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To place the power and the capacity of a State and its municipal agencies at the mercy of the Federal taxing power would be an impairment of the essential rights of the State, which as officers we are bound to defend *
To permit such securities to be the subject of Federal taxation is to place such limitations upon the borrowing power of the State as to make the performance of the functions of the local government a matter of Federal grace
While we may desire that the Federal Government may be equipped with all necessary national powers in order that it may perform its national function, we must be equally solicitous to secure the essential bases of State government. * *
I wish to thank the committee for this opportunity to present our views.
Gentlemen, I wish to thank you for hearing me on behalf of the conference of mayors.
I have here a number of communications from the mayors and councils of the various cities which I would like to submit for inclusion in the record.
The CHAIRMAN. Without objection, that will be done. (The communications referred to are as follows:)
CITY OF PHILADELPHIA, Pa., February 16, 1951. Congressman RICHARD M. SIMPSON,
Washington, D. C. Congressman H. P. EBERHARTER,
Washington, D. C. On behalf of the City of Philadelphia, Pa., I strongly oppose removing incometax exemptions on interest from obligations of municipalities. This city has forthcoming projects of an important nature such as sewers, water works, traction facilities, housing, parking, and others which must be financed through the issuance of obligations in an amount exceeding hundreds of million of dollars, the cost of which will be greatly increased if such changes are made in the existing law. The imposition of this tax would seriously hamper the city in providing these necessary facilities. I request that this telegram be made a part of the record of proceedings before the House Committee on Ways and Means of the Congress.
CITY OF PITTSBURGH, PA.
No. 75 Whereas the Secretary of the Treasury of the United States has suggested to the Congress the enactment of legislation removing the exemption of State and municipal securities from Federal taxation; and
Whereas the proposed legislation would result in an increase in the interest rates which cities would be required to pay on future issues of municipal securities and thereby subject the taxpayers of the city of Pittsburgh to material increases in the cost of government: Now, therefore, be it
Resolved, That the mayor and the council of the city of Pittsburgh do hereby oppose the enactment of all such legislation by the Congress of the United States; and further be it
Resolved, That a copy of this resolution be forwarded to the chairman of the House Ways and Means Committee, the two United States Senators from Pennsylvania, and the Members of the House of Representatives from Allegheny County. In Council February 20th, 1951. Read and adopted.
John T. DUFF, JR.,
President of Council 'Pro 'Tem. Attest: GEORGE BOXHEIMER, Clerk of Council. Mayor's Office, February 26th, 1951. Approved: David L. LAWRENCE, Mayor. Attest: CHARLES D. McCarthy, Mayor's Secretary. Rocorded in Resolution Book, Vol. 12, Page 235 20th day of February, 1951.
CITY OF MILWAUKEE Whereas, Secretary of the Treasury Snyder has recommended to the Ways and Means Committee of the House of Representatives that they consider imposing Federal taxes on interest paid on future municipal bond issues; and
Whereas such taxation would be an interference with the constitutional sovereignty of our States and would also be a further unwarranted' extension of Federal control over local matters; and
Whereas Federal taxation of future municipal issues will open the door for the proposal that outstanding issues also be so taxed; and
Whereas municipal bond rates of interest will increase as much as 1 percent if such interest is to be federally taxed; and
Whereas an increase of 1 percent in municipal bond interest rates would raise the cost of Milwaukee's authorized 1951 borrowing program more than $1,300,000; and
Whereas it has frequently been concluded by respected tax economists that the taxation of State and local obligations will result in a dollar loss to those govern. ments that will exceed the Federal Government's dollar gain (see, for example, Tax Exempt Securities and Local Financing, by Harley L. Lutz, and Tax Exempt Securities and the Surtax, by C. 0. Hardy); and
Whereas the United States Congress on two occasions in the last 10 years has wisely acted to defeat proposals similar to Secretary Snyder's: Now, therefore, be it
Resolved, By the common council of the city of Milwaukee, that the Congress of the United States be, and hereby is, requested to expeditiously defeat any proposed legislation that would have the effect of imposing Federal taxes on State and local obligations or the interest paid thereon; and be it further
Resolved, That the comptroller be and hereby is authorized and directed to send a copy of this resolution to all United States Senators and Representatives from Wisconsin and to all members of congressional committees that will conside: the question of Federal taxation of State and local obligations.
Enacted February 12, 1951.
CITY OF ATLANTA, Ga., February 6, 1951. Hon. SIDNEY CAMP, Member of Congress,
House Office Building, Washington, D. C.: City vigorously protests effort of Treasury Department to tax municipal bonds. The end result of such action will be additional tax burdens on local government now hard pressed by inflation and narrowing sources of revenue due to continual inroads of Federal and State taxation. Some zealot in the Treasury Departmea: has been pushing this for past 10 years and we sincerely hope you will again prevent it.
