That is due, I must admit, to the fact that the Ohio Constitution said there could not be placed a retail sales tax on any kind of food, but the Supreme Court definitely upheld the theory that candy was food and to that extent should be given the same treatment.

Mr. BATES. I think about 17 States have a sales tax. Is that right? Mr. WEST. Twenty-four States.

Mr. GOTT. Only four I know of, and one of them passed it last week, Maryland, at 2:30 a. m., I am told, Mr. Chairman.

But there are only four that I know of that have any discriminatory feature against candy.

Mr. BATES. In 20 of the States candy is exempt from the provisions of the sales tax; is that right?

Mr. WEST. I do not know. I think this was copied from New York City.

Mr. GOTT. A local tax, not a sales tax.

California has a sales tax in which this discriminatory provision exists, but I think in most of the other States where food is exempt, candy is also exempt.

We are not asking for special favors for the food group. We do feel if you are going to exempt food, you should exempt candy and confectionery.

If you do not exempt foods, I am sure the retailers will pay the tax the same as they do on other products.

Mr. BATES. Thank you, Mr. Gott.

Senator CAIN. Let me ask one question, sir.

How much money are we talking about if candy is included in your sales tax? How much of the total estimated revenue would come from the candy?

Mr. WEST. I do not know.

Senator CAIN. I wonder if the witness would know.

Mr. WEST. It would depend somewhat upon the figure, the amount set, below which there would be no tax.

Mr. STEIDEL. That chart shows that 65 percent of the candy sells for a dime or less. That bill excludes that from taxation. The bill calls for 50 cents or more.

Mr. WEST. What the sales would be above that, I do not know. Senator CAIN. A single candy bar would not be subject to the sales tax?

Mr. STEIDEL. The bill says the Commissioners have a right to exempt all articles under 50 cents, which would take in Hershey bars.

Mr. GOTT. 3.9 percent of the candy is sold at retail for over a dollar, and I should judge that not more than 14 percent is sold at retail for over 50 cents, so that you would eliminate automatically about 85 percent of the candy sales.

However, it is a discriminatory feature.

I will be glad to leave that.

Mr. BATES. We do not need that.

Is Mr. McMillan here?

Did you wish to testify?

Mr. MCMILLAN. I would like to do so briefly, if I may.

STATEMENT OF C. M. McMILLAN, EXECUTIVE SECRETARY, NATIONAL CANDY WHOLESALERS ASSOCIATION, INC.

Mr. MCMILLAN. Mr. Chairman and gentlemen of the committee, I am C. M. McMillan, executive secretary, National Candy Wholesalers Association, Inc.

My association represents 1,600 wholesale distributors of candy located in the 48 States, the District of Columbia, and the Territory of Hawaii. In the District of Columbia we represent 11 wholesalers who supply most of the small independent retailers who sell candy.

For your information, more than half of all the candy produced in this country is distributed through small wholesalers, many of whom are one-man firms, depending almost entirely on their confectionery volume for their livelihood. The situation is similar here in the District. Therefore, we are rightfully concerned with any tax program proposed for the District as well as for other areas.

We do not, however, profess to be authorities on either taxation or candy. We certainly would not attempt to tell these distinguished committeemen what taxes they should or should not levy or whether or not food should or should not be taxed.

Our only desire is to bring to your attention the inequity of taxing one food item-candy and confectionery-and exempting from taxation competitive items made of the same raw materials and sold in direct competition with candy and confectionery. In this we concur wholeheartedly with the testimony given here by representatives of the National Confectioners Association.

We refer to the provisions of S. 843 and H. R. 2290 in which these bills would make exceptions of "candy and confectionery," and we respectfully ask for the following deletions:

On page 5, line 2, under "milk products", delete the words "other than candy and confectionery”.

Lines 5 and 6, under "sugar products" delete the words “other than candy and confectionery".

Lines 7 and 8, under "cocoa products", delete the words "other than candy and confectionery".

