Nor are the other amusement machines covered by the $10 tax converted into slot machines simply by adding the element of a possible prize. For example, the simulated bowling, baseball, football, hockey, and basketball games and the various types of gun games do not become slot machines because a proprietor decides that the attainment of a designated score should entitle the player to a prize. The games continue to be as different in structure from slot machines as they are when the attainment of a designated score entitles the player to additional free games.

The pinball and other games under discussion are distinguishable from slot machines in another important feature. Slot machines are pure gambling devices. The player is betting that by inserting a coin and pulling a lever the drums will revolve and end in a combination which will deliver to him more coins than he put into the machine. Obviously, amusement does not result from watching the drums revolve for a few seconds. Usually all that results is the loss of money. In contrast, the machines with which we are concerned are essentially amusement devices. They involve the playing of a game in the hope of achieving a designated score. The element of chance or perhaps more properly termed "luck" far from being the controlling factor is, rather, only an incidental feature that in part contributes to the suspense and amusement attraction of the game. Awarding a prize for attaining that score does not remove the amusement feature of the game. Surely it could not be said that golf players who make nominal wagers among themselves on their skill in equalling par, for example, have removed their game from the amusement field.

Unlike the case of slot machines the successful operation of the machines under discussion depends, in part, on the skill of the player. In the typical bowling machine the score is determined by the skill of the player in pushing the pucks over the playing surface of the game. In pinball games the insertion of the coin merely releases the balls for play. From that point on the play of the game is in the control of the player who, with greater or lesser skill in the application of the proper amount of force, releases the plunger which propels the balls. Thereafter the manual dexterity of the player in slightly tilting or nudging the machine and, in some games, manipulating the flippers to again propel the ball is instrumental in achieving a high score. And in the various gun games the attainment of a required score is obviously due to the player's skill as a marksman. In none of these games does a favorable result depend on pulling a lever at the propitious time in the mathematical sequence of plays on the machine.

In recent prohibiting the interstate shipment of slot machines, Congress also used the term "so-called slot machines." Public Law 906, 81st Cong., 2d sess. (1950), 15 U. S. C. A. secs. 1171-1177). In so doing it unequivocally recognized the commonly accepted meaning of the term. Section 2 (a) of the law defines "gambling device" as including "any so-called 'slot machine' or any other machine or mechanical device, an essential part of which is a drum or reel with insignia thereon." And the House report' states:

"Paragraph (1) of the definition deals with machines and mechanical devices commonly known as slot machines. These machines commonly employ drums or reels with insignia thereon which are activated either mechanically or in some other manner as, for example, by electric power."

In thus defining "so-called slot machine" Congress recognized that "works of art bring their art with them. They bear the meaning of their habitat whether it be a phrase of technical significance in the scientific or business world, or whether it be loaded with the recondite connotations of feudalism." "

In everyday speech, as well as in the trade, the mere presence of a slot for the insertion of a coin does not extend the term "slot machine" to telephones, softdrink dispensers, turnstiles, parking meters, juke boxes, or pinball and other amusement games. As Mr. Justice Frankfurter has stated:'

"And so we assume that Congress uses common words in their popular meaning, as used in the common speech of men. The cases speak of the 'meaning of common understanding', 'the normal and spontaneous meaning of language', 'the common and appropriate use', 'the natural straightforward and literal sense', and similar variants. In McBoyle v. United States,10 Mr. Justice Holmes had to decide whether an airplane is a 'motor vehicle' within the meaning of the

H. Rept. No. 2769, 81st Cong., 2d sess. (1950).

Frankfurter, Some Reflections on the Reading of Statutes, 47 Col. L. Rev. 527, 537 Id., at 536.

(1947).

10 283 U. S. 25, 26 (1931).

Motor Vehicle Theft Act. He thus disposed of it: 'No doubt etymologically it is possible to use the word to signify a conveyance working on land, water, or air, and sometimes legislation extends the use in that direction * * *. But in everyday speech 'vehicles' calls up a picture of a thing moving on land." Notwithstanding the clarity of the legislative history, about a year ago, before this Congress and administration took office, the collectors of internal revenue in various districts arbitrarily, in our judgment, are currently assessing the $250 tax on pinball machines.

Last September meetings were held with representatives of the Bureau of Internal Revenue to review this problem, but to no avail. More recently this problem was brought to the attention of Kenneth W. Gemmill, Assistant to the Secretary of the Treasury. We are hopeful that the Treasury Department will Join us in solving this problem so as to afford the necessary relief. Two other aspects of the problem must be noted.

