point as to who is the primary beneficiary of these low postal rates, the magazine and newspaper publishers, their advertisers, or the purchasers of these same publications. Analysis of the subsidy element involved in two of the nations largest magazines, and one of the most widely circulated newspapers, yields the following information. sidering the preferential treatment accorded first-cl points from original mailing to final delivery, even th does not pay rates which properly reflect the value of treatment. The Post Office Department has labeled the loss o third and fourth-class mail als "public service losses “identifiable subsidies.” The following talle provii breakdown for the years 1959 through 1969 for these It may be noted that the cost ascertainment figures themselves have at times come under attack as based on too small a sample of mail carried or services rendered, and thus as being inadequate, or sometimes in error. A common criticism is that costs allocated to firstclass mail are understated. On the other hand, the cost ascertainment system has operated continuously since 1926 and has received critical evaluation and support from many sources, both public and private. Third- and fourth-class mail are also carried at a considerable loss. Third-class mail consists of merchandise, printed matter, and other mailable matter not in first and second classes, not exceeding 16 ounces; and fourth-class mail is mainly parcel post. Other revenueproducing services which, in the past, have been carried out at a loss include registry, insurance, cash on delivery, special delivery, and money orders. In addition, the Post Office Department furnishes nominal-rate distribution of second-class mail delivered within the county of publication, and free reading matter for the blind. Since World War II, the only postal services which have almost always been carried on at a profit, based on calculations of the Post Office Division of Cost Ascertainment, are first-class domestic mail and postal savings. It has been argued by postal officials that con 1 This chart is based upon estimated figures provided by the Post Office Department. Unfortunately the cost ascertainment procedures followed by the Department do not yield more precise figures for specific publications. POSTAL PUBLIC SERVICES LOSSES AND COSTS, FISCAL YEARS 1959-69 In thousands of dollars) 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 38, 497 36, 400 48, 150 61,850 257, 221 276, 102 319, 210 345, 142 366, 630 405, 392 432, 340 14th-class matter for blind at l-cent-per-pound charge discontinued Jan. 7, 1968. Volumes are thereafter included in free-for-blind and handicapped, The relationship of these subsidies to the postal deficit as a whole since 1959 is shown below. POSTAL DEFICIT (VARIOUS BASES) AND IDENTIFIABLE SUBSIDIES, FISCAL YEARS 1959-69 In millions of dollars) 1. Total loss resulting from transmission of matter in the mails free of postage or at reduced rates of postage as provided by statute. 2d-class mail. Mailings of authorized nonprofit organizations 3d-class mail: Mailings of authonzed nonprofit organizations. 11,558 13, 262 19, 715 26, 356 58, 224 62, 694 87,454 94,073 97,736 113,760 106, 076 39 U.S.C. 4554: (a) Books 17.815 13,787 15, 987 21, 248 46,060 47, 125 55, 657 63,619 7,672 72, 373 89,012 99, 307 Pan American mail Pan American Union and Pan American Sanitary Bureau 74 68 82 86 167 134 156 231 228 202 156 Matter for the blind. Mailing at l cent a pound 69 57 87 73 95 203 71 82 85 142 4,798 II. Rural operations (10 percent of the gross cost of the operation of 3d-class post offices and the star-route system, and 20 percent of the gross cost of this operation of the 4th-class post offices and rural routes). 18, 235 Grand total. 605. 1 634.5 875.4 837.3 819.4 651.8 791.4 942.4 1, 147.0 1,020.8 1,022.9 36.4 38.5 48 2 61.9 16.2 Reported postal budgetary deficit. Revenue concessions from regular postage rates. Total identifiable subsidies. 257.2 8 276. 1 .8 319.2 73.7 .3 345. 1 71.5 .3 366.6 62.4 .3 405.6 92.5 .3 432.3 .9 1.0 .8 .8 28.4 73.4 70.8 119.9 119.9 412.9 447.6 514. 1 542.9 561.6 640.5 699.4 Budgetary deficit exclusive of identifiable subsidies. Add postal costs paid by other departments: Retirement fund accruals. 4.5 5. 2 6.4 6.9 5.4 2.8 Total paid by other departments 33. 3 33.8 36.9 44.4 discontinued Jan. 7, 1968. Volume thereafter included in free-for-the blind and handicapped. Source: Revenue Cost Analysis Division, Office of Cost Analysis, Bureau of Finance and Ad. It is possible to argue that the total deficit as shown i table understates the postal subsidy since losses in e especially second-, third-, and fourth-class mail, are o in part by the excess of revenues over apportioned services, especially first-class mail. Thus, in fiscal year of second-, third-, and fourth-class mails alone totaled compared with the total postal deficit of $605.1 mill total deficit resulted primarily from the fact that had revenues totaling $135.4 million greater than expenditures. On the other hand, the case can readily be made that reductions from the regular classes of mail that make the so-called public service costs considered by the identifiable subsidies but the class structure itself invol able element of subsidy. It is often argued that publi magazines, and newspapers, and bulk mail shippers matter are in effect subsidized by the low rates which : second-, third-, and fourth-class mails. It is, of cour assess the extent of this subsidy, and the degree to whic) of books, magazines, and other printed matter, as oppo lishers and other businesses sending mail out by secor fourth-class mail, are the beneficiaries of the existing ACCELERATED AMORTIZATION OF DEFENSE FACI Tax PURPOSES Among the identifiable subsidies, mail transportation subsidies were the major element through fi: al year 1953. The main elements in the postal budgetary deficit for 1959 through 1968 are indicated in the following table. 287. 1 POSTAL BUDGETARY DEFICIT, BY CLASSES OF SERVICE, FISCAL YEARS 1959 68 3d-class lin millions of dollars) jeu 2 Effective Jan. 7, 1968, all airmail over 7 oz. and 1st-class mail over 13 Oz. has been designated as 3 Includes free-for-the blind and handicapped. 4th-class matter for blindat l-cent-per-pound charge Granting accelerated amortization for tax purposes mary objective providing the incentive for rapid constru defense production facilities. However, there is a wides not manimous, belief that the provisions of the Internal allowing accelerated depreciation for tax purposes of con ects certified by the Government as being in the inter involve a subsidy. The extent of the subsidy ultimato (1) future tax rates, (2) the rate of return on investme available as a result of reduced taxes arising from t amortization, and (3) the changes in the value of the d rate tax rates and rates of return on investments are assi the same over 25 years, or over the normal operating lif being amortized, the corporation receives the benefi taxes for the first 5 years during which the facility is tax purposes, and bas, in effect, additional funds, cor interest-free loan, to use for increasing working capital, loans, etc., during that time. There is, however, less d able to the corporation in computation of its taxes a period during which the amortized facility has been corporate taxes are reduced in the future, the corporatio ties have been written off at the accelerated rate b corporate taxes are increased, the corporation would b taxes in the aggregate than if it had not obtained a ce cessity permitting it to write off its defense facilities at 1 rate. The difference in total tax payments under the ty is probably less significant in most cases than benefits will receive as a result of investment of funds availabl deferral involved in accelerated amortization of del 2d-class 303.5 Priority ?(116.8) Domestic airmail (21.5) 55.5) mail 1st-class (135. 4) (6.2) 1 Includes free-for-the blind for fiscal years 1965, 1966, and 1967. Total 605. 1 942.3 Fiscal year 1959. 1968. |