Mr. CURTIS of Nebraska. Your name, please? Mr. LUCAS. My name is James C. Lucas, 1625 I Street, NW., Washington. I am a member of the staff of the American Retail Association. Mr. CURTIS of Nebraska. On I Street, here in Washington? Mr. LUCAS. Yes, sir; that is correct. Mr. CURTIS of Nebraska. You want to present Mr. Jones' statement in his behalf? Mr. LUCAS. Yes, sir; and I shall be brief and touch only the high spots, if I may. Mr. CURTIS of Nebraska. Would you like to have the entire statement received in the record? Mr. LUCAS. I should like that, if you please. Mr. CURTIS of Nebraska. Without objection it is so ordered, and you may proceed. STATEMENT OF JAMES C. LUCAS, MEMBER, AMERICAN RETAIL FEDERATION, WASHINGTON, D. C. Mr. LUCAS. My name is James C. Lucas, and I am a member of the staff of the American Retail Federation, which maintains offices at 1625 I Street here in Washington. The organization is a federation of 25 national retail-trade associations and 33 statewide associations of retailers, representing in all more than 600,000 retail outlets. Mr. Chairman, I have included with Mr. Jones' statement the names of these associations which I will not take the time to read if I may include them in the record. Mr. CURTIS of Nebraska. Without objection it is so ordered. Mr. LUCAS. Retailers believe that our American economy and American standard of living are hung upon the successful production and sale of the categories of goods which our people are not compelled to buy and that the difference between full production and full employment on the one hand and fifteen or twenty million unemployed on the other depends upon the efficient distribution of goods and services beyond the necessities of life. Indeed, the barest necessities of life could not be supplied to all our people were it not for the jobs and the purchasing power created through the production and sale of the goods some call luxuries. They are the pluses in life which make people work harder to secure. It is unrealistic, we think, to single out special categories of goods for unfair peacetime taxation-whether the goods selected are luxuries or necessities and many now taxed are not luxuries today by any defensible standard-the fact remains that all types of goods represent new wealth, furnish jobs in many facets of the economy, add to the total national income and increase the receipts of the Treasury. Such taxes constitute a tribute which must be paid before the goods reach the consumer, a tribute which cuts purchasing power by raising the retail price, thus decreasing the total consumption and cutting the taxable income and profits clear back to the point of origin of the goods and its components, to say nothing of decreasing the number of jobs available. As for jobs-and these present taxes are causing unemploymentthe jobs of workers in furs, jewelry, luggage, cosmetics, along with all workers in the manufacturers excise-taxed industries are just as important to those workers, and to the entire economy, as those in the untaxed lines. To sum up, the wartime excise-taxes, both retail and manufacturing, are now barriers to an expanding economy. They reduced production and consumption during wartime as they were intended to do. They are still having that effect today to a constantly increasing degree and at a time when the use of labor and materials should be stimulated and expanded, not curbed. The effect of the discriminatory retail excise taxes on the sales of taxed items is very clearly shown if we compare the retail excise-tax collections, which are an accurate measure of the sales of these items with other economic data over a period of years. Taking 1945 as a starting point, since the 20 percent rates went into effect April 1, 1944, we note the following trends since that time: National income has increased by 59 percent. Personal income has increased by 57 percent. Retail sales have increased by 116 percent. The consumers price index of the Bureau of Labor Statistics has gone up 47 percent. The population of the United States has increased by 12 percent. But during this same period retail excise tax collections have increased by only 12 percent. If these oppressive and unfair taxes had not been levied upon the sales of jewelry, furs, toilet preparations, and luggage, it is a fair assumption that the sales of these items would have kept in some sort of relationship with personal income, retail sales, and retail prices. On the basis of sound economics, these discriminatory excise taxes should be eliminated from the Federal tax structure as soon as possible. Mr. Chairman, it is generally known that the National Association of Manufacturers is conducting a strong campaign in support of its proposal calling for a national manufacturers sales tax on the end products of all manufacturers excepting only food. The 58 National and State retail associations which are members of the American Retail Federation are opposed to this proposal for reasons which have already been presented to this committee. That presentation, I might add, was made on March 15, 1951. Mr. CURTIS of Nebraska. At the present time we have selective excise taxes; do we not? Mr. LUCAS. That is correct, sir. Mr. CURTIS of Nebraska. You are opposed to those and are asking for the repeal of them? Mr. LUCAS. That is correct. Mr. CURTIS of Nebraska. Do you favor any excise taxes for the Federal Government? Mr. LUCAS. There are some traditional taxes which for many, many years have been ingrained into the tax structure here in this country and I think there is justification for those. Mr. CURTIS of Nebraska. What are those? Mr. LUCAS. I am thinking particularly of the excise taxes on cigarettes, liquor, narcotics, and that kind of commodities. Mr. CURTIS of Nebraska. You mentioned the