with professional and business matters which cannot be successfully prosecuted in any other way. Corporate sales meetings, annual conferences of physicians, scientists and scholars, gathering of labor delegates for the transaction of trade union business by a democratic trade union movement-all such meetings are certainly meetings in the national interest. It is incredible to discover that such conventions and conferences may suffer the inhibiting effect of a parsimonious government policy in regard to reasonable daily expense.

You have already heard from spokesmen for the American Hotel Association some facts and figures concerning the probable loss of business should the Congress impose, or the Internal Revenue Service establish by regulation, an arbitrary ceiling on per diem expense of the suggested $25 or $30. We would like to dwell particularly on what this means in terms of jobs, and of the income of the men and women who work in the public feeding and lodging industry. There are at least half a million men and women employed in those hotels and restaurants which have, as their major source of revenue, that institution which has reached its highest expression here in the United States-the business or professional convention. Any action by the Congress or the IRS which will substantially inhibit attendance at such meeting will be a body blow at those hotels and restaurants and, consequently, at the hundreds of thousands who earn their family incomes in hotels and restaurants.

It strikes us as astonishingly shortsighted of the Treasury, in an administration now wrestling with the most alarmingly persistent unemployment, to suggest a course of action certain to increase the ranks of the jobless in one of the industries which is expected to absorb many of those unemployed as a result of industrial automation.

And, gentlemen, there is curious irony in the juxtaposition of this proposal to put a ceiling on per diem expenses and the adoption by Congress less than 24 hours earlier of a minimum wage bill which utterly ignored the needs of the workers in the hotel and restaurant business.

One of the arguments adduced by those who felt it best for the country to exempt once more from wage-hour coverage these hotel and restaurant employees was the argument-which we consider a basic fallacy-that so many workers in the industry receive tips. Yet here comes Secretary Dillon to propose to you that one of the sources of those tips be cut down to a point where there will be precious little left for the business traveler to distribute among those who serve him.

Quite apart from tips, however, and far more important, is the threat to payrolls in the industry implicit in the Secretary's suggestion. Accountants for the hotel industry have given you some figures based upon a quick survey of Washington hotels. Their conclusion is that up to 75 percent of the convention business in this city would be lost should so drastic a ceiling be imposed on daily travel expense. While we cannot vouch for those estimates, we are certain that the reduction would be severe not only in Washington, but in any other city where the hotel industry has invested large sums of capital in anticipation of a steady and orderly growth in the convention business.

And what about municipal investments in convention and exhibition facilities? City after city has invested the taxpayer's money, or the proceeds from revenue as well as general obligation bonds, in construction of elaborate, carefully planned convention and exhibition halls. They have been built in the confident expectation that Americans will continue to travel away from home for the purpose of seeing new products, new methods, new ideas displayed in such settings. Is the Congress prepared to set in motion a chain of events which will convert Cobo Hall in Detroit, or the new Coliseum in New York, or other such enterprises into white elephants?

Or take another question-tourism. Of late we have been hearing from Secretary Anderson, the Department of Commerce and others in the administration of plans to encourage travelers from other countries to come to the United States as one of many ways to restore the balance of trade and help prevent the flight of gold. How can the administration, on the one hand, appeal to the hotel and restaurant business to improve its facilities, and make its services more attractive to such foreign travelers, and on the other hand impose such drastic restrictions on domestic business and professional travel as to threaten the closing of such facilities or at least a reduction in the quality of service?

Nobody who travels on business in the United States today, eating in mediumpriced restaurants, sleeping in medium-priced hotels, can do it on less than $25 a day. Once the traveler finds himself enjoying the first-class services available in this country, the daily cost goes up. It strikes us as fantastic that anyone in the Government-least of all Secretary Dillon who is surely a man of the world-thinks it is desirable to write into the tax code a ceiling on per diem expense which will force travelers to avoid the facilities afforded by the best hotels in every major city.

Is it in the public interest, gentlemen, to impose on business travel this $25 or $30 expense ceiling? Is it in the public interest to place in jeopardy the jobs of tens of thousands of working people? The markets of the thousands of enterprises which supply everything from brooms to beefsteak to the hotel and restaurant trade? The investments of hotel and restaurant stockholders, and of municipal governments which have constructed convention facilities?

