Mr. VOORHIS. All right, Mr. Chairman, then we will interpret the question the other way, as meaning any margin in the hands of the cooperatives which is not paid out or allocated in any way.

I have said that on principle, so far as I am concerned, I have no objection to taxing those as profits against the cooperative, and that most of them are now taxed as profit against the cooperative. I can show you the tax returns to prove it, Mr. Chairman.

I think you get into the field of agricultural policy in that one, because it deals with 102 (12), and I said in my remarks that I think the Congress wants to go pretty slow before it changes an agricultural policy in urging those farmers to form those cooperatives to try to adjust the balance between agriculture and industry.

But so far as the cooperative-tax question is concerned, I cannot answer the question any other way but to say that on principle, and in the absence of other important overbearing policy, I think the principle is right that money received by that cooperative which it does not pay out or allocate to ownership of members under prior obligation, should be properly taxed against that cooperative as profit, and that it now is.

The CHAIRMAN. I certainly have no feeling against the cooperative. They have rendered a great service and I do not want to see them in any way mistreated.

But my trouble is that a number of small businesses all over the district I represent claim in letter after letter, telegram after telegram, that the cooperatives are in competition across the street from them or nearby and they do enjoy a tax advantage over them.

I cannot explain to them as minutely as you have explained this difference. I just have to have some reason, some justification, or some explanation in answer to their position. They ask, "Why should we pay increased taxes? They say, "Before you increase our heavy burden of taxation, why do you not reach out and take these other corporations and businesses in competition with us and have them pay their taxes, too?"

You should see the letters I receive from them on this matter. It is not propaganda. It is just letters from people who actually feel they are suffering from this competition.

Mr. VOORHIS. I know good and well they are honest letters. I am not so sure that some of them are not inspired and I am positive they are based on misinformation.

I understand fully the problem that you confront. I sympathize with it very definitely, because I have been in that position myself. One thing that I do think is important, however, Mr. Chairman, is that I would imagine that a very large number of those smallbusiness men who are writing to you are not corporations. I would imagine they are individually owned businesses or partnerships, and if they are, then so far as taxes are concerned, they are not called upon to pay Federal corporation income taxes and their individual income taxes are on precisely the same basis so far as their business income is concerned as are the taxes of the cooperative members who receive the patronage refunds from the cooperative in the same manner that the partners receive the distribution of income from their business.

The CHAIRMAN. There is one thing that I know as much about as my distinguished friend, and that is the class of men who write and

wire me. I do know that there are hundreds and hundreds of small corporations who write me repeatedly about this matter in their own name, and not as propaganda.

Mr. VOORHIS. I have no doubt.

The CHAIRMAN. I have to deal with that.

Mr. VOORHIS. Now, Mr. Chairman, let me point this out to you: So far as the competitive threat of cooperatives against those smallbusiness men is concerned, compared with the competitive threat of great big nationally integrated companies that are moving into every local community in this country, it is ridiculous to compare the competitive threat from cooperatives, on the one hand, and the competitive threat from the big chains and other nationally integrated business, on the other.

There are thousands of small-business men who are taken over by the big nationally integrated corporations for every one that a cooperative buys out.

Yet all this excitement is about the cooperatives.

Now, I just do not think it represents a fair appraisal of the real situation, Mr. Chairman.

The CHAIRMAN. Are not the cooperatives getting into a lot of activities that are not directly related or connected with the business in which they are supposed to be engaged?

I am informed that they are branching out and owning hotels and filling stations and processing plants and a hundred and one other things.

Mr. VOORHIS. That is right, Mr. Chairman, they are. And why should they not? Here is a bunch of American citizens who are organized in business. Let me make a comparison, Mr. Chairman. You take an oil company or a steel company, those oil companies and steel companies try to integrate their operations, do they not? They try to be able to supply their own needs by establishing various chains in the link so they can supply themselves with raw materials down to the finished product. When they do that, nobody complains because it is a nonprofit distribution from one department of that great corporation to the other.

