estimates that we can procure, that a gross income tax of one fourth of 1 percent, a separate tax structure, would yield upwards of $75,000,000 on corporate returns. On individual income-tax returns, there would be more difficulty in reaching a reasonable estimate, but it would be a very productive source of revenue.

Mr. RAGON. It would be in addition to the present tax. If you imposed a tax on corporate gross income, you can readily visualize that you would have a tax of 1334 percent. I was impressed with the same proposition in the way you are until I made an investigation of it. Then I saw that it would, perhaps, work some inequities, that, perhaps, you do not have in mind.

Mr. KVALE. Not when the tax is applied at this low level that I suggest.

Mr. RAGON. I had the same idea at one time, until I went into it. Mr. KVALE. I hope the committee will consider it.

Mr. RAGON. I was impressed with it until I got down deep into it, and then I saw it would not work so well.

Mr. KNUTSON. Undoubtedly, if you have a system of that character, you do away with a lot of red tape and a lot of fine regulations that permit taxpayers to avoid the payment of their just taxes. Mr. KVALE. Yes.

Mr. RAGON. I think this, if you were to levy a tax like that, and make the amount sufficiently large to be a credit on the income

tax

Mr. KVALE (interposing). I cannot agree with that. It would be an emergency tax during the period of the emergency. It would apply alike to all corporations and all individuals.

Mr. SHALLENBERGER. Do you propose to levy this gross-income tax in addition to the taxes now levied?

Mr. KVALE. Yes, sir.

Mr. SHALLENBERGER. If I pay a tax of $500 under the present law on an income of $10,000, I would pay another $100 on that amount. Mr. KVALE. No; $25.

The CHAIRMAN. We thank you for your statement, Mr. Kvale. At this point, I will offer for the record a letter which I have received from Mr. Ellenbogen, a Member of the House from Pennsylvania.

(The letter referred to is as follows:)

HOUSE OF REPRESENTATIVES,
Washington, D.C., May 19, 1933.

Hon. ROBERT L. DOUGHTON,

Chairman Ways and Means Committee,

House of Representatives, Washington, D.C. DEAR COLLEAGUE: Since I am unable to appear in person before the Ways and Means Committee, now conducting hearings on H.R. 5664, I would appreciate it if you would bring to the attention of the members of your committee and if you would insert in the records of the hearing as part of the testimony the following observations:

The bill as now drawn does not expressly or clearly provide for the continuation of loans by the Federal Government for the construction of self-liquidating projects to States, counties, and municipal subdivisions.

Section 203 (a) is the section which deals with the power vested in the President and in the "Federal Emergency Administration of Public Works." It is this section which should have a clear and express provision authorizing loans for self-liquidating construction projects. It was perhaps intended to include this power in section 203 (a) provision 1, which reads as follows: 177809-33--21

"The President is authorized and empowered, through the Administration or through such other agencies as he may designate or create, (1) to construct, finance, or aid in the construction or financing of any public-works project included in the program prepared pursuant to section 202."

It may perhaps be argued that the power to "finance or aid in

the financing of any public works project ", includes the power to extend such aid in the form of loans, but there is no reason why such power should not be expressly and separately stated in this section.

I, therefore, respectfully suggest that the language of section 203 (a) be change by adding to section 203 (a), page 13, line 19, after the word "finance the following three words: "make loans for ", so that this section will read as follows:

"SEC. 203. (a) With a view to increasing quickly employment (while reasonably securing any loans made by the United States) the President is authorized and empowered, through the Administration or through such other agencies as he may designate or create, (1) to construct, finance, make loans for, or aid in the construction or financing of any public-works project included in the program prepared pursuant to section 202; *

I greatly appreciate your courtesy in this matter.
With personal regards, I am, very sincerely yours,

HENRY ELLENBOGEN.

The CHAIRMAN. I also offer for the record a statement from Hon. Arthur D. Healey, Representative from Massachusetts.

