American icon Will Rogers said it well: “The only difference between death and taxes is that death doesn't get worse every time Congress meets.”
Well, a whole new political reality is unfolding in Washington, D.C. right before our eyes and the beltway policy crowd is optimistically brimming Will Rogers will perhaps be proved wrong and the government will do its part to ensure a better business environment. And not just on a more competitive tax rate, but on improvements to a host of other important issues that impact the railroad industry and its diverse customers.
At the same time, still lurking are policies that leaders should be wary of so as not to undermine the positive effects of growth-oriented legislation or executive actions.
With that in mind, the privately owned freight rail sector, which has invested more than $100 billion over the past four years into its network, is closely watching the following policy debates in the near future, in no particular order:
1. Tax reform: The rail industry and the business community remains laser focused on reforming a complicated and uncompetitive tax code last revamped in 1986. President Trump recently released his broad brush plan, which the rail sector supports with an equally broad brush.
Currently, the major freight railroads pay on average a 33.5 percent effective federal tax rate and that climbs to 37 percent when state taxes are included. Yet a more competitive business tax rate means a more competitive freight rail sector, which leads to more investments and a stronger network to serve customers and the economy.
If less constrained by a 35 percent rate – whether at President Trump’s 15 percent rate or higher – our sector could plow more money into our network to further modernize operations. This should be welcome news for policymakers and customers alike, as investments directly correlate with improved safety, productivity and shipping rates.
I believe tax reform will be enacted in some form and it will spur needed economic growth.
2. Regulatory Improvement: The business community is also watching efforts to streamline government processes and ensure that government agencies advance rules and regulations rooted in complete and sound science. The freight rail industry remains vocal about the need for performance based regulations – not command and control dictates that oftentimes undermine innovation that could lead to better gains sought by the government body at hand.
Leaders in both the U.S. House and Senate continue to analyze the issue, evidenced by an April 26 hearing held by House Transportation & Infrastructure Committee. Noting that since just 2000, the number of pages in the Code of Federal regulations governing railroads has ballooned from 719 to 1,240, Railroads Subcommittee Chairman Jeff Denham (R-Calif.) asked appropriate questions: “Are regulations based on sound science? Is guidance being used appropriately? Are the appropriate rulemaking processes being followed? Can performance-based regulations be more effective than command-and-control regulations in achieving safety goals while imposing less of a burden on industry?”
Leaders from the rail sector participated in that hearing, as well as at several others this year and the industry is hopeful that hearings will lead to legislation in the months to come.
3. Trade: Freight rail has made it clear that trade is the lifeblood of our industry, which of course serves nearly every industrial, wholesale, retail and resource based sector of the economy.
Recent AAR analysis found that at least 42 percent of rail carloads and intermodal units, and more than 35 percent of annual rail revenue, are directly associated with international trade. Approximately 50,000 domestic rail jobs, accounting for more than $5.5 billion in annual wages and benefits, also depend directly on international trade.
The situation regarding trade deals, specifically Nafta, remains fluid to say the least. Yet our industry’s view remains: Efforts that curtail overall trade would threaten thousands of U.S. freight rail jobs that depend on it and limit essential railroad revenues used to improve railroad infrastructure throughout North America.
Regardless of where the discussions go next, we will reiterate this loudly and fight for fair and open trade deals that put American workers first.
4. Truck Weight Limits: The industry is once more confronted with an effort by select truck shippers to increase federal weight limits beyond the 80,000 pound cap instituted by Congress in 1982. In addition to diverting rail traffic and upending our nation’s integrated logistics sector, such a move would further subsidize commercial highway users at the expense of taxpayers and inflict more damage to crumbling infrastructure.
With unrelenting interest across Washington and the U.S. to rehabilitate public roads and bridges, now is not the time to make things more complicated and expensive with heavier trucks. We are hopeful such measures will be rejected by elected leaders.