Other essential uses of trucks

The vehicles coming under the category of nondefense are, of course, largely going to the farmer, the grocer, the baker, the dairy, and practically every line of business. The question that this poses is whether or not the limitations on the number of vehicles will disrupt the orderly supply of essential commodities to the consumer and, as well, have an adverse effect on the cost of transportation. In other words, even outside of the strictly military and defense vehicles sold to civilians for defense, it might be desirable to weigh the over-all problem to determine whether the consumer should be deprived of sufficient transportation service, or whether, in the early stages of the curtailment program, there are other quarters in which the materials might be conserved without cutting down on transportation which is so vital to the defense program itself, as well as to civilian morale.

In illustration of the vital role of truck transportation, it is pertinent to point out that statistics compiled by the United States Department of Agriculture show that 62 percent of the cattle, 68 percent of the hogs, 61 percent of the calves, 65 percent of poultry, 39 percent of the eggs, 40 percent of the fruits and vegetables, 27 percent of the butter, and nearly 100 percent of the milk shipped to leading markets is hauled by motortrucks. Essential uses of trucks in practically all other civilian lines of business can be cited.

Another consideration that enters into this truck problem is the recognition by the President, by the Public Roads Administration, by the War Department and by the defense authorities of the need for an extensive highway program to improve strategic and access roads and bridges as an essential to the defense program. It would seem just as important as having adequate highway facilities to be certain that there are adequate vehicles to perform the transportation services over those highways.

Truck industry move to conserve materials

The motortruck industry has been keenly aware, over a period of months, of the gigantic task of so many ramifications that confronts the Office of Production Management, and it is the desire of the industry to cooperate in every way possible to lessen the magnitude of this task. Several days prior to the announcement with regard to the 20 percent curtailment, the manufacturers of motortrucks met in Detroit to consider the problems arising out of the shortage of materials and the procuring of essential parts for military, as well as civilian vehicles. At this meeting, it was agreed to survey the possibilities in the industry for conserving on the materials such as aluminum, nickel steel, brass, copper, zinc, and others on which it is understood there are critical shortages. A questionnaire has been drafted (but has not as yet been released) to determine the minimum amounts of these materials that would be necessary to carry on the production of vehicles. This questionnaire is designed to determine how far critical materials can be conserved in the construction of a motortruck, and to seek engineering opinion as to how far substitutes are feasible from a production standpoint, giving due consideration to avoiding loss of time caused by retooling, even if machine tools were available.

If the industry is right in its thinking that this information will be valuable to the Office of Production Management, we should be glad to carry through with this survey which has been temporarily postponed in view of Office of Production Management's desire to save materials by cutting the number of vehicles produced.

In any event, a committee of engineers, versed in the technical problems arising out of conservation of strategic and critical materials, has been appointed by the Automobile Manufacturers Association motortruck committee and is available for consultation with Office of Production Management staff members, if desired.

Summary

In conclusion, the industry wishes to call particular attention to the following points on the transportation-for-defense aspects of motortrucks:

Existing and ever-increasing production of military vehicles and other armaments in motortruck plants has already been limiting the ability of the truck producers to meet civilian demands.

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At the same time, speeding of production for defense is placing added demands on the flexible service that is rendered more efficiently by motortrucks. Twenty-two percent of outgoing tonnage of plants producing defense matériel is moved by trucks. A 10-percent increase is anticipated within the next 6 months. This indicates that trucks are handling an even greater proportion of the defense traffic than of normal traffic.

Until a more comprehensive and impartial review is made to determine the adequacy of existing transportation facilities to meet the defense requirements, severing of the supply line may have an adverse effect on transportation for defense through lack of enough facilities.

While data show a substantial portion of truck output used for defense purposes, this is not the complete picture of the functions of trucks in facilitating the defense program since the data presented does not include movement of foodstuffs, clothing, and other goods necessary to the life, health, and well being of the millions of Americans engaged in defense activities.

Break down in railroad service during 1918 caused trucks, from a prority standpoint, to be considered in the same category as utilities and essentials. The industry sees further possibilities for conservation of strategic and critical materials by use of substitutes and this is now under study.

The motortruck manufacturers again desire to emphasize their position that defense requirements must come first.

