WI: A Horsepower Tax in the USA before WW1

July 8, 1905

E.H. Harriman
Imperial Hotel
Tokio, Japan

Ned,

I am pleased that my letter of May 1st found you in Tokio, and that you took the time to write me a prompt reply. I sent a similar letters to most of our competitors at the same time, and their replies have been, on the whole, similar to yours. It is my opinion that men like ourselves are intensely competitive by nature, always seeking to best our colleges whenever opportunity arises. In this way we are little different than the boxers slugging it out in a ring, though we use our railroads instead of our fists and scores are kept in thousands of dollars instead of blows. Thus, when a situation arises that compels us to work together, in cooperative effort, there is always some degree of mistrust between parties. Your skepticism is noted, and shared by many of our colleagues. And while I needed multiple correspondences and meetings to win some over, I was pleased that you recognized the threat that these new machines pose to our business.

In the span since that first letter, Senator Penrose has had some success crafting the legislation to be presented to the Congress in December. We railroad men have been assisting the Senator’s work by providing examples from our own history to reference, from the adoption of standardized signage to gated road crossings to the necessity of speed limits in congested areas or poor trackage. The Senator has also had some intriguing ideas of his own – stolen from others, of course. The most beneficial, from our point of view, came about from a chance meeting in Washington in May. At a social function, Senator Penrose happened into conversation with the Ambassador from Germany. The subject of motor cars arose, and Herr von Sternberg mentioned that the German government was also toying with a regulatory structure for the machines. Their plan is levy an annual fee on motor cars based on the power of the engine, rather than have a fixed tax rate applied to all machines equally. The German Parliament is expected to adopt the tax sometime next year. Senator Penrose is very enthused about the idea, and is making it a keystone of the legislation.

In addition, I have had some chance to discuss the subject with some other industrialists and financiers outside the railroads. There is a great deal of convincing left to do here, but I have made some headway. One difficulty is that while our interests are self-serving, the oil men, the steel men, and even the lumber men have much less of a stake in the matter. Motor cars do not yet use their wares in huge numbers, though the potential is obvious. So we must bear in mind that we may have to sweeten the pot to get full cooperation. I can tell you that the leadership of US Steel is practically salivating at the prospect of selling hundreds of more miles of rail and spikes. Rockefeller is a bit of a tougher nut right now. While he agrees that safety would benefit all, the old man is suspicious about the government getting involved. In passing, I did mention some of the experiments your railroad has been doing with oil-fired locomotives, and that there would be many benefits in our cities if the coal ash and soot of our trains could somehow be eliminated. His curiosity was piqued, and inquiries were made as to the consumption rate of a Union Pacific oil-burner. I assured him that it is prodigious, but if the supply and price of oil was consistent and predictable it could be the future of American Railroads. I apologize if this was presumptuous on my part.

At any rate, I look forward to seeing you upon your return, and to see some demonstrations of this Nipponese “Ju Jitsu” you described in your letter. God’s speed, and wishes for a safe journey.

Sincerely,

AJ Cassatt
 
Thank you for reading my ramblings.

And thank you for the insights and criticisms. I haven't tried writing anything more interesting than a technical bulletin in decades.

If you are enjoying them, I apologize for the uneven posting rate, I have been fighting a losing battle with the real world.

On the other hand, if it isn't quite your thing, no worries. There is so much to read on this place, most of the time I ignore my story myself.

Anyway, once I get through the handwaving that put's the law into effect, I'll get around to playing around with the effects of the law. Coming Soon(er or later): Henry Ford has a Konniption.
 
Enter Henry Ford, stage right...

Henry Ford wasn’t angry. Oh no. He had been merely angry at breakfast, when he read the morning paper. The article announcing the passage of the Highway Act was lean on details, but made it clear that the improvements to roads was going to come on the back of automobile makers like himself. Henry wasn’t opposed to better roads necessarily. Who could be? What really rankled him, though, was that the Federal government was going to stick their noses into the process. When people bought enough cars they’d demand better roads, presumably where they wanted to go, paid for willingly at a local level. That’s how it had always worked. Now, though, the Government was going to decide where the road went, and how it was made, and how it was paid for. It was nothing but a power-grab in Henry’s eyes, and it put him in a foul mood for most of the day.

But that was in the morning. Things went smooth enough at the factory, though every ten minutes somebody was asking him what he thought about the new law. He had tried to relax by working on his new light car design, but he couldn’t concentrate on any details. A walk around the plant after the work-day was done should have calmed him down, but there were nothing but Model B’s being built right now. They had put Model F production on hiatus to push through the last of the B’s. He passed by assembly blocks filled with the big 4 cylinder cars in various states of assembly. Four were essentially complete, only lacking the headlights, windshields and some trim. They’d have to be pushed outside and stored under a tarp soon, along with the other ten cars still lacking headlights. An accident at the brassworks that produced the lights had put them a week behind on deliveries, and that put Henry behind as well. It was infuriating, being at the mercy of so many things he couldn’t control.

