> Could it be as traffic drops the Class 1's start to see more value in
> publicity surrounding steam trips as pressure to regulate increases?

While I'd love to see some mainline steam, and I'm always grateful to the UPRR for their program, I'm not sure what value the railroads would see in a steam program?

It's not like the 14% downturn is caused by trucks stealing the business. It's mostly due to less business, both domestic and especially foreign. Less folks are shopping, so less stuff is getting shipped, so less cans are moving. Simple economics, and not much that would change if you ran a steam special, or for that matter if you showed off a solar powered bio-fuel windmill locomotive that made energy while it ran. It's not that they aren't sold on railroads, they don't have as much to ship.

I think that the tax rate structure in 2010, 2011, and later is likely to have the most significant long term effects for the future of railroad museums, and for all other museums as well. The possibility of much higher tax rates in the primary tax-paying "under $250,000" group (including retirees) is going to greatly reduce the income available for charitable donations. In addition many current provisions are going to expire soon, increasing individual tax burden:

http://www.house.gov/jct/x-1-03.pdf

Most people are familiar with the statement accompanying 401K programs that says it allows you to defer taking your income until after retirement when you PRESUMABLY will be in a lower tax bracket. The way things are going with the economy, that "presumably" may not be something you can bank on any more.

PC

And I get confused what to do in times like this. Buy low sell high... so it's low so I need to sell, right? Urgh, economics is hard ;)



Urm. Do you actually understand the tax implications of the 28% thing? Right now, the caps are 50%, 30% or 20% of your adjusted gross income (depending on institution and asset type, it's a horrid tangle of law.) If you exceed the caps, you carryforward the deduction to the next year, and deduct it the next year.

Do you know anybody who donates 28% of GROSS income to charity several years in a row so he can't carry it forward? This might affect 0.1% of all donors. Wring hands all you like, it's not your problem.

As for why rail preservation loses, that's easy. We can't compete on a level playing field with real museums for funding, because on average, we suck. George W Bush bailed out banks to the tune of $700B, they bought foreign banks and handed out bonuses. If you did the same for rail museums, they'd spend it on acquiring equipment. In the rare instances when railway museums actually invest in their future (case in point several west coast museums' carbarns), funding comes from the unlikeliest of places, places that don't normally support rail museums. Because *finally* a rail museum is acting like one.

Now would be a good time for rail museums to act like museums.

I read it that the proposed 28% is the maximum rate of tax that you can deduct on whatever allowable donation is under the carry forward cap. So, if you are in a proposed tax bracket greater than 28%, you can only avoid paying taxes in the amount of 28% of what ever you donate under the carry forward cap, and not the higher rate that you paid on your income.
Are you registered to vote?
That last line was a commercial message from the Judge of Elections of Penndel Boro, Bucks County, Pennsylvania. It can be a lonely job.

I agree that this is the proposal. This means that someone who only makes $50,000 per year who somehow scrapes together $100 to donate to their favorite railway musuem ends up with reduction in net income after taxes of $85, since he is in the 15% bracket. That won't change. His rich friend who won the lottery and has an income over $350,000. used to be able to get a tax reduction of 35% (his tax bracket), so nets a cost of $65 for that $100 donation. The proposal is that he only gets a deduction of 28%, so he will net out at a $72 cost. It still will far more beneficial for higher income folks to donate, not to mention they can afford it much easier. Below an income of about $200,000, there is no difference in your proposed tax "rebate" for donations than what you get today.

Getting back to my point earlier in this thread, this is another issue that will hurt the "big guys" more than it hurts the average "blue collar" railway museum . I think we get a far lower percentage of total income in donations from people earning more than $200,000 that does your local art museum or symphony orchestra.

R. McDowell

See my post on the Pennsylvania Trolley Museum's infrastructure plans for this year.

We have also informally adopted a partial solution to the problem of overcollecting. Our carbarn space is limited to 47 pieces of equipment. In addition, space for outdoor equipment storage that is secure and not blocking access to any indoor space is limited to 3 pieces of equipment. When that limit is reached, any further aquisition will have to be matched by a disposition.

BTW, my favorite advice for most museums is by W. S. Gilbert.

"I've got a little list, they never will be missed"

"Urm. Do you actually understand the tax implications of the 28% thing?"

Yes and I have a license on the wall to prove it too. Do you?

Messr's Boylan and PJS have the meachanics substantially right, but the EFFECTS are what at issue.

It will affect more people more than you think because of the increase in marginal rates and what is sure to be sneaky bracket creep because all this nice fresh money coming off the presses is going to create inflation. Pretty soon, 200k will be the new 100k. I'm waiting for the next back-ended tax grap; suspension or alteration of limit indexing.

