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The CHAIRMAN. You would be sure to get out and under.

Mr. MONTGOMERY. I may point out that the harness manufacturers never asked for and never got a law requiring the automobile consumer either to paint his own car or to go without. We did not have any taxes against selling automobiles already colored.

As a result, we have got rid of the horse and buggy and have a better substitute. But that is not going to happen in the case of butter.

During the recent war we were told to eat cheese as a substitute for meat. We shall be hearing that again this summer.

Fortunately our Government has not made it a practice to penalize substitutes. Right now it is vastly subsidizing a substitute for crude oil. The synthetic-rubber industry is virtually a Government subsidy.

Oleomargarine is a substitute for butter. Our Government should not place penalties upon it on that account.

The mistaken policy which our Government has pursued with respect to oleomargarine should now be corrected. The dairy industry has curtailed the production of butter materially. This is because dairy farmers are finding more profitable outlets for their milk in whole-milk products. This is good for consumers, too, because the greatest nutritional value of milk is in its nonfat solids. But because of the curtailment of butter production we are not meeting consumer requirements for table fats. Oleomargarine has not made up the difference. Its production and use should be encouraged because we need it.

The Congress of Industrial Organizations has no quarrel with dairy farmers because they are putting less milk into butter manufacture since the war. But it believes that other farmers, those who grow cotton, soybeans, and peanuts, should be given every opportunity to produce and sell the vegetable oils which they want in place of the butter fat we cannot get and cannot afford to buy. The Federal Government should repeal the discriminatory taxes which deprive these farmers of that opportunity and deprive us as consumers of a wholesale and less costly type of food.

And briefly, just one other point: We think that all of these manufacturing and wholesale and retail taxes on margarine should be repealed in the interests of developing the widest possible channels of distribution for that product. At present, butter is sold as a staple on very narrow margins, between the retailer and the farm price of butterfat. Oleomargarine is still more or less of a specialty because it is not so widely and generally used.

We believe that if the channels of trade are fully opened to this product, competition will develop which will bring the retail price of margarine closer in line with its cost. I think it has been pointed out to this committee, or certainly will be, that whereas oleomargarine sells at about half of the price of butter at retail, the raw materials which the manufacturer buys cost him only about a third of the price of bu terfat, and there is that larger margin in this product which we believe and hope will be reduced when the opportunities for handling it are fully opened up by repeal of these laws.

Thank you, Mr. Chairman.

Senator Hawkes. May I ask you this question? Do you think if this bill were passed, and permission was given to color margarine, do you think the benefit of the lower costs of production will reach the ultimate consumer as you want it to, and as I want it to, or do you think it may not?

Mr. MONTGOMERY. I am afraid under present conditions, when so many of the things we buy are sold in what is called a seller's market, that it is not realistic to look for very active competition or for getting the full benefits of competition. That I hope is a temporary condition, which is not going to continue.

I do not think that is any reason for keeping the laws that are hindering competition. I know that you do not.

Senator HAWKES. I think you have given a very good answer. I think where you have a shortage of practically everything, the full benefits will not be obtained as quickly as they will under a competitive market where production is in excess of demand or equal to it.

Mr. MONTGOMERY. I agree, but I think there will be some increase in the competition in oleomargarine very quickly. I think small margarine manufacturers will grow up, finding outlets through these retail stores that are not now handling it at all, and that we will have the benefits of competition in the manufacture and sale of that product.

Senator HAWKES. Mr. Chairman, I was not in the meeting this morning because I had to attend another meeting, but I remember we discussed this question of the restaurant and so-called fraud in the restaurant at a previous meeting. I am just wondering whether you can straighten me out.

Why cannot a restaurant today buy oleomargarine and the color and mix that up and serve it on the table ?

Mr. MONTGOMERY. I think they can. I think the point was made by one of the witnesses this morning.

Senator HAWKES. I am sorry I was not here. What I have in mind is that this question of serving somebody oleomargarine instead of butter in a restaurant, as I have thought of it, becomes less of a question in my mind because I think they can do it today. Am I right or wrong?

