Electrification, Why not tax incentives?

[CNW 6000]

After reading that I feel like my eyes just crossed! 

[MichaelSol]

Really? My first though would have been that something like that would be a big interference with operations. I guess not. Which now has me wondering-did the MILW own any generating facilities or did they purchase all their power? I seem to remember reading that the GN owned at least some of the facilities for the Cascade Tunnel electrification, though that was, of course, a very much smaller installation.

Commercial power supplies that could support heavy railroad electrification were unusual in that era. N&W built their own power supply. I would have to look GN's up. Don't recall. When Milwaukee Road planned its electrification, there was barely enough commercial power available to supply the Anaconda Copper Mining Co., let alone an extensive railroad electrification project. Milwaukee bought power generation sites at Thompson Falls and Fish Creek, Montana, and all along the St. Joe River in Idaho. George Gibbs was hired to implement a plan to build Milwaukee's own supply system, and to operate it as a commercial power company. The Idaho Electric Light & Power Co. was incorporated as an Idaho corporation in 1906 for that purpose.

Milwaukee owners William Rockefeller and H.H. Rogers, who were also owners of the Anaconda, were interested in developing electric power, and their Montana manager, John D. Ryan, was especially interested. When Rogers died in 1909, Ryan took his place as President of the Anaconda, and as a Director of the Milwaukee Road and convinced Milwaukee President Albert Earling that a commercial power company would present a better option for the Milwaukee.

So, the Milwaukee sold the Thompson Falls and Fish Creek sites to Ryan, and took an interest in a Ryan company to enable him to purchase from James J. Hill the Great Falls Power & Townsite company.  Milwaukee then signed power contracts, which Ryan was able to use as collateral for loans to build hydroelectric facilities at Great Falls and Thompson Falls. Milwaukee built the powerline which brought the Thompson Falls power to Missoula and on to Butte -- the backbone of the newly developed commercial power grid, which became the facilities around which the Montana Power Company was formed in 1914.

 

[Anonymous]

Even schedule trains to avoid peak electricity demand periods, during which the power could be sold for a premium, then run the trains when demand is lower.

And every railroad electrification supply contract I have ever seen has had this specific provision.

Yet if capacity is maxed on the rail line, how would a railroad be able to generate excess power for market sale during peak demand (when prices can go for 5 times the baseline prices), yet still run the trains on time?

The answer - The dual power locomotive!

[oltmannd]

The railroads argue that competing transportation industries do not pay a comparable tax. They say that would be like making the trucking industry pay property taxes for the interstate highways...CSX contends New York municipalities and school districts tax rail property at a far higher percentage of market value than other commercial and industrial property because the state values railroad property based on reproduction costs without adequately accounting for depreciation. 

http://albany.bizjournals.com/albany/stories/2001/02/26/editorial3.html

I like the statement: "that sense of fairness should be applied to the railroads."

Perhaps the concept of "fairness" should be applied to captive shippers. Awfully tough these days to be consistent, isn't it?

By the way, I think my property taxes are too high too -- and renters don't pay them at all!

What I liked was that it was a "sense of fairness" - not actual fairness - that was the goal.  I thought that wording was humorous.

[MichaelSol]

The railroads argue that competing transportation industries do not pay a comparable tax. They say that would be like making the trucking industry pay property taxes for the interstate highways...CSX contends New York municipalities and school districts tax rail property at a far higher percentage of market value than other commercial and industrial property because the state values railroad property based on reproduction costs without adequately accounting for depreciation. 

http://albany.bizjournals.com/albany/stories/2001/02/26/editorial3.html

I like the statement: "that sense of fairness should be applied to the railroads."

Nobody gets depreciation on their real property improvements for property tax purposes. For business property, that is an income tax deduction. Look at your home's property tax bill. Where's the depreciation showing up? Nobody gets it. CSX wants two deductions for the same thing.

Real property and improvements are uniformly assessed for tax purposes at "market value." For installations that do not have regular "markets" for buying and selling, they are always assessed at replacement cost because that is the only plausible surrogate for a current market value of property. Sometimes market is higher than replacement, sometimes it's lower. But the concept is entirely "fair."