WILLIAM B. HARTSFIELD, Mayor.
CITY OF ROCHESTER, N. Y., February 6, 1951. The Honorable DANIEL A. REED,
House of Representatives, Washington, D. C. DEAR CONGRESSMAN REED: It has been reported to me that Secretary of the Treasury Snyder has again suggested to the House Ways and Means Committee that consideration be given to removing the exemption from Federal taxation of future issues of municipal bonds. This matter has been brought up at least twice before and volumes of testimony have been taken in regard to the probable effect.
The city of Rochester concurs in the opinions which were expressed in the previous discussions, that such taxation would not, in the final analysis, fall upon the holder of the municipal bond, but would fall upon the public at large througt increased interest rates.
Studies made at the time the matter was discussed before indicated that the removal of the exemption would undoubtedly cause an increase in interest rates of at least 50 percent of approximately 1 percent per annum on an average. It was also felt that the taxing of interest on new issues inevitably would set s precedent for further consideration of the taxation of issues already outstanding and that this would upset the municipal market to a degree which would be high unfavorable to municipal financing.
Rochester wishes to express its strong opposition to the taxing of municipal bond interest and would like to be informed if the committee intends to give serious consideration to this proposal. Very truly yours,
S. B. DICKER, Mayor.
CITY OF MEMPHIS, Tenn., February 19, 1951. Hon. JERE COOPER,
House of Representatives, Washington, D. C.: The proposal to tax city and State bonds would go far to destroy the sovereignty of our States and cities. We cannot do our part in the defense of our Nation if more burdens are placed upon us. Cities throughout the Nation have lost many sources of revenue already because they have been limited to taxes by the constantly increase in Federal and State taxes. Cities have to care for the direct needs for the protection of the life, the health, and safety of the majority of the Nation's population. A tax on our bonds would be a tax on the cities. The cities would pay the tax through increased interest rates. Already our American cities are burdened and finding it increasingly difficult to raise sufficient revenues. for essential needs. We have been trying desperately to find new sources of revenue in order that we may serve the people. Such a tax would be a cruel biow to municipalities of America who are trying desperately to serve our country at this critical period. We need your cooperation and support. My best personal regards. Very sincerely,
Watkins OVERTON, Mayor.
CITY OF BIRMINGHAM, ALA., February 7, 1951.
House Office Building, Washington, D. C. DEAR LAURIE: We note with some surprise and anxiety the press report to the effect that the President is again advocating taxation of income from future issues of local government bonds. After the very thorough going-over that this issue was given on several past occasions, we had thought that the case had been pretty well settled for good. At these previous times these spurious claims made by the advocates of taxing this particular revenue were quite fully refuted.
Local governments, too, have their own financial troubles. The Federal Government should not have the power of control in local financial matters such as to a large extent would result from taxation of this kind. We must preserve the sovereignty of local governemnt.
There can be but little doubt that taxation as proposed by the President in this instance would increase local government financing as much as 50 percent. In many cases such an increased interest cost would simply dwarf all local improvements.
Therefore, I sincerely hope that at the proper time and place you will use your every effort to prevent any such legislation. Thanking you in advance for doing so, I remain Sincerely,
CITY OF KNOXVILLE, TENN., February 6, 1951. Re exemption municipal bonds. Congressman JERE COOPER,
House Office Building, Washington, D. C. DEAR CONGRESSMAN COOPER: We have just learned that Secretary of the Treasury Snyder has today suggested to the House Ways and Means Committee that the exemption from Federal taxation now existing on municipal bonds be removed.
Such a suggestion, I am sure, will be alarming to all administrators of municipal governments, as it will definitely and adversely affect the marketing of future issues of municipal securities and may lead to the taxation of all outstanding bonded indebtedness of municipalities.
Such action will be a backward step and constitute impairment of constitutional sovereignty of the State and its political subdivisions.
In addition to invading the constitutional rights of sovereignty, it will place directly upon the individual taxpayers a burden that they cannot stand without the possibility of converting real estate as an asset into a liability.
I am sure you are quite familiar with the financial plight of municipalities, and especially in Tennessee. They are struggling for their very existence, and it is now difficult for them to find any new sources of revenue that can be made available to meet the growing increase in the services. The tendency and the trend apparently is all directed toward siphoning away from local governments into the Federal Treasury many sources of tax revenues that should be available for operation of the political subdivisions.
In effect, such an unprecedented move as suggested by Treasurer Snyder would simply be increasing the burden on local taxpayers and transferring resultant income to the Federal Treasury to the detriment of the taxpayers of the State and its political subdivisions.
