D. Legitimate theater is a basic foundation for the performing arts and is so regarded by society. Social policy calls for support of such an activity. Certainly, it does not justify the imposition of regressive tax burdens. III. Remission of the tax will have a salutary effect only if combined with other actions by the industry that are calculated to expand its market and develop its resources. A. Actors Equity endorses AFL-CIO position which insists that the benefits of the elimination of the tax reduction be passed through to the public and urges the committee to satisfy itself that such a step will be taken. B. One method for insuring a constructive use of the tax remission was put forward by the New York Times. It was suggested that the industry establish a trust fund which would receive the revenues made available by remission. In this manner the money in question could not be reached by the individual enterprises. The fund would be required to use the money to underwrite the cost of bringing quality theater-at low prices-to people who cannot afford such theater at current prices (e.g., schoolchildren and college students). If the fund were established in advance of congressional action, the committee would be assured that the act of tax remission would indeed help to lift restraint on consumption in this particular industry. SUBJECT: FACILITIES AND SERVICES ADMISSIONS WITNESS: EDWARD O. LUTZ, EXECUTIVE DIRECTOR, MUSICAL ARENA THEATRES ASSOCIATION. SUMMARY OF STATEMENT SUBMITTED FOR THE RECORD (Prepared by staff of Committee on Ways and Means) The excise tax on admission to living theater productions should be repealed. Its repeal would provide additional and badly needed income to producers. Converting the tax into revenue will permit innumerable theaters to stay in business thus maintaining payrolls, material purchases, and other flow of funds into the communities. The continuity of a cultural institution will also be preserved. This admissions tax is of insignificant revenue from the standpoint of the overall Federal budget, but represents a significant source of revenue to the legitimate theater. This tax discriminates against the living theater in favor of its competitors-motion pictures, radio, and television, and tax-exempt organizations providing entertainment-and should, therefore, be repealed. SUBJECT: FACILITIES AND SERVICES-ADMISSIONS- WITNESS: A. F. DUDLEY, PRESIDENT, LIBERTY BOWL CHARITIES, INC. SUMMARY OF STATEMENT SUBMITTED FOR THE RECORD My testimony will concern itself with the proposed amendment to the Internal Revenue Code of 1954 to provide that the admissions tax shall not apply in the case of a postseason college football game when no more than 75 percent of the entire gross proceeds from such a game inures to the benefit of such colleges and the balance of these net proceeds inures to the benefit of nonprofit hospitals. This amendment will correct the inequity in the present act that provides that there is no admissions tax when the proceeds of the game are divided between the two colleges and hospitals for crippled children. SUBJECT: FACILITIES AND SERVICES ADMISSIONS GENERAL WITNESS: JAMES C. GROSS, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF TRAVEL ORGANIZATIONS. SUMMARY OF STATEMENT Name: James C. Gross. Capacity appearing: Executive director, National Association of Travel Organizations. Address: 900 17th Street NW., Washington, D.C. Statement of NATO's purpose and organizations it represents. Statement of position as to need for repeal of Federal excise tax on admissions. Statement on role of travel industry as it relates to the general economy of our country. The role of the travel attraction as a prime motivation for people to travel. The interrelating aspects of the need for repeal of the excise tax on attractions; the President's backing of the "See the U.S.A." program launch to help solve our balance-of-payments deficit-that part pertaining to travel; and the role travel can play in the administration's program on poverty and Appalachia. Specific data to support repeal of excise taxes on admissions. SUBJECT: FACILITIES AND SERVICES CABARET WITNESS: HON. THOMAS M. PELLY, MEMBER OF CONGRESS, STATE OF WASHINGTON. SUMMARY OF STATEMENT (Prepared by staff of Committee on Ways and Means) The cabaret tax should be repealed because it is a repressive tax on music, on musicians and on all performing arts and artists. Repeal of this tax will permit many of our fine musicians to be removed from our unemployed rolls as well as the other service employees likewise affected. SUBJECT: FACILITIES AND SERVICES CABARET WITNESS: HON. CLEMENT J. ZABLOCKI, MEMBER OF CONGRESS, STATE OF WISCONSIN. SUMMARY OF STATEMENT It has long been my belief that Congress should review the whole area of excise taxation with the aim of repealing those imposed at the time of World War II and the Korean war. There is little doubt that the present system discriminates against certain industries, retailers, and consumers in a way that injures the national economy and impedes national growth. A case in point is the cabaret tax. As you know, since 1957, I have sponsored legislation aimed at repealing this tax. My bill in this 88th Congress is H.R. 975. Past experience leads proponents of repeal to believe that eliminating the cabaret tax completely would not cost the Federal Government a loss in revenues and would significantly increase the employment of musicians and entertainers. For that reason, I urge the committee to take action now to repeal this job-destroying tax on musical entertainment in restaurants and taverns. Musicians, the public, the Government-all would benefit from such an action. SUBJECT: FACILITIES AND SERVICES—CABARET WITNESS: ARTHUR J. PACKARD, CHAIRMAN, GOVERNMENTAL AFFAIRS COMMITTEE, AMERICAN HOTEL & MOTEL ASSOCIATION. SUMMARY OF STATEMENT I am Arthur J. Packard, president of the Packard Hotel Co., with headquarters in Mount Vernon, Ohio. I am chairman of the Governmental Affairs Committee of the American Hotel & Motel Association. I am also president of a chain of small hotels and motels. I appreciate the opportunity of appearing before the committee today as the official representative of the association. The hotel-motel industry bears a substantial part of the excise tax burden. This is because we are an industry which must purchase equipment, supplies, etc., and at the same time provide service. The excise tax is a