Pulp mills are assessed this way. Hydroelectric dams are assessed this way. Coal-fired plants are assessed this way. Things that the appraiser can't just walk down the street and say, oh, there's one that just sold for $XXX.

CSX is actually complaining that it is treated like everyone else similarly situated, but then complaining that this is different than property that is taxed by market value. Yes, it is. There aren't options for the appraiser on that point. And these days, a market value for a key rail property might well be substantially higher than replacement cost in the area in question, if the county or state had the wherewithal to do that kind of an appraisal. CSX might be careful what they ask for. They mght get it.

It is seeking a special exception, and a double deduction for depreciation, not "fairness".

 

[PNWRMNM]

Michael Sol,

 

Very good explanation of a possible, perhaps likely, unintended consequence.

 

Mac

[erikem]

Carter tried tax subsidies and tax penalties to control the oil market, and then price controls. It was all a joke. Some called it "distortion," and unlike the gentleman on this thread who never saw a distortion he didn't like -- because Congress knows best -- the Carter distortions levied heavy net penalties on the American economy. And Carter was a Paul Samuelson acolyte incidentally. and when his positively wretched influence was finally lifted from the American economy by the Friedman crowd -- fuel problems got solved. Supplies went up and price went down. They knew what they were doing and this "distortion is good" baloney got the death it deserved.

If I recall correctly, price controls on petroleum were established in 1971 by Nixon with his wage and price freeze. Controls were gradually lifted on most products and services with oil beng the exception, although a distinction was made between 'old' and 'new' oil (especially after the oil embargo of 1973-74). This mess was compounded by Ford in his approving the rollback of oil prices that was included in the bill setting up fuel economy standards for cars (IMHO, we would have been better off with phasing out price controls on oil).

Where Carter dropped the ball was dealing with the aftermath of the fall of the Shah of Iran and later hostage crisis and relying on a broken system for allocating oil. The result was another spike in the price of oil and the return of gas lines. One of the first things done by the Reagan administration was to remove price controls from oil and as a consequence haven't had gas lines or rationing since (with some local exceptions).

 

More incidentally, U.S. consumption of oil dropped 1.3% from 2005 to 2006. Gas dropped 1.7%. Coal dropped 1.2%. Meanwhile nuclear was up .7% and hydroelectric was up 6.7%.

Incremental cost of hydro is almost zero, so hydro production is almost entirely dependent on water supply. Drops in oil, gas and coal can be attributed to many things, although the most likely reason is higher prices prompting lower consumption. 

[Kevin C. Smith]

Even schedule trains to avoid peak electricity demand periods, during which the power could be sold for a premium, then run the trains when demand is lower.

And every railroad electrification supply contract I have ever seen has had this specific provision.

Really? My first though would have been that something like that would be a big interference with operations. I guess not. Which now has me wondering-did the MILW own any generating facilities or did they purchase all their power? I seem to remember reading that the GN owned at least some of the facilities for the Cascade Tunnel electrification, though that was, of course, a very much smaller installation.

I may be incorrect but I seem to remember reading that a factor (though a small one) for the French TGV's was that the traffic peaks coincided with "shoulder" demand times for other power loads. France uses nuclear power for a large share of it's generating capacity (40+%? Again, I do not have the article to refer to, please correct me if wrong, someone!) and, apparantly, nuclear plants don't take to frequent output adjustments well.

[MichaelSol]

By the way, I think my property taxes are too high too -- and renters don't pay them at all!

I believe renters pay (through their rent) the property owner's property tax. 

You're getting warmer ... you could be on to something ... keep thinking about it ...

[cordon]

By the way, I think my property taxes are too high too -- and renters don't pay them at all!

I believe renters pay (through their rent) the property owner's property tax. 

 

[selector]

I worry about a lack of systems thinking, and the proberbial "quick fix that backfires", with deference to Peter Senge. 

If we erect vast wind turbine farms, what will the net effect be, even if only in a local area, when we extract large amounts of kinetic energy from the atmosphere?  Do we know?  If we convert corn crops, or even raise much more of it for economic reasons, to the production of biofuels, what will happen to everything else that currently relies on corn for energy?  Why, those prices will rise dramatically when the availability of corn is curtailed in favour of the new energy market...which you can bet your first child won't be cheaper than what we enjoy today.  Think pet food, beef, chickens, eggs, milk and a whole raft of other products that need corn, and cheaply, for a market. 

