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-percent (before income taxes) in 1957. The margin of revenues over expenses which this reflects is too narrow for financially sound operations. A ratio of expenses to revenues of 85 percent is generally considered by the Interstate Commerce Commission to be reasonable and necessary for this type of operation. One important fact, not generally recognized, is that the fares paid by passengers on regular scheduled bus operations are insufficient to meet expenses on a great many of the routes operated. In fact, the study made by the New England Governors' Conference showed that total regular-route passenger revenues were insufficient to meet total operating costs over the entire region. Wherever this is true, it is obvious that continuation of the essential regularroute service has been possible only by subsidizing it with revenues from charter operations and the transportation of mail and express. The governors and legislatures in the six New England States and in Iowa, Pennsylvania, New York, Ohio, and Michigan have become so concerned with the problem of maintaining the essential passenger service of the buslines that they have recommended, and in some cases effected, remedial measures in the form of tax relief for the carriers. A select committee of the house of the Michigan Legislature used the following language in strongly recommending tax relief for intercity bus operators: “It should be noted that there has been established in Michigan a comprehensive system of intercity motor bus routes over which individual carriers operated pursuant to authority granted by the Michigan Public Service Commission, but whose operations are coordinated through the medium of joint-line service so as to produce maximum service to the public. These carriers serve the entire State, and if it were not for their respective services, there would be many areas of this State without any form of public transportation of passengers and related traffic. Representatives of traveling, shipping, and receiving public appeared before this committee and testified as to the absolute necessity for maintaining this service and to the dire results which would befall this State if such service were to be discontinued. * * * Based upon the findings of facts hereinafter set forth, your committee concludes that both the local and intercity divisions of the common motor carrier bus industry of this State are in dire financial straits and that, if the government of this State as well as local units of government do not take immediate, progressive, and objective action, through the medium of tax relief, the above-quoted transportation policy of this State will be thwarted and the public interest * * * will be irreparably injured and eventually destroyed.”” The second implication in the railroad testimony is that bus companies are subsidized as a result of their use of highway facilities maintained at public - expense. Nothing could be more erroneous. The latest figures available to the National Association of Motor Bus Operators show that in 1956, class I intercity bus companies paid total State and Federal taxes of around $55 million. All other intercity bus operators are estimated to have paid another $10 million in taxes. Of the taxes paid by class I carriers, an aggregate of $29.7 million, or over 52 percent, represented special levies paid only by highway users. Attached to my statement as exhibit A is a table showing the taxes paid by all class I intercity bus operators per bus-mile operated for use of highways. The table shows that State and local taxes for use of highways averaged about 2.1 cents per bus-mile operated for all carriers in 1956 as estimated by the National Association of Motor Bus Operators. When other user charges, such as tolls, are added to this, the total charges average 2.5 cents per bus-mile. In addition to these taxes, the class I intercity carriers pay about $8 million ... annually (or 9 mills per bus-mile) for Federal taxes paid exclusively by bighway users. It may be added that Federal highway-use taxes paid into the highway trust fund alone average $540 per year for each bus operated by class I carriers. This takes no account of the other Federal highway use taxes paid into general funds. The $540 for a single bus is equivalent to the Federal highway use taxes paid annually into the highway trust fund by no less than 27 average private automobiles. Moreover, the average State highway use taxes per bus paid by class I carriers is $1,575 per year, exclusive of the $310 per bus paid each year as tolls. It takes the State highway use taxes paid by 34 average private
* Report of Committee on Bus Company Failures, Journal No. 16 of the House of Repre- sentatives, 68th Legislature, Lansing, Mich., February 7, 1957.
The proposed legislation thus would give rail carriers a devastating competitive advantage. It would allow them to charge lower rates than motorbus lines on the basis of out-of-pocket costs, even though their total costs exceed those of the buslines. In addition to giving them a rate advantage, it would leave them free to use below-cost rates (all costs considered) for competitive thrusts against their motorbus competitors. They enjoy financial resources which enable them to use such rates to cause ruinous revenue losses to buslines without any corresponding effects on their own overall financial situation. They would thus be placed in a position where they could make a temporary, selective use of below-cost rates in areas of competition with bus operations with the effect of driving buslines swiftly out of business with little damage to themselves.
We think the consequences of this legislation are clearly not consistent with national transportation objectives. For this reason and because of the injury to bus operators which could result from the legislation, we are opposed to this proposal by the railroads.
TRANSPORTATION EXCISE TAX
The railroads have recommended repeal of the 10-percent excise tax on amounts paid for the transportation of persons, and the 3-percent tax on amounts paid for the transportation of property. We fully support this recommendation for reasons which others have already given your committee in these hearings.
These taxes were wartime measures designed to discourage unnecessary transporation. It is indeed ironic that at a time of rising costs and declining revenues with a consequent need for greater sales, we are still faced with taxes intended to discourage travel. Both the buslines and the railroads need more than ever. before to promote interest in travel, and they need the benefits of increased traffic demand. The committee is no doubt aware that there developed strong and widespread sentiment in the first session of this Congress to repeal the transportation tax either outright or by gradual steps. No one has attempted to justify the continuation of this oppressive tax, and it has remained on the books only because of the general policy of holding the line against tax cuts. Any revenue lost by repeal of this tax would be insignificant compared to the shot-in-the-arm its removal would give the entire transportation industry.
