vehicles, thereby discriminating against particular passenger vehicles for hire. Is there not good legislative reason for the repeal of this tax? The repeal of this tax on automobiles, and particularly on taxicabs, will not in any event amount to more than the $66,000,000 collected last year, and it is suggested that the remaining surplus may then be taken from the income tax. Perfectly fair and even generous to the income-tax payer. It is especially urged that this tax on automobiles, in which is included the taxicab, be taken off at this time, because it is suggested by the Secretary of the Treasury that the tax hereafter might be made permanent. A permanent excise tax in time of peace, in place of a just and fair income tax, is going backward in the science of taxation and contrary to the spirit of an enlightened and equable system of raising revenue. We are well aware of the effort necessary to frame a revenue bill and to repeal taxes within the estimated Treasury surplus, but we believe that your honorable committee will take infinite pains to see that justice and fairness in this matter of taxation are done to the great and small alike. Respectfully submitted. NATIONAL ASSOCIATION OF TAXICAB OWNERS, J. G. WILLIAMS, Secretary, 500 North Dearborn Street, Chicago, Il. STATEMENT OF S. M. JETT, AKRON, OHIO, REPRESENTING THE RUBBER ASSOCIATION OF AMERICA Mr. JETT. I represent approximately 200 manufacturers of rubber products. These manufacturers produce approximately 95 per cent of the rubber products produced in the United States. At the outset I want to state that the rubber industry is appreciative of the fact that in 1926 the tax on the sale of tires was reduced. Approximately 30 per cent of the tires manufactured in this country are used as original equipment for motor vehicles. To that extent our product is still being taxed. The other gentlemen that have spoken here before have gone into this matter very fully, and for that reason I do not feel justified in taking more than a few minutes of your time, and will limit my statement to the fact that the rubber industry, when the revenue act of 1924 was under consideration, and when the revenue act of 1926 was under consideration, advocated, and we now advocate, the removal of the tax in its entirety from the products of the automotive industry, because we feel that a tax on the products of this industry is a tax on an instrumentality of transportation and therefore a tax on transportation. Moreover, we believe that the tax is discriminatory in that it singles out the products of a single industry and imposes an unequal burden on that industry. We feel further that it would be a grave mistake to make this the basis of a sales tax unless that sales tax were extended to all other commodities. We think that that is not a proper basis of taxation. Mr. GARNER. You would not advocate the theory of a general sales tax, would you? Mr. JETT. No; I would not. We feel, while some relief has been given to the motoring public, the full relief to which they are entitled has been withheld, but should no longer be withheld, particularly in view of the fact that unless you do remove this tax it may be considered that you have given your approval to this as a permanent, peacetime basis of taxation. Mr. HAWLEY. If that is all, we thank you for your appearance. STATEMENT OF FRANK W. PROCTOR, BALTIMORE, MD., REPRESENTING THE AUTOMOTIVE EQUIPMENT ASSOCIATION Mr. PROCTOR. I would like to say that Chicago is the headquarters of this association. There is nothing that I know of that I can add to the arguments that have already been advanced. This association is made up of about 600 members, both jobbers and manufacturers, who manufacture automobile equipment and accessories, and we are interested in the industry as a whole and the success of the dealer. In that way the association is interested in this matter and they have placed themselves on record through a resolution that was passed at one of their annual meetings as being in favor of reducing this tax or eliminating it. The association itself would receive benefits indirectly by the elimination of the tax. I believe that is all we have to present. BRIEF SUBMITTED BY FREDERICK SCHWERTNER, WASHINGTON, D. C., ON BEHALF OF THE NATIONAL ASSOCIATION OF PISTON MANUFACTURERS LIMITATION ON THE REFUND OF EXCISE TAXES At the last session of Congress in the enactment of the first deficiency bill for 1927 (Public, No. 660), an amendment was adopted which provides as follows: “Provided further, That no part of this appropriation shall be available to refund any amount paid by or collected from any manufacturer, producer, or importer in respect to the tax imposed by subdivision (3) of section 600 of the revenue act of 1924, of subdivision (3) of section 900 of the revenue act of 1921 or of the revenue act of 1918, unless the Commissioner of Internal Revenue certifies to the proper disbursing officer that such manufacturer, producer, or importer has filed with the commissioner, under regulations prescribed by the commissioner with the approval of the Secretary of the Treasury, a bond