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tion by T. V. A. and perhaps of other agencies has shown that was perhaps entirely an erroneous program. Nitrogen is classed as one of the inexhaustible elements or materials. There is no danger of this country ever running out of nitrogen, and you can get it in South America or Germany, just as well as you can in the United States.

Mr. Faddis. Pardon me; then this committee had the wool pulled over their eyes in the first place, as well as in the second place, in connection with this legislation; is that true?

Governor COOPER. I do not know about that; I think maybe they were mistaken when they did not have all of the facts before them.

Mr. SPARKMAN. Will the gentleman yield right there?
Mr. FADDIS. Yes.

Mr. SPARKMAN. You were referring to the original program, during the war, and not to 1933 ?

Governor COOPER. Yes, sir. And I want to call attention to the fact that this Tennessee Valley Authority, through investigation, has found what is really needed down there is the conservation and development of a highly exhaustible element necessary for agriculture should be encouraged and developed and improved, rather than nitrogen; that is phosphate-for this reason: You can take, as I understand the authorities have stated, 1 pound of phosphate and put 4 pounds of nitrogen into the ground; you can take a pound of phosphate fertilizer spread on the ground and, by the production of legumes, it will put back into the ground 4 pounds of nitrogen. In other words, you can take a small amount of this phosphate that is available in the valley and get more nitrogen for agricultural purposes than you could by the construction of the most expensive $100,000,000 plant you might construct at Government expense. In other words, the advantage of this program is that nature does your work for you; you conserve our phosphates, which I understand are being shipped to Germany and Japan and Italy, and one-third of our national output of phosphates now goes to outside the United States, mainly to Italy, Germany, and Japan.

Mr. Faddis. That is just exactly what this committee is now beginning to suspicion, and, as far as the national defense angle of this thing is concerned, that it was being used as a decoy all the time, to decoy us along.

Governor COOPER. I think that is incorrect.

Mr. Fadpis. That is what this committee has been suspicioning for quite awhile, and you are just confirming our suspicion.

Governor COOPER. No, sir; your question to me was whether your bill, providing for a nitrogen plant, would be advisable at this time, and your statement was you expected to use that nitrogen for agricultural purposes in peacetime. My answer is that would not be, in my judgment, a sound bill in that respect; that this Nation can get its nitrogen, which is an inexhaustible thing, and I think there is not as much need for the National Government trying to conserve an inexhaustible element, such as nitrogen, as there is to conserve a highly exhaustible element in wartime, and in peacetime, for agriculture, such as phosphate, when one-third of it today is being exported outside of this Nation and we are not getting any adequate return from it, to Japan and Italy, and I understand that they got a lot in Germany. I think the Tennessee Valley Authority is render

ing a great service to this Nation in pointing out to the Nation the value of phosphate in wartime, as well as in peacetime.

Mr. Faddis. I have always believed it is sound public policy that these public improvements should make a return to the Federal Government. I am of that belief on the locks and dams along the Monongahela River and always have been, and most of the men who represent that section have always been of that opinion, that the locks and dams on the Monongahela River should make a return to the Federal Government, but they have not been able to put that across.

The CHAIRMAN. The locks and dams on the Monongahela Riverare they the low-type dam for navigation, or the high-type dam, the multiple-type dam

Mr. Faddis. It is just a navigation dam, just to maintain a pool of water suitable for navigation; but they have been a great drain on the Nation as a whole. Now this idea of mine I believe is the modern idea. For instance, we are up against in the United States the construction of toll roads all over the United States for those who want to travel under different conditions than the roads that are not toll roads today will permit them to travel. Of course, you are familiar with the proposition of that kind and familiar with the fact that they are being constructed in some places, and I believe it is a good modern idea, and I believe the localities who have those improvements should be willing to pay for those improvements in the rate charged, because those improvements bring benefits to the localities, and I believe that they should be willing that the rate charged would reimburse the General Treasury, the Public Treasury, for them, and I think that is an idea that is in accord with the toll road, and various other things.

Governor COOPER. Mr. Faddis, may I answer that, as best I can, in this way: I fully agree, wherever it is feasible, that national assets, such as navigation, or flood control, or power development, where it is possible, should return a revenue to the Federal Government. I think that T. V. A. engineers have furnished reliable figures which will show that T. V. A. will return a splendid profit to this Nation, not only on power properties alone, but even on the properties properly allocable to flood control, as well as navigation purposes. And the whole project is going to bring back to the Federal Government a splendid return on its investment, after full replacement of the taxes which we are asking for up here today.

