Attached to the above and foregoing resolution and transmitted to the State legislature in Tallahasse, Fla., was the following: "HOUSE CONCURRENT RESOLUTION "A concurrent resolution requesting the Congress of the United States to repeal title 26, sections 3475 and 4261 of the Internal Revenue Code of the United States, which levies an excise tax on the transportation of property and persons within the United States "Whereas the Federal excise tax on transportation was for the most part levied as an emergency revenue measure for the conduct of World War II, and in the case of the tax on transportation of persons for the purpose of discouraging unnecessary civilian travel, and was not intended as a part of the permanent rate structure, and is no longer necessary because the emergency created by World War II and the problems peculiar to it have ceased to exist; and "Whereas the country's railroads, airlines, truck and bus companies and water carriers are caught between increased costs and rate competition among themselves and with unregulated and private transportation, and the transportation tax increases the prices the users of the for-hire transportation services must pay, and makes the for-hire transportation agencies involuntary collectors of a tax which drives business to private operations; and "Whereas the for-hire transportation industry is essential to the national defense and the well-being of this industry must be safeguarded from the unnecessary and disrupting influence of the transportation tax which prevents for-hire transportation agencies from being able to compete for their fair share of the available volume of traffic; and "Whereas the transportation tax is most unjust to the Nation's railroads which are especially essential to the national defense because they move the largest share of troops, equipment, and vital supplies in times of war and national emergency; and "Whereas the transportation tax is costly for the carrier to collect and administer and thus adds to the total freight bill by increasing the carrier's overall costs, putting an extra burden upon the carrier and on the shipper through high rates; and "Whereas the transportation tax, because of its nature or application tends to become discriminatory as to communities and individuals, and restricts trade areas, thereby interfering with the free flow of commerce within the United States, and the State of Florida is particularly affected because its shippers must ship their commodities for long distances to reach markets; and "Whereas the transportation tax rate is a fixed percentage of the fare or freight rate, and is substantially increased without any increase in the tax rate every time it is necessary to increase passenger and freight rates; and "Whereas the for-hire transportation agencies are specially important to the State of Florida because Florida is an importer, i. e., more goods and people come into the State and remain than go out, and this means that the transportation tax adversely affects the State of Florida to a point approximating a lack of constitutional uniformity; and "Whereas the for-hire transportation agencies are essential to the well-being of the large tourist trade in the State of Florida and the State of Florida is especially interested in protecting and developing its vacation and tourist travel and cheaper transportation costs will aid in the accomplishment of this purpose; and "Whereas transportation is in no sense a luxury but is a vital necessity and there is, therefore, sound reason for distinguishing between the transportation taxes and other excise taxes that are imposed upon luxury items; and "Whereas the benefit the public in general will derive from the repeal of the transportation tax will far outweigh the loss of revenue to the Federal Government; and "Whereas there is presently pending before the Congress of the United States legislation which would repeal the tax on transportation of property and which would repeal the tax on transportation of persons: Now, therefore, be it "Resolved by the House of Representatives of the State of Florida (the Senate concurring), That they be placed on record in favor of the repeal of the 3-percent Federal transportation tax on all commodities shipped, and the repeal of the 10-percent transportation tax on all passenger fares; and "Resolved, That this resolution be forwarded to Representative Forand and the members of the House Subcommittee on Excise Taxes with the recom mendation that serious consideration be given to supporting the repeal of excise taxes as applicable to the movement of people and goods via for-hire carriers; and "Resolved, That the members of the Florida delegation in Congress do all within their power to bring about the repeal of the Federal transportation tax, and be urged to pursue this matter as diligently as possible in order that the State of Florida might reap the benefits which would be forthcoming." Mr. Speaker, in Florida this transportation tax has become a nuisance. Fishing boats were required to contribute an aggregate sum of about $100,000 to the United States Treasury Department as a transportation tax. After some 7 years of litigation, the courts have held that the tax was unlawfully collected and must be refunded-Smith v. U. S. (110 F. Supp. 892); Walker et al. v. U. S. (144 F. Supp. 440; affirmed 234 F. (2d) 910); Davis v. U. S. (235 F. (2d) 174); Smith v. U. S. (157 C. C. H. 9550 (5th Circuit), decided April 3, 1957). As shown by my remarks in the Congressional Record of April 13, 1955, in some areas no effort was made to collect the tax. The court found that the tax varied in different localities. In some places the tax was collected at the rate of about 5 cents while under identical circumstances on other boats the tax was collected at the rate of 60 cents on a $5 fishing trip. Because of the inherent nature of transportation, as legally defined, much travel and the movement of various commodities, goods, wares, and merchandise, have been held by the courts to be nontaxable. The unauthorized assessment and collection of the tax has resulted in considerable litigation throughout the United States with its attendant expenses to both the Government and the taxpayer. The most satisfactory solution to this problem is to repeal the transportation tax law. The effort to expand the statute by administrative rulings to impose the tax on articles and activities not specified in the statute is not limited to fishing boats but includes such tonnage as