tax of ten cents a subscriber on a $5 publication with 10,000 subscribers or $500 per annum- then the second doubling of the tax for publications selling at 50 cents or less can be omitted-that is, the increase after 20,000 subscriptions are gained.

Now, that is, in a sense, a small indirect tax on the advertising which sustains that publication at its low subscription rate. It is assumed that a circulation of a million or more copies warrants its publisher in charging advertising rates in proportion. There is still left open the door for a direct tax on advertising, based on number of pages and number of subscribers, and possibly all three, collected, not by the Post Office, but by the Treasury Department. And a very small tax on all advertising, day in and day out, will produce a great sum annually. The tax must not be heavy enough to discourage advertising.

To ascertain how the plan will work for small country papers, let us take the Calvert Gazette, published in Prince Frederick County, Md., with 500 subscribers, at $1 per year. It would have its circulation in county free, pay 1 cent a pound for papers sent outside the county, and would pay 1 cent war tax on each annual subscription sent out of the county. If it sends 100 copies outside, it will pay $1, which is enough. If when the zone system goes into effect, July 1, the Calvert County Gazette is sending 100 subscriptions to all parts of the United States, it will find itself subject to many perplexities; so will the postmaster at that town.

I believe that newspapers of that size are doing so much work these days free of charge for the Government, and that their very existence is so jeopardized by war costs of print paper, labor, etc., that they should be exempted from the graduated scale if their circulation is 2,000 copies or less and exemption from any increase beyond the 1-cent-a-pound second-class rate.

I have a statement furnished by the Post Office Department showing the difficulties that attach to a little daily paper of 2,500 subscribers, and I would like to present it, as follows:

Hon. ALBERT JOHNSON,

POST OFFICE DEPARTMENT,
THIRD ASSISTANT POSTMASTER GENERAL,
Washington, June 5, 1918.

House of Representatives, Washington, D. C.

MY DEAR MR. JOHNSON: In response to your request of to-day, there is inclosed a copy of Form 3539a to be used by publishers in setting forth the circulation of their publications outside of the county of publication, as prescribed in paragraph 7 (b), section 336, amended Postal Laws and Regulations, a copy of which is inclosed.

With respect to your particular inquiry concerning mailings of your publication, the Grays Harbor Daily Washingtonian, published at Hoquiam, Wash., I have to say that there were 312 issues of this publication mailed during the year 1917. There were mailed within the county 3.389 pounds free of postage, and there were mailed to subscribers 6,614 pounds on which postage was paid at the rate of 1 cent a pound, an average mailed under postage of 21 pounds a day. It appears from a copy of the publication on file in this office that there are about seven copies to a pound, and thus the average daily mailings on which postage is required amounted to about 147 copies. Some of the copies on which postage was paid are addressed to Aberdeen, Wash., which is within the county of publication and on which there has been no change in the rate of postage under the new law.

The number of copies of your publication going to subscribers outside the county is, therefore, somewhat less than 147. Such of these copies as are addressed for delivery within the first and second zones, even though outside the

county, are subject under the law to the postage rate of 14 cents a pound during the year beginning July 1, 1918, regardless of the amount of advertising contained in them. Of the remaining copies going to the zones other than the first and second, the portion devoted to advertising would be subject to the zone rates, while the portion devoted to matter other than advertising would be subject to the flat rate of 14 cents a pound.

No change whatever is made in the manner of mailing copies for distribution in the county of publication. The copies subject to the zone rates may be presented for mailing in bulk as heretofore, the publisher furnishing the postmaster twice a year, or oftener, if he desires, on Form 3539a, the per cent of such copies which go to the respective zones.

The publisher will file with the postmaster a copy of each issue of his publication, marked to show the per cent of the matter which is devoted to advertising and the per cent of that devoted to matter other than advertising. If, therefore, 50 per cent of the matter contained in your publication should be devoted to advertising and 50 per cent devoted to matter other than advertising, one-half of the weight of the copies going to the zones other than the first and second would be subject to the flat rate of 14 cents a pound, while the other half would be subject to the rates applicable to the respective zones. Yours, very truly,

A. M. DOCKERY,

Third Assistant Postmaster General.

Mr. JOHNSON. I have shown the letter to one member of the committee, and he says he is not quite clear as to what that third paragraph means. I think it means that the advertising charge is not picked up this coming year until the paper reaches the third zone. But, whatever it means, it is clear that the same processes and the same difficulties apply to all of the smaller daily newspapers everywhere, including those in North Carolina, and I have analyzed those in that State, which I visited recently. Take Charlotte, N. C. I found two fine papers there the Charlotte Observer, delivering 13,200 copies, at $8 a year, and the Daily News, with 9,500 subscribers, at $7 a year. Now, where do those papers circulate? Probably three-fourths of all the circulation is in their counties, not a matter of post-office concern, and the others go out into the State. North Carolina is a long State and runs over three or four zones. Those papers, living largely on local advertising, are handicapped in an effort to reach the parts of the territory in which they should circulate.