The big question, still, is how to get electricity in the quantities that we'll need if we decide it is the great panacea...for cars, trains, whatever, and at prices that we'll endure, and generated in a responsible, rational way.   Money talks.

[MichaelSol]

Even schedule trains to avoid peak electricity demand periods, during which the power could be sold for a premium, then run the trains when demand is lower.

And every railroad electrification supply contract I have ever seen has had this specific provision.

[Anonymous]

I think we have to consider these following factors in terms of electrifying our railroads:

1. The upfront cost could be very frightening, especially we're talking the most extensive railroad electrification program anywhere in the world, putting up and maintaining far more miles of overhead electrical wire than any other country on Earth if we electrify all the major north-south and east-west routes.

Being in the energy biz, I think there may be an opportunity for a cooperative effort between the railroads and utilities.  We do need more transmission lines, but as you point out the up front costs are extremely high.  Ditto for new generation plants.  If certain transmission lines could be incorporated along railroad ROW in conjunction with catenary, then there's the possibility of shared costs to spread the up front risk.  Same with generation plants - the railroads could themselves become merchant electricity providers by building their own plants and selling the excess electricity on the open market.  Even schedule trains to avoid peak electricity demand periods, during which the power could be sold for a premium, then run the trains when demand is lower.

2. We have to design the overhead wiring to it clears the height of two 53' domestic containers plus well car to hold them. That may require very expensive additional lowering of railroad tunnels across the Appalacians and the mountains west of the Mississippi.

Why not use third rail in tunnels?

3. There may not really be a need to electrify our transcon lines. Thanks to developments in extracting biodiesel fuel from oil-laden algae (which is far more cost effective than biodiesel from regular plant sources), we could grow algae in large-scale tanks to make enough biodiesel fuel to substantially cut the amount of crude oil needed to make regular diesel fuel. 

I'd like to read up on that algaediesel (?) a little more before I get to excited about it.  It is already proven that synthetic diesel derived from plentiful coal is far cheaper to produce and less risky to invest in than biodiesel from seed crops, with or without the subsidies.  Not only that, but synthetic diesel is actually cleaner than biodiesel!

[SactoGuy188]

I think we have to consider these following factors in terms of electrifying our railroads:

1. The upfront cost could be very frightening, especially we're talking the most extensive railroad electrification program anywhere in the world, putting up and maintaining far more miles of overhead electrical wire than any other country on Earth if we electrify all the major north-south and east-west routes.

2. We have to design the overhead wiring to it clears the height of two 53' domestic containers plus well car to hold them. That may require very expensive additional lowering of railroad tunnels across the Appalacians and the mountains west of the Mississippi.

3. There may not really be a need to electrify our transcon lines. Thanks to developments in extracting biodiesel fuel from oil-laden algae (which is far more cost effective than biodiesel from regular plant sources), we could grow algae in large-scale tanks to make enough biodiesel fuel to substantially cut the amount of crude oil needed to make regular diesel fuel. 

 

[MichaelSol]

To me the main advantage of electricity over deisel is that electricity can come from domestic sources such as coal, natural gas and nuclear. Even if the railroads spent an equivilant amount on electricity, that money would stay in the US and not go to the Middle East or Venuzuala. 

Suppose, just suppose, there was a mass conversion of diesel fuel use to domestic electric power. What happens to diesel fuel costs?

Want to bet the price goes down?

Want to bet consumption goes up and we are even more dependent on foreign oil?

It's because railroads are a big user of diesel fuel that a "tax incentive" to somebody somewhere for electrification is irrelevant to the decision-making process. The "tax incentive" will not offer one iota of protection from the probable boomerang effect of a massive abandonment of diesel fuel use, capacity, and supply. The CEO who falls into that trap is going to be wishing there was a tax incentive for him to keep his job ... and this is a classic example of some nitwit deciding that there needs to be a political "assist" to a friend of his cousin's who happens to be an electrification supplier, and the whole system backs over everybody because the politicians don't anticipate, can't anticipate, and shouldn't be trying to anticipate, the total market effects of investment decisions.

