CHART 3-E

PERCENTAGE OF THE NATIONAL INCOME EXTRACTED FROM INDIVIDUALS HAVING INCOMES OF $100,000 AND UNDER $150,000

BY VARIOUS EFFECTIVE INCOME-TAX RATES
AS MEASURED BY THE AVERAGE

FOR THE GIVEN AND TWO PRECEDING YEARS

Tax Receipts Expressed as Percentages of the National Income

Effective Tax Rates In

44 Per

48 52 56 60 64 68 Cent

CHART 3-F

PERCENTAGE OF THE NATIONAL INCOME

EXTRACTED FROM INDIVIDUALS HAVING INCOMES OF $50,000 AND UNDER $100,000

BY VARIOUS EFFECTIVE INCOME-TAX RATES
AS MEASURED BY THE AVERAGE

FOR THE GIVEN AND TWO PRECEDING YEARS

CHART 3-G

PERCENTAGE OF THE NATIONAL INCOME

EXTRACTED FROM INDIVIDUALS HAVING INCOMES OF $25,000 AND UNDER $50,000

BY VARIOUS EFFECTIVE INCOME-TAX RATES

AS MEASURED BY THE AVERAGE

FOR THE GIVEN AND TWO PRECEDING YEARS

The CHAIRMAN. Mr. Benson is our next witness.

Mr. Benson, give your name, residence, and occupation to the reporter, please.

STATEMENT OF JUDD C. BENSON, CHAIRMAN OF THE COMMITTEE ON FEDERAL LAW AND LEGISLATION, NATIONAL ASSOCIATION OF LIFE UNDERWRITERS, CINCINNATI, OHIO

Mr. BENSON. I am Judd C. Benson, Cincinnati, Ohio. I am general agent for the Union Central Life Insurance Co. in Cincinnati, Ohio, and my appearance here is as chairman of the committee on Federaĺ law and legislation for the National Association of Life Underwriters. Mr. Chairman and gentlemen, to briefly identify my purpose, our association is the Association of Life Insurance Agents-the people who sell insurance to policyholders. I do not think our numbers are technically significant. We have about 52,500.

We are located throughout the country, and we are the direct point of contact between the companies and the policyholders.

I should like to establish this fact at the outset, and that is: So far as the bill H. R. 4790 is concerned, as agents, I think we have no particular comment to make one way or another.

I think there are some things which are of interest to our policyholders. So may I say that my representation here is strictly on behalf of our clients in this particular instance.

Sometimes we come down here talking for ourselves, and this time it is about the policyholders who, I think, have somewhat of a stake in this.

I do not know, Mr. Chairman, whether you want to go into the matter or not. I will respectfully say to you, sir, that as I have listened to the testimony in the last 2 days, it is just possible that we might be able throw some light on the things that have seemed to be rather uppermost in your mind, this question of venture capital.

So I say this: I do not want to impose on your time. So at any time you are not interested in what I am saying, I will not be upset if you just tell me so.

The CHAIRMAN. Go ahead. Take your time.

Mr. BENSON. I think the first significant fact which, I believe, will be of interest to you is that the amount of money gained in savings in life insurance reserves, savings-bank accounts, building and loan associations, and savings of similar character, has had this very significant thing happen since 1944. Understand, I am talking only about the gain.

Mr. Harriman, this morning talked about the amount of money saved. I am talking about the money gained in saving.

In that characteristic type of investment there are in the hands of the savers and investors today about $160,000,000,000.

Incidentally, I have learned since I listened to these hearings, that nothing less than a billion dollars counts.

Anyway, the gain in savings in 1944, was $22,000,000,000 plus; in 1945, it was $20,000,000,000; and in 1946, it was $11,000,000,000; and in 1947, it dropped down to a little over $8,000,000,000.

That is the gain over the previous 12 months.

The CHAIRMAN. In what category?

Mr. BENSON. In the category of life-insurance reserves. That is improvement and cash values, reserve being the technical term. In savings banks, in savings accounts, and loan associations, and things of that typical category, which, I think, are somewhat comparable

because they do not represent venture capital as we have been talking about here.

It is very significant that during that same period the total premium payments to life insurance companies went from 4.4 billion dollars in 1943 to where 1944 was 4.8 billion dollars; 1945 was 5.2 billion; 1946, 5.7 billion; and 1947, the best estimate, is 6.25 billion.

If we can quit talking about billions for a little bit, I believe I can throw some light that may be interesting to you by taking some specific cases.

Remember now, I am in the business of life insurance.

The CHAIRMAN. We are glad to have your views.

Mr. BENSON. Cincinnati is a fairly typical industrial city, I think. It is a good one, but fairly typical, and I recall this instance of calling on a man who, together with his two brothers, sold his business, which was a characteristic small business as we know it, about $300,000 or $400,000 invested, in which they made a pretty substantial earning. It was a pretty important thing in the community.

They sold that out to a very much larger business, took the money in cash, and incidentally continued in the management on a salary basis.

They stepped out from proprietor to employee.

I read that in the paper, and I went to see the man.

I had a long talk with him, and found he was pretty much interested, and here I think is the significant comment. He said: "Well, look. I think I am going to put this money in a single premium life insurance policy, and here is the reason."

He said, "I think I am just a sucker to venture this capital of mine when the Government is going to confiscate all of the profits I may make, and if I should happen to make a killing, they will knock me off for estate taxes, so why should I risk my money?"

He said, "There is no incentive."

You would be surprised, I think, to know how much of this premium income ordinarily we think premium money is what a fellow takes out of his pay, do we not? I offer you the opinion, sir, while I am not able to identify it when the checks come in, I know of many thousands of dollars in my own experience, and it would have to be multiplied, where men are taking down their venture capital because the incentive is not enough, and they are bringing it over and putting it in life-insurance funds.

You may say, "Well, you are talking against yourself, are you not?" I do not know whether I am or not. I sold that man the policy, but I am not going to sell him any more. I am all through because he just says to himself, "With taxes the way they are, I am just not going to trouble myself to try to earn that much more money."

Here is what interests me: He has two sons. One is 25 and one is 31 years of age, and I am pretty much interested in those fellows, and I am just not so sure they will do as well with their father's money tied up in life insurance as if he had it back in his business.

I believe that is one sale I just about as soon would not have made. I will not bore you to go on in that thing, but that thing is going on, and I believe accounts for the fact there is a pretty substantial amount of capital money going into life-insurance premiums.

The CHAIRMAN. Is there a general understanding in your business to that effect?