Mr. HUDSON. Yes.

Mr. TREADWAY. Therefore, I think that my question is a fair one. Mr. HUDSON. I do not see it quite that way.

Mr. TREADWAY. Of course, if it is embarrassing

Mr. HUDSON (interposing). It is not embarrassing. I think that every motorist should contribute toward the expense of building the highways, but when you retain a Federal tax on the ground that you are contributing to the Federal highways and that, therefore, you must continue the tax, I think that is unjust, because you must continue deepening the channels of the rivers, you must continue building the harbors, and you must keep up the lighthouses, but you are not taxing that cost to the transportation companies that use them. That is what I meant on that proposition.

Mr. COLLIER. Proceeding along the line of Mr. Garner's question, I gather that you believe, and I believe the same thing, that in view of the past estimates of the Treasury, in which they have been out of joint approximately $1,000,000,000, possibly this estimate of $225,000,000 that they estimate now as a surplus, in comparison with their past estimates, is also considerably out of the way, and that we could cut the taxes by a little over $300,000,000, relieving the corporations by 3 or 32 per cent and at the same time take off this tax on cars. That might be done and the Treasury not suffer much.

Mr. HUDSON. I might be willing to defer my personal opinion to the more efficient opinion of the Secretary of the Treasury, because he must know more about that than I do, but, regardless of that, you owe it to the individual taxpayers scattered all over the country to remove this automobile tax before you get down to a place where you can not go further in reduction.

Mr. TREADWAY. Just one word more: In view of your insisting on taking care of the individual, let me ask you this: If a Pierce-Arrow landau, at the factory retail price, sells for $8,000 and the factory gets $6,000 of it while the purchaser pays $8,000, the tax on that $8,000 would amount to $180. Now, do you think that that tax is a hardship on that purchaser?

Mr. HUDSON. To that extent, it is a hardship. He has been overtaxed to that extent.

Mr. TREADWAY. Do you think that the tax would interfere with his buying that $8,000 car? Do you think the $180 extra would interfere with his buying the car?

Mr. HUDSON. Possibly not, but you are levying a Federal tax on a principle that is unjust.

Mr. TREADWAY. Let me give you one other illustration: I believe the Lincoln is made in your State.

Mr. HUDSON. I think it is made in my district.

Mr. TREADWAY. The Lincoln limousine sells for $5,200.

Mr. HUDSON. And it is worth it.

Mr. TREADWAY. I drive one, and it is worth it to me. The tax on that car is $117.50. Now, is that a hardship on anybody? Your argument is based upon the proposition that it is a hardship upon the individual.

Mr. HUDSON. It is an injustice to the individual, and anything that is an injustice is a hardship.

Mr. GARNER. Do you not think that Mr. Treadway could very well answer that himself, he having bought one?

Mr. HUDSON. Yes.

Mr. GARNER. It is a hardship to the extent of $117.50.

Mr. HUDSON. It would be in his case, because Congressmen, of course, have very little money to spend.

Mr. GARNER. Let me ask you whether, from the standpoint of sound economic principles, as well as business principles, where you tax an industry very heavily, you retard the progress of that industry to that extent?

Mr. HUDSON. Yes.

Mr. GARNER. When you load a business down with taxes you retard it to that extent, no matter how prosperous it may be or how much the people may demand its products.

Mr. HUDSON. Yes..

Mr. TREADWAY. Suppose you take the four-door Ford sedan; or, rather, suppose we take the ordinary Ford touring car.

Mr. HUDSON. There is no ordinary Ford touring car now. That has passed.

Mr. TREADWAY. Take the Ford touring car, selling for $380. The tax on that car is $8.55, and I want to ask if you have known of any decrease in Ford car sales on account of that tax?

Mr. GARNER. I thought you would ask whether it was a hardship. Mr. HUDSON. I do not know of any enlargement of Ford sales on account of the tax. It has not stimulated buying.

Mr. GARNER. I thought he wanted to know whether it was a hardship.

Mr. HUDSON. Of course, that is the difference between southern Congressmen and northern Congressmen.

I thank you for your attention.

(Mr. Hudson submitted the following statement for the record:)

Mr. Chairman and gentlemen of the committee, I want to appear before you this morning to present to you my views on one matter of tax reduction. I realize that you gentlemen as a committee are of necessity compelled to keep in your minds, in drafting the new revenue bill, an adequate income for the support of our Government, which the very necessity of the case, as the population of the Nation increases and the interes.s of the people become more varied calls for a heavily increased expenditure on the part of the Government. It is generally conceded that you are planning for a reduction, however, in the general levies made. That being true, I want to advocate the elimination of the excise tax known as the automobile tax. It means the reduction of some seventy to eighty millions of dollars and should be one of the first items of reduction considered by the committee.

My reasons for that statement are as follows:

First, it is a discriminatory tax. It is a tax levied on a special product for the purpose of general revenue. It has singled out and to the extent of the tax imposed penalized one line of manufactured product while virtually to-day every other product that could be placed in a like catagory has been relieved from any excise tax. There was no thought of such a tax upon the manufacture of automobiles until the grave demands of war called for the levy of excise taxes upon products that would not be justified in time of peace. There is no tax upon the manufacture of pianos, though in a large extent they might be termed a luxury. That is likewise true of radios and other products of a like

nature.

