schlimm Sam1Corporations, including railroads, don't pay taxes. The pass any taxes levied on them to the people who buy their goods and services, unless they lack sufficient pricing power to do so. These days corporations are often not even liable for Federal income tax. Whether they are able to pass them on or not is not really relevant. In the 1950s, corporations contributed to nearly 1/3 of the revenue for Federal expenditures. Now that figure is less than 1/10 of tax revenue.
Sam1Corporations, including railroads, don't pay taxes. The pass any taxes levied on them to the people who buy their goods and services, unless they lack sufficient pricing power to do so.
These days corporations are often not even liable for Federal income tax. Whether they are able to pass them on or not is not really relevant. In the 1950s, corporations contributed to nearly 1/3 of the revenue for Federal expenditures. Now that figure is less than 1/10 of tax revenue.
According to Page iii of the FY13 Financial Report of the U.S. Government, which is the federal governments annual financial report, corporate income taxes accounted for $270.4 billion or 9.5 per cent of FY13 federal tax revenues.
Corporations are liable for more than income taxes. They pay excise taxes, property taxes, end use sales taxes, license fees, tariffs, etc. But they don't really pay any of these taxes. As noted above, they are passed on to the people who buy their goods and services.
The total tax bill for a corporation can be substantial. For example, in 2012 CSX - I am an investor - recorded $1.1 billion in federal and state income tax expense on $3.5 billion of operating income, for an effective tax rate of 31.9 per cent. Other taxes brought the total estimated tax bill to nearly 38 per cent of operating income.
Corporate income taxes have declined significantly as a percentage of federal tax revenues for a variety of reasons. Some of it is due to allowances, credits, and deductions. Some of it is due to globalization, which amongst other things allows U.S. corporations to keep more of their earnings overseas and not have them taxed until they are brought home.
One of the biggest reasons for the decline in the corporate income tax as a percentage of federal tax revenues is how corporations are classified for tax purposes. Today many corporations are S Chapter corporations, which means that they fall under a different tax category than was the case many years ago.
I don't remember off the top of my head, but in the 1950s I don't believe that S Chapter corporations existed. Almost all corporations, no matter their size, were classified as a corporation for federal tax purposes. Today, many smaller and medium size corporations are S Chapter corporations. The profits from these corporations flow through to the owners. They report them on their individual income tax returns, and they pay federal and state income taxes on their share of the profits. They are not part of the corporate tax take, although they would have been prior to the implementation of S Chapter provisions.
At the end of the day, however, the concept is the same. Businesses, including corporations, don't pay any taxes. They are passed through to the customer, unless the business lacks pricing power, in which case some or all of the taxes may be eaten by the owners (stockholders) and workers.
Phoebe Vet Where did you get the idea that the HOV lane, which has been in service for 10 years, has to be rebuilt? The contract only calls for converting it to an HOT lane.
Where did you get the idea that the HOV lane, which has been in service for 10 years, has to be rebuilt? The contract only calls for converting it to an HOT lane.
If my memory serves me correctly - I don't intend to read the article again, the Observer article said that the HOV lane, which was made possible by reducing the width of the other lanes, threw them out of compliance with the federal standards. To get the non-HOV lanes back in standard, they have to be widened, which will require the state to rebuild the existing HOV lane.
The cost of the current HOV lane is sunk, which is another financial concept that is difficult to grasp. It is gone, and it should not be considered in determining the best options rolling forward. The key question is what is the optimum option going forward. The NCDOT presumably has concluded that outsourcing the project to Cintra is the best solution. Without access to the analytics, it is impossible to know all of the elements that went into the decision.
C&NW, CA&E, MILW, CGW and IC fan
Dave
Lackawanna Route of the Phoebe Snow
Phoebe Vet While I do strongly object to the 50 year contract with Cintra, that was not the purpose of my post. I posted as an illustration of how much automobile traffic is subsidized. Cinta will incur all but $88 million of the $655 million construction cost but will get the authority to charge motorists to use both the one they are going to build and another lane that was built several years ago by taxpayers that is currently free to use. Even under those circumstances, they apparently need almost $10 per motorist to use 26 miles of road in order to operate in the black and are unsure enough that it will be enough that the contract provides for public guarantees of up to $75 million if traffic count projections are not met. Until Norfolk Southern backed out last week, the estimated cost of building the Red Line commuter rail along basically the same route was $452 million. Before you claim that it is always paid by user fees in fuel tax let me point out that there will be no refund of those fuel taxes for fuel burned on that private road.