The CHAIRMAN. The Charlotte Observer has a State-wide circulation, while the Daily News is an afternoon paper.

Mr. JOHNSON. It is a local paper.

The CHAIRMAN. Yes.

Mr. JOHNSON. Both are good journals. The Charlotte Observer is as fine a newspaper as you will find in any city of Charlotte's size. I might say the same about the Raleigh News-Observer and the Greensboro News.

The CHAIRMAN. Have you the statistics as to the zones in which those papers circulate.

Mr. JOHNSON. No exact statistics.

Mr. MOORE. I understood you to say that North Carolina is a long State and runs over three or four zones.

Mr. JOHNSON. Yes, sir; and is not that so?

Mr. MOORE. That is what I am asking you.

Mr. JOHNSON. Let us see whether we are clear about it. Do the zones for charges on newspaper advertising run the same as the parcel-post zones?

Mr. MOORE. You have looked into it, and I am asking you. As a matter of fact, how many zones are in North Carolina?

Mr. JOHNSON. Well, I am not an expert.

Mr. MOORE. I thought you said three or four.

Mr. JOHNSON. Yes; at least three. Let us look at these instructions as to the increased rates on second-class matter, effective July 1. Let us find out. This statement was put out on May 27 by ex-Gov. Dockery, the Third Assistant Postmaster General. It gives the rates per zone, but does not give the size of the zones, and I assume that the zones were perfected to run with the parcel-post zones when we were passing this law. The first zone is up to 50 miles, and the second zone is from 50 miles to 150 miles. These two are incorporated in the first zone for the postal system, but omitted as regards advertising charges by zones, if I read the provision correctly. The third zone is from 150 to 300 miles; the fourth zone from 300 to 600 miles; the fifth zone from 600 to 1,000 miles; the sixth zone from 1,000 to 1,400 miles; the seventh zone from 1.400 to 1,800 miles; and the eighth zone over 1,800 miles.

Mr. MOORE. You say there are only eight zones. Would not Carolina run into the fourth zone?

Mr. JOHNSON. I believe so.

The CHAIRMAN. What did you say the fourth zone is?

Mr. JOHNSON. From 300 miles to 600 miles.

The CHAIRMAN. From Wilmington to Asheville it is over 300 miles. Mr. JOHNSON. That would bring it within the fourth zone, then. The CHAIRMAN. But the average radius of the Charlotte Observer, the News-Observer, and the Daily News, of Greensboro, N. C., would be within the third zone.

Mr. JOHNSON. Of course, on the bulk of the circulation, so that they must go through all of the travail of the zone system, and will not be called upon for much additional postage payment. That is the very point, and I mean it with no disrespect to the smaller dailies. Further, there are three well-defined zones in North Carolina, and four for some extended cases, and New York City is only 300 miles from North Carolina: 300 miles will take you well into North Carolina. You can not travel around in those little cities and stop at the various hotels without finding copies of the New York Times in every place, and the people waiting for their copies. So, with the zone system or without the zone system, you will not stop the metropolitan newspapers from going as far as they can go.

The CHAIRMAN. Do you know how much the New York Times has increased its advertising rates and its subscription rates since the act of October 3, 1917?

Mr. JOHNSON. I know it has made a great increase above its quoted price in the Newspaper Annual of one year ago. I think the price of the New York Times is now about $12 a year.

The CHAIRMAN. Have you ever looked up the date in an effort to ascertain how much the Government was losing on the New York Times alone?

Mr. JOHNSON. I have endeavored to do it. I have a statement here about their circulation, but it is a confidential letter from the Post Office Department.

The CHAIRMAN. Have you any figures showing what the Government is losing in that connection?

Mr. JOHNSON. No; I have not the figures. But I hope the chairman will not put me in the attitude of undertaking to exempt any periodical from the payment of the full second-class rates. I believe the big newspapers are quite willing to pay their full share.

Mr. GARNER. In other words, you want the New York Times to pay what it costs the Government to handle that paper? Mr. JOHNSON. Yes.

Mr. GARNER. That premise is understood.

Mr. JOHNSON. Yes, sir.

The CHAIRMAN. From calculations made while the last revenue act was pending the publisher of the New York Times, for the year 1916, paid the Government $100,232 for the service of handling, transporting, and distributing its paper, while it cost the Government for rendering such service $551,276, making a clear loss to the Government of $451,044 and a clear subsidy to the publisher and its patrons of $451,044.

