Friday, April 1, 2011

The Political Economy of Fees

With all the hubbub about the need to cut taxes, I haven't seen much attention to the subject of fees. Fees are an excellent way of gouging extra money from the public. Airlines, knowing that people shop by price, advertise low prices and then pile on the fees. Banks make enormous profits from fees. During a recent stay at the Hilton Hotel in New York, I discovered that the cost of printing out a boarding pass was several dollars and that the charge for Wi-Fi in the lobby was separate for the $15 daily charge for the Internet in our room.

In the public sector, government can generate revenue from taxes or from fees. For example, governments can make up for shortfalls in revenue, in part, by becoming more conscientious about getting tickets for driving or parking infractions. Visits to parks or museums become more expensive.

Privatization offers an indirect method for generating fees. The privatization of the public road saves the government money for maintenance, but the public then covers the cost, as well as profits for the operator, by charging fees. In addition, the public has to endure the inconvenience of stopping and waiting to pay their fees.

Fee-based government seems to be a far more fiscally regressive method than the traditional fee-based government. In addition, these do not seem to generate the same degree of public resistance.

1 comment:

Jack said...

Fees, tell me about it. The NYC Water Board collected nearly $1,000 from me this passed year. Worse yet the federal deduction for state and local income taxes doesn't apply to the water fee(?), tax(?) or what ever its called.