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of this ruling has been to shut out numerous important industries from the benefits which the untaxed alcohol law was expected to give them and it beconies necessary to amend the law, so tbat these manufacturers can use denatured alcohol in the production of these materials.
Alcohol is distilled from farm products, and the farmer's interest in alcohol used in manuïacturing is only second to his interest in that used in the rural districts as fuel. Every additional gallon used in manufacturing means an additional market for irm products, and the cheaper the manufacturers can secure their alcohol the more they will use.
The chemical industry of Germany consumes many millions of gallons annually made from the products of the German farms, and we desire that Congress provide every possible facility for the development of the cbemical industries in this country.
Ether is a material extensively used in various manufacturing processes, and if it could be produced with untaxei alcohol its industrial uses would be very largely increased. Cheap ethyl chloride and other alcohol and ether compounds will, for example, make possible the development of new and superior methods of artificial refrigeration. Another large industry which would be greatly benefited by cheaper ether is the manufacture of photographic plates and films.
The supplementary legislation desired to be enacted during the present session is absolutely necessary to place alcohol on a competitive basis with kerosene and other liquid fuels, and inasmuch as the merit and desirability of this additional legislation is conceded by the members of the cominittee with whom we discussed the subject, and no objection to action advanced except the crowding of appropriation bills, an objection which can hardly be seriously considered, we respectfully urge that the committee report the bill with recommendation for immediate passage. Being purely supplementary legislation providing for administrative changes only, there is no need for the time of the committee or the House being consumed in lengthy consideration of the matter. Yours, truly,
NAHUM J. BACHELDER,
Chairman Legislative Committee. The proposition to limit the denaturing plants to five in any one collection district did not meet the approval of the committee and was stricken out.
The original free-alcohol law as passed by the House of Representatives in 1906 provided as follows:
Such denaturing to be done in denaturing bonded warehouses specially designated or set apart for denaturing purposes only, and under conditions pre scribed by the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury.
This was in accord with the European practice of locating these denaturing plants in large manufacturing centers where the demand for the product existed and where public convenience and commercial necessities justify their location. The character and standing of the applicants, their financial responsibility, and the necessities of each case could all be considered by the Treasury authorities and discretion exercised accordingly.
In England, Germany, and France the denaturing of ethyl alcohol is largely an independent business, like any other manufacturing process, the owner of the plant buying his raw material wherever he pleases and shipping it in bond to the denaturing plant, there to be prepared in accordance with the regulations, released from bond and offered for sale. There is no more necessary connection between the distillation of the spirit and the methylation and distribution of the denatured product than there is in this country between the raising of sheep and the manufacture and sale of woolen cloth.
It is difficult to understand how the discretionary power to designate such denaturing plants could be better lodged than in the Government authorities directly responsible for the collection of the revenues, but the provision was subsequently amended by inserting in the clause quoted above after the word “done” the words “ upon the application of any registered distillery,” with the apparent intent of broadening the scope of the law and compelling the granting of a denaturing license to every distiller who applied for it.
The real effect of the amendment was directly the reverse, for it took away from everyone but the distiller the right to engage in the business and practically amended the discretionary power intended to be placed in the Treasury authorities. Under our law anyone can engage in the distillation of spirits without limit as to tlie amount produced, so that it follows that the owner of any registered distillery, no matter how small its daily capacity, having, for example, a product of 5 gallons a day and only for a short portion of the year, can engage in the manufacturing and distribution of denatured alcohol during the entire year, and yet the independent methylator and large consumer and distributer in our great manufacturing centers is denied the privilege. But the effect of this restriction upon the discretion of the Commissioner was even more drastic and far-reaching, for while the law in specific terms does not prescribe that the denaturing warehouse designated“ upon the application of any registered distillery” shall necessarily be located upon the distillery premises, and while it is even claimed that they can be located anywhere upon such application, it is a fair inference that proximity was intended and it has thus far been so construed.
It follows, therefore, that while anyone can legally engage in the distilling business, the expense involved in the construction and maintenance of the distillery, with the bonded warehouse and separate denaturing warehouse, even though all of the cost of supervision is placed upon the Government, will tend to discourage the farmer and other small producers and concentrate the whole production in the hands of the large distillers of beverage spirits, and not only result in more or less of a monopoly, but it will deprive those sections of the country away from central points of distribution of a constantly renewed and cheap source of supply of fuel, light, and power.