You can't fight the market with artificial subsidies, tax or otherwise. The law of unintended consequences will bite you every time. Electrification has to be based on real, inevitable costs. That's why railroads aren't in a rush yet based on a highly fluctuating oil market that may not, in fact, represent long term costs.

Railroads would look idiotic if they themselves, by depressing the diesel market through electrification, caused diesel fuel prices to drop below the costs incurred in financing and operating electrification -- and handed a relative advantage, for the very first time, to the truckers in that regard.

And to me, this would represent the classic screw up by the tax incentive geniuses. They purport to help the railroads -- and the trucking industry gets the benefit. Good job.

"Unintended consequences."

Carter tried tax subsidies and tax penalties to control the oil market, and then price controls. It was all a joke. Some called it "distortion," and unlike the gentleman on this thread who never saw a distortion he didn't like -- because Congress knows best -- the Carter distortions levied heavy net penalties on the American economy. And Carter was a Paul Samuelson acolyte incidentally. and when his positively wretched influence was finally lifted from the American economy by the Friedman crowd -- fuel problems got solved. Supplies went up and price went down. They knew what they were doing and this "distortion is good" baloney got the death it deserved.

More incidentally, U.S. consumption of oil dropped 1.3% from 2005 to 2006. Gas dropped 1.7%. Coal dropped 1.2%. Meanwhile nuclear was up .7% and hydroelectric was up 6.7%.

 

 

 

[Cricketer]

I'm new to this debate, which has had some rather fun excursions into economic theory. Can I gently try to take it back into railroad territory, by asking a very much related question: in this case "Why tax incentives" ie what is the economic, or indeed social good that we are seeking to obtain through the tax incentives that would allow electrification to take place over a significant part of the American railroad network. 

Lets look first at what electrified railroads are good at.

1. High speed. There are some diesel trains running at 125mph (mostly in the UK). It is not common. 125mph plus is much easier with electric power, as shown by example in Germany, Belgium, France, Spain, Italy and Japan.

2. High frequency. If you wish to invest lots of capital stringing up catenary then it's really useful to have high traffic densities so that the capital cost is spread over a larger number of trains. Outside my window is a five track electrified main line with about 40 trains an hour in each direction from 7am until 11pm. All are multiple units and it's rather boring, but there sure are a lot of trains. This can apply just as well for freight, where the St Gotthard Railway (3 spiral tunnels, c 3000ft climb, 3%+ gradients) runs trains about every five minutes at night, and in the day will run two passenger trains and three-five freight trains per hour in the day.

3. Low emisions at point of use.  Compare trams/light rail/trolleys with diesel buses

4. Quieter working. Electric motors do make noise, but less so than diesel engines. They make very little noise indeed when the train is stationary, and with better quality rail/wheel interfaces can be virtually upon a person before they notice it.

5. With the proper systems regenerative braking so that the power used in getting train to a summit is given back to the grid while the train descends, or indeed brakes. Like dynamic brakes but with the power put back into the system rather than being put back into the atmosphere as heat.

6. Better energy efficiency as a whole. Big is cheap and it's more efficient to create a horsepower of energy in a large power station than it is in a, relatively, small diesel engine. Even at point of use with transmisison losses the equation favours rail.

7. Rather better at going up hills, which was a major reason for thsoe first American eletrifications of the Cascade Crossing, the Hoosac tunnel, and the Milwaukee. A really good argument in steam days, less so with diesel, but even so the 1 hour rating of electirc locomotives can be consideraly more than their continuous rating allowing those really hard bit of climbs to be undertaken without extra engines.   

8. Cleaner power. A good argument in Scandinavia, Switzerland and Austria, where a lot of power comes from hydroelectricity, not really so strong elsewhere.

If Americans are going to support electrification you have to decide whether these reason to electrify are enough to justify the capital cost, or even the tax dollars foregone by the federal government.

A few comments on each one.

