Mr. RAINEY. If we could get additional revenue from the business, the fact that he is a Member of Congress would not help him.

Mr. SPALDING. I do not believe it would; but he knows more about the skate business than we do, because that is only one of our lines. I want to thank the committee very much for their attention. (The following statement was submitted by Mr. Spalding:)

BRIEF SUBMITTED BY H. BOARDMAN SPALDING, REPRESENTING A. G. SPALDING & BROS.

INTRODUCTION.

This brief is submitted by H. Boardman Spalding, vice president and treasurer of A. G. Spalding & Bros. A. G. Spalding & Bros. is a New Jersey corporation engaged in the manufacture and sale of athletic goods, and widely known throughout the United States.

It is assumed that in the original draft of the proposed war-revenue act the general form and arrangement of the war-revenue act of October 3, 1917, would be followed, and hence reference is here made at the outset to Title VI, section 600, subdivision F of the latter law, which imposes an excise tax on certain items of athletic goods, and which reads as follows:

"Upon all tennis rackets, golf clubs, baseball bats, lacrosse sticks, balls of all kinds, including baseballs, footballs, tennis, golf, lacrosse, billiard and pool balls, fishing rods and reels, billiard and pool tables, chess and checker boards and pieces, dice, games and parts of games, except playing cards and children's toys and games sold by a manufacturer, producer, or importer, a tax equivalent to 3 per cent of the price for which so sold.”

A. G. Spalding & Bros., on whose behalf this brief is submitted, is in no way interested in the manufacture of any of the items specified in the foregoing subdivision, except the following: Tennis rackets, golf clubs, baseball bats, lacrosse sticks, baseballs, footballs, tennis, golf, lacrosse balls, and other athletic balls.

It was apparently the intent of the framers of section 600, of war-revenue act of October 3, 1917, to subdivide the section by industries, and it is assumed that the reason for the classification of subdivision F was because it is not unusual for retail and wholesale sporting and athletic goods dealers to handle all, or substantially all, the items enumerated in that subdivision. In the case of manufacturers, however, the industry is further subdivided, and by far the gre: ter majority of manufacturers of athletic implements are not engaged in the manufacture of billiard balls and tables, fishing rods and reels, chess and checker boards and pieces. It is, therefore, submitted that in the framing of new legislation it would tend to clarify the law if athletic goods and implements were treated in a separate subdivision.

I. PRINCIPLES OF TAXATION APPLICABLE TO THE EXCISE TAX ON ATHLETIC GOODS.

It is not the purpose in this brief to enter into a discussion of the wisdom during war time of imposing an excise tax on so-called luxuries. We assume, as a fundamental basis of the argument herein presented that the purpose of Congress is to raise a maximum amount of revenue in the fairest and most equitable manner and with the least disturbance to industries; that it is not the purpose of Congress in framing revenue legislation to thereby accomplish any direct curtailment in the consumption of the products of a particular industry simply because that industry may not be engaged directly in the production of war materials or necessities.

We therefore assume that if and when the committee has decided that there should be an excise or consumption tax on luxuries, that in so doing it has reached the conclusion that by such an excise tax it will collect more revenue than will be lost under the income and excess-profits sections of the law from the industries subjected to the excise tax by reason of the fact that the excise tax tends to reduce the volume and profits of such industries.

The arguments relating specifically to athletic goods which are herein set forth are built upon the premise that an excise or consumption tax on luxuries or semiluxuries will add materially to the total income of the Government from taxatiou.

II. DIVISION OF ATHLETIC GOODS BY SPORTS.

Athletic goods or implements can probably be best classified or grouped in accordance with the major sports or groups of sports in which they are used, and the classification which we would suggest is the following:

i. Baseball.

2. Football, basket ball, and implements for all games played with a leather inflated ball, and boxing gloves.

3. Tennis, including indoor tennis, squash, and racquets.

4. Golf.

5. Skates, which include ice and roller skates.

6. Implements used in field games, such as running, jumping, shot putting, hammer throwing, pole vaulting, etc.

7. Gymnasium and playground apparatus.

In the present law none of the implements included under groups 5, 6, and 7 are made subject to the tax and only a part of the implements in the first four groups are made subject to the tax. What the reasons were for the selec tion of these items which are taxed, we do not know. It was suggested at one time that the framers of the war-revenue act of October 3, 1917, may have assumed that by the phrase "games and parts of games they were including all athletic implements not specifically enumerated. When this section, however, came up for interpretation by the Treasury Department, it was found that these words could not, without violating their meaning, be given such broad interpretation. There is no dictionary definition of the word "game' which is broad enough to include implements used in the playing of athletic games or sports, and there is no trade custom to designate or speak of the implements used in athletic sports as a "game or part of a game." The only trade use of the word "game" to cover an article of commerce is in the case of games such as parlor or special card games most generally played by children, and only to a small extent by adults.

