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Mr. MacFARLAND. That is a question on distribution systems, as I understand it, as distinguished from transmission and generation. The figures show that the publicly owned utilities had made a contribution to local taxes in excess of the amount that was being taxed against privately owned utilities.

Governor COOPER. That is correct. I recall that now. This is a significant fact, that the municipal systems had contributed more in tax replacement than the private utilities had. I think that is borne out by the figures of the Public Utility Commission of Tennessee, and we have present a member, Mr. Hudson, of the Tennessee Utility Commission, and I hope you gentlemen will hear him after you hear me, because I think he will bring those things out.

Mr. COSTELLO. Did they make a contribution to the ad valorem tax!

Governor COOPER. Yes; they more than replaced the tax and paid more than the privately owned systems.

Mr. COSTELLO. Was that paid out to some agency other than the one owned by the utilities? In other words, if the utility was owned by the State, did they make that contribution, say, to the county or the city in lieu of taxes!

Governor COOPER. No; I think that figures in the payments back to the municipality, but I think that would be a legitimate consideration. However, I would prefer that you would ask a member of our public utilities commission, Mr. Hudson, when he gets on the stand, because he has those figures.

The CHAIRMAN. If it is paid back to the municipality, and the municipality owned the plant, what it would mean is that it is taking it out of one pocket and putting it in the other; is not that it?

Governor COOPER. I think all that means is that the municipality has merely allocated municipal taxes and they felt that was a legitimate thing to take into consideration, in view of the tax contribution of the publicly owned system. That is my understanding.

Mr. COSTELLO. Now let me ask you a question on another line. Did I understand you to say that possibly some eight or nine industries had located down there in your State!

Governor COOPER. No; I did not make any such statement. But I imagine there is a larger number that have located down there.

Mr. COSTELLO. On a question that you did bring up, that was the question of trying to take care of the children and people that came in as a result of new industries coming in there and adding to the pay roll, adding to your tax receipts in the State: they would more than take care of the additional cost to the State for education and other purposes?

Governor COOPER. All I was endeavoring to bring out there was that the State of Tennessee is entitled, before the committee, to present the facts applicable to the State's tax problem. Now, the bill pending before you fixes your situation at a definite sum. We do not know what ours will be. Our future depends, in many respects, on indeterminable quantities. We hope that industry will come down there, but industry may not come; we do not know. Now the formula fixed originally by T. V. A. has later proved unworkable, that is, this payment of 5 percent to Tennessee and Alabama has not proven to be a fair basis, and the plan presented here may not prove to be fair; but all we are trying to do is to live under the present system. And I again would like to call attention to the fact we are not here asking for anything, as we see it, that will add to the Federal taxpayer's burden; but inasmuch as the Tennessee consumers are now paying 12.5 percent in their electric bills for tax purposes, we think the revenues we are asking for today should come out of the 12.5 percent paid by Tennessee consumers. In other words, we are not wanting to bring new Federal money down there for tax replacement; we are just wanting to keep money in Tennessee that we are already paying in our electric bills.

Mr. BROOKS. Governor, there was only one thing I wanted to clear up, and it is sort of corollary matter to the issue you have in mind. I think the record ought to show something regarding it. That is the question of flood control, as analogous to the T. V. A. tax proposition.

Now, in the lower Mississippi Valley, especially, the problem of flood control is to handle waters that come down from the States above, and it is waters from Tennessee that come down there that have to be handled, and, naturally, in contributing to the building up of those flood-control works, we are handling in the lower part of the valley a problem created by those who live above us in the upper part of the valley. So, to that extent, I do not thing the proposition is analogous, and I think the record ought to show that. Do not you agree with me?

Governor COOPER. I thoroughly agree. I think that is a very fine statement.

Mr. BROOKS. For instance, when your flood waters from the Tennessee Valley come down through Mississippi, Louisiana, and Arkansas, you are creating our problem; do not you think that?

Governor COOPER. I thoroughly agree.

Mr. BROOKS. And that the State of Tennessee should make its corresponding contribution ?

Governor COOPER. Yes, sir. I believe that is an excellent point. And I understand when this Tennessee Valley program is completed, that the flood control in the Tennessee River and in the Tennessee Valley will affect the flood stage of the waters of the Mississippi by possibly as much as 2 feet, and I think, when this program is fully effective, you are not going to be troubled so much with floods down there.