What you are basically saying is "hey, we subsist off paupers, so we won't be hurt, the big guys are going to be screwed hah hah". I don't think your theory of donor stratification is completely valid; but no matter, a reduction in one of the factors that drives aggregate charitable giving unfortunately works like differently than you propose because like many people who find economics "hard" you've committed the "ceteris paribus" (all things remaining equal) fallacy. Its pretty common-a specially bred form of bureacrat developed specifically to make this error (known as a "budget ANALyst"), will often present legislators with "analyses" of tax increases that assume that an X percent rate increate will result in an X percent total revenue increase, they don't account for substitition effects. (It works only if the demand is perfectly inelastic; but we haven't found that product yet; the closest thing we've found is insulin and that's generally tax exempt)

People and institutions don't sit idly by during change; necessity is the mother of invention.

What decreased giving among previously tax-incentivized high earners means is more like the following; It means the BIG BOYS will have an incentive to target YOUR paupers with THEIR slick marketing campaigns and their moving stories of human suffering. Quick question: Delbert has less money to donate this year, will he write the check to "save the orphans" or "save the choo-choo""?

The big 501c3's will still be diggin' where there's 'taters-and if the only 'taters are on your 40, they have a bigger shovel and they won't mind beating that ploughshare into a sword if they're hungry enough.

In a famine, the small, the weak and the old die more than the big and strong. If we "suck", we're in bigger trouble; especially if we fail to appreciate the nature and extent of the threat because of uninformed summary dismissals.

As for the banks; PNC bought NCC (both domestic) and Santander (Spain) bought Sovereign. They are about to get another 500b subsidy in the form of an FDIC bailout-and the original bailout was in part engineered by noted tax expert Tim Geinther, so sorry to break your bubble, but we have "bipartisanship"; which essentially means the wolves have decided about dinner for us sheep. Did ya' notice GW givin' Obama the secret Ivy handshake?

That's another issue; your bank fees are going to go up too. I work professionally with about 110, choice and service is down; fees are going up and new fees are being added.

What name is on the license? :)

OK, so I had the meaning of 28% wrong. Still, the effects you describe are even less severe than the ones I mistook it for. A guy who makes over $160,000 goes from 33% deduction to 28%.... or $500 on $10,000 donation. A guy in the highest bracket goes from 35% to 28%, or $700 on $10,000. I don't see how that's going to significantly deter a $10,000 donation. Might turn it into a $9500 donation... ok.


Perhaps it will help if you explain WHY this will be inflationary. I don't accept "government is printing money, this must be inflationary" because it pales by comparison to the many, many trillions of dollars that have been removed from the economy due to the collapse in the real estate, stock and credit markets. If anything I would expect deflation, and I doubt the government *could* print enough money to reverse that. I may be wrong - why?

*chuckle* Well if you have real-estate restrictions, then lucky you. Without them, such "must dispose to acquire" policies can boil down to the pieces staying on the property, just not officially in the collection anymore.

I certainly respect the PTM's achievement of such a high ratio of covered storage. When I talk about museums that suck, that wouldn't be PTM obviously. You know the ones I'm talking about; they've met none or few of the prerequisites to becoming a "proper museum" that can compete for funding. These museums tend to come and go ordinarily... I'd expect a surge of "go" because of the recession. Ironically, the remaining museums may see pieces of equipment becoming available at the very time they should focus on housing what they already have.

"What name is on the license? :)"

Certified Public Accountant

"Perhaps it will help if you explain WHY this will be inflationary. I don't accept "government is printing money, this must be inflationary" because it pales by comparison to the many, many trillions of dollars that have been removed from the economy due to the collapse in the real estate, stock and credit markets. If anything I would expect deflation, and I doubt the government *could* print enough money to reverse that. I may be wrong - why?"

While you might get a superficial understanding of the process by looking up "quantity theory of money", the mechanics of too many dollars chasing too few goods are generally covered in college courses entitled "money and banking", which generally requires a prereq of Calculus (or it did), introductory micro- and macro- economics.

That can't all be explained here.

But isn’t printed money fundamentally different than the money that has been removed from the economy due to the collapse in the real estate, stock and credit markets? I am thinking that the money lost was real money with real value, whereas printed money is, in a way, only symbolic without being backed or represented by the addition of true wealth. So when printed money is added, it is still chasing the same amout of goods and services that existed before it was added, thus the price for those goods and services must rise.

If we could simply print money to compensate for real losses, why could we not simply continue printing money to enrich ourselves into total, fulfilling prosperity?

Like this maybe?

http://research.stlouisfed.org/fred2/series/BASE

PC

This thread seems to have gotten off topic and/or political rather quickly.

Are rail preservationists so narrow minded that we cannot afford to broaden our horizons? I am finding this discussion fascinating, but usually when a discussion does start to involve issues relevant to the broader world around us it is quickly smothered. Everything is interrelated, and we ignore the outside world at our own peril.

The changes taking place in credit, taxation, and currency policy are going to have long term effects for the preservation community as well as for our own personal finances. Although most of us do not like what is happening in the financial world right now (and it is unquestionably depressing to read about it) these events are going to have substantial and lasting consequences for everyone.

There will be fewer museums and tourist railroads when this is all over.

PC