240 MULTIPLE PURPOSE RIVER DEVELOPMENT 



federal agency is a sole supplier in most instances and hence is in 

 a position to monitor the resale provisions and other contract terms 

 governing power rates, the level of returns to investment in the 

 distributors' operations, and similar resale contract provisions. If 

 we assume that most of the rural co-operatives' distribution ends 

 up as rural domestic consumption, close to 60 per cent — as a 

 weighted average — of federally developed power sold to local public 

 bodies ends up in uses to satisfy final demand. Accordingly, the 

 regional incidence of the corresponding portion can be fairly 

 accurately estimated. Since these gains represent increases in real 

 income without any corresponding increases in money income, 

 there will be no partially offsetting increases in federal income tax 

 liability of the beneficiaries in the region. Thus, the income gains 

 associated with final consumption remain in the region. Since 

 about 22.5 per cent of such sales to public bodies was estimated to 

 end up in final consumption (Table 48), the real income gains 

 would amount to about 22.5 per cent of the difference in annual 

 operating costs under the three alternative approaches. Comparing 

 the federal and local private operations, the gain would amount to 

 approximately $335,000 annually. 



The ultimate distribution of gains associated with that part of 

 preference customers' purchases which are sold to commercial and 

 industrial establishments cannot be as easily located. Doubtless 

 some of these gains will appear as increased profits and, therefore, 

 factor returns to the capital invested in these enterprises. Consider 

 this to be on the order of 55 per cent.^ The regional distribution 

 of that part of these gains that does not represent increased federal 

 income tax liabilities depends on whether these firms are "home- 

 owned" or represent corporate enterprises whose equity shares are 

 distributed largely outside the region. We will assume that such 

 enterprises are predominantly home-owned, and that the propor- 

 tion of extra-regional ownership is only on the order of a quarter 

 of the total equity shares. If these assumptions are reasonable for 

 purposes of illustration, what can we say about the distribution of 

 gains associated with the resale of federal power to regional estab- 



» We employ for this purpose the assumption that the shares of the gains 

 would be similar to the 55, 12, and 33 per cent distribution respectively to 

 capital, labor, and the consumers as in Chapters IV and VII. See R. A. Mus- 

 grave, J. J. Carroll, L. D. Cook, and L. Frane, "Distribution of Tax Payments 

 by Income Groups: A Case Study for 1948," National Tax Journal, March I95I. 