Mr. BROOKS. Now, carrying that to its ultimate conclusion, would you say, in view of the large amount of land that is taken off of the tax rolls, we will say, in the lower Mississippi Valley, that the Federal Government should likewise make a contribution to replace the tax loss to the State?

Governor COOPER. I do not believe that the Federal Government has done that in the past in respect to navigation and flood control. It may be that some members of the committee may have better knowledge than I do on that particular phase of the question, but I do not believe there is any instance where local citizens' have contributed as much to flood control and navigation as Tennessee citizens have contributed, if you follow our suggestion, which is that we lose half of our State taxes as a contribution to flood control, navigation, and those other benefits we are receiving.

Mr. BROOKS. That is the reason you are willing to take that loss?

Governor COOPER. Yes. In addition to that, we are taking a 60percent loss on our reservoir lands which are being taken for floodcontrol purposes, and we feel that is a very heavy contribution for the Tennessee citizens to be asked to make, in comparison and contrast with what other citizens in other States have been asked to contribute when they had improvements from the Federal Government affecting flood control and navigation. We want to bear our share and an equal share, but we do not want to be discriminated against in that respect.

Mr. SPARKMAN. Governor, I want to ask you just a few questions. I want to go back to this proposed Faddis bill that you discussed briefly a few minutes ago, and ask you if, aside from the objection you had to it, you noticed that the tax rate proposed in that bill, in some instances, exceeded 100 percent?

Governor COOPER. Well, that, of course, would be a very objectionable feature. Of course, I have not had the benefit of every having seen Mr. Faddis' bill until he read it to me just then, and I think the objection which you raise there would be a conclusive objection against the passage of such a bill.

Mr. SPARKMAN. Now, getting back to the Tennessee situation: As I understand it, as I stated yesterday, as I believe you heard me, I regard this problem altogether as being one to be adjusted and not to be replaced.

Governor COOPER. Yes, sir.

Mr. SPARKMAN. As I understand the situation in Tennessee, the most acute problem arises with your counties, rather than with your State ?

Governor COOPER. Exactly correct.

Mr. SPARKMAN. So that the recent proposal was made that payments be made to the counties?

Governor COOPER. Yes, sir.
Mr. SPARKMAN. And I believe you endorse such an amendment ?
Governor COOPER. I fully endorse such an amendment.

Mr. SPARKMAN. Now, under the provisions of H. R. 7424, as it stands, without reference to your second proposed amendment, your State would lose, I believe, approximately $600,000 or $700,000? Governor COOPER. Yes.

Mr. SPARKMAN. I notice you refer to 50 percent as being approximately $350,000 ?

Governor COOPER. Yes; that is correct.

Mr. SPARKMAN. And if your amendment should be added to it, you would still be losing approximately $350,000?

Governor COOPER. That is correct.

Mr. SPARKMAN. I believe you stated if your amendment was adopted there would still be tħis 12.5 percent surcharge in the rates for taxes?

Governor COOPER. Yes, sir; in addition to that, there is a cushion of about 2.5 percent, as I understand the Tennessee Valley Authority contend they are making about 15 percent.

Mr. SPARKMAN. When we had this matter up last summer, there was some question as to the attitude of the county judges. Are you speaking here for the County Judges' Association of Tennessee?

Governor COOPER. I have a statement from the chairman of the County Judges' Association, Mr. Walker, of Lavinia, Tenn., and also a statement

Mr. SPARKMAN. Have they held a meeting and passed a resolution regarding this bill ?

Governor COOPER. They passed a resolution favoring this bill, as I understand, but asked payment direct to the county.

Mr. SPARKMAN. I wonder if you have it in such form that it could

go

in the record. Governor COOPER. I do not believe I have, for this reason, that the county judges passed a resolution, as the secretary tells me, but referred it to a committee to draft a proper resolution, which they failed to do. It has been certified as correct by the secretary and chairman, but they have not furnished it in that form. But what I do have is individual letters from the county judges from all over the State, which I have already put in the record.

Mr. SPARKMAN. You have put those in the record ?
Governor COOPER. Yes, sir.

The CHAIRMAN. Governor, are those county judges or anybody representing their association present here today?

