II. The State of New Hampshire, for its part, has made not attempt to infringe upon the constitutional immunity from State taxation enjoyed by the Federal Government. In recognition of the principles of constitutional law which are held to confer an immunity from taxation upon the Federal Government in respect to its governmental functions, and in reliance upon like treatment at the hands of the Federal Government in respect to its own, the State of New Hampshire has been alert to avoid the imposition of taxes in any form upon the United States-either directly or upon income derived from its securities. Thus, chapter 78 of the Revised Laws (1942) [Taxation of Incomes] carefully and expressly avoids the assessment of income tax in violation of the Constitution of the United States and Federal constitutional law. And in chapter 85, Revised Laws (1942) [Taxation of Banks] Federal Government obligations are expressly exempted from the tax imposed by that chapter. It is obvious that if the proposed Treasury measure be adopted, this State, along with many, if not all, of the others, will no longer be bound by what must have been a supposed constitutional principle and will no longer permit the Federal Government to enjoy an immunity of which it has been deprived. III. Adoption of the Treasury proposal will seriously impede the State of New Hampshire and its subdivisions in the performance of their governmental functions. A large portion of the activities of government is financed by the borrowing, either upon short-term notes in anticipation of taxes to meet the cost of current operations, or on long-term instruments ranging from the construction of schools and installations for the abatement of disposal of sewage. It is essential to the continued operation of State government that securities issued in connection with such borrowing continue in their tax-free status in order that they may be salable at a rate which the State and its subdivisions can afford to pay. Taxation of income from such obligations will inevitably be reflected in a demand for a compensatory increase in discount or in interest rate on the part of investors. To meet this the State, already burdened by increased costs, and hampered by the drain of the Federal Government on sources of income otherwise open to it, would be required further to curtail its government activities to the detriment of its people. Respectfully submitted. FEBRUARY 15, 1951. HERBERT WILTSEE, GORDON M. TIFFANY, Attorney General, the State of New Hampshire. HARRISBURG, PA. Council of State Governments, 1313 East Sixtieth Street: Please inform President Harry McMullan that arrangements have been made for Deputy Attorney General M. Vashti Burr to represent the Governor and me at the hearing February 19 to oppose Federal proposal to tax income from State and municipal securities. CHARLES J. MARGIOTTI, Attorney General, Commonwealth of Pennsylvania. CONFIRMATION COPY OF DAY LETTER SENT TO ALL GOVERNORS The Secretary of the Treasury in testifying before the Ways and Means Committee last week suggested that the new tax bill provide for Federal taxation of State and local securities. In the late thirties and early forties this question was considered at length by Congress and the proposal was not adopted. The Ways and Means Committee has just decided to hold a hearing on the proposal on next Monday, February 19. If your State would like to testify on this matter the Ways and Means Committee would like to be notified by tomorrow, Thursday, evening. If your State would like to submit a statement for the committee, such statement should be in their hands by Saturday. According to our records the Governors' Conference has never taken formal action on this subject but it is a matter of major interest in the fields of law and taxation, and we are therefore wiring you this information for such action as you deem wise. If your State testifies or submits statement to the committee we would greatly appreciate copy for our information and guidance. FRANK BANE. FRANK BANE, SACRAMENTO, CALIF., February 15, 1951. Executive Director, The Council of State Governments, 1313 East Sixtieth Street: In Governor Warren's absence, State treasurer is wiring opposition of State of California to taxation of State bonds. Will attempt to secure copy. BEACH VASEY, Legislative Secretary. FRANK BANE, Council of State Governments, SACRAMENTO, CALIF., February 16, 1951. 1313 East Sixtieth Street, Chicago: Treasury proposal to tax State and municipal bonds is serious invasion of established State financing. It will increase cost, cause confusion without any appreciable Federal revenues for many years. Will seriously undermine State government plans to finance necessary improvements which makes for progress and employment. It would further involve State and local governments to objectionable Federal controls. As treasurer of California for 28 years I earnestly appeal to you to oppose this unwarranted constitutional control. CHARLES G. JOHNSON, State Treasurer. FEBRUARY 21, 1951. Hon. ROBERT L. DOUGHTON, Chairman, Ways and Means Committee, House of Representatives, Washington, D. C.: On behalf of the people of the State of Indiana, I vigorously object to the proposal before your committee to tax the interest on municipal bond issues. The imposition of such a tax would greatly increase the cost to taxpayers of financing essential public improvements and governmental services by adding substantially to the interest costs of such financing. Schools, hospitals, sewer systems, waterworks, electric power systems, and