wood-Masonite v. Fly (182 F. (2d) 934; 194 F. (2) 257); building materials-Earl v. Babler (180 F. (2d) 1016); earth-Ellis v. U. S. (187 F. (2d) 698); stone-Kerns v. U. S. (204 F. (2d) 813); oil-Jones v. Continental Oil (141 F. (2d) 923); Continental Oil v. Jones (92 F. Supp. 927). Now, I understand, in some places an effort is being made to collect the tax on sightseeing in disregard of a regulation expressly excluding sightseeing from the tax. In view of the foregoing facts, H. R. 2867, legislation to repeal the transportation tax, should receive early consideration. AMERICAN CABLE & RADIO CORP. Hon. WILBUR MILLS, New York, N. Y., March 20, 1958. Chairman, Committee on Ways and Means, DEAR Mr. CHAIRMAN: In view of indications that tax revision may be one of the methods used to remedy the business recession, we respectfully suggest that consideration be given to the elimination of the 10-percent excise tax on international telegrams as one of the means which would contribute to business recovery. Both the telegraph industry and users have considered the excise tax on telegrams to be inequitable and discriminatory ever since its inception. With the exception of Government and press messages, almost all international telegrams are transactional. Since Government and press messages are exempt, the tax upon transactional communications is distinctly a direct tax upon business. The imposition of a direct tax upon an instrumentality of internationl commerce is prejudicial to the efficiency and usefulness of the telegraph industry because of the burden it places upon the telegraph services. Of itself this is contrary to the spirit of the International Telecommunication Convention (Buenos Aires, 1952), an international treaty ratified by the Government of the United States, the preamble of which reads: "While fully recognizing the sovereign right of each country to regulate its telecommunications, the plenipotentiaries of the Contracting Governments, with the object of facilitating relations between the peoples by means of efficient telecommunication services, have agreed to conclude the following Convention." Another international treaty, the Telegraph Regulations (Paris Revision, 1949), contains the following provision (art. 26, par. 8) : "The tariff shall exclude any fiscal tax or duty. Any country which for its own benefit levies a fiscal tax on international telegrams shall collect this tax in addition to the charges and only from senders of telegrams in its country." In ratifying the Telegraph Regulations, the Government of the United States accepted no obligation with respect to the foregoing provision. The fact is that the tax is imposed upon charges for international telegrams paid in this country regardless of whether the communications are outgoing or incoming. We know of only three other countries which apply an excise tax of substance on international telegrams; namely, Bolivia (10 percent tax), Brazil (6 percent tax), and Chile (15 percent tax). In all three cases the tax is applied on the foreign country's outgoing messages only. Based upon statistics of traffic volume to, from, or via the United States for the year 1956, reported by the international carriers to the Federal Communications Commission, there were 28,957 messages from Bolivia, 435,024 messages from Brazil, and 94,573 messages from Chile. On the other hand, there were 8,433,473 outgoing messages from the United States. The conclusion is justified that on a worldwide basis, excise taxes on international telegrams are applied principally and preponderatingly by the Government of the United States. We might also point out that the Third Inter-American Radio Conference (Rio de Janeiro, 1945) adopted as resolution X, captioned "Elimination of Special Taxes," the following: "The Third Inter-American Radio Conference considers that it is in favor of the elimination of all special excise taxes which affect international communications and in order to accomplish this aim progressively so as not to disturb the economy of the countries, and therefore, "It recommends: "1. That on press and government telecommunications no excise tax shall be applied except for services actually rendered; "2. On all other telecommunications such excise taxes should be progressively reduced until they are completely eliminated. In any event, the above-mentioned excise taxes should apply only on outgoing telecommunication messages." The Fourth Inter-Amreican Radio Conference (Washington, 1949) maintained recommendation X without any modification. Except for services performed within 225 miles of the border with Canada or Mexico, the Government of the United States does not impose the excise tax upon receipts from international passenger and freight services performed by airlines, bus transport lines, railroads, or steamships. Nor is any burden placed upon the user of overseas airmail. The airmail has a direct subsidy from the Government, as there is no pretension that the airmail stamp pays for the service. Of the various forms of international common carrier service, communication appears to be the only genuine public service subjected to the tax. The imposition of the excise tax upon international telegrams has created a demand amongst users in the United States for receiver-to-pay arrangements. Such arrangements would envision payment for outgoing messages by the addressees at foreign points. Such payments would be free from United States excise tax and certainly not subject to foreign excise tax. Due to processing and soft currency conditions, such arrangements have not yet been offered to users in the United States except for Government and press messages and, to a very limited extent, communications filed by foreign residents traveling in this country. On the other hand, incoming messages to be filed by American visitors abroad on a receiver-to-pay basis, including messages from one foreign country to another foreign country for which payment is desired within the United States, would be subject to the United States excise tax. This has caused retributive economy. This is not a healthy condition to cope with during a business recession. During the last few months of 1957 the United States international telegraph industry experienced a drop in traffic volume. In January and February, 1958 the message volume was 4 percent below that for the same months in 1957. There has been no change in international telegraph rate levels within the United States since July 1, 1950. Even the change on that