Amtrak

By the 1960s, many railroads were struggling, and Congress created Amtrak in 1970 to take over their unprofitable passenger services. Today, Amtrak operates passenger rail in 46 states over a 21,000-mile network. Amtrak was supposed to become self-supporting but receives large ongoing subsidies.

A half century after governments helped kill private passenger rail in the United States, we remain stuck with a mismanaged government-owned rail company. Congress prevents Amtrak from operating efficiently and ending its many money-losing routes.

Freight rail provides a contrast. The industry was deregulated in 1980, and government-owned Conrail was privatized in 1987. Since then, freight rail has thrived with competition, innovation, and productivity growth. The success of US freight rail shows that deregulation and entrepreneurship, not endless subsidies and state ownership, are the ways to turn around troubled industries.

Congress should privatize Amtrak and deregulate passenger rail so that entrepreneurs can pioneer new ways of running passenger services. Private passenger rail could be successful in some parts of the country, but we should let consumers and markets determine where rail makes sense for intercity travel.

Amtrak provides a cautionary tale about federal ownership of businesses. In railways, it has led to mismanagement, investment misallocation, and bottomless taxpayer support. Once politicians entrench themselves in an industry, it is difficult to restrain their penchant for micromanagement.

The rise of automobiles, buses, trucks, and airlines in the 20th century challenged railroad freight and passenger services. Railroad passenger volume plunged from over 25 billion passenger miles in the early 1950s to 6 billion by 1970. By the 1960s, numerous railroads faced bankruptcy. The problem was not just new competition but also damage from far heavier tax, regulatory, and labor union burdens than those imposed on other transportation modes.

The federal government grabbed control over railroad rates, or pricing, with the 1887 creation of the Interstate Commerce Commission (ICC) and then expanded the agency’s powers in the Transportation Act of 1920. The ICC established minimum and maximum rates and approved or denied rate changes.

A Department of Transportation (DOT) report in 1977 found that rate regulations “handicapped the railroad industry, particularly in the period following World War II, in its efforts to respond to strong competition from the newer [transportation] modes.” The ICC pursued supposedly “public goals”—such as helping farmers, trucking, and depressed industries—that came at the expense of railroads.

The Congressional Budget Office (CBO) found, “Railroads were finding it increasingly difficult to compete with trucks.… To keep from losing business to truckers, they needed to be able to reduce the rates they charged on high-value shipments, such as manufactured goods, a market in which trucking was making inroads. The ICC prevented the railroads from doing that.”

Similarly, the DOT noted, “Federal economic regulation hindered the railroads in their attempts to adjust rates to meet competition from the trucking and waterway industries.… While much of the traffic of the railroads’ competitors was unregulated, railroad rates were often maintained at artificially high levels.”

Facing competition, the railroads needed to cut low-value routes, but the ICC and state authorities blocked such changes. Even for proposed route adjustments that were ultimately approved, the bureaucratic process could take two to four years. Railroads were “plagued by excess capacity” because of government barriers to shedding services.

The DOT found, “At a time when flexibility and quick-reaction would have most helped the railroads, the ICC moved at a very cautious pace following traditional policies.… Rail line abandonment became a contentious, costly, and protracted procedure.” The federal government also restricted railroad mergers, further undermining the industry’s ability to adapt.

Rail scholar Randal O’Toole pointed to another regulation that undermined railroads—a 1951 ICC rule on passenger rail speed. The ICC limited train speed to 79 miles per hour unless railroads adopted expensive new signaling equipment. O’Toole argued that the cost of the new equipment was too high, and so railroads slowed their trains, which made them less competitive with automobiles and buses. By the 1930s, some new passenger trains were capable of 100 miles per hour, but the federal speed limit ended such innovations and killed an important advantage of rail.

Railroads were used as cash cows for governments. In 1924, Time magazine noted, “Railroads have long been a favorite source of tax revenue, not only to the federal government, but to all of the 48 states.… It seems to railroad men particularly unfair that much of the money taken from them in the form of taxes has been spent to furnish free rights of way in the form of new roads, to such competing forms of transportation as motor trucking.”