While I do strongly object to the 50 year contract with Cintra, that was not the purpose of my post. I posted as an illustration of how much automobile traffic is subsidized. Cinta will incur all but $88 million of the $655 million construction cost but will get the authority to charge motorists to use both the one they are going to build and another lane that was built several years ago by taxpayers that is currently free to use. Even under those circumstances, they apparently need almost $10 per motorist to use 26 miles of road in order to operate in the black and are unsure enough that it will be enough that the contract provides for public guarantees of up to $75 million if traffic count projections are not met. Until Norfolk Southern backed out last week, the estimated cost of building the Red Line commuter rail along basically the same route was $452 million. Before you claim that it is always paid by user fees in fuel tax let me point out that there will be no refund of those fuel taxes for fuel burned on that private road.
I never have claimed that fuel taxes pay the total cost of the nation's roadways. Fuel taxes, fees, etc., according to the CBO, pay for approximately 45 to 50 per cent of the nation's roadways. The remainder comes from property taxes, tolls, excise taxes, sales taxes - in some states, and general fund transfers.
As noted in the Charlotte Observer article, the free HOV lane does not meet federal standards, and the Federal Highway Administration is requiring NCDOT to rebuild it. The cost of the out-of-compliance HOV lane is sunk. Accordingly, financial analysts don't consider it. The key question is what is the optimum solution going forward to upgrade the highway. Apparently the NCDOT believes that it would be more cost effective to have Cintra rebuild the lane than have the state do it. Without access to the contract between Cintra and the state, it is impossible to know for sure.
Roadways are not free, although many motorists believe that they are because they don't see the total costs of the roadways and how they flow through to the end user. They should! But given the political advantages of not showing them the true cost of driving, the politicians are not likely to show them.
Corporations, including railroads, don't pay taxes. The pass any taxes levied on them to the people who buy their goods and services, unless they lack sufficient pricing power to do so. In that case the taxes are paid by the shareholders and/or the workers. The notion that the workers may bear some of the burden of corporate taxes that cannot be shifted to the businesses' customers has been demonstrated in several scholarly papers that can be accessed on-line.
Here is how it works. A corporation pays property taxes, as an example, to a taxing authority (finance department), as per your example. The property taxes are a business expense. To cover them the corporation includes them in its pricing model. It then passes the property tax expenditure, which it rendered to the state finance department,on to the customers. How do I know? I was the chief accountant, amongst other things, for a Fortune 250 corporation for many years. I did it or had it done every accounting period.
If the North Carolina or any other state taxed highways, it would be taxing itself. Cintra would collect the tax, just like sales taxes, and pass it back to the state. Cintra would, however, as I noted in my post, be liable for any ad valorem taxes levied on its property, i.e. offices, lay-down yards, etc. The difference is between taxes levied on Cintra's off-road property and the roadway, which will be owned by North Carolina. Cintra's role, as I understand it, is to oversee the construction of the roadway and collect the tolls, which are designed to cover construction and operating costs, as well as provide a return to the company's shareholders. Cintra is owned by Ferrovial.
The notion that corporations and businesses don't pay taxes is difficult to grasp. Politicians know this. It is one of the reasons that they rail - no pun intended - against corporate loopholes, etc., and urge corporations to pay their fair share of the tax burden. If politicians were honest, which would be a stretch, the corporate income tax, as well as other taxes levied on corporations, would be eliminated. After all, at the end of the day, they are paid by people.
In 2012, according to the American Association of Railroads, the Class 1s paid $960 million in property taxes. During the same year operating expenses were $40.2 billion. Thus, property taxes were 2.29 per cent of operating expenses. Income taxes and payroll taxes were the big tax items for the Class 1s in 2012. They totaled $6.5 billion or 15.5 per cent of operating expenses.
Railroads don't charge themselves a user fee, where as highway users are charged a user fee in lieu of property taxes. And highway users don't pay property taxes because they pay user fees for their use of the highways. At the end of the day, contrary to popular belief, American motorists, for the most part, pay for the highways that they use. Whether the commercial users, i.e. truckers, bus operators, etc. pay their fair share is subject to sharp debate.
