Evening star. [volume] (Washington, D.C.) 1854-1972, 1920-08-22
BY JOHN B. SMALLWOOD.

- UBSTANTIALLY downward revision of
taxes should follow the recent action of
J the Interstate Commerce Commission in
granting big increases in passenger,
freight and other railroad rates.
And for that reason and others the increased
rates may we'll be expected to be followed by
a reduction in the cost Of living, paradoxical
as that may seem.
The probability that federal taxes such as
income and excess profits taxes, will be reduced
as result of the railroad situation comes
about from the fact that the United States
Treasury is being literally tapped to
make payments to the railroads under the
guarantee of the standard return during the
first six months after their return to private
ownership So that. in general way, the
rate increases take the place of the payments
from Uncle Sam.
Therefore, it is explained by railroad ex-
perts. the rate increases mean the collection
of this revenue directly by the railroads in
stead of by Uncle Sam through taxes. 1t will
soon be shown that the total rate increases
amount. in round figures, to the same sum
which the United States has had to collect in
taxes and pay to the railroads during the
guarantee period of six months. ending Sep
TENDER 1 next. With this load taken away
from the Treasury, it is logical to assume that
federal taxes may be reduced by at least that
amount
According to estimates which have been
made by DR.. J. H. Parmelee. director of the
bureau of railway economics and Washing
toms leading expert railway figures, the
rate increases just granted by the Interstate
Commerce Commission will bring to the rail-
roads additional revenues totaling s1.546 s51.-
PAT per year. These estimates. based on the
amount of traffic carried during last year, in
that the 20 per cent Of pas
20 Per cent asat for excess
hal fOr r1nro and
344; 20 per cent increase in milk rates. $4,537,-
296. and the average Increase of freight rates
of IS per cent s1.263525,6ao.
At first glance it would seem that this
taking about billion and half dollars
more out of the pockets of the American peo-
pie. But there is the other side of the pic
ture-the tax side. 1t is to be remembered
that by the terms of the transportation act
enacted by Congress at the last session the
United States guaranteed what is known as
the standard return or rental to the railroads
for six months after the railroads were turned
back to their private owners by the govern
ment. In figures. the standard return means
net profit to all the railroads Of the United
For instance. in March, according to the figures
reported to the Interstate Commerce Commits
railroads made net profit of about $4,000 900.
The government guaranteed $75,000000; there
between $14,O00000 and $75.000.0OO. or SOL
600, 900. In April. because of the outlaw"
strike of yardmen and other employees, the
railroads did not make expenses but ran about
$50. 200, 900 behind. Uncle Sam is required to
make up this deficit in addition to paying the
net profit of $75 000, 000-a total of sos 600 900.
Practically complete figures for May and June
show that the United States owes the railroads
s74.OOO,o0o for May and $55.0o0.oo0 for June.
For the four months for which the figures
nearly complete and accurate Uncle Sam is
known to owe the railroads about $295, 900 900.
Statistics not available for the remaining
two months of the six month guarantee period.
but railroad experts familiar with traffic
ditons believe that s40,oo0.Oo0 a month is a
conservative estimate of the amount the
United States must pay the roads. that figure
being lower than the results actually shown
by the other four months. That would bring
the amount Uncle Sam has to pay up to $685.
900, 900.
X X
But an addition must be made to that
amount. On July 20 the Railway Labor Board
considering the demands of rail workers for
increases in wages amounting to over billion
dollars, made a decision providing increases
totaling $s25, o00.o 900. retroactive to May 1, or
about $52,oo0.ooo a month, or $312, 100000 for
six months. To estimate properly what six