Property taxes were the largest tax burden on railroads. The burden was not shared by automobiles, buses, trucks, or inland waterways, which used government infrastructure. Railroads built their own infrastructure and then paid high taxes on it. A Brookings Institution book cited in 1966 congressional hearings found, “Rising property taxes in postwar years imposed costs on railroads far in excess of any parallel general tax confronting their competitors, and contributed to increases in railroad rates, hardly a good competitive strategy for a hard-pressed industry.”

Railroads owned large amounts of taxable property, and the states typically taxed railroad property at much higher rates than other property. A report prepared by the Joint Economic Committee in 1968 stated, “Because railroads own their own rights-of-way, and because of frequent discriminatory assessment of railroad property, property taxes on railroads are very high relative to those on other types of transportation.”

Railroads paid heavy corporate income taxes, which reduced earnings for reinvestment. The statutory federal corporate income tax rate averaged 51 percent in the 1950s and 1960s, and effective tax rates on corporate capital were also high. Effective tax rates on capital-intensive industries, such as railroads, were high because asset depreciation rules were unfavorable.

In 1958, tax law professors James Gidding and Arnold McKinnon noted that “the situation of the railroads would not be so serious were it not for the fact that these reduced earnings are further depleted by high taxes, including the federal income tax, and for the fact that the amount of the railroads’ income subjected to tax is increased by outmoded depreciation concepts.… A large part of the railroads’ financial problem is caused by the combined effect of high income tax rates and low income tax depreciation allowances.”

Railroads and their employees pay higher federal payroll taxes than other industries. Railroads are covered by a retirement system that the Railroad Retirement Board oversees, separate from Social Security. The industry pays Tier 1 taxes, similar to Social Security taxes, but also hefty Tier 2 taxes. The DOT reported that “the railroads have clearly had to bear a heavier payroll tax burden than the other [transportation] modes. Per hourly wage earner, the railroads have been required to pay approximately twice as much as other modes for federally enacted employee benefit programs.”

While governments have long subsidized infrastructure for highways, aviation, and inland waterways, railroads have generally funded their infrastructure without government assistance. While other transportation modes contribute excise taxes to fund their infrastructure, railroads used to pay excise taxes that funded general government. The railroad industry was “burdened from 1942 to 1958 by a federal excise tax on freight waybills and from 1941 through 1962 by another federal tax on passenger tickets.” This was “a highly unfavorable time to be taxing a rapidly failing mode in the name of raising general tax revenues.”

Airlines paid federal taxes on passenger tickets to fund aviation infrastructure, and road users paid federal fuel taxes, which after 1956 were used to fund highways. But the railroad “waybill and ticket taxes were, of course, levied for general revenue purposes and were not regarded as user charges. In effect, however, they were a tax on the users of the railroads, and it is fair to say that the railroad mode received no direct Federal aid in return.”

The union share of the US nonfarm workforce peaked in 1953 at 33 percent and then fell, but the union share of the railroad workforce was long more than 80 percent. Labor unions created rigid work rules that made it difficult for the railroads to adjust to the changing economy. The Railway Labor Act of 1926 solidified a union structure based around employee crafts, with each craft having specific work rules.

A 1977 DOT report pointed out that an “enormous body of specific work rules divid[es] the responsibilities of the numerous individual railway unions and specific labor categories within those unions, which affect both operating and non-operating employees.” Disputes over job responsibilities were “numerous and elaborate,” and the pay scales were “extraordinarily complex.”

Inflexible labor union structures kept railroads stuck in the past. A 1978 DOT report found, “Operating policies and procedures dating back to the era of steam locomotion and telegraph communication still remain in effect, resulting in many outmoded practices.” A 1980 Government Accountability Office report noted that in “the countless provisions of labor contracts that govern how labor is used on railroad engines and trains, the assignment of employees to their daily tasks, and the intricate formulas by which they are paid—have the effect of increasing operating cost. In addition, work rules have the effect of restricting productivity.”

