STATEMENT OF JOHN B. HULSE, MANAGING DIRECTOR, TRUCK TRAILER MANUFACTURERS ASSOCIATION, INC., WASHINGTON, D. C.

Mr. HULSE. Mr. Chairman, I have not the good fortune to bring the complete article, but several pictures which I realize cannot go in the record but I would like to pass them around for the use of the committee. I would like to refer to them, if I may.

The CHAIRMAN. Thank you. We will pass them around.

Mr. HULSE. My name is John B. Hulse and I am the managing director of the Truck Trailer Manufacturers Association, Inc. Ours is a national association and our office is in the National Press Building here in Washington. As the name implies, our members manufacture truck trailers and, in fact, manufacture 85 percent of all of the truck trailers built in the country.

No one wants to pay taxes, and everyone thinks taxes are too high. But our Government must be supported and we must all pay taxes in one form or another.

The question I would like to bring to the attention of this committee tonight is whether or not the automotive excise taxes and particularly the manufacturers excise tax of 8 percent on truck trailers is a fair and equitable method of assessing the tax burden.

First, I think it necessary to identify the Federal automobile excise taxes, the rates and to trace briefly their historic background.

The present Federal automotive excise taxes, with the exception of that on diesel fuel, had their origin in the Revenue Act of 1932. It was not until 1951 that a levy was imposed on diesel fuel, and this differed from the gasoline tax in that it was limited to fuel used in highway vehicles.

There have been substantial increases in the rates of all Federal automotive excise taxes since 1932. Table I indicates the rate of the tax then, and the rate in effect after the passage of the Revenue Act of 1951.

1 Trailers were exempt from the excise tax until 1941 when a 7 percent tax was imposed on house trailers, and a 5 percent tax imposed on all others including truck trailers. House trailers were again exempted by the Revenue Act of 1951.

Source: Bureau of Public Roads, table E-101, January 1953 in Highway Statistics. 1951, p. 40.

Mr. HULSE. During the First World War, Congress enacted a War Emergency Revenue Act (1917), which imposed a 3 percent tax on the manufacturers sales price of automobiles, trucks and motorcycles.

In 1919 these imposts were increased, and a $10-$20 tax was placed on for-hire operation of passenger vehicles. The emergency nature of these taxes was recognized by the Congress, and they were repealed within a reasonable period after the end of the war, some in 1922, others in 1926, and the remaining taxes on automobiles and motorcycles in 1928.

With the advent of the depression, Federal revenues diminished sharply, creating a serious budgetary crisis. To meet this emergency the Federal Government enacted the Revenue Act of 1932 which imposed, for general revenue purposes, temporary excise taxes on gasoline and lubricating oil, vehicles, parts and accessories, tires and tubes. The tax on lubricating oil was levied on the manufacturer or producer, while the other automotive excises were levied on the manufacturer, producer or importer.1

These temporary imposts were subsequently extended, first by the National Industrial Recovery Act of 1933, and then by resolution in 1935 and 1937.2 The Revenue Act of 1939 again extended the expiration date for 2 years.

War broke out in Europe in September of 1939, creating new emergency conditions to replace those of the depression. The Revenue Act of 1940 prescribed a defense tax for five years, under which automotive excise taxes were increased and their period of application extended until June 30, 1945. In the interim, the Revenue Act of 1941 was passed, authorizing further increases and making all of the 1932 excise taxes permanent at the increased rates.3

The Revenue Act of 1951 imposed a 2-cent per gallon tax on diesel fuel for highway vehicles, payable by the distributor, or by the user if the fuel was not bought through a taxed sale. It also increased the gasoline tax rate to 2 cents and raised the imposts on vehicles, parts and accessories. However, it provided for an automatic reduction of these rates after April 1, 1954.

Over the years Congress has considered the Federal automotive excise taxes as temporary in nature, and there have been many scheduled termination or reduction dates, such as April 1, 1954. But new emergencies have a way of arising and we still have the taxes, at the highest rates ever imposed.

Actually, truck-trailer manufacturers do not pay the 8 percent tax; they only collect it and remit it to the Government. This tax does, however, impose a severe burden upon members of our industry, for it adds significantly to the cost of transportation by increasing the size of the investment the motor carrier must make to provide himself with equipment.

In many instances, the addition of 8 percent to the cost of motor trucks and truck trailers means that the operator is unable to replace

1 Prior to 1932, Congress on three occasions rejected a Federal tax on gasoline: in 1914 when the House Ways and Means Committee recommended a 2-cent tax; in 1915 when President Wilson recommended such an impost; and in 1918 when a proposed gasoline tax was eliminated from the Revenue Act of that year.

