1. We are not capable of carrying all the burden of Europe and Asia. 2. To be of any use or influence we must build up and retain our political and economic solvency. Today our political assets are nil. 3. Is it possible to construct a strong foreign policy and then administer it honestly and fearlessly?

Coming now to our own domestic problems of how to improve and strengthen ourselves socially and politically with special reference to its bearing upon the bill before you.

1. As to the influence of income-tax reduction upon inflation, definitely taxes do not cause inflation or deflation. Inflation is controlled by the abundance or scarcity of money and the value of money is based upon issuance of fiat money and bank credits and the velocity of movement.

2. As to influence on business, lower taxes mean lower prices to the consumer and an incentive to venture capital for new plants and greater production. A prosperity which in the end will produce more tax receipts than under higher taxation.

3. As to its influence upon our way of life, the power of taxation is fatal to enterprise if this power is abused. It can take capital from the hands of the individual and put it in the hands of the Government which may eventually own all the capital and consequently all business. This means a Communist form of government.

We are passing through a period of great import to our country's welfare and to the future political and economical life of the world. We have seen many nations blasted to bits; we are seeing others crumbling under the weight of false economic principles and social

unrest.

It is a period of alarm for many, of danger for others, and of utter hopelessness for some.

During the past decade we have borne tremendous burdens for our own protection and for the protection of others. It has left us far from normal; much of our strength has been spent. Through the indomitable spirit of our peoples, we have maintained our balance. It now behooves us to regain our strength-for our own good as well as the benefit of our fellow nations. We must keep ourselves fit for the problems before us. Others are looking to us for help. We must have the stability and strength to give them help. But above all we must maintain our own economy and way of life by building up and not wasting.

Our way of life has been challenged, largely, perhaps, because it has been demonstrated to be far superior to other ways of living.

Our strength lies in the individual, his unfettered ambitions, his genius and his capacity and willingness to do things that others shun as impossible. Our people require the greatest possible freedom of action and thought and an honesty of the people as well as of our Government.

We all recognize the importance of tax relief at the earliest possible moment and I understand the purpose of the tax bill, too, is to grant quick relief so far as it may be economically sound.

Nobody will claim that this bill will provide a model tax system. That will come later.

There appears to be the nightmare of a veto hanging over our discussions of the bill. This nightmare should be promptly and finally

disposed of in our minds without emasculating the pending bill. The people are crying for tax relief-we have been promised tax relief-and also Government spending economies. Politically, people admire a party which boldly demands that which is reasonable and right. Congress has control of the country's purse strings and should use that control if veto is threatened.

It may be in the book that a veto will stick no matter what changes are made in the bill. If such a situation develops, it would be to the advantage of the bill's proponents if the bill was an honest reduction of taxes than if the bill had been trimmed to suit the opposition. I am of the opinion that if the bill is vetoed, the vote on the veto will be the same no matter what tax-reduction bill is offered.

I am fully in accord with the policy of debt reduction. It can be accomplished by strict economy in Government costs and by maintaining a reasonable tax program. There is a limit to the tax burden. Under present assessments a considerable portion of the tax collected is taken from productive industry. All of us farmers are aware that if you skimp on feeding the chickens it will cut the egg production. By the same token capital taken from industry reduces the volume of goods produced.

Easing the tax burden will automatically reduce the price of goods. All taxation, visible and invisible, is included in the cost to the consumer of all production. The buyer of goods pays all taxes that are levied from the raw material until he receives it. Tax reduction would be fully reflected in the lower costs of consumer goods.

In summary, the tax bill passed by the House should be approved by the Senate.

1. Our present income tax is a burden upon business and a deterrent to the investment of venture capital.

2. The Republican Party platform called for economy in Government expense and a reduction of taxes.

3. The Treasury can well afford a decrease in taxes and at the same time make reasonable reduction of the public debt.

4. Our foreign situation calls for strength both in production and in our finances. Tax reduction will be an incentive to business activity.

5. Our commitments to foreign governments must be carefully scrutinized and limited to people in need and not for the purpose of supporting any particular party.

6. Inflation or deflation will not be affected by a reduction of taxes. If taxes are reduced, consumers' prices will be lower.

7. Excessive taxation will lead to a weakening of our enterprise system and could be used to destroy it.

8. The world situation today requires us to strengthen our business enterprises as well as our financial stability for our own protection and to be able to give assistance to those in need.

Thank you very much.

The CHAIRMAN. We will recess until 10 o'clock tomorrow morning, meeting in the Senate Finance Committee room.

(Whereupon, at 4:45 p. m., the committee recessed to reconvene Wednesday, March 10, 1948, in the Senate Finance Committee room, at 10 a. m.)

REDUCTION OF INDIVIDUAL INCOME TAXES

WEDNESDAY, MARCH 10, 1948

UNITED STATES SENATE,
COMMITTEE ON FINANCE,
Washington, D. C.

The committee met at 10 a. m., pursuant to adjournment, in room 312 of the Senate Office Building, Senator Eugene D. Millikin (chairman of the committee) presiding.

Present: Senators Millikin, Hawkes, George, Barkley, Connally, and Lucas.

Present also: Senators Flanders and Overton.

The CHAIRMAN. The meeting will come to order.
Senator Maybank?

STATEMENT OF HON. BURNET R. MAYBANK, A UNITED STATES SENATOR FROM THE STATE OF SOUTH CAROLINA

Senator MAYBANK. Mr. Chairman, I want to thank you for letting me testify at once because we have a meeting of the Banking and Currency Committee on extension of the Reconstruction Finance Corporation.

I just want to put in the record a statement in connection with an amendment to the tax bill in connection with oleomargarine, believing it to be an unwise tax.

