Land-value taxation will accomplish this, and preserve the fiscal integrity of the Government as well. The CHAIRMAN. Thank you for coming to the committee and giving us the benefit of your thinking on this matter. Are there any questions? If not, we thank you very much, sir. Mr. HERLONG. Mr. Chairman, I would like to insert a statement on behalf of my colleague, Mr. Sadlak, and myself in the record at this point. The CHAIRMAN. Without objection, it is so ordered. (The statement follows:) STATEMENT BY REPRESENTATIVE ANTONI N. SADLAK (REPUBLICAN, CONNETICUT) AND REPRESENTATIVE A. S. HERLONG, JR. (DEMOCRAT, FLORIDA) We should like to take this opportunity to express our appreciation to the many witnesses who testified, in the 24 days of hearings just concluded, in favor of our tax reform bills, H. R. 6452 and H. R. 9119. These witnesses obviously gave considerable time and thought to their testimony and made, in our judgment, a convincing case which proves the pressing need for tax reform legislation at this time. While a detailed analysis of the hearings is not available, we know it is a fair statement to say that more than two-thirds of those witnesses who testified in favor of tax reduction of some sort supported our bills. These witnesses cited chapter and verse of the oppressive results of present tax rates on enterprise of all sorts, particularly small business. They presented conclusive evidence that the need for tax reform is the Nation's No. 1 domestic problem. In recent days, there has been a growing belief in Washington that tax action is necessary to stem the recession and turn our economy back toward full operation. The question is rapidly becoming one of: What kind of legislation would best fit the current situation? This question is of crucial importance because tax reduction dollars are and will remain scarce in relation to the needs for economic reinvigoration, and then sustained economic growth without continuous inflation. With tax reduction dollars devoted to rate reform, there certainly would be greater economic growth with the most rapid increase in living standards and new and better job opportunities. We are convinced the Nation cannot afford to dissipate its human and economic resources by continuation of unsound tax rates. In other words, we believe the criteria for tax action should not be one of division of tax reduction dollars between multiple purposes, but should be one of how much rate reform can we afford and how fast? We, therefore, wish to restate at this time the basic premises of the measure which we have sponsored, especially in regard to its practicality under current conditions. This measure forward schedules annual rate reductions over a 5-year period, beginning January 1, 1958. With reform of the structure to unleash dormant economic capacity as its principal purpose, the top rates of both individual and corporate tax would be brought down to 42 percent. There would be corresponding compression of the middle bracket rates, with the first rate going down from 20 to 15 percent. Thus, over 5 years, in addition to reforming the rate structure, this measure would provide a minimum of a 25 percent reduction for all income taxpayers. Forward scheduling over a period of years is made feasible by the inclusion in the legislation of postponement provisions. We should like further to call attention to the fact that since economic growth and hence Federal revenues are now lagging behind normal expectations, it may be most opportune to seek quick benefit from early enactment. We, therefore, would like to suggest that one way of achieving quick recovery for the economy is to enact this legislation, effective January 1, 1958, with the January 1, 1959, as well as the January 1, 1958, cuts going into effect without recourse to the postponement procedures. We suggest this course of action because economic growth is lagging and it is becoming increasingly obvious that tax action is necessary to cure the recession. The three remaining annual cuts, the first scheduled for January 1, 1960, would be covered by the postponement procedures originally devised to protect budget balance. The revenue effect in fiscal year 1958 of retroactive enactment as of January 1, 1958, would be negligible, whereas the total effect of the combined reductions as of January 1, 1958, and January 1, 1959, in fiscal year 1959 would be in the order of $5 billion. That this revenue should be quickly recouped as the economy picks up is indicated by the fact that, if there had been no interruption by the recession of the historical growth pattern, actual revenues in fiscal year 1959 would be about $4.5 billion greater than was estimated in the 1959 budget. This $4.5 billion estimate is based on the same growth factors used, when we introduced the legislation, in estimating that under normal conditions annual revenue growth should run up to $4 billion a year. On an annual basis, the program of rate reductions contained in our bills would have an average revenue effect of only about $3 billion. The CHAIRMAN. The completion of today's witness list concludes our hearings on general revenue revision. This is our 24th consecutive day of hearings. During the course of the past 5 weeks the committee has had the benefit of receiving the views and recommendations of some 550 to 600 individuals representing all segments of our economy and practically all facets of our business community. Two hundred and eightyseven witnesses presented oral testimony to the committee. The committee has received the views of these persons and organizations on major policy questions relating to income, estate and gift taxes, which were indicated as appropriate areas for testimony in the second detailed announcement of September 11, 1957. Through the vehicle of these hearings, therefore, American taxpayers have been afforded the opportunity of advising this committee of the Congress, which has original jurisdiction over all revenue measures, as to their recommendations