other public services must be expanded to meet present demands brought about by increased school enrollments, population growth, and defense requirements, and funds must be borrowed for such expansion. Increasing the cost of financing these projects would seriously retard many and would prevent others from being carried out successfully. Increased costs resulting from such a tax would further aggravate the already serious financial plight of overburdened local units in securing necessary funds to operate governmental services. This proposal would weaken local self-government which must be preserved. It would constitute a ruthless infringement of State sovereignty and would compel States to adopt retaliatory measures. I urge that it be defeated. HENRY F. SCHRICKER, Governor of Indiana. WIRE SENT TO MAINE CONGRESSIONAL DELEGATION Urge strong opposition to Treasury proposal to tax State and municipal bonds to be heard by Ways and Means, Monday, February 26. This simply means an added burden to State and municipal government and is an unsound measure as has been previously determined. It is but a further attempt to encroach upon the constitutional rights of the State and municipalities by the Federal Government. FRANK BANE, Secretary, Governor's Conference, /s/ Governor FREDERICK G. PAYNE.' CARSON CITY, NEV., February 14, 1951. 131 East Sixtieth Street, Chicago: Notified Nevada delegation in Congress that I opposed such a move on the part of the Federal Government to tax State and local securities. I feel that this action would take away State rights. CHARLES H. RUSSELL, Governor of Nevada. [Night letter] CONCORD, N. H., February 14, 1951. Hon. STYLES BRIDGES, Hon. CHARLES W. TOBEY, Hon. CHESTER E. MERROW, Washington, D. C.: We are advised that the House Ways and Means Committee will commence hearings on Monday the 19th on the Treasury's proposal to tax State and municipal bonds. Such a procedure would of course increase substantially the cost of State and local financing. We are not familiar with the prospective revenues which might accrue from such a measure though it would not seem as though any substantial revenue could be obtained from such a source. Obviously local Governments are compelled to negotiate for financing to permit them to meet a variety of needs, among them water systems, sewerage systems, pollution abatement, new school facilities, and other similar requirements. We are finding an increasing demand on the part of towns and municipalities for the guaranty of local obligations by the State itself. The ability of the State to finance itself is being aggravated continually by the preemption of the Federal Government in what few tax fields remain to the State. We are being harassed not only for sources of revenue but by the sharply increased demands for cash to pay the prices of food and commodities which are becoming drastically inflated by present Federal fiscal policies. The proposal to tax State and municipal securities is adding insult to injury. We are earnestly trying to maintain some vestige of financial integrity and it is about time we got a little cooperation from the seat of Federal Government. Understand the committee lists for witnesses close 15th. We are requesting the delegation to present our views to the committee on this question. /s/ SHERMAN ADAMS, Governor of New Hampshire. Hon. FRANK BANE, STATE OF NEW YORK, February 15, 1951. The Council of State Governments, Chicago, Ill. DEAR FRANK: Many thanks for your wire of February 14. New York will be represented in opposition to the proposed tax bill. With warm personal regards, Sincerely yours, THOMAS E. DEWEY, Governor. FEBRUARY 16, 1951. Hon. ROBERT L. DOUGHTON, Chairman, Ways and Means Committee, House of Representatives, Washington, D. C. The Secretary of the Treasury's recommendation for Federal taxation of income from State and local securities if adopted would greatly increase the cost of State and local financing, hindering the ability of State and local governments in providing for needed improvements and would undermine the long-existing constitutional system of immunity of taxation. Seventy-five million of rural road bonds now remain unissued. Proposed tax would immediately increase interest cost of these bonds. Hope you will strongly oppose this legislation if it is considered by your committee. I am requesting Attorney General Harry McMullan to present a detailed argument to your committee against this untimely tax proposal. W. KERR SCOTT, Governor of North Carolina. FRANK BANE, SALEM, OREG., February 16, 1951. Executive Director, Council of State Governments, 1313 East Sixtieth, Chicago: Have exchanged telegrams with Austin J. Tobin, secretary, Conference on State Defense, 111 Eighth Avenue, New York, re Federal tax State and municipal bonds. Advised hearing continued to Monday, February 26 and meeting at Washington, Statler, Saturday, February 24, to coordinate testimony. Proposal vitally affects our interests and would consider sending expert representative to hearing if absolutely necessary. Air mail follows enclosing copies of letters giving details. Hon. GUY CORDON, DOUGLAS MCKAY, Governor. EXECUTIVE DEPARTMENT, Salem, Oreg., February 15, 1951. United States Senator, Washington, D. C. DEAR GUY: I have been advised by Austin J. Tobin, secretary, Conference on State Defense, 111 Eighth Avenue, New York, that the House Ways and Means Means Committee will consider the Treasury's proposal to tax State and municipal bonds. The committee's hearing has been continued to Monday, February 26, and a meeting of those opposing