1a High Speed. Not really an issue on freight railroads, and not really an issue in Europe either, where 75mph for freights is about the maximum (and there are exceptions I know)

2a. Not traditionally the American way, but as I understand it becoming more the case as service gets concentrated on specific routes. As an aside here are there any American websites that provide timetable details for freight trains. The follwoing weblink (http://www.drehscheibe-online.de/aktuell/2007-04-29_maintal-2007.pdfis is in German (but I'm sure all of you can read a timetable in any language). It has north and southbound trains for a place in central Germany. Not all trains run every day, but 19 pages for 1 location is pretty impressive, though you need to remember that tains will max out at about 800yds. There will also be passenger trains (at least hourly) from around 6am to 11pm.

3a. Becoming significant in California, and of course was a prime reason for the early electification on the East coast.

4a. Does this matter in the big wide world of the USA? An in any case with grade crossings a-plenty the train horn is louder than the engine, and as well rail/wheel interface on freight cars can cause more noise than the engine.

5a A good point in the hills, less so in the flatlands. Technology does exist for batteries to do the job of regeneration (train tried in the UK - though not in regular service by any stretch of the imagination.)

6a. Yes but diesels are becoming better, and if point 5a above comes to fruition will be even more so in the future.

7a. AC motored diesels are pretty good at going up hills now, maybe not at speed, but high speed ascents do not appear to be needed in the US.

8a. There's plenty of electricity generated by renewable resources in the west of the US, and using it is a plus versus non renewable diesel

In a sense I've argued myself out of electrification, which just goes to show that to string up mile upon mile of wire is going to need some really good arguments, arguments which American stockholders and indeed tax-payers are going to have to debate over the next few years.

Robert Butlin

Croydon, Surrey, United Kingdom

 

[MichaelSol]

The railroads argue that competing transportation industries do not pay a comparable tax. They say that would be like making the trucking industry pay property taxes for the interstate highways...CSX contends New York municipalities and school districts tax rail property at a far higher percentage of market value than other commercial and industrial property because the state values railroad property based on reproduction costs without adequately accounting for depreciation. 

http://albany.bizjournals.com/albany/stories/2001/02/26/editorial3.html

I like the statement: "that sense of fairness should be applied to the railroads."

Perhaps the concept of "fairness" should be applied to captive shippers. Awfully tough these days to be consistent, isn't it?

By the way, I think my property taxes are too high too -- and renters don't pay them at all!

 

 

[n012944]

Yup.  Been through Montana, ND, SD, Neb, Kansas and Texas (sorry Oklahoma!) and in large parts of most every other state.  You COULD put EZPass on the rural interstates at some cost,

Drive I88 west of Chicago and you will see that rural Illinois has their version of EZpass(IPASS) almost all the way to Iowa.

 

Bert

[GP-9_Man11786]

BNSF reports on a reader board at work they spent $2.6 billion for diesel fuel last year.  Now that seems quite an incentive to look at alternatives.  Of course electricity is not a free commodity and the generating companies could peg the price at a btu equivalent or hp equivalent to oil to keep the price fluctuating with the latest oil crisis.  Just good business, you know.  Natural gas in MT got pegged to a btu basis "to be fair to the folks at higher elevations" so now it is sold at the price of crude oil no matter how cheap it is to pump out of the ground and process and ship to the end consumer.  Sure you can substitute one for the other, eventually.

To me the main advantage of electricity over deisel is that electricity can come from domestic sources such as coal, natural gas and nuclear. Even if the railroads spent an equivilant amount on electricity, that money would stay in the US and not go to the Middle East or Venuzuala. 

[arbfbe]

From Ohltmannd:

"As for electrification, I would agree that in and of itself, it gets us little (maybe somewhat higher rail capacity - but hybrid locos may do that, too).  But it could be part of an overall strategy to improve the country's energy and environmental position - and thats what makes it interesting to me."

BNSF reports on a reader board at work they spent $2.6 billion for diesel fuel last year.  Now that seems quite an incentive to look at alternatives.  Of course electricity is not a free commodity and the generating companies could peg the price at a btu equivalent or hp equivalent to oil to keep the price fluctuating with the latest oil crisis.  Just good business, you know.  Natural gas in MT got pegged to a btu basis "to be fair to the folks at higher elevations" so now it is sold at the price of crude oil no matter how cheap it is to pump out of the ground and process and ship to the end consumer.  Sure you can substitute one for the other, eventually.

