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Chutzpah

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Chutzpah

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On the eve of the Jewish new year, the railroads have given added meaning to the Yiddish term "chutzpah".  Ordinarily defined as nerve or gall, the railroads have managed to add offensive hypocricy.  On September 22, 2011, the Association of American Railroads joined the RATE - Reducing America's Taxes Equitably - coalition.  The sole goal of the organization is to reduce the corporate tax rate.  AAR joined the group after its members reaped millions of dollars of Federal financial assistance through the U.S. Department of Transportation's TIGER grants. Norfollk southern Railway received #104 million to assist it in developing its 2,500-mile Crescent Corridor domestic intermodal corridor.  CSX Corporation received $98 million for its National Gateway intermodal corridor.  They and the other railroads serving the Chicago gateway received $100 million to install grade separations and other rail lilne improvements.  The railroads willingly took all this money even as they were acknowledged to be among the Nation's most profitable industries.  And now they are calling for the reduction of the rate of taxes they have been paying.  Talk about chutzpah!

  • Accepting money from the feds is not mutually exclusive to wanting lower corporate tax rates.  I take advantage of every tax preference, deduction, and exemption to which I am entitled by law, but I see no "chutzpah" or hypocrisy in simultaneously wanting to see the tax code simplified and improved.  

  • Add up 104 million + 100 million + 98 million---what do you get? $302,000,000/4 hours equivalent of IMPORTED OIL purchases by massively subsidized US motorists, truckers and airline passengers...

    The best investment for the USA is railway infrastructure.

    Amtrak would really gain lots more passengers with a DELI CAR serving triple decker grilled Rubin sandwiches with a cream soda... would make great places for traveling minches and peddlars to pass the time.

  • Even when you're correct, Railwayist, and I'm not saying you are here, you are always a few ticks off.  Transportation exists to move people and goods from where they are to where they or someone else wants them to be.  Passenger rail is not for a lunch-hour snack.  And, as usual, you completely ignore the fundamental issue of who shall pay for it.  If a service is operating only because of a public subsidy, putting more fannies into more seats only increases the subsidy needed.  That's not a good model.  And where are these trains with their marvelous triple-decker Reubens going?  It seems to forgot that.  Perhaps they exist just as rolling restaurants that go out from a station for half an hour or so and then come right back.  Fun, but not good business.

  • This devolved from a post which was just a bit outlandish, but understandable as to how things might be perceived by the public to an advertisement for a luncheon train.  

    There are dinner trains and dinner cruises on boats.  Some even make money.  If RAILWAYIST believes that the market is there for a luncheon train, I am sure that there is some short line or branch of a Class I where he might be able to rent trackage rights and invest his own money to prove his idea is worthwhile.  That is entrepreneurship.  (I will believe that will happen when I see it happen.)

    More to the point, while the absolute numbers on income and ongoing expenses for a railroad are huge, and the profits are similarly huge, as a percentage and as an amount of return on what it would cost to build a railroad, they are a pittance.  In that they are like the pedictions NASA makes about where space debris will hit the earth.  They have difficulty locating it on a specific continent, much less within a mile or so.  But if one were a bombardier on a B-17 in World War II and missed the intended target by a mile very often, someone else would be soon calling "bombs away".  The B-17 is a much smaller operation than NASA.  Therefore, the amount of error allowable is proportionatly about the same, but the actual value is much different.

    The whole point of spending the tax dollars on the railroads is that it will cost less to buy infrastructure on the railroad than to add infrastructure with the same capacity to our highway system.  The railroad will also pay taxes on the land, and in some cases the other property acquired.  No highway pays taxes on the land, much less on other facilities.  And then the railroad will make a profit and pay corporate income taxes on that profit.  

    The point is fairness.  The rate of tax on railroad profits does not reflect the other taxes paid, except to the degree that those taxes reduce the profit.  I am sure that the other modes have gripes, too, about the other taxes that they pay, but some of the companies in those modes also are members of RATE, are they not?  

    Speaking of other taxes, the railroads are particularly hard pressed to change their operations so that taxes may be minimized.  If the Pennsylvania Turnpike raises tolls, many trucks can divert to the New York Thruway or Interstate 80 or 86 (formerly NY Route 17) if the cost is less for the alternate route.  If Pennslvania communities raise taxes on property between Pittsburgh and Harrisburg, that railroad will remain in place, because there is no alternate immediately available.  The old Erie line, the Southern Tier Route, simply does not connect to eastern Pennsylvania or New Jersey the way the old Pennsylvania Main Line does.  That is why, at one time, Conrail paid more taxes to the State of New York and its political subdivisions than all the other 14 or so government entities in which it operated COMBINED.  

  • State and local governments have a long history of levying discriminatory taxes on railroads - in large part just because they couldn't pick up their rails and move.  It was so bad that Congress banned the practice in the Railroad Revitalization and Regulatory Reform (4R) Act of 1976.  Ever since, various government entities have tried to get around the 4R Act, but the railroads have been able to defend themselves quite adequately.

    Even if we were to agree that railroads behaved badly and that led to the Interstate Commerce Act in 1887, I am at a loss to understand why our society has such a hate on for the railroads.  The U.S. and Canada are the only two countries of which I am aware that have private ownership of rail operations and rail infrastructure.  In the rest of the world, rail facilities are considered strategic assets of the state and are owned by the governments.  That allows some operators to claim that passenger rail service and/or high speed service is profitable.  English not being their mother tongue, they never consider the cost of the underlying infrastructure that is provided and consider a positive operating revenue to be a profit.  Lousy accounting, I say.

    The comments on truckers avoiding tolls, etc., are quite accurate.  And because truckers have no fixed assets, they also get different accounting treatment for their business.  Got a recession?  Just park some trucks.  Less driving equals lower fuel expenses.  All of a trucker's operating expenses come down and the company stays in busisness.  A railroad that parks locomotives and cars still has to meet the scheduled payments on its debt.  Truckers can have an operating ratio of 90 and even higher and still be profitable.  There is a technical term for railroads that have an OR of 90 and above.  It's called bankrupt.