NAM proposal. I have not read it, but is that a proposal for a manufacturers tax? Mr. LUCAS. That is correct. Mr. CURTIS of Nebraska. Do you agree with the contention about the pyramiding? Mr. LUCAS. We do, sir. Mr. CURTIS of Nebraska. Are you able to state a position on retail tax, general in nature? Mr. LUCAS. The retail industry has not crystalized a definite position with respect to a broad base sales tax. There are some segments of the retail industry which feel that if the time should come when the Federal Government would decide that some sort of tax of a broad base character is necessary, a retail sales tax would be the lesser of two evils as contrasted with a manufacturer's excise tax at the manufacturing end. Mr. CURTIS of Nebraska. Any questions, Mr. Eberharter? Mr. EBERHARTER. Mr. Lucas, there isn't much difference between a manufacturer's sales tax and a retail sales tax so far as the objections to it are concerned, except the pyramiding feature? Mr. LUCAS. One other objection, sir, is the fact that the taxes when they are levied at the manufacturer's end go into the cost of the merchandise, and that means financing. Mr.EBERHARTER. We include that in the pyramiding. I always did, anyhow. Mr. LUCAS. We think of that as an additional point. Maybe it isn't. We have always thought of it as an additional factor. Mr. EBERHARTER. In other words, a person or a firm that handles merchandise always figures its profits on the amount of money it costs to handle it, to invest in it. In other words, if your markup is 20 percent, it is on whatever you pay for the item including the tax. Mr. LUCAS. That is the pyramíding feature, but the other factor is that when the merchant buys the goods, the tax is already in the goods, in the cost of the goods. Therefore, he is obliged to spend more money and have more money invested in his stock, in his inventory than would otherwise be the case. Mr. EBERHARTER. That is about the only difference between the two insofar as objections are concerned, is it not? Mr. LUCAS. Those are the two principal objections, but they are very important objections, we think. Mr. EBERHARTER. I agree with you very much. The CHAIRMAN. Have you completed your statement? Mr. LUCAS. I have, sir. The CHAIRMAN. Thank you. I apologize for not being here, but it was absolutely necessary for me to be away. I will read your statement. Mr. LUCAS. Thank you, Mr. Chairman. (Mr. Jones' prepared statement follows:) STATEMENT OF ROWLAND JONES, JR., PRESIDENT, AMERICAN RETAIL FEDERATION My name is Rowland Jones, Jr. I am president of the American Retail Federation, an organization with offices at 1625 I Street NY., Washington, D. C. The American Retail Federation is a federation of 25 national retail trade associations, and 33 statewide associations of retailers, representing in all more than 600,000 retail outlets. (A list of participating members associations is attached.) The members of this committee are already familiar with the fact that World War II manufacturers' and retailers' excise taxes are now acting as a strong deterrent to production, sales, and employment in the industries involved. It is my purpose in the time allotted to me today to outline the broad position of the retail industry in respect to these burdensome and uneconomic taxes. The American Retail Federaltion believes that the basic overriding necessity of the day is to insure an expanding economy for our country and that unless we can insure an expanding economy we, as a nation, are headed for serious trouble in the not too distant future. We believe that our American economy and our American standard of living are hung upon the successful production and sale of the categories of goods which our people are not compelled to buy and that the difference between full production and full employment on the one hand, and fifteen or twenty million unemployed on the other, depends upon the efficient distribution of goods and services beyond the necessities of life. Indeed, the barest necessities of life could not be supplied to all of our people were it not for the jobs and purchasing power created through the production and sale of the goods some call luxuries. Compared with the rest of the world, ours is a luxury standard of living which has been built in large part by the creation of new types of goods and creating the new human wants for them. With our growing population and its steadily increasing life expectancy, plus continuous technological development, it seems clear that if we are to have the expanding economy essential to the preservation of the status quo of our standard of living, as a minimum, we must make certain that no impediments are placed in the way of constantly increasing production and sale of the things we as individuals can conceivably do without. We must encourage the creative minds in our country to continue to produce new ideas on new products and new methods, test them through research and experiment, and then encourage the salesmen in all categories to create the public demand for them. Tracing the maze of our economic machine from the raw material through the intricate processing and fabrication of goods to satisfy human wants, we find that nothing has really happened until the sale is made across the retail counter. There the American consumer, all of us, makes the decisions-whether to buy or not to buy. Here consumers cast their votes and how they vote is vital to labor, to agriculture, and to industry and, I would add, vital to the Treasury of the United States. This for the reason that the vote tallies in the final analysis write the ticket on revenue totals from corporate and personal income taxes, the sources of nearly three-fourths of the Federal revenue. The essential of highest priority today is to insure an