Electric traction motor technology is a bit ahead of diesel locomotive technology.  It has always been that way and likely will remain so for some time to come.  While it is possible to install a 6K HP prime mover in a diesel locomotive it has proven to be problematic in the railroad environment.  It is far easier to install 1K or even stronger traction motors in the same locomotive if the wheel slip systems are state of the art.  So it would seem the railroads would have an interest in installing larger traction motors and pantographs on their locomotives.  When running in the flat lands the locomotive's diesel would put out 4.5K hp and the pans would be down.  When the train hit a mountain grade or especially clean air zone of concern the pans could be raised to supplant the diesels and increase the HP to the traction motors to 6K or even 10K.  The diesel could even be shut down to create a 10K hp unit with no direct emissions.

This would take advantage of the effeciencies of the electrics without the need to electrify the entire system.  It could eliminate helper districts across the railroad and could bring emisson free railroading to congested areas.  If it takes tax incentives to build a demonstration system, I am all for it.  If it does not pan out economically then that is the end of the public participation.  If it does work then the forces of ecomonics should take over and we can all go to places where we can hear the trolley sing with the passing of each train.    

 

[oltmannd]

The railroads argue that competing transportation industries do not pay a comparable tax. They say that would be like making the trucking industry pay property taxes for the interstate highways...CSX contends New York municipalities and school districts tax rail property at a far higher percentage of market value than other commercial and industrial property because the state values railroad property based on reproduction costs without adequately accounting for depreciation. 

http://albany.bizjournals.com/albany/stories/2001/02/26/editorial3.html

I like the statement: "that sense of fairness should be applied to the railroads."

[MichaelSol]

not sure that I shoudl be replying to your posts as it seems you may have some mental imbalance, perhaps autism ...

To suggest that when the railroads, at the least the Western railroads, received their right-of-way for free, and an additional 6% of the land mass of the continental United States just as a direct incentive, did not receive the largest government grant, subsidy, benefit in history, and that this is not comparable with the truckers receiving the benefit of a massive government subsidy to build a second version of a national transportation system, is simply self-imposed ignorance of how the rail system got in place in the first place.

Another way to look at it since the question was raised about truckers buying their own private right-of-way. One of those playground ideas. Is it realistic that the trucking industry has the wherewithal to buy and build its own separate infrastructure in the modern world? No.

The comparable question. Could the rail industry start from scratch and buy and build its own separate infrastructure as it exists in the modern world? No.

So, if you are arguing that railroads have an advantage because of a grand government gift and support at a key time, and that it continues to accrue to their advantage, how could anyone argue to the contrary?

I took the time to look up actual numbers and give them to you. I gave you specific numbers that show that, considering all taxes and user fees, the railroads appear to have the clear cost advantage for the only revenue you can reasonably consider -- the unit cost of production.

You continue to claim it is a disadvantage, but have shown no actual numbers why.

Would you rather own your own house, or rent it? I think the railroads rather prefer to pay the property tax. As owners, that gives them a capitalization leverage that can never exist for the trucking industry, who merely rent. Even if the operating numbers showed a disadvantage, it would still be an advantage for the railroads to own and operate their own right of ways.

If you want to continue, get some numbers and dispense with the meaningless generalities.

 

[Suburban Station]

The railroads argue that competing transportation industries do not pay a comparable tax. They say that would be like making the trucking industry pay property taxes for the interstate highways...CSX contends New York municipalities and school districts tax rail property at a far higher percentage of market value than other commercial and industrial property because the state values railroad property based on reproduction costs without adequately accounting for depreciation. 

http://albany.bizjournals.com/albany/stories/2001/02/26/editorial3.html

 

[Suburban Station]

not sure that I shoudl be replying to your posts as it seems you may have some mental imbalance, perhaps autism but here goes...

I get the solid impression that you have some extraordinarily vague idea that railroads, as property owners, do not benefit from fire, police, flood control districts, hazardous waste response, plowing the roads, fire control when sparks light a hay field on fire or when the depot catches on fire, fire trucks and ambulances for the derailment or the grade crossing accident, schools for the children of railroad employees, Universities for them if they choose to go, police for arresting trespassers or thieves, in some cases even electricity for operating the stationary equipment and the waste disposal for normal operations.

not sure where you got that solid impression. never said anything of the sort.

