TO AMEND THE TENNESSEE VALLEY AUTHORITY

ACT OF 1933

WEDNESDAY, FEBRUARY 14, 1940

HOUSE OF REPRESENTATIVES, COMMITTEE OF MILITARY AFFAIRS, Washington, D. C.

The committee met at 10:30 a. m., Hon. Andrew J. May (chairman) presiding.

The CHAIRMAN. The committee will please be in order.

Gentlemen of the committee, we meet this morning for the purpose of considering further the question of tax replacement in connection with the Tennessee Valley Authority under the several bills which have been introduced and referred to the committee.

The committee has had several weeks' hearings and we have gone extensively into conditions as they exist in Tennessee and other States concerned, and particularly with reference to the tax-replacement situation in the rural counties and taxing districts. As the record now appears, the evidence would seem entirely sufficient to give the committee a full and complete understanding of the seriousness of the situation with respect to this matter. There are so many different features of the matter that the committee will need the advice of men who are familiar with the constitutional set-up and the statutes of the State of Tennessee on the question of taxes and disbursement of revenue.

We have heard from the County Judges' Association, the Tennessee Taxpayers' League, and the representatives of the Tennessee Valley Authority, and I felt that in view of the fact that the membership of the House and Senate from Tennessee and other adjoining States that are directly affected by this matter, and others who have shown a continuing interest, should have an opportunity to be heard.

Consequently, I have set today for the purpose of hearing members of the House and Senate who desire to present their views. I asked Mr. Kefauver, of the Tennessee delegation, to appear this morning, and if he is in the room I would be glad for him to come forward and tell us what he thinks about this proposition.

Mr. KEFAUVER. Mr. Chairman, I notice some older members of the House present, and I would be glad to give way to them. I can wait.

The CHAIRMAN. The Chair will recognize Mr. Cooper of the Ways and Means Committee.

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STATEMENT OF HON. JERE COOPER, REPRESENTATIVE IN CONGRESS, EIGHTH DISTRICT OF TENNESSEE

Mr. COOPER. Mr. Chairman, and gentlemen of the committee, as senior member of the Tennessee delegation in the House in point of continuous service, I do want to express to the chairman the very grateful appreciation of the members of the Tennessee delegation for the courtesies extended and the very generous consideration given us in affording us this opportunity to appear.

As the committee knows, the members of the Tennessee delegation have been in attendance at the hearings right along. The committee has heard the distinguished Governor of Tennessee, other officials and citizens of the State. We feel that as indicated by the statement of the chair, that the matter has been fully presented and that any statements we might now make would be rather of a cumulative nature. Therefore, we simply want to acquiesce in the statements made by others who have appeared from Tennessee, and without unduly detaining the committee we will only ask brief recognition.

Mr. Pearson of our delegation has already appeared. I understand that Mr. Kefauver has given some special consideration to certain phases of the matter that he would like to present briefly, and Judge Jennings would also like to make a brief appearance.

Perhaps the districts represented by Mr. Kefauver and Judge Jennings are more seriously affected, certainly from an inundation standpoint, than other districts in the State.

I understand Mr. Gore probably would like to present a brief statement from some constituent of his. As the committee knows we are honored by the presence of one of our colleagues as a member of the committee, and the other members of the delegation are glad to accord him the privilege of speaking for us.

Therefore, again thanking you for your very kind and generous invitation to be here, we will not ask further indulgence at this time for other members of the delegation to be heard than those indicated. I thank you.

STATEMENT OF HON. JOHN E. RANKIN, REPRESENTATIVE IN CONGRESS, FIRST DISTRICT OF MISSISSIPPI

Mr. RANKIN. Mr. Chairman, I am chairman of a committee that is holding hearings and we adjourned over today in order that I might appear before this committee. I am the only one representing Mississippi and I would like to be heard.

I understand this committee is going to continue in session. If I cannot be heard this morning I would like to have a time set that I can be heard so I may arrange my own committee affairs accordingly. I asked some time ago to be heard here. I am not going to take up much time, but it seems to me that with all the testimony we have had Mississippi, at least, should be heard from, since it is one of the States involved. I cannot wait from day to day on account of the necessity of presiding over the committee of which I am chairman. The CHAIRMAN. Mr. Rankin, the chair will be happy to make some arrangement to meet your convenience.

Mr. RANKIN. May we have an understanding now as to when that will be?

The CHAIRMAN. I recognize the fact that as chairman of your committee you are extremely busy. It is possible that we will have as many gentlemen as we can hear today. We do not want to detain you and I was going to say that I had hoped to close these hearings today in order to expedite the printing of the hearing so that the Members of Congress and members of the committee might be able to examine them before we finally get down to a disposition of the

matter.

Mr. SPARKMAN. Mr. Chairman, may I suggest something?
The CHAIRMAN. Yes.

