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What, we ask, would your outlook be as a businessman in the face of these increasing taxes and mounting materials shortages? Undoubtedly many of you, just as many of these businessmen, would be facing extinction.

In addition, for many years difficulty in securing financing has been a serious deterrent to the formation of new small and independent business enterprises and to the continuation and expansion of these enterprises, once founded. Our sales representatives contacting thousands of small independents at their places of business daily seeevidence of this problem. The files of the House and Senate Small Business Committees, and of the Congressional Joint Committee on the Economic Report, contain much evidence of the problem. All three committees have held extensive investigations into the problem. The reason for this difficulty is easily determined. Even in normal times the returns available are not sufficiently attractive for individual investors. The costs of stock flotation are prohibitive. Inability to build sufficient reserves prevents internal financing.

Now, even before any further increases in taxes, all of these stumbling blocks to continued small and independent business are greatly magnified. Where then, if anywhere, are these small and independent businessmen to turn for a solution to their pressing financing problems? How are they to continue in existence?

Congress could, if it will-and as we hope it will-help smooth the extremely rough path these independents must travel if it will do any one or more of the following:

1. Refuse to raise taxes on small and independent business or to raise them to the confiscatory levels suggested so far; or,

2. While raising the tax level, either,

(a) permit tax deductions for plant expansions or improvement, or (b) permit greater retention of earnings for reserves, or

(e) eliminate double taxation of dividends, perhaps with some ceiling attached.

We recognize that any one of these suggestions will lessen the total revenue taken in by Government. Against this we are sure you recognize that if something is not done many of these businesses will no longer be a source of tax revenue; their payments to the Treasury will stop once and for all. More than this, we are sure you recognize that the easier Congress makes it for small and independent firms to secure private financing and to finance themselves, the smaller will be the demand for Government assistance, and the smaller will be the total tax bill the Government will have to present to the people. In this last we are not suggesting that private financing is now, or will be in the foreseeable future, an adequate source for small and independent enterprise. Much as the federation would like it to be, it just has not been so, and on the basis of all portents is not likely to be But we are suggesting that Government can act now, by giving up a little at the present in order to gain more in the future in the way both of taxpaying competitive enterprises and national security.

so.

Beyond all this, the loss caused by enactment of any one or more of these suggestions could be overcome, in great measure, by complete elimination of nonessential Government spending in both the defense and nondefense fields, and by closing the loopholes in present tax law.

Last month we recommended just this to the Congressional Joint Committee on the Economic Report. We told the committee that

economies can be achieved in the defense program by: (1) extension of the competitive advertised bid system of procurement, which will permit greater small and independent business service to the Nation; (2) greater defense agency use of small and independent business facilities, which will reduce the need for direct and indirect Government financing of additional new plant and reduce product cost by eliminating the build-up of wasteful backlogs and the incomplete use of the labor potential; and (3) more willingness on the part of defense agencies to heed constructive suggestions, from small and independent businessmen, designed to cut armament costs. We pointed out also that savings can be effected in nondefense programs by holding up extension or all social welfare programs and creation of new programs of this type, and by eliminating all subsidies to business and agriculture, so far as is possible. We told the committee that in a period such as this of great business activity and high income, promoted largely by Government spending for defense, curtailment and elimination of these programs can be made without endangering the Nation. On the other hand, as we recommended also to the joint committee, Government tax revenues can be increased by fair taxation of presently tax-exempt organizations which compete daily with independently owned and operated unincorporated and corporate businesses. We refer here specifically to the so-called cooperatives, which should be taxed in the same manner as their independently owned and operated competitors. In this connection you will recall that apparently reliable witnesses before your committee last year estimated that during the years of World War II, cooperatives escaped payment of some $855 million in Federal taxes. Since that time, the volume of business done by cooperatives has increased tremendously. So, obviously, has their tax advantage.

We need not remind you that a question greater than that of raising additional revenue-vital as that is-is here involved. President Truman put it well when he told the Congress, January 12: "Sacrifices must be shared fairly." Small and independent businessmen urge that Congress consider this principle when working on the problem of taxing cooperatives. All other considerations aside, it simply is not fair when co-ops do not have to pay the same taxes as their unincorporated and corporate business competitors. As a matter of fact, it might be said that the unincorporated and corporate businessmen are being coerced into paying the freight for their competitors.

