The freight rate structures are extremely complex, and the imposition of this excise tax tends to throw them out of balance. The Interstate Commerce Commission has long recognized the importance of the freight rate structures to competition and commerce. We feel that the excise tax on transportation of property should be removed because it unbalances the rate structures established over a long period of years. The coal industry has lost a great deal of tonnage to foreign residual fuel oil dumped on the eastern seaboard in recent years. Such foreign residual fuel oil is imported in tankers and seldom is transported very far inland, and the excise tax on transportation of coal further hinders coal in its unequal competitive fight with this cheap foreign product. We urge the Congress to repeal this excise tax in its entirety. If, however, the rates are merely reduced, they should be reduced proportionately. Legislation has been introduced in this Congress which would reduce the tax on transportation of oil without corresponding reduction in the tax on the transportation of coal. The adoption of such a proposal would merely increase the inequities ccasioned by this outdated emergency legislation. STATEMENT BY LOUIS S. LAW, EXECUTIVE DIRECTOR OF THE CARIBBEAN TOURIST ASSOCIATION, ST. JOHN'S, ANTIGUA, BRITISH WEST INDIES Mr. Chairman and members of the committee, an unfortunate postal delay prevented my being advised in time of the date of your hearing on August 10 on the subject of the 15 percent travel tax as applied to the West Indies and Central America. For this reason I was unable either to apply for permission to appear before your committee or to submit a statement on the question. This association is sponsored by the four sovereign nations with dependent territories in the Caribbean area, viz the United States, United Kingdom, France, and the Netherlands. In addition, the Dominican Republic and the Republic of Haiti are also members. Its primary function is the development of the full potential of tourism in the area as the best and quickest means of improving the economic standard of its inhabitants. The greatest impediment to this has been the United States travel tax. In case this statement should seem exaggerated, I would explain that our objective is to extend the tourist season to at least 8 months in the year, to the end that all hotels will find it worthwhile to remain open and no hotel or other employees earning their living from visitors will be dismissed pending the start of a new season. The winter season, extending from mid December to mid April has brought full patronage throughout the area and the extra 15 percent on travel tickets has made little difference to the type of traveler who normally takes his vacation in winter. The summer tourists however, school teachers, clerical workers, etc., with a much more slender purse, are to a great extent kept away by the tax, which in many islands would pay their keep for 1 week. The stays of this type of traveler are much shorter and the turnover or numbers of individual travelers greatera most important factor for the transportation companies. The cruise business is considerably affected insofar as it concerns the Caribbean islands, by the fact that cruise steamers often bypass them to call at Venezuelan ports in order to avoid the tax. Some steamers this coming cruise season are scheduled to call at the Venezuelan island of Margarita, which in fact lies some 50 miles further north of the Equator than Trinidad, which makes the exemption from tax on a geographical basis, somewhat questionable. I believe I am right in saying that the tax was removed from travel to Europe and South America in order to encourage travel to those areas and to supply them with much needed United States dollars. I declare without fear of contradiction that the need of the islands of the Caribbean is much greater than that of Europe and South America and that the market for American goods in the Caribbean can be much extended if a healthier balance of currency can be achieved. The law, as it now stands, permits the evasion of the tax by people in the know and with connections in the area and, in the final analysis, while it is a con37746-53-pt. 4—39 siderable handicap to the full development of Caribbean tourism, it is productive of a negligible amount of revenue as compared with the travel tax in general. My estimate is that it would pay the operation of the United States Government for 11⁄2 hours per annum. This is based roughly on a United States budget of $72 billion and receipts of $12 million from the tax on Mexico, Central America, and West Indies tickets. STATEMENT OF THE LOS ANGELES CHAMBER OF COMMERCE, LOS ANGELES, CALIF., RE TOPIC 40, EXCISE-TAX RATES That, in the case of the taxes on long-distance telephone calls, telegraph, cable, and leased wire services, and transportation, such taxes discriminate against certain business and sections of the country and, pending the time when such taxes can be repealed, the rates should be substantially reduced. (Whereupon, at 10: 28 p. m., the committee was recessed.) GENERAL REVENUE REVISION TUESDAY, AUGUST 11, 1953 HOUSE OF REPRESENTATIVES, Washington, D. C. The committee met, pursuant to recess, at 7 p. m., in the Ways and Means Committee room, Hon. Daniel A. Reed (chairman) presiding. The CHAIRMAN. The committee will come to order. We are dealing first with the excise tax on distilled spirits. The first witness is Mr. R. E. Joyce, chairman, Tax Council of the Alcoholic Beverage Industry. Good evening, Mr. Joyce. If you will give your name and the capacity in which you appear, we will be very