We only raise the question as transportation men, as to how far curtailment of motortruck production may be carried without impairing total defense output through disruption of transportation service.

Respectfully submitted in behalf of the motortruck manufacturers.

ROBERT F. BLACK,

Chairman, Motortruck Committee, Automobile Manufacturers Association.

APRIL 24, 1941.

STATEMENT OF THE NATIONAL AUTOMOBILE DEALERS ASSOCIATION CONCERNING EXCISE TAXES ON AUTOMOTIVE PRODUCTS

By NATIONAL AUTOMOBILE DEALERS ASSOCIATION, Washington, D. C.

National Automobile Dealers Association has upward of 17,000 members, each of whom is enfranchised by a manufacturer of automobiles to sell new automobiles, or automobiles and trucks, replacement parts, and accessories. The members of this association sell about 85 percent of all new automobiles sold in the United States. Through the 17,000 dealers who are direct members and by reason of the cooperation of local and State automobile dealer associations, this association speaks for all automobile dealers who are articulate through organization.

While the revenue act of 1941 was being considered by the Ways and Means Committee of the House of Representatives the Treasury Department recommended to that committee that the excise taxes on new automobiles be increased from 3 to 7 percent. Other witnesses representing other agencies of the Federal Government recommended to that committee increasing the excise taxes on new automobiles to 20 percent or more. Not, however, for the purpose of raising revenue but for the purpose of dampening consumer demand for new automobiles which would thereby result in a curtailment of production of these articles.

This association by proper action of its members assembled in convention established as the policy of this association the determination to aid and assist in the defense program. Pursuant to this policy and by reason of the extraordinary suggestions made to the Ways and Means Committee, L. Clare Cargile, president of the association, pursuant to instructions of the executive committee, appeared before the House Ways and Means Committee setting forth the basic policy of this association to aid in the defense program, and by reason of the conviction that the maintenance of private automobile transportation is essential to the defense program, opposed the suggestions for high punitive and discriminatory taxes on automobiles, trucks, replacement parts, and accessories.

This association was gratified by the report of the Ways and Means Committee and its subsequent acceptance in the action of the House of Representatives with reference to the matter of excise taxes on automotive products. While this action called for a 100-percent increase in these taxes, which is

drastic, and places a real burden on the industry, nevertheless automobile dealers were willing to assume this burden pursuant to their determination of assisting in and sacrificing for the defense program.

The position of this association and the automobile dealers for whom it speaks in relation to the considerations of these matters by the Senate Finance Committee is unlike that in reference to the Ways and Means Committee hearings in that no specific proposals to further increases these taxes have been made before this committee. If such proposals are made, we must assume that they will be made in executive sessions of this committee, under which circumstances this association will have no opportunity to counsel with the committee on the necessity or propriety of such proposals. We, therefore, are filing this statement to reiterate and reemphasize the basic positions established before the Ways and Means Committee.

We wished to point out to the committee that the considerations recited by the witnesses before the Ways and Means Committee to justify extremely high excise taxes on automotive products, no longer need be considered as essential in the tax program. These considerations were to curtail production of consumer durable goods, to dampen consumer demand thereby creating a backlog of consumer demand for the post-defense period, and to prevent inflation. The curtailment of new automobile production has been provided for through the joint action of Office of Production Management and the Office of Price Administration and Civilian Supply in the order issued on August 21, 1941. This order provided allotments for the months of August, September, October, and November 1941, representing an average 26-percent reduction and looking toward an average of 50-percent curtailment for the 1942-moder year. In order to accomplish the 50-percent average it will be necessary to curtail new automobile production 74 percent during the latter months of the model year. This drastic curtailment removes the necessity of seeking that

objective through high excise taxes.

Pursuant to the Executive order issued by the President on August 9, 1941, the Board of Governors of the Federal Reserve System, issued Regulation W on August 22, 1941, to become effective September 1, 1941, restricting the terms on which automobiles can be sold, whereby a minimum of one-third of the purchase price must be made as a down payment and the payment of the deferred balance must be made within a maximum of 18 months. All of the objectives urged by witnesses before the Ways and Means Committee for high excise taxes on automobiles were recited in the Executive order of the President as reasons for regulation of consumer credit and this regulation having been promulgated, there is no longer any necessity to seek to curb inflation or to dampen consumer demand through high excise taxes.

