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The 'hidden tax' that's in the mail


The Watchdog
Star Telegram


Most people assume that the 2-cent increase on first-class stamps and other postal rate increases that went into effect last month are needed to help a money-losing U.S. Postal Service.

More people are sending e-mails instead of letters. Gas costs have jumped for postal carrier vehicles. Labor costs are up.

"I guess it's just a cost-of-living increase," said Al Jara of east Fort Worth.

"Everything is going up," said Louise Smith of Bedford as she walked into the Grapevine post office. "The cost of stamps should go up, too."

But assumptions are sometimes wrong.

The Postal Service ended 2005 with a $1.4 billion surplus, according to postalwatch.org, which monitors the USPS.

Last month's postal increase has nothing to do with rising costs related to mail delivery.

The millions of dollars that will be raised from the price increase - and others recently enacted by the Postal Service - goes into the U.S. Treasury. How will the money be spent? Part goes to paying pensions of government employees. And the rest? Congress hasn't decided.

"It's a hidden tax," said Leo F. Raymond, director of postal affairs for the Mailing & Fulfillment Service Association, a trade group in Alexandria, Va., that represents companies that depend on mass mailings to do business.

Raymond told The Watchdog that he worries that the money could be used to prop up the federal budget. "It wasn't the Postal Service's idea," he said. "It was something they had to do."

Hearing this, Smith said: "It makes you kind of angry."

Jara said he is surprised to learn that the rate increases don't go toward postal service: "It makes me feel like we should know the truth. I'm probably like 95 percent of the people in Fort Worth who thought the same thing."

Stephen Seewoester, spokesman for the Postal Service in North Texas, acknowledged that most people don't understand the reasons for the latest rate increase, the first since 2002.

"Two cents is not a big item these days as prices are going up," he said. "So I think that people just tend not to pay attention when we're talking about two cents."

But 2 cents adds up, especially when you take into account the billions of items mailed each year and you add in the other increases that went into effect Jan. 8.

Priority mail jumped 20 cents to $4.05. Express mail jumped 75 cents to $14.40. Certified mail increased a dime to $2.40. Money orders were raised a nickel to 95 cents.

Raymond, who monitors the Postal Service for his trade association's members, said the reasons for the increase were not widely publicized.

"It's just too arcane," he said. "For something as pervasively important as the Postal Service, the average citizen is very uninformed about it."

Here's 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.

Suddenly, the Postal Service is expected to cover billions of dollars in new payments. Increasing mailing costs was the only way to do it, Postal Service officials have said.

The USPS is financially stronger than it has been in years. Not only did it finish last year with a surplus, but it also ended the year debt-free. A few years earlier, its debt was about $11 billion.

If the current system stays in place, Raymond said, postal customers can expect large rate increases for the next several years to fund escrow account payments and to pay benefits for military retirees.

But a solution is on the horizon. The House and the Senate have passed bills that would correct the problem and stop the new practice of using postal rate increases to prop up the budget.

In other words, Raymond said, no more hidden tax.

Both versions of the legislation now go to conference committee, where congressional leaders will meet behind closed doors to find a compromise.

What will happen?

"It could be anybody's guess," Raymond said. "Who knows? It could be better or it could be worse."

Research assistance provided by news researcher Cathy Belcher.

Dave Lieber's Watchdog column appears Sundays and Fridays.


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