The representatives of the manufacturers have shown you that candy and other confectionery contain some 77 agricultural products as ingredients; that candy and confectionery are recognized today by the armed services, doctors, dietitians, and parents as a vitally nour ishing and wholesome energy food; that it contains in many cases the identical ingredients of other milk, sugar, and cocoa products which it is proposed to exempt.

Therefore, to set it aside from such competitive food items as being subject to a tax which is not applied to other food items is clearly discrimination which we believe you will agree is not fair to the manufacturers, distributors, and consumers of candy and confectionery.

Our wholesaler members and their retailer customers all handle some of the milk, sugar, and cocoa products which are competitive to candy and confectionery and which these bills would not tax.

We do not therefore feel we can point our fingers at any one or more of them and suggest that they ought to be taxed. But we do feel that in all fairness to our consumer customers they ought to be able to buy all competitive food items on the same tax basis.

We therefore express the hope that you will see fit to delete from these bills the phrases referred to above, "other than candy and confectionery," and give these products equality with their competitive items:

Mr. BATES. Thank you, Mr. McMillan.

Now, we have one more witness here this afternoon, Mr. William Shelton.

These are all who are here to express themselves on candy.

Is there anyone else?

STATEMENT OF WILLIAM SHELTON, WASHINGTON, D. C.

Mr. BATES. Mr. Shelton, you are opposed to the sales tax, I understand.

This is your second appearance before the committee?

Mr. SHELTON. Not on taxation.

Mr. BATES. What was the other?
Mr. SHELTON. On the highways.

Mr. BATES. I mean before this committee.

We will be glad to hear you again.

Mr. SHELTON. This afternoon, for example, you can see it may run to inequalities between different groups.

The sales tax has no intellectual basis, it has no equitable basis on which you can levy it.

I want to mention the technical points.

Point No. 1 is among families. I have a neighbor who has 10 children. I have two. He has to buy five pairs of shoes, five suits of clothes, and five of everything, whereas I buy one.

He has more responsibility with his 10 children than I have. He is less able to pay for it than I. He has to pay five times as much in any

case.

It is a basic inequality for any tax.

In the second place, any city that puts a tax on itself is discriminat. ing against itself all the localities, States, or cities that do not have that tax.

People from Los Angeles to Maine travel through Washington and they buy or do not buy, depending on whether they have a 2 percent sales tax very often.

Because Virginia and Maryland will have a tax is no excuse for us to put a tax unfairly against ourselves for all the other 46 States in the Union.

There is no fundamental, logical basis for a sales tax being just in any way I know of.

In the third place, it is very expensive to collect.

There was testimony here that in New Orleans they had allowed only 5 percent for that expense, but the people there simply had to bear the rest of it. They allowed 5 percent but they probably allowed 25 percent to collect.

Then they decided they never could collect equitable. The thief, the crook in the District that is not well supervised gets by without paying a good portion of the tax. The honest people pay it.

Senator CAIN. May I ask you from what source you get such information?

Mr. SHELTON. From a long study of economics and taxation.

Senator CAIN. Have you ever lived in a State or city which imposed a sales tax?

Mr. SHELTON. No.

Senator CAIN. You have had no personal experience?

Mr. SHELTON. No; I have never lived in a local jurisdiction that paid them but I have had to pay them in traveling where it was levied.

As I say, it is very expensive and it is inequitable. It is impossible of close supervision so that everybody pays equally.

In the fourth place, if it is passed at all, it will contain a great many in proportion to necessity to purchase and not in proportion to ability to pay or duty to pay, which is the basis for taxation.

These are fundamental things in taxation. It is just erroneous, it is not subject to any of these principles of taxation.

Why should Washington as a national example set up such an atrocious example for taxation, and, besides, can we not levy a 2-percent additional tax on income? We have the same amount and we can get it justly levied and we will exclude those that are not able to pay it and put it on groups that are able to pay it.

