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We recognize that some companies have recently made such fuels available on a limited basis. However, the quantities available are in fact quite limited in relation to our total gasoline requirements. This tax will provide reasonable economic pressure to assure that a complete_conversion takes place on a reasonable basis over a period of time. It is important that this industry recognize the seriousness of this effort and the Government's complete dedication to achieving the goal. Enactment of this tax will adequately signal our intentions in this respect.
Adoption of the tax, coupled with suitable regulatory requirements as to fuel composition, as also proposed by the President, is the most appropriate way of achieving the objective of removal of lead from gasoline.
Imposition of the tax will complement regulatory requirements as they come into existence by creating an immediate economic incentive to switch to low leaded and unleaded gasoline.
The amount of the tax is set so as to minimize any cost advantage as a result of the use of lead. By making it possible for refiners to effectively market unleaded and low lead gasoline, the tax will create a competitive situation causing refiners to convert to such output. Competitive pressures in this regard already are in evidence, undoubtedly influenced by anticipation of the imposition of the tax.
The proposed rate is sufficient to induce refiners to increase their production of 91 octane unleaded fuel and 94 octane low-lead fuel within the limits of present octane production capability.
This coincides with the automakers' announcements that their 1971 model cars will operate on such a fuel. The result of the tax will be to assure the availability of fuels which minimize lead use as quickly as conditions allow and to assure general availability of leadfree gasoline by midsummer of 1974.
In addition to the benefits described above, enactment of the tax may well have a beneficial effect for the average motorist in reducing his maintenance costs. Large amounts of lead compounds can cause rapid deterioration of muffler and exhaust systems. Lead deposits also foul ignition systems and other internal engine parts.
Elimination or reduction of lead may therefore lead to operating economies for every motorist. These economies will help overcome any increase in gasoline prices resulting from the inability of refiners to use lead to achieve the desired octane levels.
In summary, adoption of the tax at this time is vital to our attempt to reduce some air pollution immediately. Furthermore, it will assure significant future improvement, thus reducing a health danger and minimizing smog conditions. It will cause gasoline refiners to begin conversion to low lead and eventually nonleaded fuel so that there will be assurance of incorporation of effective pollution control devices in the 1975 automotive models. Finally, we believe that it will stimulate research and development of even more effective pollution control systems by providing assurance that nonleaded fuel will be generally available in the near future.
We recommend a tax of $4.25 per pound of lead in lead additives used in gasoline. The tax should be imposed on sales of the lead additives by manufacturers and importers. The tax should become effective as of October 1, 1970. A floor stock tax would be imposed on all inventories of lead additives held by persons other than manufacturers or importers on that date.
To prevent undue hardship on smaller refiners, we recommend that in the case of any corporate group, additives containing up to 1 million pounds be freed of the tax in its first full year of operation. This amount should be decreased at the rate of 200,000 pounds per year so that the tax will be fully in effect in 1976.
If the tax is made effective on October 1, 1970, as we recommend, it will result in a revenue increase of $1.1 billion in the fiscal year ending June 30, 1971.
ACCELERATION IN GIFT AND ESTATE TAX PAYMENTS
The President has recommended that the collection of estate and gift taxes be accelerated in order to provide approximately $1.5 billion in additional receipts for fiscal year 1971. We have submitted to Congress full details for implementing the President's proposal.
Our proposal would require the filing of the gift tax return and payment of the tax on a quarterly basis on the last day of the month following the end of the calendar quarter in which the gift was made. This will not be a burdensome requirement. Timing of gifts is at the donor's option, and gifts made during any calendar quarter are readily identifiable. At the present time, a substantial majority of donors make all their gifts in a single calendar quarter of any year; thus it is expected that few additional gift tax returns will be required under the quarterly system.
Our original proposal would also require the payment of an estimated estate tax 7 months after death. This recommendation has generated considerable interest and controversy. Representatives of the Trust Division of the American Bankers Association and the Tax Section of the American Bar Association have proposed an alternative under which there would be no estimated tax requirement. Instead, the time for filing the estate tax return and paying the estate tax would be changed from 15 months to 9 months after death. An accompanying change would shift the alternate valuation date from 1 year to 6 months after death. The alternative proposal also calls for speed up in the auditing of Federal estate tax returns and the release of fiduciaries other than the executor from personal liability for the tax.
