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Repeal of the 4.3 cents per gallon RR fuel tax

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[quote]QUOTE: Originally posted by M.W. Hemphill Hmm. I easily get lost in this stuff. I don't understand this. My understanding it that if a business starts paying a tax, it must reduce its expenses by an identical amount if it's to continue to deliver to the investors the same percentage of revenue it did before. Suppose last year a railroad took in $1, spent 90 cents on fixed and variable costs, and delivered 10 cents to the investors. This year, it has a 10% tax. It still takes in $1, pays 10 cents tax, but to deliver 10 cents it can only spend 80 cents. If the tax doesn't come back in kind or in cash, the business is already out 11% of the money it used to have to meet expenses. But the 10 cents, the government says, is going to be reinvested in the property: "You'll still get 90 cents of your revenue dollar invested into the property, and you'll still be able to hand 10 cents to the investor." So where is additional investment coming from? I don't understand how additional investment in the property could possibly occur unless the investor starts agreeing to take a smaller percentage of revenue. What is different is that the government is making the investment decisions instead of the managers. Maybe the government is smarter, who knows? But the first think I think I'm going to do is help them be smart by spending a cent of my revenue dollar buying them drinks and telling them that they'll look bold and wise if so they spend 15 cents for every one of my revenue dollars on my railroad and 5 cents on someone else's railroad, because "everyone knows that property is hopeless." I hope my competitor doesn't think of that. I guess the counterargument is that the government will spend its 10 cents so wisely that the revenue and profitablity of the company will grow and all will be forgiven. Interesting -- 11% of the expense cash can leverage growth whereas the other 89% of the expense cash, not to mention 100%, can't leverage any growth at all. The commonweal argument -- everyone pays taxes for a common good -- makes a lot of sense when the participants are too tiny to leverage their ca***o accomplish large goals. Public schools, public highways, a standing army, etc., are everyday examples of my little cash being combined with everyone else's little ca***o leverage big goals. But now we only have seven Class I railroads. Where's the leverage to come from? And what about the take rate of the bureaucracy? Even if it's only 10% -- the usual overhead amount I used to figure in construction estimating -- that's 10% that won't be spent on anything other than white-collar welfare. I doubt the railroad's bureaucracy will be able to come down by an equivalent amount -- but I think of reasons it would go up: for one, to administer my gin-and-tonic slush fund. Or, is the plan to make up the cost of the overhead out of the general tax fund? Or, is it to achieve leverage by a withdrawal from the general fund that will be put in on top of the railroad fund? If I'm a railroad investor or manager, I could vote for that, if we're talking big money. Hello, subsidy. That's the only thing I can fathom that would accomplish a net positive result, at least for my railroad. Actually, there is a case for a tax for a common goal, and the railroads already do it. It's the terminal improvement project, which has been done since at least the 1920s in Chicago and myriad other cities, and recently in Los Angeles, Kansas City, and now Chicago. It's a way of resolving competitive differences among railroads in a geographic location where costs and benefits are difficult to apportion. This tax is created and spent on a case-by-case basis with limits of space and time. It's not a broad, "let's create a bureaucracy because we're smarter than them tax." Maybe the bureaucracy is smarter. It certainly will be more sensitive to politics. I guess I'd like to see (1) where the railroad money is misspent at present that can be reallocated to a tax and spent wisely in the future, (2) how the overhead is going to be made up, (3) how the government is going to create a system that isn't subject to political abuse, and (4) how the government is going to know more of the railroad business than the railroads. I could be wrong about all this, but like I said, I get easily lost in numbers. [/quote] Mark, First off, where is this railroad that pays back 10% to its investors? I might want to get in on that action! Regarding the other points, is it not true that railroads are lobbying the federal government for financial aid to pay for capacity improvements? If so, where is THAT money supposed to come from? Isn't that a tax that has to be accounted for by other businesses? Okay, so there are only seven Class I's left, but whose fault is that? We the People did not ask for the feds to create this oligarchy. The railroads will do what the truckers do: Pass this fuel tax on to the shippers. So you might ask what's the difference to the shippers if they pay for rail infrastructure improvements indirectly through their federal income taxes/gasoline taxes, or more directly through higher rates per box via a fuel tax surcharge? It's simple. The latter makes the rail infrastructure expenditures more accountable to the user, whereas the former is a disingenuous way to foster the tax on to some of those taxpayers who may not use the service. It's simply a matter of accountability. No, I do not think that the bureaucracy is smarter, after all they created the problem in the first place. But if we have to put up with the inherent inefficiencies of the rail oligarchy (as defined by lack of competitive rail rate access for shippers and a severely limited ability for new entry into the railroad operating market), then at least the bureaucracy should make sure any expenditures on behalf of the rail oligarchy is made as directly accountable as possible to the users of the rail system. If I had my druthers, there would be a separation of infrastructure entities from operating entities ala the AT&T breakup, thus no need for a railroad fuel tax to pay for rail infrastructure improvements, since the infrastructure entities would presumably charge a rate (or become part of a PPP with any aid coming from state and local governments) that covers the costs, i.e. there would be no avenue by which infrastructure maintenance would be defered by the operating company to sex up the balance sheet.
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