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Senator ELLENDER. Mr. Hart, you heard Dr. Studebaker testify a little while

ago,
did
you

not?
Mr. Hart. I heard a good deal of what he was saying.

Senator ELLENDER. You heard his answer to my question as to whether the Federal Government tried to exercise control over the schools in the administration of the vocational training?

Mr. HART. Yes.

Senator ELLENDER. And his answer was in the negative, and that this bill went much further than did the vocational training bill in providing that the Federal Government would not have control over the schools.

Mr. HART. Well, Senator, does not the hand that furnishes the money have the directing control?

Senator ELLENDER. Well, to some extent, especially in seeing that the money is properly spent, and I believe that would be in line with what you are arguing for now.

Mr. HART. But there is discretion. What about the discretion of the localities?

Senator ELLENDER. Very little.
Mr. HART. What about the localities and the States?

Senator ELLENDER. Very little, because the States would have to provide, by legislative enactment, certain plans before they become amenable to any of this money. Certainly, if the Federal Government, or in fact any other agency furnishes money, be it a State government or philanthropists, they would want to see that the money is expended for the purposes for which it is dedicated.

Mr. Hart. I will touch that in just a moment, Senator.
Senator ELLENDER. Very well.

Mr. Hart. The New York Times of November 27, 1940, in a special article on page 1 by Frank L. Kluckhohn, stated that President Roosevelt had said that nonmilitary projects were to be eliminated so far as possible from the next budget. The President was reported to have told a press conference that under this new rule the Government would shelve many types of programs which had consumed large parts of the Federal Budget; river and harbor improvements, highway construction, public land acquisitions, additions to national forests, and other projects of a similar nature.

It is true the article does not state that economy is to be introduced into education. Nevertheless I think that this utterance of the President and other circumstances have given the public the impression that all new projects not actually and vitally necessary to defense would be avoided. Certainly the public was led to believe that no new projects would be inaugurated that would cost $300,000,000 a year-particularly in view of the fact that the field of public education has throughout most of our history been regarded as the province of the States. And I insist, sir, that there is no constitutional authority whatsoever for the Federal Government to step into the educational field and, as I believe would be the case, assume control of that education, which has always been deemed the function of localities and States jointly. If education can be taken over by the Federal Government, then no State boundaries remain.

Senator ELLENDER. In that connection, I do not believe it was intended by our forefathers for people living in New York, people living in Chicago to own the State of Texas. You have in the State

of Texas at present the largest oil fields in the world, or some of them at any rate; the largest gas fields, and some of the largest public utilities. Who owns them? Citizens of New York and those of other rich States. Where are the taxes paid? A few local taxes are paid in Texas, but the majority of taxes on huge incomes are paid by people living in New York and other States, and for that reason New York and other wealthy localities are well able to pay to their teachers much more money than Texas, where they get their incomes from.

By the same token you have here in North Carolina, where most of the cigarettes are made a like situation. Certainly if the manufacturers of cigarettes in North Carolina depended on the people living in that State to buy their cigarettes they could not survive. Cigarette users from other States help to pay the taxes imposed by North Carolina for the education of her children.

Our Federal system of Government has been so administered that the natural resources of the Southern States have been, in a measure, exploited by the rich from the North and the East, and it has made the people in such States poor, and today it has caused them to have to come to the Federal Government for aid in education, so as to give to their children the same advantages as those in your State.

Why, during the last Presidential campaign I happened to go, I think it was in some city in Wisconsin. As I was riding through the city the driver said, “Senator, you see these fine buildings over here located along the avenue?" I said “Yes." "Well, that is an estate that is owned by Mr.-I forget his name now," and he said, "Before dying he created a trust to establish a school for the indigent of this locality.” They were beautiful buildings, fine surroundings. “Well,” I said, "where did that man make his money?” “Why,” he said, “in your State. He was a big lumberman."

Now, if you were to go down in my State and see what is left there you would feel as I do, and as many others do. We have had there thousands upon thousands of acres of the finest pine, cypress, oak, and other trees, that existed in the country. Today all that our people have left as a heritage is a bunch of charred stumps. After the trees were cut down and sawed into lumber this gentleman went to the North and spent his money, rather than try to help the people in the locality where he made his fortune.

