EIGHTEENTH ANNUAL YEAR BOOK — PART VH 427 



30th was $406,000,000, which was greater than in any other year in their 

 history except 1916; and they made on the capital stock outstanding, 

 water and all, big and little, during the fiscal year ending June 30, 1917, 

 over nine per cent. That looks as tho they are facing bankruptcy, 

 doesn't it? 



Mr. Dawson: I would like to ask if the war excess profits tax is taken 

 account of in those figures. 



Mr. Thorne: I can answer you very positively that some of the roads 

 deducted it and seme of them did not, but none of them ought to have 

 done so. What is the sense in an excess profits tax being deducted in 

 order to find out their profits, and whether they are entitled to an advance 

 in freight rates? 



Mr. Dawson: AVhat I wanted to get at was whether there would be 

 anything left for the upbuilding of their roads after these excess profits 

 taxes were taken away from them. 



Mr. Thorne: The law is so framed that they can put the surplus back 

 into the property. You will find that these railroads in the eastern 

 district made enough last year to pay all their operating expenses and all 

 of their taxes, estimating all of their taxes for this year under the 

 laws of the country, to pay all of their interest on bonds and debt, to pay 

 all their dividends, and to put $39,000,000 into betterments and improve- 

 ments; and they had $145,000,000 unappropriated surplus left over. Now, 

 if they were not maintaining their properties properly, what is the 

 reason? Why didn't they expend the $145,000,000 that was unappropri- 

 ated surplus above all expenses and taxes and everything else? And the 

 previous year they had $147,000,000. Those two years showed the largest 

 unappropriated surplus in the history of the eastern railroads. They 

 are going into bankruptcy mighty fast, aren't they? 



I have here a statement showing the situation on the roads that handle 

 two-thirds of the traffic in the eastern district. I want to read the indi- 

 vidual roads to you, so as to show how terribly poor and poverty-stricken 

 they are. I heard somebody say last evening that we are too hard on 

 the railroads; that the Burlington Railroad is financially embarrassed. 

 Last year the Burlington Railroad made about 26 per cent on its capital 

 stock. They paid their regular dividend of 8 per cent and then on top of 

 that they paid an extra dividend of 10 per cent. Poor old poverty-stricken 

 Burlington! But here are the eastern railroads. 



The Bessemer and Lake Erie earned 29.23 per cent on its' capital stock, 

 and 9.45 per cent on its alleged property investment, which is the book 

 value. I have talked to you before about that book value and property 

 investment. You know how your book value can be adjusted up and down. 

 The Interstate Commerce Commission, in 1907, said that no court or com- 

 mission or accountant of any standing in the country would claim that 

 it had suggested even a remote degree either the original investment or 

 present value of a railroad property. Since then they have kept that figure 

 in a better manner, but every figure today has all the errors in it that 

 w'ere there in 1907; they did not revise the figure. Not only that, but it 

 has all ..dditions and betterments out of surplus since 1907. The Penn- 

 sylvania system alone has put $350,000,000 out of earnings into its property 



