Mr. Bowditch, on page 5 of your formal statement you mention there, in the middle of the statement, that Other controls over the economy were adopted during the same period, and virtually all of these have now been terminated with the exception of the excess profits tax. It seems to me that we have a great many other taxes that came into being during the last war, and they were called excise taxes. If I recall correctly, back in June of 1950 we finally took action in the House reducing a great many of these excise taxes, and then came the Korean war. They still continue. They were supposed to be restraining or hindrance taxes, to keep people from going to theaters, and riding trains and so forth and so on. Is it not your belief that they. too, ought to be terminated, as soon as possible, because the purpose for which they had been established no longer exists? Mr. BOWDITCH. Congressman Sadlack, with your permission I would like to pass that to my technician on the left, Mr. Eads. Mr. EADS. Yes, sir; the Chamber is on record as favoring expiration of the 1951 increases in excise taxes. We want to maintain the entire schedule. Mr. SADLAK. Thank you very much. The CHAIRMAN. If that concludes your statement, we thank you very much for your appearance. Mr. BOWDITCH. Thank you, gentlemen. The CHAIRMAN. The next witness is Mr. Fred Maytag, president of the Maytag Co., and chairman of the National Association of Manufacturers Taxation Committee. Mr. Maytag, if you will just give your name and the capacity in which you appear to the reporter, we will be very glad to hear you, sir. STATEMENT OF FRED MAYTAG, PRESIDENT, MAYTAG CO., OF NEWTON, IOWA, CHAIRMAN, TAXATION COMMITTEE, NATIONAL ASSOCIATION OF MANUFACTURERS Mr. MAYTAG. Mr. Chairman and members of the committee, my name is Fred Maytag. I am president of the Maytag Co. of Newton, Iowa. I am chairman of the taxation committee and a member of the Board of Directors of the National Association of Manufacturers, and I appear here on behalf of the association. May I also introduce my associate, Mr. Jack Davidson, who is head of the Government finance department of the NAM staff. The CHAIRMAN. We are very glad to have him here. Mr. MAYTAG. Thank you. It is a privilege to appear again before this committee. Some of you may recall that I appeared here on November 20, 1950, in my personal capacity as an individual businessman in opposition to the enactment of an excess profits tax. As you are well aware, our association for many years has been vigorously opposed to what is known as excess-profits taxation. Consistently in 1950 we opposed enactment of the present excess-profits tax, although industry was ready, and we so stated, to bear its full share of increased taxation to support the rearmament program. We did not think then, and we do not believe now, that a penalty tax on so-called excess profits has any place in a sound fiscal program. We are gratified by the widespread recognition, as evidenced by testimony to date before this committee, that it is a fantastically discriminatory tax penalizing small and growing businesses and producing relatively little revenue. We agree completely with President Eisenhower when he said to Congress on May 20: Though the name suggests that only excess profits are taxed, the tax actually penalizes thrift and efficiency, and hampers business expansion. Its impact is especially hard on successful small businesses which must depend on retained earnings for growth. We agree completely with Treasury Secretary Humphrey's statement to this committee on June 1 that it is a "bad tax." We note particularly his statement, in response to a question that even if we should get into a full war he thinks we could get a better tax to furnish the needed revenue. Our taxation committee was greatly encouraged, Mr. Chairman, by your clear understanding of the inequities of this tax, when on March 13, 1953, you stated: The excess-profits tax is an obstacle not only to production and expansion of the economy, but also to the production of revenue. It must go. After the tax was enacted, we set up a subcommittee of our taxation committee to keep tabs on its operation, and to see what, if any, improvements could be made by amendments. The more we studied the tax and considered the experience of affected companies operating under it, the more we became convinced of the futility of amendment. As Secretary Humphrey said to this committee the other day, you can't make a good tax out of it. There has been a mistaken impression in some quarters that only the "corporate giants" pay this tax. A look at the record shows that this is completely untrue. That the tax is particularly burdensome to small and growing companies was impressively revealed by a survey made last summer among our members. Of 4,066 who replied to our questionnaire, 2,639 reported paying excess-profits taxes in one or more of the years 1950-52, inclusive. We have analyzed the distribution of these respondents subject to the