Mr. MONTGOMERY. I believe that they can. I think there is the possibility for a great deal of substitution in restaurants; as a consumer I would like to see that prevented. I am not sure that I know how to do it. I certainly know that when I order a cup of coffee, I hope that I get coffee, and often I find that I do not. “Then go to a restaurant that really sells you coffee that has plenty of coffee in the cup, you may say. This problem that you are raising is not peculiar to oleomargarine at all. There are all sorts of substitutions possible in restaurants, and I dare say in a good many restaurants they are practiced.

I wish we would get away from that. That is not the problem before this committee, because it is not peculiar to oleomargarine and butter.

Senator HAWKES. If a restaurant put on the bill of fare “Bread and butter, 10 cents,” and then served oleomargarine, they would be violating the law, would they not?

Mr. MONTGOMERY. I would think so. Are they violating the law if they put on "Fresh vegetable soup,” and sell you canned vegetable soup?

Senator HAWKES. I think the question is, How fresh? I think it might come in there. What I am getting to is this: What are they going to do when oleo, if this law is passed and oleo has more of a free market than it has had—what distinction-one question was brought up this morning as to how they would overcome that. They would say bread and oleo, or what, on their bill of fare!

The CHAIRMAN. Senator Fulbright has suggested an amendment that would require them to publish it; to put a sign up.

Senator HAWKES. Put a sign up in the restaurant ?
The CHAIRMAN. That is required in many States.
Senator HAWKES. Thank you very much.
The CHAIRMAN. Thank you.
Mr. MONTGOMERY. Thank you.

The CHAIRMAN. The next witness is Tyre Taylor of the National Association of Retail Grocers of the United States.

STATEMENT OF TYRE TAYLOR, NATIONAL ASSOCIATION OF

RETAIL GROCERS OF THE UNITED STATES, WASHINGTON, D. C.

Mr. TAYLOR. Mr. Chairman and gentlemen of the committee, my name is Tyre Taylor. My address is 712 Jackson Place, here in Washington. I appear here on behalf of and as general counsel to the National Association of Retail Grocers, the headquarters of which are at 360 North Michigan Avenue, Chicago.

The National Association of Retail Grocers, gentlemen, represents and speaks for the independent retail grocers of the United States. Its opposition to these federal taxes and restrictions on margarine is of very long standing. As a matter of fact, for more than 40 years, in recurring national conventions, we have been passing strong resolutions against all of these restrictions.

At this point, if I may, Mr. Chairman, I would like to introduce for the record a copy of the last resolution which was passed by our national convention in San Francisco last June.

The CHAIRMAN. It may appear in the record at this point. (The resolution is as follows:) Whereas the special Federal tax on retail dealers in oleomargarine cannot be justified as necessary to protect public health since oleomargarine is a pure food product, subject to the same vigilance of the Federal Food and Drug Administration as other foods, and it cannot be justified as a revenue measure since only a small amount of money is collected; and

Whereas this tax is unwarranted and serves no useful or legitimate purpose of the Federal Government; and

Whereas it is an unjust discrimination against the lower income groups and tends to keep prices up at a time when a downward adjustment of prices is being called for by the President and his administration; and

Whereas the National Association of Retail Grocers has a record of long and continued opposition to this tax on retail dealers : Therefore be it

Resolved, That the association renew and redouble its efforts to have this unjust tax repealed and that to this end the national association invite the active assistance and cooperation of all affiliated State and local associations.

Mr. TAYLOR. Of course, in the first place, gentlemen, these taxes are an unmitigated nuisance from the standpoint of the consumer. They impose on the housewife the time-consuming mess of mixing in the coloring: How many woman- and man-hours have been wasted in performing this exasperating chore over the past 62 years will never be known, but the total if it could be determined would be fantastic.

But, more important, these taxes penalize the distribution and use of a wholesome, economical product with a high nutritive value. That margarine is a wholesome and nutritious food product is no longer denied even by those who perpetuate the restrictions. That it is also economical as compared with other table fats is likewise not open to question. The price of butter here in Washirngton last week was 97 and 98 cents a pound. That of margarine, uncolored, was 45 cents; colored, 55 cents.

I might add, gentlemen, that my information is that these items are almost universally carried by the retail grocers at a loss; in other words, they do not return the cost of operating:

In this connection it should also be noted that the people who are penalized most by these taxes are precisely those with the very lowest incomes. These taxes are all essentially taxes on the poor, for the simple reason that at the present prices many cannot afford to buy butter.

