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who may be forced by ruinous competition to a way of doing business not in keeping with the public interest. A monopoly of opportunity is not unlikely locally with a few, well-financed, large retailers meeting the competition of the adjacent monopolies, at least long enough to force a large number of other retailers into bankruptcy and ruin. Before the war years, during which it is conceded that nearly everyone, in every line of business, made money, bankruptcy was not unknown in the retail liquor business. Now that the war is over, it has returned. And while it has not yet reached the retail package store it has closed a number of night clubs and restaurants.

Indicative of the times is a certain retail package store which was sold last September for $65,000. The same store was sold a few weeks ago for $30,000. An appreciable factor in the depreciated price was the computed fall in the weekly gross volume of business.

With conditions as they are it would seem economically unsound to aggravate the situation by an increase in the tax of 120 percent with its corresponding effect on the selling price of alcoholic beverages. 3. The proposed increase in taxes on alcoholic beverages will not return the

sum stated by its proponents and could lead to a reduction in the taxes now received by the District government By reason of its price policy, the average price of 18 popular brands of whisky sold in the State-owned stores of the State of Pennsylvania is 63 cents higher than the average price for the same brands in the other monopoly States. Mr. Lawrence H. Eldredge, president of Pennsylvania Alcoholic Beverage Study, Inc., has estimated that State revenues from the sale of alcoholic beverages have decreased by 34 percent under the new price policy. In a recent letter sent every member of the State legislature he recommended legislation to curb the Pennsylvania Liquor Control Board's "uncontrolled power to charge what it pleases for liquor.” In that letter he stated : “Only the legislature can protect the citizens of Pennsylvania from being forced to pay liquor prices higher than those paid in other monopoly States and in surrounding open license States. The present policy is not producing more revenue; it is diverting sales to other sources from which the Commonwealth derives no profit.”.

Quite to the contrary is the more businesslike policy followed by the contiguous State of Virginia. When the legislature in Virginia recently considered a bill to tax the sales of liquor in the State-owned stores 10 percent for educational purposes the loudest opponent to the proposal was the chairman of the Virginia State Liquor Commission. He frankly stated the necessity for keeping liquor prices lower in Virginia than those in the District of Columbia in order that Virginia's buyers would not find their market in the District of Columbia and in order that District buyers might be attracted to the State of Virginia. I can find no fault with his position. From his point of view and from the point of view of protecting the revenues of the State of Virginia, his is the sound course.

From these two experiences we must realize that while the State of Virginia prices for alcoholic beverages continue lower than are those in the District of Columbia, not only will local tax collections by way of gallonage taxes tend to decline, but the loss of business and loss of profits will materially reduce the many other contributions made to the tax fund by the alcoholic beverage industry. That Virginia prices are lower is apparent from a study of the April 1, 1947, liquor price list issued by the Virginia State Alcoholic Beverage Control Board. Typical of the variance is PM Deluxe, referred to earlier as selling in the District for $3.29. The Virginia price is $2.85; Seagram's V. O. advertised by one of the lower priced local retail stores here at: $5.01 is priced at $4.45 in Virginia ; Seagram's 7 Crown, $3.49 locally (varies $3.49 to $3.75), in Virginia, $3.15. An increase in the tax of 120 percent locally will only aggravate this Now present variance.

What is the purpose of the State of Virginia in placing a retail liquor store on the south side of the Fourteenth Street Bridge, immediately adjacent to the District of Columbia, if not to compete for District business, and to compete on the basis of lower prices?

On the other side of the District, local retail dealers are faced with the same problem presented by the stores operated by Montgomery County, Md.

The District of Columbia is one of the very few jurisdictions which does not have a Fair Trade Practice Act. There is no method available to control local retail prices. Dealers can, and will try to meet the competitive prices of Virginia and Maryland. This will be a desperate, foolhardy and costly mistake. It will bring ruin to many and only the few who are exceptionally strong and well-financed will be able to stand amidst the ruins. Bankruptcy, unemployment, and a reduction in the contribution to the cost of government by this industry will be the certain result.

With the present tax this industry will have its problems to face in the months to come. At the moment the industry is pretty well stabilized. Thus far it has been able to meet the post war recession in buying. The stability of this industry is of greater importance than that of any other because of the necessary restrictions which surround its operations and because of the recognized danger in the abuse of the product which it dispenses. It is making, proportionately, a greater contribution by way of taxes to the Federal and District governments than any other business. I fear that many who seek to increase its tax burden seek to do so, not for purpose of revenue, but for purpose of destruction.