(The statement from Mr. Healey referred to is as follows:) STATEMENT SUBMITTED BY HON. ARTHUR D. HEALEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS

I introduced a bill a few weeks ago amending the Federal Reserve Act so that the Federal Reserve Board may authorize any Federal Reserve bank to discount tax-anticipation warrants of cities.

This is an emergency amendment, and under the provisions of the bill would continue in force for 2 years from the date of its passage. This bill has been referred to the Committee on Banking and Currency for consideration. However, I believe that this proposition may properly be considered by your committee at this time in connection with the pending bill and a certain proportion of the total amount of $3,300,000,000, say $200,000,000 may be used for the purpose of loaning money to municipalities on tax-anticipation warrants. The market for tax-anticipation warrants of cities and towns has dwindled to such an extent that they are unable to borrow money, even at a prohibitive rate of interest.

It is customary to assess property valuations in practically all cities and towns in the United States during the month of April. The tax rate is not determined until the middle of September, and, generally, tax bills are not sent out until sometime in October. So that, for a period of practically 8 months, cities are run on borrowed money.

Prior to 1930 it was possible for these cities to make short-term loans in anticipation of tax collections at a rate of interest of about 21⁄2 percent. The prevailing rate of interest is now about 6 percent, with the possibility of borrowing money, event at a prohibitive interest rate, practically negligible. This has impeded the cities in carrying on the ordinary functions of their government and, in many instances, has even resulted in failure to pay the teachers, firemen, policemen, and others on city pay rolls. This is an appalling situation, and unless some assistance is given to cities providing a means whereby they may discount their tax-anticipation warrants, disastrous results will follow.

Due to the fact that there are so many tax delinquencies, the cities face the necessity of borrowing more funds than ever in anticipation of tax collections. In my opinion, if this proposal is incorporated in your national industrial recovery bill, it will not only provide a market for these tax-anticipation warrants, but it will also substantially reduce the rate of interest and correspondingly benefit the taxpayer by the savings resulting therefrom. I ask for its consideration by this committee in connection with the pending bill.

The CHAIRMAN. I also offer for the record a telegram from the National Automobile Dealers Association addressed to Walter B. Guy, Washington, D.C.

(The telegram referred to is as follows:)

WALTER B. GUY,

Edmonds Building, Washington, D.C.:

ST. LOUIS, Mo., May 19, 1933.

This association, representing over 30,000 retail automobile dealers, protests against any further taxes on industry already heavily burdened. Would favor general sales tax only if presence excise tax is eliminated, which would place us on par with other industry. Any additional gasoline tax likewise opposed, as it already exceeds 100 percent in some sections. Please submit protests to committee as strongly as possible. NATIONAL AUTOMOBILE DEALERS ASSOCIATION, F. W. A. VESPER, President.

The CHAIRMAN. I offer for the record briefs of A. Julian Boglowski and Abram F. Myers which have been filed in lieu of personal appearances.

BRIEF OF A. JULIAN BRYLAWSKI, WASHINGTON, D.C., REPRESENTING THE MOTIONPICTURE THEATRE OWNERS OF AMERICA

The motion-picture theatre owners can never understand why they, as a class, are selected to carry so much more than their share of the tax burden, and why the attendance of a motion-picture theater should be classed as a "luxury." If not an actual necessity-and as such we do not claim that it should be classed with food, clothing, and shelter-it is as far from the luxury classification as schools, newspapers, or other educational and recreational agencies.

No one today argues for just the bare necessities of life-recreation, relaxation, sport, and amusement contribute much to filling out the hours of life and the building up of that mysterious "morale" that so often determines the difference between success or failure.

To this end, modern amusements mean motion pictures to 95 percent of our population, and so far as the importance of motion pictures to the community may be stressed let us quote from recent happenings.

In February of this year a "strike" of musicians and operators closed all of the motion-picture theaters in Cleveland, Ohio (the others were not affected). After 1 week of this city-wide closing, arrests for misdemeanors and other petty crimes had doubled, and the mayor of the city called for a prompt settlement of the difficulties and the reopening of the theaters as a civic duty. In Chicago, on a similar occasion last year, the mayor gave the theaters and unions 3 days to settle their differences or he would open the theaters himself.

