equally applicable to the other organizations. Moreover, in its report in 1957, the committee stated that this logical extension of the principal would be given further study with a view to some decision. Our supporting arguments relate to consistency with respect to tax exemption policies among various forms of organizations, the value to the public of services rendered by voluntary nonprofit agencies, their comparability to those performed by governmental agencies which now enjoy such exemption, and the fact that these voluntary agencies are increasingly performing services for governmental agencies under contracts or other arrangements involving the use of tax funds. SUBJECT: MANUFACTURERS GENERAL WITNESS: DONALD W. CORDES, VICE CHAIRMAN, COUNCIL ON GOVERNMENT RELATIONS, AMERICAN HOSPITAL ASSOCIATION. SUMMARY OF STATEMENT The testimony of the American Hospital Association will be directed in support of H.R. 857 by Mr. Boggs. We will support the proposal to exempt private nonprofit hospitals from certain manufacturing, transportation, and communication excise taxes. All public, nonprofit hospitals (all those governmentally owned hospitals-local, county, State, and Federal) are presently exempt from such excise taxes. The private, nonprofit hospitals perform the same services in behalf of the public as do the governmentally owned hospitals. We believe the existing excise taxes on private, nonprofit hospitals to be discriminatory. Except for the existence of the private, nonprofit hospitals, their functions in behalf of the public would have to be performed by publicly owned agencies at an enormous increase in the cost to the Government. Hospitals are under strong criticism for what is called the high cost of hospital care. We believe it is incumbent upon the Federal Government to relieve private hospitals of tax burdens which contribute toward the cost of hospital care. The situation is further aggravated by the fact that the law at present would permit hospitals which conduct formal educational programs to deduct excise taxes incurred in connection with such pursuits. However, the exhaustive accounting and administrative procedures required usually nullify the possibility of hospitals receiving the exemption. Further, the Federal Government has acted to exempt private, educational institutions from excise taxes. Many hospitals conduct essential educational functions and are, in fact, the basic educational institutions for the Nation's health personnel. The cost of excise taxes add to the cost of hospital educational programs which are financed, in the main, by hospital patients. We believe the appropriate remedy is to grant the same exemption from excise tax liability to voluntary, nonprofit hospitals as is now enjoyed by governmental hospitals. 34-720-64-pt. 6 SUBJECT: MANUFACTURERS GENERAL WITNESS: EDWARD F. FISHER, PRESIDENT, GAR WOOD INDUSTRIES, INC., WAYNE, MICH. SUMMARY OF STATEMENT SUBMITTED FOR THE RECORD (Prepared by staff of Committee on Ways and Means) It is recommended that sales to the Federal Government be exempt from the Federal manufacturers' excise taxes. SUBJECT: MANUFACTURERS GENERAL WITNESS: ARNOLD J. HOFFMAN, NEW YORK, N.Y. SUMMARY OF STATEMENT SUBMITTED FOR THE RECORD (Prepared by staff of Committee on Ways and Means) The provisions of existing law relating to the filing of suits in the case of Federal excise tax matters should be amended. Perhaps some form of declaratory judgment procedure could be considered. Present law presents a barrier to legal action since, to secure a refund, the taxpayer must repay the amount of the tax to the ultimate vendors, or obtain the written consent of the ultimate vendors to the allowance, both of which are impractical to do in all cases. For purposes of the excise tax laws, the term "manufacturing" should be defined to eliminate the existing confusion between court decisions and interpretations by the Internal Revenue Service. SUBJECT: MANUFACTURERS PASSENGER AUTOMOBILES WITNESS: HON. JOHN D. DINGELL, MEMBER OF CONGRESS, STATE OF MICHIGAN. SUMMARY OF STATEMENT The Federal excise tax on the sale of new cars should be repealed because it exercises a restraining effect at the most sensitive point in the marketing process, the buyer's decision to "buy now." The average $230 extra charge makes it harder for buyers to decide to buy. When buyers' decisions to delay purchases of new cars form a mass trend, the industry shifts from "boom" to "bust" in a hurry. The tax has an excessive influence against the sale of new cars. SUBJECT: MANUFACTURERS-PASSENGER AUTOMOBILES WITNESS: HON. CHARLES E. CHAMBERLAIN, MEMBER OF CONGRESS, STATE OF MICHIGAN. SUMMARY OF STATEMENT (Prepared by staff of Committee on Ways and Means) The 10-percent excise tax on passenger automobiles should be repealed for numerous reasons. Repeal of that tax would benefit all groups concerned-the automotive worker, the stockholder, management--as well as the entire economy. The 10-percent rate is discriminatory as it applies to the automotive industry. In 1962, the 10-percent rate on rail and bus fares was eliminated, and the 10-percent rate on air travel was reduced to 5 percent. The purpose for which the tax was enacted-to curtail transportation and nonstrategic consumption-no longer exists. The burden placed upon the auto industry by this tax is evident. Revenues collected from the auto excise tax account for some 40 percent of all revenue collected from all the excise taxes. Evidence suggests that the low- and middle-income persons bear a significant part of the burden of this tax. Because of its interrelationship with other sectors of the economy, the repeal of the tax would have a significant impact on the entire economy. Any tax which is enacted should be made retroactive to the date the committee announces its intention to consider legislation in this area. Automotive companies have stated they would recommend to their dealers that the full amount of the tax reduction