Real Value of Postal Monopoly: $18 Billion a Year

The value of the monopoly enjoyed by the U.S. Postal Service is apparently far greater than previously enumerated–four times greater than the government estimate of $4.5 billion a year, according to economist Robert Shapiro.

In a forum on the future of the Postal Service at the Brookings Institution yesterday, the Georgetown professor and former chief of economic affairs in the Clinton Administration, applied an economist’s sharper pencil to the subsidies enjoyed by USPS and pegged them at closer to $18 billion per annum. “I’m not saying there’s a problem in the [government] accounting,” Shapiro said. “I’m just saying this is how an economist would conceptualize it.”

Government bean-counters underestimate the advantages gained by the Postal Service in competitive markets such as shipping due to its exclusive access to business and residential mailboxes. Because USPS’s package deliveries ride along on its regular delivery routes, and because other shippers like FedEx and UPS must deliver to customers’ doors, the additional burden on private shippers amounted to $14.9 billion in 2013, according to Shapiro.

Unlike those free-market competitors, the Postal Service is exempted from paying state and local property taxes. Based on a real estate valuation of $27.5 billion in 2012, the Postal Regulatory Commission put USPS tax savings for that year at $315 million. But a subsequent report from the Postal Service’s Office of the Inspector General assessed the fair market value of USPS properties at a much higher $85 billion. “At at average tax rate of 1.8 percent, that exemption produces a $1.5 billion subsidy,” said Shapiro (at left).

The Postal Service is exempt, too, from paying state vehicle registration fees, road tolls, fuel taxes, and parking tickets.

The Postal Service enjoys a particularly sweet deal from the IRS that doesn’t figure into the PRC’s calculations. USPS is required to pay taxes on profits it realizes from the sale of competitive products. The Treasury deposits those payments into something called the “Postal Service Fund,” which the Postal Service may freely access for the payment of any expenses. “So the tax payments circulate back to the Post Office,” Shapiro said. “That was $850 million last year.”

Above and beyond these calculations are the unrealized savings that USPS would be able to present to the U.S. Treasury were it forced to operate as a free-market player. “The Bureau of Labor Statistics found that, between 1987 and 2012, productivity at the Postal Service grew an average of seven tenths of a percent each year,” Shapiro said. “Private companies in shipping, storage, and delivery recorded productivity increases averaging 2.5 percent over the same years. By 2012 that higher productivity would have reduced [USPS’s] costs by $20 billion. That’s a lot of money.”

And that’s a lot to think about as the Postal Service, the PRC, Congress, and business mailers and shippers reshape the configuration of mail and package delivery in the years directly ahead.

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