REDUCTION IN TAX REVENUES-BURDEN TO NEIGHBORHOOD STORE OWNERS

The imposition of the higher tax because prizes are awarded would seriously diminish the revenues which Congress intended to collect. Needless to say, the $250 tax would drive most of these machines off the market. Coin-operated amusement machines are found in neighborhood stores and in local taverns. They are not "big business." The few dollars earned by the small-shop keeper from their operation help pay the rent and other expenses. Depending on the player appeal of the game and location, the annual income from a machine may range from less than $250 to amounts several times greater in unusual and exceptional locations." Obviously it is not economically feasible for the occupant of the premises on which a machine is located to pay a $250 tax. It is estimated that there are in excess of 300,000 such neighborhood store owners and local taverns in which the amusement games are placed and which are adversely affected by this burdensome tax.

DAMAGE TO INDUSTRY AND TO SMALL BUSINESS

The current drive to impose a $250 tax on amusement machines because of the presence of a possible prize element is seriously affecting the coin-operated amusement machine industry. The industry will be unable to operate in the face of this unwarranted increase in tax to the extent of 2,400 percent. The end result will be the virtual cessation of operations, with its attendant economic dislocations.

Such dislocations will be of more far-reaching effect than first appears. While the manufacturers themselves are small in number with an aggregate direct employment totaling probably less than 10,000, the injury to the countrywide consumers of the manufacturers' products, and their employees, would mount to an impressive total.

In the first instance there are hundreds of manufacturing firms supplying raw materials to the members of the industry and who would be adversely affected. Moreover, there are approximately 15,000 retail purchasers of the manufacturers' equipment, who place this equipment on location with many thousands of local storekeepers. Some of the retail purchasers consist, of course, of individuals, but the majority are business enterprises employing from 2 or more persons to as many as 100 persons. Similarly, the better than a quarter-million location owners multiply to a much greater total than the proprietors alone. The majority are of the local storekeeper-tavern owner class conducting a family enterprise. However, each represents additional employees ranging perhaps from only members of the family up to very appreciable numbers. It may fairly be assumed that perhaps half a million people would be adversely affected if the amusement machine industry is forced out of business or seriously restricted in its operations by reason of an excessive and confiscatory excise tax.

ASSESSMENT OF LARGER TAX INVADES THE RAPIDLY DIMINISHING SOURCES OF REVENUM FOR LOCAL GOVERNMENTS

One need but make a passing reference to the very serious financial problems confronting city, town, and State governments. With increasing cost of govern

11 The operator must amortize his usual investment of from $500 to $600 per machine from his share of its income. The games have a sharply decreasing attractiveness after they are first put into operation, and the amortization period is usually 1 year.

ment, cities, towns, and villages have been in serious and dire need of increased revenues. Taxes on real estate have about reached the maximum. More and more local bodies have had to look to other sources of revenue, such as the sales tax, license fees and licensing for revenue. Hundreds of cities throughout the United States have in effect or are presently considering the licensing of amusement games. It is only fair and equitable that this source of tax revenue be reserved for the local communities. The licensing of an amusement game is feasible for the local communities. In general, it is the local government that regulates the public use of such amusement machines. Logically, the local body should have the exclusive right to license such machines.

The extent to which local communities have utilized this source of revenue may be gleaned from exhibits herewith submitted:

Exhibit A which is a partial list of a representative group of cities with over 30,000 population where coin-operated mechanical amusement devices are licensed. While the term "coin-operated mechanical amusement devices" covers a wide variety of amusement machines, pinball and marble games appear to be the most widely operated of all types. This information is from the publication of the United States Conference of Mayors, as of September 1, 1948.

Exhibit B, being report No. 2991 on Licensing of Coin-Operating Machines, prepared by the New York State Board of Municipal Information, dated November 2, 1947.

Exhibit C, letter dated May 18, 1953, from George W. Jenkins, vice president of Bally Manufacturing Co., addressed to Attorney Martin M. Nelson, my associate in this matter.

These exhibits, based on the best available information, clearly demonstrate the extent to which cities and States throughout the United States have utilized this source of revenue.

More recently, it is noted, the German Assembly of the State of Illinois, in seeking much-needed additional revenue, has in the session just concluded enacted a law licensing coin-operated amusement games at $50 per pinball machine. It is variously estimated that this law will produce from $2 to $3 million dollars of needed revenue.

It is most serious to note that in many places in the United States, such as Maryland, Washington, Oregon, Mississippi, Louisiana, Kentucky, and Illinois, the sum of the city, State and Federal tax would exceed the value of the machine. Clearly, as a revenue measure this is shockingly confiscatory.

The assessment of the higher Federal excise tax of $250 against amusement machines will rapidly and quickly dry up this source of revenue for local communities.

