And it will prevent citizens from wasting good road service, unless they accept the responsibility of paying directly for that which they waste as well as that which they benefit from.

Please study the charts in this booklet and you will soon realize that the solution to this problem is not nearly so difficult as one is apt to anticipate at first. Do not assume that the correct way is difficult, for it is not. It is the wrong way that creates complication and makes public business appear intricate to many citizens. And the wrong way is the direct result of citizenship indifference. For you or any other citizen to be indifferent to this problem deprives our Government of that which it so sorely needs to obtain the prope direction and support.

Although we Americans are overly generous when it comes to aiding the maimed and unfortunate and are quick to offer ourselves to our country in time of conflict, it should also be remembered that we are the most individualistic people on earth and that we have many other interests of no less importance to each of us than our national institution. We are interested in obtaining and retaining homes; we are interested in having a sufficient supply of food, clothing, etc., and we are interested in the security of our business, profession, or job, and that we might receive an equal exchange for our production. We are a people capable of loving our family, our home, our work, and ourselves without loving our country any the less. However, it might be best for all concerned if we would consider ourselves as stockholders in this great national institution rather than as its citizens.

Now, as stockholders in this national institution—which is our Government— are we going to continue directing it to distribute public road and street service without unit control, knowing that in such case this national institution must in turn resort to the act of taxation (assessing and confiscating our other interests and more of each year's production) in order to balance the ever-increasing deficit incident to the output costs and the constant progression of unnecessary expenses? Or will we as stockholders insist, as each one has the right to do, that this particular branch of our national institution be placed on a self-supporting basis immediately whereby the total cost of supplying each unit of service will be collected directly from the user at the time of delivery, and thereby eliminate the necessity for it to resort to assessing, confiscating, and undermining our other interests in order to supply the much-needed road and street service?

This a most vital question at this time. But the fact that it is, is no reason for becoming bewildered and pessimistic, for public business is only starving from want of the same attentiveness and intelligence that have been so successfully demonstrated in private business. So it is very, very important that all of the stockholders of this national institution, or in other words-the payers of the liabilities now accruing from uncontrolled distribution of public service, take time to figure out for themselves the proper solution as they would do if it was their own private business. For in order to keep this national institution solvent while distributing without unit control we must render every type of private business and individual interest insolvent. And let us remember that the great gap existing between the purchasing ability of the large majority at this time and the price of merchandise and service is caused by the enormous accumulation of taxes and tax expense, and that it can not be bridged with sham optimism, high-powered salesmanship, and installment selling; and that the only possible solution is to untax" by controlling the unit distribution of public service.

THE PROGRAM

This institute proposes that we start "untaxing" by first controlling the unit distribution of road and street service; that we collect the total cost of administrating, marking, policing, maintaining and building roads and streets and bridges (whatever it may be), by way of a gasoline tax, until a more scientific method of measuring and collecting for the units of this service can be installed, thus enabling us to cease collecting for any part of this service by way of vehicle licenses, mill levy taxes on vehicles, and the taxation of other property.

STATEMENT OF J. HOWARD PEW, PHILADELPHIA, PA., REPRESENTING THE AMERICAN PETROLEUM INSTITUTE

Mr. PEw. My name is J. Howard Pew; president, the Sun Oil Co. Mr. Chairman, in a time when well nigh every governmental unitFederal, State, county, municipal, and all the rest-is struggling with deficits and seeking revenues to meet them, I think of this committee as representing a very real national leadership. The Constitution vests in the House of Representatives the initiative in revenue matters; and the House delegates that authority largely to this committee. Your authority is great and your responsibility corresponding. I should not wish to take even a few moments of your time, in a period of emergency such as now exists, if I did not have the sincere hope of making some suggestions that might be helpful.

Practically everywhere the present-day problem of public finance is to find relief from the excesses of the general property tax. That tax, once as nearly fair as any tax could be, has become in our time the cause of much injustice and inequity. Students of public finance are all seeking ways to broaden the basis on which must rest the load of public charges.