III. BASEBALL AND FOOTBALL IMPLEMENTS SHOULD NOT BE SUBJECT TO AN EXCISE TAX.

The only implements used in the playing of the games of baseball, football, basket ball, and other games in which leather inflated balls are used which are now subjected to any excise tax are the balls themselves used in the games, and, in the case of baseball, the bats. This constitutes only a small part of the equipment ordinarily used by teams engaged in the playing of such games as baseball, football, basket ball, etc. In almost all these games special uniforms and protective devices of various kinds for the players are generally employed and which are not now subject to any excise tax. The same is true of boxing gloves. All the games included within this group are played almost entirely by young men of military age, and as they enlist or are drafted into the Army, the civilian market for these goods is very greatly reduced.

It has been found by the military authorities of all the allies-especially France, England, and the United States-that athletic sports and games play a very important part in the training and morale of the armies. It is perhaps not putting it too strong to say that athletic equipment for the armies is almost as essential as the regular quartermasters' and ordnance supplies, and we believe that they would to-day be a regular part of the quartermasters' supplies had the furnishing of athletic goods to the armies not been so efficiently provided for by such organizations as the Y. M. C. A. and the Fosdick committee for war-camp community and recreation work. Approximately 50 per cent of our production of this class of goods during the past six months has been sold to organizations furnishing goods directly to the Army, and we estimate that at least 25 per cent of the balance has reached the Army indirectly. This latter can not be an accurate estimate, because many sales for goods which are used by soldiers are made at retail through our stores or through dealers handling our goods located near Army camps. We believe it is entirely safe to predict that as time goes on the percentage of these goods used by the Army will increase rather than decrease, and hence any excise tax imposed on such goods falls upon either the Government or semigovernmental agencies engaged in supplying the Army with such goods or upon the soldiers themselves. We believe that it is only necessary to make this statement for it to be self-evident that any tax imposed on the goods so sold does not conform to the principles of the excise tax on luxuries.

With regard to the balance of goods in this class which are sold and consumed by the general public, these in turn may be subdivided into three groups: 1. Professional clubs and leagues, such as exist in baseball.

2. College and school teams, such as exist in all of the sports mentioned in this group.

3. Individual players or teams formed in small communities or amongst the employees of industries.

With regard to the first group, all professional baseball clubs are to-day having great difficulties in paying their expenses, to say nothing of earning any profits, and not only is it unfair to throw any greater tax burden upon them than they are now bearing but there is a great risk that any increase will greatly imperil revenues now being secured directly from professional baseball by the tax on receipts. It must be remembered that in addition to the regular income and profits taxes which they have to pay the same as all individuals and businesses, there is a gross tax of 10 per cent on their receipts, and in addition they are very seriously affected by the increased railroad fares and taxation on railroad fares.

With regard to the second group-that is, college and school teams-these also have had their revenue greatly cut down as the result of the war. Even in the case of the large universities, their athletic program, as the result of the war, has been seriously curtailed, and they are finding it difficult to raise the funds necessary to keep up the amount of athletics which is deemed essential for the physical welfare and morale of the students.

In the past the college athletics have been supported largely by gate receipts from the intercollegiate athletic contests in the major sports, such as football and baseball. The attendance at these games and the curtailment of the number of such contests which have been held has so reduced their revenue that it will be necessary for most of them to appeal to the graduates for subscriptions in order to keep up the athletic sports in the colleges on even the most economical basis.

If this is true of the large universities, it is even to a greater extent true of the small schools and colleges throughout the country.

With regard to the third group-that is, individuals-the individuals who play baseball, football, and basketball, come largely from the poor and people of moderate means, the sports of the relatively wealthier classes falling more in the tennis and golf groups. I don't mean to imply that only the wealthy play tennis and golf, but merely in comparing the players of the two groups that the average in tennis and golf would consist of the people of greater financial means than those in the baseball and football group.