in such sum and with such sureties as the commissioner deems necessary conditioned upon the immediate repayment to the United States of such portion of the amount refunded as is not distributed by such manufacturer, producer, or importer, within six months after the date of the payment of the refund, to the persons who purchased for purposes of consumption (whether from such manufacturer, producer, importer, or from any other person) the articles in respect of which the refund is made, as evidenced by the affidavits (in such form and containing such statements as the commissioner may prescribe) of such purchasers, and that such bond, in the case of a claim allowed after the passage of this act, was filed before the allowance of the claim by the commissioner." Subdivision (3) of said acts pertains to the excise tax on parts and accessories of automobiles, trucks, and motor cycles. Congress adopted this amendment under the assumption that in every case the excise taxes were passed on to the ultimate consumers. This, however, was erroneous. Nearly everyone of the members of the National Association of Piston Manufacturers, which comprises practically all of the piston manufac turers in this country, absorbed the tax, and the price of pistons was largely fixed by competitive conditions. The National Association of Piston Manufacturers urges most strongly that the amendment referred to above be not reinserted in subsequent appropriation bills. The amendment to the deficiency bill requires the manufacturer to distribute the refund to the persons who purchased for the purpose of consumption the articles in respect to which the refund is made, as evidenced by the affidavits of such persons. The requirements to be observed are mentioned in T. D. 4015, volume 6, Internal Revenue Bulletin No. 17, dated April 25, 1927. In actual practice a manufacturer in selling his products passed the tax on as a specific item, increased his selling price by a certain percentage to take care of his tax, or absorbed the tax entirely due to competition. When the tax was shifted it was a part of the cost of the goods. Practically every tax, including the income tax, is shifted, although with a sales tax it is more direct and more easily traceable. The tax is a certain percentage of the manufacturer's selling price. There are very few parts and accessories, if any, which are sold directly by the manufacturer to the ultimate consumer who is referred to in the amendment. A manufacturer of parts or accessories sells to a distributor, jobber, or dealer, and the tax was figured on the price of the article sold. The distributor, jobber, or dealer in turn sold to service stations or retailers and in doing so generally fixed a price on each article without respect to the tax which attached to the original sale by the manufacturer. The retailer or service station sold to the ultimate consumer, who did not know what tax they were paying, In other words, the tax was determined by the price at which the manufacturer sold and not by the subsequent sales of the article. This applies to many articles, such as tire pumps, pistons, carburetors, spark plugs, piston rings, etc. In practically every case the ultimate consumer is unknown to the manufacturer, and since the ultimate consumer did not know what part of the price which he paid for the article represented tax, it is wholly impracticable for a manufacturer to secure the affidavit required by T. D. 4015. The requirements which have been imposed by the deficiency bill are wholly unworkable and its plain purpose was to retain in the Treasury taxes which had been collected illegally. The excise tax is a tax primarily against the manufacturer for the privilege of doing business and its constitutionality could only be sustained on this ground. It is a certain percentage of the manufacturer's selling price and the tax is levied against the manufacturer. The tax attaches immediately upon the sale by the manufacturer and is payable by him. Even if the manufacturer fails to collect the purchase price of the article from his customer, he is nevertheless required to pay the tax, since he made a sale of the article. In many cases the Commissioner of Internal Revenue has imposed against a manufacturer a retroactive tax on articles which the manufacturer believed were nontaxable. In a case of this kind the manufacturer was in no position to shift the tax burden to his customers. That the tax is recognized by the Treasury Department as one on the manufacturer is clear from a letter addressed by former Deputy Commissioner James M. Baker to the Wisconsin Highway Commission, dated October 1, 1919, in which it is stated: · However, the tax imposed by section 900 is on the manufacturer of the taxable article and is to be returned and paid by him, and the question of whether he is to be reimbursed by the purchaser for the amount of the tax is a matter of agreement between the parties to the sale over which this department has no jurisdiction." In the case of Heckman & Co. v. I. S. Dawes & Son Co. (Inc.) (Court of Appeals of the District of Columbia, April 5, 