The alternative proposal would also change the holding period rule so that any property included in the gross estate which is sold within 6 months after death would be given long-term capital gain treatment.
This alternative proposal is designed to reduce the time necessary to complete administration of estates due to tax considerations. By requiring the filing of the estate tax return and payment of the estate tax 6 months earlier than under present law, the alternative proposal should normally shorten the period of estate administration by at least 6 months. This would represent a major improvement in our legal system.
This alternative proposal has received widespread endorsement from various bar associations, professional fiduciaries, and other taxpayers and their representatives.
After study, we have concluded that this alternative is preferable to our original proposal for an estimated estate tax, and accordingly we now recommend the principal features of the proposal to you for adoption.
We have some minor modifications in the specific proposals of these groups and we are submitting for the record at this time a draft bill incorporating our recommendations for adoption of the alternative proposal.
An important feature of the proposal is a speed up in the time of auditing Federal estate tax returns. While this cannot be reflected in the draft legislation, we are prepared to make changes in the Internal Revenue Service's audit procedure in order to shorten the time now required to complete audíts of estates. These steps will reduce further the time necessary for the administration of estates.
A major advantage of the alternative proposal is its simplicity when compared to the proposal for estimated estate tax returns. No additional return would be required; the time for filing the final return would merely be shortened.
In order that this proposal achieve its primary revenue-raising purpose, it is absolutely essential that it be made effective so as to require the filing of the estate tax returns of decedents dying prior to September 30, 1970, no later than June 15, 1971, or 9 months after death, if later.
Returns of decedents dying after September 30, 1970, will be required to be filed 9 months after death. In the case of persons dying before September 30, 1970, there is no unfairness in shortening the 15 months' period under existing law. None of these estates will be required to file returns less than 9 months after the decedent's death. Notice of our intention to seek this type of legislation was first announced to the public in April 1970.
This recommendation will result in a revenue increase of $1.5 billion in the fiscal year ending June 30, 1971.
EXCISE TAX EXTENSION
The existing budget situation and economic outlook require continuation of the present 7-percent excise tax on automobiles and 10percent excise tax on telephone services through calendar year 1971. These taxes at present levels have played an important part in the anti-inflation program, and the scheduled reductions of these taxes would seriously weaken the program which has proven so successful in recent months. Thus, it is proposed that all scheduled reductions of these taxes be deferred for 1 year, and that their repeal be deferred until December 31, 1974.
The recommended extensions of present levels of excise taxes will prevent a revenue loss of $650 million in the fiscal year ending June 30, 1971, and $1,250 million in the fiscal year ending June 30, 1972. At this time Chairman Russell E. Train of the Council on Environmental Quality, Under Secretary John G. Veneman of the Department of Health, Education, and Welfare, and Dr. Hubert Heffner, Deputy Director of the Office of Science and Technology, will present their statements with respect to the tax on lead used in gasoline additives.
Following their statements we will all be available to answer questions on the lead tax. Members of my staff and myself will answer questions on the estate and gift tax acceleration and the excise tax
The CHAIRMAN. Thank you, Mr. Secretary. Our next witness is the Honorable Russell E. Train.
Russ, we are glad to have you with us again.
STATEMENT OF HON. RUSSELL E. TRAIN, CHAIRMAN, COUNCIL ON ENVIRONMENTAL QUALITY, EXECUTIVE OFFICE OF THE
Mr. TRAIN. Thank you, Mr. Chairman.
The Council on Environmental Quality is pleased to have the opportunity to affirm to you our wholehearted support for the administration's proposed legislation to tax lead additives to gasoline.
It is well known that lead in sufficient quantities is toxic. Historically, cases have been documented for deaths traceable to this element in certain situations such as occupational exposure in lead mines and in instances where children have eaten paint containing lead. Experts tell us that in all probability there is no requirement for lead in the human body, although due to natural sources there is a certain minimum lead content present. The exposure to the lead wastes placed into the environment by man adds to this content and raises the concentration toward that level above which short-term adverse effects could result.
