Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


The Confiscatory Tax That Republicans Like

One of the basic tenets of modern American conservatism is that confiscatory taxes—levies designed to take from the rich and give to the poor or middle class—are bad. So one would not expect Congressional Republicans to propose a confiscatory tax, yet that is exactly what they are doing.

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Republicans in the House of Representatives want to take $3 billion raised by airline security fees and put it in the federal Highway Trust Fund, The Hill reported. Airline security fees are basically a sales tax on airline tickets that is supposed to raise money for the Transportation Security Administration (TSA).

How Republicans Used the TSA to Put a Sales Tax on Airline Tickets

Two years ago the Bipartisan Budget Act of 2013 more than doubled the fee from $2.50 to $5.60 a ticket and increased the numbers of flights it could be charged on. The same law also diverted most of the money raised by the increased fees from the TSA to the general fund of the U.S. Treasury, the TSA admitted.


“In accordance with Federal Law, the revenue generated from the security fee will be deposited in the general fund of the Treasury,” a TSA press release from June 20, 2014, states. “The revenue is to be used to offset TSA costs for providing civil aviation security services, after stipulated amounts are applied to reduction of the federal deficit.”

USA Today reported that $12.6 billion of the $16.9 billion in additional funds raised by the fees will go directly into the Treasury. The original idea was to help pay down the deficit, which could free up other funds for Congress members’ pork barrel projects. Now Republicans have dropped even that pretense and want to use the airline security money for highway maintenance and construction.

Why the TSA Fee Is a Confiscatory Tax

The airline security fee is a classic confiscatory tax for a simple reason: because it collects from the more affluent, who are more likely to fly and spends it on infrastructure that lower income people are more likely to use—highways.

Since higher income people fly more, it disproportionately affects them. In particular, this tax seems squarely aimed at business travelers and at upper middle class people, who are more likely to fly on a vacation.

It spends money to benefit lower income people, who are more likely to drive when they travel between communities. There is also a class and regional aspect to the fee; it reallocates wealth from affluent people in larger cities, who are more likely to fly and vote Democrat, to middle or working class people in rural areas, who are more likely to drive and vote Republican.

Effectively, the Republicans are taxing the New York journalist or the Silicon Valley software engineer to get money to repair the highways that Bubba drives his pickup truck on. It looks as if Republicans believe in confiscatory taxes as long as they benefit their likely voters.

Serious Questions Raised Here

The TSA fee raises some serious questions about Republicans, Democrats, and confiscatory taxes in general. The Republicans are basically admitting that they believe in confiscatory taxes and that such levies can benefit the country.

This is sure to make Republican opposition to confiscatory tax schemes such as Bernie Sanders’ Robin Hood tax on investment transactions harder. Instead of principled opponents to taxation, Republicans look like hypocrites. Worse, by imposing such a tax, they concede the argument to their opponents.

It also calls the whole issue of transportation infrastructure into question. Under the present tax system, the U.S. Highway Trust Fund is already dipping below critical levels. A better source of funding for surface transportation would be a national sales tax or a higher gasoline tax.

Another important question is raised here: Will Republicans be willing to support confiscatory taxes if they benefit their constituents? Even though the GOP will deny it, it sure sounds like it. That means Republicans might be open to other confiscatory taxes to fund popular programs such as eliminating the earnings cap that keeps the federal government from collecting Social Security taxes from the wealthy in order to pay more benefits to senior citizens, who are more likely to vote Republican.

Perhaps the age of confiscatory taxation has begun in the United States, and the GOP has started it. One wonders how Republicans can criticize Democrats for trying to implement practices they already engage in.