1926, Washington Law Reporter, Rep. Vol. LIV, p. 343), it was held that a customer could not recover from a manufacturer excise taxes refunded to the manufacturer by the Treasury Department, since the tax was on the manufacturer and not the dealer. The manufacturer had added the amount of the tax to the sale price of the cider and the customer paid the entire amount of the bill voluntarily. While this decision undoubtedly represents the law in the case, it is true that many manufacturers have refunded to their customers taxes recovered from the Treasury Department. Under the limitation, however, it is practically impossible for any manufacturer to secure a refund of excise taxes which were collected from him illegally, and it was the obvious purpose of the amendment to retain in the Treasury such taxes which were collected illegally from the manufacturer. From the standpoint of plain business honesty there is but one question involved, and that is whether the United States will retain taxes which it has illegally collected. The Treasury Department should be the first to set the example of plain business honesty, and Congress should not pass legislation which attempts to give an executive department the power to retain money to which its title is illegal. The courts have recognized the manufacturer as the taxpayer in a number of decisions and given judgments for excise taxes illegally collected. In the case of Atwater-Kent Manufacturing Co. v. The United States, reported in 5 Amer. Fed. Tax. Rep. 6067, the Court of Claims held that timers and coils were properly subject to the manufacturer's excise tax as automobile 73038-27-60 parts, since they had a general commercial utility. It was because of this decision that the Treasury Department sponsored the passage of the objectionable amendment and thereby avoid its effect. In the case of A. G. Spalding & Bros. v. Edwards (262 U. S. 66) the Supreme Court of the United States held that baseballs and baseball bats, etc., in the course of transportation for export were not subject to the manufacturer's excise tax. In the case of American La France Fire Engine Co. v. Collector (5 Amer. Fed. Tax. Rep. 964, Circuit Court of Appeals, Second Circuit) it was held that fire engines were not taxable as automobile trucks or automobile wagons. In the case of Martin Rocking Fifth Co. v. United States (60 Ct. Cls. 466) it was held that the Commissioner of Internal Revenue erroneously taxed semitrailers as parts of automobile trucks. In J. J. Seeburg Piano Co. v. United States (5 Amer. Fed. Tax. Rep. 6051) the Court of Claims held that an automatic piano operated by depositing a coin in a slot was not taxable as a vending machine under paragraph 11 of section 900 of the revenue act of 1921. In National Rubber Filler Co. v. United States (6 Amer. Fed. Tax. Rep. 6595) it was held that tire fillers were not subject to the excise tax as parts or accessories of automobiles. The judgment in this case was rendered after the limitation to the appropriation bill became law and the Treasury Department has refused to pay the same. The judgment of the Court of Claims and other courts in excise-tax cases are payable out of the general appropriation for refunding taxes illegally collected, but the limitation placed on the refund of excise taxes make final judgments of competent courts absolutely valueless. This creates quite an anomalous situation. The United States has given its consent to be sued in the matter of excise taxes, but refuses to pay a judgment handed down by its own courts. There is no time limit on the validity of a judgment against the United States, and in order to defeat the payment of a judgment Congress would have to carry the objectionable limitation in the appropriation bill ad infinitum. There is no limitation, other than time limit, on the Commissioner of Internal Revenue in collecting excise taxes legally due from a manufacturer, and there should likewise be no other limitation imposed on a manufacturer in seeking to recover from the Government excise taxes illegally collected from him. There is no more reason for placing a limitation on excise taxes on parts and accessories than there is for placing a limitation on the refund of excise taxes paid on cameras, photographic films, candy, firearms, shelis, and cartridges, automatic slot vending machines, and other articles which were taxed under the same section with parts and accessories for automobiles. It is the position of the piston manufacturers that the objectionable amendment should be eliminated entirely. While practically all of the piston manufacturers absorbed the tax, it is felt that if a provision were inserted under which refunds could be made where the manufacturer absorbed the tax it would only result in a controversy as to whether the tax was actually passed on, and it would require a court to make a finding of fact that the tax was not actually shifted before a refund could be secured. The provision of law authorizing the refund of taxes erroneously collected has been in existence in substantially the same language since the year 1866 and no limitation