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Mr. MONROE. Net investment, Mr. Avery, represents the actual dollar investment in the transportation facilities used in transportation service; it represents the investment in rolling stock and rights-of-way and everything that is utilized in the transportation service. That is the figure used by the Interstate Commerce Commission to determine the rate of return for rate making purposes. Mr. AVERY. Then, there is no distinction between them?

Mr. MONROE. The net comes into the picture because it is the investment less depreciation charges.

Mr. AVERY. All right. I see. Thank you very much. That is all, Mr. Chairman.

The CHAIRMAN. Mr. O'Brien ?
Mr. O'BRIEN. No questions.

The CHAIRMAN. Mr. Alger?
Mr. ALGER. No questions.
The CHAIRMAN. Dr. Neal ?
Mr. NEAL. No questions.

The CHAIRMAN. Well, Mr. Finney, I want to thank you very much for the statement you have made. I had one or two questions that I did want to ask.

Mr. Finney, I assume that Mr. Monroe will probably discuss this, and I do not want to unnecessarily delay the hearings, but this is the first information that we have had in the committee about the obligations of the railroad industry after taxpayments have been made.

Now, I understand that the total income-tax payments of the railroad industry amount to 31 percent. Mr. FINNEY. On average; yes, sir.

The CHAIRMAN. I had the impression that we had an overall tax of 52 percent on corporations.

Mr. FINNEY. Well, of course, some railroads do pay the 52 percent, Mr. Harris; and others do not pay anything. I am only giving you the figure that has been given to me by Mr. Monroe as the average paid by the industry, I think, for class I railroads, rather than the entire railroad industry. Mr. HALE. Will the gentleman yield? The CHAIRMAN. Yes, I will yield. Mr. HALE. You mean that the average of 31 percent of the income goes to taxes?

Mr. FINNEY. No, sir; I mean that the average income tax figure is 31 percent for all railroads.

The CHAIRMAN. I think that a very important question has been raised here, and the next question that I would have would be: Are the taxes greater or smaller on the railroads serving perhaps the less populated areas of the country than they are on the larger railroads serving the highly populated areas?

Mr. FINNEY. Ďollarwise, Mr. Chairman, they would of course each pay the same amount in retirement taxes. Their individual circumstances, I take it, would dictate whether they were hurt more or hurt less, depending upon whether they had income on which to pay the 52 percent or whether they had no income.

Some little railroads make a lot of money. Some big railroads do not make any money. You heard Mr. Bevan yesterday tell about the financial situation of the Pennsylavnia Railroad.

The CHAIRMAN. And some of us were very much interested in it, too, and I do not want to take the time to go into it, but some of us

NEF, 52 percent income thathat we have

have wondered if the class I railroads.generally do not have a higher rate of return than the Pennsylvania has, according to the charts shown here yesterday. I do not want to take the time to go into it now.

But the question that I raise here, which I would like to be informed on is this: Is it not a fact that we have individual railroads that will have a sufficient income that their taxes will be at the maximum rate of 52 percent?

Mr. FINNEY. Yes, sir.

The CHAIRMAN. And others will have an income such that their taxes will be nothing. Mr. FINNEY. Yes, sir.

The CHAIRMAN. Then, the burden here upon the railroads that have no taxable income would be much greater than it would be on the railroads that have income sufficient to require them to pay 52 percent. Mr. FINNEY. Yes, sir; of course.

The CHAIRMAN. Now, is there any way that we can get a breakdown of this to show how the various railroads throughout the country are affected by it?

Mr. FINNEY. I think that perhaps we could try to get together a list of the individual railroads and determine what their income taxes were, as paid last year.

The CHAIRMAN. I have not had time to look all of the way through this. Would that information be available in this annual report of the Railroad Retirement Board ?

Mr. FINNEY. I am almost certain that it would not. It would not be available in the report of the Interstate Commerce Commission.

Mr. MONROE. The annual report of the Interstate Commerce Commission, Mr. Chairman, would show the net income of the carriers and the Federal income taxes paid.

The CHAIRMAN. Of the individual roads? Mr. MONROE. Of the individual roads. But, of course, they have only usually the annual report for 1955. I am speaking of the annual report—the so-called blue book—not the annual report to the Congress. They do not show that in the annual report to the Congress.

Mr. FINNEY. It could be found in the individual report that the railroads make to the Interstate Commerce Commission.

The CHAIRMAN. Well, I think that would be helpful information if we could get it, because I think it is important to see how it affects the railroads in the various areas.

Mr. FINNEY. Mr. Monroe says that he will have his men in the Bureau undertake to see what can be developed.

The CHAIRMAN. If you would do that and present it to the committee for the record, we would appreciate it. (The statement is as follows:).

