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Mr. CHINDBLOM. The property is forfeited to the State ?
Governor GREEN. To the State of Michigan.
Mr. CHINDBLOM. For failure to pay taxes?

Governor Green. Yes, sir. There were 727,000 acres and over 8,000,000 lots.

Mr. TREADWAY. In other words, you think it is fair for the State to put an extra tax on the user of the automobile, but you do not think that it is fair for the Federal Government to do so?

Governor GREEN. I think that that should be left, just as I think the inheritance tax should be left to the State, rather than to the Federal Government.

Mr. McLAUGHLIN. Does the question of the tax that is pending in the Supreme Court of Michigan involve the validity of the 2-cent tax as well as the additional 1-cent tax?

Governor GREEN. I have not gone into that sufficiently to be able to answer that question, but I imagine that every question has been raised all the way up.

Mr. TREADWAY. As all good lawyers do?
Governor GREEN. Yes, sir.

Mr. HAWLEY. If there are no further questions from the committee, we thank you for your appearance, Governor.

STATEMENT OF S. A. MARKEL, RICHMOND, VA., REPRESENTING

THE AMERICAN AUTOMOBILE ASSOCIATION

Mr. HAWLEY. Will you state your connection with the American Automobile Association?

Mr. MARKEL. I am the chairman of the legislative committee of the bus division. The motor-bus division is the National Association of Motor Bus Operators.

I want to say to the committee that we have a membership of approximately 3,500 individuals and companies, which operate motor busses in every part of the United States. This membership represents an ownership of about 20,000 units engaged in common-carrier service.

This is the first time, gentlemen, that a national representative of the motor-bus industry has ever appeared before this committee to ask specifically for relief from the war excise taxes, and to anticipate a question I want to say to the committee that I am here at my own expense and that I am not a lobbyist. I am directly interested in the operation of motor busses.

Mr. RAINEY. The reason that you are here at your own expense is that you are not speaking against the estate tax.

Mr. MARKEL. No, sir; I am not speaking against the estate tax.

Mr. Rainey. If you were, you would find plenty who would finance you.

Mr. MARKEL. I am here merely presenting our case. I believe that we can present facts to this committee that will justify it in clearing a situation which to us appears inequitable.

I want to state first of all that the motor-bus operators of the country are unanimously supporting the statements made by Mr. Henry, the president of the American Automobile Association. We believe, since the war emergency is past, the excise tax should be eliminated from all automobiles, as it has been eliminated from the products of other industries.

We are particularly interested, however, in the 3 per cent tax assessed against the motor bus used in the common-carrier service. When the excise tax was first adopted in 1917 there was not any particular reason for Congress to disassociate the motor bus from any other automobile, because the business was then in its infancy. The bus was a truck with a home-made body, or an elongated passengercar chassis, and did not render a dependable service. But within 10 years this business has grown to the extent where we are rendering frequent and dependable service with 40,000 vehicles over 275,000 miles of definite routes on regular schedules in every State in the Union.

I might also state to the committee that we are regulated as a utility by the commissions of 44 States.

Mr. Rainey. Do those 44 States allow you to compete with the railroads--that is, all of them?

Mr. MARKEL. I am going to answer that question in this way, sir: They do not let us compete with the railroads. But the people of 44 States who have adopted bus laws take the position that the commissions of their respective States controlling these properties should give major consideration to the public convenience and necessity of the operation. If the railroads or any other utility have fallen down on the job, the primary object is to give the people service. Where the people demand motor-bus service, it is the duty of a State commission to grant a certificate, whether it be in competition with the railroads or anybody else.

Mr. RAINEY. Is that true in all the States?

Mr. MARKEL. That is true in practically all the States so far as the motor bus laws are concerned. To the best of my knowledge the administration of all bus laws are governed by that principle.

Mr. RAINEY. The effect is to protect railroads where they give adequate service?

Mr. MARKEL. No, sir; I am unwilling to state that the effect is to protect the railroads any more than to protect the busses. The effect is to serve the public.