the proposal will be held Saturday, February 24, at the Washington Statler, to exchange views and coordinate testimony. I have also received wires of a similar effect from Frank Bane, executive director, Council of State Governments, 1313 East Sixtieth, Chicago, Ill. The Attorney General also has received a wire to a like effect. This proposal vitally affects Oregon's finances. At the present time our bonded indebtedness is a little over $32,000,000. Pursuant to a vote of the people at the last general election authorizing a soldiers' bonus and loans, and contemplated highway bonds to continue our highway construction program, an issue of approximately $144,000,000 additional bonds will be necessary, or a total of $176,000,000 of bonded indebtedness. This will bring Oregon from the twenty-sixth position among the States for per capita indebtedness, to the second position-Delaware being the highest. At the present time there are approximately $118,000,000 municipal bonds of various kinds outstanding. Just what the municipalities have in mind as to additional issues is only conjectural, but it will be considerable. You can readily see what a tax on these bonds will do to our financial structure, and to the credit of the State, as it would mean a loss of several million to the State and the municipalities if the tax is imposed. I am writing to you and Senator Morse and wish you would contact Oregon's Representatives in Congress and inform them of the seriousness of the situation. There is some demand that we send an expert representative to Washington to testify. We are willing to do so if it is absolutely necessary. However, in addition to the expense, there is the fact that our experts are needed here in Salem during the legislature, and we do not want to send a representative unless it is absolutely essential. It would seem that other States who are much nearer Washington will be equally interested and that testimony probably will be produced at the hearing which would cover any contribution our representative might make. If you can convey our situation to the committee and keep me informed of the progress of this hearing, change of dates, et cetera, it will be appreciated, as the State is vitally concerned. With kindest personal regards, I am DOUGLAS MCKAY, Governor. Hon. REVA B. BOSONE, OFFICE OF THE GOVERNOR, Salt Lake City, Utah, February 19, 1951. House of Representatives, Washington, D. C. DEAR REVA: I am enclosing a copy of a letter that was prepared by the State tax commission relative to the proposal of permitting Federal tax on State and municipal bonds. I am in accord with the position taken by the tax commission. It is my contention that such a tax ultimately would be passed on to the individual taxpayer, who is already having a difficult time making ends meet. Furtheremore such a tax proposal encroaches upon State and municipal interests, and would seriously increase the cost of State and local financing without yielding any appreciable revenues for many years. This increase in local costs would undermine the ability of local governments to finance needed improvements and would further subject State and local governments to Federal control. I strongly urge that you oppose this taxation scheme with all the power at your command. I am sending a similar letter to the other Members of the Utah congressional delegation asking them to assist in this matter. Sincerely yours, J. BRACKEN LEE. OLYMPIA, WASH., February 14, 1951. Reurtel following telegram sent today to Chairman Doughton and entire congressional delegation, "proposed tax on State and municipal bonds seriously threatens effort on State and local governments this State to maintain solvency. Tax would seriously increase cost of State and local financing without yielding any appreciable Federal revenue for many years and would undermine ability of local governments to finance needed improvements. Strongly urge your opposition this unconstitutional invasion of States' rights. Thursday, February 15, is deadline for applying for place on committee calendar." Hon. FRANK BANE, ARTHUR B. LANGLIE, Governor of Washington State. WEST VIRGINIA, EXECUTIVE DEPARTMENT, Executive Director, The Council of State Governments, Chicago, Ill. DEAR FRANK: I have your telegram of February 14, relative to the suggested taxation of State and local securities. I have already contacted our two Senators and six Delegates concerning this matter, and requested that they wholeheartedly oppose same. Hon. Harley Staggers, one of our West Virginia Delegates, called me today advising that all West Virginia Representatives are definitely opposed to this taxation, and have designated him as a spokesman for West Virginia. Therefore, he will appear before the Ways and Means Committee to testify in behalf of West Virginia against this measure. I am sending him a copy of my communication to you, with the request that he furnish you a copy of the statement which he will make before the committee for your information. Thanking you for wiring me about this matter, and with kindest regards, I am Sincerely yours, Copy to Hon. Harley Staggers. OKEY L. PATTERSON, Governor. CHARLESTON, W. Va., February 14, 1951. Hon. AUSTIN J. TOBIN, Secretary, Conference on State Defense: Pursuant your telegram have wired our two State Senators and six Delegates as follows: "Strongly oppose proposal to tax staff and municipal bonds. Would appreciate your efforts in behalf of defeating this measure." Copy to Hon. William C. Marland, Attorney General, West Virginia. Sincerely, OKEY L. PATTERSON, Governor. |