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Solving these technical problems has required research and expenditures on the part of the manufacturers which they could ill afford in a period of constantly declining sales.

The household incinerator industry is in trouble, and it needs relief and help if it is to survive without casualties which should be avoided. Perhaps I can best illustrate this by telling you that in 1954 there were 31 manufacturers of household-type incinerators in the United States. Today there are 13.

As a source of revenue the excise tax on household-type incinerators is not justified: Based upon manufacturers' sales, it is estimated that in the fiscal year 1963, the excise tax on household-type incinerators produced approximately $117,400 in revenue for the United States.

The performance of this declining tax as a revenue producer and a comparison of its trend with exice tax collections in general is as follows:

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It will be recalled that in the papers submitted by the fiscal experts in connection with the panel discussions held by this committee last month, Professor Due cited as one criterion for the evaluation of specific excise taxes the provision of small amounts of revenue, saying that there was little justification for taxes yielding only a few million dollars a year, and that a tax producing under $10 million was a very doubtful justification, noting that a yield of $10 million was onehundredth of 1 percent of the total Federal tax revenue.

Applying this yardstick to the excise tax on incinerators, we find it producing only one nine-thousandth of 1 percent of the total Federal tax revenues. But it was a full 5 percent of my industry's gross sales. The figures speak for themselves.

The household incinerator performs an increasingly important function in our Nation: As population increases, so does garbage, and the question of what to do with it becomes more acute-particularly for municipal authorities. How big can the city garbage dump get?

For the city of tomorrow-and in many instances, the city of todayincineration is the only solution. And that means incineration at the place where the garbage is generated-not incineration after hauling to a place of disposal.

Incineration in the home is the quickest, easiest, and cheapest form of disposal.

It replaces the garbage truck, making its painful way through overcrowded streets and it will dispose of almost any type of refuse or garbage something which other types of disposers cannot do.

It is an aid to sanitation and health by its means of transforming immediately into a sterile ash the refuse which would be a fertile breeding ground for insects, germs, and rodents.

It can actually reduce fire hazard by immediate disposal or inflammable rubbish and by obviating that favorite of all fire hazards, the backyard trash fire.

Thus, the incinerator performs an increasingly important function as one looks to the future, and the incinerator industry should be allowed to survive and grow without the burden of an unnecessary selective tax.

Conclusion: The tax on household incinerators should not have been imposesd in the first place, is hobbling an industry that is having trouble anyway, hurts an industry which should be helped, produces almost no revenue, is administratively unsound and unjustified, and should be repealed.

Thank you very much.
Mr. KING. Thank you.
Are there questions?

Mr. Knox?

my

Mr. KNOX. I have no particular question, but I want to welcome colleague from Michigan, Mr. Cederberg, before our committee, and also his constituent, Mr. Hebert.

Mr. Hebert, I might say that you have given us some illuminating figures relative to what has happened to a great industry since 1954 and on down to 1963, which in a period of 9 years finds that the manufacturers dollar of sales is only about 50 percent of what it was 9 years ago.

Mr. HEBERT. Yes, sir.

Mr. KNOX. Following your testimony, I would be inclined to believe that you feel that the competition that you have with garbage disposals and so on has created the situation that you find the incinerator business in today.

Mr. HEBERT. That is correct, sir.

Mr. Knox. It is your feeling that this has contributed greatly to the reduced sales of incinerators.

Mr. HEBERT. Yes, sir.

Mr. KNOX. I appreciate your statement very much.

I must say that my colleague from Michigan has done a very good job in his introduction of Mr. Hebert today.

Mr. CEDERBERG. Thank you very much. I must say I think the testimony is very interesting, that probably it costs more to collect this tax from this industry of 13 manufacturers than the revenue produces.

Mr. KING. Thank you again, Mr. Cederberg, and you, Mr. Hebert. Mrs. GRIFFITHS. I would like to say that between the two of them they have almost convinced me. I am almost ready to buy one. Mr. HEBERT. Mrs. Congresswoman, we have them for sale.

Mrs. GRIFFITHS. Thank you.