Now, if I may make another observation : You mentioned toll roads and the improvement of navigation as Federal projects. It is part of the T. V. A. program, as I understand it, when these dams have been constructed in compliance with the T. V. A. program, to provide 650 miles of additional 9-foot channel of internal waterways of this Nation. I understand when this 650 miles of 9-foot channel is added to the internal waterways of the United States we will then have approximately 5,000 miles of internal waterways of the Nation of 9-foot channel, which is bound to be of inestimable value to all of the central portion of our United States; because then you can ship grain by water from the grain fields of the West down the Missouri River and through rivers clear over to the eastern portion of the United States. And that dovetails right in with the magnificent program for national conservation of natural resources and the development of natural resources. And I think rather than to adopt the bill you have suggested, we had better go along with the well-developed T. V. A. program, as already outlined, because, according to the figures furnished

to me by their engineers, which I believe are reliable, there will be a splendid profit to the Federal Government after we have provided for waterways and improved navigation, and for this development of power. Might I say the development of power should never be overlooked by the House Military Affairs Committee as a great necessity in time of war, because that is a lesson, I think, that we learned in the last war.

Mr. Chairman, may I be permitted to make a correction? I stated awhile ago I believed that 88 percent of the tax loss occurred in Tennessee. I would like to substitute for that figure 75 percent. It was 88 percent of the revenue that is paid into T. V. A. that is paid from Tennessee. That is a significant fact, that the State of Tennessee today is paying in 88 percent of the income to the Federal Government of all the revenues coming in to T. V. A. Sixty percent of all of the property is located in Tennessee and the great tax problem is a Tennessee problem almost in its entirety, because 88 percent of the revenue is paid in through our State.

The CHAIRMAN. Have you anything further, Mr. Faddis ?

Mr. MERRITTT. Governor, I have honestly to differ with some of your statements. Perhaps I am a little selfish, but I have supported T. V. A. up to this very moment. You said a moment ago that New York, for one place, would derive as much benefit from the T. V. A. as the State of Tennessee.

Governor COOPER. Mr. Merritt, I believe I would like to qualify that in this way: What I meant to say was I think the great nationaldefense asset, aside from the Tennessee Valley, would be as valuable for the defense of New York City, as any other seaport of the country, and perhaps would be necessary for that.

Mr. MERRITT. Forgetting about national defense, the State of New York has lost many of its factories and plants, which has created an unemployment situation for us because, perhaps, of the low power rates, and the cheaper labor, be what that is—I do not know; however, the State of Tennessee, I assume, has been able to take care of its unemployment situation because of the T. V. A., and I know it is awfully hard for many States to get any jobs at T. V. A., and I doubt whether the State of Tennessee has any severe unemployment problem.

Getting back to the tax feature

Governor COOPER. Mr. Merritt, may I make an observation there? I know some of the Tennessee Valley Authority employees and I find them there from New York State, from Massachusetts, from the east. Most of their technical experts come, I think, from the east and the north, and while I am not wanting to limit the benefit of T. V. A. to Tennessee in any respect, yet I doubt if T. V. A. has been one of the major factors in relieving Tennessee of its unemployment problem, because we have an unemployment problem in Tennessee.

Mr. MERRITT. I want to point out this, that probably we have lost some of those men and they have gone down to T. V. A. to work, and we have lost the taxing power both of the personnel and from a business point of view, and Tennessee has taken advantage of the other States down in the Tennessee Valley. And I think perhaps when you say you have lost a tremendous amount of taxing power, you have made it up because of the influx of people and business into that territory.

Governor COOPER. May I answer right there I just want to get this fact before you gentlemen. We have not made up any loss. Our loss is going to increase as time goes on, under the provisions of the very bill here, in some respects, in that this bill is a conservative bill, insofar as the national viewpoint goes, because you safeguard the national interest in every instance. For instance, you pay us back 10 percent in tax replacement the first year, but you only pay us 9 percent the next year, and it goes on down to 5 percent in 1948, and you freeze our income in tax replacement; whereas the cost of State services will increase as time goes on, with a revenue increase to the Federal Government from any new industry that may come down there, but the cost of the State services increases.