It should be noted that the requirement that the store owner purchase a $250 Federal "gaming" stamp tax and the resultant adverse inference that may be drawn from being placed in the "slot machine" class is an insurmountable barrier to many location owners in using amusement devices to supplement income, irrespective of the amount of tax involved. This would very adversely affect the resultant license revenues to local governments.

PROPOSAL

To solve the problem herein discussed, and to eliminate a burdensome and confusing situation, it is respectfully requested that section 3267 of the Internal Revenue Code be amended so as to make it clear that pinball and amusement machines are clearly within the $10 classification.

The following amendment to section 3267 would solve our problem and its adoption is respectfully urged:

"SEC. 3267. TAX ON COIN-OPERATED AMUSEMENT AND GAMING DEVICES."

"(a) RATE.-Every person who maintains for use or permits the use of, on any place or premises occupied by him, a coin-operated amusement or gaming device shall pay a special tax as follows:

"(1) $10 per year in the case of a device defined in clause (1) of subsection (b);

"(2) $250 per year in the case of a device defined in clause (2) of subsection (b); and

"(3) $10 or $250, as the case may be, for each additional device so maintained or the use of which is so permitted. If one such device is replaced by another, such other device shall not be considered an additional device.

"(b) DEFINITION. As used in this part the term 'coin-operated amusement and gaming devices' means (1) any music machine operated by means of the insertion of a coin, token, or similar object; or a vending machine operated by means of the insertion of a 1-cent coin, which, when it dispenses a prize, never dispenses a prize or a retail value, or entitles a person to receive a prize of a retail value of, more than 5 cents, and if the only prize dispensed is merchandise and not cash or tokens; or any amusement machine, including any so-called 'pinball' machine, operated by means of the insertion of a coin, token, or similar object, but not including any device defined in clause (2) of this subsection; and (2) any so-called 'slot machine' or any other machine or device an essential part of which is a drum or reel with insignia thereon, and (A) which when operated may deliver as the result of the application of an element of chance, any money or property, or (B) by the operation of which a person may become entitled to receive, as the result of the application of an element of chance, any money or property; or any machine or mechanical device designed and manufactured to operate by means of insertion of a coin, token, or similar object and designed and manufactured so that when operated it may deliver as the result of the application of an element of chance, any money or property."

The definition of machines in clause (2) is identical with the definition of "gambling device" as used in Public Law 906 enacted into law by the Congress, approved January 2, 1951.

EXHIBIT A-MECHANICAL AMUSEMENT DEVICES

LICENSE FEES BASED ON FLAT RATE PER MACHINE

$100 per year: Fresno, Calif.; Orange, Passaic, Union City, and West New York, N. J.; Toledo, Ohio.

$60 per year: San Bernardino, Calif., Granite Falls, Minn.

$50 per year: Watertown, Mass.; Highland Park, Mich.; Erie, Pa.; Ogden, Utah; Minneapolis, Minn.

$35 per year: Perth Amboy, N. J.

$25 per year: Santa Monica, Santa Ana, Calif.; New Britain, Conn.; Tampa, Fla.; Chicago, Ill.; Cumberland, Md.; Wyandotte, Mich.; Reno, Nev.; Camden, N. J.; Salt Lake City, Utah; Portsmouth, Va.; and West St. Paul, Minn.

$20 per year: Moline, Ill.; Paducah, Ky.; Tulsa, Oklahoma; Reading, Pa., and Philadelphia, Pa.

$15 per year: Louisville, Ky.; Cambridge, Mass.; Buffalo, N. Y.; Canton, Ohio; and Norristown, Pa.

$12 per year: Burbank, Calif.; Peoria, Ill.; and Evansville, Ind.

$10 per year: Orlando, Fla.; Lexington, Ky.; Lansing and Muskegon, Mich.; St. Joseph, Mo.; Hazelton, Pa.; Racine and La Crosse, Wis.; and Cheyenne, Wyo. $5 per year: Irvington, N. J.; Huntington, W. Va.; Oshkosh, Wis.; and Echo, Minn.

$2 per year: Nashville and Memphis, Tenn.

$1 per year: Lewiston, Maine.

LICENSE FEES BASED ON OTHER THAN SINGLE FLAT RATE PER MACHINE

Alameda, Calif.-Each penny machine, $3; others, $20.

Bellingham, Wash.-Persons owning or operating machines $5,000 annually plus $5 per month for each device operated.

Baltimore, Md.-Each 5-ball machine $65. Each 1-ball or console machine $100. Amusement arcades operating 15 or more machines, $1,000 for the operation of all such devices.

Charleston, W. Va.-Each penny machine, $2; others, $5 each.

Columbus, Ohio-Each machine operated by less than 5 cents, $5; others, $10 each. Amusement arcades, $175.

