Economics Blog

Finance Blogs » Economics » House votes for budget, fee hike

House votes for budget, fee hike

By Mark Hamrick · Bankrate.com
Friday, December 13, 2013
Posted: 12 pm ET

The House of Representatives has forged past an increasingly bitter Republican divide and approved a budget bill with strong bipartisan support.

The vote of 332-94 sets the stage for consideration by the Senate next week. If approved there as anticipated, President Barack Obama is expected to sign the bill into law.

The most important feature of the budget bill is that it would head off partial government shutdowns in 2014. It eliminates $65 billion in across-the-board spending cuts for next year called for by so-called sequestration. It also cuts the deficit by $85 billion over 10 years.

But what does this mean to you? If you travel, there could be a tax hike or fee increase set to hit you.

Backers of the deal trumpet that it includes no new taxes. But that defense requires a certain interpretation of the word "tax." It hikes a fee paid by airline passengers to at least $5 for a one-way trip, currently $2.50. It was initially approved to help pay the Transportation Security Administration's costs after the Sept. 11, 2001, attacks.

Passengers can expect to shoulder the extra cost. "The fee will be directly assessed to passengers," says Kevin Mitchell, chairman of the Business Travel Coalition. "The question for the airlines is: Will the additional fee dampen demand such that new fare increases will be more difficult? I believe that now that the industry is so concentrated, airlines will have little problem raising fares," says Mitchell.

Critics complain the increased fees are going to the U.S. Treasury for general obligations. In a blog, JetBlue complained that "this plan will not improve airport security; it simply hikes TSA passenger taxes to reduce the budget deficit. But it will definitely drive up the cost of your air travel." An airline industry group says passengers are already getting slammed. Trade group Airlines for America says the hike "would cost passengers an additional $732 million annually on top of the near-record $2 billion in TSA passenger security taxes paid last year." The airlines have profited through the billions of dollars in fees they charge, such as for luggage or Wi-Fi access.

Mitchell says there's no doubt that it is a tax hike. "Revenue from true user fees go to pay for the services rendered. In this case, revenues from the security-fee increase are being diverted to the general fund. So, it's a tax," he says.

The agreement was hammered out mostly behind closed doors by Rep. Paul Ryan, R-Wis., and Sen. Patty Murray, D-Wash.

Before the vote, both Ryan and House Speaker John Boehner, R-Ohio, sought to quell dissent among conservatives who want a sharper focus on reduced spending and deficits. Reacting to the groups that had also targeted the Affordable Care Act and pushed for the October partial government shutdown, Boehner said "they're misleading their followers."

Critics have included possible candidates for the Republican presidential nomination, such as Sen. Marco Rubio, R-Fla. Ryan said some of the opponents voiced their feelings even before the agreement was announced. Reacting to Rubio's comment that the deal will make it "harder for more Americans to achieve the American Dream," Ryan quipped, "Read the deal and get back to me."

While criticism of the bill sparked the sharpest words among members of the Republican Party, Democrats also have complained that it fails to provide an extension of unemployment benefits for more than 1 million Americans -- benefits otherwise set to expire this month. After the House vote, The White House said, "Congress must act quickly to extend unemployment insurance to prevent Americans from losing a vital economic lifeline this holiday season and avoid an unnecessary hit to our economy." With support from the president, Democrats in the House will likely renew their push for the legislation after returning from the holidays. Because more spending is involved, they will face more resistance from Republicans.

What do you think? Will this budget bill be passed? What is it missing?

Follow me on Twitter: https://twitter.com/hamrickisms.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
Add a comment

(Comments may take 5-10 minutes to appear)