relating to action which should be taken to achieve a more equitable, responsive, and balanced tax system. I would like to here emphasize that this committee, being well aware of the vital relationship between our tax policy and our economic well-being, first announced these hearings last August. The course of events since that date has amply proved the wisdom of the earlier decision by our former chairman. The record of these hearings will remain open for a period of 2 weeks for the purpose of receiving additional information which has been requested from time to time of witnesses by members of the committee, additional statements for the record in the case of individuals and/or organizations who were unable to appear in person, and other pertinent material appropriate for inclusion in the record which is in accord with the August 9 and September 11, 1957, announcements relative to these matters. In this connection, I invite the attention of interested persons to the general rules which were laid down in the detailed announcement of September 11, 1957, concerning the type of statements which are to be considered appropriate for inclusion in the printed record. As was stated in that release, information presented to the Subcommittee on Excise Taxes during the general hearings conducted by that subcommittee in the fall of 1956 will be incorporated by reference in these hearings and there will be included in the printed record of these hearings only statements relating to proposals which were not covered in the subcommittee hearings and proposals relating to new developments in the excise tax field since those hearings. The staffs of the Committee on Ways and Means and the Joint Committee on Internal Revenue Taxation, in conjunction with the staff of the Treasury Department, have been instructed to immediately begin analysis and thorough study of the proposals which have been made to the committee during the course of the past 5 weeks preparatory to discussing with the committee during its consideration of revenue revision proposals. On behalf of the Commitee on Ways and Means I wish to express appreciation to the large number of witnesses for their valuable contributions and for their cooperation with the committee and its staff in the scheduling and conduct of these hearings. We all wish that more time had been available, but this year the committee is faced with an extremely heavy workload in several areas of its jurisdiction due to expiring statutes, et cetera, and 5 weeks was the maximum time which could be devoted to this subject. The general tax revision hearings of 1958 are now closed. (Whereupon, at 4 p. m., the committee adjourned.) APPENDIX (The following communications, all referring to excise taxes, were received by the committee:) Hon. WILBUR D. MILLS, HOUSE OF REPRESENTATIVES, Washington, D. C., January 13, 1958. Chairman, Committee on Ways and Means, House of Representatives, Washington, D. C. DEAR COLLEAGUE: Enclosed please find a letter from one of my constituents regarding a special tax problem of the South Bay Yacht Club in my district. You will note that this organization strongly recommends an amendment to section 4242 (a) of the Internal Revenue Code as per the attached proposed bill. In the event that hearings are held on this particular section, it would be appreciated if my constituent's views could be incorporated in the hearings and a notation that I heartily concur in the point of view he has presented. Thanking you for your courtesy, I am Yours sincerely, Hon. CHARLES GUBSER, CHARLES S. GUBSER. SAN JOSE, CALIF., January 6, 1958. House of Representatives, Washington, D. C. DEAR MR. GUBSER: The South Bay Yacht Club is a boating organization which has been in existence over 60 years and which maintains its facilities at the extreme southerly end of San Francisco Bay. Its membership has an does include many of the leading citizens of this community. The South Bay provides some of the roughest expanses of water in the bay area, particularly when the prevailing southwesterly afternoon wind meets an ebb tide. It has narrow channels and treacherous mud and shell flats. In consequence, only those boatsmen who are entirely familiar with the area are qualified to take a boat into many parts of the South Bay during adverse conditions. Through participation in the activities of the South Bay Yacht Club, its members have acquired unusual skill in small-boat operation in the area. These abilities have repeatedly proved to be of great value during national and local emergencies. A few examples of such serivces rendered by its members were the dimming of the aids to navigation at the outbreak of World War II, an imposing list of rescues from death by drowning or exposure, assisting in operations involving aircraft which have fallen into the South Bay, furnishing water transportation to legislative groups and other public officials, and a host of related public services. While the organization bears the misleading title of "Yacht Club," it actually has a membership composed of small-boat owners of whom most have limited finances to devote to this worthwhile activity. Section 4242 (a) of the Internal Revenue Code of 1954 imposes a severe handicap to the group's operations. This section imposes a 20-percent tax on initiation fees or annual dues in excess of $10. This is bad enough, but it also imposes a like tax upon assessments irrespective of purpose and upon any charge for the use of facilities which apparently covers mooring fees for the members who own boats, and apparently would cover money raised to dredge the basin where the small craft are moored. In consequence of this tax burden, the membership is fearful that it will be forced to disband. It is our understanding that on January 10, 1958, an amendment to section 4242 (a) of the Internal Revenue Code will be introduced in the Congress of the United States. A copy of the proposed amendment is enclosed. The membership of the club has asked that this office write