We feel that too much emphasis cannot be given to the Federal alcoholic tax box score. After repeal the tax was:

No other taxes have shown the proportionate increases in the last 10 years than the burden placed on beer and distilled spirits. This of course has been an open invitation to the bootlegger, he has lost no time in making it big business, until today the number of stills seized by the Federal and State officers compares favorably with the number taken at the peak of bootlegging during national prohibition.

We sincerely hope that you and your committee will give favorable recommendation to legislation that will relieve this situation, redeem a promise written into the law in 1944 and deal a smashing knockout to the bootlegger.

The CHAIRMAN. The next witness is Mr. Raymond Koth. Mr. Koth, will you give your name and the capacity in which you appear?

STATEMENT OF RAYMOND KOTH, EXECUTIVE SECRETARY, OHIOKENTUCKY STATE COUNCIL OF BREWERY, YEAST, SOFT DRINK, AND DISTILLERY WORKERS, CIO

Mr. KоTH. My name is Raymond Koth, executive secretary of the Ohio-Kentucky State Council and I would like to file this for the record.

The CHAIRMAN. Without objection it will be made a part of the record. We thank you for your appearance.

Mr. KоTH. Thank you.

(Mr. Koth's prepared statement follows:)

STATEMENT SUBMITTED BY RAYMOND KOTH, EXECUTIVE SECRETARY, ON BEHALF OF THE OHIO-KENTUCKY STATE COUNCIL OF BREWERY, YEAST, SOFT DRINK AND DISTILLERY WORKERS, CIO, FOR THE REDUCTION OF EXCISE TAX ON LICENSED BEVERAGES

Mr. Chairman and members of the committee, the Ohio-Kentucky State Council of Brewery, Yeast, Soft Drink, and Distillery Workers, CIO, have instructed me to present the following statement in behalf of that organization, urging that the House Ways and Means Committee recommend to the Congress legislation to reduce the high, discriminatory excise taxes placed on distilled spirits and malt beverages (beer).

This high Federal tax does more than increase the burden of the distiller and the brewer. It does more than take money from the Federal Treasury, from the taxpayer, and the consumer, it also eliminates jobs in the legal licensed beverage industry. This high tax is creating a new era in America. It is an era that is marked by crime, by violence, by racketeering, and a mushroomlike growth of a privileged outlaw class.

The bootlegger is back. The patent of prohibition is back-prohibition by taxation. You must not be misled about the character of today's traffic in bootleg alcohol. This is no mere mountain moonshine, rather, what we are faced with today is a highly organized criminal conspiracy, The conspirators

are tax thieves, they prey on the American public. Their territory is America's 3,200,000 square miles. Their product is raw, and impure whisky-bootleg whisky. Last year, Federal, State and local enforcement officers seized over 20,000 stills. It is said that these stills had a daily producing capacity far greater than the daily production of the legal industry. How many illegal stills are not seized? No one knows, but it has often been said that for every one seized, five escape. These illegal producers hire nonunion help, they package their whiskey in used containers of every description. These employees of the illegal producers pay no income tax, social security, or other taxes that the union men and women employed in the legal beverage industry pay.

I sincerely urge that you give this matter your earnest consideration and recommend to the Congress that the present high excise tax on distilled spirits of $10.50 per gallon be rolled back to the prewar level of $6 per gallon, and that the present tax of $9 per barrel of beer (31 gallons) also be reduced to the prewar level of $7.

On behalf of the Ohio-Kentucky State Council of Brewery, Yeast, Soft Drink, & Distillery Workers we thank you for giving us the opportunity to present our statement.

The CHAIRMAN. The next witness is Mr. Ludwig Boch of Pennsylvania.

STATEMENT OF LUDWIG BOCH, EXECUTIVE SECRETARY, PENNSYLVANIA STATE COUNCIL OF BREWERY, SOFT DRINK & DISTILLERY WORKERS

Mr. BоCH. Mr. Chairman, my name is Ludwig Boch, executive secretary of the Brewery, Soft Drink & Distillery Workers Council of Pennsylvania. I respectfully ask to submit my statement for the record.

The CHAIRMAN. We thank you for your appearance, and without objection your statement will be made a part of the record. (Mr. Boch's prepared statement follows:)

STATEMENT SUBMITTED BY LUDWIG BOCH, EXECUTIVE SECRETARY, PENNSYLVANIA STATE COUNCIL OF BREWERY SOFT-DRINK & DISTILLERY WORKERS, PHILADELPHIA, PA.

