destroyed by fire, with no insurance, the people of the community have declared a holiday and the men, the women, the children, and even the preacher have aided in rebuilding the mills.

Today, gentlemen, more than 50 percent of these mills are shut down. Some of them have been shut down almost 2 years. The machinery is idle and rusting. The people in the community have been deprived of employment and the farmers have lost a market for their white oak. The mills cannot make any other product, as you cannot make anything but staves and heading in a stave and heading mill.

On top of this, the few mills that are operating are running only 2 or 3 days a week, and only a few hours a day.

We are not in the same boat as the big distillers, gentlemen. We wish we were. The big distillers, with plenty of capital and extensive lines of credit, can coast when the going is tough. But the stave and heading man is up against it. He usually has little, if any, capital. If he has credit with a local bank, the bank watches him like a hawk, and closes in on him when things look bad. He has to close up his mill, let his employees go, and try to find some other way to make a living. His investment is worthless until somebody wants to buy his staves and heading again. I know his problems, gentlemen, because I deal with him every day, and he has really been taking a beating in the last year or two.

Why? Because the moonshiner and the illegal producer have been doing a good share of the liquor business. We are not authorities on moonshining, and we do not know how much business the moonshiner is doing. We have, however, been told that more than 20,000 moonshine stills were seized last year. We have no reason to doubt this figure. If we assume that it is true, the moonshiner, with his illegitimate business, is depriving us of a whale of a lot of legitimate business we could use. The bootlegger, remember, does not use barrels, he uses tin cans and bottles to peddle his tax-free "rotgut."

We would like to make those staves and heads and those whisky barrels the moonshiner deprives us of. We would not have much of a gripe if we had lost this business to legitimate competitors, gentlemen. But when we realize that gangsters, thugs, lawbreakers, and tax evaders have closed us down and hampered our legal means of making a living, we think we have a howl coming and we think we are entitled to ask for relief.

We are not the only ones who are suffering. Uncle Sam is taking it on the neck from all sides, too. Our closed mills are not paying any taxes at all. The operators of these mills are not paying any income taxes, and the former employees probably are in the same boat. The closed mills are not buying any timber from the farmers. They are not buying any machinery or saws or logging equipment. And it would be my guess, based on our own experience, that the few mills running part time on a shoestring are not paying much in the way of taxes, either. And do not forget that the moonshiner does not pay a cent of tax on the liquor he makes each year.

We know the moonshiner is in business, gentlemen, and we know that he is in business in a big way. We see him in our own communities. We see the white mule sold in gallon jugs and in 5-gallon tins and it has never been near a barrel. We find it in bottles that still carry the label of good legal whisky. The moonshiner, as we have pointed out, does not want anything to do with a whisky barrel.

He is not interested in making a quality product. As a matter of fact, he does not seem to care much whether you go blind or die from drinking his stuff. He is interested only in making a lot of money by selling his "rotgut" to people who cannot afford to buy legal whisky. And, gentlemen, he can sure make a lot of money, with no $10.50 Federal excise tax, no State tax, no cooperage costs, and no storage costs to worry about.

I have told you the story of our stave and heading mills, and now I want to talk to you about our cooperage plants, the plants which assemble these staves and heads into finished barrels. There are not as many of these, only about 30 of them, but they are just as hard hit. They are small fellows, too, for the most part, employing from 50 to 300 or 400 men. Some of them, of course, are owned by the big distillers, but they are in the same boat as the others who are not. It is my contention, and I will so express it to this committee, that all of the cooper shops, whether independent or distillery-owned, are in a legal, taxpaying business and are entitled to protection from an illicit, tax-free racket.

We can tell better what has happened to the entire cooperage industry by taking a look at the barrel plants, as they collect statistics. Here is the picture:

In 1950, the barrel plants produced 2,959,500 whisky barrels. In 1951 this figure dropped to 2,582,623 whisky barrels. On November 1, 1951, the further increase in the distilled spirits tax went into effect, and in 1952 production took a drastic slump to 1,186,641 whisky barrels.

Somewhere along the line we lost almost 2 million barrels. We know that part of that loss is accounted for by reduced whisky production in 1952 on the part of the distillers. We are equally sure that a sizable part of that loss was caused by the expanding operation of the moonshiners. Last year, Federal, State, and local authorities seized more than 20,000 moonshine stills with a reported producing capacity of 715,000 gallons of moonshine every day. This 715,000 gallons represents 14,300 barrels a day.