Mr. KING. Thank you.

The next witness is Mr. Muscio.

STATEMENT OF U. V. MUSCIO, IN BEHALF OF ROOM AIR-CONDITIONER SECTION, NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION

Mr. DEROUNIAN. Mr. Chairman, I have a distinct pleasure this morning. Not only is Mr. Muscio from New York State but he is from my home community of Roslyn. I know what he says is the truth and is worth listening to. We are very happy to have you with us, Mr. Muscio.

Mr. Muscio. Thank you.

Mr. KING. Mr. Keogh?

Mr. KEOGH. I yielded to my distinguished colleague because I knew Mr. Muscio was a resident of his district. But I alluded to him earlier this morning during the testimony of a previous witness.

So that the record may be complete, I would say that while he is a resident of your district, his very large, fine, and modern plant is in the district represented by Representative Delaney of New York, and I am pleased to count him among my friends as one who is a great citizen and a great businessman.

I am delighted to join in your welcome of him here this morning. Mr. KING. You are off to a pretty good start, Mr. Muscio.

Mr. KEOGH. I did not intend thereby to put you ill at ease, Mr. Muscio.

Mr.MUSCIO. I wonder whether I shouldn't leave now.

Mr. KEOGH. You mean now that you are ahead?

Mr. MUSCIO. Yes.

My name is U. V. Muscio, executive vice president of the Fedders Corp. If I could unfetter myself from an unnatural modesty, I would say that not only are we one of the important manufacturers of room air conditioners, but we are the most important manufacturers of room air condtioners.

I speak this morning on behalf of the room air-conditioner section of the National Electrical Manufacturers Association and speaking for an industry which is noteworthy for their diversification of ideas, but there seems to be unanimity of opinion at least in this one respect, that the excise tax is inequitably applied to us.

Sitting on my left is Mr. Miller, the managing director of the National Electrical Manufacturers Association, and he has submitted a statement on behalf of all the consumer products of the National Electrical Manufacturers Association.

I have submitted a specific statement for room air conditioners, and I would like to be taken as a matter of the record and just limit myself briefly to a superficial recapitulation or summarization of the statement. Mr. KING. Without objection, Mr. Muscio, your entire statement will be made part of the record.

Mr. Muscio. I will say that perhaps even in the brief summarization I should yield to the Congressman from Brooklyn because I doubt very much whether I should make or can make as eloquent a presentation of my case as he has already done before. But in view of the fact that I am here, I will take advantage of the additional 5 minutes.

We maintain that our situation is unique in this respect: first of all, the chapter under which we are presently taxed. We are the only equipment taxed at the rate of 10 percent. All others are taxed at 5 percent. It is aggravated in the following: Firstly, in 1954, when there was a reduction of all other items in our chapter from 10 to 5, it was thought by the sponsors of the amendment that it included room air conditioners. Unfortunately, it did not. One, some of them were misled by what was a self-contained air conditioner. They didn't recognize that we were talking about a room air conditioner. Two, they just naturally assumed that it was covered. So we find ourselves where the sponsors of the amendment thought we were covered and we were not. But that is only a minor part of the problem, the fact that we are taxed at 10 percent.

In 1959, an administrative ruling, an IRS ruling, was changed by an IRS regulation, and whereas previously room air conditioners only have 1 horsepower or more were being taxed, they changed the definition and said that irrespective of horsepower all units would be taxed if they distributed air without ducts. That is the way they defined room air conditioners.

The net result of that was that we were not only paying twice as much as anybody else, but, secondly, the revenue exacted from our industry ran from a little less than $2 to $29 million, 24 times that which we paid the year before the tax.

I suggest there is no rhyme or reason for such an inequitable application of tax.

We are a very competitive industry. That goes without saying. There were 119 people manufacturing a room air conditioner in 1954. There are less than 15 that represent 90 percent of the industry today.

Two, we can't be considered a luxury. I do not think anybody would consider going into a restaurant that is not air conditioned. This room is very comfortably air conditioned.

