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Estimated distribution of the individual income-tax returns, adjusted gross

income and tax liability under the Revenue Act of 1951 and after the Jan. 1, 1954 termination date

(Money amounts in millions]

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$5,000 to $10,000
$10,000 to $25,000.
$25,000 to $50,000.
$50,000 to $100,000.
$100,000 to $250,000
$250,000 to $500,000
$500,000 to $1,000,000.
$1,000,000 and over..

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24. 11
16. 94
10. 79
8. 45
5. 73
2. 01
1. 35

23. 96
16. 75
10. 69
8. 49
5. 96
2, 15
1. 24
1. 46

25. 61 18. 74 11.81 8. 06 3. 52


. 70

.50 .27

. 33

. 30

. 27

Total over $5,000

25. 61

52. 59

70. 54

70. 70








1 Includes normal tax, surtax, and alternative tax.
2 Calendar year 1952 and 1953 liabilities.
3 Less than 0.005 percent.
NOTE.-Detail may not add to totals due to rounding.
Source: Joint Committee on Internal Revenue Taxation.

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Comparison of the individual income-tax liabilities under the law in effect prior

to the enactment of the Revenue Act of 1951, under the Revenue Act.of 1951, and under the present law for 1954


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I would also like to make a request of the Treasury that the exact number, if now known, and if not, the approximate number of returns for fiscal year 1953, of last year, be inserted in the record, and the actual number of returns percentagewise of the number of taxpayers.

I know in a general way, many returns are joint and they cover both husband and wife, or two taxpayers. I would like to have that definite figure.

Then, Mr. Chairman, from the Treasury—and I presume some Treasury representative is present-I would like to have a statement of the number of tax warrants now pending and unsatisfied in the Bureau and whether or not—and I would like the answer to be specific—a rule or custom exists to issue no tax warrant if the tax liability is $10 or less, and whether the Bureau is now considering increasing this minimum to $25 in lieu of the $10. I would appreciate that very much. Mr. Chairman, at the suggestion of my doctor that I shall be away for a week or so, and may not be able to return by the time the committee reads these subjects in executive session.

Therefore, I would like to now record myself as saying that I favor the 2-year carryback. Under existing law, there is a 1-year carryback allowed, but I think it should go back 2.' I also think that the depreciation formula is sound, assuming, however, that it is optional with the taxpayer, and that no basis could arise for the exercise of discretion by the Bureau to reimpose the old original Virginia Hotel Co. rule that we corrected, here, by legislation.

On the question of taxation of dividends paid, I have not had an opportunity to study the formula. It seems a bit complex, and I wonder why it couldn't be simplified, but I am in harmony with the general principle and think there should be some deductions in computing the taxable income of the taxpayer against dividends paid on which a corporate rate has been actually paid, but I withhold any statement on that, hoping I will get back before you finally dispose of that question which may be a somewhat troublesome one, and because I have been not quite able to understand why we could not simplify the formula, rather than make it more complex.

I thank you very much, Mr. Chairman. I regret that I have been unable to be here during the hearings. I will, of course, try to read all the testimony before we actually get down to executive consideration of the bill, but I wished to make these two statements, one especially with reference to the 2-year carryback, and the other with reference to the depreciation.

The CHAIRMAN. We shall miss you very much, Senator, and we hope you will take good care of yourself.

Will the staff see that the things are supplied and have the Treasury do the things which are necessary. (The information requested by Senator George follows:)

APRIL 23, 1954. Hon. EUGENE D. MILLIKIN, Chairman, Committee on Finance, United States Senate, Senate Office Building,

Washington, D. C. MY DEAR MR. CHAIRMAN: During the Senate Finance Committee Hearings on H. R. 8300, April 19, 1954, Senator George requested that the Treasury Department supply the committee with information about the number of individual tax returns and taxpayers and also the number of tax warrants outstanding in the Internal Revenue Service.

The latest final statistical compilation of individual income tax returns is for the 1950 income year and is presented in Statistics of Income, part 1, 1950. These data show a total number of returns filed of 53,060,098, of which 31,586,090, or about 60 percent, were the joint returns of husbands and wives. Since both persons reporting on a joint return are regarded as filing the return, the number

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of joint returns may be added to the total number of returns to show the total number of individuals included in the filing process. On this basis, there were 84,646,181 individuals filing income-tax returns for 1950.

