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Mr. JOHNSON. Perhaps I should not use the word "tax" because I prefer it to mean the cost of delivering the paper through the mail. Mr. MOORE. That is the revenue the Government is to get under your proposition.

Mr. JOHNSON. Yes, sir; which the Government is to take in to cover the expense of carrying second-class matter through the mails. Mr. MOORE. Let me see if I understand you. Would you abolish the zone system?

Mr. JOHNSON. Yes, sir.

Mr. MOORE. And substitute a charge in the form of government revenue against the subscriber?

Mr. JOHNSON. It is not against the subscriber.

Mr. MOORE. Let it be laid against the paper but really charged up to the subscribers?

Mr. JOHNSON. Well, not quite. Give me $500,000, and I'll gladly pay a fair postage toll for each one.

Mr. MOORE. Then you would have to add something to that which you propose, because that would not make up the difference in second-class matter to-day.

Mr. JOHNSON. No, perhaps not. Neither will the zone system. Mr. MOORE. Then, would you tax advertising?

Mr. JOHNSON. Then I ask this committee to come in and place a tax on the number of pages in every publication, based on the size of the page, whether it be the size of the ordinary small magazine, the Saturday Evening Post page, or the seven-column page of the Chicago Tribune, and based on the number of subscriptions in the mail and out of the mail.

Mr. MOORE. Would not that leave open the same old question of favoritism to a certain class of business men?

Mr. JOHNSON. Not a bit of it. Where does favoritism come in? Mr. MOORE. In having a certain advantage of the mails which others do not enjoy?

Mr. JOHNSON. Who would have the advantage of the mails?
Mr. MOORE. The publishers.

Mr. JOHNSON. If any publisher circulates anything outside of his county in the mails he pays through two forms of graduation.

Mr. MOORE. Let me put it to you a little more clearly, from the viewpoint of another matter. I am going to do this in your time because you are a newspaper man and it will fit in here very well. We receive many letters from users of the mail, first class, complaining about the prospect of the repeal of the proposed zone system going into effect in July. These protests come from men who pay full postal rates for the use of the mail, and, perhaps, more now under the 3-cent first-class postal charge. They complain that the publishers will have an undue advantage in the matter of the secondclass rate under the zone system as they had it heretofore.

This is a business man's point of view and not a public man. I am quoting from a letter from Walter Cox, president of the Pennsylvania Wire Glass Co., and it is in the same form and substantially in the same language of many other protests that come from business men. Mr. Cox says-

It certainly does seem outrageous to us that first-class postage should bear the brunt of all mail-carrying charges; that the business men of the country should be taxed to pay, what amounts to a subsidy, the carrying cost of

second-class postage. The increase in the number and extent of magazines of late years only goes to show the enormous profits which they are getting in the magazine business, owing to a subsidy granted to them by the Government.

You are familiar, of course, with that general line of argument. Mr. JOHNSON. Oh, yes. It is a just complaint.

Mr. MOORE. And it grows out of the fact that in the matter of publications using the second-class mail privilege, there is a great distinction made. The Government loses money in permitting the use of the second-class mail privilege as it has been permitting it to be used.

Mr. JOHNSON. That is just what we are trying to cure.

Mr. MOORE. It is due to the fact that magazines carrying a large amount of advertising seem to have an unfair advantage over firstclass mail, just as the country newspapers, of which, I think, you spoke, have an unfair advantage over other newspapers in their free circulation in the counties where they are published. Those things are what we call subsidies, and I am presenting to you the view of a business man on them so that you can consider it in making your argument.

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Mr. JOHNSON. If this committe will consider this plan, I would be glad if the committee would appoint a subcommittee to look into the whole question, because, in my opinion, it will have to be consireded in conjunction with the matter of raising revenue. question of equalizing the zone system or the second-class system has been before another committee, but we want it equalized now so that you will hear no more complaints, like that you have just read.

Mr. MOORE. Then, as I understand it, you consider the present system faulty, and think it ought to be modified?

