4. Private clubs are experiencing financial difficulties

20

19

The ability of private golf clubs to continue providing its broad range of benefits is being jeopardized by their growing financial difficulties. Despite the increased popularity of golf, since 1931 there has been a 20-percent decrease in the total number of private clubs. Many of these were victims of the depression; but many others simply were unable to overcome the squeeze between rising costs and the financial limitations of their members' pocketbooks. In every year except one from 1948 through 1956 there was a decrease in the number of private golf courses." An annual survey by an accounting firm specializing in club audits shows that in 1962 private golf clubs in general were in greater financial difficulty than in 1961 and could not even recover the depreciation on their facilities. These clubs are large 18-hole courses located in the major metropolitan areas; and it is likely that the financial condition of smaller clubs is even more grave. Our survey of one-fourth of our member clubs disclosed that during 1963 more than 50 percent operated at a net deficit which aggregated nearly $8 million.

Indicative of the adverse impact of the dues tax on the growth of private clubs is the fact that during this same period 1931-63, while private clubs were decreasing, the number of semipublic courses, which involve considerably less taxable dues, grew from 700 to 2,868-more than 300 percent growth.22

In appraising the effect of the dues tax, it should be borne in mind that the tax not only constricts existing clubs (many are sorely tempted to solve their financial troubles by converting to residential subdivisions), but also deters the establishment of new clubs to meet the increasing demand now overburdening municipal courses.

To summarize, golf clubs perform a valuable public service by providing healthful outdoor recreational opportunities for millions of Americans, by relieving the strain upon identical public facilities which even now are grossly inadequate, and by providing employment to substantial numbers of unskilled and youthful persons who might otherwise be deprived of employment opportunities. All this is accomplished at private expense. Indeed, private golf clubs make very substantial contributions to local treasuries in the form of property and other local taxes. We feel it should be the policy of Congress to encourage private initiative in this area. Yet the policy reflected in this aspect of the excise tax law is precisely the contrary. Membership in private recreational clubs has been made the object of a 20-percent Federal excise tax applicable to no other recreational facility except horse and dog racing. The comparatively small amount of revenue involved hardly warrants continuation of such unfair tax treatment. I wish to register my association's strong objection to this unwarranted discrimination and our fervent hope that the club dues tax will be reduced to a less discriminatory 10-percent level. Thank you.

19 National Golf Foundation Information Sheet, ST-2 (attached). 20 Ibid.

21 "The Horwath Accountant," vol. 43, No. 8.

22 National Golf Foundation Information Sheet, ST-2 (attached).

Regulation golf courses in the United States-Breakdown by State, showing the number of courses by size (9 holes and 18 holes and larger), arranged according to type of course-Private, semiprivate, and municipal, as of Nov. 1, 1963

Regulation golf courses in the United States-Breakdown by State, showing the number of courses by size (9 holes and 18 holes and larger), arranged according to type of course-Private, semiprivate, and municipal, as of Nov. 1, 1963— Continued

Mr. BENEDICT. Thank you, sir. I will not read the statement. I will not take the time to do that, but I would like to emphasize three points which are covered in more detail in the statement itself.

First, back in 1954 when excise taxes in general were reduced from 20 to 10 percent, this committee recommended that the club dues tax be included in this general reduction. This recommendation was not approved by Congress and that left the 20-percent tax still applying to golf club dues, to admissions to dog and horse racing, and also to cabaret charges.

While it is true that a small percentage of golf clubs have high dues structure, this 20-percent tax has become for the most part a burden on the person of modest income. Over half of the golf clubs in the United States are small nine-hole courses located in counties of less than 10,000. Two-thirds of the golf clubs in the United States have average monthly dues of less than $25 and ranging down to less than $4.

My second point is to emphasize the role of the golf club in the welfare of the community and of the Nation. The game of golf, as you know, is a healthful outdoor sport which can be enjoyed and played by persons of nearly all ages and abilities. It promotes physical fitness and I believe that physical fitness today is more important to this Nation than at any other time in its history.

Private golf clubs supplement, at their own expense, the terribly overcrowded public courses which are provided by local governments. Were it not for these private golf clubs local governments would be put to staggering, almost impossible expense to try to provide adequate public golf facilities. Golf clubs employ many unskilled and youthful workers who represent a large part of our unemployed.

In my own metropolitan New York area in 1960 a survey by the Metropolitan Golf Association showed that the total payroll for 66 private clubs exceeded $11 million. This surely helped with the unemployment in New York.

Do you realize, also that golf clubs employ over 250,000 boys as caddies each year? And boys of this age represent about 25 percent

of our unemployed. This gives these boys healthful outdoor work, it keeps them off the streets, and it lets them have a chance to earn money to help out at home or to help with their future education.

Golf clubs in general, however, are in financial difficulties and many seriously so. It is hard to believe, but in the period from 1931 until the present time when the game of golf itself has had fantastic growth in this country and throughout the world, that the number of private golf clubs in the United States has decreased by 20 percent.

My final point, gentleman, is to emphasize the really discriminatory nature of this 20 percent tax on club dues. Ever since the cabaret tax was reduced from 20 to 10 percent in 1960 there have been only two things still subject to the 20 percent high excise tax. These are the taxes on the golf club dues and those on admissions to dog and horse racing.

To sum up, gentlemen, it is difficult for the U.S. Golf Association to believe that this committee or the Congress of the United States would wish to continue this high 20 percent discriminatory tax on club dues.

As I said before, we do not ask for the complete abolition of this tax. We ask only for simple justice and that this tax be reduced to 10 percent. Thank you.

Mr. KING (presiding). That completes your statement, Mr. Benedict?

Mr. BENEDICT. Yes, sir.

Mr. KING. The committee wishes to thank you. Are there any questions? Mr. Betts.

Mr. BETTS. Did I understand you to say that the number of golf clubs has declined in the last couple of years?

Mr. BENEDICT. Yes. The number of private golf clubs from 1931 to 1964 has reduced by 20 percent.

Mr. BETTS. I am surprised. I would have thought that there had been an increase in the number.

Mr. BENEDICT. I would think so too. I was surprised when I got these figures.

Mr. KING. Thank you, Mr. Benedict.

Mr. BENEDICT. Thank you.

(The following material was received by the committee:)

HOTEL AND RESTAURANT EMPLOYEES &
BARTENDERS INTERNATIONAL UNION,
Detroit, Mich., July 14, 1964.

Hon. MARTHA W. GRIFFITHS,
Congressman, State of Michigan,

House of Representatives, Washington, D.C.

DEAR MARTHA: On July 20 a hearing before the Ways and Means Committee, conducted by Representative Wilbur Mills, will be held in Washington on the reduction of the 20-percent excise tax on private club dues, locker and moorage fees.

We want to acquaint you with our point of view on this matter and hope that you will attend that hearing giving voice to that view. We feel that there may have been some justificatian to the 20-percent excise tax on club dues and fees during the war years. Inasmuch as the 20-percent tax on furs, jewelry, luggage, admission to nightclubs and cabarets has been reduced to 10 percent, such reduction should be extended to clubs as well.

We feel that it is especially unfair that clubs which make contributions to Government-approved employee pension plans should be forced to pay 20 percent