Mr. MERRITT. That is all right, as far as the Federal Government is concerned, but I do not see why. Tennessee should be at such a tremendous loss, in comparison with other States. You took, for instance, Polk County a few minutes ago, and you were unable to give us the constitutional limitation on the taxation. I wish you would do that; I think it would play an important part in this.

Governor COOPER. While they are getting that, I would like again to call attention to something that Mr. Fitts yesterday called attention to, and that is that there is a well-established national policy of tax replacement.

The CHAIRMAN. Suppose you do not go into that, Governor. We know about that, and the gentleman yesterday listed it here in his statement.

Governor COOPER. That is right. But he did not bring out, I do not think, and I would like to bring out, with the chairman's permission, for the benefit of the record, that that tax replacement has varied all of the way from 25 to 50 percent in the past and beginning back as far as 1908, when Congress provided for 25 percent of the revenues derived from the national forests to go back and you come on down next to the Oil and Mineral Leasing Act, which replaced 37.5 percent of the revenues.

The CHAIRMAN. That is the same thing that the gentleman (Mr. Fitts) gave us yesterday, and you are reading from his statement, are you not?

Governor COOPER. It is information furnished by them; yes, sir. The CHAIRMAN. The committee has that already, I think.

Mr. MERRITT. Governor, in regard to these lands taken in Polk County, I understand they were cultivated lands-farm lands?

Governor COOPER. No; they would not all be farm lands.
Mr. MERRITT. What was the tax rate on these lands?
Governor COOPER. You mean for the lands in Polk County?
Mr. MERRITT. Yes; we are using that as an example.

Governor COOPER. The State of Tennessee tried to get up a full compilation of data on every county in Tennessee which took a good many months, which we supplied to all of you gentlemen of the committee.

Mr. MERRITT. Is that contained in here [indicating] ?

Governor COOPER. We compiled that and we believe those figures are reliable, and we furnished every member of the committee with a copy, but if there is any member of the committee who does not have this compilation of data, we will be glad to furnish it to him.

Mr. MERRITT. You think this legislation will give you back 50 percent of your losses; that is the way you figure it, according to the compilations that are in this record.

Governor COOPER. No; the present bill does not give the State government of Tennessee back anything. We propose an amendment that would return 50 percent of our lost revenue to the State government. The bill does replace the ad valorem or property tax to the counties, and we think that is the first great necessary good to come from the bill.

Mr. MERRITT. That is the amendment you read before?
Governor COOPER. That is the amendment I read before.

Mr. MERRITT. I wonder if you would just read that again. I missed the first few words.

Governor COOPER. I am not wedded to this particular language, but it is a suggestion, that we add, in H. R. 7424, on page 3, in line 19, these words:

And provided, That no State government shall be required to suffer a tax loss greater than 50 percent of the revenues formerly collected by it from private utilities and incident to the transfer of the private electric utility properties to public ownership within that State as of January 1, 1938.

The CHAIRMAN. Now, let us avoid repetition here as much as we can. That is already in the record, and we will have it printed and everybody can read it.

Mr. COSTELLO. Governor, did I understand you to say that the T. V. A. has taken away approximately 100 percent of the taxes formerly collected from utilities in Tennessee?

Governor COOPER. Ninety percent of the utility properties in Tennessee have been transferred to public ownership, and there has been a 90-percent transfer of public-utility properties. Now, the State of Tennessee, under this existing bill, will lose all of the revenues derivable from the public utilities, except about $65,000 a year. In other words, we will lose about $700,000 from our privilege tax, or business tax, alone.

Mr. COSTELLO. Had not any municipalities in Tennessee taken over private utilities before T. V. A. came into the picture?

Governor COOPER. It was a negligible acquisition. The acquisition had been all the other way-private utilities acquired municipal systems, and that is what was going on in the State of Tennessee for a considerable period of years.

Mr. COSTELLO. I do not suppose the State of Tennessee made any violent effort to collect taxes from municipally operated concerns, did they?

Governor COOPER. No. The State has not been deriving revenue from municipal plants to amount to anything. The plants in our State have been largely owned by the great privately owned utility companies, like the Commonwealth & Southern.

Mr. COSTELLO. Now, these municipal companies in the State have not made any effort to pay any form of taxation at all, either to the city, the county, or the State, have they?

Governor COOPER. I believe so. Is that correct?

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