A further tax increase at this time will be adding “the straw that broke the camel's back" or like killing "the goose that laid the golden eggs."


By F. JOSEPH DONOHUE, Counsel. Mr. Bates. We will now hear from Mr. Joseph E. Keller. Do you wish to be heard again?



Mr. KELLER. Well, Mr. Chairman, I made a statement the other day which I thought was a general statement on the over-all tax picture and at that time I said that I would like to present a brochure today and an additional statement which I will be very glad to do.

Mr. Chairman, this represents an analysis of the highway program which the Highway Department submitted to the District Commissioners on October 5, 1946.

Now, this Highway Department report was analyzed by us and it was made a basis of this special study and in accordance with the chairman's request, I have a one-page summary here of our position in this matter also.

Our position briefly, Mr. Chairman, is that the Highway Department has, within the next 3-year period, almost $34,000,000 to spend on highways in the District of Columbia.

As I pointed out the other day, that sum is made up from the estimated revenues of $21,442,000 for 1947–48; the highway fund balance is $1,890,830; set aside by the Highway Department in 1946 for Federal-aid matching, $1,600,000, and a 3-year Federal-aid allotment of $8,922,000, which makes a total of $33,857,830.

There is no disagreement, Mr. Chairman, between our position and that of the Highway Department, except as the spokesman for the Highway Department pointed out in his opening statement, the first day of the hearing, we have taken a different figure for the revenues, we have taken a higher revenue figure than the Highway Department has, but I have here a chart which I refer to as table No. 1, and that appears in this statement, Mr. Chairman, which shows the 1945-46 fiscal year, actual tax collections in the District, for the months of July, August, September, October, November, December, and January, and

it shows the 1946–47 fiscal year collections for those same months, so that there is a basis for comparison, and the chairman will note that there has been in that, from July to January, inclusive, a 21.8 percent increase in the gasoline tax collections.

Now in our estimated increase here, we have not taken 21 percent or anything like 21 percent. We have taken for 1947–48 fiscal year, an 8 percent increase, which we think is extremely modest, and for the 1948-49 fiscal year, we have taken only 6 percent because we are not crystal gazers and cannot tell exactly what is going to happen.

I want to subscribe to the statement made by the Highway Department Director that neither of us knows and I am sure this committee does not know what the actual tax collections are. The only thing we can do is base our assumption upon the actual facts, and these are from the District of Columbia figures here, and say to you we feel it is fair and reasonable to assume an 8 percent increase one year and a 6 percent

6 increase another year when as a matter of fact the increase in the last 7 months has been 21.8 percent.

Mr. Bates. You didn't have February in this, did you?

Mr. KELLER. Well, the statistician, Ýr. Chairman, when this chart was made—it was made up on March 10. Your hearings were started the next week and we didn't know when we would be called and the tax collections were not available from the District. They are available for the month of February now, and I would be glad to make them a matter of record.

Mr. Bates. How do they check?

Mr. KELLER. It shows the same trend. It shows exactly the same trend.

I want to be fair about this thing and say that so far as the collections for 1946–7 fiscal year are concerned, the Highway Director said in his hearing the other day, that he did not think they were going to reach the goal for this year. To that I say this: That we have three of the best driving months coming up. We have the collections for the rest of this year, and I do not think it is fair for us to stop at July. These trends, Mr. Chairman, are things that get under way and which take a long time to work out.

Now, this shows a very definite trend already. It is one that we think will continue, and we think it is unsound and even unfair to take a statement any less than this. Another source of highway revenues is the revenues from registrations, and it is a very curious thing to note that the same increase is apparent in the registrations in the District of Columbia. These were made up to March 10. Look where we started down here, way back here in April of 1946 with only 90,000 cars registered and on March 10 the figure was 146,720 registrations.

Mr. BATEs. What was it March 10 a year ago?

Mr. KELLER. I do not have that exact figure here, sir, but I do have that for quarters. You can see it at the bottom of the page, how it has

gone up since that time. I wanted to make clear that the 21 percent increase is from this particular period, and it totaled 1945–16 registrations and not from way back here in April. It would have been much greater had we taken that figure. We did not think it was a fair figure to take, however.

