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Tax Law

State Net Capitol Journal – August 18, 2014; Federal High-Speed Rail Investment Generating Lackluster Returns

Budget & Taxes

FEDERAL HIGH-SPEED RAIL INVESTMENT GENERATING LACKLUSTER RETURNS: In his 2011 State of the Union address, President Barack Obama spoke of a future in which sleek bullet trains whisk passengers all about the country at speeds of over 200 m.p.h.

"Within 25 years, our goal is to give 80 percent of Americans access to high-speed rail," he said. "This could allow you to go places in half the time it takes to travel by car. For some trips, it will be faster than flying — without the pat-down."

But despite the federal government's having spent nearly $11 billion over the past five years to develop high-speed rail, the United States still lags well behind Europe and Asia.

Republican opposition has hindered some high-speed rail projects. GOP governors in Florida, Ohio and Wisconsin, for example, canceled projects after deeming them too expensive and unnecessary. But some also place blame on missteps by the Obama administration, such as providing high-speed rail funding for upgrading existing Amtrak service, which won't allow trains to go faster than 110 m.p.h., and initially failing to distribute such funding to the Northeast Corridor, possibly the most appropriate location for a high-speed rail network.

"The Obama administration's management of previously appropriated high-speed rail funding has been as clumsy as its superintending of the Affordable Care Act's rollout," said Frank N. Wilner, former chief of staff for the Surface Transportation Board, a bipartisan body that oversees the nation's railways.

But high-speed rail advocates remain hopeful.

"Once something gets built, then we're going to see more projects get going," said President Obama's first transportation secretary, Ray LaHood, who added that it took decades for the Interstate Highway System to be completed.

LaHood thinks California's planned high-speed rail network is the most likely candidate for success, although the 520-mile route connecting Los Angeles and San Francisco has been bogged down by legal challenges.

U.S. Rep. Jeff Denham (R-California), chairman of his chamber's transportation subcommittee on railroads, favors private rail projects proposed in Florida and Texas instead.

"High-speed rail can be a good idea; I just think it should be left up to the private sector," he said.

Even if all of those projects succeed, however, C. William Ibbs, professor of civil engineering at the University of California, Berkeley, said it's unlikely the United States will ever have a high-speed rail system like countries in Europe and Asia. He said countries with successful high-speed rail systems generally have higher population densities, higher gas prices and lower rates of car ownership.

"So it wouldn't make any sense to have a high-speed rail train in most areas of the United States," he said. "The geography is different and other factors are just too different."

Andy Kunz, executive director of the U.S. High-Speed Rail Association, however, thinks high-speed rail will succeed in the United States eventually.

"It's going to take some years after gas prices rise and highways fill up with traffic," he said. "It's going to happen because we won't have a choice." (NEW YORK TIMES)

NY ANTEING UP ON CASINOS AS POT SHRINKS: New York is upping its stake in the gambling business, with four full-service casino resorts likely to be approved this fall and open for business as early as next year. Supporters, including Gov. Andrew Cuomo (D), hope the expansion will provide a much-needed jump-start for long-stagnant regions of the state like the Catskills.

But some experts and casino operators warn that the once untapped Northeast is already suffering from intense competition, if not oversaturation. Connecticut's Foxwoods is cutting costs. Winnings have flattened or even declined in many places. And casinos in Atlantic City are closing.

"He's 15 years too late to the party," said Harold L. Vogel, a veteran gambling industry analyst.

Even if the state's casino gambit doesn't produce the upstate economic boost Cuomo is hoping for, however, it has already paid off in one way. Last spring, the governor threatened to license new casinos to compete directly with those of the state's Mohawk, Oneida and Seneca tribes unless they agreed to resolve longstanding disagreements over revenue sharing with the state. They did so, which has resulted in millions of dollars in additional revenues for the state (NEW YORK TIMES).

TAX CUTS WEAKENED WI ECONOMY? The left-leaning Wisconsin Budget Project released a report this month making the case that the unprecedented tax cuts mostly to top earners enacted by the state's GOP-controlled government have put the state in worse economic shape.

The report, titled "Breaking with Tradition: How Wisconsin Lawmakers have Shortchanged a Legacy of Investment in the State's Future," contends the cuts have come at the expense of public education and health care and haven't led to any meaningful increase in jobs. In addition, the report stated, the state's debt repayment costs have increased from 4 percent of general fund tax revenues — the state's traditional target — to 5.3 percent, as the state has borrowed money to pay for road construction and other major capital projects.

"Some lawmakers have said that these changes are necessary to help Wisconsin grow economically, despite the steep cost to our schools and communities," Jon Peacock, director of the Wisconsin Budget Project, said in a statement. "But the promised job growth hasn't materialized." (CAPITAL TIMES [MADISON])

BUDGETS IN BRIEF: Lottery revenues fell in MARYLAND for the first time in 16 years last fiscal year, which ended June 30. But while lottery revenues dipped 1.9 percent, the state's casino revenues more than tripled, netting the state $830 million in tax revenues, an increase of more than 27 percent from the 2011-2012 fiscal year (WASHINGTON POST). • The U.S. Securities and Exchange Commission ruled last week that KANSAS violated investment disclosure laws in selling bonds. The SEC said the state failed to adequately disclose the poor financial shape its employee retirement system was in when it sold $273 million worth of bonds in 2009 and 2010 (WICHITA EAGLE). • NORTH CAROLINA Gov. Pat McCrory (R) signed a $21.1 billion budget bill this month that makes adjustments to the second year of the two-year budget approved by lawmakers last summer. Among other things, the supplemental budget gives teachers and state employees significant raises for the first time in years (NEWS & OBSERVER [RALEIGH], STATE NET). • Washington County, OREGON and the city of Hillsboro have offered Intel an estimated $2 billion in property-tax breaks over 30 years to try to keep the company and its projected $100 billion expansion plans in the state (OREGONLIVE.COM). • A state appellate court in ILLINOIS upheld a lower court ruling barring a ticketing practice employed by the Chicago Bears enabling the team to avoid paying a portion of Cook County's amusement tax. The ruling puts the team on the hook for $4.1 million in back taxes (ASSOCIATED PRESS, CHICAGO SUN-TIMES).

- Compiled by KOREY CLARK

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