Finally, let us suggest that such a ceiling is an invitation to still more of the very abuses of which the Secretary now complains. Even so sober a citizen as David Lawrence has already publicly, in his column of conservative comment, proposed a method of evading the restriction on per diem expense proposed by Secretary Dillon. Lawrence's suggestion is simple: Let the company wishing to send someone to a convention simply add to the individual's salary enough extra money to cover his daily expenses, plus the amount required to pay the income taxes on the extra salary payment. No doubt other suggestions will be dreamed up. For the Treasury's suggestion is so totally unrealistic, it overoloks so many elements which enter into perfectly reasonable and justifiable business and professional travel costs, that firms dependent upon the movement from place to place of their executives, sales personnel, research scientists, auditing staffs and others, will have no choice but to devise schemes for evasion.

We cannot believe that the Congress or the administration wants to invite the corporate taxpayer to become a scofflaw, or anybody else, for that matter.

But mainly, gentlemen, we ask you to reject this notion of a $25 or $30 ceiling on business and professional travel costs because it is a direct threat to the jobs of those now employed in serving that portion of the traveling public who travel for necessary business and professional reasons. Not only in hotels and restaurants, but in transportation, and in all the collateral enterprises which directly and indirectly draw the revenue for payrolls from the public feeding and lodging industry.

Let the Internal Revenue Service lay down strict ground rules for honest reporting of legitimate expenses. Insist that claims for per diem deductions be backed by reliable evidence that the money was actually used for such purposes. But don't impose a ceiling on such travel costs which will have the effect of reducing the Treasury's revenue from taxes on lost corporate and individual income, or which will invite a wave of evasion so great that the Treasury will have to hire thousands of additional auditors to examine the returns of resistant citizens.

HOUSE OF REPRESENTATIVES,
Washington, D.C., May 22, 1961.

Hon. WILBUR MILLS,

Chairman, Committee on Ways and Means,
House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: I should like to add my voice to the number of others who have spoken before your committee on the subject of the recommended limitation of business expense account expenditures by executives, particularly as it has and will affect the State of Florida.

The Florida Hotel Association, Inc., has supplied me with information indicating that during the past several months the convention business has already started to suffer as a consequence of the proposed limitation of business expense accounts to $30 per day per person. This is illustrated by the following chart:

Trend of business in Florida hotels/motels, April 1961 compared with April 1960

Florida's six "trend" areas. For the purposes of the trend of business reports, Florida is divided into six “trend" areas, indicated on the map below and designated with letters "A" through “F.”

Hotel-motel operators, particularly those concerned with conventions and business travel, know that a $30 per day business expense account allowance would have to be calculated as an average figure. With convention expenditures being estimated to annually average $40 per day per person attending conventions, it's not hard to realize that the $30 average when computed into a firm figure would result in an economic decline for all areas catering to the conventioneer.

To interpret this into terms of the Miami area, consider that during the months of June, July, and August of 1961 this area will entertain 17 conventions with 100,000 delegates and bring in an estimated $16 million (average attendance is 4 days). If the expense account restriction, as is before the House Ways and Means Committee, were in effect it would depress the figure by 25 percent-an impressive reduction in convention-economied Miami.

In Jacksonville, as another example, the city will host 180 conventions in 1961 with delegate attendance estimated at 70,000. The Jacksonville Tourist and Convention Bureau estimates the return to the community from this group will be approximately $7 million. Of the situation, George Tobi, vice president and general manager of the Jacksonville Tourist and Convention Bureau, has this to say, "We believe any blanket law containing overall restrictions or limitations (on business expense accounts) would be unfair ***. Our opinion of this situation is that each case should be considered separately and judged solely on its own merits. The new proposed convention expense tax law would have a tremendous impact on our convention business *** it could have a serious effect on our Nation's economy."

In conclusion I should like to stress one more important consideration. The nature of the hotel-motel business in Florida has changed drastically in the past 5 years. The growth and increasing importance of convention business here cannot be overestimated. Not less than $100 million revenue accrued to Florida during the past year from conventioneers. Many of our larger hotels now deal mainly and exclusively in conventions in order to exist.

It is my sincere hope that the Ways and Means Committee, in seeking to revise our tax laws, will conscientiously consider the possibility of creating a much larger economic problem-that of decreasing the amount of revenue contributed to the Federal Government by States such as Florida which depend so heavily on their resort and convention industry.

Sincerely,

DANTE B. FASCELL,
Member of Congress.

SUPPLEMENTAL TESTIMONY ON THE EXPENSE ACCOUNT PORTION OF THE PRESIDENT'S TAX MESSAGE BY ELECTRONIC REPRESENTATIVES ASSOCIATION, CHICAGO, ILL. Mr. Chairman, on May 15 it was our privilege to appear before your committee to present our views on several portions of the President's tax message. We should like now to expand briefly on one portion of our testimony, specifically that section dealing with the proposed flat-rule limitation on expense accounts. Permit us to repeat that we have no objection to removing such items as yachts and hunting lodges from the category of deductible items nor vacations disguised as business trips. Business gifts would be a welcome elimination, since, as small businessmen, averaging five employees, we are hard put to match the gifts of large corporations with their own direct salesmen; these gifts actually place us at a competitive disadvantage. As stated previously, we would much prefer to put such funds to work in modernizing our equipment and facilities, or as contributors to scholarship funds for future leaders in our industry.