We think it important in levying taxes on the motorcar that its necessity uses be given careful consideration. Contrary to casual opinion, the passenger car nowadays is a luxury vehicle in only a minimum degree. Its necessity uses not only outnumber all others but, owing to new conditions brought about by defense work, they are constantly growing. Here follow official statistics, taken from the United States Census, Opinion Research Corporation, Public Roads Administration, and War and Agriculture Department records, indicating the manifold passenger-car necessity uses:

There are approximately 27,000,000 passenger automobiles in the United States, and practically all of them are devoted, in part at least, to necessity driving.

The necessity driving of the Nation is 274,000,000,000 passenger-miles annually. This is approximately three and one-half times the passenger mileage of all other types of transportation, including steam and electric railways, busses, and airplanes.

The largest percentage of necessity driving occurs in rural sections and small towns. The Bureau of the Census gives the rural population of the country as 57,245,753, and, with the exception of a few horse-and-buggy and bus-line patrons, all of these persons are dependent on the automobile for transportation. An additional 12,678,823 persons who live in 2,320 cities that do not have mass transportation facilities also are dependent on the automobile exclusively.

The farmer is hit especially hard by any increase in the cost of passenger autobiles. Thirty-eight percent of all the passenger automobiles of the Nation are on farms. The average age of these rurally owned cars is 7 years, so replacements during the next 2 years are bound to be large.

Six out of every 10 cars owned in the cities are usually driven to and from work. Twenty-five percent of cars owned by workers are utilized by their owners

for carrying other passengers to work. Many new defense plants are being built in sections which have no public transportation, and hence the workers must depend solely on automobiles for transit.

Believing that motorcar transportation always would be available, thousands of persons have bought homes in recent years away from electric railway and bus lines. The 1940 census shows that in 92 of the largest cities of the country since 1930 the unincorporated surrounding areas increased almost five times as rapidly as the population within the city limits.

The necessity uses of the motorcar are strikingly illustrated by United States Army figures. A year ago the Army possessed 29,867 motor vehicles. Today it has 153,000. The current program calls for 262,950 next year.

Although no specific recommendations have been made by witnesses before this committee but in the chance that the matter may come up during executive sessions, we wish to point out to the committee objections to the imposition of any excise taxes on used cars. A large part of the trading in and selling of used automobiles is done by used car dealers who are not organized, who are constantly shifting their places of operations, and who by the reason of the manner in which they conduct their businesses are difficult to regulate and are difficult to collect taxes from. This fact would make it very difficult for the appropriate authorities to collect such taxes, it would by reason of the evasion by a large number impose an unfair competitive burden on new-car dealers. Furthermore, in order to escape the tax there would be an incentive for individual car owners to attempt to sell their cars directly, which would divert used cars from the normal channels of trade, producing a disruptive effect and would seriously hamper enforcement of State regulations and the collection of State taxes. It is the firm conviction of this association that such a tax would be uncollectible. In conclusion we wish to point out that we believe that excise taxes on automobiles, automobile parts and accessories, tires, tubes, batteries, and gasoline should not be a permanent part of the Federal tax structure, as all of these are essential to a vital form of transportation, However, recognizing that in this emergency excise taxes on these articles may be necessary for the additional revenue needed, such taxes must be borne. We believe that the rates adopted by the House of Representtives are the highest which in fairness should be imposed on these articles. Any higher taxes would be detrimental to the essential transportation of civilians and civilian goods, to the essential movement of military personnel and equipment, and too great a burden on a vital necessity would impair civilian morale.

We respectfully direct your attention to the statement made before the Ways and Means Committee on behalf of this association, as that statement being available we did not wish to burden this committee with a repetition thereof. Respectfully submitted.

NATIONAL AUTOMOBILE DEALERS ASSOCIATION,
L. C. CARGILE, President.

STATEMENT BY JOHN T. BARNETT, DIRECTOR, INDEPENDENT PETROLEUM ASSOCIATION, DENVER, COLO.

