Armstrong, C. E., comptroller and director of finance, Birmingham, 332 470 442 371 Brush, William W., editor, Water Works Engineering, formerly Chief Cohen, Julius Henry, chairman, law and legislation committee, 515 385 473, 489 Costello, Joseph K., general manager, the Delaware River Bridge, Curry, R., Granville, representing the Albany Port District Com- 362 Darby, Walter R., Commissioner of Local Government, New Jersey, 281 Epstein, Hon. Henry, Solicitor General, State of New York, repre- senting the attorneys general of the States through the Conference Gibbs, Hon. George Couper, Attorney General of the State of Florida. Hart, Henry, vice president, First of Michigan Corporation, Detroit, Herbert, Hon. Thomas J., Attorney General of the State of Ohio.. 452 468 Kelly, Raymond J., corporation counsel, Detroit, Mich., representing 416 Kershner, W. E., secretary, State Teachers Retirement System, 367 Linen, John S., vice president, Investment Bankers Association of 259 Lutz, Dr. Harley L., professor of public finance, Princeton University, 186 Mallery, Earl D., manager, American Municipal Association. Marsh, Benjamin C., executive secretary, the People's Lobby, Wash- Mashburn, Hon. Gray, Attorney General of the State of Nevada_ McMullan, Hon. Harry, Attorney General of the State of North McShane, O. F., Commissioner, Industrial Commission of the State 365 Statement of-Continued. Pallotti, Hon. Francis A., Attorney General of the State of Connecticut. Seidman, M. L., chairman of taxation committee, New York Board of Staples, Hon. Abram P., Attorney General of the State of Virginia.. Van Dusen, Dana B., general counsel, the Metropolitan Utilities Dis- Telegrams, statements, letters, etc.: Page 454 274 439 461 377 392 437 284 Baldwin, Hon. Raymond, Governor of Connecticut.. 458 436 Chrostwaite, Thomas F., president, the Pennsylvania State Association of Boroughs 472 Hughes, Hon. Charles E., letter (legal opinion) to chairman, the Port of New York Authority 249 Kenworthy, S. S., executive secretary, New Jersey State League of 284 Long, Henry F., Commissioner of Corporations and Taxation, State of Massachusetts.. 375 Martin, Hon. Clarence D., Governor of Washington.. Moses, Robert, chairman, Triborough Bridge Authority. O'Connor, Hon. Herbert R., Governor of Maryland.. Tobin, Austin J., secretary, Conference on State Defense Miscellaneous: 523 284 522 458 523 Resolutions on Federal taxation of municipal revenues, bonds, and Resolutions on Federal taxation of State and municipal revenues, Resolutions and statements on the taxation of municipal salaries and Report prepared by Dr. Harley L. Lutz, of Princeton University, on 287 296 321 348 91 209 223 416 TAXATION OF GOVERNMENTAL SECURITIES AND SALARIES TUESDAY, FEBRUARY 7, 1939 UNITED STATES SENATE, SPECIAL COMMITTEE ON TAXATION OF Washington, D. C. The special committee met, pursuant to recess, at 10 a. m., in the committee room of the Senate Finance Committee, Senate Office Building, Senator Prentiss M. Brown, chairman, presiding. The CHAIRMAN. The committee will be in order. We are devoting this week largely to the hearing of those who are opposed to the recommendations made by the administration. Mr. Tobin, who has consulted me regarding the program, has given me an order of appearances this morning, which consists of Mr. Tremaine, the comptroller of the State of New York, Dr. Lutz, of Princeton University, Mayor LaGuardia, followed by others. That program will be followed. Mr. Tremaine, we will be very glad to hear from you. STATEMENT OF MORRIS S. TREMAINE, COMPTROLLER OF THE STATE OF NEW YORK Mr. TREMAINE. Mr. Chairman and gentlemen of the committee: If the committee please, by way of establishing my qualifications to speak from experience on the subject under consideration, may I simply state that I have been comptroller of the State of New York for the past 12 years. The office of State comptroller is one of only four that are filled by State-wide election. The people of my State have seen fit to elect me to that office seven consecutive times-a record for the entire history of the State. We be The comptroller of the State of New York, among his various other duties, is by law the sole trustee of the sinking funds and other investment funds belonging to the State, amounting in the aggregate to something over $250,000,000. Approximately four-fifths of the securities in the entire portfolio represent purchases made by me. lieve we have something of a world's record, in that since I have been comptroller not $1 of principal or interest has been lost