date was due to a shift in service classifications and did not have the true character of a rate increase. At recent hearings before the Federal Communications Commission the international carriers produced considerable evidence as to the inadequacy of the United States international rate levels and the lack of a reasonable rate of return. Worsening business conditions have increased the gap between present earnings and a reasonable rate of return. In the face of all these facts, the United States excise tax upon communications has become a serious drag to the economy of the industry. It is our view that the elimination of the tax on communications would not only avoid jeopardizing an essential business but the very knowledge of its elimination would stimulate business and play its own important role in business recovery. I shall appreciate it if all of the foregoing is brought to the attention of the members of your committee for consideration and incorporated into the record of the proceedings in the general tax revision hearings. Very truly yours, ELLERY W. STONE, President. UNITED STATES INDEPENDENT TELEPHONE ASSOCIATION, Hon. WILBUR D. MILLS, Chairman, Committee on Ways and Means, House of Representative, Washington, D. C. DEAR MR. CHAIRMAN: During the past 11 years, representatives of the United States Independent Telephone Association have on several occasions urged the elimination of excise taxes on telephone service. Our latest witness, Col. William C. Henry, president and general manager of the Northern Ohio Telephone Co., Bellevue, Ohio, testified before a subcommittee of your committee on December 6, 1956. The attached statement of our current position concerning these taxes is submitted for your consideration. We kindly request that it be made a part of the record of the recent hearings held by the committee. Respectfully yours, R. A. LUMPKIN, Chairman, Tax Committee. STATEMENT ON BEHALF OF UNITED STATES INDEPENDENT TELEPHONE ASSOCIATION The United States Independent Telephone Association submits this statement on behalf of its member companies and the nearly 10 million telephone customers which those companies serve. Our purpose is to call attention to a gross inequity in the Federal tax structure and to recommend a proper remedy in the nature of a general relief measure universally beneficial to every taxpayer. A discriminatory tax is presently levied on essential telephone service at rates ordinarily reserved for luxury items such as furs, perfume, and jewelry. While Federal excise taxes have been imposed on communications services in all but 8 of the past 40 years, it was not until 1942 that local telephone service was made subject to this tax as a part of a wartime emergency measure. This tax was conceived as a means of restricting the growth of telephone service in order to save critical materials for national defense. Sixteen years after enactment, the Federal excise tax on communications services continues to restrict the growth of telephone plant and service thus contributing to the current slowdown in business activity. The tax is out of keeping with the times. The discriminatory nature of this tax has been stressed by industry representatives in testimony before your committee on many occasions. It has been pointed out that telephone service is distinguished by the fact that it is the only one of the essential household utilities so taxed. Our customers and the investors in our business as well, cannot understand why telephone service should be singled out from gas, electricity, and water to be taxed in this discriminatory fashion. They are naturally fearful that a tax continued so long after the end of the emergency which prompted it may tend to become a permanent part of the general tax structure. Communications services are carrying a large burden in the form of taxes. The telephone industry's bill for Federal income and operating taxes amounted to $1,500 million for 1957. In addition, telephone customers paid nearly $600 million in Federal excise taxes on their service. This is a sum that is becoming increasingly burdensome to the telephone user. In the final analysis, telephone customers must pay the industry's taxes. We estimate that the average telephone customer's bill included more than $50 in taxes for the year 1957. This fact is even more striking when it is realized that out of every dollar the customer currently pays for telephone service, approximately 28 cents goes for taxes, including excise levies. Our customers have been bearing their full share of the tax load for many years. The time has come for relief. Since the use of the telephone is so universal, repeal of the Federal excise tax on communications services would have the same effect as a general tax reduction equal in amount. Economists who advocate tax reductions as a stimulant to business activity clearly recognize the broad effect which can be expected from repeal. People in all income groups pay excise taxes on communications. Repeal of these taxes will provide direct benefits for most everyone in the Nation. Many more people would be directly benefited by a repeal of the excise tax on communications than by a reduction in income taxes. This is particularly true of the millions now unemployed. We firmly believe that one of the most practical ways of affording immediate relief to the average taxpayer is to repeal the excise taxes on communications services. Our position may be summed up as follows: 1. The Federal excise tax on communications services was conceived as an emergency measure and should not be continued longer lest it may come to be regarded as a permanent part of the tax structure. 2. The tax is unfair because it discriminates against users of telephone serv ice. Regarded by most people as a daily necessity, telephone service is treated as a luxury for tax purposes and subjected to rates approaching those imposed on club dues, cabaret bills, liquor, and tobacco. It is the only household utility service so taxed. 3. The necessity of maintaining Federal tax revenues at the current high level should not preclude the elimination of the unfair and discriminatory excise tax on communications services. The nature of this tax demands its early repeal. 4. Repeal of the Federal excise tax on communications services is the most practical means of providing a general tax reduction immediately stimulating to the national economy and universally beneficial to all our people. United States Independent Telephone Association Tax Committee, |