tax by size of establishment, as indicated by number of employees: 16.3 percent employ 50 people or less, 19.3 percent employ between 51 and 100 persons, 43 percent employ between 101 and 500. Thus the survey shows that 78.6 percent of the 2,639 respondents subject to the tax employ less than 500 employees. These can hardly be called "corporate giants." As we understand the situation, the issue now before this committee is not whether this is a good tax. The evidence that it is a bad tax is overwhelming. Rather the question is on the issue of whether or not Congress should reenact it for an additional 6 months. We believe it should not. Our position is that it should terminate on schedule June 30, 1953. This position was adopted by our board of directors, on April 22, 1952, and reaffirmed last October. Understandably, President Eisenhower's proposal that the tax be extended until the end of the year came as a great disappointment. Although we applauded the President's intention to restore fiscal integrity to our Government, we found it difficult to believe that this extension of such a bad tax was necessary. We are disappointed that more progress has not been made so far in reducing expenditures. We are certain that more can be made, and are impressed with the determination of the administration and Congress that it will be done. Mindful of our own responsibilities, we are urging our members to assist Congress and the administration in their efforts to reduce expenditures and are asking businessmen to eliminate their requests for Federal funds to be spent on projects in their own home communities. When your committee decided to hold hearings on the excess-profits tax, the association sought an opportunity for me to present its position to you, and I was originally scheduled to appear June 4. However because of a number of conversations I had with NAM members and others, I became concerned that there might have been a significant switch in opinion as a result of the President's speech and recommendation to Congress. Under the circumstances, I felt it desirable to have the guidance of an up-to-date poll of Board sentiment on this question. A meeting of the Board was obviously out of the question in view of the shortness of time, so a telegraphic poll was taken. This poll showed the following results: Eighty-four members voted in favor of modifying our position which reads: This job-killing tax should be allowed to expire on its scheduled expiration date of June 30, 1953 by adding the phrase: but under no circumstances later than December 31, 1953. Forty-six members voted against modification. The amendment thus failed to achieve the two-thirds majority which is required by our constitution and our bylaws for our board of directors to adopt or change policy positions. The comments of many board members who voted in favor of modifying our position, indicated no weakening of their basic opposition to the tax. Instead, they concluded that the administration should perhaps have up to 6 months to straighten out its legacy of fiscal irresponsibility. Gentlemen, our position therefore remains that the excess-profits tax should expire June 30, 1953. This is our recommendation to you. Mr. JENKINS (presiding). Does that conclude your statement? Mr. MAYTAG. That concludes my statement, sir. Mr. JENKINS. Any questions? Mr. Eberharter will inquire. Mr. EBERHARTER. Mr. Maytag, on page 4 of your statement you said: However, because of a number of conversations I had with NAM members and others, I became concerned that there might have been a significant switch in opinion as a result of the President's speech and recommendation to Congress. Would you care to tell us who those others are that you had conversations with, aside from the NAM members? Mr. MAYTAG. I presume, Mr. Eberharter, that you are referring to the reported conversation between me and Mr. Folsom. I will be glad to tell you anything you would like to know about it. Mr. EBERHARTER. Did you call him up or did he call you up? Mr. MAYTAG. Which time? If I may explain, sir, in general terms, I have had several conversations with Mr. Folsom. Mr. EBERHARTER. After the President's recommendations? Mr. EBERHARTER. You were still able to talk after the shock of the President's recommendation? Mr. MAYTAG. Yes, sir. I have had a great many shocks, and I haven't had any of them leave me quite speechless yet. I have had several conversations with Mr. Folsom. On February 20, a number of members of my committee and I had a conversation with him in his office at our request, during which time we went over the entire NAM tax program. We talked, among other things, about the excessprofits tax. I saw him on April 16 when we were both speakers on the National Industrial Conference Board program in New York. I talked with him briefly in Washington on May 14, when we were both attending a meeting of the Committee for Economic Development. That brings us down to the date which I believe is May 25, on which he