to you on behalf of the individual members in the hope that you can consistently see fit to urge that careful consideration be given to the enactment of the proposed amendment. It would seem to be a short-sighted policy to impose such a tax hardship upon individuals who are engaging in a nonprofit and worthwhile club activity. With every good wish, we remain, HUGH S. CENTER (For Rankin, Oneal, Luckhardt & Center). STATEMENT BY NATIONAL CONFERENCE FOR REPEAL OF TAXES ON TRANSPORTATION The National Conference for Repeal of Taxes on Transportation strongly believes that when your committee undertakes tax adjustments, repeal of the excise taxes on transportation should have priority consideration. The national conference is made up of a large number of organizations who agree that the transportation taxes should be repealed. These organizations represent shippers, travelers, all forms of transportation, along with agriculture and labor. List of the organizations authorizing the conference to speak for them is attached. The national conference exists for the sole purpose of seeking repeal of the transportation taxes, and serves as the coordinator of the activities of the participating organizations. Its office is at room 605, 1000 Connecticut Avenue, Washington, D. C. Realizing the difficulties confronting this committee and the Congress in the critical situation in the world, the national conference is realistic in its approach to the question with which it is concerned. But it does maintain that these transportation taxes should have early consideration, because they are a severe drag on for-hire transportation and on those who must rely on such transport; because they are the most discriminatory of excise taxes; because they affect the cost of living; and because repeal would be offset in considerable measure by more revenue from income taxes. While the problems of transportation are not within the purview of this committee, we call attention to such facts as these: Disturbed by the problems of some segments of the railroad industry, a Senate subcommittee is holding extensive hearings on that subject; suffering sharp declines in traffic and earnings, one major airline has applied for Federal subsidy and another has announced reductions in pilot personnel. Relief from the transportation taxes can be a great lift to for-hire carriers. It should be added that the Interstate Commerce Commission, which regulates surface carriers, supports repeal of these taxes. Clearly it was not the intent, when these taxes were imposed, to continue them indefinitely, as they were largely wartime measures. Each year seems to find new reasons for postponing repeal, and while the fiscal problems of the Government cannot and should not be ignored, the transportation taxes seem to us to be the most discriminatory as well as most damaging of all excise taxes. Industries and persons able to provide their own facilities for freight or passenger travel can and do avoid the tax; any steps Congress takes toward repeal should slow the trend toward private transportation and give for-hire carriers a chance to meet such competition. Many travelers going abroad can avoid the tax by simple expedients; shippers in areas near the Canadian border must compete with shippers across the line who pay no such tax; shippers with long hauls pay heavily in transportation taxes as against those who happen to be closer to their markets. From the standpoint of revenue, it should be borne in mind that a major part of these taxes is deductible business expense, so that much of the loss in revenue would be offset by increased incomes taxes. From the standpoint of the public, it is obviously an important item in the cost of living. With 500 million tickets for passenger travel sold in a single year all paying the tax, and with every freight shipment by for-hire carriers subject to the tax (pyramiding with each movement of goods) it clearly affects every consumer. As items in the cost-of-living index, they affect escalator clauses in labor contracts-in short are serious contributors to inflation. Any revision, such as the gradual repeal which has been suggested in some quarters, is certainly a desirable step in the right direction. However, the national conference suggests that for the reasons stated, as well as for the other reasons more extensively presented to your Excise Tax Subcommittee by the national conference a year ago, consideration should be given to complete repeal of all the excise taxes on transportation. SUPPORTING ORGANIZATIONS FOR NATIONAL CONFERENCE FOR REPEAL OF TAXES ON TRANSPORTATION Air Conditioning & Refrigeration Institute American Association of Nurserymen, Inc. American Hotel Association American Merchant Marine Institute American Mining Congress American National Cattlemen's Assn. American Retail Federation American Retail Coal Association American Short Line Railroad Association American Society of Travel Agents American Transit Association American Trucking Associations, Inc. American Veneer Package Assn., Inc. American Waterways Operators, Inc. Associated Cooperage Industries of America, Inc. Associated Traffic Clubs of America Association of American Railroads Association of American Ship Owners Athletic Goods Manufacturers Association Atlanta Freight Bureau Brotherhood of Locomotive Engineers Brotherhood of Locomotive Firemen & Enginemen Brotherhood of Railway Carmen of America Brotherhood of Sleeping Car Porters California Manufacturers Association California State Chamber of Commerce Casket Manufacturers Association of America Corn Industries Research Foundation The Dude Rancher's Association Federation for Railway Progress Florida Boatsmen Association Foundry Equipment Manufacturers Association, Inc. Greater Detroit Board of Commerce Institute of Scrap Iron & Steel, Inc. International Apple Association, Inc. Monument Builders of America, Inc. National Agricultural Limestone Association, Inc. National American Wholesale Lumber Association, Inc. |