COMPENSATION FOR MAIL
As I have said, intercity bus carriers furnish the only means of public transport to thousands of small communities in the United States. In connection with this service, they can provide a useful and needed service in transporting United states mails to these many small communities. The need for this service increaseS as the railroads continue to cut down on train services. These carriers are now carrying some mail, but they could do much more. However, they deserve some assurance that they will be properly compensated for the service, and they need relief from the cumbersome requirements of competitive bidding which now prevail. There are no statutory provisions for governmental regulation of mail rates paid bus operators. Rates are established in contracts with the Post Office Department. The Post Office Department naturally has an interest in keeping its expenses to a minimum. It has shown little concern for carrier costs for this reason. We strongly support the proposition that when the Government is a customer, it should pay compensatory rates. It should not be allowed to shop around among the various modes of transportation to obtain unduly low and noncompensatory rates. This situation can be corrected if Congress specifically prescribes a uniform policy which the Federal Government should follow in dealing with all transportation companies. The policy should require payment of rates which will cover costs plus a reasonable profit; and it should give all modes of transportation an Opportunity to participate in this essential service in accordance with the inherent transportation advantages of each.
TAXATION IN REGARD TO REPLACEMENT AND MODERNIzATION OF EQUIPMENT AND
The replacement and acquisition of equipment and facilities presents many problems to bus carriers as well as the railroads. Three proposals to give carriers some relief in this regard have been made to Congress.
Common carriers of general freight, 18t quarter, 1958 and 1957
2, 158, 327
15, 980, 013
Net income (or loss).
25. Intercity power-unit miles--common..
949, 979, 428
3, 315, 079 33, 075, 448 267, 944
1,010, 052, 989
3,563, 462 35, 971, 768 264, 889
Mr. ROBERTS. I believe that is all.
Mr. ROBERTS. Thank you, Mr. Pinkney. The committee will resume its hearing at 1:30 this afternoon. I believe the next witness at that time will be Mr. Robert J. Corber, National Association of Motor Bus Operators.
The committee will be in recess until 1:30 this afternoon.
(Whereupon, at 12:05 the hearing recessed, to reconvene at 1:30 p.m. of the same day.)
Mr. Roberts. The subcommittee will please be in order.
Our next witness is Mr. Robert J. Corber, National Association of Motor Bus Operators, Washington, D.C.
Mr. Corber, the committee welcomes you, and you may proceed with your statement.
STATEMENT OF ROBERT J. CORBER, COUNSEL, ACCOMPANIED BY HAROLD R. HOSEA, DIRECTOR OF RESEARCH, NATIONAL ASS0CIATION OF MOTOR BUS OPERATORS, WASHINGTON, D. C.
Mr. CoRBER. Thank you, Mr. Chairman. My name is Robert J. Corber. I am counsel for the National Association of Motor Bus Operators. My appearance today is on behalf of that association. It is the national trade association for the interstate motorbusindustry. It was our hope, Mr. Chairman, that we would have someone from one of the operating companies among the membership of NAMBO in making this appearance today, but it wasn’t possible in the time available. In lieu of that, I have brought with me two statements which were made on behalf of the national body before the Surface Transportation Subcommittee of the Senate Interstate and Foreign Commerce Committee during its investigation of the current railroad roblems. Those statements were made by Mr. Claude Jessup, who is the president and general manager of Virginia Stage Lines at Charlottesville, Va., and Mr. Arthur S. Genet, who is president of the Greyhound Corp. Both of these gentlemen are also directors of the national body. I would like to request, Mr. Chairman, that those statements be received in the record as a part of these hearings. They are, as I say, the statements of representatives of operating companies, and they are directed to matters under consideration by the subcommittee. Mr. Roberts. Without objection, the statements will be received. (The statements referred to follow :)
STATEMENT of NATIONAL Association of MotoR BUs OPERATORs
My name is Claude A. Jessup. I am president and general manager of Virginia Stage Lines, Inc., Charlottesville, Va., an affiliate of the National Trailways System. I am also a director of the National Association of Motor Bus Operators, I appear before your committee today on behalf of the National Association of Motor Bus Operators. NAMBO is the national trade association for the intercity motorbus industry. It serves as spokesman for nearly 1,000 carriers which account for about three-fourths of the intercity motorbus transportation in the United States. The intercity bus industry serves all the major cities in this country. What is even more important, it furnishes the only means of public passenger transport in thousands of communities which, for economic reasons, the railroads and airlines do not serve. The bus industry also supplies the only package express and firstclass pouch mail service in many of these communities. Service to the smaller communities is growing in importance with the railroads' gradual withdrawal of trains. At the present time, exclusive of mass commutation travel, intercity buses transport some 35 percent more passengers than the railroads. I might explain that my purpose here is not to belittle the seriousness of the railroads' plight or to attempt to throw roadblocks in the path of their efforts to obtain relief. Their testimony clearly indicates that they are rapidly moving