At the outset, then, of my protest against a Federal tax on gasoline, I want to point out that such a tax would be a long step toward repeating the very mistake that has been made throughout the long period in which the general property tax has come to be the chief burden bearer in the structure of public finance. Because real property could not be hidden, the tax on it could not be dodged. It was easy to assess, easy to collect. For a very similar reason, the tax on gasoline has become a favorite method of revenue production; it is easy to collect. But, just as the ease of piling more and more of the tax load on the general property levy has wrought disastrous consequences, so the tendency to squeeze constantly more and more revenue out of the gasoline tax threatens similar disaster. It is a fundamental law of taxation that the levy which attempts to collect too much ultimately passes the point of maximum returns; it has done just that in the case of the general property tax, and Í warn you that it is beginning to do it in the case of the gasoline tax. Because it is easily collected and generously productive, the gasoline tax has become an easy mark for legislation. It has been so easy to raise the rate from 1 cent to 2 cents, from 2 cents to 4 cents, and so on up, that fiscal statesmanship has not much bethought itself of the consequences. The breakdown of the general property tax as a revenue producer may well warn you of the danger in excessive levies against any particular object of taxation.

I venture that the gasoline tax, viewed in the light of administrative experience and of results accomplished through it, would be rated as very nearly a model. It is only about a dozen years since this tax was first levied by an American State and dedicated to construction of highways. Since that time it has been adopted by every State, by the Canadian Provinces, by pretty much the whole motoring world. In our country it has provided means for that program of highway development which has gridironed North America with modern roads.

May I urge your attention for a moment to the significance of this accomplishment? I believe human history records no parallel, in the realm of public works, to the road-building achievements of this country in the last quarter century. Rome required centuries to build the highways which unified her empire; China required centuries to construct its great wall. We have accomplished here in America a vastly greater task than either of those in two decades.

I ask you, gentlemen, before you commit yourselves to a policy of fundamental change, to consider that most of this road-building record has been accomplished under the system of exclusive State rights in this tax, and State administration of it. I ask you to consider whether it is not dangerous now to interfere with a plan so well established and so well tested by results. The present plan of highway building by the States, based on revenues from automotive taxes and a modest participation by the national Government, has been a splendid success. Viewed in the light of either its economic or its cultural fruits, I know of no more useful purpose to which public revenues have ever been devoted. Gasoline, and the highway which it has brought to us, have together converted a continent into a neighborhood. Shall we, in order to meet the exigency of a difficult moment, take the risk of tearing down the system under which this has been accomplished?

It is calculated that in the past 20 years, roundly, $1,000,000,000 have been spent annually on public highways; and that amount is likely to grow from year to year, owing to increasing mileages, larger maintenance costs, and the unending demand for more roads. I recently prepared an estimate that, due to contantly higher charges, the year 1932 would see, roundly, $400,000,000 collected in registration fees; $650,000,000 in gasoline taxes, $150,000,000 in personal property taxes, and $50,000,000 in municipal taxes; total, $1,250,000,000. It will just about meet the bill for highway construction, maintenance, and the fixed charges on road bonds.

The Bureau of Roads says there are now outstanding $1,151,571,820 of State highway and bridge bonds; fully 75 per cent of them based on the assumption that motor-vehicle revenues will meet interest and principal. In the last seven years, according to the same authority, all new securities of this type have been predicated on revenues from this source. The volume of such securities is bound to increase greatly in the next few years. The States are going to need their gasoline-tax money. It is, in truth, something of a marvel in public finance that a $20,000,000,000 work of public improvement could be made so nearly to pay for itself from current revenues. A work covering 20 years and involving an annual expenditure two and onehalf times that of the cost of the Panama Canal. Only $1,151,000,000 of bonds outstanding against $20,000,000,000 of work accomplished attests that our road program has been run on the rule of "pay as you go." Not many public works even attempt that. To have come so near to a debt-clean slate must be set down as testimony that the present method of road finance is too sound to be interfered with.

From the beginning there has been a tacit understanding between the Federal Government and the States that this source of revenue

should be left to the States. The States have organized their roadbuilding programs in full faith that they might rely upon this revenue. Some of them, indeed, either overconfident or overnecessitous, have already made their gasoline taxes so high as to pass the point of maximum productiveness. Evasion has developed on a scale of big business, with disastrous results both to the revenues of States and the stability of the affected industries; it has suddenly grown to the proportions of possibly the greatest "racket" in American business.

The country is now paying about $150,000,000 a year for every cent in the average gasoline tax. The levy of an additional cent by the Federal Government will add at least that much to the burden; it will increase, in even greater proportions, the tendency to evasion. Even if the Federal Government is able to collect every dollar that is coming to it, that very fact will prove an additional incentive, as the price goes higher, for evasion of the States' levies.