I desire to say further, that, in addition to the common-carrier service, there are 30,000 other motor busses being used every school day in carrying school children back and forth from home to school. According to 1926 transport figures the common-carrier busses of the country carried a total, in round number, of 2,000,000,000 passengers, while the school busses carried a total of 280,000,000 passengers. The grand total of all passengers hauled by motor bus would therefore reach 2,250,000,000 per year. In view of these figures we are very much hurt that the Secretary of the Treasury did not appear to be aware of the existence of a public utility of the magnitude to which the bus has grown.

In his report to this committee on October 31 the Secretary said that, in his opinion, the automobile is a semiluxury article and the excise tax upon it should be retained. I do not want to discuss that phase of it, because I think that was amply taken care of by Mr. Henry.

I should like to say, however, that while it is hardly likely that the Secretary intended to include the bus in his characterization of the private passenger car, his reference, under the classification of the law and with no exception being made for the motor bus, implied that all passenger carriers were luxuries.

So, as a consequence, if the recommendation of the Secretary were to be accepted by this committee literally, with no distinction being made between private and public carriers, the motor bus would continue to operate under the permanent handicap of being the only public utility in the United States suffering from a war-time emergency levy.

To refer further to the Secretary of the Treasury's report, mention was made in that report of the heavy taxes paid to the United States Government by the railroads. I think the facts will demonstrate that the motor-bus industry pays more taxes to the United States Government and to the States than do the railroads. Not counting the tax paid on income by the different bus manufacturersand they are here to present their story—this industry, with a gross annual operating revenue of $300,000,000 makes a big contribution each year to the Government in the form of individual and corporate income-tax returns.

For a comparatively recent entrance into the field of transportation, the motor-bus industry is laboring under an enormous tax burden. The Federal excise tax, from which we seek relief here to-day, is one of the many levies imposed upon us. This tax alone is relatively light when measured against our total tax bill. Let me cite you a few figures: The total annual taxes on common-carrier busses under the 1926 law, excluding Federal income taxes and personal-property taxes, amounted to over $20,000,000. If the Federal income tax and the personal-property taxes levied against the $300,000,000 worth of equipment, terminals, garages, etc., were included, the totals would amount to $28,000,000 or $30,000,000.

This means that the average tax per motor bus engaged in commoncarrier service, in license fees and gasoline taxes alone, amounts to approximately $500 per vehicle per year. With all taxes included in the total, the average figure runs up to nearly $700 per year per vehicle.

When consideration is given to the fact that our total average gross revenue per bus is $7,500 per year, it can be seen that we pay about 10 per cent of our annual gross revenue in taxes. As all taxes are charged against the cost of operation and thus reflected in the rate structure, the cost is, of course, borne by the public. I am fairly certain that the railroads can not match those figures, although I want to say to the committee that we have no quarrel with the railroads. Inasmuch as a number of the railroads are now operating motor buses, I am here also representing them, because several of them are members of the motor-bus division.

The motor bus is very new in its rôle of a public utility, dating its existence in public service from the year 1917. It is not right that its early development as a necessary economic factor should be handicapped by heavy governmental penalties, when all of our other transportation facilities were given every advantage in their youth, even to the point of subsidy.

This committee, gentlemen, has the opportunity to lighten the load somewhat and to encourage the progressive development of highway transportation. Taking the bus-chassis production figure

of 15,000 for the year 1926 and using an average valuation figure of $6,000 per unit, the total amount of the excise tax paid annually to the Federal Government by the bus industry will hardly exceed $2,750,000. Considered in terms of governmental tax income, this does not represent a great amount, but considered in terms of relief to the operator and to the public this item, if deducted from the bus operators' annual tax bill, would make a very appreciable difference.

In the committee's last revision of the revenue act, presumably because of the utility feature involved, the 3 per cent tax on motor trucks was repealed. Other units of transportation, including the railroads and pipe-line carriers, were relieved of all emergency war-time taxes as early as the year 1922. This being so, is it fair that the motor bus, now one of the greatest and most necessary of our public utilities, one which is yet in its infancy, should continue to suffer under a war-time levy? We do not think so, and we do not believe that this committee after reviewing the facts will think so.