Judging from the experience of other countries where the right to use denatured alcohol freely has been conceded for twenty-five to fifty years, probably two-thirds of the entire consumption will be of what is known as “ completely denatured” spirit. This is what is used for domestic purposes, for heating, cooking, lighting, for all kinds of internal explosion engines, and for many manufacturing i-es.
It is purchased and consumed at the will of the buyer, as freely as oil or coal can be, and no records are required to be kept by him and no license needed, except in the case of the manufacturer using an average of more than 50 gallons per month.
The completely denatured spirit in England is made by adding to 90 parts of ethyl alcohol 10 parts of wood alcohol and three-eighths cf 1 per cent of mineral naphtha.
In Germany the mixture consists of 971 per cent ethyl alcohol, 2 per cent wood alcohol, and one-half of 1 per cent of pyridine bases.
In this country practically both methods have been adopted, as under the regulations issued by the Treasury the complete denaturant may consist of 10 parts of wood alcohol and one-half part of benzine added to 100 parts of ethyl alcohol, or an alternative of 2 parts of wood alcohol and one-half part of pyridine bases added to 100 parts of ethyl alcohol.
As much of the wood alcohol used as a denaturant in England and Germany is the American exported product, it is manifest that the advantage in cost of the denaturant as well as the pure spirit should rest with us. The expense of making the mixture, with reference to the time required or labor involved, is insignificant. Indeed the average cost of methylation in all Germany last year, including all expense for materials and labor, was one cent and eight-tenths of a cent per gallon.
It follows, therefore, that with the great area of the United States and the distances between the natural points of production, the cost of transportation or assembling the ingredients will be one of the largest items of expense. The wood-alcohol industry is largely centered to-day in the States of New York, Pennsylvania, and Michigan. The cheapest ethyl alcohol will be made from West India molasses on the Atlantic coast, from corn in the corn belt, from potatoes in Maine and the Northwest, and from waste products of sugar production in Hawaii, Louisiana, and the beet-sugar States. In the interest of the local consumer and with a view to a competitive distribution of the surplus product of any section, either of the pure spirit or the denaturant, neither article should be subjected to double transportation to reach its market.
It is with this object in view that this bill has been prepared, looking to the most economical handling of the product at the distillery, to cheap methods of transportation in steel containers and by tank cars, and to the establishment of denaturing warehouses in large centers of population where no distilleries are located. There need not be the slightest anxiety about the unnecessary multiplication of these establishments. With the general use of the complete denaturant, and throughout the greater portion of the country denaturing at the distillery will be all sufficient, but the great cities like New York, Chicago, Philadelphia, St. Louis, and Cleveland, with their enormous and diversified manufacturing interests, using special denaturants adapted to particular products, are entitled to such facilities as will enable them to procure this article, which to them will be a raw material, as quickly as possible and at the lowest possible cost. In some of these cases, the special denaturant will be bulky and weighty, and transportation to the distant distillery and of the mixture back again would be a wholly needless addition to their manufacturing cost.
In other cases, such as fulminates, smokeless powder, and other er: plosives, the dangerous character of the material used, will compel the establishment of denaturing plants for such purposes only. Such an application for the transfer of one of these industries from Canada to the United States is now awaiting the action of Congress upon this bill.
There is no probability whatever that an ar rage of five denaturing plants to a district other than those now authorized in connection with distilleries, will ever be reached, but your committee can see no reason
why, in the few districts where the necessities of the case might require more, an arbitrary restriction to five or any other number should be made. The cost of inspection in each case is trivial. The mixing process requires but a few minutes of time. No inspection is necessary except during its continuance. The limit of quantity denatured at any one time and consequently the frequency of visitation by an inspector are wholly under the control of the Commissioner of Internal Revenue, and the probabilities are that no additional employees will be needed beyond those already authorized.
The untaxed use of alcohol for domestic, industrial, and mechanical purposes is a wholly new proposition to the present generation in the United States.
POLICY OF THE UNITED STATES IN TAXATION OF SPIRITS. The first taxation of spirits was in 1791, and varied in amount from 9 to 25 cents per gallon, according to the degree of strength. This taxation continued till 1800, when it was repealed upon the recommendation of Thomas Jefferson.