through default or otherwise. The average interest yield is still approximately 4 percent, and, at current quotations, there is a marketable profit of something like $30,000,000. Another important function of the New York State comptroller is that he superintends the fiscal affairs of the State's 1,600 municipalities-counties, cities, towns, and villages-with the exception of the cities of New York, Buffalo, and Rochester. Each of the fiscal officers of these municipalities is required to file annually with the State comptroller a sworn statement covering in detail the financial operations of the previous fiscal year. In addition, expert auditors from the State comptroller's office examine the books of these various municipalities to verify the correctness of these statements and offer constructure guidance in their financial management. So that we have a constant and intimate association with, and expert knowledge of, the fiscal problems of the States governmental subdivisions. I speak of experts, because the business world frequently comes in and takes these men because of their complete knowledge of the situation. About 2 weeks ago I considered it my duty as the State's chief fiscal officer to communicate to these 1,600 fiscal officers some of my thoughts-purely from an economic standpoint-concerning the legislation now under consideration by your committee. With your permission, and with the thought that you might like to have these views before you on the record, I should like to take this opportunity to read that letter at this time. I quote: DEAR SIR: You are, of course, aware of the current proposal in Congress to remove by statute the tax-exempt feature on future issues of Federal, State, and municipal securities. You also know that our attorney general has organized some 40 other State attorneys general in opposition to this proposal on constitutional and legal grounds. I do not consider myself competent, nor do I propose to discuss its constitutional or political aspects. But, as chief fiscal officer of the State of New York, I do consider it my duty to forewarn you of the serious financial burden such a statute would inflict upon your municipality. May I simply remind you of these facts: 1. Existing tax exemption makes a price difference of about three-fourths of 1 percent on bond interest per annum. Therefore, on the basis of a 3-percent coupon, this obviously means a 25 percent increase in interest charges-with nothing in the way of jobs or services to show for it. 2. Bonds totaling approximately $500,000,000, still unissued, have been authorized by vote of the people of this State. Assuming an average life of 20 years for these bonds, an additional three-fourths of 1 percent in interest charges could obviously add as much as $75,000,000 to the ultimate cost of completing this financing. 3. But that is not the only serious aspect. Under the proposed statute the States "theoretically" would be given reciprocal powers to tax Federal securities. While such "reciprocity," even as concerns the States, is largely one-sided, the very theory of reciprocity would not extend to municipalities. To them the increased interest costs would mean a dead loss. Are they prepared to assume this burden? 4. It is estimated that by doing away with the tax exemption on State and municipal bonds the Federal Government's revenue will ultimately be increased thereby by approximately $300,000,000 annually. Even assuming the correctness of this estimate, nobody ever collects money without somebody else paying its equivalent. Who pays it in this instance? The ordinary local taxpayer upon whose property the tax differential would have to be assessed by the issuing municipality. 5. Some authorities argue that taxing public bonds would force capital to venture more into private enterprise. But it is difficult to conceive how the mere addition of a tax handicap to the one type of security would of itself reduce the risks inherent in the other. Certainly such a tax would not alter the relative merits of existing credits. Speaking generally, no proposal in modern times has been so fraught with danger to the American fiscal system or to the fundamental American principle of decentralized powers. Certainly, no legislator, either State or Federal, who can truly claim to represent the constituents who elected him, can possibly favor a statute of such serious consequences. If you agree with these observations, I hope you will make it your business personally to convey your views in no uncertain terms to the United States |