Though not without problems I think the suggestion is interesting. It is clearly not a "let's kill passenger trains through privatisation" scheme, and it could bring in some innovation in how to run the trains or modest savings on the subsidies. The fact that tax credits might also be easier to stomach for subsidy-averse republicans is a good point too (even if they from my point of view are exactly the same, this appears to be a political fact)
I also think a couple of the answers/dismissals look like people either didn't really read the proposal beyond "contracting out" or are somewhat obsolete.
1) Freight railroads don't have any incentive to actually provide quality service. They could just do the bare minimum, bump trains to unreasonable hours and less convenient routes to fit into their freight schedules, cut food service, etc.
Well this proposal actually has precisely that, as it provides a fixed subsidy/tax credit and leave the RR with the risk if financial performance deterioates and the opportunity to make money if it improves. Of course a contract with some minimum service for the arrangement must be in place, so it doesn't become a total scam, but not so tight it will need a lot of oversight or no room for finding the level of service that actually makes the smallest deficit.
Cause Amtrak was created cause the freight railroads no longer wanted passenger rail.
Yes but it is 40 years ago, and the solution was accepted by a desperate railroad industry fighting for its life. They were not offered a solution where they could keep offering passenger rail and make money on it back then, and noone has asked since. The railroad industry of today is far stronger and often annoyed with the obligation and interference they have to accept from Amtrak. They might be willing to look at other solutions.
If the freight railroads really wanted to run passenger trains, they'd find a way now.
Come on, of course they are not interested as long as it is a sure money-loser, no matter how well they run the passenger routes. They are not in the railroad business because they are interested in playing with trains.
There is no incentive for the major freight railroads to run passenger trains.
If you really read the proposal it offers a scheme for them to be able to make money on passenger rail if they can do it just moderately more efficient than Amtrak. Making money is a great incentive, and so might be getting the power over running both passenger and freight trains within the same company weighing the interests in finer details.
However there are more than a few conditions and problems that would need to be sorted out:
First this is only a good idea for routes on host railroads that also think it is a good idea. In any way forcing passenger routes back to railroads that don't want them would be a disaster. But it could be very interesting to see if any of them wanted to have a go at it, and would offer their way of how to run a passenger service.
Secondly there is an issue of how to set the size of the tax credit in the long term. In 20 years it might not say a lot what Amtrak needed of subsidy to run the service in 2011. Both cost structures, overall passenger appeal of railways and possible fares may have changed a lot, resulting in either a return to perpetual losses for the private railroads or close to profitable routes that are still backed by large tax credits. I can already hear the political fight over either scenario.
Thirdly how does this system leave space for introducing new services if this should become possible politically, and how should the tax credit then be priced? For the first many years at least there will still be an Amtrak though as I doubt all the RR's would jump on this ship right away, so totally new routes would not be that much of a problem. But what about additional frequencies on existing routes for all or even more complicated parts of the route, which would also affect the market for the existing now private service? A system that would block new intrastate services in Florida or Texas or daytrain runs WAS-ATL or Toledo-Buffalo would be highly undesirable.
And fourth there is a host of practical problems - What about routes run over several different railroads? Someone also mentioned schedule coordination and on a related note guaranteed connections. I'm sure there's a bunch of others too.
But if those problems could be sorted, I actually like the idea. I don't think it will save many cents in costs for the federal reserve be it subsidies or tax credits, but monopolies whether governmental or not tend to be not the most innovative businesses in the world. Cost efficiency is also sometimes lagging. As I wrote I don't think anywhere near all of the freight RR's would buy into this scheme, but both the routes that are transferred and the remaining Amtrak might actually benefit.