Income and sales are roughly the same. A good deal of the sales go to outside people but that is no great difference.

You can levy a little more if it does not fit, but you can make it one tax instead of two and get a fair tax.

Senator CAIN. You would oppose the sales tax as taking moneys away from tourists of which this grand city has millions every year? Mr. SHELTON. Well, I do not know why the tourists should pay our local taxes. These are primarily for local purchases.

If they trade here or room here or live here for a day or two, they may pay gasoline taxes, they may pay for their goods and the merchant makes enough profit to pay a little more taxes.

Senator CAIN. It is a national city, and from that point of logic, it might be reasonable to think that those who visit their own city, being different from any other community in America, could well

afford to assist.

Mr. SHELTON. Yes, Senator, but if they stop at the hotel, do they not pay for the expense at that hotel and does not the hotel have funds and therefore pays more taxes, and if we do not levy the tax, more people will come here.

Also, it does not put a burden on the people of the country who would like to see the National Government. It does not put a burden on them to be able to do so. I mean, we are putting a burden on these people which they probably should not bear.

Now, however dire the necessity that this tax forces on people, they have it to pay.

Of course, you exempt food, medicine, and medical assistance, and

all of that.

You exempt some, but if you exempt, for example, candy and all the things that have been mentioned here this afternoon, what about the other things that the poor people, milk and things like that, have to buy?

Of course, if you exempt all foods, and that is really the point, you exempt a great many things, finally candy, that are bought by the wealthy more generally than by the poor, it does not hold up against any principle of taxation.

Now, an income or property tax does not lead to these inequities. For example, some woman riding in a car with me the other day said, "I hope we will get that sales tax. So many people do not pay

any taxes.

I replied: "Do you know anybody who does not have to pay a realestate tax?"

"A lot of people do not own that property."

"Do they not pay it in their rent?"

"Oh, I had not thought of that."

I said: “You try to rent property where the tax is on it and you will see the difference. Of course, if you have competition and cannot rent property and get your taxes, you will get out of that property and get out of it as soon as you can."

But if it is a case where you have a margin, everybody has to pay it, and of course all the people in this city have to pay property taxes, so they are not exempt from those things.

I have already made my general suggestion that a 2-percent tax or whatever is necessary to be considered in addition to the income tax and that gets all of us more or less equitably, those that are able to pay it.

I think I will make a separate point of this No. 5. It is not according to duty to pay or ability to pay.

Ability to pay in tax history has been taken as a duty to pay. It is assumed that ability to pay should measure a person's proportion of

taxes.

Ad valorem tax on property is not quite that, but it is ad valorem so it is in the nature of approaching that principle, so it is not an extremely bad tax. So the main canons of taxes stand up for both the income tax and the property tax.

We have had testimony here this afternoon regarding how the amount we need, $19,000,000, might be had. I do not know the proportion, $6,000,000, for example, from the Government of the United States, $5,000,000 from income, $7,000,000 from property.

Mr. BATES. Where do you get the $5,000,000 income? The estimate is only $2,500,000, and about $500,000 on property of business. Mr. SHELTON. Do you mean at the present rate?

Mr. BATES. In the bill.

That is the estimate, Mr. West, about $3,000,000?
Mr. WEST. That is correct.

With the tax on unincorporated business, it will run $3,000,000.
Mr. Shelton is suggesting an increase in rates.

Mr. SHELTON. I understood from the witness this afternoon that is what she suggested.

Mr. BATES. We have had a lot of suggestions but that is not in the bill.

Mr. SHELTON. The bill is not permanent, it can be changed?

Mr. BATES. It is still there to be considered among the others. Mr. SHELTON. Well, now, as to the total budget, that question you have raised very definitely from the witness here this afternoon.

As to that total budget, that is a question. Of course, we are going into a permanent policy for a number of years running into $20,000,000 and $30,000,000 a year. That is questionable, and any policy that starts wrong is bad. If you start improvements that should not be

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