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act to regulate the traffic in oleomargarine,' reads in part as follows: "This act provides that any person who shall knowingly sell, or offer for sale, any article or substance in semblance of butter, not the legitimate product of the dairy, made exclusively of milk and cream, but into the composition of which oil or fat of animals or melted butter, or any oil thereof, enters as a substitute for cream, in tubs, firkins, or other original packages, not distinctly, legibly, and durably branded,
shall be guilty of a misdemeanor,' etc. This section of the act of 1881 was held to be a legitimate exercise of police power.
“The public may be protected by appropriate legislation against imposition in the purchase of articles for consumption; and if, as we may assume, the prevalent compounds resembling butter in appearance and flavor, and put on the market as a substitute for it, and generally known as 'oleomargarine,' 'butterine,' etc., are liable to deceive and mislead purchasers and consumers as to the real nature of the product, and—then we think there may be sufficient reasons why the legislature may, in its discretion, meet the evil sought to be remedied by provisions for the suppression of the manufacture and sale of such artificial compounds altogether (State v. Addington, 12 Mo. App. 217; S. C. 77 Mo. 110; People v. McGann, 34 Hun. 361)."
The court further holds: “As respects the right or liberty of the citizen to engage in business, and conduct industrial pursuits, these privileges are to be enjoyed in subordination to the general public welfare, and all reasonable regulations for the preservation and promotion thereof. ‘All property,' says the court in Com. V. Alger (7 Cush. 55), 'is held subject to the general regulations which are necessary to the common good and general welfare. Rights of property, like all other social and conventional rights, are subject to such reasonable limitations in their enjoyment as shall prevent them from being injurious, and to such reasonable restraints and regulations, established by law, as the legislature, under the governing and controlling power vested in them by the constitution, may think necessary and expedient (Thorpe v. Railroad Co., 27 Vt. 149).
“In People v. Arensburg, the following statement appears: "The amended New York law on the subject under consideration (Session Laws New York 1885, ch. 458, sec. 2) prohibits, among other things, the manufacture, except from unadulterated milk and cream, of any product “in imitation or semblance of” natural butter made from cream, and also prohibits the sale of any article produced in violation of such act.' In People v. Arensburg (40 Hun. 359), a conviction for the violation of that act was sustained, on the ground that the legislature might not only interpose to protect the public health, but to prevent fraud and imposition in the simulation of a healthy article of food universally consumed by the people; and upon this proposition we are disposed to rest our decision in this case.
“Oleomargarine and kindred products have meen manufactured and disposed of to a greater or less extent for years, and there has been sufficient opportunity to test, by observation and experience, their general character, and the methods adopted in conducting the business of the manufacturer and sale of such substitutes for butter, so as to enable the legislature to determine as to the necessity or propriety of police regulation or restriction. It is doubtless easy to introduce cheap and unwholesome ingredients into their manufacture, and the product is easily passed off upon the consumer, under the semblance of butter, without detection of the fraud.
"It is claimed that the act is repugnant to article 4, section 27, of the constitution, on the ground that the subject matter of section 4 is not embraced in the title. But the provisions of that sections are, we think, legitimately connected with the subject of the act and included therein. An article manufactured and sold as butter, which is not a genuine dairy product, would fairly come within the spirit and object of the act, as entitled, without reference to the extent of adulteration, or the peculiar process of manufacture, and though the product be wholly simulated.
"This legislation sufficiently conforms to the title, and, as before observed, is justified, because the adulterated article is not readily distinguished from the genuine, and is easily substituted for it, so as to work a fraud upon those who actually use and consume it, as well as upon purchasers; and for these reasons it was considered by the legislature that the mischief could only be effectually suppressed or remedied by the imposition of severe penalties.”
The First Biennial Report further states in regard to the sale of oleomargarine that a number of dealers admitted having sold what they had bought for butter but decided afterwards that it was oleomargarine.” The report further states that in "canvassing the city I found men selling oleomargarine as butter without any marks on the tub as requested by the law.” Court cases involving this type of fraud were successfully prosecuted in Minneapolis in 1886.
In March 1886, the firm of Anderson & Co., Stillwater, was indicted for selling oleomargarine in tubs. The tubs bore the legend "Eclipse Dairy" as the only label. Anderson & Co. sold this as butter and charged the price of butter for
In view of the above history of the establishment of Minnesota law regulating oleomargarine, it would seem that effective curbs need be retained to protect not only the Nation's dairy industry, but also the consuming public who want and pay for genuine butter.
