Massachusetts who derived an income from obligations of the State of New York.

Senator LONERGAN. If you have no further questions, that concludes all I have to offer this morning.

Senator VAN NUYS. We tentatively agreed in the full committee, when we passed on Senator Vandenberg's child-labor amendment, that we would insert the same language contained in the eighteenth amendment, fixing a limit of time of 7 years.

Senator LONERGAN. That is agreeable to me.

Senator VAN Nurs. It is agreeable to you to amend it to conform with the language used in the eighteenth amendment?

Senator LONERGAN. Yes. I would like for the committee to hear other witnesses at a time to be agreed upon by the committee. Senator VAN NUYS. You may have that opportunity.

SENATE JOINT RESOLUTION No. 154

STATEMENT OF HON. HARRY FLOOD BYRD, A SENATOR IN CONGRESS FROM THE STATE OF VIRGINIA

Senator VAN NUYS. Senator Byrd, you may proceed to make such statement as you wish relative to Senate Joint Resolution No. 154.

Senator BYRD. Mr. Chairman, Senate Joint Resolution No. 154 not only provides for the taxation of bonds issued by a State or subdivision thereof, but likewise the power to lay and collect taxes on the compensation paid by any State or political subdivision thereof to its employees or officers. I am not going to attempt to discuss at great length the question of the taxation of bonds, about which Senator Lonergan has made a very able statement. I would, however, like to read to the committee a letter from Herbert E. Gaston, Assistant to the Secretary of the Treasury, addressed to me, and dated December 22, 1936, as follows:

In conformity with the request in your letter of December 7, 1936, to Mr. George C. Haas, Director of Research and Statistics, I am enclosing herewith photostatic copies of four tables setting forth the estimated amount of securities, outstanding interest on which is wholly or partially exempt from the Federal income tax, June 30, 1913 to 1936, classified by type of obligor. These exhibits will appear as tables 46 to 49, inclusive in the forthcoming Annual Report of the Secretary of the Treasury.

As appears from table I, the estimated total amount of such securities outstanding on June 30, 1936, amounted to about 64 billion dollars, or, excluding those held in sinking funds or owned by the United States Government or by governmental agencies, about 54 billion dollars. Of this net estimated amount of 54 billion dollars of securities outstanding on June 30, 1936, the interest on which is exempt from the Federal individual income tax, the interest on the remaining 21 billion dollars being exempt from the normal tax only is exempt from both the normal corporation income tax and from the surtax on undistributed earnings. The tax exemption provisions of the various types of public-debt securities and of fully guaranteed securities, outstanding as of June 30, 1936, are more fully explained on pages 2 and 3 of the enclosed Statement of the Public Debt of the United States as of that date. The entire debt described on page 2 of this statement as Treasury notes, certificates of indebtedness, and Treasury bills, as well as the Panama Canal loan, conversion bonds, postal-savings bonds, and adjustedservice bonds included under "bonds", have been included in the tables as fully tax-exempt, while the Treasury bonds and United States savings bonds have been included as exempt from the normal tax only. In addition, Federal land bank bonds (both the consolidated bonds and the bonds of the individual banks), Federal intermediate credit bank debentures, joint-stock land-bank bonds, and all bonds of territories and insular possessions of the United States as well as all

bonds of States, counties, cities, etc., have been included in the tables as fully tax-exempt, while the bonds of the Reconstruction Finance Corporation, the Home Owners' Loan Corporation, and the Federal Farm Mortgage Corporation have been included in the tables as partially exempt only.

It will be understood, of course, that the tables undertake to classify outstanding securities only with respect to the degree in which their interest is exempted from the income tax of the Federal Government. All securities of the United States are exempt both with respect to principal and interest from all taxes levied by States except estate, inheritance, and gift taxes. No securities, whether issued by the United States or by the States or their political subdivisions are exempt from the estate, inheritance, or gift taxes of either the Federal Government or the States. Securities issued by a State or a political subdivision thereof, while considered to be exempt with respect to both principal and interest from taxes levied by the Federal Government are not exempt from the taxes of other States when held by residents thereof except by reciprocal arrangement with the issuing State, while States may tax their own obligations and those of their political subdivisions or permit their political subdivisions to tax their own securities and those of the State Government as they choose and agree in the contracts with their creditors. None of these types of tax exemption or the absence thereof, however, are considered in compiling the enclosed tables.

The Treasury has no comprehensive information with respect to the holdings of the United States Government bonds. The amounts held by United States Government trust funds and governmental agencies and by the Federal Reserve banks are indicated in the tables. I believe that you will also be interested in the enclosed press release by the Comptroller of the Currency indicating that about $17,400,000,000 of United States Government securities, direct and fully guaranteed, were held by banks (exclusive of Federal Reserve banks) as of June 30, 1936. The figures of the Comptroller of the Currency do not show the amounts of other types of tax-exempt securities held by banks, but corresponding figures reported by the Federal Deposit Insurance Corporation as of the same date indicated that insured commercial banks held as of that date about $2,800,000,000 of State and municipal bonds and about $400,000,000 of Federal land bank and Federal intermediate credit bank securities. The last issue of the Proceedings of the Association of Life Insurance Presidents estimates the amount of United States Government bonds, direct and fully guaranteed, held by 49 large life-insurance companies as of December 31, 1935, at $2,500,000,000 and the amount of State and municipal bonds at $1,200,000,000. The companies with respect to which these estimates apply held as of that date about 92 percent of the assets of all life-insurance companies in the United States.

I hope that these data answer adequately to your need and am sorry that we were not able to supply them more promptly.

Senator VAN NUYS. Will the tables referred to be included in the record?

Senator BYRD. Yes; I submit the tables referred to in the letter of Mr. Gaston.

(The tables referred to are here set forth in full, as follows:)

TABLE I.-Estimated amount of securities outstanding interest on which is wholly or partially exempt from the Federal income tax, June 30, 1913 to 1936, by type of obligor 1

1000,000 omitted]

Includes Federal land bank bonds (both those issued by the individual banks and the consolidated series), Federal intermediate credit bank debentures, joint stock land bank bonds, and Federal Farm Mortgage Corporation bonds. Does not include stocks.

"Total outstanding issues" less "Held in U. S. Government trust funds, or owned by U. S. Government or by governmental agencies" and "Held in sinking funds."

Treasury Department, Division of Research and Statistics.

TABLE II.-Estimated amount of securities outstanding, interest on which is wholly exempt from normal income tax and surtax of the Federal Government, June 30, 1913 to 1936, by type of obligor 1

B. HELD IN UNITED STATES GOVERNMENT TRUST FUNDS OR OWNED BY UNITED STATES GOVERNMENT OR BY GOVERNMENTAL AGENCIES

TABLE III.-Amount of securities outstanding interest on which is exempt from normal income tax, but not surtax, of the Federal Government, June 30, 1918 to 1936, by direct obligor 1

B. HELD IN UNITED STATES GOVERNMENT TRUST FUNDS, OR OWNED BY UNITED STATES GOVERNMENT OR BY GOVERNMENTAL AGENCIES 3

1 No securities of this type were outstanding in 1917 and prior years. Figures in sections B and C revised On basis of daily Treasury statements (revised).

3 Excludes stabilization fund and Federal Reserve banks.

"Total outstanding issues" less "Held in United States Government trust funds, or owned by United States Government or by governmental agencies." The United States Government and its agencies issuing this type of bonds maintain no sinking fund in which bonds are held alive.

Treasury Department, Division of Research and Statistics.

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