We didn't know how many days these moonshine stills that were seized actually operated. We inquired about it and were told that the Treasury Department estimated that the stills that were seized in the South operated an average of 37 days before seizure. Those seized in the metropolitan areas outside of the South operated an average of 107 days before seizure. If we just take the 37-day figure, it shows a total of 529,000 barrels the moonshiner cost us last year. Now, what does the loss of 529,000 barrels mean to the cooperage industry? It means, first of all, a loss of more than $10 million that would have been spent for barrels. It means that the stave men were deprived of a market for approximately 30 million staves. It means that the heading men were deprived of a market for approximately 1 million heads. It means that the farmers and timber owners were deprived of a market for 50 million log feet of white oak timber. It means that the steel companies were deprived of a market for 72 million pounds of steel in the form of barrel hoops.

Of course, that might not be a staggering loss to a big corporation, gentlemen, but it is a terrific loss to our little industry. We are good, law abiding Americans, for the most part, and we hate to see moon

shiners and bootleggers depriving us of our business and cheating our Government out of taxes.

That is why we are up here, and that is why we are making our earnest plea to this committee. We do not mean to tell you what to do, but we beg you to give careful thought to an immediate and drastic reduction in the Federal excise tax on whisky.

We are not authorities on the distilling industry. We are not authorities on taxes. We are in the cooperage business, or were, a couple of years ago. But our ox has been gored, too, and that is why we feel we are entitled to tell you our story.

As far as we can see, looking in from outside, the only factions that benefit by this exorbitant excise tax on whisky are the moonshiner and the bootlegger. It certainly hurts the distiller. It makes the price of whisky so high that it certainly hurts the consumer. It hurts the hotels and the taverns and the bars and the wholesalers and the retailers. It must hurt the bottlemakers and the casemakers and the labelmakers. It certainly hurts the United States Government, when the moonshiner pays no taxes, and when most of us have lost, income upon which we formerly paid taxes.

This moonshine business is growing, gentlemen. We are sure the Treasury will tell you that. It is getting bigger every day, and every day it is costing us more business. The time to crack it is right now, not next year or the year after that.

We think that the case is clear. The moonshiner will stay in business and grow in numbers as long as he gets a lot of money for the risk he takes. He can make a lot of money as long as you retain a $10.50 tax on legal whisky.

That is why we urge you, in all humility and in all sincerity, to reduce this Federal excise tax to a reasonable level. If you do that, gentlemen, we are confident that we can make more staves and heading and barrels, buy more timber and put more men to work. We can start up our mills and barrel plants again and make an honest living under the American system.

That is all we ask, gentlemen, the right to make a living unhampered by a bunch of gangsters and crooks that have blossomed forth under the fertilization of an unreasonable tax on legal whisky.

Up to this point I have been speaking as president of the Associated Cooperate Industries of America, Inc. This is my honorary job, and I have tried to do my best for the little fellow who cannot afford to come up and talk to you himself.

Now I want to speak to you from my bread-and-butter job, vice president of the J. C. Pennoyer Co. of Chicago and Memphis, and to tell you what this unreasonable Federal excise tax on whisky has done to our own company, as an example of what has happened to others.

Our company is now in its 78th year. Our principal business for the past several years has been the supplying of bourbon staves and heading. For the last 12 months our business has dwindled to practically nothing.

We are a stock company and no stockholder likes to see the company in which he has invested capital lose money, with the prospect of continuing along the same lines for an indefinite period. So, in September, we will have a meeting to determine whether we shall con

tinue operations or liquidate the company. Personally, I see little chance of a change in business between now and September.

Most of our employees have been with us over a long period of time, so the outlook is that we, who have put our life's work into this business, will be thrown out of employment. What is happening to us will undoubtedly happen to others, unless conditions take a change for the better.

The CHAIRMAN. We thank you very much for your appearance and the testimony which you have given. You certainly have a very old and a very fine business.

Are there any questions?
Thank you very much.

Mr. McCALL. Thank you, Mr. Chairman.

The CHAIRMAN. The next witness is Mr. Karl F. Feller, president of the International Union of United Brewery, Flour, Cereal, Soft Drink and Distillery Workers of America, CIO.

If you will give your name and the capacity in which you appear, we will be glad to hear you.

