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Thus, the additional polling became a source of real gratification to those Congressmen who had supported the Taft-Hartley Act by proving that most of the people were behind the principles which the act sought to establish.
Mr. Benson has presented figures that clearly cast a new light on the public's feeling about oleo. It is obvious that the Gallup-poll results were both qualified and limited in scope, and that many were polled who, like the rest of us, would be inclined to vote instinctively against taxes.
However, when further questioning was made of these persons interviewed and an attempt was made by this psychological process to find out what they were really thinking about, you will notice that there were very definite modifications, proceeding down through that list of charts, just as there were modifications in connection with the additional questions asked as to the Taft-Hartley Act.
Dairy farmers could not believe that such basic considerations as have been suggested here in this poll would be overlooked on the floor of the House. They do not now believe that a Senate committee will ignore them. The dairy industry has had only the short space of 5 weeks to make the latest surveys and gather the facts.
It was only by the the cooperation of such professional groups as Benson & Benson, Fact Finders Associates, Inc., the Armour Foundation, and other authorities that we were able to assemble the information available today.
We believe that their surveys should be carried on to completion, so that the Congress may act not on emotional propaganda but on the basis of what is best for the country as a whole.
Let me remind you that, although repeal measures have been before the Congress for some time, no congressional or governmental authority or agency has analyzed them with the Nation's welfare in mind beyond the usual hearings conducted by the congressional committees.
No governmental agency has investigated the consequences of oleotax repeal to the dairy industry, to our supplies of dairy fluid milk, and other products, and to the nutritional standards of the Nation; nor have official studies been made to indicate how a fundamental change in our agricultural economy would affect our natural national resources.
No congressional probes have been conducted to determine the extent to which butter imitations are now being fraudulently passed off as butter. No studies have been made to develop means of curbing the certain and sharp increase in such frauds if Federal regulations are to be lifted. No scientific evidence, other than ours, has yet been presented to the Congress to show clearly what the people's real feelings are in this controversy.
What is needed are authoritative congressional surveys as well as studies made by private groups. Most phases of the oleo question involve national policy, and have a direct bearing on the well-being of virtually our entire population. Every nation in the world that values its dairy industry has found it necessary to regulate, or even to forbid, the manufacture and sale of butter imitations.
In that connection, Mr. Chairman, I have a number of supplementary tables directly bearing upon the case, including a list of the foreign countries, not all of them, but a number of the foreign countries, showing the character of regulatory controls that they have. And I would like to file these 13 tables as an appendix to my material.
The CHAIRMAN. They will be included.
Mr. HOLMAN. And in connection with that, I would like to point out that according to the New York Times of Wednesday, May 12, the French Academy of Medicine, in response to a query from the French Ministry of Health, which had asked the academy to rule on the advisability of adding vitamins and coloring matter to margarine, replied that although the matters were threshed out in a secret session, it was learned that the doctors had decided that vitamins could be added to the product, but only with prudence, while artificial coloring matter, no matter what its nature was, was categorically condemned.
And may I call your attention also to the fact that just a few weeks ago, the Canadian Senate, by a very substantial vote, refused again to permit the manufacture and sale of any kind of oleomargarine for domestic consumption within the Dominion.
In view of this, dairy farmers cannot understand how the Congress could consider legislation of such fundamental importance without a thorough and painstaking study.
On this basis, can we afford to risk the hasty repeal of a law that has been deemed vital to our economy since 1902? If there is some thought in your minds that conditions may have changed since that time, which we assure you they have not, let us investigate before taking action which may impair that economy,
Only the Congress has the authority and the facilities to examine all sides of the question, and to come up with soundly based answers. We submit that further investigation is necessary before any action whatever is taken, and we hope that this committee, rather than reporting a bill of this character, will recommend that a special subcommittee of this committee be appointed to investigate and that an adequate appropriation be made for such investigation.
Senator Lucas. How long do you think that would take?
Mr. HOLMAN. I think 6 months would be adequate for the subcommittee to make the investigation. It could be ready by January 1.
Now, for the second part of my testimony, which has to do with proposed amendments which we are offering at this time:
The Rivers bill, H. R. 2245, as it passed the House, would take out of the Federal statutes the taxes and license fees which the Federal regulation of oleomargarine is designed to implement and enforce. Elimination of the taxes and license fees will leave on the statute books the regulations, but they would no longer be necessary in connection with the power to lay and collect taxes.
And it is the taxation power, as the committee well knows, that is the whole basis of the enforcement of the Federal legislation.
Our attorneys have, therefore, raised the question as to whether these regulations, standing alone, can be enforced. We think it is quite likely that the ultimate effect of this bill would be virtually to wipe out the Federal regulation of oleomargarine.
