differential between the price of oleomargarine and butter in recent years. During the prewar period, when the price differential between yellow oleomargarine and butter was not more than 10 cents, the indirect burden was substantially less than it is.today. Unhappily, this is also a period of high living costs. While the imposition of these burdens through taxation is always undesirable, it is especially objectionable at times when high prices threaten the living standards of large groups in the population.

I would like to emphasize that the views of the Treasury Department are concerned only with the tax aspects of the legislation before you. It may be appropriate nonetheless to observe that the oleomargarine taxes may interfere with the optimum utilization of our resources. It has been forcefully argued before this and other committees of Congress, for instance, that the national diet would be improved if more milk were consumed in fluid form and if the table fat requirements of the Nation were obtained to a greater degree from oleomargarine. The Treasury is not in a position to appraise the validity of this argument, but I mention it only because it illustrates the dangers involved in utilizing the taxing power as a punitive instrument in channeling consumption in the direction for some products and away from others. It suggests that we should exercise great restraint in the use of the tax system for such purposes, except where the objective is clearly in the public interest and cannot otherwise be secured.

In addition to the Federal taxes, large segments of American consumers bear also the burden of State regulation. Today the sale of colored oleomargarine is prohibited in 22 States. Three additional States impose a tax of 10 cents a pound on the colored product. In 23 States the sale of colored oleomargarine is unfettered by excises or State prohibitions.

Uncolored margarine is available without tax in all but 19 States. Seven of the 19 States impose taxes ranging from 5 to 15 cents a pound. In the other 12 the exemption of oleomargarine made of domestic oils and fats or with a specific minimum of animal fats renders the tax ineffective. As a result of this factor and the overlapping between States which tax colored and uncolored oleomargarine, approximately one-half of the States impose effective restrictions on the sale of oleomargarine.

License fees for the manufacture or sale of margarine are required in 14 States. Annual fees for manufacturers and wholesalers vary from $1 to $1,000, and for retailers from 50 cents to $400 (table 4, p. 39).

State taxes have been more onerous in the past than they are now, and the trend toward less State regulation of oleomargarine continues both by legislative and judicial action. Less than a month ago the State of New Jersey repealed its law which prohibited the manufacture and sale of colored oleomargarine in that State. A bill to repeal a similar prohibition has recently passed both the House and the Senate in the Commonwealth of Massachusetts and is now in the hands of the conferees of the two chambers. However, State taxes are still widespread and repeal of the Federal taxes would make some contribution to intergovernmental tax integration by removing one of the all too many instances of overlapping Federal and State taxes.

In summary, it is the Treasury Department's view that there is no longer need for the use of revenue laws to regulate the manufacture and distribution of oleomargarine and that the Bureau of Internal Revenue might well be freed of this responsibility. The oleomargarine taxes unnecessarily burden consumers far in excess of the amount paid in taxes and interfere with the optimum utilization of national resources. Revenue considerations are not involved.

State imposed taxes and prohibitions are so far reaching that even in the absence of Federal taxes oleomargarine would continue to be unavailable to consumers in many parts of the country. Nonetheless, it is the Treasury's view that the Federal taxes should be repealed. Such action would eliminate one instance of overlapping Federal and State taxation and would directly benefit consumers in the majority of the States. In the event, however, that the Congress deems it to be necessary to continue the use of the tax instrument for regulating the production and distribution of oleomargarine, this end would be fully served if the present punitive tax rates were replaced by token tax requirements.

The CHAIRMAN. Are there any questions?

Mr. WIGGINS. Now, Mr. Chairman, I would like to file following my testimony four tables referred to in the testimony. Table 1, giving the number of taxpayers of special taxes on the manufacturers and dealers in oleomargarine for the fiscal years 1934 to 1947; a second table showing the collection from oleomargarine taxes for the fiscal years 1934 to 1949; table 3, the production and witdrawal of colored and uncolored margarine for the fiscal years of 1934 to 1947, inclusive, and the first 8 months of fiscal year 1948; and table 4, the State oleomargarine excises and license fees as of May 15, 1948.

The CHAIRMAN. The tables will be entered of record at this point. (The tables referred to follow :)

TABLE 1.-Number of taxpayers of special taxes on manufacturers of and dealers in oleomargarine, fiscal years 1934-47

TABLE 2.-Collections from oleomargarine taxes, fiscal years 1934–49

1 Not available.

(1)

(1)

ee

ee

(1)

(1)

(1)

(1)

27,000

(1)

(1)

(1)

(1)

27,000

2 Includes collections from taxes on adulterated butter.

Source: Annual reports of the Commissioner of Internal Revenue and the Budget of the United States Government, fiscal year 1949.