You do not say something unfair has been done because the United States Steel Corp. does not pay income taxes on what it may have charged for its iron ore to its smelters. You take it for granted that will be a nonprofit line of dealings.

Here is a bunch of farmers over here who are carrying on agricul ture and who need tractor fuel to do the job. Now they have started to distribute gasoline to themselves and tractor fuel and they have found out they could not get it.

Then they established refineries. They found out they could not get crude for their refineries. They went back and owned some oil wells. All in the world they have done is exactly the same as every big corporation in this country has done. They have tried to inte grate their agricultural operations and protect their economic position.

But, when they do it, then everybody thinks when they sell to themselves from their oil well to the refinery, somehow or other, they have no right to do it on a cost basis, which is all the cooperative tries to do.

The CHAIRMAN. Steel does not go into the field of agriculture.

Mr. VOORHIS. They are important in the field of agriculture. The farmers pay for their own products.

The CHAIRMAN. Why do they not expand in the field of agriculture, instead of some other field not related whatever to their primary business.

Mr. VOORHIS. I am just trying to draw the comparison, and to point out that a group of American citizens who organize a cooperative business have just the same right to expand their business as have a bunch of people who organize a corporation.

The CHAIRMAN. They can do that if they pay the same tax.

Mr. VOORHIS. I am telling you, Mr. Chairman, basically they do. The CHAIRMAN. Maybe the tax advantage does not exist. That is why I am asking you these questions so that I may hear both sides and come to a sound and correct conclusion. I want to hear both sides of it because I have an open mind on the subject up to this point. Mr. VOORHIS. Yes, sir.

The CHAIRMAN. Mr. Reed?

Mr. REED. Mr. Voorhis, we are certainly glad to see you here. We really miss your fine mind over in the House. You made a great record while you were here.

Mr. VOORHIS. Thank you, sir.

Mr. REED. When the patronage dividend is paid to the farmer, he pays the tax, does he not?

Mr. VOORHIS. That is right.

Mr. REED. You are not a registered lobbyist?

Mr. VOORHIS. Yes, sir; I am.

Mr. REED. As a lobbyist, you are sending out letters to get contributions for your organization?

Mr. VOORHIS. No, sir. My organization is supported by dues from its members, amounting to 10 cents per year per individual.

Mr. REED. There is an organization here, I think known as the National Tax Equality Association. I have before me one of many letters which are rather interesting.

Inasmuch as the contents of this letter are directed almost entirely to me, I think I will read it:

NATIONAL TAX EQUALITY ASSOCIATION, Chicago, Ill., February 17, 1951. DEAR FRIEND AND MEMBER: A calculated effort is being made by Congressman Daniel A. Reed of New York, a member of the Ways and Means Committee, to impugn the sincerity and good faith of the businessmen and taxpayers who are writing letters to the Ways and Means Committee and to Congress demanding tax equality.

At a public hearing of the Ways and Means Committee on Thursday, February 15, Chairman Robert L. Doughton revealed that thousands upon thousands of letters are being received from businessmen and taxpayers all over the Nation demanding that cooperatives be taxed the same as other businesses. Whereupon, Congressman Reed launched a vitriolic attack on businessmen who have written letters, characterizing them as "suckers."

Congressman Reed's attempt to prejudice the committee as to the sincerity of you and other businessmen who want tax equality can only be answered in one way, and that is by more letters from you and your friends and business associates.

Therefore, I urge you to write immediately and have your friends do likewise, stating in terms that cannot be misunderstood your own personal and independent desire for tax equality.

The Ways and Means Committee has scheduled hearings on this subject for March 1 and 2. The following witnesses will represent NTEA and present the case for tax equality:

Dr. O. Glenn Saxon, professor of economics at Yale University.

Mr. Ralph Burgess, tax expert, formerly connected with the Joint Staff and Treasury Department.

Mr. Joseph J. O'Connell, formerly Chief Counsel for the Treasury Depart

ment.

Mr. Clarence A. Jackson, executive vice president of Indiana State Chamber of Commerce.