We are proposing three amendments to the bill:
The first would retain the 10-cent-per-pound tax on colored oleomargarine, but would repeal the 14-cent-per-pound tax on uncolored oleomargarine, and reduce the occupational taxes on retailers, wholesalers, and manufacturers to $1 each per year.
The second amendment would repeal the 15-cent-per-pound internalrevenue tax levied on imported oleomargarine.
The third would repeal the internal-revenue tax of 3 cents per pound levied on the first domestic processing of coconut, palm, and palmkernel oils.
1. We are proposing retention of the 10-cent tax on butter-colored oleomargarine while repealing the other oleomargarine taxes, because the public interest, as well as that of the dairy industry is most vitally endangered by unregulated production and sale of the yellow-colored oleomargarine.
The retention of the color tax sanctions controls over the production and distribution of this product which wuld not be available under other powers of the Government.
The size of the tax alone is a deterrent to fraudulent practices. On the other hand, the taxes upon uncolored oleomargarine and the higher license fees may be a burden disproportionate to their importance as regulatory devices.
2. The 62-year-old, 15-cent internal-excise tax on imported oleomargárine should certainly be removed if, as proponents of this bill argue, the object is to lower the cost of food to consumers.
The oleomargarine manufacturers have screamed abuse at the dairy industry for what they claim was discrimination and special privilege. Yet in the 15-cent special tax on oleomargarine imports they have a special protection absolutely without equal in the tariffs or other taxes on other fats and oils, or on dairy products. The 15-cent tax, plus the regular duty of 7 cents on imports builds up a 22-cent wall against imports. We can see no fairness in granting the oleomargarine industry broad opportunities to masquerade its products as butter under the plea of cheaper food while at the same time that industry is protected from competition of others located outside our borders but equally desirous of providing American consumers with oleomargarine at a low price.
The possible sale of uncolored oleomargarine at slightly lower prices as a result of this amendment would benefit consumers measurably while having little effect on the basic factors underlying the competition of oleomargarine with butter.
3. Our final proposal is an amendment to repeal internal revenue taxes levied on the first domestic processing of certain imported fats and oils. As I said above, these are coconut oil, palm, and palm kernel oils.
These taxes first became effective May 10, 1934. They were intended to correct the ruinous level to which incomes of domestic vegetableoil producers had been brought by the competition of imported oils, principally coconut oil. During 1933 the last full year before the tax went into effect, cottonseed oil averaged 4.5 cents per pound in tank cars at New York. In 1935 the first full year of the tax, cottonseed oil rose to 10.4 cents per pound. Refined coconut oil rose from 4.8 cents in 1933 to 10 cents—including the tax-in 1935.
Today the price situation is different. Cottonseed oil has been selling recently for 38 cents a pound—more than 700 percent above the depression low. There is no longer a depression. The domestic oils and fats industry is thriving. Moreover, prosperity would be piled upon prosperity if some of the arguments of the proponents of
oleo-tax repeal can be believed. The domestic oil producers are being told that their already high prices would be raised even further.
When the processing taxes were first enacted they were intended to create an economic balance within our domestic agriculture. It was judged best for our whole economy to levy moderate import and internal taxes on cheaper oils.
The whole effect of recent developments, however—including the proposed repeal of the oleomargarine taxes and the reduction of tariffs in the recent general agreement on tariffs and trade at Genevahas been to upset the balance so carefully worked out in the legislation of the early 1930's. Since the balance is being disturbed, we are now advocating that the processing and import taxes, as outlined above, be taken off.
Another aspect of this situation is the current world shortage of fats and oils. Last year the world produced only 20,000,000 tons of oils and fats—that is approximately 44,000,000,000 pounds-as against nearly 22,000,000 tons in 1935–39. In the meantime, the world's population has grown larger. Also, some of the former sources of supply are now dry or almost dry. Manchuria, formerly the world's principal source of soybeans and soybean oil in international commerce, has been shut off from world trade; and that product, as you know, is going back into Russia.
The coconut industry of the Netherlands Indies—once a major source of supply-is still largely paralyzed. World exports of fats and oils in 1948 have been forecast at only 3.7 billion pounds; more than 40 percent below the 1935-39 average. World supplies are being allocated through the Food and Agriculture Organization. The shortage and the allocations would preclude a huge influx of foreign oils, and the present removal of the processing taxes on imported oils would not have the disastrous effects possible in a severe depression. It would, moreover, be consistent with the theory of the House bill in giving consumers the cheapest possible product.
