EXHIBIT 4

A REPORT OF OPINION RESEARCH CORP., PRINCETON, N. J., APRIL 1950

When it comes to reducing excises, the public distinguishes between so-called necessities and luxuries.

In a nutshell they say, "Lower the tax on things we have to have, and can't get out of buying."

It is clear from the testimony that people are not asking indiscriminate removal of excises. As the table below shows, large numbers are saying there should be no tax at all on local and long-distance telephone service and railroad tickets. Other large groups say these taxes should be lowered.

Even in the "luxury" category of jewelry and furs, a third feel taxes are currently too high.

UNDER PRESENT FEDERAL TAX RATES, THE CUSTOMER MUST PAY UP TO $2.60 TO PROVIDE THE COMPANY WITH $1 OF ADDITIONAL NET EARNINGS

Telephone rates must be increased a minimum of $2.08 in order
for the company to retain $1.00 after Federal income taxes. This
increment is inescapable because 52% (or $1.08) of the $2.08
goes to the Federal Government as income taxes. Then the cus-
tomer must be charged excise taxes on the entire $2.08. Thus,
where the 15% excise tax rate applies to the $2.08, the addi-
tional excise tax is 31 ; and where the 25% rate applies, it is 524.
The end result is that the customer must pay from $2.39 to $2.60
in order for the company to retain $1.00 as additional earnings.

COPY OF RESOLUTION ON EXCISE TAXES ADOPTED BY THE MOUNTAIN-PACIFIC STATES CONFERENCE OF PUBLIC SERVICE COMMISSIONS MEETING, SANTA FE, N. MEX., JUNE 11-14, 1952

RESOLUTION

Whereas the Special Tax Committee of the NARUC has been and is continuing to give study to the effect of the tax burden on utility services; and

Whereas Congress has recognized the special burden created by excise taxes on public-utility services by the recent elimination of such tax on electrical energy and reduction of the tax on telegraph communications; and

Whereas the excise tax paid by telephone customers in 1951, which is rightly considered by the customer as an integral part of the cost of telephone service, amounted on the average to $1.27 per telephone per month; and

Whereas other comparable regulated public utilities generally are not currently subject to a Federal excise levy of any kind; and

Whereas the telephone cannot be considered in the class of a luxury and is taxed higher than most luxuries, thus discriminating against the use of telephone service: Now, therefore, be it

Resolved, That the Mountain-Pacific States Conference of Public Service Commissions is of the opinion that the present excise taxes on telephone-communications service are inimical to the maintenance of a reasonably priced and nondiscriminatory communication service and that, accordingly, the excise tax on telephone-communication service should be revised to the level of at least no higher than the tax rate applied to other nonluxury services; and

Resolved further, That the special tax committee and the committee on legislation be requested to appear on behalf of the NARUC at any hearing before any committee of Congress which may be held to consider any legislation looking toward revision of excise taxes on telephone-communication service, for the purpose of making a statement in support of the views herein expressed.

Resolved further, That copies of this resolution be transmitted to the chairman of congressional committees considering this matter, to each United States Senator and Representative in the Mountain-Pacific States, and to the president and general solicitor of NARUC.

EXCERPTS RELATING TO EXCISE TAXES FROM VARIOUS STATE PUBLIC UTILITY COMMISSION ORDERS IN BELL SYSTEM COMPANIES' RATE CASES

Maine, F. C. No. 1316, September 14, 1949 (p. 47):

we are not unmindful of the fact that an increase in rates automatically entails an increase in the Federal excise tax on communications, which is billed to the customer as an item additional to the amount of his telephone bill. One's local telephone bill is subject to a Federal excise tax of 15 percent; on longdistance calls the tax is 25 percent. These wartime taxes are burdensome and increase substantially the cost of telephone service to the customer."

