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Congress approves Amtrak funding by veto-proof margin

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[quote user="Prairietype"] It is the chief reason why something like this MUST be public.  Another comparison could be made to airport development. No big airport was ever built in a day, and none are ever built by the airlines. An airport is equivalent of the the rail corridor and everything that goes into it.The Senate should go along with this House version and let it be. In fact the private sector provision may even please the President, not that he can or will do anything about it.[/quote]How will the proposed funding for Amtrak, as well as other intercity rail projects, be covered?  Will there be offsets in other spends or will the federal deficit be increased?  If the market for intercity passenger rail is not robust enough to attract private enterprise, what is the justification for spending taxpayer money on it?  This is especially true for people who don't have access to passenger rail, which would be large parts of the U.S.  I can understand using tax money to support local transit systems.  They fill an important social role.   They provide transport for the poor and working poor who otherwise could not get around, or at least would have a great deal of difficulty doing so.  I can also understand using public monies to fund some commuter rail, barring a change in how we charge and pay for transport in the U.S., as per my comments regarding subsidization.  But subsidizing an affluent passenger traveling from New York to Washington on a high speed train is a bit difficult to justify.    Most airports in the United States, outside of converted military fields, were built by local authorities.  They were financed with tax free bonds.  Tax fee means that the interest, plus the gains or loses, are not taxable to the investor.  With the exception of a handful of new airports, e.g. Austin, Denver, or expansion of some of the older fields, e.g. DFW, Charlotte, the bonds have been retired.  They are a sunk cost.The issuer of tax free bonds (the airport authority) incurs less interest expense than the issuer of fully taxable bonds.  Thus, the users and vendors benefit from slightly lower landing fees, hanger fees, store rentals, etc.  The difference, however, is marginal.  Thus, except if the bond issuer defaults on them, which I don't think has ever happened with airport revenue bonds, the airlines, as well as other users, actually pay for the construction and maintenance of the airport.  The airlines, contrary to popular belief, are not getting a free ride.    The only cost to federal taxpayers would be the tax revenue difference between tax free bonds and fully taxable bonds.  If the bonds were general obligation bonds, as opposed to the more common revenue bonds that are issued to build airports, local taxpayers could get stuck with some or all of principal outstanding in the case of a default.  And the U.S. Treasury would take a slight hit because the holder could declare a loss on his or her tax return.  The probability of such an event is rare.  Last year, for example, less than one per cent of the issuers of municipal bonds defaulted on them.  In fact only about one to two per cent of the issuers of investment grade corporate bonds, which are riskier than municipal revenue bonds, default on them.       As an example, if an airport board had issued recently $6 billion of fully taxable bonds, at the U.S. Treasury long bond rate, which today would be 4.375 per cent, the interest cost would have been $262.5 million per year.  Issuing tax free or municipal bonds, in the same environment (the average rate would be about 3.8 per cent) would have attracted an interest charge of $228 million or a spread of $34.5 million.  The difference could reduce tax revenues, but the exact amount would depend on the marginal tax rates of the investors.  If all of the bond holders were in the 35 per cent marginal tax rate, the annual loss of revenue to the U.S. Treasury would be $12.1 million a year.  The loss in tax revenue would be offset in part by a reduction in the business expenses of the users (airlines, general aviation, business aviation, etc.) and the airport vendors.  Because they pay lower landing fees and rentals, the airlines and vendors would have greater taxable income than would otherwise be the case, all other variables held constant.  And greater taxable income means more tax revenues for the national treasury.  The caveat would be if an airline or airport occupant loses money and, therefore, does not have any taxable income.  At the end of the day, the net reduction in taxable revenue is minimal.  In fact, depending on timing, allowing airports to be built with tax free bonds is probably a zero or nearly zero sum game.
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