The Willamette River Case: Costs 223 



case, however, the problem is complicated by the fact that the rapid 

 amortization is computed for tax purposes only. It is not carried 

 over to reduce the rate base on which a utility is permitted to 

 schedule its power charges to customers. It has been used, rather, 

 to serve as an added incentive to investors to encourage more rapid 

 expansion of hydroelectric facilities than could be anticipated in 

 the absence of the accelerated amortization privileges. ^^ It is the 

 equity shareholder, in this case, rather than the power consumer 

 who is the beneficiary of the shifted tax burden. 



Here, as in the case of the nonfederal public body, the incidence 

 of the shifted tax burden by income classes is symmetrical with that 

 involving federal tax avoidance under public development and can 

 be similarly observed from Tables 39 and 40, depending upon which 

 of the tax models is assumed to apply.^^ 



Distribution of Costs by Regions 



Our analyses to this point have been principally concerned 

 with identifying the direction of the shift and the incidence 

 of the shifted tax burdens by income classes. It is also desirable 

 to analyze the shifted incidence in terms of the geograph- 

 ical dimension, since regional income redistribution is a significant 

 phenomenon of resource development expenditures. 



REGIONAL INCIDENCE;, ASSUMING TAX MODEL A 



In our consumption model of Chapter IV, we assumed that 80 per 

 cent of the reduction in taxes would come from an increase in 

 personal income exemptions and 20 per cent from a reduction in 



^ For the administrative ruling as to how the deductions under rapid amortiza- 

 tion are to be handled, see Federal Power Commission, Opinion No. 264, In the 

 Matter of Treatment of Federal Income Taxes as Affected by Accelerated 

 Amortization, Docket No. R-126, December 1954, pp. 5-6. 



^ It is recognized that the relevant costs and gains involved in tax shifting 

 where rapid amortization is concerned are only indirectly related to the differ- 

 ences in approach as to whether the reimbursable project features are to be 

 privately or publicly developed. They are more immediately related to the 

 associated policy of using accelerated amortization as an instrument of economic 

 policy to accelerate expansion of electrical capacity. 