Medical opinion tells us that, one, it is good for hay fever, it is good for heart conditions, and, as a matter of fact, IRS says that if it is pursuant to a medical prescription it can serve as a deduction.

You allow us a 7-percent investment credit and then you take it away by giving us a 10-percent tax.

In keeping with the times when people are talking about a rectification of their siutation as they say now, I should like to very respectfully suggest to this honorable committee that you give consideration to a rectification of our situation as quickly as you possibly can.

In essence we are talking about, one, paying twice as much as anybody else in our chapter, and, secondly, it has been aggravated by the definition in 1959 which has so broadened the base that we are presently paying 24 times that which we were paying the year before the regulation went into effect. Even if you were reduced from 10 to 5 percent and allowed the broad base as presently defined by IRS, you would still get $12 million, or $10 million more than you were getting back in 1958.

I thank you very much for your attention. If there are any questions, I should be very happy to answer them.

(Statement of U. V. Muscio follows:)

STATEMENT CONCERNING THE INEQUITY OF THE MANUFACTURERS' EXCISE TAX ON SELF-CONTAINED AIR-CONDITIONING UNITS

Presented by U. V. Muscio, Executive Vice President, Fedders Corp., on behalf of Room Air-Conditioner Section, National Electrical Manufacturers Association, New York, N.Y.

SUMMARY OF STATEMENT

I. The term "self-contained air conditioners" includes (1) household appliances commonly known as "room air conditioners," and (2) since December 1, 1959, all other air-conditioning units suitable for use without the use of ducts. II. The 10-percent tax on self-contained air conditioners is discriminatory, unfair, and inequitable.

III. The Treasury regulation of December 1, 1959, which greatly expanded the definition of self-contained air-conditioning units has made an already discriminatory tax even more unfair and inequitable.

IV. The discriminatory tax of 10 percent on self-contained air conditioners cannot be justified on any basis because the necessity and essentiality of air conditioning has become an accepted fact.

V. The discriminatory tax of 10 percent has contributed to the economic instability of a new industry.

VI. The interests of sound tax policy require that air-conditioning manufacturers, if they are to be subject to excise tax, be taxed at the same rate as the manufacturers of other household appliances.

INTRODUCTION

My name is U. V. Muscio. I am executive vice presidnt of Fedders Corp., of Maspeth, Long Island, N.Y., one of the largest producers of the equipment subject to the 10 percent excise tax on "self-contained air-conditioning units." I appear here as the representative of the room air conditioner section of the National Electrical Manufacturers Association (known hereafter as NEMA), a trade association of manufacturers in all phases of the electrical industry.

NEMA, through Joseph F. Miller, its managing director, on June 25, 1964, submitted a statement setting forth the policy of NEMA and asking for the repeal of all taxes imposed by sections 4111 and 4121 of the 1954 code. I, of course, completely concur in the views expressed by Mr. Miller not only as to the need of the repeal of those taxes but also as to the extreme difficulty of responding directly to the criteria set forth in the committee's notice of April 13. However, for the reason that the problems faced by the manufacturers of self-contained air conditioners are unique, I have been authorized to make this separate presentation in their behalf.

Our room air-conditioner section is composed of 15 manufacturer members who produce 91 percent of the entire volume of room air conditioners, all of which volume is taxed at 10 percent. These manufacturers also produce a substantial portion of the balance of the self-contained air-conditioning units, other than so-called room air conditioners, which are also subject to tax. The entire tax paid by the industry on self-contained air-conditioning units during the year 1963 is estimated to be not less than $29,492,900.1

1 The Commissioner of Internal Revenue in his annual report for fiscal 1963 gives the single figure of $61,498,000 as being the total taxes collected under sec. 4111 of the 1954 code on household-type refrigerators, freezers, and self-contained air-conditioning units. annual report, p. 87. Industry estimates of taxes collected for the calendar year 1963 indicate the following breakdown:

Self-contained air-conditioning units_

Household-type refrigerators.

Household-type freezers__

Total taxes, year 1963_

$29, 492, 900

26, 629, 250 6, 061, 176

62, 183, 326

34-720-64-pt. 4--13

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