Mr. HARRISON. Yes; more than it now gets. And the Treasury estimates that if you go a step further and tax the income that is allocated but not distributed in cash, it would yield $25,000,000. Therefore, this whole controversy revolves around $15,000,000, according to your figures. Why should we have this row over $15,000,000? Mr. VOORHIS. Mr. Harrison, I think the difference between the $25,000,000 and the $10,000,000 is not the same difference that you speak of. It is a difference between the Treasury's estimate for the present year and my estimate for 1946 on the taxation of unallocated earnings.

Mr. HARRISON. Did you not do more business in the past year than you did in 1946?

Mr. VOORHIS. Certainly.

Mr. HARRISON. That would reduce the difference, not increase it? Mr. VOORHIS. No; it would increase it.

Mr. HARRISON. I don't follow you, because if you were to pay $10,000,000 on a smaller amount of business in 1946, you would pay a larger amount on a larger amount of business in 1950.

Mr. VOORHIS. That is right; that is what I am saying.

Mr. HARRISON. All right.

Mr. VOORHIS. But that is a different question, Mr. Harrison, from the question as to whether, in the case of cooperatives, you should tax invested money as if it were income.

Mr. HARRISON. You are going back to your principle and I am getting at the practical proposition ahead of us.

Mr. VOORHIS. All right, as far as the practical problem is concerned, it would make my job as secretary of the Cooperative League tremendously easy.

Mr. HARRISON. It undoubtedly would.

Mr. VOORHIS. But I don't think that you could do that in the case of co-ops without getting yourself in the position where you are going to have to tax investment income elsewhere, and that is a tough problem.

Mr. HARRISON. You are here representing the cooperatives and I want to know why cooperatives, over a very small sum of money, relatively speaking, permit themselves to get the bad will and the unfavorable advertisement that they do over this thing. I think they make a mistake there.

Now, there is one other line of questioning I want to go into with you. You have just discussed various kinds of cooperatives such as insurance companies, and so forth.

I want to talk a minute about the marketing cooperatives. Now, is not the marketing cooperative an organization of farmers which sells farmers' products to the public?

Mr. VOORHIS. That is right.

Mr. HARRISON. Now does a marketing cooperative in any way compete with private business in a community?

Mr. VOORHIS. I suspect it does with other businesses that sell the same commodities.

Mr. HARRISON. If a cooperative takes a farmer's products, shall we say milk, and sells that product to the consuming public, what business in the community does that compete with?

Mr. VOORHIS. What was that?

Mr. HARRISON. What business in the community does that compete with? As a matter of fact, if the cooperative gets a better price for the farmer for his milk than if he sold it individually, it adds wealth to the community and puts dollars into the hands of the merchant's customers. Is that not true?

Mr. VOORHIS. Of course it is.

Mr. Reed mentioned the name of Bowman Dairy Co. of Illinois as one of the contributors to the National Tax Equality Association. Well, that is because the Bowman Dairy Co. would rather handle all the milk in that area than have some farmer co-ops selling some of it. Mr. HARRISON. I am talking about the local businessman. He is the man that is in serious protest against you.

Mr. VOORHIS. Yes, I know.

Mr. HARRISON. It is the small merchant in the community who feels the competition of the consumer cooperative, but why should he object to the marketing cooperative?

Mr. VOORHIS. He would not unless he is in the marketing business. I mean that you can't get rid of the competitive situation. Of course, there is a competitive situation.

I could point out, if I thought I should take time, but I don't, that when you set up a business on a democratic basis, you have a lot of disadvantages that make it much more difficult to run that business that way than you would where you don't set it up that way. So the shoe is sometimes on the other foot.

Mr. HARRISON. I am frank to say that I just feel that over such a small sum of money, and considering the progress that your adversaries are making, the cooperatives are making a mistake to continue the fight on an insignificant tax. That is all.

Mr. MASON. Mr. Chairman.

The CHAIRMAN. Mr. Mason.

Mr. MASON. Mr. Voorhis, I do want to compliment the Cooperative League for selecting their representative because, if anything, you are not only eloquent but you are sincere. That goes a long way with

me.

I think you and I differed when you were in Congress on many things, but I always gave you my highest regard and respect because of your sincerity, and I think you did the same with me.

Mr. VOORHIS. That is right.

Mr. MASON. Now, on that basis I want to let us reason together a little bit and see if we can get each other's point of view.

Mr. VOORHIS. All right.

