Doctoral Dissertations
Date of Award
3-1983
Degree Type
Dissertation
Degree Name
Doctor of Philosophy
Major
Economics
Major Professor
Kenneth E. Quindry, P. David Qualls
Abstract
Most studies of the American transportation market concentrate on measuring the economic effects of regulating price and output levels and leave constant existing government taxing and subsidy policies. One of the most important of these policies is the way state and local governments levy property taxes on the railroads and their chief competition--regulated and exempt trucking firms. If the effective tax rate levied on a unit of railroad capital is higher than that levied on a unit of capital in the trucking industry one can expect differential effects on marginal costs, and potential shifts of traffic from truck to rail if rates are later equalized.
Given this "second best" environment the purpose of this dissertation is to answer the following three questions. First, under what circumstances will the use of the unit rule method lead to a higher effective property tax rate than a typical local appraisal? Second, is there empirical evidence to suggest that the unit rule method leads to higher rates? Third, if property tax rates are lowered, can this be expected to lead to a gain in efficiency in transportation markets.
Where earnings were capitalized in the appraisal process the sample means were found to be uniformly larger than the local appraisal. Thus the income approach to value under the unit rule seems to lead to a much higher value estimate than the local appraisal unless a high discount rate is used. The appraisal of a unit of railroad property probably exceeds in value the appraisal of a unit of property used by private or exempt motor carriers in Tennessee.
However, only under a very restrictive set of circumstances can one expect an increase in efficiency in transportation markets from the equalization of effective tax rates. These circumstances are the abandonment of value-of-service and minimum rate regulation; a large number of railroads serving the same market; rails being the low cost producer in the market; and close to perfect substitutibility between truck and rail services in the eyes of shippers. Reducing effective property tax rates on railroads will probably not improve net welfare but may still be justified on equity grounds.
Recommended Citation
Schoening, Niles Craig, "The economic consequences of valuing railroads for ad valorem tax purposes using the unit rule methodology. " PhD diss., University of Tennessee, 1983.
https://trace.tennessee.edu/utk_graddiss/13131