Governor COOPER. A number of them were present yesterday and I hope some are present today.

The CHAIRMAN. Are they going to want to appear on the matter! Governor COOPER. I do not believe they want to appear; no, sir.

The CHAIRMAN. Well, they have been bombarding me with letters and telegrams requesting the privilege of appearing, and they are going to get an opportunity to appear before this is over with.

Governor COOPER. Yes, sir; that is perfectly proper. May I read this resolution, which I also have from the Tennessee Taxpayers Association. The resolution is very short, and I will just read the “Resolved” part:

Therefore, be it resolved, by the executive committee of Tennessee Taxpayers Association on this the 20th day of January, 1940, That Tennessee Taxpayers Association favors the enactment of the Norris-Sparkman bill and joins all others interested in this problem in requesting Congress to enact said bill.

The CHAIRMAN. Do they say in that resolution how much study they have given it; how many times they have seen it, and what they know about it, or not?

Governor COOPER. This association gives the greatest study to tax problems and is an association that commands respect throughout our State.

The CHAIRMAN. No doubt that is so; that is the reason this committee wants to have the benefit of their advice in the matter.

Mr. SPARKMAN. I would like to ask that that resolution be put in the record.

Governor COOPER. That is already in the record.

Mr. MERRITT. What is the membership of that committee you just referred to ?

Governor COOPER. It is a State-wide organization and they haveI do not know just how many members, but it has a large member

Mr. MERRITT. Do they pay dues ?

Governor COOPER. Yes. They have a large membership and are quite active and have been for a number of years in Tennessee.

Mr. ANDREWS. Governor, the capital investment in all of the T. V. A. property comes from the taxpayers of the country, does it not?

Governor COOPER. I did not catch the question.

ship.

Mr. Andrews. I say, the capital investment in all T. V. A. properties comes from the taxpayers of the country, Tennessee included ?

Governor COOPER. That is correct.
Mr. ANDREWS. It comes from the 48 States?
Governor COOPER. Just the same as Boulder Dam, or any other.

Mr. ANDREWS. I am interested in what the ultimate end of T. V. A. is going to be. There is an adage, "Do not send good money after bad money," and suppose a future Congress should enact legislation which would, in effect, say to the Governors of the States concerned—Tennessee, Kentucky, Alabama, Mississippi, Georgia, North and South Carolina-suppose it should take Tennessee and say, "Gentlemen, we will give you the whole T. V. A. property, capital investment and all; it is yours for you to operate in any way you see fit”; would you be perfectly willing to take the set-up and get your taxes from that and never come back to the Federal Government any more? You have a lot of faith in its earning power ?

Governor COOPER. If the figures furnished by the engineers of the Tennessee Valley Authority are correct, I would be delighted.

Mr. ANDREWS. You have great confidence in those figures?
Governor COOPER. Yes, sir.

Mr. ANDREWS. If that offer were made to you today, you would take that offer?

Governor COOPER. If those figures are correct, I certainly would, and I think they are correct.

Mr. HARNESS. Right along that line, if this committee or this Congress should say, "We will allocate to Tennessee their proportionate part of the profits based on the investment of the taxpayers of Tennessee”; would you be willing to take that in lieu of any other tax replacement ?

Governor COOPER. For the State government, I would certainly say, “Yes.”

Mr. HARNESS. For the whole State counties, cities, and everything?

Governor COOPER. Well, I think that would probably be a safe proposition for us, too, because we are the main ones affected. We pay 88 percent of the revenues, and 75 percent of the tax loss is attributable to Tennessee, and if we got 75 percent of the profits, I think we would be in real good shape.

Mr. HARNESS. I see you want 75 percent?

Governor COOPER. That is the present State loss. You were going to give us the whole thing.

Mr. HARNESS. The people of Tennessee have invested so much money in Federal taxes in T. V. A., have they not?

Governor COOPER. Yes.

Mr. HARNESS. Now, if you were delivered back the amount that the people of Tennessee have invested as capital in that industry, would you be willing to have allocated your proportionate share of the profits in lieu of all tax loss you sustained?

Governor COOPER. That who had invested ?
Mr. HARNESS. The taxpayers of Tennessee.
Governor COOPER. Have invested in what?
Mr. HARNESS. In T. V. A.

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