And where do you get these ideas?

Of course, you would not be comparing apples to oranges by comparing railroad property taxes to trucker user fees -- trucker's who don't, in fact, own property in most of the counties they pass through, and do pay property taxes where they have facilities. And even though you felt the analogy sufficiently comparable to make it in the first place, now it's apples and oranges when someone actually took you up on it.

it's not apples to oranges to compare ROW to ROW. it is apples to oranges to compare per equivalent carload costs when al we are talking about it ROW property taxes and boththe physical infrastructure needed as well as the capital needed to finance it. I do believe that deep down inside you is a reasonable individual that woudl rather like to understand what I said than find ways to insult others.

In most states -- actually all of them that I am aware of -- a commercial truck must register in order to operate commercially within the state. This is called "proportional registration" and each fleet must estimate its proportional mileage run within a given state for the purpose of assessing a tax -- a tax additional to the highway trust fund taxes.

Those taxes go to the State General Fund. Not the Federal Highway Trust Fund -- the State General Fund. The one that pays for the highway patrol, emergency services, property tax relief (including to railroads!), schools, Fish & Game, the University systems, parks & recreation, services for the poor, building codes, the court system, environmental regulation, the prison system, the Extension Service 4-H Clubs, sanitary regulations, the Governor's salary, drug rehabilitation programs, lettuce inspection, livestock inspection, tourism advertising, tax collection, child support enforcement, etc. -- all manner of things that have nothing to do with the Interstate Highway System, and just about exactly resembles what, in many states, property tax supports. 

And all of which, from a trucker's perspective, have d*** little to do with the two or three hours he might spend on the Interstate crossing the state.

 all businesses pay to support these things (one way or another)that they have little to do with. none of that really addresses the issue I was referring to. you say that truckers more than pay for roads but provide no real proof of that. that their tax revenues more than pay for environmental studies, maintenance, capital, etc.

 

Do you think both truckers and railroads should be exempt? Why? Why not?

And why do you think the rest of us should make up the difference?

Truckers should be exempt from ROW taxes not directly associated with the cost induced so as to minimize distortion. of course, that's as likely to happen as railroads being exempted from property taxes. yes, the citizens of a state shoudl pay for the services they use. however you're general fund example is flawed in that many things contribute to the general fund. It doesn't take into account costs and revenues, only general facts about how the fund is used. to put it most simply, trucking companies do not pay for roadway improvements. they do benefit from teh fact that roadways operate with no proeprty taxes. that funds are raised by governments which either have tax free bonds or, at the very least, a lower borrowing cost. you remind me of a lot of libertarians, which is why they never win anything. at least we can agree that milty is a superior economist to Samuelson. I thought samuelson got dumped in the 1980's after his bad ideas were spread for too long. guess not. Harvard is overrated.

[oltmannd]

Ohltmannd said,

"If ever there was a distorted user tax, it's the gasoline tax."

I took a tour bus out of San Diego a few years ago to get deeper into Mexico than I could do on foot.  The driver was a former Mexican national now a US citizen.  On the way south we seemed to stop every few miles to pay a toll for passage through the next section of highway.  The driver thought this was a grand idea since, "people who do not use the road do not have to pay taxes to build the road."  I told him is was sort of the same in the US where the gasoline taxes pay for the construction.  If you do not drive on the highway you do not have purchase fuel and pay the fuel taxes.  The difference is in the US we do not have to pay for all the toll collectors to collect the fuel taxes.

So you have to pay for the roads one way or another.  The fuel taxes seem to be a way to better equalize the costs of construction with the utilization of the highway.    

I'm OK with fuel taxes to pay for roads.  It's a pretty good compromise, but you gotta admit, it's not a perfect system.  I'll play devils advocate.

Why not EZ-pass?  A low cost way to collect tolls.  Collecting the gas tax is not cost free.

A little old lady drive to church and the grocery store strictly on county roads.  She pays for these road with her property tax.  She still has to pay the state and federal fuel taxes.

