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176 IRET Congressional Advisory 1 (2004)

handle is hein.taxfoundation/iretcgadv0173 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote growth and efficient operation of the market economy. July 15, 2004 Advisory No. 176 LEGISLATIVE PROPOSALS WOULD MODESTLY TRIM SOME HIDDEN GOVERNMENT SUBSIDIES TO POSTAL SERVICE Executive Summary Because the Postal Service is a government enterprise, it escapes many government-imposed taxes and fees that private-sector businesses must pay and possesses various other governmental powers. Bills fundamentally changing the laws governing the Postal Service have received unanimous committee approval and been sent to the House and Senate floors (H.R. 4341 and S. 2468). The bills, which have many similarities and some differences, would curtail several of the agency's government-based privileges, particularly in competitive markets beyond the postal monopoly. The government agency has ventured into many competitive markets, some of which are unrelated to traditional mail service, and has often sought to expand further in competitive markets. The Postal Service's indirect government subsidies are a drain on government finances, let the Service ignore some socially worthwhile rules of conduct, reduce the economy's efficiency, undercut competition, and lack transparency. Some of the bills' proposals in this area are to: place an internal charge (misleadingly called an assumed federal income tax) on the agency's competitive products; limit the Postal Service's exemption from the antitrust laws and remove its exemption from truth-in-advertising laws; limit its current exemption from zoning laws; and order a study by the Federal Trade Commission to examine remaining indirect government subsidies in the competitive products category. These proposed reforms would be worthwhile, but they are modest in terms of the Postal Service's current array of indirect government subsidies. Many additional improvements would be possible. For instance, neither bill touches the Postal Service's exemptions from state and local income taxes, property taxes on its multi-billion-dollar property portfolio, sales taxes on its products, or state motor vehicle fees. One provision that seeks to limit the Postal Service's subsidized borrowing would likely backfire and is examined in an upcoming paper. Unless that provision is fixed, it could encourage continued Postal Service overexpansion in competitive markets via subsidized interest rates. g~*I S I 66. 8 ~ee

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