Mr. CRISP. Yes. I know it was contended that it added on those taxes, and when you made the reduction retroactive, you made a gift to those people.

Mr. RAGON. I heard that argument made two years ago, that Judge Crisp suggests. Is not that the very fact that the people take into consideration, what their taxes are going to be, and then there comes along the time to pay, and they feel their taxes are a great deal larger than that. Would not that have a bad psychological effect on the country?

Mr. MILLS. I do not believe it.

Mr. RAGON. We are asked now in the House to pass a bill the effect of which we all believe will restore confidence. In other words, the background of the bill is psychological. Now, to come along and pass a bill here with retroactive features in it-I do not know, but I am asking you the question in my mind is whether or not that will not be a disturbing element in business?

Mr. MILLS. I think the most disturbing element in business will be the failure of the Government to put its own house in order. I think the country expects us to live within our income.

The CHAIRMAN. Mr. Mills, you have stated the theater tickets would bring in $135,000,000, commencing at 10 cents a ticket. Have the gentlemen from your department the figures showing the amount of money collected on the tickets under 35 cents and under 50 cents? Have you those figures with you?

Mr. MILLS. We have not got them. Mr. Stark tells me he does not believe it is possible to work that up. It would be just a guess. The CHAIRMAN. I think you will find that with the exception of a few of the large cities that the great number, if not the large majority of the theaters, are operating on a 25, 30, and 35 cent plan, and I just thought it might be interesting and valuable to the committee to have those figures as near as the Treasury can estimate them.

Mr. MILLS. We are going back to 10 cents, because that was the original exemption, and, again, Mr. Chairman, when you have got to raise almost a billion dollars, while it is undesirable, is it not fair to say that amusement income is legitimate?

The CHAIRMAN. I think we do not want to tax anybody, but we have a raise the money.

Mr. CROWTHER. When we first undertook to revise those rates the exemption was higher than 10 cents, and we were taking in just under $90,000,000, as I remember it.

Mr. MILLS. $90,000,000 in 1921.

Mr. CROWTHER. And when we made the exemption 50 cents that took $33,000,000 away. We lost $33,000,000 in making the first cut to 50 cents.

Mr. MILLS. That is my recollection now that you mention the figure.

The CHAIRMAN. That is valuable information.

Mr. MILLS. At least, that was our estimate.

Mr. CROWTHER. Well, Mr. McCoy figured it out on his "Chinese board" there, as to what we would lose.

Mr. CANFIELD. Mr. Mills, is it possible for the Treasury Department to get the figures to show what the tax would be if collected on

35 cents on up, and on 50 cents and up? I would like to have it in the record.

Mr. MILLS. We will endeavor to do it, but I do not know that we have figures available that will give the admissions split up. We have the admissions, the total amount, but I do not believe it is split

up.

(The desired information follows:)

The Treasury's estimate of $135,000,000 of additional revenue to be collected through a tax of 10 per cent on admissions in excess of 10 cents represents largely collections on admissions to moving-picture theaters. As far as I know, there are no data showing the distribution of theater admissions according to price ranges. I understand, however, that, taking the country as a whole, by far the greater portion of admissions to moving-picture theaters is at prices ranging from 25 to 40 cents. If this be true it is clear that to place the exemp tion at 35 cents would be to relinquish a large part of the increase which is estimated on the basis of the Treasury's proposal. A 50-cent exemption would further decrease the estimate.

Some indication of the effect of changes in exemptions is given by collections data for past years. On this basis it appears likely that if the exemption were to be increased from 10 cents as proposed by the Treasury to 35 cents, the additional revenue which the Treasury estimates now at $135,000,000 would be reduced by about 55 per cent, indicating about $61,000,000 as compared to $135,000,000 for the fiscal year 1933. Were the exemption to be placed at 50 cents, the Treasury's present estimate would be reduced by about 70 per cent, and the probable amount of additional collections would be $40,000,000 as compared with $135,000,000.

Mr. HAWLEY. Mr. Mills, how much would a 1 per cent tax on manufactured sales on import values bring in?

Mr. MILLS. On what basis, Mr. Hawley?

Mr. HAWLEY. On manufactured sales on import values.
Mr. MILLS. On all?

Mr. HAWLEY. If you do not know now, will you put it in the record?

Mr. MILLS. You mean on everything?

Mr. HAWLEY. Yes.