Baltimore's chief of police stated at Annapolis this January that the opening of Baltimore theaters on Sunday had materially reduced juvenile delinquency in that city, a sentiment echoed by all police departments in large cities where this change has been made.

The proposed lowering of the exemption on the 10 percent Federal tax on motion-picture theater admissions to 19 cents, strikes at the very existence of the popular-priced motion-picture theaters. Contrary to the general belief of Treasury officials, it is next to impossible to pass this tax on to the public. In almost every case where this has been done, theater attendance has dropped to such an extent that the theater owner has been compelled to absorb this tax as the lesser evil, even though he must operate at a loss, but whenever possible, has lowered admission prices below the tax limit in the hope that this savings passed on to the public might bring greater attendance-a hope I regret to say has seldom been realized.

That the motion-picture theaters have been, and are still, passing through a terrific struggle for a continued existence, is evidenced by the following figures: Of the 21,000 theaters in the country (1929 Treasury estimate) today less than 12,000 are operating, and of these more than one third are in the hands of receivers or bankruptcy courts.

Theaters that are open pay an amazing multiplicity of taxes, licenses, special fees, etc., varying as to State requirements but sometimes going up as high as 14 separate levies, and are an asset to city, State, and country. Theaters that are closed pay no taxes but real estate and frequently not those. Theaters that are open add to the business life of the community. The value of the adjacent real estate gives work to many and happiness to millions. Theaters that are closed depreciate adjoining properties and leave a gap in the lives of surrounding citizenry, and add to unemployment. An admission tax that the theater owner cannot pay and cannot pass on, must close many theaters.

There is far from sufficient margin of profit in operation to carry the load. Any theater in the United States would be happy to earn 5 percent of its gross business and most theaters must be satisfied with but a fraction of this figure.

Glance at continually declining Treasury reports on the present motionpicture admission taxes since their imposition last fall-October, 225,000,000; April, less than 900,000; a startling example of the vicious law of diminishing returns.

This present admission tax through closed theaters, changed policies and lower admissions will fail to meet 50 percent of Treasury estimates from this tax, and this revenue is being collected at a cost to the industry and theaters that will startle the Treasury and Congress when the figures are revealed. Motion-picture admissions which reached the high total of over $1,000,000,000 annually in 1928-29 have declined to a figure of less than 50 percent of that sum. The prosperity of the industry must not be judged by local conditions-it is a different story when you leave the District of Columbia.

And so the theater owners of America petition the honorable Congress to help them through this crisis and to lighten their load, and not increase it. We are the theater owners and operators of the Nation; we do not make or produce motion pictures, we exhibit them to the public; we are the ultimate consumers and we are heavily laden.

BRIEF OF ABRAM F. MYERS, WASHINGTON, D.C., GENERAL COUNSEL OF THE ALLIED STATES ASSOCIATION OF MOTION PICTURE EXHIBITORS

In behalf of the Allied States Association of Motion Picture Exhibitors, a federation of regional organizations of independent motion-picture theater owners, I desire to record my approval of the bill.

Having had many years of experience in the enforcement of the antitrust laws, first as a member of the staff of the Attorney General, later as a member of the Federal Trade Commission, and finally as an adviser to numerous trade organizations, I am heartily in favor of title I of the bill.

Obviously the power conferred by the bill could be greatly abused by the administrator by approving certain monopolistic and predatory practices and thereby exempting them from the antitrust laws, but in view of the admonitions of section 3 (a) it is unthinkable that he will do so, and the broad discretionary powers conferred are clearly necessary to the solution of the great problem with which the bill deals.

The industry codes cannot be formulated and administered according to hard and fast rules is amply demonstrated by the experience of the Federal Trade Commission with the trade practice conference procedure. So long as this was kept elastic and industries were permitted to fashion the rules which their necessities demanded, this procedure was a success. As soon as the Commission began revising the industry rules and poured them all into the same mold, they lost their value and the industries lost interest therein.