Mr. MASON. I am sincere in being on the other side of the fence from you on this problem. First, I want to say, however, that Mr. Camp and Mr. Granger talked about compromising and getting together so that the heat will be removed from the coal box. I have here a newspaper article carried in the Lincoln State Journal of Nebraska, being an editorial which appeared in that paper on February 9, 1951, being a report of a meeting that was held here in Washington for the purpose of seeing whether they couldn't, amongst themselves, get together and offer what might be called a compromise.

The different organizations that were represented, according to this newspaper report, were the American Farm Bureau Federation, the National Grange, the Farmers' Union, the Council of Farmers

Co-ops, the Missouri Farmers' Association, and the National Cooperative Milk Producers. They were all represented at that meeting, trying to arrive at some conclusion on this problem which faces this committee and the Congress and the country.

The net result of that meeting, according to this article, was-and I am reading just the last paragraph:

When the meeting finally broke up, it was as far from an agreement as when it started. The farm leaders departed miles apart.

Some of them proposed doing exactly what the Treasury has suggested, and others just said, "No, we won't give an inch."

Mr. Chairman, I would like to have unanimous consent to have this article, which describes that meeting and how they differed among themselves, inserted in the record at this point.

The CHAIRMAN. Without objection it is so ordered. (The item referred to is as follows:)

[From Lincoln (Nebr.) State Journal, February 9, 1951]

FARM GROUPS DISAGREE ON CO-OP TAXES

WASHINGTON.-The big farm organizations are split wide open over coopera

tives.

This came to light at an unreported meeting in Washington of top representatives of the American Farm Bureau Federation, National Grange, Farmers' Union, National Council of Farmers Co-ops, Missouri Farmers' Association and the National Cooperative Milk Producers.

The fireworks started when D. W. Brooks, head of the National Council of Farmers Co-ops, expressed the view that it might be desirable to agree on a compromise on the issue before it was taken up by the House Ways and Means Committee in drafting the new tax bill, explained Brooks.

"We may have to give some ground on this matter of taxing farm co-ops, and I believe it would be good strategy to have a compromise ready that will be acceptable to all of us. One suggestion is that we back a sales tax. That would make a tax on cooperatives less necessary and thus take off the heat for such a tax." This drew instant fire from Angus McDonald of the Farmers' Union and Charles Holman of the Milk Producers.

"I see no reason why we should compromise," asserted McDonald, “and I certainly do not approve of a sales tax in any event. We are emphatically opposed to that."

"It is ridiculous to talk about surrendering even before the battle starts," Holman declared. "We farmers have a lot of supporters in Congress. Why should we start giving ground before we've been hit? There has been talk about taxing cooperatives for many years, but they are still untaxed."

Herschel Newsom, new head of the National Grange, sided with Brooks. Newsom said that his organization was opposed to special favors for co-ops and against boosting taxes on corporations.

"I believe that taxes on individuals should be raised to meet defense needs," he declared. "Corporations are bearing a very heavy tax load already, and we should help business fight any further increase."

"I don't see that at all," retorted McDonald. "We should never put co-ops on the same basis as corporations. If you do, co-ops will be taxed out of existence. Aren't you aware that is exactly what business has been trying to do to co-ops for years?"

This blast drew a sharp rejoinder from Joseph Betts, of the powerful Farm Bureau Federation. He lined up with Newsom and Brooks.

"The Farm Bureau," announced Betts, "favors a compromise on this question of taxing co-ops. We believe that co-ops should be taxed on their unallocated reserve. We feel that is fair, and we think the time is ripe to make a concession along that line."

"Well, I can tell you the Missouri Farmers Association doesn't think that way," retorted Frank Heinkel, head of the organization. "Further, if you are going to propose that sort of a proposition, then you should stay away from the hearings of the House Committee."

"We will make our own decision on that," snapped Betts. "Our proposal will be presented to Congress at the proper time because we believe that certain tax loopholes should be plugged up."

"I, too, am in favor of plugging up loop-holes," declared Heinkel. "I've been urging that for a long time. But if loopholes are going to be plugged, Congress should begin plugging the big ones first, such as the 27-percent oil deletion allowance. And there are a lot of other loopholes just as bad. I don't recall hearing you say anything about them. As I said, I'm all for plugging up loopholes, but let's start at the right place. The Government will get a lot more revenue plugging up the big ones than slapping a tax on farm cooperatives."

When the meeting finally broke up, it was as far from an agreement as when it started. The farm leaders departed miles apart.

Mr. MASON. Now, Mr. Voorhis, the Treasury tells us that if we tax co-ops under the Treasury plan, we will pick up about $25,000,000,000. Mr. VOORHIS. You mean millions, don't you?