All these government burdens created damage; by the 1960s, railroads were struggling. Congress created Amtrak in 1970 to take over passenger rail and created Conrail in 1973 by taking control of numerous bankrupt freight railroads. Freight rail was subsequently deregulated in the 1980 Staggers Rail Act, and Conrail was privatized in 1987. But the government still owns and mismanages the nation’s passenger rail system.

Amtrak is a for-profit corporation with the government owning virtually all stock and appointing the board of directors. Policymakers “expected the company to become self-sufficient and operate as a private entity without subsidies within a few years.” However, Amtrak has never earned a profit and relies on continuous taxpayer subsidies.

In 2025, Amtrak had revenues of $4.2 billion, expenses of $6.1 billion, and a net operating loss of $1.9 billion. More than $400 million of the revenues were operating and capital subsidies from the states; thus, passenger rail finances are further out of balance than Amtrak’s operating loss suggests.

Amtrak had been receiving about $2 billion a year in federal subsidies. During the COVID-19 pandemic, Congress provided Amtrak an extra $3.7 billion in aid. That was followed by an overall $66 billion rail outlay over five years in the Infrastructure Investment and Jobs Act of 2021, of which $22 billion was for Amtrak directly and the rest for federal and state rail grants.

Amtrak says that its 2025 passenger volume of 34.5 million trips was its highest ever. But that figure is small compared to annual intercity bus passengers of 62 million and annual domestic airline passengers of 971 million.

Amtrak has a repair backlog of over $84 billion, and the company’s Office of the Inspector General (OIG) reports that its stewardship of assets is poor. The backlog underlines how unsound Amtrak finances are—not only is the company losing money, but its assets are also deteriorating from a lack of maintenance.

Let’s examine some of Amtrak’s operational failings first and then examine the company’s capital investment failings.

Only three-quarters of Amtrak trains are on time, with long-distance trains performing the poorest. Less than one-third of all routes meet Amtrak’s standard for customer on-time performance. These problems stem both from trains running on congested freight routes and from Amtrak’s own failures, including equipment breakdowns.

In 2025, Amtrak had 21,700 employees earning an average $142,000 a year in wages and benefits. Collective bargaining agreements cover 83 percent of Amtrak’s workforce. Labor unions tend to raise costs and reduce productivity by protecting poorly performing workers, pushing for excessive staffing levels, and resisting cost-saving innovations. Recently, railroad unions have resisted new technologies for track inspections.

Former Amtrak head David Gunn complained that workers from different union crafts were not allowed to share work on maintenance projects, which reduced efficiency. A 2019 report by Amtrak’s OIG looking at the company’s maintenance facilities found that “current labor agreements also limit the company’s staffing flexibility, which results in inefficiencies and additional costs.”

Amtrak’s OIG says that one of the company’s “high-risk fraud areas” is “employee wrongdoing.” Workers make false claims for such items as hours worked, which the OIG says regularly leads to “convictions, employee terminations, and resignations.” And workers take fraudulent medical leave and abuse the health benefits system. In 2025, auditors found “a widespread scheme in which at least 119 current and former employees conspired with New York health care providers to bilk Amtrak’s health care plan of more than $12 million.” The volume of such scams prompted the OIG to lament the “troubling workforce culture” at Amtrak.

A 2026 analysis in Trains examined how “equipment failures still plague Amtrak routes.” The piece discussed “railroad congestion; hours-long delays resulting from grade crossing collisions; and numerous locomotive failures.” It noted that “delayed departures, or breakdowns shortly after leaving a terminal on time, are happening frequently.”

A 2025 analysis in Railway Age discussed how Amtrak’s long-distance network “is suffering mechanical, personnel, and performance setbacks on an almost daily basis.” The setbacks include “locomotives malfunctioning en route or before they even leave the station. Reduced speeds due to weather conditions or freight train congestion. Departures delayed on account of no rested crews. Coaches and sleeping cars having inoperable climate control or toilets. Dining cars unable to serve meals. Late trains getting later or being annulled altogether.” Passengers have also been complaining about Amtrak’s poor Wi-Fi connections for years.