NATIONAL COOPERATIVE MILK PRODUCERS FEDERATION, WASHINGTON, D. C.
NINE REASONS WHY THE FEDERAL OLEO LAWS SHOULD BE RETAINED
Present federal oleomargarine laws provide for a 14-cent per pound tax on the uncolored product and a 10-cent per pound tax on the colored. They also provide for occupational taxes of $600 a year on manufacturers, $480 on wholesalers, and $48 on retailers of colored and uncolored oleomargarine. On wholesalers of only uncolored oleomargarine the taxes are $200 a year. The retailer of uncolored oleo pays a tax of only $6 a year.
These laws should be retained because :
1. They harm no one. They are not burdensome to manufacturers, handlers, or consumers. The trivial benefits that might be derived from their repeal would be far outweighed by the damage to our agricultural economy and to the consumers' interests.
Proof that the laws are not restrictive to the oleomargarine industry is the fact that since 1941 oleo sales have more than doubled ; retail outlets have increased 64 percent. These are the figures of the Bureau of Internal Revenue. The same authority shows some 260,000 retail oleo outlets-about every other food store in the Nation.
As for the consumers' interests, no one pays the 10-cent tax unless oleo is purchased yellow. The 14-cent per pound tax is paid by the manufacturer, and is a negligible amount per capita. The old contention that the home coloring of oleo is tedious and wasteful no longer holds water. Modern packaging enables a housewife who wants yellow oleomargarine to color it easily, quickly, and without waste.
2. Repeal of the laws would open the doors to fraud upon the consuming public.
Many believe that fraud is not possible in substituting colored oleo for butter because of the existence of the pure food and drug laws. Actually, these laws have no jurisdiction as long as the frauds are practiced within State borders. Only through the operation of present Federal tax laws can the Government reach within State borders to suppress and prosecute fraudulent practices.
To permit colored oleo without the present regulatory laws would invite widespread substitution of an inexpensive yellow imitation for a genuine product. Among the thousands of handlers of oleo-in warehouses, trucks, stores, restaurants, and elsewhere—there would be those who could not resist this lure of easy money.
3. Repeal of the laws would seriously damage an important segment of American agriculture and threaten the Nation's dietary standards.
Uncontrolled and ruthless competition of a low-cost product in almost identical imitation of butter would hurt butter prices and drive many farmers out of dairying. Unfortunately those who say "let the consumers drink milk” do not have the answer to this dilemma.
To have enough milk to meet fluid demands in the slack season requires more than enough milk in the flush season. Some of this excess must go into butter. Without a butter outlet farmers would cut their herds toward the point where there would be insufficient fluid milk in the slack season. Cattle numbers would continue to decline. In the final analysis the question is whether America is to continue its meat and milk products diet, or revert largely to a grain and field crop subsistence.
4. Repeal of the oleo laws would not benefit any segment of American agriculture.
Soybean oil and cottonseed oil bring no more when sold for oleomargarine than when sold for other uses. If the oleo market disappeared, the other outlets would still be available. As it is, the oleo industry accounts for only 5 percent of the farm returns from soybeans and only 112 percent of the farm returns for the total cotton crop. Even in its total, cottonseed oil accounts for only 7.26 percent of the cotton crop value. Of this, 3.27 percent comes from the shortening industry and 2.54 percent from other uses.
5. Repeal of the laws would be costly to consumers.
Already (in the city of Washington, D. C., for example) colored oleo has sold on the same day at 14 to 20 cents per pound more than uncolored brands. The tax is only 10 cents per pound.
If present laws were repealed, the production of colored oleo could be expected to virtually displace uncolored oleo. There would be nothing to prevent the colored product from being sold at substantially higher prices than the uncolored-with little or none of the uncolored available. At the same time the price spread between colored oleomargarine and butter might be great enough to accomplish the primary purpose of the oleo interests—to drive butter from the table spread market.
6. Other laws already give oleomargarine a disproportionate competitive advantage over butter.
Oleomargarine already has been given competitive privileges which are denied to butter. It may be “fortified” with vitamins, flavored with butter flavor, and preserved with benzoate of soda. None of these—nor any other extraneous substances—may be added to butter.
7. Other imitations of good butter are taxed; why should, oleo be exempted?
Adulterated butter—which, like oleo, is an imitation of good butter-carries the same per pound tax and the same manufacturers', wholesalers', and retailers' occupational taxes as does colored oleo. Renovated or process butter carries the same per pound tax as uncolored oleo. There is no reason why an exception should be made for oleomargarine.