Mr. MILLS. And allowing for pyramiding?

Mr. HAWLEY. That I do not think would come in the purview of the law.

Mr. MILLS. It is a very important factor. One manufacturer sells a half-finished product to another manufacturer. If you tax that 1 per cent, then it goes to manufacturer B, and you tax that 1 per cent, and it goes to manufacturer C, and you tax that. Your 1 per cent tax becomes a 3 per cent tax. You can not just say all manufactures, Mr. Hawley; you have got to be a little more specific.

Mr. HAWLEY. In correcting your remarks, will you put in some answer that you think would be a fair answer to that question, because it is being discussed in the House a great deal by the Members.

Mr. MILLS. Mr. Stark says you would have to estimate the maximum amount.

Mr. STARK. If you say merely "the sales of manufactures," that includes all manufactures. You would have to assume duplication throughout, unless there were some provision made to avoid it.

97999-32- -3

Mr. CRISP. Is it not generally estimated there are four or five turnovers from the manufacturer before it ultimately gets to the consumer, and will not that tax be pyramided on each transaction, and the consumer not only pays the original tax but pays a per cent of profit on the previous tax collected?

Mr. MILLS. He does. That is the great vice.

Mr. HAWLEY. I ask this question because it is being asked by Members of the House continuously, as to how much it will bring in. I would like the Treasury to answer it by a statement of some estimate of the amount of revenue.

Mr. MILLS. We will do that, Mr. Hawley, with the understanding you would probably not pass a bill in this form, because you would have to make a number of exemptions.

Mr. HAWLEY. Make your answer in any way that will give us some estimate as to the amount.

Mr. MILLS. All right.

(Mr. Mills subsequently submitted the following information :)

A general sales tax of 1 per cent on all sales of domestic manufactures and a compensatory tax of 1 per cent on all imports of finished and partially manufactured products is estimated to yield approximately $500,000,000 in the calendar year 1932 or about $550,000,000 in the fiscal year 1933. In arriving at this estimate no allowance was made for exemptions. Furthermore, the estimate includes the effect of duplication or pyramiding of the tax which would result from its application to successive sales from one manufacturer of partially finished products to another manufacturer through successive stages of fabrication.

The CHAIRMAN. I would like to ask this question on the sales tax. Do you confirm the statement I heard the other day that Canada, after increasing its tax four times the amount of what it was, is not getting in as much under the increase as they did under the lower figure? Or do you know anything about it?

Mr. MILLS. I do not know, but if the committee are interested in the Canadian sales tax, we have asked Doctor Adams and Mr. Alvord to go to Canada and make a study of the situation there. Based on their report, our recommendations are made to your committee. I know that both Doctor Adams and Mr. Alvord would be only too pleased to explain to you in detail the result of their investigation. It was a comparatively brief investigation, Mr. Chairman.

Mr. RAINEY. How long ago was that, Mr. Mills?

Mr. MILLS. That was two months ago.

Mr. RAINEY. Is it comparatively up to date?

Mr. MILLS. I think so.

Mr. RAINEY. Is it in accord with the present law in Canada?
Mr. MILLS. Yes.

Mr. VINSON. I would like to get some information with reference to "Miscellaneous income, internal-revenue collections." As I understand your report, the total amount derived from that source in 1930 was $628,000,000; in 1931, $569,000,000; and the estimated amount to be received in 1932 is $544,000,000. Now, of those amounts actually received in 1930 and 1931, what part did tobacco pay?

Mr. MILLS. Tobacco paid most of it. I can give you the separate figures. Tobacco paid in the fiscal year 1930, $450,000,000; it paid

in the fiscal year 1931, $444,000,000; and it is estimated it will pay in the fiscal year 1932, $430,000,000, although I think perhaps that estimate is a little optimistic.

Mr. VINSON. Treating with the total amount received under the item "Miscellaneous internal revenue," the amount of taxes paid into the Treasury in 1930 as compared with 1931 showed a decrease of less than 92 per cent, and between the years 1931 and the estimated amount for 1932, less than 42 per cent. Now, Mr. Mills, I would like you to state what class of taxpayers or what commodity or product has been so stable in the line of taxes paid into the Treasury as tobacco?

Mr. MILLS. I do not know of anything. It is the most stable source of revenue that we have, and it has shown a very distinct upward trend over a number of years now, due, of course, to the fact, I suppose that women are smoking more and more.