Failures of Amtrak’s aged electrical systems are causing major disruptions. In February 2026, a 60-year-old electrical component failed on the Pelham Bay Bridge, which shut down services north of New York City for half a day. Similarly, the New York Times reported on how a circuit breaker explosion in 2024 halted rail traffic between Philadelphia and Connecticut for hours. The explosion “showed that much of Amtrak’s vulnerabilities along the Northeast Corridor can be traced back to the system’s astonishing age and long-outdated technology.”

Amtrak’s capital investment is misallocated and mismanaged. The Congressional Budget Office noted that even in the 1970s, it “became evident that Amtrak would be guided by politics as much as by business decisions.” That is still true. Congress requires that Amtrak run money-losing routes, and it imposes “Buy America” policies on procurement, which raises equipment costs.

Amtrak’s routes are grouped into three service lines. The Northeast Corridor (NEC) between Boston and Washington, DC, carries 44 percent of Amtrak trips and includes the Acela and Northeast Regional trains. Outside the NEC, state-supported routes are shorter (up to 750 miles). They carry 43 percent of trips and are subsidized by state governments. Long-distance routes (more than 750 miles) carry 13 percent of trips and typically run only once a day.

On the NEC, Amtrak owns four-fifths of the track and runs electric locomotives. On the rest of the network, Amtrak owns the trains, but freight rail companies generally own the tracks. Outside the NEC, the trains are generally diesel powered.

Amtrak’s NEC routes earn operational profits, but nearly all other routes do not. Table 1 shows service line data for 2025. The NEC routes earned $349 million, while the state-supported routes lost $232 million and the long-distance routes lost $623 million. Without the state subsidies, the state-supported routes lost $560 million.

Amtrak’s long-distance routes account for just 13 percent of riders but most of Amtrak’s operating losses. In its 2025 annual report, Amtrak admits that its long-distance trains “typically run once daily or less, reach major metropolitan areas at inconvenient hours, suffer from poor on-time performance, and generate significant operating losses.”

The state-supported routes are also inefficient. Based on the figures in Table 1, ticket revenues cover just 48 percent of operating expenses for these routes, which is less than 51 percent for long-distance routes.

As bad as these figures are, they represent Amtrak’s optimistic spin. The “adjusted” earnings used for this analysis do not account for some expenses usually included on financial statements, particularly depreciation. Amtrak’s actual operating loss for 2025 of $1.9 billion was much larger than the “adjusted” total loss shown for three service lines of $506 million. Thus, the actual per-rider results are worse than Table 1 shows.

Another way to compare routes is by load factors, calculated as passenger miles divided by total seat miles. In 2025, state-supported trains averaged a 39 percent load factor, compared to 56 percent for long-distance trains and 68 percent for NEC trains. By contrast, the average load factor for US domestic airline flights is about 80 percent.

Except for the Auto Train from Virginia to Florida, all 15 of Amtrak’s long-distance routes lose money. For example, Amtrak lost $505 per rider on the Sunset Limited route between New Orleans and Los Angeles in 2025. For the state-supported routes, 28 out of 30 lose money even with the state subsidies. And again, these are Amtrak’s optimistic “adjusted” earnings without depreciation expenses.

Amtrak’s core financial problem is that Congress insists on running train routes that lose so much money. The long-distance routes run through many congressional districts but make little practical sense because of the high costs, poor scheduling, and shoddy on-time record. For the state-supported routes, intercity buses are a more efficient transportation option.

Congress imposes Buy America rules on Amtrak, which require that the company’s purchased equipment use US iron and steel and be manufactured and assembled domestically. The effects of the rules can push up the cost of new trains and other equipment and delay delivery. Amtrak criticized the Buy America rules in its 2025 annual report:

The “negative impact” was evident when a state consortium proceeded with a $352 million purchase of 130 rail cars for Midwest and California Amtrak routes funded by federal stimulus legislation in 2009. Japan’s Nippon Sharyo planned to manufacture the cars in the United States to fit the Buy America rules. But the production costs ballooned because the design was changed to fit US regulatory rules and because the company “had to rely on suppliers that it has never worked with before and found some components so difficult to obtain.”