called me at my office. That was after the President's speech. He recalled our previous conversations, and said that he presumed I was acquainted with the President's request, which I was, and asked whether or not that was going to have any effect on our stand on this question. I told him that I didn't think that it was, that I was scheduled or would be scheduled to testify before this committee, and that my intention at that time was to express opposition to the proposal. He discussed with me some of the reasons why the administration had felt it desirable to make the recommendation, and referred back to a conversation we had in his office about this problem of balancing the budget. He said that he had hoped that the NAM might be influenced by the President's request to either change its position or possibly remain neutral. I think he asked me-yes, I am sure he did-whether or not we were going to make any reexamination of policy. I told him that I didn't know, I didn't think that we were, but that I would be glad to let him know whether or not we did and would also definitely let him know as soon as possible what the nature of our testimony would be. And then I had one further contact with him, which I think was on May 28, some 3 days later, the 28th or 29th, when responsive to the statement I had made to him on the 25th I called him to tell him that as a result of a substantial interest in the question on the part of the board members, we had decided to poll the board by wire, and would be guided by the results of that poll. Mr. EBERHARTER. His suggestion came first, that there would be a poll; did it not? Mr. MAYTAG. I don't think he exactly suggested it, but he asked whether or not we were going to do it. He said "does this make any difference, the President's message? Are you going to reexamine your position?" Mr. EBERHARTER. Has your organization ever gone on record in favor of a sales tax, either a manufacturers sales tax or a general retail sales tax? Mr. MAYTAG. Yes, sir; for a number of years we have recommended the substitution of a uniform excise tax on all end products of manufacture for the hodgepodge of selective excises which we have now. We believe that it should preferably be at the manufacturers level. Mr. EBERHARTER. Of course if this excess-profits tax is killed at the end of this month, that will mean a greater demand for more sources of revenue and it will work toward your aim of a general sales tax. Mr. MAYTAG. Well, I have never thought of it quite that way, sir. I don't think that there is any particular tie-in in our mind of the type of thing you suggest. Mr. EBERHARTER. I just thought that not getting, as the Treasury thinks, as much money from the excess-profits tax, it will make more necessary the imposition of some other type of tax, and you favor the sales tax. Mr. MAYTAG. Perhaps I could better answer your question, sir, by saying that we do not propose a uniform excise tax to raise more revenue than is now raised by the present selective excises. We propose that the rate be set, a uniform rate, and consequently a low rate, at such a level as to generate the same revenue which is now produced by the selective excises. Mr. EBERHARTER. I do not want to go into the principles of it. It is quite a subject in itself. Mr. MAYTAG. It is, sir. Mr. EBERHARTER. That is, unless you prefer to. Mr. MAYTAG. No, sir; not at this time. I hope that there will be an opportunity to do so at a later date. Mr. EBERHARTER. Mr. Maytag, on page 3 of your official statement, you say: Although we applauded the President's intention to restore fiscal integrity to our Government Is that a political statement? Mr. MAYTAG. I presume that is a matter of opinion. Mr. EBERHARTER. Are you willing to say that the Government had not had fiscal integrity? Mr. MAYTAG. Yes, sir. That is my opinion. Mr. EBERHARTER. In your opinion, the previous administration had not had fiscal integrity? Mr. MAYTAG. Yes, sir; that is my opinion. Mr. EBERHARTER. Do you think that the previous Republican administrations had fiscal integrity, under former Republican Presidents? Mr. MAYTAG. Mr. Eberharter, in order to go back to a previous Republican administration, I would have to go back so far that I am afraid I wasn't very much aware of questions of that kind at that time. Mr. EBERHARTER. I always thought that the word "integrity" is almost synonymous with honesty and sincerity. Have you believed that the previous administration was dishonest and insincere in its fiscal policy? Mr. MAYTAG. I believe, sir, that a fiscal policy which promotes deficits or results in deficits, which tries to persuade one segment of the population that it is getting free Government at the expense of another segment of the population, a policy which takes vast billions of dollars from the taxpayers down here to Washington and then deals them out, again, to the States and the communities-I think that is a policy that doesn't have integrity. Mr. EBERHARTER. You mean it is dishonest? |