glad to hear you. STATEMENT OF R. E. JOYCE, CHAIRMAN, TAX COUNCIL OF THE ALCOHOLIC BEVERAGE INDUSTRY Mr. JOYCE. Mr. Chairman and members of the committee, my name is R. E. Joyce. I am chairman of the Tax Council of the Alcoholic Beverage Industry and vice president of National Distillers Products Corp. The council represents all branches of the wine and distilled spirits industry including distillers, rectifiers, importers, wholesalers, hotel operators, package store retailers, and tavern owners, operating more than 200,000 businesses and establishments. While we are concerned with the rates of excise taxes as they apply to both wine and distilled spirits, we understand that the wine industry will make its own statement to the committee and will confine our remarks to the rate of excise tax applying to distilled spirits. We were greatly pleased when your committee decided to hold hearings on the general subject of tax revision in an endeavor to remove existing inequities, simplify the needless complications in tax laws which have developed over the years, and generally secure a better balance of tax revenues. We appreciate the opportunity to participate in these hearings and offer our views on the present rate of the excise tax on distilled spirits. We feel that not only is the present method of selective excise taxes unsound, since it requires some 45 commodities and industries to pay a special tax over and above the taxes paid by industry in general, but even within the structure of these selective excise taxes the tax on distilled spirits is excessively high and discriminatory. President Eisenhower recently stated that "the wide variety of existing excise rates makes little economic sense and leads to improper discrimination between industries and among consumers." It is our position that this discrimination is more pronounced in the case of the $10.50 tax on distilled spirits than for any other article bearing an excise tax and we shall show that an adjustment of this rate to a maximum of $6 a gallon is necessary to bring that tax in line with the tax burden now being carried by other industries whose products bear an excise tax. Obviously, the elimination of inequities and injustices in the current tax laws involves the shifting of collections from some excessively taxed commodities to others to accomplish a fair distribution of the tax load among all taxpayers. We are frank to admit at the outset that the adjustment in the distilled spirits excise tax rate, which we feel is essential to achieve equity, will result in some loss of revenue in the Federal excise tax collections from our product. But in the case of distilled spirits, there are more compensating factors which would offset this apparent revenue loss than would apply to the adjustment of any other rate of tax. These factors will be apparent as we discuss the effects of the present high rate. We merely wish to emphasize at this point that if we are to reconstruct our tax laws so as to eliminate discrimination and inequities we must accept the fact that the "take" of the Federal Government will be decreased from certain sources of revenue where discrimination now exists. Only through such a realistic approach can we revise our tax structure to conform to the general principle that the tax burden should be distributed fairly among all segments of the economy and all classes of the population. DISTILLED SPIRITS BEARS A HIGHER TAX BURDEN THAN ANY OTHER COMMODITY The present $10.50 rate is far out of line with other excise rates. No other Federal excise tax rate is so high. It represents 500 percent of the cost of producing, warehousing and bottling this commodity. An equally high ratio of excise tax to cost of production would result in a $2,000 Ford sedan selling for $7,750, a 25-cent package of cigarettes for 49 cents and a $200 television set selling for $750. Since repeal of national prohibition, the distilled spirits tax rate (as shown in the chart below) has increased 854 percent. DE (RA TAX INCREASE OF 855% SINCE REPEAL Viano 955% 818% 364% 182%$1.10) By: 1941 Since prewar 1941 alone it has increased 16212 percent against an average increase of 4512 percent for all other excise rates. It is the largest source of Federal excise revenue. Today this one product alone furnishes nearly $1 out of every $5 collected in excise taxes an increase of 11 percent since 1939 despite the fact that the coverage and rates of excise taxes have been greatly expanded during that time. A comparison with foreign countries, which are often believed to deal more harshly with spirits than our own, shows that in the same 13-year period the increase in our spirits excise-tax rate was 5 times greater than the Canadian increase and almost twice as great as the British increase. We know of no other country in the world that receives so high a proportion of its commodity tax from distilled spirits. This condition is further aggravated by additional Federal and States levies, applicable only to distilled spirits, which raise the total tax burden to $13.30 a gallon. Any revision of our tax structure to remove inequities and relieve discrimination must provide for a downward adjustment of the present $10.50 a gallon rate. An adjustment to $6 would be 50 percent higher than the prewar rate. It would merely remove the last two emergency increases recognized as temporary when they were imposed. It would still leave the tax burden 30 percent higher than that borne by any other commodity with the exception of cigarettes. Sound standards of taxation require first, that taxes should be borne according to the ability to pay (which increases more than |