We sincerely trust that you will throw the full weight of your effective opposition to any such move, and should this proposal reach the point of serious consideration we shall appreciate your efforts in arranging for our city to be heard before any committee consideration. Very respectfully yours,
J. W. ELMORE, Jr., Mayor.
CITY OF CAMDEN, N. J., February 21, 1951. Hon. ROBERT W. KEAN,
House Office Building, Washington, D. C. MY DEAR CONGRESSMAN KEAN: Enclosed find certified copy of resolution adopted by the Board of Commissioners of the City of Camden (its governing body) opposing the proposition of the Secretary of the Treasury in which he advocates that future issues of municipal bonds and securities be subject to Federal taxation, and which matter I understand is to be considered by the House Ways and Means Committee on February 26.
We respectfully urge you to reject the Secretary's proposal.
It will be appreciated if you will submit this resolution into the record of your committee hearing. Respectfully yours,
GEORGE E. BRUNNER, Mayor.
CITY OF CAMDEN, N. J. Whereas the Secretary of the Treasury has proposed to the Ways and Means Committee of the House of Representatives that future issues of State and municipal bonds and securities be subject to Federal taxation; and
Whereas such proposition would materially affect the borrowing ability of municipalities and would result in a substantial increase in the interest rates which municipalities would have to pay on their future borrowings, which in many instances would be double the rate they are paying at the present time; and
Whereas we believe such proposition would result in increasing the cost of local government and that such increased cost would necessarily be transmitted directly to the local taxpayers; and
Whereas such proposition strikes at the very foundations of our system of government, which has preserved the immunities from taxation between Federal and State Governments, which immunities have been defended repeatedly by the courts and Congress heretofore: Now, therefore, be it
Resolved by the Board of Commissioners of the City of Camden, N. J., That it hereby records its disapproval of such proposition and strongly urges Congress to reject said proposal; and be it further
Resolved, That certified copies of this resolution be forwarded to the Members of Congress from this State.
Dated February 21, 1951.
City CLERK'S OFFICE
CAMDEN, N. J. I, Mary K. MacClennan, deputy city clerk of Camden, N. J., do hereby certify that the foregoing is a true copy of a resolution opposing Federal taxation of municipal bonds passed by the Board of Commissioners of Camden, N. J., the 21st day of February A. D. 1951, as taken from and compared with the original now on file in my office.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal of the city of Camden, at Camden, this 21st day of February A. D. 1951. (SEAL)
MARY K. MacCLENNAN,
Deputy City Clerk.
CITY OF OMAHA, NEBR., February 19, 1951. Hon. A. L. MILLER,
House Office Building, Washington, D. C. DEAR CONGRESSMAN: This is to advise you that the City Council of the City of Omaha, in regular session February 13, 1951, did, by unanimous vote, adopt a resolution objecting to the proposed legislation which would allow for Federal taxation of future issues of municipal bonds.
Those of us concerned with financing on the local level are already suffering immeasurably and find it extremely difficult to survive because of the high cost of providing public services, due to inflation. Unlike our State and National Governments, we cannot increase our tax levy because that levy is fixed by State law and cannot be increased except by vote of the people. It should be evident to all that our people will not approve an increased levy simply because we need more money to continue existing services. This is not true in the case of Federal and State Governments. They have no ceiling on their income and may increase it whenever or wherever they desire.
With such problems as these facing us today, if would be impossible to carry this burden if expenses were further increased because of the proposed Federal tax on our bond issues. If such a tax were added, our interest charges would increaseit's as simple as that.
Trusting you will do all in your power to stop the proposed legislation which comes before the House Ways and Means Committee on Monday, February 26, I am. Very truly yours,
GLENN CUNNINGHAM, Mayor.
CITY OF YONKERS, N. Y.
Whereas on February 5, 1951, the Secretary of the United States Treasury proposed to the House Ways and Means Committee that the income from State and municipal securities, now tax-exempt, be subjected to Federal income taxation; and
Whereas the comptroller of the city of Yonkers, concurring in the opinion of municipal finance officers and municipal law officers generally, has advised this common council that said proposal would inevitably adversely affect the marketability of municipal securities by depriving them of their historic attractiveness to the investing public because of their exemption from taxation, and that said proposal would necessarily increase interest rates on such municipal securities from approximately 1 percent upward, thus nearly doubling the cost of borrowing money to many cities and other municipalities; and
Whereas the increased interest costs of municipal securities resulting from said proposal will necessarily fall upon the already heavily burdened owners of real property, which is the principal source of revenue upon which the city of Yonkers and other municpalities must rely to meet the costs of essential governmental functions; and
Whereas the corporation counsel of the city of Yonkers, concurring with the opinion generally held by municipal law officers—that the taxation of income