Mr. MASON. Yes, sir. I mean $25,000,000. We are so used to talking in billions.

Mr. VOORHIS. I know.

Mr. MASON. And our experts in the group rather agree with the Treasury. There is a difference of $5,000,000 or $10,000,000 but not anything to quarrel about. I understand from your statement that you agree entirely with the plan of the Treasury?

Mr. VOORHIS. In principle I do.

Mr. MASON. It only proposes to tax the undistributed and unallocated earnings of the corporation.

Mr. VOORHIS. Correct, as I understand it.

Mr. MASON. And that is really what Mr. Camp and these others are talking about.

Now, then, I made a speech on the floor of the House on June 16, 1949, in which I stated definitely that if we taxed the untaxed organizations on the same basis that we tax corporations, we would pick up $1,000,000,000 or more. I broke it down, and I said, and I am quoting from that speech, a copy of which I have here:

some cooperatives and other mutual organizations, such as mutual savings banks and savings and loan organizations, and all of the rest of it, we could get $626,000,000; and from labor unions and other organizations of similar nature, $14,000,000.

Mr. VOORHIS. Well, now, Mr. Mason, may I interrupt you just a minute?

Mr. MASON. Yes.

Mr. VOORHIS. That $626,000,000 I suppose contemplates all refunds as if they were profits?

Mr. MASON. Exactly.

To continue

and altruistic associations $173,000,000, and from the Government-owned businesses themselves, such as the Mississippi Barge Company and TVA, and the other operations competing with tax-paying businesses, $267,000,000, if we taxed them on the same basis as we tax corporations.

At that time the rate was 38 percent, now it is 47 percent. So this $1,000,000 would probably go up to 1.25 or 1.5 billion dollars if we did that.

Now, then, I think we ought to consider these things just a little bit. You say in your statement that if other businesses were to hand out their profits in the form of rebates of one kind or another, then they would not have to pay any tax on their profits because they

wouldn't have any, and they would then be in the same identical position as the co-ops.

Mr. VOORHIS. More exactly I said that to the extent that any other business did that, they would be in the same position. They wouldn't necessarily have to do it with all of it, any more than co-ops necessarily do it with all of it.

Mr. MASON. Supposing, Mr. Voorhis, that business in general did do that, and did hand out their profits in the shape of rebates, as coops now do, then where would Uncle Sam get his tax receipts from? Mr. VOORHIS. We would have to raise individual income tax rates, or you would have to get them from excise taxes or some other place. But, Mr. Mason, I am not too alarmed about that thing because I am not a bit sure, as I said in my statement, about the economic soundness of taxes on business for revenue purposes. I realize that in the present emergency the Congress must do it, but I am not so sure that that is the best way in the world to raise revenues.

As I said before, if you had a wide distribution of benefits among a lot of people and raised their standards and everything, I do not think it would be something that would wreck the country.

Now, don't for a moment contemplate that this is going to happen and I am not asking any business to do that. All I am asking is that until they want to treat their profits in the way the co-ops treat the patronage refunds, they ought not to say that they are the same thing.

Mr. MASON. I am in accord with you and in accord with Dr. King,' who testified before us last week that corporation taxes are probably the worst type of taxes that we could have, and that perhaps we shouldn't tax corporations as corporations at all. I think I agree with that theory. However, we are facing a fact now, and we are taxing corporations, and we want to try to analyze this problem. I want to see whether you can follow me with this little history of the taxation of co-ops. When tax immunity was first granted the cooperatives

Mr. VOORHIS. Just a minute. That was never done. What was done was that it was decided that, in order to encourage farmers to solve their problems by their own efforts, that for agricultural co-ops they would be allowed to qualify for an exemption if they had agreed to limit their returns to stock and to do a lot of other things that virtually put them into a nonprofit position. That is what the Congress said.

Mr. MASON. That is right; I will agree with that. I want to make the statement this way: When the Congress adopted section 101 (12) the farm co-ops were small groups of farmers that were banded together to get better prices for their crops. That was all they were, and that was a very excellent objective in my opinion and it was an objective worthy of encouragement.

But, figuratively speaking, these farmers' co-ops in the beginning were little lambs needing the protection and encouragement they received; but today we have big wolves masquerading in sheep's clothing, the way I put it, multi-million-dollar affairs, such as the Grange League Federation Exchange of New York, such as the Kansas City Consumers' Cooperatives Association, and such as Union Equity Cooperative Exchange of Enid, Oklahoma, multi-million-dollar affairs.