Secretary Morgenthau, in his recent appearance before the Senate Finance Committee, stated:

"For years, the concerns engaged in extracting certain of our national resources, notably oil, have been granted far greater allowance for depletion than can be justified on any reasonable basis of tax equity, if the income tax is to be extended to lower incomes, this privilege of tax escape should simultaneously be removed." In his statement the Secretary apparently admits that some depletion allowance should be recognized for concerns engaged in producing what he terms our "national resources," notably oil. His criticism goes only to the amount of the allowance. It is a little difficult to understand why the Secretary designates oil as a national resource any more than he would designate our manpower, our farms, or our factories. To me they are all in the same sense national resources. However, there is one difference in these national resources which the Secretary fails to mention; that is, the oil and other mineral resources of the Nation are what has been termed and recognized as exhaustible resources for the reason that all of them, and especially oil, when employed in the uses of industry or national defense, are totally exhausted by such use, whereas the same is not true of the other national resources mentioned above.

Ever since the principle of the income tax was adopted and applied in this country it has been the settled policy of Congress and of the Treasury Department to recognize this difference in the character of our national resources and to compensate for the inevitable exhaustion of them by granting to the owners thereof specified depletion allowances to enable such owners and operators, by the expenditure of the reserves made possible by such depletion allowance, to prospect and search for similar additional resources and thus partially at least to replace those exhausted by use.

That policy having been adopted presumably upon a sound and equitable basis, there is every reason for its continuance. As no one, not even the Secretary, has denied the soundness, or justice, or equity of that underlying basis, I think it may be assumed that some allowance for depletion is justified.

The depletion percentage originally allowed, I believe, was 50 percent, but was reduced and now is, and for a number of years last past has been, 271⁄2 percent, with the limitation that in no event should it exceed 50 percent of the net income from the property.

There has been some talk at different sessions of Congress of limiting the amount of depletion to the basis of actual cost of the particular property producing the oil, and much argument has been made by various persons for the adoption of such a principle. These arguments have always been rejected by Congress, and quite properly so, for the very good reason that the over-all cost to any oil producer of building up a spread of oil properties capable of yielding production for a period of years has very little, if any, relation to the cost of the individual pieces of property which happen to yield oil in any 1 year. The true relationship between depletion and cost must be referred to cost in a broad and general sense— that is, in the sense of what it would cost to replace by new discoveries and development the oil fields as a group being exhausted by use. There is no one who knows anything about that phase of the oil industry who would claim that such replacement can be had for the amount of the tax saved by a 271⁄2-percent depletion allowance.

This subject has been so completely covered heretofore in arguments made before the Ways and Means Committee of the House and the Senate Finance Committee by representatives of the Independent Petroleum Association, individual owners and operators, and others that it would seem not to be necessary to repeat or to reargue the fundamentals of the question.

I desire, however, in connection with the consideration of this problem, to point out to the taxing authorities of the Nation some facts which I fear they have not fully considered:

First. The oil industry, as a whole, has been and is continuing to be a great source of income to the National Treasury, not only through the payment of income taxes by those concerns engaged in the industry, but by the tax that is levied by the Government upon the gasoline and any other residual products derived from the crude oil. The combined sums collected by the Government in the form of taxes on the industry have been of staggering amounts, and this new tax bill will undoubtedly increase the gasoline tax and raise the percentage of tax on corporations and other producers of oil until even greater amounts will be paid.

Second. If for any reason new supplies of oil are not sought out and provided by the industry to take the place of the reserves annually exhausted, not only will the industries of the Nation and national defense suffer, but the Treasury Department itself will suffer a severe decline in the income now being derived by it from the oil industry.

Third. If, as is undoubtedly true, and as the oil industry maintains, the 271⁄2percent depletion allowance is a tremendously vital and important factor in replacing the supply of oil annually exhausted, that fact should be frankly recognized by the Treasury Department and it should long hesitate and carefully consider the disallowance of depletion. The Treasury itself, in such event, would

probably be the greatest income loser.

As the hump on the camel is the reserve that provides the camel with the necessity of food and drink over lean and exhausting periods, so the 27%-percent depletion allowance provides the hump on the oil industry and enables it, as a whole to meet otherwise exhaustive periods of inadequate supply of oil.