be deducted from the price of the car. SUBJECT: MANUFACTURERS-PASSENGER AUTOMOBILES WITNESS: RICHARD E. CROSS, CHAIRMAN, TAXATION COMMITTEE, AUTOMOBILE MANUFACTURERS ASSOCIATION. SUMMARY OF STATEMENT The Automobile Manufacturers Association urges the elimination of the discriminatory excise tax on the purchase of passenger cars for the following reasons: 1. Passenger cars are by far the most widely used form of transportation of people. The special wartime excise taxes on all other forms of personal transportation have been reduced or eliminated. Unchanged from the wartime peak levels, passenger car excise tax adds either directly or indirectly to the price of the 20 million new and used passenger cars purchased annually. By continuing the excise tax on passenger car purchases, Congress is adding about $1.7 billion annually, over and above the State and Federal taxes that pay for highways, to the costs incurred by all users of automotive transportation. 2. Elimination of the passenger car excise tax by stimulating the purchase of both new and used cars would directly increase employment opportunities in the industries that contribute to the production of passenger cars. Jobs also would be created indirectly in all the businesses that serve users of automotive transportation. Finally, a part of the effect would show up in purchase of other items or services, stimulating economic activity in general. 3. Elimination of the passenger car excise tax would contribute more than any other single exicse tax action to faster, sustained economic growth. The rise of automotive transportation has been for 60 years, and will continue to be, a primary force in national economic growth. The development of new modes of living and the increase in travel associated with the improvement of automotive transportation have stimulated the development of businesses of many different kinds. 4. Elimination of the excise tax on passenger cars would reduce the costs of almost all business firms and thus lower the costs of most goods and services and improve the competitive position of American business generally. We estimate that 20 to 25 percent of new passenger cars are sold to business firms or to salesmen, accountants, doctors, and others for use in earning their livelihoods. Thus one-fifth to one-quarter of the $1.7 billion of excise taxes collected annually on the purchase of new cars is added to the cost of producing other goods and services. 5. The price performance of the automobile industry has been outstanding. Over the last 5 years, the price of a typical $2,500 car, for example, has been reduced relative to the prices of all consumer goods and services by some $200, despite a 4-percent average annual increase in labor costs. In the face of the industry's demonstrated ability to increase sales and employment by serving its customers better, it is particularly unfortunate to continue a form of taxation that makes the purchase of cars more expensive than it need be, or should be. These five points are developed in detail in the body of our statement. We also present in detail a procedure to provide that elimination of the excise tax be made retroactive to the date that hearings on specific legislation are first announced. Because of the adverse effects on car sales, and therefore on the economy generally, of any postponement of purchases occasioned by hearings on specific legislation, we strongly urge that there be provision for retroactivity. SUBJECT: MANUFACTURERS- -PASSENGER AUTOMOBILES WITNESS: ED KOSSMAN, CHAIRMAN, GOVERNMENTAL RELATIONS COMMITTEE, NATIONAL AUTOMOBILE DEALERS ASSOCIATION. SUMMARY OF STATEMENT The National Automobile Dealers Association, whose membership is comprised of nearly 22,000 franchised new car and truck dealers engaged in selling and servicing new cars and trucks of all makes, domestic and imported, in all of our 50 States, strongly urges the immediate repeal of the discriminatory excise tax on new automobiles and automobile parts and accessories because 1. the tax on passenger cars, which averages about $225 per car, is imposed without regard to income. It is therefore a consumption tax with regressive effects and is a special hardship on lower income groups; 2. motor vehicles are subject to continuing multiple taxes imposed throughout their usable lives, including Federal and State taxes on gas and oil, taxes on repairs involving replacement parts, license fees, and personal property taxes; 3. the tax is a deterrent to customer demand and employment in the automotive and related industries and likewise a deterrent to increased economic gain; and 4. the tax is discriminatory. Other transportation media, such as aircraft, boats, streetcars, subways, etc., are not subject to excise tax; yet none of these means of transportation is more essential than passenger cars and trucks, and the parts needed for their maintenance and repair. Despite the fact that the passenger car is a necessity, not a luxury, for most individuals, the present tax rate on automobiles is twice the rate on most nonluxury consumer durables such as refrigerators, freezers, clothes dryers, dishwashers, and other household electric, gas, and oil appliances. In 1954, the rate on these items was reduced from 10 to 5 percent. Even luxury items, such as fur coats and jewelry, have been reduced 50 percent since the Korean war, and some luxury items, such as watercraft, are not taxed at all. It is further recommended that (1) the repeal of the tax on new vehicles be made retroactive to new units sold during a reasonable period prior to the actual repeal of these taxes, in order to minimize market disruptions; and (2) the present floor-stock refund provision (sec. 6412(a)(1)) of the code be amended to provide that a "new automobile" shall mean an automobile the equitable or legal title to which has never been transferred by a manufacturer, distributor, or dealer to an ultimate purchaser, for his own use and not for resale. |