Mr. JOHNSON. Yes; and if the gentleman will permit me I will make the further statement that later on, when all the little daily newspapers-I see there are 30 of them in Mr. Kitchin's State-have to make reports every day as to the number of papers put into the mail by zones and the percentage of the pages of advertising, the percentage to be reported each and every day, it will add greatly to the congestion already existing in the post offices, of which the letterpostage payers are now complaining bitterly. Take any mediumsized post office. The postmaster is already worked nearly to death; he is not only the postmaster but he has many other duties. As postmaster his duties have been greatly added to because of parcel post; but, in addition to all that, he is an important Government factotum in the matter of the draft and in war matters generally. The probabilities are that the zone rules have not yet reached him. The Post Office Department, only day before yesterday

Mr. MOORE (interposing). We are now putting into effect the zone system?

Mr. JOHNSON. Not until July 1 for newspapers; and these regulations embrace nearly 300 lines of the smallest type that is used.

Mr. MOORE. You must bear in mind the fact that that act was passed on October 3, 1917, and at that time it was generally announced that the newspapers would have six or seven months in which to adjust themselves to it.

Mr. JOHNSON. How can a newspaper adjust itself? Take, for instance, the daily paper at Charlotte, N. C. We will suppose that the

Charlotte paper has 4,000 subscribers in certain zones in that State, with 300 papers going to subscribers clear into the eighth zone. It is a morning daily. The publisher of that paper must certify to the Post Office Department every day the percentage of advertising in those papers for each zone. That will make confusion out of all proportion to what that paper will pay in addition to the second-class postage rate. The regulations say, among other things:

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3 (a). The copy of the publication filed with the postmaster as required by paragraph 1 of this section shall be marked by the publisher to show the portion devoted to advertisements and that to matter other than advertisements, and the percentage of each shall be indorsed on the first page of such copy by the publisher. The term advertisements as used herein and in paragraph 1 (b), section 429, embraces display, classified, and all other forms of advertisements purporting to be such, as well as all editorial or other reading matter for the publication of which money or other valuable consideration is paid, accepted. or promised. (See par. 2, sec. 443.)

3 (b). When a news agent presents for mailing second-class matter subject to the zone rates of postage, he shall submit to the postmaster a statement showing the per cent of the space in such matter devoted to advertisements and the per cent devoted to other than advertisements Publishers should furnish this information to news agents purchasing copies of their publications in order that such agents may be able to prepare the statements required.

And so on, with numerous references to forms which are not yet printed.

Mr. MOORE. You are familiar, of course, with the law which requires circulation statements to be made by newspapers?

Mr. JOHNSON. Yes, sir.

Mr. MOORE. Is it not a fact that the newspapers find difficulty in making those statements or returns?

Mr. JOHNSON. I think not.

Mr. MOORE. Have you heard of any statistical companies or auditing companies that have been taking over that business for the papers and covering the work of preparing those circulation statements because of the confusion that was caused by that work in the newspaper offices?

Mr. JOHNSON. No; I doubt if it should be attributed to a matter of confusion in the newspaper offices. There are concerns that audit circulation statements of newspapers and undertake to assist those newspapers having the circulations to get a better rate from foreign advertising because of the fact that the circulations are certified.

Mr. MOORE. Is it not a fact that certain large newspapers have found it difficult to prepare their circulation statements, and for that reason have employed those agents?

Mr. JOHNSON. I do not think so at all. I think those agencies and this auditing business have developed for the purpose of certifying, for instance, that the Jamestown Gazette has so many subscribers, and the Jamestown Gazette can then go to Peruna, for instance, and say, "Here is our certified circulation." They can do that and demand such-and-such a rate based on that circulation.

Mr. MOORE. It did not become necessary to employ those agencies to prepare those statements because of the confusion that was created in the newspaper offices in the preparation of them?

Mr. JOHNSON. I do not think it is necessary on that account. They employ those agents, of course, for other reasons.

Now, gentlemen, I think that the very machinery by which the newspapers now state their circulation to the Post Office Department

could be used in the collection of the form of second-class rates that I have outlined. The newspapers would then have to divide their circulation into free county circulation and outside county circulation reducing it to two forms, rather than dividing it according to

zones.

Mr. HAWLEY. Do you propose to withdraw the privilege that local papers now have of circulating free of charge in the counties where they are published?

Mr. JOHNSON. No; I propose to continue that as it is. I think it would be well to exempt them.

Mr. HAWLEY. What does it cost the Government, out of this deficit to which reference has been made, to pay for circulating those papers free in the counties where they are published?

Mr. JOHNSON. I have not exact information as to what it costs, but it is a considerable sum of money.

Mr. HAWLEY. What proportion of the deficit of $90,000,000 would it be?