Congress has already repealed the war excise tax upon every commodity formerly so burdened, with one or two exceptions. I desire to insert here a table of the excise taxes imposed at one time and now removed.

DISCRIMINATION-EXCISE TAXES REMAIN ON ARTICLES NOT CROSSED OUT

Classification by Bureau of Internal Revenue.

Forty-three of the classifications once burdened with war excise taxes have been granted complete repeal, but two classifications continue to bear these special imposts.

You will notice in that list the tax still remains upon automobiles and motor cycles and firearms, while every other item has been erased. This table clearly shows the discrimination. No fair government can afford to ignore the principles that a tax program ought to be general in its application and not discriminatory against any one industry or any group of individuals. We contend that the excise tax on automobiles is both. The seventy-odd million dollars raised the past year by this method of taxation has been a burden upon 4,000,000 of people, while the blessings of the automobile and the industry has been of general benefit to the entire Nation.

In the second place, I want to call your attention to the further fact that this tax is not only a discriminatory tax, therefore unjust, but it is also a tax on essential transportation. Unless one has given a careful study to the recent developments of transportation they can not comprehend to what extent the automobile to-day has become the great method of transportation for both freight and passengers. The automobile in the United States travels one hundred and seventy-five times as many actual miles and seven times as many passenger-miles as does the steam passenger train. It has revolutionized local transportation and is destined to become a still more important menus for the quick and easy as well as cheap transportation of freight and persons. Other units of transportation were the first to be relieved of emergency war taxes, because it was recognized they were of vital importance to the economic life of the Nation.

Secretary Mellon is quoted by the papers upon his appearance before the committee last week as saying: "The automobile is one of the railroads' chief competitors. Our railroads are paying heavy taxes to the United States Government, a part of which is being used for highway purposes." It is well known, gentlemen of the committee, that this tax which the railroad corporations pay to the United States Government is collected, in one way or another, through rates on merchandise or persons from the very John Smiths and Harry Joneses who are compelled to pay the excise tax on automobiles and which they can not pass on to anyone else to pay. The Secretary, in this argument of comparing the tax on the automobile owner to the tax on railroad corporations, is falling into the common error of reasoning by those who desire to see the tax continued, viz, that the corporations manufacturing automobiles pay this tax instead of the motorists, which is the fact in the case.

Let's carry this reasoning a step further. The present excise tax of 3 per cent on automobiles is entirely on passenger cars, Congress having exempted "automobile truck chassis and bodies, automobile wagon chassis and bodies, and

It is

ractors." This leaves the present excise tax only upon passenger cars. the truck that is affecting railroad transportation, that can not be adjusted by taxation. It is a matter of the transportation system of the Nation, adjusting themselves to this new system of transporting merchandise and persons,

Let me call the attention of the committee to the fact that after the World War's termination $2,000,000,000 worth of road-building machinery was sold by the Federal Government to France for $450,000,000. Some of this machinery was sold back (by France) to some of our States for 100 cents on the dollar. When the money is paid to us the Government should place it in the Federal good-roads fund and be used to aid the various States in pushing through transcontinental highways, not only from the Atlantic to the Pacific, but also in closing up the many highway gaps now existing between the North and the South.

We now urge that inasmuch as the motor-vehicle owners of this Nation have given to the Government more than a billion dollars through the Federal war tax let the Government show its appreciation by applying the $450,000,000 toward the building of Federal highways. Such roads will save millions of dollars in wear and tear on automobiles and will bring prosperity to every section and industry.

I want to call your attention further that this tax is only one of the additional burdens by way of taxation that the motorist is compelled to pay. He buys his car, and before he can possess it he pays this Federal war tax, then he must pay a State registration fee, then he must pay a tax upon the value of the car, and then he must pay a tax for the privilege of driving it, and in 45 States of the Union a tax of from 2 to 4 cents per gallon on gasoline in order to run it. In other words, in 1926 there was levied upon this method of transportation and paid by the motor public a total tax-Federal, State, and municipal of $712,272,350. These are the figures secured from the United States Bureau of Internal Revenue, Bureau of Public Roads, and municipal statistics. In other words, the motorist, who had already paid all the general taxes required of the citizen of the Nation as income tax, indirect tax, and a corporation tax, if he is in business or a stockholder in a corporation, is still further taxed for this discriminatory, unjust Federal tax. The total of all motor-vehicle taxes in 1926 of $712,000,000 plus is equivalent to approximately 70 per cent of all the annual rural highway cost. The average tax per registered motor vehicle was $32.35, and in some States much higher.

Let me call attention again to what this industry or, rather, this class of our citizenship has paid in war taxes. At present I stated the tax was bringing to the Treasury of the United States between $70.000,000 and $80,000,000. On December 31, 1926, the total revenue from the war excise tax on all automobiles and equipment had amounted to the vast sum of $1,039,071,746.53. No one can argue that this industry and this group of citizens has not paid its share of the war expense, and now we pray that they be relieved and not penalized further.