The reason for putting in the amendment, I want to say: in 1942, as you probably remember, we tried to get a bill out, and in 1943, this committee was good enough to hold extended hearings on the tax bill on the amendment I had at that time.

Then we took the matter up in the Seventieth Congress January 10, and there was quite a long debate covering pages and pages.

There were quite extensive hearings here in the fall of 1943 before this committee with experts from various sections.

I will not go into any of that, but I want to say that for this reason: there is now pending a bill before the House on which extended hearings are being held. If this should be reported out of the House committee, I would not ask it to be called up.

In 1942, we tried to get the bill out and could not.

In 1943, the committee was good enough to hold a hearing and in January 1944, we had a vote on the removal of the tax at that time, and unfortunately we were defeated by a vote of 55 to 23. But there have been so many changes in the Senate since then, and so many new Senators, and the picture has so completely changed that I thought again I would call attention to that and make just this short statement.

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I came here for the purpose of proposing an amendment to H. R. 4790. This amendment would repeal certain taxes on oleomargarine, amend the definition of manufacturer of oleomargarine and repeal the occupational tax on manufacturers, wholesalers, and retailers of oleomargarine.

Under the present laws uncolored margarine is taxed at the rate of one-fourth of a cent per pound while a 10 cents per pound tax is paid for colored margarine. The license fees are equally discriminatory. For example:

Add to these figures a $600 annual fee for coloring the product and you begin to see the unjustness of this discrimination both to the manufacturer and the housewife.

These complex and burdensome regulations make anyone coloring margarine yellow, and serving it to customers or paying guests, liable to a manufacturers' license fee of $600 a year and 10 cents a pound tax on each pound so colored.

These regulations are understandable when we remember the quality of this product when it was first placed on the market and its one claim to consideration was its economy. The present tax and license fees were set by the Congress of 1902-46 years ago. These were imposed after the crippling taxes and fees of the Oleomargarine Act of 1886. So it is that, after 60 years, the Federal Government still imposes the very same taxes on margarine-the only pure food in the land so restricted by national laws.

Mr. Chairman, it is unthinkable, in the light of page after page of testimony such as has been given on behalf of this product, that these ancient and outmoded laws should still rest among our ladened statutes. These laws still stand despite the fact that a small army of witnesses has, in recent years, appeared before committee meeting after committee meeting. They have represented science, manufacturers, wholesalers, retailers, cotton, soybean, livestock, and peanut producers, labor, consumers, and hospitals, and they have unequivocally urged the repeal of the discriminatory margarine taxes and license fees. Therefore, I am requesting the Senate Finance Committee to incorporate my bill in H. R. 4790.

American margarine is made today from domestic vegetable oilsoils derived from soybeans, cottonseed, peanuts, and corn.

I would like to disgress there for 1 minute, Mr. Chairman.

In South Carolina they are making some shirts out of soybeans now. I asked them to send some up here so we could see what they were doing.

Margarine has become the second largest user of soybean oil and also uses about one-fourth of all the cottonseed oil refined in this country. Farmers of 44 States produce the products from which margarine oils are taken. Because of the substantially increased demand for margarine, manufacturers are encouraging production of more of these farm products which produce these fine domestic food oils.

The issue at hand has boiled down to two basic points: Color and definition of the word manufacturer. The only basic difference between margarine and butter is that margarine is vegetable fat; butter an animal fat product. There is actually no perceptible nutritive difference. Each offers about 3,300 calories per pound. The amount of vitamin A in butter varies according to seasonal and other factors; while in margarine it is maximum and uniform the year round. Both products are equally digestible.

Report after report by medical associations and nutritional scientists declare margarine to be a nutritious, high quality food.

An official definition and standard of identity was adopted by the United States Food and Drug Administration in 1941 under the Federal Food, Drug, and Cosmetic Act of 1938. Under it, margarine has a minimum fat content of 80 percent; the actual average figure is slightly more.

The standard requires fortified margarine to contain a minimum of 9,000 USP units of vitamin A per pound. But 99 percent of all margarine is now fortified with 15,000 units of vitamin, the content always being shown on the label. This margarine fortification is endorsed by the American Medical Association and leading nutritionists.

The nutritional value of the product dispensed with on the word of competent authorities, we come to color.

Artificial color adds nothing to the direct nutritional value of foods. It is not nutritive in itself. But, by satisfying natural color perceptions in relation to the palate, it promotes digestion and thus indirectly aids the process of nutritive assimilation.

A product's "right" to any color is established by consumer preference. There is no patent or natural or common law trade-mark to yellow for butter, for example.

The argument that all that is being done, in the coloring of butter, is restoring a uniform yellow to the product, falls to the ground. For one thing, butter is not colored uniformly, but to meet market demands. Thus, butter coloring is done to suit regional taste preferences -the New York market, I am told, generally prefers butter whiter than Wichita or Kansas City markets.

Butter is only one of the hundreds of food products using artificial coloring. Butter itself uses artificial coloring during most of the months of the year, because butter produced from cows on winter forage is pale yellow in color; frequently white.

Further, the ingredient of butter (cream) has no more, or even less, claim to yellow than the ingredients of margarine (vegetable oils). Cottonseed, soybean, peanut and corn oil are yellow in color, varying, of course, in degree. Nevertheless, in their natural state, they frequently could convey to the finished product a yellow tint. Because of this, the oil ingredients of margarine must be bleached to avoid the Federal tax of 10 cents a pound on yellow margarine and the other penalties imposed on yellow margarine.

Artificial coloring is permitted by the United States Pure Food and Drug Administration when the colors used are certified United States Pure Food and Drug Administration colors. There are scores of these colors, each of which has been approved by the Administration. Under the Pure Food, Drug and Cosmetic Act of 1938, all food products using artificial coloring must label that fact.