When he reached the end of the assembly building, he reached another point of frustration. The K. Henry had argued against the K, but his business partner Alexander Malcomson had presented a solid case for the project last spring, and the shareholders were enthusiastic about the new venture. Ford Motor Company was not the biggest producer of automobiles in the world, but they had a good reputation for building solid, somewhat affordable and completely boring automobiles. The C had been a good seller, and the profits from the eight hundred they’d built were rolled into the improved F. Henry liked the F – almost powerful enough, somewhat simple to operate and pretty good looking. But it cost slightly more than the earlier C and was still outside the reach of most people. What he wanted to do was improve and simplify the F, which could be sold at a lower price to more people.

What he ended up designing and building was the K. Henry wanted a small automobile that would be light and nimble. The K was twenty inches longer than the F, and weighed more than a quarter ton more. Henry envisioned a small three or four cylinder engine of around 20 horsepower to replace the twin found in the F. The K had a six-cylinder monster that put out 40 horsepower. Henry figured that if he could build and sell a car for $700, thousands of people would line up to get them. The K was going on the market at $2500, and was being pitched to a small and wealthy social set. This last point worried Henry the most. Not selling cars to the wealthy. Henry had nothing against wealthy people, in fact he was working very hard to become one himself.

No, the problem was that the K was just not good enough. It was good mechanically. Henry thought he had outdone himself on the engine, and the brakes were better than most other vehicles on the road. But the shareholders had wanted to meet a price point. They wanted to keep the price in line with the B, which itself was near the top of what the market would bear. Cutting the quality of the mechanical components would decrease reliability, and reliability would make or break anyt manufacturer’s reputation. So the remainder of the car suffered. It wasn’t bad, not by any stretch. But the quality of the bodywork and fittings, while serviceable, was a step below the competition from Pierce and Cadillac.

But the Ford Motor Company was committed. The foundry had already cast 500 sets of cylinders, crank-cases and transmission housings. Fifty engines were completed already, and half the machine tools from the B line were already switched over to the new product. The frame shop had built the last B frame, and was already setting up the jigs for production. Orders were placed with the coachworks that would supply the bodywork. Wheels were being made, tires purchased. And there, in the last four building stations in the assembly hall were pre-production Ford Model K’s. One was complete, with hand-made coachwork and fittings that served as patterns for their suppliers. Another two were partly assembled, engines and drivetrain installed on a rolling frames. The last one was just being started, and the crates of parts from Fords outside suppliers were stacked on the bare frame rails of the adjacent car. Henry scowled at the K’s, secretly afraid that it would end up a white elephant and break the company.

But Henry Ford was merely angry as he returned to his office. The mail boy had dropped off the afternoon paper, and Henry’s eyes were immediately drawn to a follow-up article on the new Highway Law. There was a little more meat to the story this time. By the time he had finished reading it, he was seething. Those imbeciles in Congress were out to ruin him! They were out to kill the automobile industry dead! Henry skimmed the rest of the article – different rate for steam, no tax on electrics, half rate for commercial vehicles – and went back to the description of the taxing schedule for automobiles. The concept was simple enough, charge an excise tax on the sale of the vehicle based on the engine horsepower. The formula was essentially the same as he and other designers used to roughly estimate engine performance. He didn’t even really mind the increasing tax rates for bigger engines, since at his heart he was a populist and the rates were set to give inexpensive cars a relative break. If he was still making the old Model C, or only making F’s, he’d probably just grin and bear the burden.

But the Model K, with its big six-cylinder engine and not-quite luxurious bodywork, became a bigger and whiter elephant. Henry started doing some rough estimates – the tax on the K was going to be close to $95. The fuel tax would surely play into the mind of any potential buyer. Early testing was hinting that the K was going to consume around a gallon of gasoline every ten miles, so the nickel per gallon tax would add up in a hurry. Any way you cut it, Henry thought, they K is the wrong car at the wrong time. Damn that Malcomson and his so-called luxury. There are a lot more farmers in the USA than there are high-rollers – sell a cheap car to every farmer and it would earn you a lot more than the luxury market ever could. Henry looked out the window and saw a horsedrawn wagon trundle past the factory, loaded down with crates of who-knows-what, going who-knows-where. He stared at the teamster perched on the seat, bundled against the December cold. That man would never need a Model K. Even if he could afford one, what good would it do him? You can’t carry a load of anything in the tonneau -

Henry’s mind raced back to the assembly floor, to the partially assembled Model K’s with parts and tools stacked on the frame rails. Henry grabbed a ruler and some scratch paper, and raced out into the factory.
 
BTW, according to the internets, $1.00 in 2015 would have been worth about $27 in 1905.

Gasoline was about 20 cents a gallon. Average wages in Mr. Ford's plant were probably around 15 cents per hour, and probably about 60 hours a week.
 
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