Impose Fees to Cover the Costs of Government Regulations and Charge for Services Provided to the Private Sector
CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.
|Billions of Dollars||2019||2020||2021||2022||2023||2024||2025||2026||2027||2028||2019-
|Establish Fees on Users of the St. Lawrence Seaway|
|Change in Revenues||0||*||*||*||*||*||*||*||*||*||0.1||0.3|
|Increase Fees Charged to Industries to Recover the Full Costs of Registering Pesticides and Chemicals|
|Change in Revenues||0||*||*||0.1||0.1||0.1||0.1||0.1||0.1||0.1||0.2||0.6|
|Charge Fees to Offset the Costs of Federal Rail-Safety Activities|
|Change in Revenues||0||0.1||0.2||0.2||0.2||0.2||0.2||0.2||0.2||0.2||0.7||1.8|
|Charge Transaction Fees to Fund the Commodity Futures Trading Commission|
|Change in Revenues||0||0.2||0.2||0.2||0.2||0.2||0.2||0.2||0.2||0.2||0.8||2.0|
|Assess New Fees to Cover the Costs of the Food and Drug Administration's Reviews of Advertising and Promotional Materials for Prescription Drugs and Biological Products|
|Change in Revenues||0||*||*||*||*||*||*||*||*||*||*||0.1|
|Collect New Fees for Activities of the Food Safety and Inspection Service|
|Change in Revenues||0||0.8||0.9||0.9||0.9||1.0||1.0||1.0||1.0||1.1||3.5||8.6|
|Set Grazing Fees for Federal Lands on the Basis of the Formulas Used to Set Fees for State-Owned Lands|
|Change in Spending|
|Decrease (-) in the Deficit||0||-1.1||-1.4||-1.4||-1.5||-1.6||-1.6||-1.6||-1.6||-1.7||-5.4||-13.5|
This option would take effect in October 2019.
Fees collected under this option could be recorded in the budget as offsetting collections (discretionary), offsetting receipts (usually mandatory), or revenues, depending on the specific legislative language used to establish them. For this option, the Congressional Budget Office categorized changes to fees that arise from the use of the government's sovereign power as changes to revenues, even if the agency was directed to record existing fees as offsetting collections or offsetting receipts.
* = between -$50 million and $50 million.
The federal government imposes regulations on individuals and businesses to ensure the health and safety of the public and workers in regulated industries and to facilitate commerce. It also provides the private sector with a wide array of services and allows the use of public assets that have economic value, such as navigable waterways and grazing lands. To cover the costs of enforcing those regulations and to ensure that it receives compensation for the services that it provides, the government could impose a number of fees or increase existing ones. Those fees could be collected by several federal agencies and through various programs.
This option would increase some existing fees and impose some new ones. Among the changes the government could make are the following:
- Establish fees on users of the St. Lawrence Seaway. The fee would offset appropriated funds for operations and maintenance of the seaway (a waterway that extends from the Atlantic Ocean to the Great Lakes) and would be equal to 100 percent of the adjusted appropriations in the Congressional Budget Office's baseline for the 2020-2028 period. (That amount is estimated by adjusting current-year appropriations by a measure of inflation.)
- Increase fees charged to industries to recover the full costs of registering pesticides under the Federal Insecticide, Fungicide, and Rodenticide Act and registering chemicals under the Toxic Substances Control Act. The current fees cover less than half of the Environmental Protection Agency's (EPA's) administrative costs of registering pesticides and chemicals. The higher fees, phased in over three years beginning in 2020, would offset appropriated funds for those administrative costs and would be equal to about 70 percent of the adjusted appropriations in CBO's baseline for the 2020-2028 period. (That amount is estimated by adjusting current-year appropriations by a measure of inflation.)
- Charge fees to offset the costs of federal rail-safety activities (such as safety inspections of tracks and equipment as well as accident investigations). The fees would offset appropriated funds for rail safety and would be equal to 100 percent of the adjusted appropriations in CBO's baseline for the 2020-2028 period. (That amount is estimated by adjusting current-year appropriations by a measure of inflation.)
