AFTER RECESS. STATEMENT OF MR. ALFRED REEVES, GENERAL MANAGER NATIONAL AUTOMOBILE CHAMBER OF COMMERCE, WASHINGTON, D. C. The CHAIRMAN. Mr. Reeves, we will hear you now. Mr. REEVES. Mr. Chairman and gentlemen of the committee, a little unlike these other gentlemen who have talked about taxation, the automobile is already taxed, as you very well know. The CHAIRMAN. Mr. Reeves, give your full name and address and your business and occupation. Mr. REEVES. Alfred Reeves, 509 Seventh Street NW., Washington, D. C., general manager National Automobile Chamber of Com merce. The CHAIRMAN. Are you connected with the automobile business at all? Mr. REEVES. Yes, sir; I am the general manager of the association, and not an attorney. I want to thank you gentlemen for this opportunity of coming here and talking on this question. The original tax under war-revenue act of October 3, 1917, of 3 per cent on automobiles, grouping them with piano players, talking machines, jewelry, perfume, and chewing gum, was doubtless placed on the theory of taxing articles that were nonutilitarian. The automobile industry, the third largest manufacturing industry in the country, deprecates the placing of automobiles with the articles enumerated above, because during the past decade, both passenger and freight vehicles have entered so largely into the personal and business use of our people, that they must be considered articles of great utility. These time-saving vehicles have so increased our efficiency that their disuse or any marked decrease in the number in use, would be nothing short of a disaster at this time when the speedy movement of persons and commodities is of such vital importance. It is hoped that no favorable consideration will be given to any plan of taxation that will discourage the purchase and use of motor cars, which are such great factors in our fast-moving American life. The making and use of automobiles should not be discouraged because: 1. The industry ranks third in manufacturing importance, employs more than 800,000 people, who with dependents would populate several of our States; pays annual wages approximately equal to all the gold in circulation in the United States; employs capital of more than one and a quarter billion of dollars, exceeding by one-quarter billion of dollars the capitalization of all the national banks; produced finished product of nearly a billion dollars in 1917. An important part of the war program is, and should be, the maintaining of industry to the fullest possible extent. 2. The passenger mileage of automobiles exceeds that of the railroads by more than 10,000,000,000 passenger miles; they carried 3,000,000,000 more persons than the railroads carried in 1915; the value of this passenger mileage at 2 cents per mile would have been $900,000,000. It would be impossible to adequately replace this service under present conditions by any other form of transit. A recent investigation developed that the farmers in Livingston County, Ill., bought 73 per cent of their automobiles as a necessary part of their farming equipment, 25 per cent for both business and pleasure, and 2 per cent for pleasure alone; 2,000,000 of the automobiles in use are owned by farmers; nothing could be more disastrous to-day than to interfere with the efficiency of the farmer. Mr. Garfield rules the automobiles are public utilities. Mr. Hoover buys new car, although giving up chauffeur-driven car. 3. No automobile is exclusively a "pleasure car"; the most expensive machines are used more or less in a utilitarian way. There can be no danger that so-called pleasure use of automobiles can be permitted to become wasteful of gasoline, because Mr. Requa, oil director of the Fuel Administration, has ample powers to enforce any rules necessary to conserve fuel. 4. There are 5,000,000 passenger automobiles in use to-day. Probably 850,000 per year will wear out. If production is not kept up, residential suburbs would become to a considerable extent imprac ticable, tending to greater congestion in cities; local and suburban transportation facilities would be inadequate; suburban and farm values would decrease tremendously; the efficiency of farmers would be impaired very greatly. 5. Automobiles are the greatest economizers of time of farmers, doctors, contractors, builders, salesmen, and men engaged in all busi nesses. 6. They increase efficiency of the individual when farm labor is scarce; physicians are assuming the practice of doctors who have gone to France, and manufacturers are called on for increased production. There are 150,000 doctors in the United States. 7. Railroad service has been curtailed, and many valuable hours will be lost by business men if use of the automobile is curtailed. 8. Automobiles have been used most liberally in the campaigns for sale of liberty bonds and war savings stamps, to raise war funds for the Red Cross and Y. M. C. A., in recruiting, and in many other ways connected with war activity. To discourage the sale of automobiles will make these activities less efficient. 