Now that is on the revenue side.

There is another point at which we disagree with the Highway Department's report, and that has to do with the estimated expenditures.

Now for the 1946–47 fiscal year, the Congress has already approved an increase of 42 percent in the projected operating expenditures for the Highway Department.

In the Highway Department's report, they come along and ask for a 69.4 percent increase for 1947–48, and shoot it up to a 74.9, actually. It really does not show there—71.9 increase for 1948-49.

In order to come out with what we would like to call a bald budget and what we think is a sound highway plan for the District, we are asking the Highway Department for these next 2 years to see what is going to happen with these increased revenues, and at the same time to hold to this expenditure program what they have said they could get along with in 1947–48. If that is the case, I will show you where we will come out in the end and it is a very promising figure and is something I think is worth working for and worth trying to attain if we possibly can,

In order that you have the details before you, Mr. Chairman, I have the chart, and this is taken from the Highway Department's report, in which they show the various stories of these operating expenditures.

Now the Highway Department has said before this committee that a lot of them are as a result of an operation of the law. That is very true but I want to make it perferctly clear that all of these things are not by operation of law and all of them are not justified.

Here, of course, if we take a minor item like an increase in the pay for the policemen, and we have to pay our proportionate share of that, that, of course, is by virtue of another law and we will not question that.

I do not even question any increases, Mr. Chairman-a modest increase—in the revenues of the Department of Vehicles and Traffic, but their report points out that they are proposing 135 percent increase in the budget for that particular office.

Now no kind of business and no kind of sound Government program can absorb that kind of a shock. When you are increasing your expenditures at the rate they are increasing them here, and when you come out with any kind of an expenditure that you want to make and you put it on paper and then say, “We have to have more money in order to do it,” of course you have to have an increase in the gas tax.

These are the percentages from the Highway Department's own statement that have been put in that chart which I have just shown you.

I have another point to make here, Mr. Chairman, having to do with the statement that during the war years there was a holiday, as it was called, on minor capital improvements and on maintenance and operations.


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This is a page from the Highway Department's own report, and if you will note the various headings, let us take under "Maintenance and operation” here, we have for the years 1939 to 1948, in 1939, 1940, and 1941 the maintenance operations were at the rate of about $1,100,000 a year, average. The figures are right here. I do not have the specific figures.

If you will take the figures for the rest of these years, the war years of 1942, 1943, 1944, 1945 and 1946, average them out, you will find that they are almost exactly the same rate as they were in prewar years.

There is no holiday, therefore, in that particular situation.

Let us take "Minor capital improvements." We go over here into ditto, the same thing holds true. Here is one million four, one million one, one million two. We come along to 1942, however and we are up to 2,000,000 and almost 212 million.

We come to 1943; we were spending at the rate of $1,440,000; 1944, we dropped down to $198,600, and this is on the chart.

I do not want to get away from that figure at all but what I am speaking of is an average.

Now let us take “Major capital improvements.” In 1944 and 1946, there were no major or capital improvements made, it shows, during those 2 years, but do not overlook the major capital improvements made with Federal-aid funds which appear in the last column.

If you will average those figures in 1941, we had $2,500,000 in Federal aid. Add those to the figures in here, and I think that any fair person would say that the same thing was true, that there might have been a somewhat reduced operating rate and a somewhat reduced program of major or capital, and minor or capital improvements, but it was nothing like a holiday, and that therefore the District is not going into a postwar period with a tremendous backlog of improvements.

I think this chart fairly shows that.

Now this is what I think is the attractive thing. This is the goal that we have been working for, a sound operating program and a sound and ample budget for the District of Columbia.

Here we have the final chart, and that appears in the last page in your particular report there. You will note we have a title "Highway Department fund," fiscal years 1947–49.

We have projected revenues here which we have set forth showing $21,442,000. That is the figure which I gave you at the start of my testimony.

In addition to that we must add "Highway balance including lapsed balances from appropriations as of June 30, 1946," of $1,893,830 for a total of $23,335,830.

Now the projected revenues of the Highway Department are shown in the next group of statistics. You will note that they have statistics there for maintenance and operation, trees and parking, vehicles and traffic, metropolitan police, miscellaneous expenses, minor capital outlays, major capital outlays other than federal-aid projects. You will note the changes that are made in each year reflecting the increase in the operations as were shown.


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