Colorado Springs, Colo.-Operators, $100 plus $15 for each machine.
Covington, Ky.—Each machine, $10. Distributors license, $10.

Danville, Va.-Each penny machine $2; others, $25. Persons selling, leasing,

or renting machines for operation by others, $250.

Davenport, Iowa.-Each machine, $10. Persons selling, leasing, or renting,

$300.

Dallas, Tex.-Each machine, 5 cents deposit or less, $15; others, $30 each.
Elizabeth, N. J.-Operator's license, $2,000 plus $10 for each device.

Grand Rapids, Mich.-Each machine, $25. Owners or lessees of devices operated in more than 1 place of business: 25 machines or less, $25; 26 to 50 machines, $50; 51 to 75 machines, $75; 76 machines or more, $100.

Greenville, S. C.-Each penny machine, $5.50; others, $7.50.

Hartford, Conn.-Operators, $12 each machine. Distributors, $12 each

machine.

Houston, Tex.—Each machine taking coins of a value in excess of 1 cent but not over 5 cents, $15; over 5 cents, $30 each.

Inglewood, Calif.-Each penny machine, $6 per quarter; others, $10 per quarter.

Joplin, Mo.-Persons who contract for the operation of machines on premises other than his own, $25 plus $5 for each 5-cent pinball machine; $2 for other 5-cent operated amusement devices; $1 for all 1-cent operated amusement devices. Owners of machines operated in their own place of business: Each 5-cent pinball machine, $5; other 5-cent operated amusement devices, $2; all 1-cent operated amusement devices, $1.

Jackson, Mich.-Owners of more than 1 machine, $1,000 for the first device; each additional device $5. Owners of 1 machine, $25.

Johnstonom, Pa.First machine $20; each additional, $10 but not to exceed $100 for 1 place of business.

Jacksonville, Fla.-Persons providing machines for use on premises of others, $250 for each 100 machines plus $25 for each machine displayed for operation. Persons owning and operating machines on own premises, $50 for each machine. Kansas City, Mo.-Each pinball or marble machine, $10; other coin-operated amusement machines, $5. (Under pending amendment all devices $100 each. Distributor, $25.)

Long Beach, Calif.-First machine, $75; each additional, $6.

Le Sueur, Minn.-$150 up to 15 machines and $10 for each additional machine. Operators fee $5 per machine and not more than 5 licensed for operation in 1 place of business.

Lincoln, Neb.—Investigation fee, $5; permit fee, $25; and an annual occupation tax of $25 on each 1-cent machine and $50 each on others.

Milwaukee, Wis.-Each machine, $10. Distributors license, $200.

McKeesport, Pa.-Each machine using 5 balls or more, $35; others prohibited. Mobile, Ala. For the first 10 machines (nickel slot), $15 each; all over 10, $10 each; penny machines, $5 each.

Madison, Wis.-Machines operated by: 1 cent, $5; 2 cents, $10; 3 cents, $15; 4 cents, $20; 5 cents, $35.

Miami, Fla.-Each machine, $33.75. Distributors, $1,340 each 100 machines. Norfolk, Va.-Each penny machine, $5; others, $20 each. Persons selling, leasing, or otherwise furnishing machines to others, $30 plus three-tenths of 1 percent of gross receipts for the preceding year in excess of $3,000.

New London, Conn.-Each machine, $15. Each establishment where machines are operated, $10.

Newport News, Va.-Each machine, $50. Persons selling, leasing, or renting machines, $500.

Oklahoma City, Okla.-Each penny machine, $5; nickel machines, $10. Phoenix, Ariz.-Each machine operated by coins of a value of not more than 25 cents, $100. Persons selling, leasing, or renting such devices, $10 annually. Pontiac, Mich.-Persons placing machines for operation in other than his own place of business, $50 plus $5 for each device. Persons owning and operating machines in own place of business, $5 each device.

Portland, Oreg.-Persons selling, leasing, or distributing, $200 a year plus $10 semiannually for each device sold, placed, or operated. If only 1-cent device, $10 a year plus 25 cents semiannually for each device. Persons owning or operating a business in which machines are located, $10 a year plus $10 semiannually for each device except those for which individual machine license has been paid by a lessor and except for penny machines.

Pueblo, Colo.-Persons using or renting devices for use on premises, not under such person's control, $125 plus $15 for each machine. Owners of less than 3 machines operated on premises under control of such person, $30 each machine. Rockford, Ill.-Each machine, $15. Persons who lease or distribute machines for operation by another, $100 for the first 10 machines or less plus $10 each for all over 10.

Riverside, Calif.-Machines operated by 5 cents or more, $50 for first 10 machines or less and $5 for each machine over 10.