Rails Lobby Against Budget Provision Raising Taxes to Fund Retirement Plan
The rail industry is lobbying furiously to scrap a little-noted paragraph in both Democratic and Republican budget proposals that would cost railroads and their employees at least $400 million over the next five years.</br></br>Almost lost in the politics of the budget negotiations is the proposal, which would substantially boost the taxes paid to fund retirement benefits for rail workers. The Bush administration has proposed the higher payments to help reduce what it estimates to be a $34 billion unfunded liability.</br></br>Supporters of the budget proposal want the rail industry to step up rail retirement contributions to reduce the risk that the federal government would eventually have to bail out the fund. But railroads say the higher taxes aren't needed because the retirement fund is financially healthy.</br></br>The "fund doesn't need the money," said Richard Briggs, executive vice president of the Association of American Railroads, a trade group. But budget negotiators are "trying to raise the tax as a gimmick to reduce the deficit."</br></br>Drew Lewis, former Transportation secretary who is chairman of Union Pacific Corp., has fired off letters to a half dozen congressional and administration budget negotiators calling the tax unfair and unnecessary. Mr. Lewis was co-chairman of a blue-ribbon commission created by Congress in 1988 to find ways to cut the federal budget deficit. Smaller railroads say they would be hit particularly hard. David Hughes, president of Bangor & Aroostook Railroad in Bangor, Maine, said he would have to cut capital spending 10% to pay the higher taxes.