Because we are independent manufacturers representatives, however, we do find it necessary to expend moneys on items which do, at times, exceed the proposed $30-per-day limit on expenses. We do, for example, conduct sales and engineering meetings for groups of our customers, assisting them with problems ranging from technical design to merchandising, and acquainting them with the newest development in our industry. Quite often these meetings must be held in a hotel, and normally involve a meal function; such sessions necessarily exceed the proposed expense limitation. Not infrequently, we might add, these meetings are conducted for Government scientists and engineers, which is the quickest, most efficient manner of acquainting these people with the newest ap

plications of electronic products in the space, defense, and other important Government programs. Such meetings can and do involve the costly transportation and display of complex electronic gear, and often involve expenditures on our part for special technical personnel brought in especially for the meeting. We do not complain about the expense of these meetings-certainly they aid our sales effort, even as they assist our customers-but they would be sharply curtailed, if not eliminated, by a flat-rate per diem expense limitation.

We do not complain, either, about the cost of having our personnel visit our manufacturers to keep up with the latest developments-the requirements of our industry demand that we do this. Again, however, such cost often exceeds $30 per day, yet we consider it money well spent, and of direct benefit to our Government and other customers.

In our fast-growing industry there are also numerous trade shows, including four major national shows per year. All of us must attend at least two of these shows to keep abreast of changing technology, and find that we must pay $18 to $20 per day for hotel rooms, or more, since the shows are held in cities such as New York, Chicago, and Los Angeles. Hotel prices on meals for ourselves alone more than consume $30 per day, and this does not include the cost of tips, taxi fares, telephone, and show admission expenses. Additionally, these shows present an excellent opportunity for us to discuss business problems with the manufacturers we represent, many of whom we can consult with in person through no other medium except an expensive and time-consuming trip to visit his plant. You would find little dispute, we believe, over the contention that the atmosphere of the luncheon or dinner table is a far better place to discuss business affairs than the hustle and turmoil of a crowded trade show floor. This same situation applies to our customers, to whom we can give uninterrupted attention, and they to us) if we can discuss problems in such an atmosphere, where we can also bring forth pertinent literature and diagrams. Add such expenses to our own, and, for the duration of the trade shows particularly, our operations would be severely and unjustifiably hampered by an arbitrary daily limitation. Local trade shows are also worthy of mention, particularly since they involve even heavier expenditures on the part of the electronic representative. As this testimony is written the Military Electronics Conference is going on in Washington, D.C.; here the representative must, in addition to other expenses, purchase exhibit space, transport equipment, and supply extra personnel to man the booth. To this show come personnel from the various Government agencies, where they may view and discuss, under one roof, the very latest in electronic equipment. Again, the quieter atmosphere of the dinner table, or a hotel suite maintained for conference purposes, is a far better place to discuss individual problems. Expenses for these local expositions must necessarily exceed $30 per day. One other area merits special consideration. As small businessmen we must, as Congressman Ikard and others have recognized, continually improve our business ability, both in facilities, and in management skills. Because of this need, our association sponsors each year an annual management conference, specifically designed to improve the business operations of electronic representatives. The business and technical sessions of this conference are invaluable to us in reviewing our present operations and in planning for our future requirements. We recognize and readily accept the fact that the conference fees, in addition to housing and food, make expenses for this conference run to more than $30 per day, but we cannot gain this information in any other way. This is true, too, of our university-conducted management institutes for our members-weeklong concentrated "short courses" in business management (one of which is being conducted for our members at American University in Washington, D.C., even at this moment). Competent instruction is expensive if it is to be worthwhile, and again, while we are happy to pay the costs involved in thus improving our business ability, they are beyond the proposed expense limitation. We might also add that many of us, serving as officers of our association, expend our own money in traveling to, and participating in various committee meetings. This we are happy to do, to advance the business and professional scope of our nonprofit association; understandably, we would not be happy about restrictions which would limit (or eliminate) our deductions for our service to the electronic industry.

The examples above are, of course, exceptions to our daily pattern, and only serve to illustrate the day-to-day expense fluctuations which are characteristic of most businesses. This is particularly true in our business, which is one of service, and does not have a pattern of daily predictability. As stated in our