To find the number of individuals who were taxable on their 1950 incomes, the number of taxable joint returns may be added to the total of taxable returns. On this basis, 60,831,391 individuals had tax liabilities for 1950 incomes. The 1950 data are summarized in the following table :

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The most recent data showing the total number of returns filed are based on administrative reports of the Internal Revenue Service. These data, which are preliminary, indicates that during the 1953 calendar year, 56,841,351 individual income-tax returns were filed, relating for the most part to 1952 incomes. The data as reported do not show the number of returns filed by particular types of taxpayers. However, it is estimated that this total includes 42.5 million taxable returns representing 69 million individual taxpayers.

For the current income year, 1954, it it estimated that 47.2 million taxable returns will be filed. These returns will represent an estimated 77.7 million individuals with tax liability.

The additional information requested in regard to the current status of tax warrants in the Internal Revenue Service is being assembled and will be forwarded in a separate letter as soon as it is available. Sincerely yours,


Under Secretary of the Treasury. (Note: The additional data was subsequently submitted directly to Senator George and is not included in the hearings.)

The CHAIRMAN. Go ahead, Mr. Packard.
Mr. PACKARD. Thank you.



Mr. PACKARD. I have with me Mr. Vernon Kane of the firm of Horwath & Horwath, who are our tax consultants, and our legal counsel, Charles W. Merritt.

We have filed with you, Senator, a brief which involves about 10 pages, but in the interest of time there are just two points I would like to stress orally.

We are very grateful, of course, for the job that has been done in H. Ri 8300 as it stands today, and we feel it goes a long way toward removing numerous longstanding inequities--also it closes numerous loopholes in the Revenue Code.

Further, we feel that in most respects Congress did a good job in the passage of the excise tax amendment 3 weeks ago. Our industry, together with all segments of American business, and the public at large, will profit from the careful deliberations of Congress. There was only one instance in the items which meant the most to the hotel business, where factual evidence, we feel, was swept aside. We regretted very deeply the fact that your committee recommendation was rejected when the bill reached the floor of the Senate, and that body declined to reduce the 20 percent tax on entertainment rooms in hotels,


even though the Treasury's own figures reveal that that levy has long since passed the point of diminishing returns.

On the other hand, we are very grateful for what we think is equitable taxation as far as our industry is concerned; but to hurry along, there are two particular items in this, bill in which we are primarily interested and which we would like to discuss. The first is tax-exempt establishments.

For several years, now, spokesmen for the hotel industry have been urging Congress to close some of the loopholes in section 101 of the existing Revenue Code. Congress did make a beginning in this direction in the 1950 Revenue Act, when it exposed to Federal income-tax liability the proceeds from unrelated business activities of certain categories of 101 organizations. I do stress for you today, however, gentlemen, that one of the most serious inequities remaining in the code reposes in this particular section, and unfortunately, H. R. 8300, as it stands today, fails to further tighten these provisions.

I have here for your information, and they will be filed if you like, the type of exhibits which we have been assembling for several years and turning over to appropriate authorities. These have been filed with congressional committees and with the Internal Revenue Service. They reveal an increasing volume of instances where tax-exempt establishments are catering to the general public, for profit, and in serving luncheons, dinners, receptions, and so forth. This provides utterly unfair competition to taxpaying establishments.

There are even some of these organizations today which are providing transient rooms for the general public, and operating as hotels. This certainly goes beyond the original concept of services to members for which these organizations were initially granted a tax-exempt status.

The Treasury Department has estimated that 5.5 percent of all consumer expenditures are channeled into business-type receipts of exempt organizations. If this measurement is applicable, for instance, in food service, it means that $550 million worth of hotel and restaurant business is avoiding Federal income tax. These tax-exempt organizations have a terrific advantage over us.

First, they can undersell us considerably because they are not subject to Federal income tax, which all private corporations must pay. Second, operating in the guise of organizations which cater only to their members, they frequently solicit public groups to have dances and other forms of entertainment without payment of cabaret or admissions taxes, and so forth. It is essential that Congress provide the Internal Revenue Service with authority, and funds, which will permit a better policing job in this particular field.

In 1950, the Congress stipulated that certain 101 organizations were to be subjected to the Federal income tax. These were 101 (1), (6), (7), and (14). All references are to existing code sections, incidentally.

I would like to ask your committee, if I may, a question. Is it your interpretation of the code that 101 organizations not covered by 1950 amendment, such as 101 (3), can be deprived of its tax-exempt status if found to be engaging repeatedly in catering to public functions, for a profit, in fields which are entirely unrelated to the purpose for which it was originally chartered?


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