I want to turn now, gentlemen of the committee, and discuss very briefly the fallacies that have been brought forth as arguments for the retention of this discriminatory, unjust war excise tax.

It is contended that the automobile is a luxury and that those who are able to afford it should not complain of this Federal tax. Gentlemen, there might have been a day when the motor vehicle could have been classed as a luxury. That day has long since passed away. It is a necessity to-day to the extent of 90 per cent. The motor is foremost in the movement of food from the truck farm to the city market, from the farm to the warehouse shipping point, and has thus become an absolute necessity both as a light truck and as a passenger car to the producer of the foodstuffs of the Nation. It is also foremost in the movement of raw materials and manufactured goods, and thus becomes to the smaller manufacturers his vehicle by which he receives the raw material for his plant and then in turn transports the manufactured articles to the market. And it is readily understood and conceived how the motor vehicle is in the front rank as a necessity for the transportation of persons, both within cities and between cities. It is fast taking the place of the electric car and the street railway as a method of transportation.

May I call the committee's attention in this connection to the further fact that the cheap automobile has made possible the doing away of the tenement district of our industrial cities and enabling the workman, because of his easy means of transportation, to live in the outskirts of a city in God's sunshine and clean air, where his family and children are growing into better citizens than was possible under the old régime.

Gentlemen, the automobile is not a luxury. It is a necessity to the farmer, the business man, the professional man, and to-day is the essential in the activities of our modern life, whether we are thinking of the farm or the city.

Another fallacy often heard and argued is that this tax should remain as long as the Federal Government gives financial aid to the States for Federal roads. Secretary Mellon calls attention in this connection to the Federal appropriation for good roads that in the fiscal year 1928 wil run as high as $71,000,000, and for the fiscal year 1929 he estimates it will be $75,000,000. The Secretary then says: "These expenditures by the Federal Government are for the direct and immediate benefit of automobile owners. They shou'd make some contribution in return." We desire to take issue with our most able Secretary of the Treasury when he states that the above expenditures by the Federal Government for good roads is for the direct and immediate benefit of automobi e owners. There is no Federal expenditure for specific purposes that is so general in the application of its benefits as is that expended for Federal roads. It is entirely changing the isolated, small, ily furnished schoolhouse to the centralized, well-equipped school buildings in charge of trained, competent teachers. This is only one instance of a hundred ways whereby our highways are for the direct and immediate advantage of the entire communities and States affected. Surely this committee will not give any weight to such an argument, for I am sure that this committee readily recognizes that it has never been the Federal policy to tax any one group of its citizens for a specific purpose of benefit. We do not tax the farmer to-day with a specific tax for the support of that great activity of our Government which we call the Department of Agricu ture. While its benefits may seem on the face of it to be for one class of citizens and one industry, we all recognize that the work of the Department of Agriculture is for the general good.

May I cite a specific instance of the above reason? The Sixty-ninth Congress, in view of the alarming devastations of the corn borer, appropriated $10.000,000, to be met by a like amount by the States affected, in an attempt to stop the ravages of this pest. We probably will appropriate a like amount or double in the Seventieth Congress for this purpose, but no one advanced the argument that the farmers directly concerned and receiving an immediate benefit should bear a specific tax to meet the expenditure.

The shipping industry of the Nation is not taxed with a specific tax, or the money appropriated by this Government for the development of our river transportation, our harbor improvements, or our Lighthouse Service, while the benefits of the money thus appropriated seem to be for the benefits of our transportation and shipping interests, yet the Government recogn.zes that adequate and continuous transportation is a vital necessity of the Nation's life. There si no connection, gent emen, between the principle of the excise tax on automobiles and aid given by the Federal Government for the building of highways. While the man who possesses the automobile will travel with greater comfort and deliver the products of his industry with greater dispatch because we possess adequate and well-built highways, the benefits accruing from these highways is to all the people and not to any one class of industry. The Federal highway act was passed in 1916, a ful. year in advance of the war tax levied or motor vehicles. Further, there is no provision in the act and none was contemplated in its passage that the cost of Federal aid toward these Federal highways should be levied upon the motorists or upon the industry. Let me repeat that Federal aid represents Government participation in an enterprise for general good.

One more argument that is advanced by some as an excuse for not removing this unjust tax is that if the tax was removed the motorists will not profit by its repeal. This is an argument that is one and the same as the argument that the excise tax on automobiles is a tax on the industry and paid by the manufacturers. Of course, there is no reason or excuse for my answering such an argument before this intelligent committee. You all understand very readily that this excise tax is attached to the price of a car and paid for by the purchaser when the car leaves the factory or service station. The manufacturer is simply the tax gatherer for the Federal Government. The tax has always been added and billed separately. Gentlemen, my district, which I have the honor to represent in Congress, is perhaps the center of the automobile industry of the Nation, and I am here to say to you that the automotive industry has been a leader in the industries of the Nation in constantly seeking to reduce the price of its manufactured product to the consumer. Through mass production and efficient methods the automobile industry has constantly been