Bush, an Opponent of Raising Taxes, Proposes $47 Bln in Fees
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March 1 (Bloomberg) -- While President George W. Bush is adamantly
against raising taxes, he's increasingly comfortable with imposing billions of
dollars in new government fees, as the airline, commodities and shipping
industries have discovered.
Bush's 2007 budget proposal would raise more than $47 billion over the
next five years by imposing, raising or extending expiring fees on everything
from airline tickets to oil drilling to commodity transactions to ships passing
through the St. Lawrence Seaway.
``It's a way for the administration to get around its `we'll
never-raise-taxes' attitude,'' said Stan Collender, managing director of the
Washington office of Financial Dynamics, a business-consulting firm.
Bush won't suffer politically from what is essentially a tax increase,
because he has backed extending even larger tax cuts, said Grover Norquist, a
prominent anti-tax activist.
``A tax increase offset by larger tax cuts may or may not be a good idea,
but it's not a sin,'' Norquist said.
Administration officials said the fees shift the costs of programs from
taxpayers to the industries and individuals that receive government services.
Opponents call the new charges thinly veiled tax increases that are unlikely to
be approved by Congress.
The government collects billions of dollars each year in fees in the form
of postage stamps, Medicare premiums, entrance tickets to national parks and
scores of other charges. Last year, those fees totaled more than $185 billion,
the equivalent of about 8 percent of the government's $2.4 trillion budget. The
administration's proposal would impose $3.4 billion in new fees next year,
growing to $15 billion in 2008 before shrinking to $8.7 billion in 2009.
Airlines, Oil and Gas
The increases would hit a host of industries next year. The
administration wants to double the security surcharge on airline tickets. It
wants to charge oil and gas companies $4,000 to process permits to drill on
federal lands. It wants to charge the meat, poultry and egg industries more for
federal safety inspections and increase federal medical-care charges for some
military retirees.
``User fees help match the cost of government programs with those who
benefit from them,'' said Scott Milburn, a spokesman for the White House's
Office of Management and Budget. ``It's not reasonable for all Americans to
bear the entire cost of government activities from which they only receive a
partial benefit,'' he said.
Commodity Futures
Industries subject to the new fees see the issue differently.
John Damgard, president of the Washington-based trade group Futures
Industry Association, said an administration proposal to raise $127 million
next year through a new fee on commodity futures and options contracts amounts
to a new ``transaction tax.''
Goldman Sachs Group Inc., the world's second-biggest securities firm by
market value, and Morgan Stanley, the third- biggest securities firm, are among
companies represented by the trade group.
``You tax us on the money we make, don't tax us on how we make our
money,'' Damgard said.
The fee would apply to approved exchanges and is intended to cover the
cost of government regulation of the industry. The Commodity Futures Trading
Commission is the only federal financial regulator that is not funded by the
organizations it oversees.
`Drive Business'
Damgard said the administration's proposal would hurt the futures
industry. ``This will drive businesses to markets where they do not require the
tax,'' he said.
Lawmakers, including Democrats such as Representative David Obey of
Wisconsin and some Republicans, said the proposals amount to accounting
gimmicks that enable the administration to claim it's holding the line on
spending without having to sacrifice popular programs.
House Appropriations Chairman Jerry Lewis, a California Republican, wrote
in a memo to his colleagues that the ``proposals make a difficult
appropriations season even harder.''
``They allow the administration to artificially inflate programmatic
priorities (and expectations) while at the same time touting a `fiscally
conservative' top-line budget number,'' Lewis wrote last month.
Explosives
Bush also has proposed a new fee on explosives manufacturers that some
industry officials said would be excessively costly. Chris Ronay, president of
the Institute of Makers of Explosives, a Washington-based trade group, said a
proposed 2 cents a pound fee on explosives equals about 12 percent of the cost
of the product.
``It is monumentally expensive compared to what people pay today,'' Ronay
said.
The administration said the fee would generate an additional $120 million
needed to help fund the Bureau of Alcohol, Tobacco, Firearms and Explosives,
which regulates the explosives industry.
Airlines are targeted by a proposal to increase the security surcharge on
tickets.
``At the end of the day, the money has to come from somewhere,'' said
Transportation Security Administration Director Kip Hawley, defending the
proposal at a congressional hearing last month. ``Our sense is that it's fair
to have that part of it come from the air passenger.''
A Public Good
The industry has rejected that argument, contending that airline safety
is a public good. ``Aviation security is a function of national security and
should be paid as such,'' said James May, president of the Washington-based
trade group Air Transport Association, which represents companies such as AMR
Corp.'s American Airlines and UAL Corp.'s United Airlines.
For some lawmakers, the fees are an obstacle to putting together the
federal budget.
``Here's what tees me off,'' said Representative Harold Rogers, a
Kentucky Republican, at a Feb. 16 hearing. ``OMB and the department, knowing
that you cannot pass a tax, instead build it into the budget and puff up the
budget, then dump it on the laps of this committee, and we've got to find a way
out of the mess that you've made.''
Damgard said Bush should take a lesson from his father, who as president
publicly promised not to raise taxes, and was vilified by some Republicans
after agreeing to a tax increase. ``This is a bad idea,'' he said. ``Ask his
dad.''
To contact the reporter on this story:
Brian Faler in Washington at [EMAIL PROTECTED]
Last Updated: March 1, 2006 00:09 EST
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