Those who argue that highways should be taxed overlook the benefit side of the equation. Highways have helped generate huge roadside investments, i.e. shopping malls, restaurants, auto service facilities, etc. They all pay taxes. If there were no highways there would be no roadside businesses. Also, if highways were assessed property taxes, they would be passed through to the end users in higher fees. Everything shipped by truck, which includes most food, medicines, clothing, etc. would increase in price. It probably would touch off a serious round of inflation.
Taxing highways is just not going to happen. It would be political suicide for any politician to suggest it.
Sam1 If Cintra were required to pay property taxes, it would collect them from the users and pass them through to the taxing authority. Just like my company collected sales taxes and passed them through to the state! It would be an accounting wash. ... Railroads pay property taxes, along with income taxes, inventory taxes, etc. They don't charge themselves a user's fee. Actually, the railroads don't pay any taxes. They are paid by the shippers.
If Cintra were required to pay property taxes, it would collect them from the users and pass them through to the taxing authority. Just like my company collected sales taxes and passed them through to the state! It would be an accounting wash.
...
Railroads pay property taxes, along with income taxes, inventory taxes, etc. They don't charge themselves a user's fee. Actually, the railroads don't pay any taxes. They are paid by the shippers.
Interesting and confusing logic. I don't see how you can compare property taxes and sales taxes.
With sales tax, the amount is separately displayed to the consumer and is in addition to the price paid for the product. Even in Europe where sales tax is included in the displayed price, we are all supposed to understand that x% of the item price is sales tax. The seller collects that tax and remits it to the government, in this case acting as a tax collector. Reporting is separate from other accounting.
Property tax is paid by a business based on calculations based on property owned, not amount of sales or other income. In other words, a railroad that owns a rail yard in Some City, would be required to pay property tax on that property, whether it actually generates any business from it or not. As I understand it, that was in part the motivation for railroads to remove extra tracks or even electrification, since the property tax was levied based on the property and if some tracks are gone or catenary removed, then the property is worth less and hence a lower tax bill.
While I would agree that the railroad property taxes ultimately come out of what shippers pay for shipping, I don't see any basis for claiming that railroads don't pay any taxes, but the shippers do. I think the Department of Finance in your locality would beg to differ as they obviously collect the respective taxes from the railroad.
In considering a level playing field for different modes of transportation, it must be a disadvantage for one mode to have to pay property tax on its physical plant, while other modes don't.
Sam1Those who argue that highways should be taxed overlook the benefits that good roads and highways bring to the country. Without I-35 the town that I live in would be a small hamlet. I-35 has helped turn it into a robust community of more than 55,000 people. Within a mile of the highway there are hundreds of businesses that otherwise would not be there. They pay all sorts of taxes. If it were not for the highways, most of central Texas would be mesquite ranch land. And the tax take would be minuscule.
All an integral part of a commonwealth, the basis of many of the original 13 states. And the same notion really applies to building a real passenger trains service.
Cintra will be required to pay taxes on the income that it generates from its road projects in the United States. It may also be required to pay some sales, excise, inventory, etc. taxes, and it will pay property taxes on any off-road facilities that it owns or rents.
Motorists (roughly 90 to 92 per cent of the population over 19 in 2011) pay user fees instead of property taxes. They also pay general taxes that flow into the general fund(s). A portion of these taxes flow back to fund the building and maintaining of the nation's roadways.
Governments recover the cost of the highways through direct and indirect user fees. Ultimately, motorists pay almost all of the cost of the nation's roads. It has been argued that people who don't drive are subsidizing those who do. This is true to a limited extent. The millionaire who lives in Manhattan and does not drive is subsidizing the roads. But most of the 8 to ten per cent of people who are not motorists are relatively poor. They cannot afford a car and, in many instances, they pay little if any tax.
Those who argue that highways should be taxed overlook the benefits that good roads and highways bring to the country. Without I-35 the town that I live in would be a small hamlet. I-35 has helped turn it into a robust community of more than 55,000 people. Within a mile of the highway there are hundreds of businesses that otherwise would not be there. They pay all sorts of taxes. If it were not for the highways, most of central Texas would be mesquite ranch land. And the tax take would be minuscule.
Phoebe Vet I don't think so.
I don't think so.
PHOEBE: Will Cintra pay property taxes ?