Mr. JOHNSON. I would hate to guess, but I should say it would represent $15,000,000 of the deficit of $90,000,000.

Mr. RAINEY. I saw the estimate of that, and it was $1,000,000. Mr. JOHNSON. For the handling of weekly papers in the mail? Mr. RAINEY. For circulating them free in the counties.

Mr. JOHNSON. I was brought up on a county weekly that had 3,000 subscribers, and 2,500 of the copies were circulated in the county. I know that it made quite a weight every week. Now, on that subject of exemption, in conjunction with any tax rate made, I would exempt the small papers up to a certain number of subscribFor instance, I know that Mr. Kitchin's own home paper, the Scotland Neck Commonwealth

The CHAIRMAN (interposing). You mention that because it is one of the best papers.

Mr. MOORE. Why do you use as an illustration a paper in the chairman's district?

The CHAIRMAN. It is because that is the best country paper published.

Mr. JOHNSON. I am glad to hear that. I am only using that as an illustration, because that belongs to the class of papers that can not exist long if any burdens are added to them. That paper is published on Tuesdays and Fridays, twice a week, at $1 a year, and it has 1,400 subscribers. Now, if many of the citizens of that county go to France as soldiers and have that paper follow them, the paper can not afford to do it at $1. That paper has to live on the advertisements of the dry-goods merchants, phonograph-record sellers, and other lines of business in that town. The cost of white paper is sky high and will be higher. Few weekly newspapers will exist at $1 per year, and this one has an edition twice a week.

The CHAIRMAN. I want to say in that connection that the owners have never complained about the zone system. It may be that they have not found out about it.

Mr. JOHNSON. Perhaps not. It won't pay much zone revenue at best. In my opinion, not many of the newspapers are complaining, and I said at the outset that no newspaper man has asked me to take any steps in regard to this matter.

64059-18-No. 2- -2

The CHAIRMAN. As I understand it, a very large majority of the newspapers, especially the editors of the weekly papers, are very strongly in favor of the zone system. In fact, a telegram has just been handed me giving their view on the matter. The National Association of Editors is meeting at Hot Springs, Ark., and this telegram is dated, "Hot Springs, Ark., June 7." It reads as follows:

The National Association reiterates the action of a year ago favoring secondclass zone postage, but urge simplification in operations. Publishers Advertising Board have endeavored to put association on record against system, but were overwhelmingly defeated.

That telegram is from the National Editors' Association. You are a member of that association, are you not?

Mr. JOHNSON. I am not a member of it.

The CHAIRMAN. It looks like the newspapers agree with us on that.

Mr. JOHNSON. I am not so sure of that.

Mr. RAINEY. Do you know what action the Chamber of Commerce of the United States took, or the result of their referendum vote? Mr. JOHNSON. No, sir.

Mr. RAINEY. They favor a system that compels the newspapers to pay their way through the mails.

Mr. JOHNSON. And I do, too. I have said that over and over again.

Mr. RAINEY. That would be three times as much as our bill

proposes.

The CHAIRMAN. Yes; three times as much as our bill proposed.

Mr. JOHNSON. I am proposing a bill that would impose at least twice as much in the way of second-class rates alone, and then leaving the newspapers' advertising a subject for war taxes, which I think should be imposed.

The CHAIRMAN. As I said a while ago, we have talked over this matter, and it is the main purpose to make them pay more or something approximating the cost.

Mr. JOHNSON. If the committee will undertake that, we are not a long ways apart.

The CHAIRMAN. Now, the question is as to the method.

Mr. JOHNSON. Whether the National Editors' Association favors the zone system or not makes little difference, because we will presume that few newspapers will be able to sit tight in some little community and because the zone system makes it harder for a national paper to go there, rise to the occasion and be the localized national newspaper. I will not take up any more of your time. I think you will find it necessary to place a tax on all advertising wherever you find it, and it is easy to place it. Then, my suggestion is that you drop the zone system and substitute a graduated system, based on the number of papers carried in the mails and upon the subscription price. Then, you would have the entire advertising field. before you from which you could raise more revenue, or such revenue as will not drive the advertisers out of business.

Mr. LONGWORTH. You would not include the sales of papers made over the counter?

Mr. JOHNSON. Yes, sir; for a war tax on advertising. One of the great difficulties, or, rather, the reason for the heavy Saturday Eve

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