Before we close, gentlemen, let us make one point very clear; as we told the Senate Finance Committee, December 8, 1950, small and independent businessmen are quite willing to assume their full tax burden. They do not desire to have anyone carry the load for them. They have never asked for any unfair shift of the burden from themselves to any other class of taxpayer.

But they realize as well as you that ruined businesses neither pay taxes nor contribute otherwise to national security. They know, too, that any expansions to fill the gap caused by their elimination will not provide Government with the same amount of revenues as it is now receiving.

Remember, many of these enterprises-as you have seen by their own testimony-are now close to ruin. Further tax increases, at least to the levels suggested in the President's suggested program, may push them over the brink to complete disaster.

Mr. MILLS. Mr. Chairman.

The CHAIRMAN. Mr. Mills.

Mr. MILLS. Mr. Burger, I was very much interested in your statement, and particularly in the suggestions on page 6 which you made to the Congressional Joint Committee on the Economic Report. Now, if you will, I would like to have a little more information about the three points that you make there. The first one is:

Fconomies can be achieved in the defense program by extension of the competitive advertised bid system of procurement, which will permit greater small and independent business service to the Nation,

Now, do you have a specific suggestion along that line?

Mr. BURGER. Congressman, from what we hear from our members and read in the press, we find that the procedure of negotiated contracts is increasing over the use of competitive bids. Only yesterday I received a letter, from a member in Billings, Mont., in which this independent businessman said that by the time he received the application for the bid, the closing date was so close that automatically he was prohibited from sending in the required data to the Govern

ment.

Mr. MILLS. Is it your opinion that there is a deliberate effort on the part of these procuring agencies to bypass the smaller businesses of the country?

Mr. BURGER. I want to be fair, Congressman. From my observations and in my opinion, there definitely is; yes.

Mr. MILLS. Is there some reason for such a policy?

Mr. BURGER. To answer your question, Congressman, I would like to refer to the testimony of General Harrison in testifying before the Senate Small Business Committee on the 20th of January, where he said that the Government has been placed in the position of getting the materials as fast as they can and as cheap as possible.

Mr. MILLS. Is it your point that the Congress should take some action?

Mr. BURGER. Very definitely, if small business is to participate in this program.

Mr. MILLS. Do you have some definite suggestion for action by the Congress?

Mr. BURGER. Congressman, I cannot boil it down to a figure. But I was a member of the Small Business Task Force of the National Security Resources Board up to about a year ago. For some unknown reason, that Small Business Task Force was discontinued when we were starting to go into the question of why small business wasn't being considered.

Mr. MILLS. With what agency were you working?

Mr. BURGER. The National Security Resources Board which was the over-all planning agency, I believe, at that time.

Mr. MILLS. That activity would now be with the National Production Administration?

Mr. BURGER. I suppose so. There are so many agencies around now that it is pretty hard to know where to put your finger on it. Mr. MILLS. Now, with respect to your second point, you state:

Economies can be achieved in the defense program by greater defense agency use of small and independent business facilities, which will reduce the need for direct and indirect Government financing of additional new plant and reduce product cost by eliminating the build-up of wasteful backlogs and the incomplete use of the labor potential.

Now, that does follow pretty closely the first suggestion, does it not? Mr. BURGER. I would like to say this, Congressman. There has been a proposal submitted to the National Federation of Independent Business from Dallas, Tex., the proposal being to recondition the motors in motor vehicles. I understand that there are close to 1,000 accredited motor rebuilders throughout the United States.

Now, in my opinion, this program is for domestic use, not for overseas use. These are tanks, jeeps, and all military vehicles. Now, it would strike me that if the proposal is carried out, satisfactory as a result of investigation by the Government, the services of those independent businessmen throughout the Nation should be utilized instead of building up new motor plants and new plant facilities.

Mr. MILLS. The continuation of the policy which you allege now exists would, in your opinion, tend in the direction of the creation of greater monopoly in the production of goods in the United States?