Another aspect of the situation which deserves, and, I am confident, will receive your thoughtful attention is the fact that even if low-income consumers could afford butter, there is not enough of that product available to meet their minimum needs.

Furthermore, the present production trend of the industry is downward. In 1946 both per capita production and per capita consumption of butter were about half what they were at the turn of the 'century, when the economic war on margarine really got going in a big way.

Repeal of all these taxes already voted overwhelmingly by the House is a practical, tangible contribution which Congress can make now to the counteracting of high food prices, and it can do this as the Under Secretary of the Treasury has told you without any appreciable loss of revenue.

The burden on the retailer, here we have reference of course to the $600 annual retail dealer tax on uncolored margarine and the $48 tax on the colored, as well as the mass of regulations and restrictions which accompany these levies.

There is no question whatever, gentlemen, but that these taxes do prevent thousands of retailers from handling margarine at all. In 1947, 270,000 grocers paid the tax, or about half of the total number of stores. On this point, and in preparation for these hearings, the National Association of Retail Grocers conducted a survey to obtain some idea of the percentage of its members who do not now handle margarine, but would do so if these taxes were removed. A total of 1,175 retail grocers were interviewed, mostly by telephone. They represent all sections of the country. Of this number a total of 402 or 34 percent do not now have a license to sell either white or colored margarine. However, 1,169 of the 1,175 interviewed, or better than 99 percent, said that they would handle the product if the restrictions were removed.

The discrepancy between the 34 and the 50 percent mentioned above, we account for by the fact that the members of our association operate comparatively large stores, the average gross in 1947 being $134,000. The burden of having to pay a license fee is of course not the only expense and hardship. There is also the mass of highly technical regulations and requirements which grocers must follow or suffer the consequences.

First of all the retailer must file every year certain special tax returns. Then he must be sure conspicuously to display his tax stamp

many months.

or pay a fine of $10. If one of his partners dies or withdraws, or additional partners are taken into the firm, or if he changes his name or relocates his place of business, he must remember to file another forin with the collector, or pay a penalty which may run to 25 percent of the tax.

The retailer is under obligation to follow certain requirements in displaying margarine in his store, and if a customer enters his store, and purchases over 10 pounds of magarine, and the grocer fails to have the customer make payment in at least two separate transactions, the grocer will be classed as a wholesaler, and he will be required to pay $200 for a license, plus a penalty for failure to file a return. And of course in the case of the colored margarine that figure would be $480 plus the fine.

And innocent mistakes like that could cost the grocer his profits for

In addition he must be at all times advised as to the branding and marking requirements of the margarine tax regulations. If he does not know all of these requirements and innocently sells a misbranded package, even though he shows that the product was sold in cartons as marked and packed by the manufacturer, he will be held liable for the violation,

Then the retailer must be sure at all times that his sales of margarine are completed at his place of business. Thus the grocery boy cannot deliver a pound of margarine to the home of Mrs. Brown unless she included this item when she telephoned her order. The boy may have the margarine in his truck, but if he sells it to her at her home, the grocer will be required to pay a $6 tax.

Still another inequity in these taxes, and a source of continuing irritation to the small independent dealer is the fact that the tax and the regulations are applied equally on all retail merchants regardless of whether they sell 10 pounds a week or 1,000 pounds. To a large chain store the license fee of $6 or $48 is of course only a trifle. But not so to the small independent who is competing with the chain.

It is of course ridiculous to place dealers in margarine in the same regulatory category with dealers in liquor, narcotics, marihuana, and firearms. Without laboring the point, we submit that there is no danger to public health and morals in permitting the unlicensed sale of a comparatively cheap and wholly wholesome food product. On the contrary, if abstension from profanity, especially by housewives, be a contribution to public morality, .we suggest that the latter will be affirmatively uplifted by the removal of these unnecessary irritants; also that the public health will benefit from the removal of this cause of high blood pressure.

Finally, these laws are the very antithesis of the economic system under which this Nation has grown and prospered. Under this system of free enterprise any person has the right to make and sell any domestic product which is not harmful. The exercise of this right free from discriminatory governmental interference is the foundation of our political and economic liberties. To deny a man the right to make or sell a product for which there is a public demand and social need, unless he submits to discriminatory taxation is a wrong which no law in this country can justly impose, and when, as in the case of antimargarine laws, such discrimination is made to protect the market for a competing product, the evil which results is magnified.

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