Mr. Chairman, my name is Ludwig Boch, executive secretary of the Pennsylvania State Council of Brewery, Soft-Drink, & Distillery Warkers, which represents approximately 10,000 workers in the malt beverage and distilling industries in the State of Pennsylvania. They have directed me to submit a statement in their behalf, urging that the House Ways and Means Committee, Senate Finance Committee, and Congress act favorably on legislation for reducing the high Federal excise tax, placed on the products of malt beverages and distilling industries.

Newspaper stories in the Philadelphia papers during the past several months have reported a large increase in moonshine and bootleg liquors; in fact 2 illegal distilleries were raided by the authorities in Philadelphia in the past 2 weeks, both in full operation, with a combined capacity of 1,000 to 1,500 gallons per day.

There is no question that this expanding illegal industry is responsible for the loss of jobs to thousands of members of our union that were employed in the legal licensed beverage and distilling industry here in Pennsylvania.

I urge that this committee recommend to the Members of the Congress, a cutback in the present excise tax of distilled spirits from $10.50 per gallon to $6 per gallon, and on malt beverages (beer) from the present $9 per barrel (31 gallon) to $7 per barrel (31 gallon).

By reducing these taxes back to the prewar level, I am sure it would take away the incentive for the producers and distributors of nonunion nonlicensed, and nontaxable products.

We are sure that with the lower tax, it will increase the purchase of legal made products, thereby bringing in a greater revenue to the United States

Treasury, as well as to increase employment of workingmen and women in the legal beverage industries.

Thank you.

The CHAIRMAN. The next witness is Mr. Ed S. Miller, general secretary and treasurer, Hotel and Restaurant Employees and Bartenders Union, A. F. of L.

Mr. SWEET. Mr. Chairman, my name is Frederick Sweet. I appear instead of Mr. Miller.

The CHAIRMAN. Very well, you may proceed.

STATEMENT OF FREDERICK SWEET, REPRESENTING THE HOTEL AND RESTAURANT EMPLOYEES AND BARTENDERS INTERNATIONAL, A. F. OF L.

Mr. SWEET. Mr. Chairman, my name is Frederick Sweet. My home is in Cincinnati, Ohio, where I am employed in the general headquarters of the Hotel and Restaurant Employees and Bartenders International Union, A. F. of L., as managing editor of The Catering Industry Employee, its official publication.

In addition to these editorial duties, I am also responsible for our research and public relations work bearing on the legal sales of licensed beverages, a subject in which you may be sure we have the liveliest interest. In both capacities I report to our general secretary-treasurer, Ed S. Miller, in whose behalf I appear here tonight, and who has asked me to thank you and this committee for the courtesy you have shown us in giving us this opportunity to speak our piece on this question.

We are here as part of an industrywide effort to convey to this committee and its technical staff in the clearest possible terms our strongly held view that it is high time the Congress rolled back excise taxes on the licensed beverages to levels far more fruitful, for Government, public, workers and industry, than the sky-high levels now obtaining. We are asking that distilled spirits be taxed at $6 the gallon, not the present $10.50; that the malt beverages be taxed $7 the barrel instead of $9; and that you reduce as well the rates on the various wines. We shall address ourselves principally to the tax on distilled spirits, since in our view this levy is the chief source of the several kinds of mischief now besetting not only our members, but the whole Nation in this field.

It is important that you understand the nature of our international union's concern in this matter of liquor taxes. To begin with, ours is by far the largest labor organization in the licensed beverage industry. We number 430,000 men and women, a very large proportion of whom are employed on licensed premises, and are by no means confined to the skilled craftsmen who tend bar. Waiters and waitresses, kitchen crews, hotel housekeeping and front service workers, yes, and dining car crews, are also at work in houses with liquor licenses to a degree which leads us to estimate that at least 80 percent of our members are deeply and directly concerned in the taxation of these products.

In addition to these we represent directly, we speak too for many, many thousands of fellow union members in other organizations whose people work in the production, transportation, distribution and sale of these goods, or in lines closely tributary to this industry. And,

I may add, at such times as this we do not hesitate to speak as well for the unorganized people in the public feeding and lodging industry, chiefly in the smaller towns and cities, who have none to come forward to such a forum as this to represent them. All told the hotel and restaurant industry employs some 2 million citizens according to the latest census figures.

From where we sit we see four main points to be driven home here tonight.

The first is that the present tax rates have already contributed directly to unemployment among our members, well as other craftsmen, and threaten to aggravate our employment problems further if consumption of legal, taxpaying liquor continues to decline as it has since 1946.

