Evening star., 1921-05-24
Rate by Mail-Payable in Advance
MARYLAND and Virginia.
All Other States.
Obstacles to Immediate Merger.

Obstacles to Immediate Merger.
There are considerations which
immediate merger.
~ Denial Of the zone system OF
charges. which compels the passenger
to pay for the mileage of transporta-
tion which he enjoys, and the taxa
tion of gross earnings instead Of net
profits have so reduced the net profit
earning capacity Of the Washington
Railway and Electric Company that its
valuation for merger purposes, based
.in any large degree upon its present
apparent proft-earning capacity, Is
cut to a minimum. Compulsory mer-
ger on this basis Of valuation would,
the Washington Railway and Electric
Company claims, be unjust and con-
fiscatory. This company also balks at
immediate merger on the ground that
it's great prospective and potential fu-
ture assets do not enter sufficiently
into the calculation. These possible fu-
ture assets include the millions Inn
pounded or to be impounded. pending
the final electric light rate decision Of
the Supreme Court.
(2) Refusal by the community to
permit the zone system Of railway
rates, under which the passenger pays
for what he gets, and the wise refusal
to approve the charge Of different fiat
rates on the Washington Railway and
Electric and the Capital Traction on
their competitive urban lines. permit
the Capital Traction to charge for its
short urban hauls as much as the
Washington Railway and Electric Is
permitted to charge for its long urban
suburban hauls, and a fat rate which
merely pays the heavy operating ex-
penses Of the Washington Railway and
Electric Company puts excessive and
unsought profits into the treasury Of
the Capital Traction, with It's largely
urban trackage, and its much smaller
operating expenses. While the Cap
ital Traction Is not pressing for these
excessive and inequitable profits. it IL
naturally in no haste to cut OF their
receipt by merger, or to agree to any
merger which does not take into &C.
count its present abnormal profit earn.
ing capacity in fixing its valuation for
merger purposes.
Thus. under present conditions both
roads hold back from merger. Con-
gress. the Districts legislature, is
probably about to make equitable
changes In those conditions which will
tend to promote merger.
Most Washingtonians thing it wise
community policy, for well-understood
reasons. to retain the flat-rate system
for the District, but no thinking Wash
ingtonian contends that as between
an urban short line and an urban
suburban long line the system is equi-
table. AS an abstract proposition to
charge the long haul passenger no
more than the short-haul passenger is
obviously unjust. Apply a magnifer
to the discrepancies and differences Of
conditions of the two local systems
and a result may be conceived which
asserts that a fat rate for carrying q
passenger from Chicago to Denver by
road which terminates at Denver is
all that should be charged by another
road for carrying a passenger from
Chicago through Denver to San Fran.
cisco.
The taxation Of gross earnings,
without deduction Of actual oberating
expenses. is obviously ineQuitable in
the abstract, and results in its present
concrete application in taxing as high.
ly business which has oftentimes
been running at a loss as another
which in the same period has been
making excessively high profits.
The Districts legislature before tax
ing or otherwise legislating on the
basis Of net rather than gross profits
will, OF course, so regulate the deduc-
tions for expenses that no deduction
benefit is enjoyed to cover extrav.
agances or the cost Of mismanage.
rnent. When Congress assures itself
that the same principle Of wise liberal
ity and true economy Is applied in
the management of both roads, the
way will be prepared to tax eouitably
Sn net earnings.
II Congress should adopt tentatively
for the District the principle that the
rate Of car fare is equitably related to
the length Of the haul, and that IN.
Come taxation is equitably upon net
and not gross earnings. the action
would be just in itself, meeting the de.
rnands Of equity in the abstract, and
1t would tend to solve on eouitable
lines the local street railway problem.
For such legislation would tend tn
remove in respect to both railways the
apprehensions and the considerations
which are now obstacles in the way OF
speedy merger. After voluntary and
equitable merger had been brought
about in this way or in any other way
the Districts legislature could apply
TO the consolidated railways in the
general community interest a fiat rate
fare instead OF any zone system, and
could either continue to tax net earn
ings or change the method Of taxation.
if any change were found to be de.
manded by equity or in the community
interest.