The Wall Street Journal said that the Nippon Sharyo train order showed the “struggles of foreign companies to comply with made-in‑U.S. guidelines.” The order was canceled in 2017. The state consortium then hired Siemens to provide the trains, but it ran into technical and regulatory problems as well. Siemens delivered the trains two years late, which caused costly problems for Amtrak.

In 2025, Amtrak put into service a new generation of Acela trains. The trains had been funded 15 years earlier, but political indecision slowed the procurement process. The Buy America provisions also slowed procurement by requiring complex waiver requests for items that were difficult to obtain domestically. A US Senate report found that the Acela delivery was delayed by at least four years, which cost Amtrak $287 million.

Governments often mismanage large infrastructure projects, and rail projects are no exception. For example, California’s high-speed rail project from Los Angeles to San Francisco has soared in projected cost from $34 billion in 2008 to $126 billion today.

Amtrak also mismanages large projects. In 2026, Amtrak’s OIG testified that it had “seen the company struggle to develop accurate cost and schedule estimates, leading to cost overruns and late deliveries.” In 2024, the OIG noted Amtrak’s “longstanding pattern of insufficient project management processes, tools, and staff to oversee the capital investment work.” Amtrak suffered a 69 percent cost overrun on the Moynihan Train Hall in New York City.

Amtrak’s 30th Street Station restoration project in Philadelphia almost doubled in cost from $58 million to $109 million and was mired in scandal. Five individuals were convicted of corruption-related crimes and Amtrak project manager Ajith Bhaskaran died while awaiting trial. In its 2025 investigation, the Philadelphia Inquirer called the project a “corruption bonanza.” Businesses lavished Amtrak employees with cash, cars, and vacations in exchange for millions of dollars in contracts.

Amtrak’s OIG reported in 2023 that the company’s spending provides “criminals with a lucrative target for fraud.” Indeed, the Philadelphia scandal revealed that Amtrak’s contracting process seems shockingly lax. A single person was approving millions of dollars in payments. The corruption continued for more than three years with Bhaskaran living the high life on ill-gotten gains. Amtrak only discovered the corruption because of an anonymous tip to the OIG.

Rail enthusiasts envision a nationwide high-speed system, but California’s failed high-speed project has shown that view to be pie in the sky. On the other side, rail skeptics argue that there is no reason for passenger rail at all because airlines, buses, or automobiles are better than rail on every route. This view may be too pessimistic—perhaps entrepreneurs could cut costs and innovate to make rail financially viable in some places.

The problem today is that government ownership has locked passenger rail into a high-cost, low-innovation straightjacket. Privately owned freight rail has vastly improved performance in recent decades, but government-owned passenger rail has stagnated. While airlines and intercity buses have increased efficiencies, unionized and politically driven Amtrak plods on.

Amtrak faces many competitive challenges. On speed, airlines outcompete Amtrak on door-to-door trip times over about 300 miles; on shorter trips, buses often outcompete Amtrak. On fares, intercity buses are usually cheaper than Amtrak. On safety, fatality rates per billion passenger miles are lower for aviation and intercity buses than for rail. And on the environment, intercity buses use less energy and produce fewer carbon emissions than passenger rail.

To better compete, passenger rail needs to be greatly improved. That has not happened for the past half century with Amtrak trapped inside a bureaucracy and manipulated by Congress. Government-owned rail is a dead end of subsidies and poor performance. It is time for a change.

Congress should privatize Amtrak, repeal political control, rescind union and Buy America rules, and let entrepreneurs experiment with routes, rolling stock, and other rail parameters. Entrepreneurs could harness new technologies—such as automation and AI—to drive new efficiencies.

Freight rail illustrates how entrepreneurship can invigorate an industry. The outlook was bleak when major railroads went bankrupt in the 1970s. Congress created Conrail to consolidate the failed freight railroads, pumping in $7 billion of subsidies. Fortunately, Congress then changed direction and deregulated freight rail in the Staggers Rail Act of 1980 and privatized Conrail in 1987.

Since then, US freight rail has boomed. Between 1980 and 2000, the rail industry had strong earnings, lowered energy intensity, and cut real freight rates by 38 percent. Between 1980 and 2008, total factor productivity in rail grew much faster than in the overall private sector. Accident rates also fell substantially in the freight rail industry after 1980. Privatization and deregulation have had dramatic success.