2 The National Industrial Recovery Act increased the rate of the gasoline tax from 1 cent to 12 cents as of June 18, 1933. However, it provided that the one-half cent increase would be abolished on the first day of the calendar year following (1) repeal of the 18th Amendment, or (2) the date when Government revenues exceeded expenditures. Since the 18th Amendment was repealed in 1933, the gasoline tax was reduced to 1 cent on January 1, 1934, and rmained at that level until 1940.

During this period other excises were imposed which indirectly affected the motorvehicle operator. These included a tax on transportation of both persons and property, a tax on transportation of oil by pipeline, and a $5 ner year use tax stamp on motor vehicles. The latter, imposed in 1941, was repealed in 1945.

worn and obsolete equipment and must continue it in service beyond its safe and economical life.

Our members believe the Federal automotive excise taxes as applied to commercial transportation equipment are unjust and inequitable because no competing form of transportation equipment is so taxed. Railroad freight cars, canal barges, pipe for pipelines, and cargo airplanes, all compete with truck trailers for a share of the commodity movement business but none of these types of carrier equipment is obliged to carry a sales tax burden.

Mr. MASON. May I ask right there: Is it more objectionable than all of these things that you people are all complaining about?

Mr. HULSE. Mr. Congressman, I think it is much less objectionable. Mr. MASON. That is what some of us think.

Mr. HULSE. I hope that was a diplomatic statement to say it was objectionable in principle. It would seem more equitable than the present method of singling out certain commodities or services to bear a tax not applied to competing commodities or services.

Historically, I believe the theory of the excise taxes has been to apply them to luxury items such as jewelry, cosmetics or furs and to products not considered to be "good" for people. The high tax on alcoholic beverages and cigarettes is a case in point.

Commercial transportation equipment, particularly truck trailers, certainly falls in neither of these categories. Our members, therefore, urge that this discriminatory manufacturers excise tax be repealed. It is their belief that trucks and truck trailers should not be singled out to bear an additional share of the tax burden over and above that placed on competing types of transportation equipment.

Now that I have stated our position on the manufacturers excise tax in general, I should like to call to your attention two specific instances of arbitrary and, we believe, incorrect rulings that have been made by the internal revenue service. We believe these rulings are vastly different from the congressional intent.

Several of our members build low bed trailers which operate on and off highways and are used to transport large and frequently heavy objects such as power shovels, road-building or industrial machinery which cannot be readily dismembered to conform to legal highway limits. Many of these trailers are more than 8 feet wide and since 8 feet is the almost universal State width limit, they must have special permits when used on highways.

Internal revenue service has recognized that the manufacturers excise tax set forth in section 3403 applies to highway vehicles and so exempts all trucks over 96 inches in width. They have so far refused to extend this ruling to low bed trailers. Thus, when an operator buys a new truck tractor and semitrailer designed for this type of service, that is, both vehicles over 96 inches in width, he must pay the 8 percent tax on the low bed trailer but is relieved of the 8 percent tax on the tractor that is to pull the trailer. It is certainly difficult for our members to explain how the internal revenue service can find that the truck tractor in this combination is classed as an "off-highway vehicle" and the low bed trailer of the same width is an on-highway vehicle. Certainly the trailer in instances such as this should receive the same treatment as the truck.

The second case to which I should like to call your attention is even more inconsistent. As you know, the rubber in tires and tubes is

subject to tax at 5 and 9 cents per pound, respectively. The tire company collects and pays this tax. When the trailer manufacturer buys tires to install on a truck trailer he is allowed to deduct the cost of the tires before computing the 8 percent excise tax on the trailer. This is known as taking the tire-tax credit, and incidentally it is the most misunderstood provision of the law. Nearly every time this provision is discussed by any of our members, we find people figuring it incorrectly and the error is always in favor of the Government. They have been collecting and paying more than the law requires.

Some time ago in a routine field check representatives of the Bureau of Internal Revenue raised a question with one of our member companies about taking tire-tax credit on converter trailers, sometimes known as converter gears or dollies. Those are trade terms and photograph No. 2 will illustrate the converter trailer and photograph 3, you will note, is an almost identical vehicle which is a logging trailer or logging dolly. The one because it has a fifth wheel superimposed over the axle structure is called a dolly for converting a semitrailer to a full trailer, is subject to one tax treatment and the other, because it has a bolster instead of a fifth wheel and is used to haul logs which are boomed from the bolster on the trailer to a semibolster on the truck, is given a different tax treatment.

I might explain that in some areas, particularly on the west coast, it is common practice to operate a truck tractor with two semitrailers, one of which through the addition of a converter dolly operates as a full trailer. And photograph No. 3 shows that.

