recently to supplement the general budget.

The airline industry is among those opposed to the Ryan-Murray deal, which would double the security tax passengers now pay for the Transportation Security Administration. The fee would rise to $5 per passenger, which the airline lobby said would add $1.2 trillion annually to the cost of air travel.

"We understand Congress intends to use the proceeds from this tax increase to avert the need for sequestration cuts," a group of travel and airline advocacy groups said in a letter to Ryan and Murray. "None of these funds would benefit consumers or the aviation industry by improving security or the efficiency of the Transportation Security Agency. While fiscal responsibility is a priority for our country, solving sequestration on the backs of the traveling public is not an appropriate solution."

Ryan and Murray are also considering an increase in fees banks pay to Fannie Mae and Freddie Mac.

The Federal Housing Finance Agency late Monday increased fees on new mortgages to shore up the finances of Fannie Mae and Freddy Mac, but the Ryan-Murray deal would raise those fees further and use that revenue to help erase the sequester cuts.

Banking industry lobbyists tell the Washington Examiner the fee increases under consideration by Ryan and Murray amount to pennies on the dollar, but when priced into mortgages they would add up to hundreds of dollars in additional fees for homeowners.

"It may not be a huge amount but it impacts the ability of the homeowner to take out a loan," a banking lobbyist said. "It can make a difference as to whether someone can afford a mortgage or not."

The Ryan-Murray deal may also include a hike in Pension Benefit Guarantee Corporation premiums and an increase in spectrum license user fees.

Like the TSA and home loan fees, the money would be used to offset the sequester, a move Holler called a gimmick.

"It's hard to see how conservatives support it," he said. "The question is, how angry will they get?"

While some conservatives may balk, other Republicans will likely back the plan because they are eager to restore funding to the military, which is facing $52 billion in sequester cuts next year. Many don't view the fees as a tax.

Democrats are also likely to back fee increases since the new revenue would restore funding for favored domestic programs like Head Start.

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