(The Virginian-Pilot posted the following article by Christopher Dinsmore on its website on November 11.)
NORFOLK, Va. — Norfolk Southern Corp.’s No. 1 legislative priority has come to pass.
The American Jobs Creation Act of 2004, recently signed by President Bush, includes a two-year phaseout of the 4.3-cents-per-gallon “deficit reduction fuel tax” paid by railroads and tugboat operators.
“We use about a half-billion gallons a year of diesel fuel,” said William A. Galanko, vice president-taxation for Norfolk Southern.
Given the Norfolk-based railroad’s current consumption, the phaseout will save the Norfolk-based railroad about $21.5 million a year once it is completed in 2007.
The Association of American Railroads estimates that the industry has paid $2.1 billion under the tax since it was enacted in 1990 to help reduce the federal budget deficit. While the trucking industry also paid the tax initially, its share was subsequently diverted to the highway trust fund.
Railroads, which pay for their own infrastructure, cried foul.
“Starting at that point, we felt it was an unfair tax, and we’ve been trying to get it removed since then,” Galanko said.
Eliminating the tax has been the top priority for Norfolk Southern ’s lobbying efforts, company officials have said. The railroad spends about $2 million a year lobbying Congress and several hundred thousand dollars more on campaign contributions in each two-year election cycle.
While Congress has tried to eliminate the tax several times since 1999, the legislation hasn’t passed for unrelated reasons. The phase-out made it into the tax relief bill, which includes millions in tax cuts for various industries, signed Oct. 22 by Bush .
In its position statement against the tax, the Association of American Railroads argued that eliminating it does not amount to corporate welfare or a tax break for the rail industry. “Repeal of this tax would provide equitable relief for an unjustifiable and anti-competitive tax,” the association said.
The American Waterway Operators, the association for tugboat and barge operators, also lobbied for the tax’s repeal. It estimates the tax’s elimination will save its members about $20 million a year.
The fuel tax is being phased out rather than eliminated outright because of budget constraints.
The tax will be cut to 3.3 cents a gallon on Jan. 1, then 2.3 cents on July 1. It will be completely repealed 18 months later, on Jan. 1, 2007.
Galanko estimated that Norfolk Southern would save about $8 million next year.
“Given the increase in oil prices this year, this is relatively small,” he said. “But it’s not insignificant.”