I will say that that same things exists not only in Louisiana, Mississippi, Alabama, and the South, but in quite a few Western States. That condition has given rise to the demand that is now being made on the Federal Government. That is the cause of it, the reason for it.

Mr. Hart. Senator, I am glad you brought that up. It gives me a chance to say something.

Senator ELLENDER. Fine. I wish you would answer it. I wish you could answer it to my satisfaction and to the satisfaction of a lot of us who live in the South.

In my own State, you take the Standard Oil, the Texas Co., where are they located?

Where are their domiciles? Since the advent of Huey Long, we did put some taxes on them, to make them pay their just proportion of taxation, but before that they were permitted to come in the State and take our oil, take our gas, take our natural resources and pay no more taxes than the average

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farmer paid. As the result of that kind of economy, we were left high and dry, we are not able to get enough funds in order to adequately educate our colored people and the white people in our State.

Mr. Hart. Senator, I again am glad you brought that up. Of course when you say that these people who own this live up in New York, you recognize the corporations that own it have their domiciles in New York. That, in most cases, is merely a matter of convenience. It has no relation to the number of stockholders that are in that State. One of the phenomena of recent years has been that stock ownership has been widely diffused from the Atlantic to the Pacific.

Senator ELLENDER. But mostly in the Northeast.

Mr. Hart. Well, because it is the oldest and most populous section. But I daresay that the number of stockholders in Louisiana and in other States is growing constantly. We know the amount of wealth is increasing

Let me say, in the second place, you have the oil fields in Texas, you have the oil fields in Louisiana, and those other places. In other words, you have the property. You do not have simply the site where certain pieces of paper are engraved and sent out and people are told they are worth so much, you have the actual property. Therefore it seems to me it is your own fault, in those States, that the property which you have there is not taxed locally.

Senator ELLENDER. My dear sir, prior to 1928 when Long came on the scene, a man whose heart beat for the masses and who did all he could to help the masses of Louisiana, prior to that period I am telling you that the legislatures did not place on the statute books any laws to adequately tax these natural resources.

Why, take the State of Pennsylvania, the richest State in the Union when it comes to natural resources. You have never had a legislature elected yet by the dear people to cause them to place a severance tax on oil, as we have in Louisiana.

Mr. HART. That is up to the people of the State of Pennsylvania.

Senator ELLENDER. Of course, but they are under the control of companies, big business, and of course being under the control of big business naturally they are responsive to the views and attitude of big business.

Why, you take the State of Idaho, take the State of Montana, where you have in those States vast natural resources and they are not taxed, as you would have it, for the benefit of the local people. The people are not able to elect to office from what I can understand, men who are responsive to their demands.

Why, in Texas—I do not want to make any comparison in regard to my neighbor, Texas, but the amount of taxation on oil, let us say, that we impose in Louisiana is far greater in proportion than that of Texas. You have heard, I am sure, of Governor Daniels of Texas, who tried to put more taxes on the oil interests, but he has not been able to do so, except in a very limited degree. It seems that the

, legislature is more in the control of legislators who are responsive to the views and ideas of big interests than of the people.

Mr. Hart. Well, Senator, I am not able to discuss the conditions in Texas, and certainly not in your own State.

Senator ELLENDER. I am familiar with both, particularly with those in Louisiana.

Mr. Hart. You must be, of course.

Senator ELLENDER. I was in the Legislature of Louisiana for 12 years before I came to the Senate and I know how it worked before 1928 and since.

Mr. HART. But let me say this: Every man who hails from New York is supposed to hail from a rich State. If he is not rich himselfthere are many who are not, and I am one of them—he is supposed to represent, nevertheless, a rich State. I think, sir, that this Congress has too long taken it for granted that the State of New York—that is the only one I can mention, and I used to be in the New York Legislature-is rich. I think that that impression has prevailed too long. I want to say that I believe New York State is far poorer than the great mass of the people of the United States think it is.

Let me say this, Senator. Taxation is destroying real property in most of the communities of the State of New York.

Senator ELLENDER. Why don't you put it on the intangibles?

Mr. Hart. There are plenty of taxes on the intangibles. They catch them coming and going one way or another. As you well know, the Stock Exchange-and I have nothing to do with it, I do not even own any stocks on the Stock Exchange, I wish I did sometimes, but they do not seem to be worth very much—but the Stock Exchange business which has been under attack for many years past, is now dwindling, and still dwindling, and you can hardly go into a more barren section in the State of New York, from a real-estate standpoint, than the lower section of New York City, where once they had hundreds and hundreds of millions of dollars of real estate, and it is simply languishing.