8. Oleomargarine is not entitled to the color yellow.
The claim that oleo has as much right as butter to the color yellow is false. Oleo in this country is produced from the oils of cottonseed and soybeans. The oleo industry claims it must bleach these oils white because of Federal laws. The real reason is: when cottonseed oils are turned into fat they become gray; and when soybean oils are turned into fat they become green. So to have a uniform color the oleo manufacturers must bleach out the gray and green colors. It is impossible to produce a natural yellow oleomargarine from domestic oils.
Butter, on the other hand, is always yellow-although at some seasons of the year it is less yellow than at others. When color is added to butter it is for the sake of uniformity-not for the purpose of making it look like some other product. In tests run at the University of Wisconsin on four commercial milk supplies, it was found that the natural color of butter is at its lowest ebb during March and April. Even at this low ebb, it never went below 2.0 Lovibond Tintometer units, Oleomargarine become subject to the 10-cent color tax when it exceeds 1.6 Lovibond units of yellow and red combined.
9. Repeal of the oleo laws would set the precedent for other imitation foods.
The relative nutritional values of oleomargarine and butter has no bearing on the repeal of the oleo statutes. Even if oleomargarine were identical in nutritional values with butter, the repeal of the laws would set a dangerous precedent. Such actions would establish the philosophy that an imitation food product achieves full legal legitimacy if it is nutritionally equivalent to the product it imitates. The floodgates would be down to a whole category of simulated dairy products such as filled cheese, filled ice cream, and filled milk. Our standards of food products would be undermined. Imitations and substitutions would take over our food industries.
STATEMENT OF WILLIAM J. MURPHY, DAIRY COMMISSIONER, STATE OF NORTH DAKOTA,
TO SENATE FINANCE COMMITTEE ON OLEOMARGARINE TAXES
Mr. Chairman, I am happy to have this opportunity to discuss with this committee the matter of Federal taxation of oleomargarine. I will make this statement as brief as possible and request that the subject matter contained herein be given due consideration by this committee.
As dairy commissioner for the State of North Dakota, I am charged under our State statutes with the responsibility of supervising the production, processing, and sale of all dairy products in North Dakota so as to further the interests of our dairy farmers. I am also responsible to the consumers in protecting them against the fraudulent sale of imitations and substitutes of dairy products. From the viewpoint of both dairy farmers and consumers I am deeply con cerned with the implications of the River's bill, which is now before your committee.
There are several pertinent facts relative to this bill which I feel should be given due consideration by your committee--facts which I feel indicate the urgent need of maintaining existing taxes. This isn't just a question of butter versus oleo; the issue involved is the protection of our great dairy industry, the consuming public, and maintaining the fertility of our soil.
It is a known fact that the present production of milk is insufficient to provide the consuming public with adequate amounts of dairy foods to provide a nutritional diet that is recommended by scientists and dietitians. It is also a known fact that dairying as part of a well-balanced agriculture is the best practice known for the conservation of our soils. Dairy farmers also provide the major part of the market for cottonseed and soybean meal, which market provides for the largest percentages of the income to the producers of these products. Figures released by Federal agencies show that the cotton farmers' income from cottonseed cake and meal is approximately seven times greater than their income from oil used to manufacture oleomargarine. Soybean farmers' income from meal was, as shown by these reports, over four times greater than the value of oil used in oleomargarine. The oleo industry can and will use any other vegetable oil they can purchase at a lower price, and the possibility of using mineral oil in their product is being explored,
Butter is the stabilizer of the dairy industry, providing a steady year-round market for butterfat and especially during the period of flush production. If the unrestricted sale of oleomargarine, colored yellow to resemble butter, is permitted, there will undoubtedly be a drastic curtailment in milk production as a whole and especially in the major butter-producing States. · This will mean a very short supply of milk during the seasons of low production and consumers will be unable to secure sufficient milk for a minimum nutritional diet. The cotton and soybean farmer will lose a considerable portion of the market they now have for cottonseed and soybean meal. The decrease in the number of dairy cows will intensify the problem that we all are now concerned with, the depletion of our soil fertility.
If the consumers were given the correct information as to what their interests are in this bill, public sentiment would be as strong for the defeat of this legislation as it now is in favor of passage.
Under present regulations governing the manufacture and sale of oleomargarine, it is permissible to add diacetyl so as to make the product taste and smell like butter. The mixing of the product in skim milk further adds to the butter flavor and aroma. It is also permissible, under these regulations, to add benzoate of soda as a preservative. If the manufacturers of oleo are permitted the unrestrictive use of yellow color, the consuming public will undoubtedly be the victims of the fraudulent sale of this product as butter.