The second is that working people, including our members, are the major portion of the market for licensed beverages, and as consumers we resent a tax so high that it is beginning to produce what the Cincinnati Enquirer has called "prohibition for the masses but not for the classes."

The third is that our members, as good citizens, are disheartened at the growing number of stories in newspapers and magazines which leave no doubt that we are, with this tax structure, fostering a return to the American scene of the outlaws which brought shame to the Nation in the repudiated days when "Chicago" became synonymous with "murder".

And finally, we wish to call to your attention what we call the "mystery of the missing market."

Not long ago the Wall Street Journal published one of its excellent business roundups on trends in the tavern trade. Its writers found in spotchecks from Boston to the coast that unemployment had hit bartenders because of a decline in business, largely traced by tavern men, union officials and consumers to the high price levels imposed principally by high taxes.

In New York City our local 15 reported 5 percent of its members out of work. San Francisco's local 41 said 500 men of 3,000 were looking for jobs. In Boston the report was gloomiest: 30 percent of local 34's members were haunting the union hall in search of work at their trade.

The journal's report also bore out the Enquirer's warning of "prohibition for the masses, but not for the classes"; they found that the bitterest complaints were coming from the corner cafes in working class neighborhoods, while the plush spots catering to the heavy spenders found their bar sales were holding up fairly well.

There has been, highlighting this decline, a most interesting and, we think, significant switch in the pattern of buying liquor. Back in 1940, when the tax on whisky was $3 per gallon, consumers bought 65 percent of their spirits over the bar. Ten years later, when the tax had climbed to $9 only 35 percent of spirits were sold for consumption on licensed premises. This sharp drop has been found generally throughout the country, although there is some evidence, we understand, that the legal bar's share is now down to 30 percent with the tax at $10.50, and reports from our local unions bear out this view.

The direct cost in terms of jobs in the taverns themselves is clear enough to see. Not so clear is the cost of this trend to the hotel

worker employed in another department, but it can be understood when you know that Horwath & Horwath, the principal hotel accountants tell us that from 13 to 15 percent of a hotel's revenue derives from its bar or cocktail room. When the customers are driven away from the bar, it will not be long before the maid and the houseman are joining the bartender at the unemployment insurance office. In preparation for this hearing we checked with the research people at the AFL's Distillery Workers Union, and learned that about 20 percent of their members are out of work. They report that distillery warehouses are stacked to the rafters with unsold whisky, that some of the smaller plants are threatening to close down for keeps, and that bottling operations in the big ones have been spotty for months. All these facts reflect the weak demand for high-priced, taxpaid liquor.

Our second point concerns the plight of the consumer, including not only our members but many other citizens. The celebrated Dr. Gallup tells us that almost 60 million adult Americans use these products, a figure not much smaller than the total in the labor force. The industry's market analysts tell us that 64 percent of the taxes paid on liquor sold in 1952 were paid by consumers earning less than $5,000 a year. A couple of years ago another industry study put it this way that 80 percent of its market was made up of wage-earners. Such a share of the market means it's a certainty that most consumers of liquor-as of soap or soup or cigarettes or anything else offered to the mass market-are working people.

The figures show that more than half the cost of a bottle of whisky is accounted for by taxes, with the Federal bite of $2.10 a fifth of bonded whisky taking the lion's share. We are told that the increase since repeal is 854 percent in the Federal rate alone, and that while rates on other articles were rising an average of 45 percent after 1941, the tax on liquor went up 162 percent.

Why should consumers of this one product be called upon to pay so large a share of the excise tab? The tax not only discriminates against a single branch of industry; it discriminates as well against all who use its products.

Much the worst aspect of that discrimination against a single market was the practical result of the latest increase: it cost the consuming public an extra $237 million in taxes alone-and that is not counting the markup, by the way-to buy the smaller quantity consumed in the first year after the last tax increase. Yet those $237 million we paid out brought the Treasury only $30 million more than the old tax rate. We paid nearly $5 to get $1 for Uncle Sam. What kind of economics is that?

When we were digging into this subject we came upon a pair of figures showing clearly what the public thought of that kind of economics. We found that in 1946, peak year of liquor sales in this country, we consumers bought 231 million gallons of spirits. But we found that in 1952, the year following the last rise in the Federal tax, we bought only 183 million. That was a loss of 48 million gallons from the top of the market, or more than 20 percent.

Then we looked at other figures, showing there were more people in the country in 1952 than in 1946. Spendable income was higher. Commodity sales in all lines were booming during those years. Wages were rising. Yet sales of spirits were off by 20 percent. Why? We