The independent theater owners are particularly concerned that the antitrust laws be not amended so far as they apply to monopolistic practices which are not necessary to the accomplishment of the purposes of the bill, such as block booking, allocation of product to chain theaters, exclusive contracts, and unreasonable clearances and protection. But we do not believe the administrator will receive any code approving such practices. On the contrary, we believe that the way will be open under section 3 (d) for us to apply to the administrator for relief from these and all other unfair methods of competition. The independent theater owners also are in accord with the objects and purposes of title II of the bill. They think such legislation is demanded by the emergency in the interest of all the people of the United States. That being so, they feel that the burden should be borne by all the people of the United States.

They are willing, even glad, to cast their lot with the rest of the country and to pay a reasonable sales tax on purchases of pictures, supplies, and equipment.

They feel very strongly that they should not be singled out for special taxation by a lowering of the exemption on admission taxes.

The exemption was placed at 40 cents in the revenue act of 1932 to relieve the then destitute independent exhibitors from the tax.

The Congress was advised and recognized that this class of theaters, located in the residential sections of cities and in the small towns, and having admission prices in the lower brackets, could not stand the burden of the tax.

Since then thousands of these independent theaters have been forced to close. Three reasons may be assigned for this: The growing acuteness of the depression; the unfair advantages given the chain theaters in the distribution of film; the increased chain competition resulting from a general reduction of the admission scale.

So high is the mortality rate among the independent theaters at the present time there is no accurate information as to the number now open. It is estimated that out of the 21,000 theaters open in 1928, not more than 12,000 are now open.

The president of the Allied Theaters Association of New Jersey, a regional unit of this organization, reports 25 closings in the past 2 weeks. With this process going on in every State, it is clear that the theaters offer a poor source of revenue for the Government.

Let us consider the results under the revenue act of 1933. It was estimated that the admission tax carried in that bill would produce an annual revenue of $40,000,000. The first month produced about $2,000,000. The last month for which we have the figures (April) produced something like $900,000.

It is common knowledge that the entire motion-picture industry is tottering. It will not take a Sampson to topple it over. The additional burden incident to a reduction in the exemption to 19 cents, as now proposed, may easily do the trick. Certainly it will hasten the demise of many additional theaters. Thus the Government may lose the small revenue already derived from this source instead of adding to it.

To say that theater box offices will benefit immediately from the distribution of money under the public-works program is a fallacy. The unemployed are already too much in debt for necessaries to enlarge their outlays for amusement for some time to come.

No other industry contributes as much to the public good by supporting charitable, civic, and patriotic movements as the motion-picture industry. Right now this association is furnishing to theaters at cost, and urging them to show, trailers exhorting the public to uphold the President in this emergency. Yet this business is singled out by the National Government and the governments of the 48 States for special taxation.

We are a little weary of hearing the representatives of untaxed classes come before this committee and point glibly to the theaters as a source of

revenue.

The independent theater owners as a class are as hard pushed today as those represented by the spokesmen who have urged this committee to impose this special tax on the independent theater owners.

The independent theater owners are not tax dodgers. They pay their local property taxes and franchise taxes and (in many States) admission taxes, as well as their Federal income taxes. They feel that they have gone the limit in the payment of special franchise and occupational taxes and that it is time the burden was more generally distributed.

There are social and economic problems involved in a sales tax which makes it debatable as a question of permanent policy. But these arguments do not hold good against emergency legislation of this kind for the salvation of the United States and everyone in it. The theater owners are willing to sink or swim in the same boat with other businesses; they protest against being fed to the sharks in order that other industries may go untaxed.

The CHAIRMAN. If there is no one else who desires to be heard, we will conclude the hearing. The committee will adjourn to meet on Monday morning to consider the bill in executive session.

(Thereupon, the committee adjourned to meet Monday, May 22, 1933, at 10 o'clock a.m.)