deadweight against a commercial establishment, making no allowance for the fact that a given year may witness no profits whatsoever. One of these excise taxes; namely, the cabaret tax, has provided more headaches for the hotel-motel industry than any other single excise, during the years it has been in operation; even if it is passed on to the guests, it has always had an adverse effect on business. We found in a survey conducted by our association in 1946 that approximately 700 hotel rooms provided entertainment and/or dancing where the cabaret tax was applicable. Thirteen years later we found that there were less than 200 rooms in the Nation's hotels which provided entertainment and/or dancing subject to the cabaret tax. This decline has been continuous through all these years and clearly illustrates the depressive effect of such a tax. This tax has naturally contributed to the demise of entertainment in hotels' and motels' facilities. Many hotel guests who dine in a hotel dining room where entertainment is provided, complain bitterly about the imposition of the 10 percent cabaret tax. This is especially true where a hotel or motel attempts to provide entertainment one or two nights a week, with instrumental music the other nights. The guests who come during the nights when entertainment is provided are incensed by the imposition of the 10 percent tax, when they had been in the same. room the night before and paid no tax at all. There is no doubt but this tax destroys job opportunities for musicians, entertainers, waiters, waitresses, cooks, etc. The reduction in the cabaret tax from 20 to 10 percent effective May 1960 encouraged hotels and motels to appeal to public patrons in the area of entertainment and/or dancing. Our statement filed with the committee shows evidence of this fact. We received the following statement from our affiliate in Omaha, Nebr., on March 19, 1961: "The reduced cabaret tax saved one major hotel entertainment room which otherwise would have closed, involving an eight-piece band and approximately eight waiters." Our analyses of the expansion of entertainment facilities following the reduction in the cabaret tax can only lead us to believe that should the tax be repealed there would follow still a greater expansion in the employment and business activity of present hotel-motel establishments. It stands to reason that the public today is keenly aware of the tremendous tax burden which is placed on it by Federal, State, and local authorities. The last thing in the world a man wants to do is pay another Federal tax on the few occasions when he takes his beloved wife "out for the evening." The overburdened male taxpayer usually ends up providing simply an average dinner in an average establishment oftentimes devoid of atmosphere. Dinner dancing has become practically extinct. A wife who loves to dance is oftentimes placed on the defensive by the simple remark of her husband “if we go there we will have to pay a tax." Repeal of this harsh and unpopular tax may lessen the discord between husband and wife. The Federal Government will realize increased taxes from the hotel-motel industry, taxes from individual musicians, taxes from entertainers, taxes from waiters and waitresses. At the same time a reduction in the unemployment and relief rolls can be expected to result. The law seems to provide an immunity for diplomatic personnel. But the language of the statute, together with the revenue ruling, is not too clear as to how a hotel should distinguish between persons who might be eligible for exemption from the cabaret tax and those who would not be. In hotel dining rooms, while enjoyable entertainment is being presented, it poses a problem for waiters or waitresses to examine credentials from persons who claim to be diplomatic or consular personnel. Sometimes an establishment is so designed that from the doorway of an adjoining room a patron can enter the entertainment room. Such a situation might bring that room under the designation which the Internal Revenue Service calls a "related room," wherein the food and beverage sales are held to be subject to the tax. The management would have to keep the door locked in order to remove any possible danger of having such an assessment levied. We cannot permit a guest who has been served food or beverage in that "related room" to somehow find his way into the entertainment room subsequently, or else by so doing the hotel would automatically be exposed to the 10-percent tax upon his total check which may have already been paid. The cabaret tax is not applicable at all in dancehalls, ballrooms, etc., where the service of food and beverage is incidental. We submit that a hotel dining room could probably never be regarded as exempt from this tax, even though food service were limited to soft drinks, sandwiches, etc. The very words "ballroom" and "dancehall" automatically would seem to preclude properties like ours from qualifying. The test should be as to whether the food service is incidental, not whether the room involved is a dancehall or a ballroom. We congratulate the Internal Revenue Service on its decision to no longer litigate cases involving the applicability of the cabaret tax to amounts paid at an establishment for food, refreshment, service, or merchandise before the establishment attains cabaret status or after such status has been terminated. We believe, however, that IRS should provide "necessary guidelines" in this complex tax area by publication of a comprehensive revenue ruling. As a consuming industry we pay tax on all supplies and equipment which reaches us over our common carriers. Obviously this increases our operating costs. Additionally, we pay tax on room air conditioners, on silver flatware and hollow ware, home-type electric gas and oil appliances, refrigerators, alcoholic beverages, and numerous other items. We are large users of communication media; whenever the staff has occasion to make local or long-distance telephone calls the hotel pays the tax. We earnestly believe that the time is long past when these taxes should be employed on the tools of the public. In conclusion, we firmly believe that the present situation warrants early repeal of the cabaret tax in its entirety. We respectfully urge you, Gentlemen, to try to find a way by which you can repeal, or grant some further substantial reductions to, most of the excise taxes which still remain on the books. |