Further & More


Transportation Deregulation: The Benefits Roll On

With airline deregulation in 1978 and bus deregulation in fits and starts since then, it's a new marketplace in transportation. The well-known lower air fares for travelers aren't the only benefit. Bus fares, too, have come down in the new, competitive environment.

Ticket prices on Greyhound Lines, the nation's largest bus operator, have dropped by two-fifths since airline deregulation, The Economist recently reported. And with lower air fares drawing off long-haul passengers, "the average distance of a journey on Greyhound buses has fallen by two thirds." The competition has taken a considerable toll on the bus line: last year, Greyhound lost $1.4 million on its bus operations (though that loss was greatly offset by profits from other of the company's diversified operations).

But Greyhound's loss doesn't mean that bus service itself has suffered. To the contrary, some 2,000 independent—and profitable—bus lines have sprung up since airline deregulation to serve smaller communities that airlines found it unprofitable to serve in the deregulated climate.

Fortunately, Greyhound is responding to the new competitive pressure not by calling for reregulation but by restructuring its business. The firm is experimenting with franchising its operations to the new, independent carriers, offering them the use of the Greyhound name and facilities in exchange for a fee and a percentage of revenues—a market solution to a new marketplace.

Sales Tax Selling

With Washington debating a score of "flat-rate" income tax proposals that are actually far from flat, Bob Poole suggested in his April editorial ("Flatter Than Flat") that a far better alternative might be replacing the income tax with a sales tax. He is not alone in that view. The case for a national sales (or value-added) tax has been cropping up lately in noticeable places.

Economist Wassily Leontief, a Nobel laureate, argued in a recent New York Times op-ed piece for replacing the personal and corporate income taxes, "riddled with inefficiencies and fraud," with a general sales or value-added tax. Leontief, like Poole, pointed out that this would provide new incentives for savings and investment. And even though he is often considered a Keynesian liberal, Leontief attacked corporate income taxes as "inefficient" and said that they "fall ultimately on people."

In a Wall Street Journal letter to the editor, Michael Bazdarich, vice president of the Claremont Economics Institute in California, reiterated this view. "A truly efficient, non-distorting tax system would be one with no corporate income tax and no personal income tax," he said. Instead, it would feature a "personal consumption tax, which exempts saving from tax and taxes income of any type only when it is consumed."

Similarly, Emory University professor Peter Fong argued on the New York Times op-ed page for a 13 percent national sales tax. This would be "the fairest levy," he said, because "it taxes what you take from society (consumption), not what you contribute (earnings)." Unlike the mode of collecting income tax, a sales tax would be "pay as you go, anonymous and dossier-free."

Towering Decision

The Federal Aviation Administration (FAA) recently decided to contract out to private operators 130 of its air traffic control (ATC) towers at smaller airports. Fourteen will be contracted out this year, and the remainder will be turned over to private operators at a rate of about 15 per year.

In REASON's May 1983 issue, airline pilot John Doherty detailed how private ATC operators at a dozen airports throughout the country perform as effectively as FAA operators but at dramatically lower costs ("Towering Entrepreneurs"). Indeed, an FAA spokesman told REASON that the agency expects private operation to save at least 25 percent on traffic control costs at the 130 targeted airports.

And More

? Computing the benefits. Last fall, REASON reported on the growth of, and hostility to, computer home work ("Telecommuting: Will the Plug Be Pulled?" Oct.). Since then, the Wall Street Journal has reported a consulting firm's estimate that the telecommuter population could grow to 7.2 million this year. And in an interview with the newsletter Telecommuting Review, futurist Alvin Toffler—himself a former unionist—called the AFL-CIO opposition to telecommuting "criminally absurd." Soon afterwards, Los Angeles Times columnist Sam Hall Kaplan mentioned in a column that he was writing at home on his personal computer, and he wondered, "Am I violating the local zoning code that specifically prohibits a commercial use in a residential zone?"

? Bonds oversold? Industrial-development bonds have been peddled in the Lone Star State as a panacea for unemployment and economic stagnation, but as Michael Berryhill reported last December ("How the Rich Get Richer in Texas"), they're ordinarily little more than an elaborate subsidy that benefits well-to-do Texans. Evidently, other states are having similar experiences. Oregon official Joseph Cortright recently testified that his state's 10-year-old bond program resulted in less than a third of the new jobs originally promised, while the state lost $1.4 million because of increased borrowing costs.

? No place like home. Evidently taking a cue from British Prime Minister Margaret Thatcher and Rep. Jack Kemp (R–N.Y.) ("How to Change the Facade of Public Housing," Trends, Oct.), Fidel Castro's government has enacted a new law that makes renters of government housing into homeowners. Even Marxist-Leninists can evidently appreciate the virtues of private property on occasion. "Now the population, being homeowners, will feel more responsible for maintenance and repairs," government official Eugenio Balari explained to the Los Angeles Times.