Mr. VINSON. Referring to the proposal that you bring to us, I believe you say, in the main, you go back to the 1924 tax bill?

Mr. MILLS. Yes; we follow its general structure and in many cases the actual rates.

Mr. VINSON. The suggestion you make in regard to tobacco, increasing it one-sixth, would that tax be the same as that contained in the 1924 bill, or would it be an increased tax?

Mr. MILLS. Óh, no. It is an increase.

Mr. VINSON. Of how much?

Mr. MILLS. One-sixth.

Mr. VINSON. Now, what other items, commodities, or products, or what other class of taxpayers have any increased tax in your proposal over the rates set forth in the 1924 bill except tobacco?

Mr. MILLS. Well, admissions are very much increased.

Mr. VINSON. Over the 1924 bill?

Mr. MILLS. Yes.

Mr. VINSON. How much in rates?

Mr. MILLS. The rate is not increased, but the exemption is decreased. The exemption in the 1924 act was 75 cents.

down from 75 cents to 10 cents.

Mr. VINSON. In the 1924 act it was not 75 cents.

Mr. MILLS. That is my impression, subject to correction.
Mr. VINSON. No; in 1928 it was 75 cents, as I recall.

Mr. MILLS. Fifty cents in 1924.

Mr. VINSON. I am speaking of the minimum.

We come

Mr. MILLS. Fifty cents. Now, then, to answer your question further: Radio and phonograph equipment was not taxed at all under the 1924 act. Telegraph and telephones were not taxed in the 1924 act. Checks and drafts were not taxed.

Mr. VINSON. I am referring to articles that were taxed in the 1924 bill, all of which received reductions, or practically all of them except tobacco.

Mr. MILLS. But, Mr. Vinson, I do not see quite the force of the argument.

Mr. VINSON. Well, if you were in the tobacco district and knew the conditions that obtained down there, Mr. Mills, I think you would recognize it very fully.

Mr. MILLS. But the tax is passed on.

Mr. VINSON. That is the theory upon which the tax upon tobacco has been placed there, and it is the theory upon which the increase is made, but if you were in the tobacco districts and were to know the methods pursued by the men who purchase the tobacco for the manufacturers, I think you would have a different idea. I would like to get this definitely clear: What class of taxpayers and what commodity or product or business under your recommendation would pay an increased tax rate over that set forth in the 1924 bill, other than tobacco?

Mr. MILLS. Well, I think that tobacco is the only one of the excise taxes in the 1924 act, other than admissions, and the stamp tax on capital stock transfers, where there is an increase, but a number of articles that were not taxed in 1924 have been added. Of course, the Treasury conception of the tobacco tax is that it is a tax that is passed on, and what you are increasing is the cost of a package of cigarettes from 14 cents to 15 cents. I do not believe personally it will affect the grower. I do not believe even after business prosperity is resumed that it will retard the very distinct upward trend in the consumption of tobacco which has been a very marked feature during the course of the last 10 years. That line rises perfectly steadily, and I do not believe that the addition of 1 cent will retard that upward growth, providing we emerge from the business depression. The only question that we could see was whether this would tend to diminish sales, and on the whole we concluded it would not. That was the only question in our minds. I do not think it was a question affecting the producer of tobacco at all.

Mr. VINSON. Did you have anyone investigate the conditions that obtained in the tobacco country?

Mr. MILLS. No; because we did not think the producer was concerned in this, because we did not believe the producer paid any part of this tax.

Mr. VINSON. I do not agree with you gentlemen in that regard. It is a question of who pays it, and to whom it is passed, whether it is passed on to the consumer or to the producer.

Mr. MILLS. I think consumption taxes are passed on.

Mr. VINSON. Does the gentleman know that last week here in Washington the Federal Farm Board entered into an agreement with the tobacco growers of western Tennessee and western Kentucky in regard to their particular kind of tobacco, attempting to save them from utter ruin in the way of loans?

Mr. MILLS. No; I am not familiar with the loans made by the Farm Board to the tobacco growers, and I do not want the gentleman to understand that we are in any way inimical to the tobacco growers. It is the firm conviction of the Treasury Department that a consumption tax of this kind is passed on to the final purchaser. and I am satisfied that the four hundred odd millions contributed to the Federal Treasury is not paid by the producer of the tobacco, but by the smoker of the tobacco.