NCPA - National Center for Policy Analysis

HIDDEN TAX IS IN THE MAIL

February 24, 2006

Most people assume that the recent two-cent increase on first-class stamps and other postal rate increases are needed to help United States Postal Service funding. But assumptions are sometimes wrong, says Dave Lieber, who writes the Watchdog column in the Fort Worth Star Telegram.

Last month's postal increase has nothing to do with rising costs related to mail delivery. The Postal Service ended 2005 with a $1.4 billion surplus, according to postalwatch.org, which monitors the USPS. The millions of dollars that will be raised will go into the U.S. Treasury, not USPS.

Here is what happened:

  • Congress passed a law in 2003 that required the Postal Service to create a $3 billion escrow account, with the use of the funds to be determined by Congress at a later date; without this requirement, rates would not have been raised last month.
  • A second part of the increase relates to a new requirement that the Postal Service begin funding military pensions for former armed services personnel who either work for or are retired from the Postal Service; those payments had come from the federal Treasury through the Civil Service Retirement System.

The postal rate increase is really a hidden tax, says Leo F. Raymond, director of postal affairs for the Mailing and Fulfillment Service Association. If the current system stays in place, Raymond says postal customers can expect large rate increases for the next several years to fund escrow account payments and to pay benefits for military retirees.

A solution is on the horizon, says Lieber. The House and the Senate have passed bills that would stop the new practice of using postal rate increases to prop up the budget. Both bills now go to conference committee.

Source: Dave Lieber, "Hidden Tax That's in the Mail," Fort Worth Star Telegram, February 15, 2006.

 

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