In recent years, the main (Class I) freight railroads have innovated with the adoption of Precision Scheduled Railroading (PSR), which favors trains with mixed shipments running on tighter schedules with less terminal dwell time. PSR has allowed railroads to downsize their assets and workforces substantially, thus boosting productivity.

The first convert to PSR was the Canadian National Railway Company (CN). Industrial relations professor Carol Beatty said that under government ownership, CN was “one of the worst railroads in North America, highly indebted, perpetually in the red, and losing market share to the more efficient, flexible and newly deregulated U.S. railway and trucking industries.”

The Canadian government privatized CN in 1995, which allowed the new COO and later CEO, Hunter Harrison, to transform the company with his PSR innovations. Beatty explains:

This is the sort of transformation that Amtrak needs. Privatization would allow entrepreneurs to bring new efficiencies to passenger rail. CN’s turnaround would not have happened under government ownership—nor will Amtrak’s.

Other foreign reforms are instructive. In the United Kingdom, government-owned British Rail was heavily subsidized as rail travel was in decline. In 1994, the government partly privatized the operation of rail services in a franchise structure. The reform did not end subsidies, but it did bring entrepreneurial innovation to the industry. UK rail ridership soared from 740 million passenger trips in 1994 to more than 1.8 billion by 2026. The European Commission found that UK’s railways were the “most improved” in Europe.

Japan’s rail privatization was also successful. Before the 1990s, government-owned Japanese National Railways (JNR) struggled with bloated costs, labor strife, and political manipulation, according to a National Bureau of Economic Research study. The government split JNR into six regional companies in 1987 and privatized the largest three in the 1990s. The privatized firms reformed union rules and slashed workforces by about one-third. Labor productivity increased about 50 percent, and accident rates were cut in half. Today, the privatized railroads earn operating profits without subsidies. The study concluded, “The Japanese approach to rail restructuring has succeeded in many ways, by improving productivity, cutting operating deficits, decreasing fares, and providing better services.”

For the United States, Amtrak privatization would allow entrepreneurs to seek ways of running financially viable rail services. Freed from political meddling, entrepreneurs could prune excess workers, base worker pay on performance, reduce unionization, close inefficient routes, and purchase new equipment from the best suppliers. Meanwhile, Congress should phase out subsidies to other transportation modes to create a level playing field for competition.

Even with Amtrak dominating the market, we have seen entrepreneurial interest in passenger rail. Brightline has provided service between Miami and West Palm Beach since 2018 and has now extended service to Orlando. Brightline is privately funded, though it has received government support for some infrastructure, such as station improvements.

In Canada, the government’s VIA Rail was losing money and canceling services. In 1990, an entrepreneur stepped in to operate the rail routes through the Rocky Mountains without subsidies. Today, the highly regarded Rocky Mountaineer company operates three successful routes in western Canada and two routes through the US Rockies.

Governments inflicted heavy damage on the rail industry in the mid-20th century with taxes, regulations, and labor union rules. That was a huge policy blunder because it came at a time when railroads were facing rising competition from automobiles, trucks, buses, and airlines.

After financial losses and bankruptcies in the 1960s and 1970s, the federal government took over passenger rail and parts of the freight rail industry with the creation of Amtrak and Conrail. With freight rail, Congress changed course with deregulation and privatization. The freight industry has boomed with innovation, rising productivity, and financial stability without subsidies.

Passenger rail is a striking contrast. Congress has smothered it with subsidies for half a century while trapping it inside a bureaucracy. Amtrak suffers bloated costs, mismanagement, and political misallocation of investments. The company illustrates that government ownership prevents markets and entrepreneurs from moving industries forward with innovations and efficiency gains. It is time to try something new with passenger rail.

Congress should privatize Amtrak and repeal government control over routes, labor relations, capital investments, and other aspects of rail operations. Privatization would not automatically solve Amtrak’s failings, but it would allow entrepreneurs to bring new efficiencies and innovations to the table. To find out which US corridors make sense for passenger rail, we need to free rail from the federal government.