There is no definitive evidence that the current lead level in the atmosphere by itself, causes clinical human illnesses. However, there appears to be evidence that lead borne by air, such as the submicron size lead salt particles generated by motor exhausts is absorbed by the body in greater proportions than that absorbed from other means. For example, although there is a variance of opinion, some published results state that over 50 percent of the inhaled lead is absorbed as compared to less than 10 percent of that ingested by food and water.1 Airborne lead also enters the body indirectly. It can come to rest on edible plants and even in fish which consume the washoffs from the adjoining land. These products are then ingested by man.
When the lead source to the body is cut off, the lead concentrations absorbed into some body constituents, such as the blood, are gradually reduced. However, some experts tell us that lead may have a long term detrimental effect on other constituents such as the red blood cellsan effect that cannot be reversed.
I am not a medical doctor. But as an environmentalist I am deeply concerned by the warnings in the professional literature. We are all well aware of other substances which man has placed in the environment in large quantities without first taking the precaution to determine if they had any detrimental effects. We are now paying the price for some of these-notably DDT and mercury.
I do not feel we should take this chance with lead transmitted through the air, of which automobile exhausts are a major source. There is no necessity that these exhausts contain lead, only a convenience factor. Additional research needs to be conducted to ascertain the effects, particularly the long-term ones, of atmospheric lead on human health. This research takes time. In the interim the advantages in safeguarding human health far outweigh the conveniences
1Stokinger, Herbert E., Amer. Ind. Hygiene Assn. Journal, 30, May-June 1969.
such as more power in our automobiles. Lead must be removed from gasoline. The proposed tax on lead additives should be a major inducement to accomplish this.
Automobile exhaust is one of the major sources of air pollution, particularly in urban areas, and the threat posed by auto exhausts was made amply clear by the recent wave of pollution episodes across the country. The high levels of smog in these episodes, in many cases, were due to the automobile.
The National Air Pollution Control Administration of the Department of Health, Education, and Welfare has issued, and is continuing to make more stringent, emission standards to minize these pollutants. The efforts to meet these standards can be divided into two general categories:
1. Cleaning up the emissions of the present internal combustion engine.
2. Developing a low emission power system other than the internal combustion engine.
The latter approach may well be necessary in the long run and we must take steps now to clean up the internal combustion engine since it probably will be with us for some time.
We have seen evidence where hydrocarbon emissions can be reduced 7 to 20 percent by using lead-free gasoline in both existing and new automobiles. Thus, even without the new emission control devices, the removal of lead from gasoline yields significant results toward smog reduction.
A panel of experts, chaired by Dr. David Ragone under the aegis of the Department of Commerce, has made a detailed study of the need to remove the lead additive from gasoline and the means for doing so.
In their preliminary report, issued in July, they concluded that lead has a deleterious effect on potentially important emission control devices needed to meet the increasingly stringent future emission standards and that the development of a variety of these devices depends on the assurance that a low and eventually an unleaded fuel will be generally available when needed, I refer to a low leaded gasoline as containing around 0.5 grams of lead per gallon. The present lead content in most gasolines ranges from 2 to 3 grams per gallon.
Many of the potential devices which might be used to reduce gaseous emissions are rendered ineffective by lead after relatively short mileage has been accumulated. Some are poisoned by just one tankful of leaded gas; others after only a few thousand miles. The goal is to obtain a device which will last for at least 100,000 miles before replacement is required.
It takes time and investment by industry to develop and test these devices to the point where we have assurance as to their performance when produced under high volume conditions and when operated and maintained under conditions pertaining to normal American driving habits and car care. The commitment to remove lead from gasoline will increase the chances that these devices will be effective under these conditions and thus should be an incentive to industry to intensify their development.
It takes time for the petroleum industry to convert in an orderly and economical manner to the production of large quantities of low and unleaded gasolines. Hence, we must declare in no uncertain terms