9. Further reduction of manufacture will force out of business a large proportion of the 27,500 dealers and 25,000 garage owners whose livelihood is derived solely from sales and care of motor cars and accessories, and who are located in every town and hamlet in America. 10. Eleven big companies made 85 per cent of the cars in 1917. More than 200 manufacturers produced only 15 per cent of all the passenger cars made. These are the ones who will suffer most from any increased taxation, because their profits are smallest and they are unable to secure war contracts to keep their plants in operation. There are bound to be many failures among them. Forty-nine failed or went out of business since last October. 11. With growing scarcity of foods, the use of the automobile instead of the horse should be encouraged. Every horse continued in use represents 5 acres of land and the necessary labor to produce oats, hav, and other feed diverted from the production of human foodstuffs. 12. The automobile is one of the greatest utilities we have and renders a passenger-car service exceeding that of the steam and electric railroads combined. By no stretch of imagination can it be classed with intoxicating liquors, cosmetics, and so-called nonessential luxuries. A tax on the use of automobiles is provided for in the new bill of Congressman Cox, to which I have heard no objection, so far as the plan is concerned. 13. To replace the cars that are worn out, an annual production of about $50,000 cars is necessary, the average life of an automobile being figured at approximately six years. Production thus far in 1918 was at the rate of only about 1,000,000 a year. 14. A tax on this article with any thought of arresting its production seems unwarranted; the question of how many machines should be produced is one of materials and labor, and production should be maintained on a basis consistent with those conditions. This is a matter entirely apart from taxation and is being dealt with by another arm of the Government-the War Industries Board. 15. It is unfair to compare the motor-vehicle industry of this country with that in European countries. England has only 260,000 passenger cars and imports all her gascline, whereas in this country we have seven States each of which has more than 260,000 cars (New York leading, with 419,000), while gasoline production here is almost 7,000,000 gallons a day, according to the Bureau of Mines report. 16. It is a great economic mistake to reduce this output and disarrange organizations important to the prosecution of the war more than our own conditions as to material and labor make it absolutely necessary. The more it is restricted because of these reasons, the greater our misfortune. 17. Holding great automobile organizations for war work seems vitally important at this time, and scores of the automobile plants are now doing Government business, with many other companies asking for similar work. The Government should add no undue burdens to this great industry; it should be maintained as fully as economic conditions will permit, in order that such a vital and large part of our community may be in position to participate in Government loans, income and other taxes, and in other ways. It is to be regretted that the automobile industry as a whole is sometimes judged by the glittering successes of a few companies. Probably no other business presents the same mortalities during the past eight years, our lists showing 760 companies that failed or went out of business during that period. Since last October, when the new revenue bill was passed, there have been 49 companies that failed or went out of business. The 450 manufacturers of motor vehicles, and the 825 manufacturers of motor vehicle parts and accessories, and the 52-000 motor vehicle dealers and garages, with their more than 800,000 employees, constitute an important part of our manufacturing business-laborcommunity. Greater loyalty to our present cause exists nowhere, and it is their earnest desire to pay any equitable tax in their power that is considered necessary for the prosecution of the war. If it is considered necessary and wise to raise revenue by a manufacturing tax on essential articles, with which the motor car must be classed, there will be no complaint or objection, but it would then naturally follow that the quota necessary would be so distributed over a wide variety of articles so as not to be too burdensome on any one. With their business dwindling owing to advanced prices due to increased cost of labor and material, and of which this tax also forms a part, and with a realization, keener than others owing to their close contact with the subject, that motor vehicles are vitally essential to our national efficiency, the manufacturer ask you to now reconsider and come to an appreciation of the point that an economic error is being made in grouping motor vehicles with nonessential articles for revenue-raising purposes. It has always been felt that a great injustice was done to the motor truck when it was included in the last war revenue bill with perfumes, sporting goods and musical instruments, and