expanding economy. Only an expanding economy can provide the new jobs to absorb our growing population. Only an expanding economy can honor the promises of various kinds already made by government. Only an expanding economy can produce the steady flow of production of new wealth, the only basis for progress in any nation. To insure an expanding economy, we must begin to apply to every act and function of Government and every expenditure by Government the hard test as to whether it contributes to that end. Failure to insure an expanding economy for America will inevitably bring problems and crises far beyond any we have thus far experienced. The taxation of production and distribution of goods and services through excise taxes has no place in our tax structure regardless of deficit or debt. Such taxation is a burden and a hurdle in the path of an expanding economy. The need is more and more production, more and more new products, more and more improvements in old products, and, most important, their sale to consumers. Rather than placing obstacles in the way of an expanding economy, Government should be constantly seeking ways and means of stimulating the creation of new products and new wealth. New products should be welcomed instead of their emergence signaling the imposition of a burdensome tax. Witness the Treasury's proposal, approved by Congress, to tax television receivers the product of a new industry with an excellent record thus far of improving the product and progressively reducing the price, to say nothing of the huge new job opportunities involved. Television has been hailed as the development with the greatest potential in jobs, production and sales volume which has emerged since World War II— and we have now burdened it with a 10-percent tax before it is barely out of the cradle. It is unrealistic to single out special categories of goods for unfair and discriminatory peacetime taxation. Whether the goods selected are luxuries or necessities-and many now taxed are not luxuries today by any defensible standard—the fact remains all types of goods represent new wealth, furnish jobs in many facets of the economy, add to the total national income, and increase the receipts of the Treasury. Such taxes constitute a tribute which must be paid before the goods reach the consumer-a tribute which cuts pur chasing power by raising the retail price, thus decreasing the total consumption and cutting the taxable income and profits clear back to the point of origin of the goods and its components, to say nothing of decreasing the number of jobs available. As for jobs, and these present taxes are causing unemployment, the jobs of workers in furs, jewelry, luggage, cosmetics, along with all workers in the manufacturers' excise-taxed industries are just as important as those workers, and to the entire economy, as those in the untaxed lines. To sum up, the wartime excise taxes-retail and manufacturing-are now barriers to an expanding economy. They reduced production and consumption during wartime as they were intended to do. They are still having that effect today to a constantly increasing degree and at a time when the use of labor and materials should be stimulated and expanded-not curbed. The effect of the discriminatory retail excise taxes on the sales of the taxed items is very clearly shown if we compare the retail excise tax collectionswhich are an accurate measure of the sales of these items-with other economic data over a period of years. Taking 1945 as a starting point, since the 20-percent rates went into effect April 1, 1944, we note the following trends since that time: National income has increased by. Retail sales have increased by--. The Consumers' Price Index of the BLS has gone up--. But during this period: Retail excise tax collections have increased by only- If these oppressive and unfair taxes had not been levied on the sales of jewelry, furs, toilet preparations, and luggage, it is a fair assumption to make that the sales of these items would have kept in some sort of relationship with personal income, retail sales, and retail prices. More production, more sales in steady progression is the only path to the expanding economy we must have to maintain high employment and increasing consumption. To this end, all categories of goods and services stand on equal footing of importance and essentiality. On the basis of this goal and sound economics these discriminatory excise taxes should be eliminated from the Federal tax structure as quickly as possible. The National Association of Manufacturers is conducting a strong campaign in support of its proposal calling for a national manufacturers sales tax on the end products of all manufacturers excepting only food. The 58 National and State retail associations of the ARF are unalterably opposed to the NAM proposal for reasons which have already been presented to this committee. MEMBER ASSOCIATIONS, AMERICAN RETAIL FEDERATION National associations: American National Retail Jewelers Association American Retail Coal Association Association of Credit Apparel Stores, Inc. Institute of Distribution, Inc. Limited Price Variety Stores Association, Inc. Mail Order Association of America National Appliance & Radio-TV Dealers Association National Association of Chain Drug Stores National Association of Music Merchants, Inc. National Association of Retail Clothiers & Furnishers National Association of Shoe Chain Stores National Foundation for Consumer Credit National Industrial Stores Association National Jewelers Association National Luggage Dealers Association National Retail Dry Goods Association National Retail Farm Equipment Association National Retail Furniture Association National Retail Hardware Association National Retail Tea & Coffee Merchants Association |