Mr. JOHNSON. Let us see what would happen to the New York Times if we made two charges as a matter of post-office regulation, based upon the subscription price of the New York Times, if it is $12 a year, one scale applying as a post-office charge for that and the second scale based on the price of each subscription, and charged on that. That would be the cost of getting it through the mails.

The Daily Times has approximately 400,000 subscribers. Say it puts one-half in the mails, and we can easily find exactly the number it mails. The top rate I offer is for a $6 subscription. Let the committee add other rates on up to $12, and you can secure from the Times several hundred thousand dollars in addition to 1 cent a pound on the twelve million-odd pounds it mails per year.

And then you can look to the matter of raising war revenue. The New York Times, on Sundays, has, we will say, 112 pages. Why has it 112 pages? Because it gets advertising to support that number of pages, and 40 per cent of the pages, roughly speaking, are advertising. Now, then, if you want to tax advertising, tax the number of pages in the periodical or newspaper in proportion to the number of subscribers, and put on any tax that this committee thinks is necessary to raise sufficient revenue, being always careful not to discourage advertising by making the tax too high.

Mr. MOORE. Are you favorable to that?

Mr. JOHNSON. Yes, sir.

Mr. MOORE. To the taxing of advertising?

Mr. JOHNSON. Absolutely. We have got to go far deeper into all places than the public realizes to raise revenue.

Mr. COLLIER. I want to ask you a question to see what your general idea of this is. Do you believe that the second-class mail matter should be carried at a loss or that it should be self-sustaining?

Mr. JOHNSON. I believe it should be placed in the position of sustaining its cost, or nearly so.

The CHAIRMAN. The only difference between Mr. Johnson and this committee is the method.

Mr. JOHNSON. That is it.

Mr. COLLIER. Do you think our present rates are too high?

Mr. JOHNSON. No. I have a letter from a very important weekly saying they hope I will not undertake to disturb the zone system. It seems to think it is getting the best of it.

Mr. COLLIER. You want second-class mail to pay its way? Mr. JOHNSON. Well, it should nearly pay its way. It can afford to do so, if you do not make some of them pay what they have not got, and will not get under a zone system. I stated to the committee in the beginning that I did not intend to criticize the zone system, although I could do so on many points. I am not going to waste your time in making those criticisms, because they can wait. It is a question now of devising, if possible, a better plan to raise the necessary second-class postage revenue so as to fairly distribute it and not penalize the minor publications.

Mr. COLLIER. You do not take the position that on account of the educational feature of some of the publications they should go through at a very low rate.

Mr. JOHNSON. No. I oppose special privilege. I take the position that it is a mistake to exempt a lot of publications because they are educational, scientific, philanthropic, agricultural, labor, fraternal, or religious, the net income of which goes for the benefit of no private stockholder or individual. Let us see what we do there. We let a large number of classes of publications come into the mail through the second class and thus disturb the situation so that we may never know what is the actual and proportionate cost of carrying second-class matter, because they have practically a free rate as compared with the other publications. On top of that we invite them to solicit advertising and they fill up their pages. A man who has Castoria to sell does not care where he puts his ad if he can get results, and if you make it hard for Castoria to advertise in a Philadelphia periodical that is run for profit and make it easy for him to put his advertisement in a religious paper, he will put his advertisement in the latter, even though it is a cooperative paper. Because of that it will always be difficult, if ever possible, to have a proper classification of the second-class rate, which we want to raise to the point of paying its bills.

Mr. COLLIER. You think that a fraternal and religious journal should bear the same rate as other publications and provide some other way to take care of them?

Mr. JOHNSON. I believe there should be no distinction. If we make these exemptions we defeat our own argument that second-class matter should pay its bills, pay what it costs to circulate it, because the argument generally is that second-class mail matter must not stick the Government for $90,000,000 a year.

Mr. MOORE. Have you explained your bill or have you read it.
Mr. GARNER. It is in the record.

Mr. MOORE. Several members have come in since that and it might be helpful to briefly explain it again.

Mr. JOHNSON. My bill provides that for a subscription rate of 50 cents a copy, up to 20,000 subscribers, there shall be a charge for the second-class privilege of one-half cent per subscriber; that from 20,001 to 100,000 subscribers the tax rate for the second-class privilege should be 1 cent per subscriber, and in excess of 100,000 subscribers that the tax rate shall be 2 cents per subscriber. All of that is based on a subscription price of 50 cents. High subscription prices, higer rates.

Mr. MOORE. Is that the tax?