We can appreciate that the fact that a particular class of merchandise is purchased largely by the poor and people of moderate means, would not in itself be a reason for not imposing an excise or consumption tax. If the poor or people of moderate means can in war time indulge in the extravagance of useless luxuries, this is probably in itself a very good reason why they can pay the consumption tax on such luxuries, but we contend that athletic goods do not fall into the group of comparatively useless luxuries. It is in common experience that many things which are luxuries of one decade become the necessities of the next decade. We contend that there is no other single factor which has contributed to a greater extent to the physical development of the youth of the United States than the popularity and indulgence in athletic sports. No one can to-day predict how long this war is to last. Many persons whose views are entitled to respect are predicting a was lasting from four to five years longer. Such a prediction sounds to us to-day as extreme and impossible. Does it sound any more extreme and impossible than did the prediction of Lord Kitchener in August, 1914, when he said that the war would last at least three years? In any event, it is the duty of the Nation to prepare and lay its plans for a long war. Everything, therefore, which will aid to the physical development of the youth of the Nation, especially those in schools and colleges who are now under the draft age, but who will, if the war lasts, in all probability be called into the Army before its end, should be encouraged. Therefore any taxation which might result in limiting or decreasing participation would be unwise at this time. We therefore strongly and respectfully urge on the committee that no tax should be imposed on the balls and implements used in the playing of the sports enumerated in this group.

IV. TENNIS AND GOLF.

With lawn tennis should be included the closely related games of indoor tennis, rackets, squash, and handball, which an Dear a close sinnarity LO

each other, and which in a way are probably played by the same classes of people.

The present tax covers only tennis balls and tennis rackets; the only other implements, however, used in these games which could be practically subjected to tax would probably only be tennis nets and posts and the sale of these is probably not sufficiently large to warrant including them within the tax.

Assuming that Congress has decided in favor of the policy to impose a consumption tax on luxuries or semiluxuries which presumably will fall on those best able to pay it, we believe that in the application of such a policy it is entirely proper to impose a tax on tennis and golf goods. We do strongly recommend and urge upon the committee, however, that this tax be confined entirely to tennis balls and golf balls and the balls used in playing the games of squash, rackets, and indoor tennis. That there may be no doubt in our motives in urging this, I wish to state at this point that we are manufacturers both of the balls used in these games and of the golf clubs and tennis rackets, we are, therefore, in an entirely impartial position between the manufacture of the rackets and clubs as opposed to the manufacture of balls.

Our reasons for urging that the tax be applied on the balls only are, first, that the volume of sales of balls in these sports constitutes far the greater proportion of all the sales; second, the balls lend themselves to the imposition of a specific tax of so many cents per dozen, the advantage of which as against a percentage tax we will urge in a later part of this brief; third, the tax on balls which are substantially all consumed within the same season conforms more in theory to the war consumption tax than a tax on clubs and rackets, which may be retained and used for a long period of years; fourth, the purchase of balls by each individual is far more closely proportionate to the amount of his indulgence in the games than is represented by the purchase of golf clubs and tennis rackets; fifth, manufacturers and producers of the balls are very few in number, because they can not be produced economically except in quantities, the tax would be collected from a very few individual manufacturers and producers and would all be collected in comparatively large amounts, whereas the manufacturer of tennis rackets-that is, the man who finally completes the racket by stringing it and even to a greater extent in the case of manufacturers of golf clubs, namely, the man who completes the golf club by joining the shaft and head, varnishing and polishing, and puts on the grip, is in a large number of instances a small retail dealer or golf or tennis professional, producing only a few dozen rackets or clubs a year, and in order to collect the tax requires the filing of hundreds of small monthly reports, the amount of tax collected on each in many instances being less than $1. This adds very greatly to the expense of the Treasury Department in collecting the tax and is likely to result in evasion in many instances.

This particular feature of the law has in the case of our own business been an extremely troublesome and expensive one, as it renders necessary keeping a separate report of tennis rackets and golf clubs which are finished in branch stores operated by us under subsidiary corporations from those clubs which are manufactured complete at our factories. The expense and trouble involved by this particular feature greatly exceeds the tax which we pay on the clubs and rackets finished in our branch stores; sixth, it is entirely feasible, in our opinion, to fix the tax on the balls at such an amount that the total produced will be equal to the tax which it was comtemplated to raise by assessing a tax on tennis rackets and golf clubs, including balls, and that such tax will fall entirely fairly, because it will fall on precisely the same people who would also ultimately pay the tax on the tennis rackets and golf clubs.