Washington, cause No. U-8207, December 9, 1949 (pp. 28–29):

"The telephone and telegraph business is still burdened with wartime excise taxes. *** These taxes were imposed during the Second World War principally for their inhibiting effect upon the services involved. Their broad purpose was in aid of the war effort. They have served their usefulness and should be repealed. Since they are applied as a percentage to rates charged for the services referred to, every increase of those rates automatically increases the amount of the tax. * * * The commission feels that subscribers to telephone service should appreciate that a sizable amount of the total charges for services paid by them is, in truth, a tax collected by the Federal Government."

Michigan, T-252-50.6, June 19, 1950 (p. 34) :

"We are mindful of the impact of the prevailing discriminatory and excessive Federal excise tax upon telephone customers, which tax will increase the customer's costs for telephone service, due to this rate increase, about $1,230,000 a year."

New York, Case No. 14131, May 10, 1950 (p. 43):

* the company collects, as agent for the United States Government, an excise tax of 15 percent on subscribers' rates, and on tool call costing less than 25 cents. On toll calls costing more than that, the tax is 25 percent. These taxes are all added to the bill which the subscribers pay, the excise tax being a direct tax on the customers-not on the company. The total excise tax collected in the current year from users of telephones in this State will approximate $75 million under the rates established in 1944 as a war measure. The amount of these excise taxes far exceeds the increase granted here. Even with the increase which we feel the company is entitled to under the law, if these excise taxes were repealed there would be a reduction of many millions of dollars in the bills paid by customers in this State."

37746-53-pt. 4——33

Mr. KING. Mr. Chairman, the witness has stated that he is speaking for the entire system. I would like to remind the members of the committee that he is the president of the Pacific Telephone & Telegraph Co., which takes in my State, and I believe every member of this committee is aware of the impact of the great population exodus to our State upon facilities and utilities such as Mr. Sullivan heads.

I welcome you here tonight, Mr. Sullivan. I am sure that the committee will be very interested in your statement.

Mr. SULLIVAN. Thank you, Mr. King.

The CHAIRMAN. I just want to say, Mr. Sullivan, that you are very well and ably represented by Mr. King, whom we value very highly on this committee.

Mr. SULLIVAN. Thank you.

We from the telephone industry find great satisfaction in this review the committee is making in excise taxes. We think it is timely and proper because there are many inequities. The telephone company, of course, is very greatly concerned, since the amount we bill our subscribers is so greatly increased because of the excise tax.

We should like to make it clear that if any reduction is made, the saving goes completely and directly to the customers because we act only as a collecting agency. We could not retain any of the money ourselves. Our customers run into the millions because there are millions of telephone users.

We submit that telephone service is a necessity and yet it is subjected to unreasonably high and burdensome excise-tax rates; that the present telephone excise taxes are discriminatory; that the conditions which prevailed at the time they were first applied have long since changed; that State regulatory bodies are concerned about the high excise-tax rates; and that the public has expressed a strong dislike for such a tax on something it feels it has to have and this dislike is becoming more pronounced.

Excises are selective taxes. Particular products and services are selected to bear a tax; others are not. The tax rates also are selective, some higher, some lower. This selective procedure is a distinguishing feature of the excise tax. The public recognizes the importance of this selective feature. I like the way it was expressed by the Opinion Research Corp., of Princeton, N. J. This is their expression:

When it comes to reducing excises, the public distinguishes between so-called necessities and luxuries. In a nutshell they say, "Lower the tax on things we have to have, and can't get out of buying."

Telephone service is a necessity. Telephone service is a service that practically everyone must have, in one form or another, in modernday living in the United States. The telephone is a must for every business. Few, if any, businesses can survive without a telephone. The telephone is also a must for householders' purposes. Most householders have telephone service of their own, and those who do not rely on the use of telephones in the homes of neighbors or in nearby stores or public places. Aside from the normal usage in everyday living, telephones are dependent upon for police protection, fire protection, calling the doctor, the hospital, and on like occasion when even life itself may be at stake.