TABLE 3.-Production and withdrawals of colored and uncolored oleomargarine, fiscal years 1934–47, and first 8 months of fiscal year 1948

Source: Annual Reports of the Commissioner of Internal Revenue and Internal Revenue Bulletin.

Less than 500 pounds.

28 months.

3 Not available.

TABLE 4.-State oleomargarine excises and license fees, May 15, 1948

1 Manufacture or sale of colored margarine prohibited.

2 Tax applies to oleomargarine (colored or uncolored) not made from oils and fats (specifically named by the statute) that are largely derived from domestic materials.

3 Idaho also prohibits the manufacture or sale of colored margarine.

4 Minnesota's tax applies to oleomargarine not containing a minimum percentage (65 percent) of animal fats, as well as that made of foreign materials. Wyoming's tax applies only to vegetable oleomargarine (containing 20 percent or less of animal fats).

5 The license is for 2 years.

6 Tennessee's tax applies to all colored margarine, regardless of ingredients. Uncolored margarine is exempt if made from domestic oils and fats.

Senator BARKLEY. May I ask you whether your figure of 40 and 90 as comparative prices of oleomargarine and butter, whether that includes the tax of 10 cents per pound? I suppose you are talking at the retail price. Does that include the tax?

Mr. WIGGINS. We are talking about retail prices, including the tax. Senator BARKLEY. That includes the tax, whether levied on the colored or otherwise.

Mr. WIGGINS. There is very little of the colored sold. They sell it white.

Senator BARKLEY. Yes, I know.

Mr. WIGGINS. And give some coloring with it.

Senator BARKLEY. Yes, I know. They buy the coloring or furnish it when you buy the white, and color it at home.

Mr. WIGGINS. That is correct.

Senator BARKLEY. Or on the way home.

The CHAIRMAN. Any further questions?

Senator BUTLER. Mr. Chairman, Mr. Wiggins made a remark about the very few cases that have been brought by the Government for violation of the tax regulations.

Mr. WIGGINS. Yes.

Senator BUTLER. As an indication that it is not needed. I do not think we need to enter into any argument here, but I wonder if that would not be an illustration of the effectiveness of the tax that has been in effect all of the time, rather than otherwise.

Mr. WIGGINS. I think each one can draw his own conclusions. My opinion is that the Pure Food and Drug Act takes care of the type of violations that I think the Congress had in mind, when it originally imposed the tax.

The CHAIRMAN. Any further questions?

Thank you very much.

Mr. WIGGINS. Thank you.

The CHAIRMAN. Congressman Rivers, we will be very glad to hear from you. Will you identify yourself?

STATEMENT OF HON. S. MENDEL RIVERS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH CAROLINA

Mr. RIVERS. My name is S. Mendel Rivers, Member of the House from South Carolina.

Mr. Chairman, it is quite a difficult assignment to follow my two distinguished South Carolinians who preceded me here before this splendid committee, my own colleague and senior Senator, the Honorable Mr. Maybank, who has worked hard on this subject, and who has introduced legislation, proposed legislation on numerous occasions, also our splendid Carolinian Mr. A. L. M. Wiggins, who did such a splendid job in the Treasury Department. I need not say anything about this other fine Senator we have over here who has likewise helped us a great deal on this subject.

Mr. Chairman, I am grateful for this opportunity to appear on my bill, H. R. 2245, which passed the House on the 20th of April by such a large vote, as you recall 260 to 107. My bill passed the House without one single amendment, saving and except the effective date, which was necessary to bring the bill, having been introduced each year, up to date, and the effective date of which would be July 1 of this year.

My bill is simple and to the point. Beginning on July 1 of this year, the tax on margarine is repealed. The bill, of course, does not affect the duty imposed by paragraph 7 of the Tariff Act of 1930 on imports of margarine, currently fixed at 7 cents per pound by the Geneva agreement.

This duty will remain in effect, as well as the tax of 15 cents per pound imposed by section 2306 of the Internal Revenue Code on margarine imported from foreign countries.

This is my opinion, and that of the congressional committee over there which helped me prepare the act which I am prepared to say now the passage of the bill in my opinion would not repeal certain sections of the Internal Revenue Code relating to manufacturers and