AssociaTION OF AMERICAN RAILROADS,

LAW DEPARTMENT,

. Washington, D. O., April 1, 1957. Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C. DEAR MR. HARRIS : When I had the privilege of appearing before your committee on March 26 to discuss proposed amendments to the Railroad Retirement and Unemployment Insurance Acts, particularly H. R. 4353, you asked if the committee could be informed as to the relationship of Federal income taxes to the net income of the individual carriers.

The Interstate Commerce Commission publishes each month a statement designated as “M–125," the second page of which shows for each railroad of class I, and for the regions as a whole, data relating to net income and Federal income taxes accrued. Based on that publication, issue dated December 1956, I, and for the regions as a whole, data relating to net income and Federal income taxes accrued for 1956 in relation to the net income reported for that same year.

I should point out that the net income of the railroads as reported to the ICC is, among other things, after normal depreciation charges whereas under regulations prescribed by the Internal Revenue Service it is after allowances for accelerated amortization of defense projects. The net income of the railroads reportable to the Internal Revenue Service is not available. However, the attached statement will indicate that, as I testified, Federal income taxes, for 1956, on the average, consumed 31 percent of the net income of the class I railroads as reported to the ICC. That ratio varies for the individual roads. Yours very truly,

GERALD D. FINNEY.

Percent Federal income taxes of net income reported to Interstate Commerce

Commission, calendar year 1956

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Percent Federal income taxes of net income reported to Interstate Commerce

Commission, calendar year 1956—Continued

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5.8 47.8 43.3 100.0

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Chesapeake & Ohio..
Norfolk & Western
Richmond, Fredericksburg & Potomac-

Virginian.-
Southern region, total.

Alabama Great Southern.--
Atlanta & Saint Andrews Bay..
Atlanta & West Point.
Atlantic Coast Line..
Carolina & Northwestern..
Central of Georgia ---
Charleston & Western Carolina
Cincinnati, New Orleans & Texas Pacific.
Clinchfield.----
Florida East Coast Ry...
Georgia RR.-lessee organization
Georgia & Florida -
Georgia Southern & Florida..
Gulf, Mobile & Ohio.
Illinois Central ---
Louisville & Nashville..
Nashville, Chattanooga & St. Louis.
New Orleans & Northeastern...
Norfolk Southern ------
Piedmont & Northern..
Savannah & Atlanta.---
Seaboard Air Line-
Southern..
Tennessee Central

Western Railway of Alabama..
Western district, total..
Northwestern region, total. ---

Chicago & North Western...
Chicago Great Western...
Chicago, Milwaukee, St. Paul & Pacific
Chicago, St. Paul, Minneapolis & Omaha
Duluth, Missabe & Iron Range ----
Duluth, South Shore & Atlantic-
Duluth, Winnipeg & Pacific.--
Great Northern...
Great Norueru-----------------
Green Bay & Western...
Lake Superior & Ishpeming --
Minneapolis & St. Louis..
Minneapolis, St. Paul & Sault Ste. Marie
Minneapolis, Northfield & Southern..
Northern Pacific
Spokane International...
Spokane, Portland & Seatt
Wisconsin Central...

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38.2 39.5 50.8 41.9 51. 5 25. 7 25.0 32.9

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Percent Federal income taxes of niet income reported to Interstate Commerce

Commission, calendar year 1956Continued

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1 Deficit or other reverse item. » Includes Atchison, Topeka, & Santa Fe Ry.; Gulf, Colorado & Santa Fe Ry.; and Panhandle & Santa Fe Ry.

3 Data not included in totals. Includes Southern Pacific Co., Texas & New Orleans RR. Co., and leased lines.

4 Effective Mar. 1, 1956, the reorganized Missouri Pacific returns include the Beaumont, Sour Lake & Western; International-Great Northern; New Orleans, Texas & Mexico; St. Louis, Brownsville & Mexico; and San Antonio, Uvalde & Gulf.

Source: Statement No. M-125 (December 1956) Bureau of Transport Economics & Statistics, ICC.

The CHAIRMAN. Now, you have been asked about the comparison of the present Railroad Retirement Act as compared with State and other systems. Is it true that the railroad industry has supplemental retirement programs for certain employees?

Mr. FINNEY. I have seen an analysis prepared in about 1950 by the Railroad Retirement Board that indicated that some 55 individual railroads had supplemental plans.

The CHAIRMAN. Well, that was in 1950 and this is 1957. Mr. FINNEY. I think, Mr. Harris, that all those 55 probably have been continued and there may be others in addition to the 55.

The CHAIRMAN. But you are not advised as to that?
Mr. FINNEY. No, sir.

The CHAIRMAN. Is there any way that you can provide us with the information ?

Mr. FINNEY. I might say this. I understand that Senator Morse has requested the Railroad Retirement Board to secure that information from the individual roads. I mean by that, each railroad has received a request from the Railroad Retirement Board to furnish information regarding its supplemental plan if it does have one.

We have no information in the association, and Mr. Schoene testified that his organization did not have that in their organization, and I think perhaps for that reason, it is now being collected.

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