(The results of the poll referred to follows:)

TIGHTEN UP TAXING OF COOPERATIVES

Should Congress make cooperatives or their members (one or the other) pay taxes immediately on earnings when they are allocated on the books to members but not paid out in cash? (No one is required to pay tax on such earnings now.) 1. Argument for tightening up the tax- 1. Argument against tightening the taxing: This loophole is costing Government a tax loss running into millions yearly. Definitely cooperatives can avoid paying tax on their earnings by the simple method of allocating them on the books to their members, but giving the members paper IOU's instead of cash. Not only do the co-ops avoid taxes, but the members pay no tax until they get cash in hand. Only naturally, Government deprived of this income is going to take it out of the purses of other taxpayers, including independent businessmen. By the same token this gives cooperatives a fine source of interest-free operating capital.

ing: All this talk, which implies that co-ops are jealously intent on maintaining privileged tax position, is the bunk. First, the 1958 Tax Adjustments Act permits many smaller businesses to operate taxwise like a cooperative; they can incorporate yet pay taxes as a partnership if they want. Secondly, many associations of cooperatives have asked Congress to require that their members pay taxes currently on earnings allocated but not actually paid out. Thirdly, in any case, sooner or later allocated earnings will be paid out, and when paid are taxable. Thus no money completely escapes taxation.

The following mandate we reported the results of this poll:

Here's the national summary of votes on issues in mandate 260. This has been sent to all Congressmen and Senators, all congressional committees, and all agencies and individuals in the executive branch of our Government, for their information. It also has been sent to all State senators.

Mr. BURGER. It is interesting to note that a most respectable majority of our members then favored a course of action right in line with recommendations which President Kennedy recently made to the Congress on the same subject.

Later in Mandate No. 264 (March 1961) we asked our members: The results of that poll showed that 86 percent were for taxing cooperatives, 12 percent against, and 2 percent no vote.

(The results of the poll referred to follow :)

H.R. 3550, CO-OP TAXATION

Require cooperatives to pay Federal taxes on all earnings before dividing their income among their members (Representative Mason, Illinois).

2. Argument for H.R. 3550: Co-ops 2. Argument against H.R. 3550: There's are giant business. Some 101 marketing no need for this bill. It offers little and farmer-supply co-ops do more than benefit to small businessmen. Under $20 billion annual gross volume. They present law many small corporations can escape Federal taxes by allocating can pay taxes like partnerships, the earnings to members on the books, same as co-ops and their members do. while withholding the cash. Their Further, many co-ops recognize there is members don't have to pay Federal tax- a loophole in tax laws which permits es on this income until they get the their members to withhold tax paycash. This bill would close this tax ments temporarily, until they get the loophole by making co-ops pay taxes on cash to back up payments which have their income before dividing it among been allocated but not actually paid to their members. It would add several them in cash. Co-ops have asked Conhundred million dollars yearly to Fed- gress to close this loophole. All want eral tax collections. tax equality. Let Congress work it out.

The following mandate we reported the results of this poll: Here's the national summary of votes on issues in mandate 264. This has been sent to all Congressmen and Senators, all congressional committees, and all agencies and individuals in the executive branch of our Government, for their information. It also has been sent to all State senators.

Mr. BURGER. Now, to further improve our polling, we distributed some 30,000 of these folders to members in all parts of the country during the first quarter of 1961, and received an approximate 60 percent response, made at the time of call by our fieldmen and even before that time by members who sent their replies directly to the federation's Washington office.

It is significant to note that in point of problem areas checked, "Unfair competition (co-ops, etc.)," was the second most frequently mentioned. For your study, a State-by-State breakdown of the actual number of replies to this poll to March 31, is as follows. This will afford each and every member of your committee a chance to see for himself just how this particular problem area ranked among the independent business and professional people of his own State. Of course you have already received signed mandate ballots on the aforementioned polls.

(The special poll and summary referred to follow :)

Help Direct Federation Activities
Tell Us What You Want,

To Help Guide Congress

Below-points excerpted from 1960 independent business platform
pledges by both Political Parties. Your answers will help us put first things
first in pressing for action and bills to solve independents' problems.

To: National Federation of Independent Business

I have placed an "X" in the box opposite the problems that affect my
business the most:

UNFAIR COMPETITION (CO-OPS, ETC.)

GOVERNMENT COMPETITION (PXs, ETC.)

UNFAIR LABOR ORGANIZING PROCEDURES

OVERHAUL TAX LAWS

FACTORY OWNED STORE COMPETITION

TEAR ALONG THIS LINE

Additional comments

(Signature)

(Business name)

(City)

(State)

FOR ACTION NOT ONLY AT NATIONAL LEVEL BUT ALSO AT STATE LEVEL

Special poll summary, months of January-February-March 1961
[Submitted by National Federation of Independent Business]

Mr. BURGER. Further than this, a great number of our members who answered this poll took the time to write additional comments on their responses. Here is a representative cross section of the remarks so made on the subject of taxation of cooperatives, and on cooperative competition in general:

By a small businessman in Arkansas:

Tax co-ops on same basis as corporations.

By a small businessman in California:

Co-ops will eventually force us out of business unless they are made to pay taxes like the rest of business.