It was renewed as a war measure in 1813 and repealed in 1818. For forty-four years spirits were free of all tax.
In July, 1862, the tax was again imposed as a war measure and fixed at 20 cents per proof gallon.
On March 17, 1864, it was raised to 60 cents per gallon.
In 1868 it was reduced to 50 cents and increased in 1872 to 70 cents. Increased again in 1875 to 90 cents, and on August 28, 1894, increased to $1.10 per proof gallon, where it now stands.
EFFECT OF TAXATION.
In 1860, with alcohol free of tax, the consumption of distilled spirits was about 90,000,000 gallons, or about 3 gallons per capita. David A. Wells estimated that 333 per cent of this was for industrial
purposes. He says:
The consumption of distilled spirits in the United States previous to the war for a great variety of purposes had become enormous, affording a practical illustration of the curious varying relations between prices and consumption, and also of what may be considered in the light of an axiom in political economy, namely, that practically there is no limit to the consumption of any useful commodity, provided that through a reduction of cost or price it is brought within the purchasing power of those who desire to consume.
And the reverse of this process is equally effective. The first result of the tax was a reduction in consumption and a falling off in production in 1863 to 16,000,000 gallons, and as the tax was increased a still more marked effect was shown in other directions. Wells says:
The immediate effect of this imposition and rapid increase of internal taxes on distilled spirits was a series of industrial and commercal phenomena, more remarkable than anything of the kind before recorded in economic history. In short, the influence of these taxes was to entirely and rapidly revolutionize great branches of domestic industry, and in some instances to utterly destroy them.
Forty years have passed since the United States taxed out of domestic, industrial, and mechanical uses a product which it is capable of supplying to its own people cheaper than any other nation on earth can make it. During the past summer a member of your committee called upon Mr. J. B. Meers, secretary of the board of commissioners of inland revenue, at Somerset House, London, and was greeted with this remark, which may well be coupled with the statement of David A. Wells, uttered many years ago. Said Mr. Meers: " I wonder how your country has got along for forty years without a free alcohol law. It will work a revolution in your industries." He said it with an intimate and practical experience of the legislation of Great Britain and a most thorough and comprehensive knowledge of the marvelous success of Germany along the same line for the past twenty-five years.
The first revolution meant destruction, and the latter means progress.
With reference to the first section of the bill attention is called to the latter part of the letter of the legislative committee of the National Grange.
By the use of untaxed alcohol in their manufacture both ether and chloroform will become available as cheap and effective solvents in many lines of industries. Chloroform will be extensively used as a solvent for resin, gutta-percha, camphor, iodine, bromine, and the alkaloids.
Ether in the manufacture of artificial silk, photographic paper, collodion, and in various kinds of nitrocellulose products, such as celluloid, artificial leather, etc. It is also largely used in the manufacture of smokeless powder.
In the manufacture of both ether and chloroform the alcohol is decomposed and its chemical properties wholly changed, so that its recovery or restoration to the form of alcohol is impossible.
So far as the use of these articles for surgical operations and general hospital work is concerned, under the provisions of the act of May 3, 1878, page 159, volume 1 of the General Statutes, the Treasury Department has held for years that untaxed alcohol may be used in the preparation of ether and chloroform where its identity as alcohol is destroyed, and to be used exclusively in the treatment of patients in legally authorized hospitals connected with medical colleges, to which chemical laboratories are attached, and not to be sold to any person whatever.
With untaxed alcohol for other manufacturing purposes, does any good reason exist now why all hospitals and medical institutions for the treatment of the poor and unfortunate, whether a chemical laboratory and training school is attached to them or not, should not have the privilege of cheap ether and chloroform which the more wealthy and favored institutions have for years enjoyed ?
Section 3 looks to economy in handling and transporting alcohol. It can not be disputed that a steel container is safer than a wooden cask, and a steel tank car than a wooden box car. The experience of Germany, where both are allowed and freely used, has further demonstrated it. With reference to the economy of the tank-car system. your committee has been advised that the railroads make no charge for handling empty tank cars back to the point of shipment. Their practice is to charge the same rate of freight as if the article was carried in barrels, and to make an allowance for mileage both coming