To this hour the internal revenue service is insisting that this company may not take credit for the tax already paid on the original equipment tires installed by them on a converter trailer if sold separately, but may take the credit if it is sold as a part of the sale of one or more semitrailers.

Their reasoning is that the converter trailer is a "part or accessory" subject to section 3403 (e) if sold separately, despite the fact that the State requires that it be registered separately, titled separately, and financed separately. Moreover when we had production allocation and vehicle rationing by governmental authority, it was allocated and rationed as a separate vehicle.

Again we are completely unable to explain to our customers why the same item is taxed in one transaction and not taxed if sold in connection with another vehicle.

We are very much in hopes, first, that this tax may be repealed in its entirety at an early date and, secondly, that pending such repeal the Congress will review section 3403 and make the congressional intent crystal clear as to whether or not the manufacturers excise tax on automotive vehicles is intended to apply to vehicles which exceed the dimensions permitted on highways. We also ask for a clarification of the provisions of section 3403 which apply to duplicate taxation on tires and tubes so that it will be entirely clear that the Congress did not intend that any original equipment tires and tubes be taxed once as rubber and again as a component in the cost of the vehicle.

Thank you gentlemen for your patience in hearing our petition. The CHAIRMAN. We thank you very much, Mr. Hulse. That was a very fine statement.

Are there any questions? The Chair hears none. Thank you, sir. Mr. HULSE. Thank you, Mr. Chairman.

The CHAIRMAN. I move that the brief of Mr. G. W. Laurie, chairman of the highway policy committee, National Council of Private Motor Truck Owners, Inc., and the statement of Mr. Alton M. Costley, chairman, national affairs committee of the National Automobile Dealers Association be incorporated in the record at this point. Hearing no objection, it is so ordered. (The brief referred to follows:)

STATEMENT OF G. W. LAURIE, CHAIRMAN, HIGHWAY POLICIES COMMITTEE
NATIONAL COUNCIL OF PRIVATE MOTOR TRUCK OWNERS, INC.

My name is G. W. Laurie, manager of the automotive division, Transportation department, Atlantic Refining Co., Philadelphia, Pa., and I am also chairman of the highway policies committee of the National Council of Private Motor Truck Owners, Inc., Sheraton Building, Washington, D. C., on whose behalf this statement is submitted. Since I am unable to appear personally before you, I respectfully request that this statement be received and incorporated into the record.

The National Council of Private Motor Truck Owners, Inc. (hereinafter referred to as the council), is the only national organization which speaks and acts exclusively for those who own, or lease, and operate motor trucks as part of their businesses of farming, manufacturing, mining, processing, wholesaling, retailing, and servicing. Its members operate fleets of from 3 or 4 units up to 15,000 vehicles.

Council members are not in the transportation business but their many types of business all require transportation. Among these, the private motortruck provides local distribution of goods and services, moves commodities to and from railheads, and performs many other specialized transportation functions.

Our immediate interest is to present to this committee our position with respect to the imposition of the 8 percent Federal excise taxes on trucks, parts, and accessories.

Although as a group we purchase more transportation than we operate ourselves, still as operators of our own equipment we have been unduly discriminated against, since the truck is the only item of freight-transportation equipment called upon to pay an extra and added share of the general tax burden in the form of automotive-excise taxes.

The council holds that the costs of transportation must be the lowest consistent with adequate and efficient service; that there must be a constantly wider and more efficient distribution of goods and services in order to maintain the expanding economy on which the prosperity of the Nation depends.

It is for these reasons that so many businesses operate their own motortrucks. Such operations benefit the consumer as well as the private motortruck operator. Today, the private motortruck operator, engaged in hauling his own goods in his own vehicles, vastly outnumbers the for-hire carrier. Current accurate figures are not available but it is believed that a least 87 percent of all trucks registered in the Nation are engaged in such private operations; the remaining 13 percent being operated for hire.

No current authentic statistical breakdown of the Nation's truck fleet by occupational use is available, but during World War II the Office of Defense Transportation complied certain data (as of August 31, 1944), which showed

that:

Farmers operated 35 percent of the total property-carrying commercial motor vehicles then certified by the ODT. Such motor vehicles being used primarily and almost solely in agricultural operations where no other transportation was available.

Industry operations including lumber, logging and milling, mining, general contracting, meat packinghouses, metal and metal-product concerns, flour and feed mills, building materials and supplies, plumbing and heating, hardware, furniture, and home furnishings; oils and gasoline, utilities, produce and commission merchants; coal, coke, ice, machinery, and tools; drugs and chemicals; and food processing accounted for almost 30 percent of the commercial motor vehicles operating under certificates of war necessity.

Business enterprises engaged in consumer distribution such as bakers, dairies, retail merchants, etc., operated 14 percent of all property-carrying vehicles.