Throughout the city of New York the Real Estate Board of New York City has kept track of the dwindling value of property, by checking and recording the sales on real estate in Manhattan, and the assessed valuation, and it has gotten down to the point now where the prices received on all open-market sales are somewhere around 77 or 78 percent of assessed valuation. There are many instances where property is sold for one-half or one-quarter, and sometimes it is sold for one-tenth or even one-twelfth of the assessed valuation. And yet, because of the provision of the Constitution authorizing spending only up to 2 percent of assessed valuation, and because even more of the provision that forbids the city to have a debt greater than 10 percent of the total assessed valuation, the city simply cannot materially reduce assessments. The result is that we are going rapidly downward, sir, in real estate values in the supposedly great and rich city of New York. We are approaching stagnation.

Now that is being done on a greater or lesser scale in most of the sections of New York State. The theory that New York is a rich State is rapidly becoming a myth. Whenever we had somebody who died and left a great fortune we used to think of those people as rather an asset in the community, but now, between State and Federal inheritance taxes, they take a substantial part, and sometimes nearly all of the estate. All right, that is gone, it never can be taxed again. That is just one of the ways in which we are destroying property. So coming back, sir, to this piece of legislation here

Senator ELLENDER (interposing). In that connection I might say this, that prior to 1938, in my own State real estate was being taxed to death in order to give good schools to some communities. I know of some communities wherein the real estate was taxed 70 mills, 7

а

a

percent. Well, what we did thereafter was to place taxes, as I said, on intangibles and on natural resources, so that today 82 percent of the home owners in my State do not pay a nickel of taxes on their homes either to the State or to the county in which they live. Why? Because we have had the leadership. To do what? To impose the burdens on those best able to pay, that is those who produced their wealth on our natural resources. We have just learned how to do it, and we are doing it. If that course had been pursued throughout the South 40 years ago we would not come begging at the doorstep of Uncle Sam.

Mr. Hart. Well, Senator, I just want to leave this thought with you, that maybe the Congress is making a mistake, and I think it is making a mistake of fact, in counting too much on the wealth of at least one of the supposedly rich States, because I can assure you, sir, that the wealth is going down fast. May I return to the statement?

Senator ELLENDER. Certainly. Your statement is not borne out from the income taxes you pay. Somebody must be getting it. It may be that only a few are getting it, but New York has so long led the list in the payment of income taxes that there is no comparison with any 10 other States, except maybe Pennsylvania, and a few of the richer States of the North. I think New York pays more income taxes than all of the States of the South and a few from the West, as I remember the figures, excluding North Carolina and Virginia.

Mr. Hart. Of course a good many people have gone to live there, have made their homes in New York, and are taxed there. We have State income taxes which some of our people are very proud of, but they are very damaging to the pocketbooks of many of the people.

Senator EĽLENDER. The thing that hurts me is that some of those large incomes on which the great State of New York obtains its revenues come from my own State, and come from the State of Texas and the State of New Mexico and other Southern and Western States. Now, what we are asking you is just a paltry sum in return, so that we can help educate the poorer classes of our State who have been unable to get their education because of not sufficient taxes being collected upon those great natural resources from which you are now benefiting. Pardon me,

I am sorry we got into this argument. Mr. Hart. That is quite all right, sir. I am aware that in the so-called "finding of fact" in section 1, the attempt is made to dress up this old project of Federal control of education in a new suit of clothes and make it appear as a defense project. But section 1 fails completely to make a case.

Let me speak of this provision in detail. The first finding is “that public elementary and secondary schools available throughout the Nation for all children and maintained in keeping with American standards of life and education are essential to the national program of total defense.” Just what is meant by the words "in keeping with American standards of life and education"? I readily admit it is desirable at the right time to continue to strive to attain this ideal. I say "continue" because the people of the United States have been hard at work on this very objective for over a hundred years, and have achieved considerable success. But are you going to take a time when this Nation is threatened with war, and when our national safety is in peril, for the Federal Government to jump in and take a hand? It is said that already in the United States more money is spent on educa

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