STATEMENT OF KARL F. FELLER, INTERNATIONAL PRESIDENT, THE INTERNATIONAL UNION OF UNITED BREWERY, FLOUR, CEREAL, SOFT DRINK, AND DISTILLERY WORKERS OF AMERICA, CIO

Mr. FELLER. Mr. Chairman and members of the committee, my name is Karl F. Feller. I am international president of the International Union of United Brewery, Flour, Cereal, Soft Drink and Distillery Workers of America, CIO. Our headquarters is at 2347 Vince Street, Cincinnati, Ohio, and I have been instructed by our membership to speak here tonight on their behalf.

Our union is the oldest industrial union in this country. We number 72,000 workers in malt beverage, distilling and allied operations. Our entire organization wants this committee to give favorable consideration to the industrywide plea that you roll back taxes on the licensed beverages, taxes we now consider to be not only discriminatory in conception, but so high as to defeat the very purpose for which they were ostensibly imposed.

It might not be amiss at this point for me to explain that as president of the international union, I am in direct contact with all our local unions and State councils, charged with legislative work carried out in the various States. These local unions and State councils are responsible for the protection of the interests of the workers and employees in the licensed beverage industry at the State level. And I feel no hesitation in telling you that the sky-high tax rates now in effect on these beverages is playing havoc in the States. From Pennsylvania, from New York, from Ohio, from Illinoisfrom everywhere we are getting reports to the effect that Federal imposts on these products are creating serious problems for State governments. The excessive tax rates are, as you know, accompanied by a sharp decline in the sales of legal, taxpaid products in this field. And this decline in demand is reflected in lower State revenues.

But of even more concern to us is the story of what is happening to jobs. In our union alone, distilling operations have shown a decline

of 20 percent in employment since the Congress last increased the tax rate on distilled spirits. Other witnesses tonight will fill you in on the impact of these taxes on other crafts and other lines of employment.

We can be sure that what is happening is not a decline in the sales of alcoholic beverages, but rather a decline in the sales of these beverages that count-the legal, taxpaid beverages.

And as the sales of legal products fall, we are watching the development of a boom of amazing proportions in what one Alabama paper described the other day as "America's fastest-growing industry.” It is not an industry that the local chambers of commerce are crowing about. But its dollar volume appears to be climbing-and in direct proportion to the climb of alcohol tax rates.

I refer, of course, to the industry known as moonshining. Only nowadays moonshining, once hidden up in the farthest reaches of mountain gullies has, because of this remarkable tax structure, moved out of the mountains to the environs of the Nation's biggest cities. Last year more than 20,000 stills were seized by the Federal, State, and local government officers. It has been stated that for every still seized five escaped detection. It stands to reason that the plants still doing business must be turning out a whale of a lot of alcohol.

It is worth noting that among the seized stills, a substantial number, including the biggest one, of course, were found close to important markets. They were picked off in our biggest cities. Just last month, in Philadelphia, Federal agents walked in on a plant in which the capital investment was estimated to be at least $50,000.

It stands to reason that the "take" must be enormous to justify risks of that proportion in an enterprise so hazardous. And this Philadelphia plant was but one of many. likewise large and expensive, found operating up and down the populous eastern seaboard.

The size of these illegal manufacturing operations points to one certain fact: That more and more people are choosing to buy the bootlegger's product because it is cheaper. And the reason it is cheaper, of course, is that the bootlegger starts off with a price advantage of $10.50 a gallon-because he pays no tax.

It is plain to see that the capital for these expensive investments is coming from some place, and it is an educated guess on my part to suggest that it is coming from those mobsters and hoodlums who have been driven from gambling into something where the heat is less severe.

And with the mobsters, we are beginning to read of other aspects of the whisky underground reminding us of the unhappy days of 20 or 25 years ago.

In Alabama last year the ATTU men seized and destroyed, along with 1,851 stills, tons of mash and thousands of gallons of mountain dew, 247 motor vehicles all souped up and ready to roar down the midnight higways to deliver their contraband cargoes.

Out in Cleveland the other day it was disclosed that two police officers so far forgot their oaths of a support for law and order as to hijack a cargo of $34,000 worth of legal whisky of a well-known brand.

Not many months ago, from Atlanta, the Nation heard the shocking news that 42 people had died from drinking moonshine that proved to be nothing but bottled death.