- Charge transaction fees to fund the Commodity Futures Trading Commission. The fees would be assessed on futures, options, and swaps contracts and set to recover the commission's costs.
- Assess new fees to cover the costs of the Food and Drug Administration's reviews of advertising and promotional materials for prescription drugs and biological products. Fees would fund the current workload associated with regulating the promotion of those products to physicians and the advertising of those products directly to consumers. The Secretary of Health and Human Services would set the new fees, which would apply by product or by advertisement.
- Collect new fees for activities of the Food Safety and Inspection Service. Those fees would offset appropriated funds for inspection activities and would be equal to about 95 percent of the appropriations in CBO's baseline for the 2020-2028 period. (That amount is estimated by adjusting current-year appropriations by a measure of inflation.)
- Set grazing fees for federal lands on the basis of the state-determined formulas used to set grazing fees for state-owned lands. The federal grazing fee for 2018 is $1.41 per animal unit month (the amount of forage required by one cow and a calf for one month). This option would result in an average fee of about $5 per animal unit month.
Those changes are illustrative of the types of services or regulatory activities provided by the government for which fees could be charged or increased.
Effects on the Budget
If all fees considered here were implemented, they would increase income to the government by $14 billion from 2019 through 2028. For the fees included in this option that increase revenues, the estimate includes an income and payroll tax offset. That offset reflects the fact that the fee would reduce taxable business and individual income. The resulting reduction in income and payroll tax receipts would partially offset the revenues generated by the fee.
Lawmakers could achieve lower savings by establishing fees that offset only part of the federal costs associated with implementing the regulations or providing the services considered here. Lawmakers could achieve higher savings by adjusting those fees to more than offset federal costs, but that change would alter the nature of the option. The government's savings would be proportionally more for higher fees or less for lower fees, CBO expects.
Government income from this option would tend to increase over the next several years. Some of the changes would take time to implement—either because they would be phased in over time by design or because they would advance through the federal rulemaking process.
Changes in fees might alter the behavior of people subject to increased costs, and those responses would introduce uncertainty about the effects of the changes on the federal budget. For example, charging fees to offset the costs of federal rail-safety activities could prompt a shift of freight traffic to other modes of transportation, such as trucking. CBO projects that a limited share of freight traffic would shift away from rail, but that share could grow over time. In contrast, in CBO's assessment, new fees for activities of the Food Safety and Inspection Service would not affect industry behavior because producers cannot market products unless they are subject to inspection.
Whether the fees included in this option were recorded as revenues or as collections that are subtracted from discretionary or mandatory spending would depend on the nature of the fees and the terms of the legislation that imposed them. Most of the fees listed in this option would typically be classified as revenues in accordance with the guidance provided by the 1967 President's Commission on Budget Concepts. That guidance indicates that receipts from a fee that is imposed under the federal government's sovereign power should generally be recorded as revenues. However, lawmakers sometimes make the collection of fees subject to appropriation action; in those cases, the fees would be recorded as offsets to spending rather than as revenues.
An argument for implementing user fees is that private businesses would cover more of the costs of doing business, including the costs of ensuring the safety of their activities and products. That change would lead to a more efficient allocation of resources because businesses would make decisions based on a more complete assessment of costs. Currently, some of those costs—the Federal Railroad Administration's costs for rail-safety activities and the EPA's costs to register pesticides and chemicals, for example—are borne by the federal government.
Another argument in favor of this option is that the private sector would compensate the government for a greater share of the market value of services that benefit businesses (such as the operation and maintenance of the St. Lawrence Seaway) and for using or acquiring resources on public lands (such as grasslands for grazing). If consumers highly value the products and services that businesses provide, those businesses should be able to charge prices that cover all of their costs.
An argument against setting fees to cover the costs of regulation and recover the value of public services and resources is that some of the products and services provided by private businesses benefit people who neither produce nor consume those products and services. Thus, it is both fair and efficient for taxpayers to subsidize the provision of those benefits. For example, by lowering the cost of rail transportation, taxpayers' support for rail-safety activities reduces highway congestion and emissions of greenhouse gases. Similarly, support for the registration of new chemicals reduces the use of older chemicals, which may be more damaging to public health and to the environment.