That concludes my direct testimony, Mr. Chairman.
The CHAIRMAN. Mr. Holman, have you gentlemen given any special attention to the suggestion of the Chair at the opening of the hearing, posing the question whether there could be a series of regulations that would protect the consumers' choice, that would not be based upon a tax?
Mr. HOLMAN. I have our legal department at work on the problem, Senator. I do not know what success they will have. Also, we have the legal departments of two additional member associations, who employ very competent counsel, studying the question. We hope to come to some conclusion on the matter, and we will be glad to furnish it to you at the very earliest possible date. I think you said you wanted to have these suggestions in by the end of the week.
(The memorandum appears on p. 97.)
The CHAIRMAN. You have the form of your amendments attached to your statement?
Mr. HOLMAN. Yes; they are attached as a part of my statement.
The CHAIRMAN. Thank you very much, Mr. Holman.
(The proposed amendments and tables previously referred to are as follows:)
PROPOSED AMENDMENT No. 1 To H. R. 2245
H. R. 2245 is amended by striking out all language following the enacting clause and inserting the following new sections: • “Sec. 1. Section 2300 of the Internal Revenue Code (26 U. S. C. sec. 2300) is amended by adding at the end thereof the following proviso: ‘Provided, however, That effective July 1, 1948, the provisions of sections 2300 to 2315, inclusive, and sections 3200 and 3201 of the Internal Revenue Code (26 U. S. C. secs. 23C0-2315; 26 U. S. C. secs. 3200–3201) shall be applicable only to oleomargarine which is yellow in color as defined in section 2301 (a) (2) of said code.'
“SEC. 2. Section 2301 (a) (1) of the Internal Revenue Code (26 U. S. C. sec. 2301 (a) (1)) is amended to read as follows:
• '$ 2301. Tax-(a) RATE.—(1) Upon oleomargarine which shall be manufactured and sold, or removed for consumption or use, there shall be assessed and collected a tax at the rate of 10 cents per pound.'
“SEC. 3. Section 2305 of Internal Revenue Code (26 U. S. C. sec. 2305) shall be renumbered section 2315 and the following new section 2305 shall be inserted :
8 2305. VENDORS. "(a) DEFINITION.—Every person who sells, vends, supplies, serves, or furnishes oleomargarine at any place where meals or lunches are served or sold for the use and consumption of others, except to his own family, shall be held to be a vendor of oleomargarine.
"*(6) NOTICE REQUIREMENTS.--Every vendor of oleomargarine shall, in addition to the requirements of State or local law, display in such manner as to be clearly visible and readable from each table, counter, or other place where oleomargarine is so sold, supplied, served, or furnished signs bearing the words “Oleomargarine served here” and shall place upon each menu card used in connection with such meals or lunches the same wording so displayed as to be equally as prominent as the wording in the main portions of the menu.'
"SEC. 4. Section 2308 (j) of the Internal Revenue Code (26 U. S. C. sec. 2308 (j)) is amended by inserting after the first word 'any' the words 'vendor or'.
“Sec. 5. Section 3200 of the Internal Revenue Code (26 U. S. C. sec. 3200) is amended to read as follows:
"§ 3200. Tax.-Each manufacturer of, wholesale dealer in, retail dealer in, or vendor of oleomargarine shall pay a special tax of one dollar per year.'
"SEC. 6. Section 3201 of the Internal Revenue Code (26 U. S. C. sec. 3201) is amended by adding a new subsection thereto to read as follows:
“'(d) VENDORS.—Every person who carries on the business of a vendor of oleomargarine without having paid the special tax thereof, as required by law, shall be fined not less than $50 nor more than $1,000.'”
PROPOSED AMENDMENT No. 2 To H. R. 2245
H. R. 2245 is amended by adding a new section to read as follows:
“SEC. Section 2306 of the Internal Revenue Code (26 U. S. C. sec. 2306), imposing an internal revenue tax of 15 cents per pound on oleomargarine imported from foreign countries, is hereby repealed.”
PROPOSED AMENDMENT No. 3 to H. R. 2245
"SEC. Section 2470 (a) .(1) of the Internal Revenue Code (26 U. S. C. sec. 2470 (a) (1)) imposing a tax of 3 cents per pound upon the first domestic processing of coconut cil, palm oil, palm kernel oil, and certain fatty acids and salts, is hereby repealed.
“SEC. Section 2470 (a) (2) of the Internal Revenue Code (26 U. S. C. sec. 2470 (a) (2)) is renumbered section 2470 (a) and amended by striking out in the first sentence thereof the following parenthetical phrase '(in addition to the tax imposed by the preceding paragraph)'."