222 MULTIPLE PURPOSE RIVER DEVELOPMENT 



$163,856 annually, would reverse, moving from the general tax- 

 payers to the private utility. Since there is a difference in the time 

 distribution of receipts and disbursements, the effect is similar to 

 the provision of a loan in five annual installments, the principal 

 of which is repaid without interest during the next forty-five years 

 in equal annual installments. This becomes clearer as we analyze 

 the problem further. 



First, when a private utility is permitted to enjoy a reduction in 

 tax liability during the first five years, consistent with the effects 

 of rapid tax amortization, by our method of approach, others are 

 assumed to be burdened with an equivalent increase in tax liabil- 

 ities. We have previously estimated that the social cost of this 

 change in tax burden is on the order of 5.5 per cent. Consider 

 the results, then, as a loan to the utility in the amount of 1 1,474,704 

 annually for five consecutive years, which bears an opportunity 

 cost of 5.5 per cent per year by the remaining taxpayers. After five 

 years, at 5.5 per cent compounded annually, this sum would be 

 equivalent to |8,230,457. If left unattended for the remaining 

 forty-five years, it would accumulate to $91,576,250. Actually, it 

 would not be left unattended; for part of this otherwise accumulat- 

 ing burden would be liquidated by the utility's increased tax 

 liabilities, beginning with the sixth year. These increased liabilities, 

 by our line of argument, would reduce the taxes required from 

 others, on which we assume an average marginal rate of 5.5 per cent. 

 Accordingly, the increased tax payments of $163,856 per year, 

 beginning with the sixth year at 5.5 per cent compounded annually, 

 would be equivalent to an accumulation of $30,169,030 by the 

 fiftieth year. This would leave a deficit, or shifted tax burden, of 

 $61,407,220 over the entire fifty-year period of the license. 



Now, since we are interested in the annual burden which is 

 shifted to the general public, we must ask what amount set aside 

 each year, and earning 5.5 per cent compounded annually over a 

 fifty-year period, would equal the accumulated deficit. This would 

 be approximately $249,000 — the annual amount of the tax shifted 

 from the utility to the remaining taxpayers. 



One aspect of tax shifting remains. When the reimbursable fea- 

 ture was assumed to be publicly developed — and therefore exempt 

 from federal taxes — we observed that power charges to consumers 

 of electricity would be lower and therefore assumed a shift in tax 

 burdens from power users to the general public. In the present 



