Tracing the tax that's supposed to fund TSA
The Indicator from Planet Money Podcast Recap
Published:
Guests: Adam Hoffer, Angela Grana
What Happened
Chaos at airports continues as TSA workers are not showing up for work due to a lack of pay. This situation arises from Congress's failure to fund the Department of Homeland Security, leaving TSA employees unpaid for more than a month. Angela Grana, a TSA worker in Colorado, expresses frustration, highlighting the need for politicians to resolve the funding impasse.
Every time a traveler buys a ticket for a US flight, they pay a US passenger security fee of over $11 for round-trip tickets. This fee was intended to fund TSA salaries, but despite travelers continuing to pay this fee, TSA workers remain unpaid. The issue traces back to the concept of a hypothecated tax, where tax revenue is earmarked for specific expenditures.
Adam Hoffer from the Tax Foundation explains that hypothecated taxes can be effective when the revenue and spending are directly linked. Initially, the passenger security fees went directly to TSA funding. However, in 2013, bipartisan legislation changed this setup, redirecting a significant portion of the fees to reduce the federal deficit instead of funding the TSA.
The change in 2013 benefited the airline industry by removing the monthly fees they paid for security, while the passenger tax more than doubled. Despite this increase, the funds for TSA salaries diminished as they were redirected to the general fund, leaving TSA workers without pay during government shutdowns.
Angela Grana emphasizes the financial struggles faced by TSA workers, who often live paycheck to paycheck. With incomes under $50,000 for first-year agents in Washington, D.C., the lack of consistent pay exacerbates financial instability, leading some workers to reconsider their careers.
The economic implications extend beyond TSA employees. Angela highlights concerns about air travel security vulnerabilities during shutdowns, as adversaries may exploit these weaknesses. She also criticizes President Trump's proposal to use ICE agents at airports, suggesting it could create resentment among TSA workers.
Some airports have set up donation boxes for TSA workers, collecting grocery and gas gift cards. Angela describes this support as both fantastic and humiliating, as it requires workers to rely on public generosity despite travelers already paying security fees.
Key Insights
- TSA workers are not getting paid despite the continued collection of the US passenger security fee. This fee, originally meant to fund TSA salaries, has been partially redirected to reduce the federal deficit since 2013.
- The 2013 legislative change removed monthly fees paid by airlines and increased passenger taxes, but did not result in increased TSA funding. Instead, a large portion of these funds now go into the general fund.
- The financial instability faced by TSA workers during government shutdowns highlights the broader economic issue of hypothecated taxes. When the connection between revenue sources and expenditures erodes, it can lead to significant operational challenges.
- Angela Grana warns of potential security risks and increased vulnerability in air travel due to understaffed TSA checkpoints. She argues that using ICE agents as a substitute is not a viable solution.