Phoebe Vet For a good idea how much the governments fund highway construction, consider Charlotte. I-77 north of Charlotte needs to be widened. The state decided to have a Spanish company build one new lane in each direction for 26 miles at their own expense. The state is throwing in $88 million and is going to give them the existing HOV lane, making 2 lanes in each direction toll lanes with the tolls being collected and kept by the contractor for 50 years. This is from the Charlotte Observer: "The lanes would be the first privately operated toll lanes in North Carolina. The NCDOT documents predict that Mooresville-to-Charlotte tolls will jump to at least $20 one way by 2035, according to the group. “The numbers just don’t make sense. I don’t see how it’s a viable option,” Huntersville Commissioner Danny Phillips said. “Very few people use HOV (high-occupancy vehicle) lanes now, and they’re free. What makes people think they will pay a toll that high to use them?” On top of that huge giveaway, the State has promised to make up any shortfall in the revenues. read more here: http://www.charlotteobserver.com/2014/06/23/4997844/study-predicts-9-to-11-tolls-on.html#storylink=cpy
For a good idea how much the governments fund highway construction, consider Charlotte. I-77 north of Charlotte needs to be widened. The state decided to have a Spanish company build one new lane in each direction for 26 miles at their own expense. The state is throwing in $88 million and is going to give them the existing HOV lane, making 2 lanes in each direction toll lanes with the tolls being collected and kept by the contractor for 50 years. This is from the Charlotte Observer:
"The lanes would be the first privately operated toll lanes in North Carolina.
The NCDOT documents predict that Mooresville-to-Charlotte tolls will jump to at least $20 one way by 2035, according to the group.
“The numbers just don’t make sense. I don’t see how it’s a viable option,” Huntersville Commissioner Danny Phillips said. “Very few people use HOV (high-occupancy vehicle) lanes now, and they’re free. What makes people think they will pay a toll that high to use them?”
On top of that huge giveaway, the State has promised to make up any shortfall in the revenues. read more here: http://www.charlotteobserver.com/2014/06/23/4997844/study-predicts-9-to-11-tolls-on.html#storylink=cpy
I am at a loss to understand what this has to do with finding the monies to fund dedicated passenger rail infrastructure in the United States. Having said that, there are two points that stand out in a quick read of the Charlotte Observer articles.
The HOV lane was built under a standards waiver granted by the Federal Highway Administration. It does not meet interstate highway standards, and the state is being required to bring it to standard irrespective of who pays for it. It appears the state is transferring the current value of the HOV lanes to the builder as a way to bring it in line with Interstate Highway standards.
Cintra expects to collect $13 billion in tolls over the 50 year contract period. The present value of the tolls is difficult to calculate because we don't know Cintra's average weighted cost of capital. However, if we use the average 30 year North Carolina municipal bond rate, which was 4.357 per cent on Friday, as per Fidelity Investments Bond Quotes, and is a conservative approach, the present value of the tolls is $1,477,563,876.
Cintra's estimated cost for the project is $567,000,000, before time lag accretion. If the project comes in at cost, Cintra would have an profit before expenses of $910,563,876. Out of this amount Cintra has to pay all of the expenses associated with operating the highway. One would need access to Cintra's cost projections to know what these expenses are projected to be. More importantly, this information would be required to calculate the company's return on equity and return on investment for the project. What appears to be a state give away may be far from it.
State officials have said that the state needs the investment of a private company because it couldn’t otherwise afford the project. The state expects to contribute $88 million toward the $655 million project, with Cintra paying the rest. In return, Cintra will receive toll revenues for 50 years.
This is the major reason why Texas is turning more and more to toll roads. The culprit, in part at least, is the Texas state legislator's refusal to increase the fuel taxes to cover the cost of the new roads needed by the state. I suspect the same situation may be present in N.C.
Outsourcing a highway project to a private contractor frequently has positive ramifications for the state's balance sheet. It depends to a large extent on how much debt the state is carrying. Some times shifting addition debt to an off balance sheet provider generates a better return for the taxpayers than if they paid for the project.
On top of that huge giveaway, the State has promised to make up any shortfall in the revenues.
Running passenger rail should be businesslike in terms of covering above the rail expenses and the capital charges for equipment. But the ROW should be treated like our highway infrastructure, which without a substantial increase in the gasoline tax, requires money from the general fund each year.