Mr. SPARKMAN. I am asked to speak for several of the Tennessee delegation. I am rather of the opinion they could finish in the morning session. I may be wrong about that. Why not hold an afternoon session and fix a definite time for Mr. Rankin to come here. I suggest 1:30 or 2 o'clock.

Mr. RANKIN. The House will be in session at that time.

Mr. SPARKMAN. It is general debate.

Mr. RANKIN. If you will set another date for me to appear before the committee I shall appreciate it.

The CHAIRMAN. What about 3 o'clock this afternoon?

Mr. RANKIN. I will be here at 3 o'clock if that suits the committee. The CHAIRMAN. Now, Mr. Kefauver.

STATEMENT OF HON. ESTES KEFAUVER, REPRESENTATIVE IN CONGRESS, THIRD DISTRICT OF TENNESSEE

Mr. KEFAUVER. Mr. Chairman and gentlemen of the committee, I appreciate very much this opportunity of discussing this matter with the members of the committee on behalf of the 12 counties that I represent.

For 12 years I have been a practicing attorney in Chattanooga, Tenn., and for 312 months in the early part of 1939 I served as commissioner of finance and taxation of the State of Tennessee. For that reason I am familiar, in a general way, with the tax laws and with the constitutional provisions relative to taxation in our State.

My purpose in appearing before the committee is to give you some of the facts relative to the tax loss in the counties that I represent, and to explain in a general way some of the chaos that will result if these taxes are not replaced; to present the equity and justice of the claim of the counties throughout the valley.

I wish to say in the first instance that I have always been an enthusiastic supporter of the T. V. A. program. I believe when the history of this era is written that it will stand out as one of the worth-while achievements of this time.

Now, the 12 counties I represent are in the southeastern section of Tennessee. Those counties are going to lose by reason of this loss of taxable property, $353,000.

A large part of the generating plants and of the transmission lines owned by the Tennessee Electric Power Co. are in the 12 counties that I represent. It has been previously stated when the Tennessee Power Co. property was sold approximately 60 percent of it was purchased by the cities and by the cooperatives. That consists of the distribution systems largely.

The cities and cooperatives have added to their power rate an amount sufficient to take care of the taxes that used to be paid by the Tennessee Electric Power Co. on its distribution system on the part of the property that was purchased by the cities and cooperatives, so the matter of replacing taxes on that part of the property is not a congressional matter.

The only thing we are interested in, of course, are the generating plants and transmission lines which were purchased by T. V. A. Based on an average assessment for the 2 years, 1937 and 1938, the 12 counties in my district will lose $353,919 in taxes that were formerly paid by the Tennessee Electric Power Co. That is the property that has been acquired by the T. V. A. This excludes the 8-cent levy that the State made and was collected by the counties. The loss in those counties ranges from 8 percent to 42.6 percent, or an average of about 25 percent of the taxes realized by the counties from land.

The counties in Tennessee generally have two principal sources of revenue. The larger and more important source is from the tax on property-the property tax.

Mr. RUTHERFORD. Is that real estate?

Mr. KEFAUVER. Yes.

Mr. THOMASON. Ad valorem?

Mr. KEFAUVER. Yes. The only other appreciable source of revenue is the 2-cent gasoline tax that is collected by the State and repaid to the counties. But of course under the Hayden-Cartwright Act that must be used for road purposes and cannot be diverted for other purposes. If it is diverted of course the State and counties will lose the Federal aid of the Federal Bureau of Roads.

Mr. ANDREWS. Do the counties of Tennessee receive any revenues from the State which have been collected on so-called business taxes? Mr KEFAUVER. No, sir. A part of the liquor tax is divided equally between the counties, a small part of it, but that is used for Social Security purposes.

Mr. ANDREWS. Then there is some $700,000 the State of Tennessee is out of pocket because of the business tax?

Mr. KEFAUVER. Yes. No part of that went back to the counties. Mr. ANDREWs. That was all for the benefit of the State itself? Mr. KEFAUVER. Well, that all went into the general fund of the State.

Mr. THOMASON. Do you have a sales tax or luxury tax?

Mr. KEFAUVER. We have some picture shows and some few luxury

taxes.

Mr. THOMASON. Does any of it go back to the county?

Mr. KEFAUVER. No, sir.

Mr. THOMASON. Is there any additional gasoline tax? What is your State tax on gasoline?

Mr. KEFAUVER. We have a 7-cent gasoline tax and 2 cents of that goes back to the county. One cent on a geographic division-one ninety-fifth to each county and 1 cent on population basis.

Mr. THOMASON. With reference to the ad valorem taxes, what is the basis of assessments?

Mr. KEFAUVER. Our constitution provides that all property must be assessed according to its value. The tax assessor takes an oath that he will assess the property according to its real value.