These hearings are the initial step in the big fight ahead for tax equality. This fight is going to be won by you who continue to write, phone, and talk to your Members of Congress and Chairman Robert L. Doughton, who, when your sincerity was questioned by Congressman Reed, defended you, and further stated that taxes should not be increased on anyone until the untaxed are taxed.

Please back up Chairman Doughton and our witnesses who are going to present the facts in your behalf. It is important that you send copies of any letters you write to Chairman Doughton to your own Congressman and ask him to also intercede with the Ways and Means Committee, demanding that they tax the untaxed before increasing taxes on anybody. Act now.

Sincerely,

GARNER M. LESTER, President.

Attached to that letter is an order blank, which is as follows:
NATIONAL TAX EQUALITY ASSOCIATION,

Chicago, Ill.

Please send me

and then there is a blank space

copies of this letter that I may send to friends and business associations who are interested in the fight for tax equality.

Then there are lines for the name, address, and city and State.
Well, that is one of a series of letters.

Now, let us see who the contributors are and just make a check on that. Now, these are contributors of $500 or more to the National Tax Equality Association, Chicago, Ill. The source of the information is the Quarterly Lobbying Reports, Nos. 1954, 2212, 2541, and 2805 filed by the National Tax Equality Association with the Clerk of the House of Representatives.

These are the contributions for the first quarter ended March 31, 1949:

Alabama:

Alabama Power Co., Birmingham.

Stockham Pipe Fittings Co., Birmingham.

Now, they are vitally interested in the farmer, no doubt.

Arkansas: Arkansas Power & Light Co., Pine Bluff, another great promoter of the farmers' interests.

California: Rheem Manufacturing Co., San Francisco.

Now, remember that all of these are contributions of $500. They are not reporting anything under $500.

Colorado: The Colorado Milling & Elevator Co., Denver.
Connecticut:

Connecticut Light & Power Co., Hartford.

The Stanley Works, New Britain.

Florida: The Florida Power & Light Co., Miami.

Illinois:

Bowman Dairy Co., Chicago.

The Chain Institue, Inc., Chicago.

International Minerals & Chemicals Corp., Chicago.

Indiana: Public Service Co. of Indaina, Inc., Indianapolis.
Iowa: Maytag Co., West Newton.

Louisiana:

Louisiana Power & Light Co., New Orleans.

New Orleans Public Service, Inc., New Orleans.
Massachusetts: Samson Cordage Works, Boston.
Michigan: The Lufkin Rule Co., Saginaw.
Minnesota:

Fullerton Lumber Co., Minneapolis.
Marsh & McLennan, Minneapolis.
Lampert Yards, St. Paul.

Northwestern Hanna Fuel Co., St. Paul.

St. Paul Fire & Marine Insurance Co., St. Paul.

St. Paul Livestock Exchange, St. Paul.

Of course, they are very strong for the farmers, are they not?
Missouri:

Hart-Bartlett-Sturtevant Grain Co., Kansas City.
Fresh Milk Institute, St. Louis.

Montana:

Retail Lumbermen's Association, Missoula. Another outfit very strong for the farmers.

New York:

New York Wire Cloth Co., New York City.

Believe me, they are certainly helpful to our farmers up-State.
Ebasco Services, New York City.

Southern Agricultural Chemical Corp., New York City.
North Carolina:

Carolina Power & Light Co., Raleigh.

I wonder whether they inspired any of these letters to the chairman. Ohio:

Pacific Power & Light Co., Portland. Pennsylvania:

Abbotts Dairies, Inc., Philadelphia. Tennessee:

Orgill Brothers & Co., Memphis.
Texas:

Southwestern Public Service Co., Amarillo.
Lone Star Gas Co., Dallas.

Texas Power & Light Co., Dallas.

Tex-O'Kan Flour Mills Co., Dallas.
Texas Electric Service Co., Fort Worth.

Virginia:

Smith Douglass Co., Inc., Norfolk.

Virginia Electric & Power Co., Richmond.
Wisconsin:

Wisconsin Electric Power Co., Milwaukee.
Wisconsin Power & Light Co., Madison.