With the price incentive what it is at the present time, who is naive enough to believe that unscrupulous manufacturers and distributors will not take advantage of a situation such as this. I hope the members of this committee will seriously analyze the reason why the oleo interests are so determined to have the privilege of coloring their product yellow. If these oleo witnesses were honest with you they would tell you that the reason they want the yellow color is so that the consumers in homes and in public eating places will be led to believe they are eating butter.
If the Federal taxes on yellow-colored oleo are removed, the consuming public will have lost the last measure of protection they now have. Yellow color is nature's trade-mark for butter and all butter made, regardless of time of year or type of feed fed to cows, contains the yellow color in varying degrees according to carotene content of feed consumed by the cow.
Any manufacturer that cannot get public acceptance of his product without dressing it up to resemble a superior product has, in my opinion, a very weak case and should not be granted special privileges under Federal or State statutes.
NATIONAL-AMERICAN WHOLESALE GROCERS' ASSOCIATION,
May 14, 1948. Hon. EUGENE D. MİLLIKIN, Chairman, Senate Finance Committee,
Senate Office Building, Washington 25, D. C. DEAR SENATER MILLIKIN: National-American Wholesale Grocers' Association, with members in every State of the Union, represents approximately 75 percent of the wholesale grocery volume of the United States. The association favors the enactment of legislation to repeal the tax on oleomargarine, along the lines of the bill now before your committee and on which measure hearings will begin May 17.
At Atlantic City, on January 22, 1948, this association adopted a convention resolution reading as follows:
"Repeal of margarine taxes: We advocate repeal of the existing Federal and State statutes that impose taxes on sales of oleomargarine, and also provide for occupational license fees on: manufacturers, wholesalers, and retailers of margarine.
“We recommend that our members study this subject and cooperate in the program to bring about elimination of these penalties, which obstruct the free movement of wholesome food products manufactured from raw materials produced in the United States."
May I ask you please to include this communication in the record of the hearings? Thanking you in anticipation of your consideration and kindness, I am Sincerely yours.
M. L. TOULME, Executive Vice President.
STATEMENT FILED ON BEHALF OF THE NATIONAL EDUCATION ASSOCIATION WITH
THE SENATE COMMITTEE ON FINANCE, MAY 17, 1948, BY H. FRANCES BOYER OF THE LEGISLATIVE-FEDERAL RELATIONS DIVISION OF THE NATIONAL EDUCATION ASSOCIATION
I represent the National Education Association, which has a present membership of over 400,000 teachers and administrators. Its business is transacted through a representative assembly, boards, committees, and commissions.
Since the beginning of World War II living costs in the United States have steadily increased while the income of teachers has lagged far behind. This is to say, living costs have mounted more rapidly than teacher income. In many States today the buying power of teachers is below the 1935-39 level. It is an under- rather than an over-statement to say that half of the teachers in our public schools today are forced to subsist on a near-poverty level.
The imposition of any tax upon any object that increases the cost of living is a direct attack not only upon the well-being of teachers but upon the basic educational safety of the Nation. The present tax program imposed upon oleomargarine is vicious and therefore unsound. It is offensive to the principle of justice and the spirit of fair play which lies at the very base of the American way of life.
The tax on oleomargarine should accordingly be adjusted downward, if not entirely removed. This is in line with a basically sound economy. It treats the consumer fairly. It places production on a sound basis. For these reasons the National Educational Association supports the proposal to eliminate the inexcusable and unjustified levies now imposed upon oleomargarine.
NATIONAL WOMEN'S TRADE UNION LEAGUE OF AMERICA,
Washington 1, D. C., May 17, 1948. Senator EUGENE F. MILLIKIN, Chairman, Senate Committee on Finance,
Senate Office Building, Washington 25, D. C. DEAR SENATOR MILLIKIN: The National Women's Trade Union League urges repeal of all restrictions against the free manufacture and sale of oleomargarine. The thousands of housewives in the league's membership tell us that the unjust restrictive taxes on oleomargarine should be repealed; that repeal would tend to lower the price of milk and make other milk products more plentiful and within reach of the average consumer.
It is a direct attack on our competitive system, which is the backbone of our economy, for the producer of one product in the United States to demand protection against another domestic product such as is demanded by the butter industry against oleomargarine. Furthermore, it is the only instance of such an atack by one industry against another.
Scientific research shows that, from a nutritional standpoint, margarine is the equal of butter, “containing the same amounts of protein, fat, carbohydrates, and calories per unit of weight” (from the report on margarine by the New York