This country is now in the midst of depression, and many people believe that the automotive industry may be expected first to recover and to lead in general economic improvement. What, then, could at this time more effectively discourage the motorists and the motor industry than for the Federal Government to start taxing gasoline? Every motorist would begin to vision the possibilities of a tax, not of 1 cent, but of 5, 10, or even 15 cents. The average weighted wholesale price of gasoline at principal refining centers is now about 5 cents per gallon. State taxes average about 4 cents; add 1 cent Federal tax and you have doubled the cost. Surely such a tax is little short of confiscation.

This tax alone means $30 a year to the average motorist, to the workman who uses his car as a necessity. Surely such tax is little short of confiscation.

But it is sometimes urged that high gasoline taxes can be justified as luxury levies. The argument will not bear analysis. People in the industry know that fully 50 per cent of gasoline is used for strictly industrial and industrial transportation purposes. Of the remainder, fully half is for routine transportation of people in connection with their business. In the open country, where distances are considerable and the motor vehicle has become the accepted mode of transportation, the luxury argument has no standing at all. And as to the cities, I wonder how many of us realize how impressively the mode and fashion of life, the distribution of populations, have been revolutionized by the motor car? In all the great cities the people have been deserting the congested central areas, moving out to the suburbs and country. Thus, from 1920 to 1930 the population of Manhattan Island fell 20 per cent, but the Bronx increased 75 per cent; Nassau County, Long Island, 120 per cent; and Westchester County, 50 per cent. Again, Philadelphia County, which is coextensive with the city of Philadelphia, gained only 7 per cent in the decade, while the adjoining County of Delaware gained 65 per cent; Montgomery County, Pa., and Camden County, N. J., each gained 32 per cent. The other great cities show similar conditions. Now, everybody recognizes that this wider diffusion of metropolitan population is desirable socially, economically, and from the standpoint of health, sanitation, and morals. And that diffusion has

been made possible by the automobile and its gasoline. The motor age has wrought a veritable revolution in city life; a revolution that is also an evolution, altogether good and desirable. I ask you gentlemen not to forget that the endless streams of motor cars which throng the downtown streets of cities, and whose gasoline you would tax as a luxury, are merely the transportation means by which this improvement in city life has been worked out. Can you afford to check this movement away from the congestions of the great cities? Can you view without concern the prospect of higher taxes making motor cars, as in Great Britain, really the luxury of the fortunate few? For England still has its acute congestions in the cities, and England has a tax of 16 cents per gallon on gasoline!

I find a luxury defined on high authority as an expenditure beyond the requirements of the current living standard of the time in which it is made. Will anybody seriously contend that, when we have substantially an automobile for every family in the United States, an automobile represents expenditure beyond the standard of the times?

It is a commonplace of human experience that the superfluities of one generation are the necessities of the next. The private bath was the greatest luxury of the Roman Empire; and a good many of us can even recollect when a washtub of rain water was warmed in the Saturday afternoon sun for the weekly ablutions. The bathtubs of but one generation ago were widely accounted as an evidence of vanity, effete and of dubious moral character; but most of us would hate, nowadays, to have Federal and State governments tax them as luxuries.

Neither on the ground that this is a luxury tax nor on that of the exigent necessity for revenue can you justify such a tax as is here proposed. Gasoline is by far the most heavily taxed commodity. The tax as I have shown would just equal the production cost. No industry in the land would meekly assent to that. If you don't believe me, try levying a 100 per cent tax on shoes or beefsteak or steel rails or radio sets and listen to the uproar that follows.

Approximately $9,600,000,000 is invested in this industry of ours. It is probably the largest in capital investment of any manufacturing industry in the world. Its earnings have over the past 10 years averaged $265,000,000, or approximately 234 per cent on the capital, or its income earning is about one-half of the gasoline taxes now being paid.

The real beneficiaries of the oil industry are the farmers from whose land oil is extracted. I roughly estimated that to these farmers there is distributed each year in bonuses, royalties, and rentals during this same period about $350,000,000. I want to qualify that by saying that that is a very rough estimate. It is based on the experience that our company has had, and three or four others, and equated to the whole industry, but it is not an absolute figure. The farmers, then, in fact, have a greater interest in the success of this industry than do the stockholders who made the venture possible.

On the broadest grounds of social and economic policy I urge against such a tax. For the sake of the comity that should exist between Federal and State governments, you can not afford to impose it. The States have few enough revenue sources; many of them have just as pressing needs as you are seeking to meet. The Federal