Private automobiles and publicly funded hard surface roads killed the passenger train. Train ridership in peace-time America peaked in 1923 and was declining sharply before the Great Depression even started. Passenger train ridership did have a mild increase in the late 1930s as diesel electric streamliners captured the public imagination. Gasoline rationing and the severe rubber tire shortage caused a major increase in passenger train ridership during WWII, but it began to decline after the war. With the start of the Interstate Highway system in 1956 and the introduction of jet commercial airliners in 1957 ridership began to plunge to new lows after 1957.
Passenger trains were expensive to operate. They required more crew than a freight train, the passenger stations were expensive to heat, light, maintain and occupied prime real estate that was assessed property taxes. In the early 1960s, when the Post Office introduced the Zip Code, they diverted most of their mail from the trains to the airline industry. The Railroad Express Agency (REA) was also getting clobbered by UPS and the Post Office and lost much of the lucrative parcel trade. So the extra sources of revenue, mail and express, was drying up along with the dwindling revenue from passenger ticket. The costs of providing passenger service continued to climb. The Interstate Commerce Commission was reluctant to let the railroad industry exit the passenger train business. However, their arguments that freight traffic could cross subsidize the losses the railroad incurred from operating passenger trains were harder to support. Courts were becoming more likely to overrule the ICC and allow the railroads to cancel their passenger trains. By 1970, the number of passenger trains still being run by private railroads was a shadow of what it was in 1920. They were an albatross around the neck of the railroad industry and the whole industry was on the verge of collapse, until congress established Amtrak in 1971. This allowed a skeletal system of intercity passenger trains to remain, with the losses absorbed by the Federal government. It was ironic that the ICC fought the railroad industry tooth and nail to keep "essential" passenger trains operating during the 1960s, but the day Amtrak started to operate, two thirds of the intercity passenger trains were immediately cancelled.
Sources: "Who Shot the Passenger Train" by David P Morgan in the November 1958 issue of "Trains" magazine
"The American Passenger Train" by Mike Schafer, Joe Welsh and Kevin Holland