“USPS’s legal constraints, along with the value of its implicit subsidies, and concludes that the USPS’s unique legal status likely places it at a net competitive disadvantage relative to private carriers.” source: Federal Trade Commission 2007 report

Fox News in an article on Congressman Darrell Issa’s letter to the American Postal Workers’ Union President Cliff Guffey urging him to take down an ad claiming: The TV ad, which started running this week, has a voiceover claiming U.S. mail delivery doesn’t cost taxpayers a “single cent” and is “funded solely by stamps and postage.”

The article is in response to “Oversight and Government Reform Committee Chairman Darrell Issa in a letter to the American Postal Worker Union (APWU) asks the union to cancel a misleading ad campaign that falsely claims the United States Postal Service (USPS) does not receive taxpayer support when it does, in fact, receive hundreds of millions of dollars of taxpayer money through preferential tax treatment and other benefits.”

Issa went on to say “A December 2007 report from the Federal Trade Commission includes a long list of implicit subsidies the Postal Service receives that are not available to private companies,” said Issa in the letter to APWU President Cliff Guffey. The letter notes that “the Postal Service is exempt from, among other items, federal, state, and local income tax, all state and local taxes (including property tax), and vehicle registration and titling fees.”

Now readers can draw their own conclusions but the excerpts from the Federal Trade Commission 2007 report stated the following:

As the foregoing discussion suggests, state and local taxes – such as income taxes, real property taxes, sales and use taxes, personal property taxes, and franchise taxes and fees –
cannot be assessed against the Postal Service, as a consequence of its status as part of the United States Government. By contrast, private firms such as Federal Express and UPS must pay a variety of state and local taxes, including “real property taxes, sales and use taxes, personal property taxes and income and franchise taxes.” Like private companies, however, the Postal Service must pay “specific service fees, such as sewage and water fees, which are measured by use.” Moreover, the Postal Service leases approximately 25,000 of its facilities – accounting for approximately one-third of its total interior square footage – and a portion of the rent it pays for these facilities covers the property taxes which the facilities owners must in turn pay to state and local governments. Furthermore, the Postal Service states that while private corporations, “including major Postal Service competitors, have a history of negotiating tax reductions or incentives in exchange for locating their operations in particular jurisdictions the Postal Service must serve all locations and by statute cannot lobby or negotiate for locational inducements or similar incentives provided by local governments or private parties.

Federal Income Taxes

Although the Postal Service has not in the past been required to pay federal income taxes, the PAEA established a new mechanism for imposing an internal tax on the income the Postal
Service derives from its competitive products. In particular, Title 39 now provides that beginning with fiscal year 2008 the Postal Service must “(1) compute its assumed Federal
income tax on competitive products income for such year; and (2) transfer from the Competitive Products Fund to the Postal Service Fund the amount of that assumed tax.

Section 3634 of Title 39 also prescribes the manner in which the “assumed Federal income tax” is to be calculated for each fiscal year and provides that the required transfer of that amount to the Postal Service Fund must be effected by January 15th of the following fiscal year. The Postal Service expects that the monies thus transferred “will help to defray the cost of universal service requirements.” One would also expect this provision to eliminate any advantage the Postal Service previously possessed, vis-á-vis its private competitors, as a
consequence of not having to pay federal income taxes on revenue derived from sales of its competitive products.

Furthermore, the Postal Service estimates that through 2016 it will have to pay OPM $5.4 to $5.8 billion per year to cover the cost of health benefits for its retirees. By contrast, private employers are not required by statute to prefund annuitant health benefits from company-sponsored plans. The Postal Service also states that it will have to pay OPM $250 million more per year than comparable private employers to cover the cost of the Medicare Part D program for Postal Service retirees.

… the USPS’s unique legal status appears to cause it to suffer a net competitive disadvantage relative to its private competitors. Although we estimate that the USPS avoids $39-$117 million in costs that private carriers pay due to its federal status and its borrowing advantage, we estimate that federally-imposed constraints on its operations cause the USPS to incur $330-$782 million in additional costs. Thus, even if the USPS were required to account for the value of the implicit subsidies that we have estimated, its legal constraints still would cause it to incur costs that are $213-$743 million higher than they might otherwise be, with the caveat that this range is based only on estimates of those burdens and benefits that we have been able to quantify.

Whether the USPS enjoys a net economic advantage or disadvantage by virtue of its unique status ultimately is irrelevant to the issue of efficient allocation of resources in the economy as a whole. It may be the case that the USPS’s burdens are greater than its benefits so that it is disadvantaged relative to its private competitors