Dome Rider People, until Amtrak gets dedicated rail for passenger trains only, it is what it is. It's impossible to run an efficient passenger train system on freight railroad's tracks who don't want you there in the first place.
People, until Amtrak gets dedicated rail for passenger trains only, it is what it is. It's impossible to run an efficient passenger train system on freight railroad's tracks who don't want you there in the first place.
True! How you pay for a dedicated line is a key question.
Amtrak owns 363 of the 457 miles or 79 per cent of the NEC. Whether running over the portion of it that it does not own impacts negatively its train's performance is unknown.
In FY13 the NEC had an operating profit of $392.1 million before OPEBS and capital charges. After inclusion of these expenses, the NEC lost $202.6 million in FY13. The capital charges, i.e. depreciation and interest driven by capital expenditures (ballast, rail, poles and wire, equipment, etc.), made the difference.
The proponents of the high speed rail projects in the United States, at least, appear to recognize the impracticality of funding a new rail line from scratch. This is why, at least in part, they propose to use existing rights of way for most although not all of their high speed lines. Using existing rights of way does not mean that they propose to run their trains over existing rail; it means along side or over existing rail.
blue streak 1 We need to consider the structure of freight and passenger. 1. Ideal freight railroading is flat track but not more than 1% grades so a lot of curves ( many up to 5 % ) to accomplish that. 2. Passenger especially HSR does not like curves of what ( any more than 1 % ) but can handle 3 -4 % grades though not especially desired. So many of the mountain routes of present freight RRs do not work for HSR. An example is the NS route BHM -- ATL which has a present Crescent speed average of 40+ MPH on class 4 track. 3. Much of the ATL - WASH Crescent route is hilly. Scheduled Palmetto to Savannah takes almost 2 hours less than an almost equal distance to Gainesville, Ga. for the Crescent.
We need to consider the structure of freight and passenger.
1. Ideal freight railroading is flat track but not more than 1% grades so a lot of curves ( many up to 5 % ) to accomplish that.
2. Passenger especially HSR does not like curves of what ( any more than 1 % ) but can handle 3 -4 % grades though not especially desired. So many of the mountain routes of present freight RRs do not work for HSR. An example is the NS route BHM -- ATL which has a present Crescent speed average of 40+ MPH on class 4 track.
3. Much of the ATL - WASH Crescent route is hilly. Scheduled Palmetto to Savannah takes almost 2 hours less than an almost equal distance to Gainesville, Ga. for the Crescent.
HSR also does not like vertical curves, where the slope gradient makes changes. This came up in another thread where someone suggested replacing all the Conn. Shoreline NEC drawbridges with high level bridges. The bridge approaches would have to be so gradual that they would hardly get back to ground level, before they had to start the next gradual transition into the next bridge approach.
Dave: No, just totals are given on the Amtrak state reports.
The South East Corridor service will go from Raleigh to Petersburg on it's trip. The Carolinian could remain on it's current route, or the Piedmont could be lengthened along that route so those people could connect with the SEHSR route at either Raleigh or Richmond.
schlimm Wilson had boardings and alightings of 52,692 in 2013; Selma had 13,222.
Wilson had boardings and alightings of 52,692 in 2013; Selma had 13,222.
The Palmetto would still serve these towns.
How much traffic for the Silver Star and the Carolinian is generated in Rocky Mount, Wilson, and Selma? If the two trains were shifted, Wilson and Selma, unless the Silver Meteor began stopping there, would have no passenger service
Johnny
There are some creative proposals to use dormant rights of way for passenger service. In addition to the aforementioned Wolverine route, Virginia and North Carolina plan to resurrect the old SAL line as part of the Southeast High Speed Rail route from Petersburg to Raleigh. I am sure that CSX would love to see this happen since it would mean that two trains, the Carolinian and the Silver Star could be shifted off the increasingly busy A line in that part. They would also have an alternate route to use, if that is needed.
I think the closest it comes to this is the Wolverine Corridor. Amtrak and the State of Michigan own the track from just outside Detroit to Porter, IN. where it meets the NS Chicago line. Unfortunately the slog from there can bog down.
That statement may have some merit. If you check the NEC on Dixieland most times there is only 1 or 2 trains running more than 30 minutes late.
People, untill Amtrak gets dedicated rail for passenger trains only, it is what it is. It's impossible to run an efficient passenger train system on freight railroad's tracks who don't want you there in the first place.
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