of the kind above referred to has ever been before suggested. If this amendment were adopted at a time when a national emergency existed similar to the entrance of the United States into the World War, with the end that the Treasury of the United States would not be depleted by the refund of taxes, the manufacturers of the country could well appreciate the circumstances, but the adoption at this time of a policy by the Congress of the United States to retain money illegally exacted does not commend itself to any fair-minded citizen. FREDERICK SCHWERTNER, Counsel for National Association of Piston Manufacturers. BRIEF SUBMITTED BY THE AMERICAN MOTORISTS ASSOCIATION The CHAIRMAN AND MEMBERS WAYS AND MEANS COMMITTEE, United States House of Representatives, Washington, D. C. GENTLEMEN: The American Motorists Association, a representative organization of individual automobile clubs of the United States, with national headquarters at Fifteenth and Pennsylvania Avenue NW., Washington, D. C., here with respectfully submits the following concise observations in behalf of its contention that the present 3 per cent tax on passenger automobiles should be discontinued. This association is more distinctly representative of the automobile user than any other national association, as it represents the private automobile user and no other interest, and is the only national organization which is not supported in any degree by the automobile industry. Your committee has so completely at hand all the requisite statistical information that no review of it here will be attempted. The purpose of this memorandum is to submit the following summary of the viewpoint of the individual owners of passenger automobiles in America as interpreted by the American Motorists Association: 1. The 3 per cent tax on passenger automobiles is a war-excise tax which originally was imposed on a large number of subjects, including musical instruments, sporting goods, articles of wearing apparal, perfumes, fur articles, firearms, and a number of other subjects. The great majority of these taxes have been removed. 2. The retention of the 3 per cent tax on automobiles is an unfair discrimination in view of the removal of the tax from numerous other subjects. 3. In view of the tremendous increase in the number of automobiles the revenue from the 3 per cent tax is greater to-day than was the 5 per cent tax originally imposed during the war period. 4. The necessity for the tax (in any amount) no longer exists. 5. The retention of this tax in the Government's permanent fiscal plan is unwarranted, and would be an unfair discrimination against the man of very moderate means, who comprises the big percentage of the passenger-car users of to-day. 6. The private passenger car is not in the luxury or semiluxury class, but is an article of essential utility, playing an indispensable part in the domestic life of the millions of American families. It should be so regarded in the consideration of the subject of taxation. 7. In local taxes alone, including gasoline tax, registration fees, personalproperty taxes and municipal taxes, $615,000,000 are annually paid by the automobile user as such, most of which revenue results in the economic betterment of the country in the form of highway improvements. If a permanent excise tax of any form and on any subject is required, it should more properly be upon a subject or subjects contributing less to the general welfare. 8. Finally, we believe that the 3 per cent tax is unfair, discriminatory, and unnecessary, and should be repealed, and we respectfully urge your recommendation to the House of Representatives to that effect. Respectfully submitted. AMERICAN MOTORISTS ASSOCIATION, By J. BORTON WEEKS, President. BRIEF SUBMITTED BY THE MONTGOMERY COUNTY MOTOR CLUB WAYS AND MEANS COMMITTEE, National Capitol, Washington, D. C. ROCKVILLE, MD., November 10, 1927. SIRS: The Montgomery County Motor Club, representing the motorists of Montgomery County, Md., in conference last week considered the existing war excise tax of 3 per cent against new automobiles. Upon direction of our board of governors, I am submitting the consensus of opinion of our organization that it is our belief that this tax as a matter of principle should no longer be invoked. The tax as originally applied was primarily a war emergency measure. It was then determined that certain revenues could be procured from this particular source, hence the application of the 5 per cent war excise tax at that particular time. The motorists of our county, as well as other counties throughout the United States, have obediently subscribed their share of taxation for the emergency measure created at that particular time to raise the specific sums of money which it was considered necessary to be obtained from this particular source. We call your attention, however, to the fact that since 1917 there has been a decided increase in the production of automobiles, hence the larger revenues derived from this particular source. To continue the existing tax in our opinion would be decidedly discriminatory, inasmuch as levies against |