The amount of the tax which we would suggest to be assessed on tennis balls is 25 cents per dozen and on golf balls 50 cents per dozen. In our opinion it is not necessary to make any distinction between the prices at which the various grades of golf balls and tennis balls are sold. In the first place, the golf ball and tennis ball trade is an exception to the general rule, in that far the greater majority of the sales are always in the highest priced balls rather than the lowest priced. The majority of the manufacturers in this countrty produce both the expensive and cheap grades, and in arriving at profits they generally estimate them by averages on the entire line, so that a uniform tax on balls would probably be met by the manufacturers by simply a horizontal increase in prices sufficient to cover the amount of the tax on the whole line, and since this adjustment between balls of different grades can be made by each individual manufacturer, any theoretical unfairness of the same amount of the tax on the cheap

as on the expensive ball is offset by the far greater simplicity and convenience in collecting and assessing the tax at a specific amount on every dozen balls regardless of the price at which sold. Here again we believe that we are in an impartial position, as we manufacture and sell both cheap and expensive balls.

V. SKATES.

Skates, either roller or ice, are not to-day subject to any excise tax. We do not, of course, know whether it is the intention of Congress to impose a tax on them. There is probably no part of the athletic goods industry which has been curtailed to a greater extent since the war than the sale of skates. Skating seems more than other athletic sports to be largely subject to great fluctuations of sales in normal times. Skating in one or two years may be very fashionable; everybody is indulging in it. In succeeding years it will probably drop off to only a very small percentage of the consumption in those years. Because the craze for skating would probably have fallen off somewhat under normal circumstances during the past year, also largely as the result of the activities of men and women of leisure in Red Cross and other war work during the past winter, our sale of skates has been only approximately 50 per cent of what it was in the preceding year.

While we are manufacturers of skates, being at the same time manufacturers of athletic goods generally, a falling off in our skate department is not of serious consequences to our business as a whole; on the other hand many of our competitors in skates manufacture nothing else, and when there is a falling off, such as there was last year, they are faced with a very serious financial situation. For these reasons alone we believe it would be a serious mistake to subject a business which will have for the next few years the greatest difficulty in keeping its head above water to an additional burden of an excise tax. We fully appreciate, of course, that an excise tax or consumption tax is only paid in the first instance by the producer and is a tax which must be, and is intended to be, passed on to the consumer of the goods subjected to it. Nevertheless it hurts the business by resulting in higher prices, causing a decrease in consumption, and if business failures enervating to the financial strength of the country are to be avoided, businesses which are already finding difficulty in avoiding insolvency should not be subject to the added burdens of an excise tax.

VI. WITH REGARD TO IMPLEMENTS USED IN FIELD GAMES AND GYMNASIUM APPARATUS.

No tax is to-day imposed on such implements. The total volume of their sales is very small. We have never found the manufacture and sale of these goods in our business to be profitable and have only continued their manufacture and sale because we aim to be general athletic outfitters. The equipment is also largely purchased by communities for public buildings, playgrounds, and such semicharitable institutions as the Y. M. C. A. An attempt to classify all the various items would be very difficult and any general classifi cation would probably lead to difficulties and disputes between taxpayers and the Treasury Department. Much of the apparatus also can be made by local carpenters or builders. The great necessity also of curtailing any public or charitable expenditures except for direct war purposes results in a very greatly increased demand for items under this group so that we strongly urge that no tax be imposed on them. The amount collected would be very small and the amount of trouble and expense involved in the collection would greatly exceed the amount of the tax.

VII. A SPECIFIC TAX SHOULD BE IMPOSED RATHER THAN A PERCENTAGE TAX.

The present law calls for a tax of 3 per cent on the price at which the articles taxed are sold by the manufacturer, producer, or importer. The manufacturers', producers', and importers' sales may be grouped into three general classes:

1. Sales in considerable quantities to jobbers.

2. Sales to retail dealers.

3. Sales to consumers.

The prices at which the manufacturer sells to these different groups differ very widely in the athletic-goods trade. The average may be stated in the