2009-02-28

High Speed Rail = Higher Taxes. Any questions?

High speed rail means higher income or sales taxes. If you don't believe me, check out the tax rates of countries that have high speed rail. What follows is a February 26th editorial in the Toronto Star , and my comments. 

The governments of Ontario, Quebec and Canada are moving forward – albeit in slow motion – on a high-speed rail link.
If the $3 million feasibility study announced this week has a familiar ring to it, that's because Premier Dalton McGuinty keeps proclaiming it in old railway hotels: nine months ago at the Chateau Frontenac in Quebec City and 13 months ago at the Chateau Laurier in Ottawa, both times alongside his Quebec counterpart, Jean Charest.
Back then, McGuinty mused: "This has been talked about for quite some time, but every once in a while there's an idea whose time actually comes." Comes and goes, actually.
High-speed rail has been coming to the Windsor-Quebec corridor for the past 35 years, which is when the first report was submitted – followed by 15 more studies. The latest iteration will essentially review and update the previous ones, notably the $18 billion pricetag from a 1995 study – about $24 billion in today's dollars.
For all the stops and starts, times have truly changed: The price of oil is destined to have us over a barrel again in no time, and there is growing pressure to curb carbon emissions. About 60 per cent of the country's population resides in the Windsor-Quebec corridor, where highways are rapidly turning into parking lots and airports are plagued by delays. The idea of halving the rail travel time from Toronto to Montreal to two hours on an electrified right-of-way is improving with age.

So how does cutting travel time cut carbon emissions? Explain that to me please. And apart from a very few long weekends (when trains would be full anyway), the highway from Montreal to Toronto is clear sailing. Halving travel time is great, working five times as many hours to pay for your ticket (vs. bus or regular train), not so much.

The rise of private-public partnerships also makes the daunting pricetag easier for taxpayers to digest, especially if built in stages. High-speed rail has proven profitable in Europe, and studies have shown there is high potential demand in the Montreal-Toronto leg.

Profitable to whom? There is no rail line outside the UK that is profitable. If some lines generate a small operating profit, they are completely overshadowed by the debt required to build the line and buy the trains. 

We may already be paying a heavy price for the past year of intergovernmental foot-dragging on high-speed rail. Quebec waited many months before tendering the latest feasibility study, which is only now getting underway. Were it shovel-ready by now, this infrastructure project would provide a timely economic stimulus. Regardless, high-speed rail stands on its own merits and is long overdue.

McGuinty worries that "the Prime Minister is not as much of a fan on this score," and indeed federal cabinet ministers have been unenthusiastic. After so many years and so many studies, this project needs strong leadership at all levels. If Canada continues to hesitate over high-speed rail, it risks being left in the dust.

Who drives the buses that transit on the 401? Who flies the planes? Where are the buses made and where are the planes maintained? Ditto for the current trains, which would presumably be replaced by the high speed trains. 

I love high speed trains. But I also love Ferraris and Lamborghinies. If you want to take a high speed train, use the tax savings of not having Canadian high speed rail and go to Europe, Japan or Shanghai.

And remember, even if you are a student and don't pay taxes, higher rail ticket prices will mean less choice, not more. 

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