subjected to a tax of 3 per cent. There can be no argument on the statement that motor freight vehicles should be taxed only under a plan of taxing articles of use and necessity. The motor truck has so demonstrated its ability to operate not only in the trucking field, but as a long-haul substitute for inadequate railroad facilities, and for marketing farm produce, that this has become self-evident. In its consideration of tax measures by the members of the Ways and Means Committee, it is hoped that the tax on the automobile manufacturer will not be increased to a point where it would disturb the making or use of the motor car which is now such an important factor in adding to the efficiency of the Nation, because of its ability to transport men and materials in the shortest possible time, and to the needed relief of the railroads. Mr. DIXON. Mr. Reeves, do you think the present tax has curtailed the manufacture of automobiles? Mr. REEVES. I think it has contributed to a slowing down of the sales, and the automobile manufacturer would have suffered were it not fot the fact that he has been taking on war work in many of the plants. Some of the small manufacturers have suffered as a result of the tax. Mr. DIXON. The tax has been passed on to the consumer? Mr. DIXON. You referred to the other method of taxation, the Cox bill. You think that is a better way to adjust the tax than to have a tax on the manufactures? Mr. REEVES. Mr. Cox's bill, of course, applies good deal heavier fees than the bill suggested last year. Mr. DIXON. Its principal feature is the bill that was introduced in the Senate. Mr. REEVES. Quite so, and that bill, based on the figures of last year, at rates ranging from $5 to $40, would raise $50,000,000 from the cars in use, and I would not think very much of any man's patriotism who objected to paying a small tax of that kind on his automobile during war times. Mr. DIXON. Do you know how much money the Government raised last year from the present tax? Mr. REEVES. My understanding is that up to this time, since October, they have taken in something like $17,000,000. Mr. CRISP. You spoke of the tax slowing down production. Is it not true that all of the automobile companies that are putting out automobiles are behind with their deliveries? In other words, is there not a greater demand for automobiles than they can manufacture and supply? Mr. REEVES. I think that has become true in the last two or three months as the result of the labor and materials situation. The motor car manufacturer, gentlemen, feels it is a little unfair to take an article of which 5,000,000 have been bought and are used in this country and put it in a class with perfumes and golf balls and sporting goods of that class, and tax it on that basis. The CHAIRMAN. You do not object to the increased tax, but you want to be taken out of the classification? Mr. REEVES. We object to the company we are in, and if we are to be taxed we would like other industries of similar importance to be taxed also. Mr. GREEN. Permit me to call your attention to another matter. You were speaking about the motor truck being put in the same class as luxuries. I did not feel that way about it in supporting the tax that was proposed, but we put a tax on the receipts of the railways. Now, we can not put a tax on the receipts of motorcars because that would be impracticable; and if we put the tax on in this other way it would amount to far less than a percentage of the receipts or benefits received from the trucks. Mr. REEVES. Yes; but you did not put a tax on the making of locomotives and freight cars. Mr. GREEN. No; but we put a tax on them that amounted to a great deal more than it would have been if we had put such a tax on locomotives and freight cars. Mr. REEVES. But still the fact remains that it was put on automobiles in the particular section of the bill that covered cosmetics, perfumery, and golf balls. Mr. GREEN. A rose under any other name would smell as sweet. Mr. RAINEY. In other words, if you could get out of bad company you would not object to the tax? Mr. REEVES. The tax is on now and I know the automobile manufacturers would feel it would be a good deal of a burden to put any more tax on them now. Mr. RAINEY. You do not object to the tax, for instance, on the automobiles in the hands of the ultimate consumer? Mr. REEVES. I do not think anybody objects to that. Mr. RAINEY. You only object to taxing the automobile before it gets to him? Mr. REEVES. Because it is a discrimination against' a particular. manufacturer who is in a great industry and it seems should not be classed in that way. Mr. RAINEY. You want to be relieved but you do not want the owners of the automobiles that you make to be relieved at all? Mr. REEVES. It does not make any difference, because whatever tax is put on the automobile manufacturer, even that 3 per cent last year, he could not have absorbed it himself because a good many of them do not make 3 per cent on their sales. That 3 per cent gross sales tax levy the automobile manufacturer is obliged to pay to the 64059-18-PT 5- -3 |