A guy drives a 3 ton SUV that gets 10 mpg.  Another guy drives a 1-1/2 ton sedan that gets 40 mpg.  They both use up nearly the same highway capacity and so approximately the same damage to the highway, so why does the SUV driver have to pay 4x more?  Similarly, an 40 ton semi does 9600x the damage to the highway that the sedan does, so why doesn't he pay 9600x more?

If you're guided by an ideology that tries to draw fine, bright lines around things and has decided that gas taxes should ONLY go for road construction and maintence, you could very well wind up with a transportation network where each mode is optimized but the whole transportation system is suboptimized.  RRs have been making the pitch that public investment in RRs can mitigate traffic congestion more efficiently than investment in addtional highway lanes.  An interesting idea as is the notion of giving RRs a bit of an economic boost to electrify in order to improve the national energy, transportation and environmental picture, but you have to erase some of those fine, bright lines, or at least smudge'm a bit.

 

EZ Pass to collect tolls?  Have you ever been to Montana, Wyoming, Idaho, rural Nebraska or rural Kansas?  Installing all the EZ Pass reader stations would break the system.  This would simply be an unworkable system for most locations.

The little old lady example is a bit distorted account more and more construction is done with the help of federal and state funds collected via fuel taxes.  I doubt the main street of any town with a population of more than 50 people has less than a state highway designation.  Besides if the little old lady is only driving the small amount you suggest her contribution is pretty limited, one full tank purchased every few months?

The SUV vs family sedan argument?  Now who is drawing fine lines?  This is one of the choices the consumer makes when a purchase decision is made.  I suppose we could all get some sort of a credit card device to swipe when making a fuel purchase to define the vehicle type.  Those with bigger heavier vehicles would pay a smaller fuel tax compared to a smaller vehicle which has a higher fuel economy rating.  Sure it could be done but it adds complexity.  Why doesn't the semi driver pay 9600X more in taxes?  Probably account they hire lobbyists to plead their case to legislatures via trade organizations.  They certainly can claim such a tax level would drive many truckers out of business.  So the government allows them the lower tax rate to keep them in business which makes a large portion of the rest of the economy function well.  If the government forced the trucking industry to pay the full tax load they would require freight rates for truck borne shipments would skyrocket.  Retailers and consumers would scream and their gasoline taxes could get a healthy increase to make up for all the fuel taxes not paid by all the parked trucks.  Sticky business these taxes can be.  So the family drivers subsidize the truckers high way taxes but the same consumers get a break with retail prices.  Is it fair, can it be measured?  It would take a room full of economists to work through all of that.

You are the one drawing the fine lines in your arguments.  I never suggested any public subsidy to the railroads for electrification or anything else.  I can see why farm states have worked to keep rail service in their rural areas.  All those grain trucks really do a number on county roads during the harvest and shipping seasons.  These states may indeed SAVE money for the taxpayers by purchasing or subsidizing rail lines in lieu of rebuilding or upgrading farm to market roads each season.  Note it is the states who are commonly offering the subsidy not the railroads who are requesting payment in this situation.

The golden age of electrification was in the early 1900's in the US.  Back in the time when electricity was still relatively new and all these new dams and steam plants generated more electricty than there was a market for.  Fixed plant was under utilized and need more demand than the market provided.  Electricity was cheap but could be cheaper if the volume increased.  Providers looked for any way to get consumers to go electric.  Toasters, refrigerators, power tools, anything to get homes wired and electricity into the hands of the largest number of consumers.  If you could move industrial customers away from belt driven factories, water driven machines and coal powered steam propulsions you could make the dams and steam power plants more effecient by spreading out the fixed costs over more Kilowatt-hours.  Now things are different.  Brown outs, limited transmission capacity and the high cost of siting new generation plants mean the system is running much closer to capacity than ever before.  I doubt you will find too many electrical companies trying to sign up railroads as industrial customers to put hundreds of locomotives on the grid daily.  The railroads will be demanding contracts which smooth the costs of electrical power so they do not face the spikes and brown outs recently seen.  High power costs pretty much killed the aluminum industry in electrically blessed states in the PNW when deregulation made it more attractive to sell the power generated locally to other states with a shortage of generation capacity.  Most o

-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/) 

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