smoked, while only 16.4 percent of all librarians did. And it found that a higher percentage of Black male workers smoked than their white male counterparts, 60 percent to 54 percent.

Clearly, the federal tobacco tax is targeted at certain income groups-the poor and the working poor-who are ill-prepared to pay it.

In 1965, in recognition of the fundamental unfairness of most excise taxes, Congress repealed excise taxes on 35 different products. Of the excise taxes which remain, the cigarette tax is the most regressive of a regressive lot.

Of course, economic circumstances are much different today. Federal deficits hover around the $200 billion level, a key factor in keeping our manufacturing sector into recession. In this context, the hunt for new revenues is inevitable. And there will be those who will propose the politically appealing option of taxing people who are without an organized army of lobbyists to represent their interests-the poor and the near poor.

Already rumblings are beginning to be heard about a value-added tax, and presumably a whole array of excise taxes could be revived and/or increased to deal with the deficit.

But such moves would be contrary to the basic notion of tax fairness-that is, that tax burdens should be based on the ability to pay. Over the past seventy years, progressivity in our federal tax system has been a key vehicle for enlarging and equalizing opportunity for all American citizens.

Taxes based on consumption fly in the face of the ability-to-pay principle. We have already seen just how regressive the existing federal cigarette tax is. A socalled "broad-based" value-added tax would also be strikingly unfair in its impact. According to the Treasury Department, a 10 percent value-added tax would impose new taxes on a family making less than $10,000 a year equal to 14.2 percent of total income. A family earning in excess of $200,000 a year would feel a bite of only 1.8 percent of income.

We urge this Committee to reject efforts to move in the direction of general or selective consumption taxes. We have massive deficits today largely because of massive tax cuts granted in 1981 to wealthy individuals and profitable corporations. These deficits have arisen because we have reduced our reliance on federal revenue sources that are based on a taxpayer's ability to pay-the personal and corporate income taxes. The answer to our deficits must come from a resurrection of the idea of progressivity, not from taxes which hit the poor the hardest.

These same federal deficits have been the impetus behind budget cuts totaling $59 billion in aid to state and local governments over the past four years. The FY 1986 budget, at least the version adopted by the Senate, contemplates the total elimination of programs such as general revenue sharing, work incentives, the community services block grant and the Economic Development Administration. And the President's tax simplification package contains a provision-the repeal of the federal deduction for state and local taxes-that, if enacted, would greatly impair the tax capacity of state and local governments.

Given this context, it is significant that 15 states have already passed laws "picking up" the 8¢ per pack tax the federal government is scheduled to forego as of October 1.

We at Citizens for Tax Justice urge the Ways & Means Committee to let the temporary increase in the federal cigarette tax expire on schedule. Increasing consumption taxes are antithetical to the spirit of reform. There are better ways to deal with the federal deficit—and we believe that the Committee should begin by requiring wealthy individuals and corporations to pay their fair share.

EXPENDITURES ON TOBACCO PRODUCTS AND SMOKING SUPPLIES AS A PERCENT OF HOUSEHOLD INCOME BY INCOME GROUP, 1980–81

EXPENDITURES ON TOBACCO PRODUCTS AND SMOKING SUPPLIES AS A PERCENT OF HOUSEHOLD INCOME BY HOUSEHOLD CHARACTERISTIC, 1980-81

Source: US Department of Labor, Bureau of Labor Statistics Consumer Expenditure Survey: Diary Survey, 1980-81.

THE INCIDENCE OF A 16 CENT PER PACK FEDERAL CIGARETTE TAX BY INCOME GROUP-1985

81.

43212

Source: Citizens for Tax Justice estimates based on data from the Bureau of Labor Statistics Consumer Expenditure Survey: Diary Survey 1980

Household expenditures on tobacco products and smoking supplies were multiplied by .94 for each income group to obtain household expenditures on cigarettes only. Cigarette expenditures were then divided by the average price per pack, including all federal, state, and local taxes as of November 1, 1980 (60¢), to obtain the number of packs consumed by average households for each income quintile. The number of packs consumed annually was then multiplied by the 16¢ per pack cigarette tax rate to obtain total federal cigarette tax payments.

STATE TOBACCO TAX LEGISLATION

[In cents]

State

Present tax

Tax, if Federal rate is cut

(Ten States have adopted legislation stating that if the Federal Government cuts the tobacco tax from 16 cent to 8 cents, those states will "pick up" this difference by increasing their State tobacco taxes by 8 cents).

(Ten States have adopted legislation stating that if the Federal Government cuts the tobacco tax from 16 cent to 8 cents, those states will "pick up" this difference by increasing their State tobacco taxes by 8 cents).

1 Each of these States have the increase in revenue (or possible increase, in the case of the States with "pcik up" legislation) from the tobacco tax earmarked for specific programs: Arizona for highway construction; Maryland for land conservation and removal; lowa for tax reduction in other areas; Kansas for education; and Mississippi for teachers' salaries.