Mr. BURGER. There is no question about that at all. I think the only outlet for the situation now is for the Congress to consider the proposal of setting up the Small Defense Plant Act. I think that might be an answer to the problem facing small business throughout the Nation.

I say to you gentlemen of the Ways and Means Committee that the mail in our office in Washington is just coming in in leaps and bounds from all over the Nation. So it is not a condition in a local area. It is all over the country.

Mr. MILLS. Now, with respect to your third point you state:

Economies can be achieved in the defense program by more willingness on the part of defense agencies to heed constructive suggestions from small and independent businessmen, designed to cut armament costs.

Mr. Burger, what suggestions do you desire to make along that line? Mr. BURGER. Congressman, I think, in the first instance, that there are competent, sincere, and patriotic independent businessmen. For example, when the over-all mobilization committee was appointed last August, there were 12 put on that committee. There were representatives of small and large farm blocs, and rightfully so. There were representatives of small and large labor. But when it came to independent business, we were told by the Administrator, or, rather, Senator Sparkman was told that the Committee of Economic Development, the United States Chamber of Commerce, and the National Association of Manufacturers could speak and act for small business. So from the top bracket the voluntary action of smal! business to assist the Government in a patriotic move, not one for position or jobs, was ignored.

Mr. MILLS. The part of your statement there that I am particularly interested in is the phrase "designed to cut armament costs". Now, is it your thought that the spreading of the procurement contracts for armaments among the smaller and independent businesses of the country will cut those costs?

Mr. BURGER. Yes, sir. There is no question about that at all. The greater the competition in any line of business, war or no war, the lower the cost to the Government.

Mr. MILLS. You are following the usual thought that more competition will give us lower cost?

Mr. BURGER. There is no question about that. I have been in business, Congressman, for 30 years myself, and I know that the more

competitors there were in my respective business the better off the

consumer was.

Mr. MILLS. I was just interested in your statement on those points because we have been reading recently of the fact that labor itself feels that it has been left out in the cold with respect to this planning for production for defense, and now the small and independent businessmen of the country feel the same way.

Mr. BURGER. Yes, sir. I was asked that question, Congressman, last night by certain labor people. You gentlemen probably know this from your mail. I went through World War II voluntarily assisting the House and Senate Small Business Committees, committees whose efforts have been invaluable. I am telling you that the condition right now facing our people is even more serious with respect to whether they are going to stay in business. If you eliminate those people from the business structure, the Government is going to suffer as a result of the reduction in income from taxes.

Mr. MILLS. Can you put your finger on any one or any group that is responsible for this situation?

Mr. BURGER. Well, I would not, Congressman. The Director or the Administrator of the National Security Resources Board knows our position. I think_the_pattern was set last August when this first over-all Mobilization Committee was appointed, and from then the situation went down.

Mr. MILLS. You mean as a result of the membership of the committee, that is, those who were appointed to the committee?

Mr. BURGER. We have no grievance with those three business organizations. They have their place in the economy the same as independent businessmen have; but we think that no one can speak for independent businessmen but their accredited spokesmen.

Mr. MILLS. As I understand you, then, the procurement of war matériel has largely been turned over to the membership of these three organizations; is that right?

Mr. BURGER. Their members are the greatest participants. You can read that in the record. Their members must be the greatest participants because they are the greatest participants.

Mr. MILLS. And those three organizations again are what?
Mr. BURGER. I beg pardon?

Mr. MILLS. What are the names of those three organizations?
Mr. BURGER. The National Association of Manufacturers, the
United States Chamber of Commerce, and the Committee on
Economic Development.

Mr. MILLS. Now, the members of your organization are what? Mr. BURGER. They are independent businessmen and professional

men.

Mr. MILLS. And they are not members of the organizations you have just named?

Mr. BURGER. No, sir.

Mr. MILLS. That is all, Mr. Chairman.

Mr. JENKINS. Mr. Chairman.

The CHAIRMAN. Mr. Jenkins.

Mr. JENKINS. Let me ask you this: If I ask you any questions that you do not want to answer, please feel free not to answer them. I think everybody agrees that the plight of small-business men must be

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