We do not ask, gentlemen of the committee, for any special consideration or for a concession which is not rightfully ours. We simply ask you to accord us the same measure of consideration that you have accorded other public utilities in this country. We appear to be the only remaining public utility to have a war-time tax levied against it. Our war-time taxes are charged in our operating costs and a certain portion of that charge must be passed on to the public. We ask that you relieve us of this tax so that we may relieve our passengers likewise of the tax, which would include, as I say, the 280,000,000 school children whom we haul annually.

We have developed into an industry which, including school-bus equipment, has $500,000,000 invested in motor-bus properties and terminals in the United States, and we feel that we are not asking anything that would be hard for this committee to grant.

Mr. COLLIER. I believe that the railroads perform a very useful service and the bus companies perform the same kind of service. You do not think it is fair to tax the busses $700 a year and at the same time you spoke of subsidies-give the railroad companies what is virtually a subsidy in the shape of the Pullman surcharge!

Mr. MARKEL. To answer the question directly, we do not; but we do not wish to appear to oppose anything that the Congress or the country may wish to do for the railroads as a matter of relief. We do not feel if you adopt that as a policy you should single us out for taxation.

Mr. DICKINSON. What effect would it have upon this industry if the railroads would occupy the field by putting bus lines on public roads, and to that extent drive out the busses that now occupy that field?

Mr. MARKEL. I am very glad you asked that question. We are very glad to have the railroads engage in the bus business, as they are now doing. I do not know what the intent of the railroads is, but before the railroads can put busses upon the highway they must do the same thing that the bus man has to do-that is, apply to the State commission for a certificate. Then if the railroads can show public convenience and necessity for their service, we are happy to see the commission grant them certificates, the same as they grant them to us, in the territory which we serve.

Mr. CHINDBLOM. Are there many instances where branch-line railroads have been unprofitable to the railroad company and where busses, taking the place of the railroad, getting its business, have been operated with profit?

Mr. MARKEL. Many of them. After spending millions of dollars in fighting the motor bus the railroads have now come to that conclusion, and by their action admit that the bus is a utility in their business. They are eliminating many unprofitable short lines.

Mr. CHINDBLOM. And permission granted to the railroads by State commissions to discontinue many of these lines is in fact a boon to the railroads?

Mr. MARKEL. Exactly. Many of them are doing so, and to-day the railroads are getting into the bus business and using busses as an economic factor in their scheme of things.

STATEMENT OF A. E. MITTENDORF, CINCINNATI, OHIO, REPRE

SENTING THE OHIO STATE AUTOMOBILE ASSOCIATION

Mr. MITTENDORF. Mr. Chairman and honorable members of this committee, it is not my intention to take up the valuable time of this committee in any extended argument in regard to the abolishment of this tax, since it might simply be a repetition of what the president of the American Automobile Association has said.

I am here as the president of the Ohio State Automobile Association, including its membership of 136,000 motorists in the State of Ohio. The board of trustees of our association, through a resolution, urged me to come here and represent the Ohio State Automobile Association at this time.

The motorists of the State of Ohio paid $3,442,660 last year in motor excise taxes. They feel that they are already burdened so far as motor taxation is concerned, and it is because of that feeling that I am here making this plea to the committee to abolish entirely the excise taxes on motor cars.

Mr. CHINDBLOM. Is that the amount of Federal excise tax paid by the motorists of Ohio?

Mr. MITTENDORF. That is the Federal excise tax.

Mr. KEARNS. Where do you get the opinion of these various owners of motor vehicles? I have not heard a man connected with an automobile organization ask about this tax or complain about this tax.

Mr. MITTENDORF. You are Mr. Kearns?
Mr. KEARNS. Yes.

Mr. MITTENDORF. Well, we had a convention in Cincinnati last May of all the automobile clubs in the State association. I think practically all of them were represented. There were 665 registrations at that convention.

Mr. KEARNS. How many were there?

Mr. MITTENDORF. I think there were 665 registrations, if I am not mistaken, and they unanimously adopted a resolution requesting the abolishment of the motor excise tax. Our State association has been on record for years with regard to this matter.

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