2 Effective June 1, 1985.

3 Effective July 1, 1985.

DISTRIBUTION OF 10 PERCENT VALUE-ADDED TAX AS A PERCENTAGE OF FAMILY INCOME

10 PERCENT VAT AS A PERCENTAGE OF CURRENT INCOME TAX BURDEN

Source: U.S. Department of Treasury, Tax Reform for Fairness, Simplicity, and Economic Growth, Volume 3, November 1984.

Mr. PEASE. Thank you, Mr. Wilhelm.

Mr. Anthony.

Mr. ANTHONY. No questions.

Mr. PEASE. Mr. McGrath.

Mr. McGRATH. No questions.

Mr. PEASE. We appreciate the testimony of all you gentlemen and we will recess the committee until 2 p.m.

[Whereupon, at 12 noon, the committee recessed, to reconvene at 2 p.m.]

AFTERNOON SESSION

Mr. GEPHARDT [presiding]. The committee will come to order. The next panel of today's session will be the National Black Caucus of State Legislators with the Hon. Clarence Mitchell, State senator from Maryland; the California Hispanic Chamber of Commerce with Larry Lopez, executive vice president; and the North Carolina Growers Association with W.L. Billy Carter, president. Will that panel please come forward?

Gentlemen, we welcome you to the committee and want you to be aware that your written statements will be made part of the record.

We now look forward to your oral remarks.

Mr. Mitchell, welcome. It is good to have you here today, and we are happy to receive your statement at this time.

STATEMENT OF CLARENCE M. MITCHELL III, PRESIDENT, NATIONAL BLACK CAUCUS OF STATE LEGISLATORS, AND MARYLAND STATE SENATOR

Mr. MITCHELL. Thank you, Mr. Chairman and distinguished members of the House Ways and Means Committee. I appreciate the opportunity to appear before you this afternoon.

I sat through this morning's session, and so I don't think there is really a great need to be repetitious. I have served for 23 years in the Maryland Legislature, so I know the value of submitting a written statement and making a few comments, and then if there are any questions, we can move from there.

I do represent, and I would like for you to know that our organization is made up of 388 black State legislators in 42 States with a collective constituency in excess of 26 million people. We operate at the grassroots level, and we formed as a caucus because we felt the larger body, the National Conference of State Legislators, was not addressing some of the specific issues that were peculiar to our legislators and our constituents.

We found that there was a need for some vehicle to give special attention to those issues that concern black Americans in this country from the State perspective. So we have been in existence since 1977, and we are beginning to emerge. We have an office on Capitol Hill at the Hall of the States Building, and you will be hearing more and more from us in order that you might have the benefit and advantage of our thinking and our perspective on the various issues that you will be considering.

I think it is especially important that you understand that we have, across the board, taken a position, and our opposition to nuisance taxes or luxury taxes or those taxes which bear a much heavier weight on low-income people and the poor in our society.

This tobacco tax is not unlike taxes on beer, which is the poor man's luxury. It is not unlike taxes, sales taxes, that bear more

heavily on the poor and low-income because they buy cheaper products which have lower quality and do not last as long, as they buy

more.

I would most respectfully submit that those of us who would promote and support these kinds of taxes do a great disservice to the title that we hold as public servants, especially in light of the fact that I have always viewed my position as one of public trust and imposing upon me a responsibility to pass legislation and tax proposals that are fair.

Tobacco taxes, liquor taxes, sales taxes are not fair. They are regressive and they hurt people who in the past, to a large extent, have not been heard from. They were unorganized and they were of the avenue of least resistance. They didn't raise the hue and cry that comes from the more affluent in our society.

If we suggest a fair tax, like a properly graduated income tax, if we were to impose a fair tax, then we would not be today talking about the budgetary deficits that are doing such damage to our economy in this country. But many of us, and I include myself as a public official, have failed to live up to our responsibility to give leadership in this area and demonstrate to all of the people that we represent that Government can be responsive and can be fair.

As we talk today about this particular tobacco tax and allowing the sunset to occur in October, there are some States who already are passing legislation to make up for the difference in anticipating that the Congress will not do damage to the sunset, and therefore they can pick up the revenues that would come from the difference between their State taxes and the Federal tax. So, certainly State legislators are as guilty as Members of Congress in this respect.

I think it is also important that you understand that by the passage, by allowing the sunset provisions to take place, you send a message at a time when you are considering a tax proposal that is unfair. It is titled a Tax Reform Act.

In fact, I chair the joint Federal relations committee in the Maryland Legislature. We just spent all of Tuesday hearing about this great tax reform proposal that you are considering now, and find that seven States that do not impose income taxes also happen to be some of the richest States, the oil States, and they will not be affected if this proposal were to pass, by the effort to take away the deduction, the State tax deduction, for taxpayers. So even that proposal, a key element in the proposal that is supposed to be a fair reform taxing measure, the key element in that is unfair.

And I suggest that there comes a time when we have got to begin to send some different messages, and I would hope that this committee would see fit to reject the effort to prevent the reduction in the tobacco taxes.

It has been said over and over this morning, but it is worth repeating, that you can't tax people into doing what you want them to do. If we proceed along that line, then we will be taxing cities who have more pollution than other cities, and we will be taxing all of those items and elements in our society that pose high risks to the people we represent. I suggest that that is an improper way to move.

I appreciate this opportunity to appear before you, and you have my statement.