DECEMBER 3, 1947
GENEVA—Perhaps one of the most interesting subjects to be considered in discussing the question of nationalizing American railroads is how they are now regulated and how their taxes are distributed.
They operate under both Federal and State regulations, and they are also affected by city ordinances. The first regulatory Interstate Commerce Act was passed in 1887. Its purpose was to prevent discrimination. Laws and regulations are now concerned with freight and passenger rates, the publication of tariffs relating thereto, hours of service, safety standards, minimum wages, accounting, working conditions of employees, and so on.
No stocks and bonds can be issued, no railroad can acquire other railroads, new rail lines cannot be built and old ones cannot be abandoned without the authority of the Interstate Commerce Commission. Railroads are still regulated as a monopoly even though they now compete with many other types of transportation.
So much for regulation.
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Railroad taxes may be divided into three general groups:
- Federal normal income, surtax, and excess profit taxes.
- Taxes for pensions, social security, etc.
- State and local taxes on physical property, franchise taxes, excise, license and miscellaneous taxes, as well as state income taxes.
The annual tax bill of the railroads depends upon earnings. The taxes of Class I railroads prior to World War II varied from $237,000,000 to $396,000,000 a year. Naturally, during the war their taxes soared, but even in 1946 they were only a little short of $500,000,000. In many counties, railroads are the largest taxpayers. In 1946, Class I railroads paid $2.13 in taxes for every $1 paid in dividends.
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There is a trend towards consolidation of railroads just as there is in every other business in our country, but it goes on under careful regulation.
It is easy to see that it is competition which is the incentive for improvement of all private enterprise. If the railroads were owned by the Government, this incentive would disappear. And operation under the Government would be bound to have some political taint.
The main reason why I have chosen to look into railroads is because obviously nationalization in this field would be the entering wedge to widespread nationalization of industry. The Government would not be likely to permit competition from other forms of transport, and would therefore be prone to nationalize not only transportation but some of the essential elements which enter into the functioning of transportation.
Our country is very large, and we still have conditions which make it seem probable that, under private ownership, the railroads can be better and more cheaply run and can furnish the Government—Federal, State and local—with a substantial amount in revenue. In a later column, however, I shall cover the arguments in favor of nationalization, as presented by a labor leader.