a component part of it, that the retailer would not be in any position to know what the relative value or actual value of the component parts of the materials in the garment was and, while that might not be a valid objection all the way through, undoubtedly there must be a line where it would be difficult for the retailer to say that this garment has fur on it; that this fur is not the material of chief value; but since he didn't make the garment and he hasn't any separate invoices on everything that is in the garment, he has a pretty difficult job; doesn't he? Mr. BELDOCK. Yes; he has, Mr. Chairman. However, isn't that a matter of the mechanics of the collection of the tax? We are bound to find some difficulties. Now, doesn't the Government compel those engaged in selling or manufacturing of woolens, under the Wool Labeling Act, to go to a great deal of inconvenience to identify the content of the wool in percentages, and would it be so farfetched to recommend to the Treasury Department that when the retailer buys his garments that he obtain from the manufacturer, together with his invoice or by certification on the invoice, some reference to the value of the fur as compared to the value of the cloth? The CHAIRMAN. I suppose he could do that, but it appeals to me as being a rather forcible objection. Mr. BELDOCK. It is, sir; but I don't believe that objection goes to the kernel of the whole tax question; that is only one portion of it. Then, we have a great part of the industry which hasn't the componentpart problem. The CHAIRMAN. Yes; that is not so difficult. I Mr. BELDOCK. I realize the problem confronting the committee. feel that the Treasury Department has thoroughly investigated the matter, and I know they recommend this tax at retail, after a great deal of deliberation. I say that the Treasury Department believes in the collectibility of this tax. It has had the experience with the manufacturers' tax, and I think their judgment is better than mine and better than those who propose the tax on dressing who have had no experience with that at all. Senator TAFT. If you had reduced Mr. Printz' exemption, $50, then there would be no such objection that you have raised to the $70? Mr. BELDOCK. That depends on whether the $50 was at retail or wholesale. Senator TAFT. Retail. Mr. BELDOCK. Yes; that would cover a good portion of the rabbit coats; but still there is a close line, and it would be very hard to divide― that is, the man who sells the rabbit coat at $50 or $60 from the man who sells the cloth coat at $50 or $60. Senator TAFT. Only if they sold it under $50. Mr. BELDOCK. Yes; there are a great many sold under that figure. There are a great many cheaper garments sold at $50, average. (Mr. Beldock submitted the following letter for the record:) SILBERMAN FUR CORPORATION, Mr. GEORGE J. BELDOCK, Ambassador Hotel, Washington, D. C. DEAR MR. BELDOCK: I have read a newspaper account of the arguments presented before the Senate Finance Committee by Mr. Charles Gold, counsel for the Retail Manufacturing Furriers of America, Inc., who was arguing that the proposed Federal tax on furs be placed at the point of dressing. I know that you are in Washington to appear before the committee and present your arguments in support of the tax to be placed at the point of retail sales. I would like you to point out to the committee the following argument against placing the tax at the point of dressing: Since the outbreak of the war, the American fur trade has lost most of its export business and has been trying very hard to increase its exports to the South American countries, which is the only export market we have available to us at the present time. It so happens that the dressing and dyeing industry in South America is not developed and many South American furriers buy their fur skins raw and have them dressed in the United States. If a 10-percent tax were to be imposed at the point of dressing, it would automatically mean that the South American buyer would find that furs bought in the United States cost him 10 percent more than in the normal market. This would, undoubtedly, create a situation whereby the South American customers would try to buy their furs elsewhere or develop their own dressing trade, which would take away employment from the United States citizens. I am sure it is not the intention of the Senate Finance Committee to harm our export trade in their desire to derive additional revenue by placing a tax on furs. Very truly yours, SILBERMAN FUR CORPORATION, The CHAIRMAN. Mr. Fillmore. STATEMENT OF EDWARD FILLMORE, NEW YORK, N. Y., REPRESENTING THE ASSOCIATED FUR COAT & TRIMMING MANUFACTURERS, INC. Mr. FILLMORE. Mr. Chairman and gentlemen, my name is Edward Fillmore. I am here in behalf of the members of the Associated Fur Coat & Trimming Manufacturers, Inc., which is a New York membership corporation. Its 750 members-individuals, corporations, and partnerships, all are engaged in the manufacture of articles made of fur. They employ approximately 10,000 skilled workers of various crafts and produce fully 85 percent of the fur-wearing apparel, including fur trimmings for cloth garments, sold within the United States. Therefore, any tax, regardless of where it may be imposed on fur articles, must necessarily affect every member of this association. Despite the fact that the proposed tax is discriminatory because fur garments are the only articles of wearing apparel that have been singled out in this measure for taxation, since Congress, in its wisdom, because of a national emergency, and the Government's need for revenue, has seen fit to impose "an excise tax of 10 percent on the retail price of articles made of fur and articles of which fur is the component material of chief value," we unhesitatingly approve the action of Congress, and we give our support to a tax on the retail price of furs, as provided for in the section of the bill covering. The sole reason for our appearance before the Senate Finance Committee in support of the tax on furs, as provided for in the new revenue bill now before the Senate, is because of the organized opposition by the retailers and the campaign which they are waging in order to influence the Congress to shift this proposed tax to some other point, regardless of the consequences al i How unsound, dangerous, and undesirable such a shift would be, or how little revenue the Government would obtain through such a shift. The retailers and opponents of this proposed tax, as now provided for in the revenue bill, undoubtedly being fearful of criticism in these critical times, in the event of open opposition to the imposition of a tax on the retail price of fur articles, conceived the ingenious idea of avoiding such criticism by advocating that the tax on furs be shifted from the retail sales prices of fur articles to the skins at the point of dressing. Every branch of the fur industry, excepting the retailers, is unalterably opposed to the shifting of the tax from the retail price of manufactured articles to the skins at the point of dressing, as advocated by the retailers, or shifting the tax to a manufacturers' sales tax as has been proposed by the representative of the National Retail Dry Goods Association, inasmuch as the attempt to accomplish this end is motivated by pure selfishness and is definitely opposed to the best interests of the Government, the consumer, and the fur industry as a whole. Senator CLARK. The tax is ultimately on the consumer anyway, isn't it? Mr. FILLMORE. Certainly. We submit briefly our reasons for supporting the action of the House in levying this tax on the retail sales price and our opposition to its being shifted to the skins at the point of dressing. Point L.-The retail sales price of articles made of fur, or of which fur is the component material of chief value, is the only logical point for taxation-easiest to administer-will yield the most revenue, and will be least disturbing to the industry. The United States Treasury Department in its report to the Ways and Means Committee, respecting the Government's need for revenue, recommended among other things a 10-percent excise tax on the retail sales price of articles made of fur. This recommendation of a tax on the retail sales price was undoubtedly the result of expert study of the subject by the Treasury Department, including its difficult administrative experience with the manufacturers' excise tax on furs that had been imposed in previous revenue measures. And I endorse the chairman's statement, when he said what difficulties they have had with this manufacturers' excise tax. It may interest the committee to know that I have appeared before every committee that has considered this tax since the World War, and I was the first one to be consulted, and, because having had over 30 years' experience in the fur business, they deferred somewhat to my opinion when the regulations were written. The revenue quota to be obtained from the fur trade was fixed by the Treasury Department at $20,700,000. The Treasury Department undoubtedly based this figure on its knowledge that the total sales of fur-wearing apparel and articles of which fur is the component material of chief value is approximately $207,000,000. Hence, if the Government requires at least $20,000,000 of revenue from the fur trade, it could not be obtained at any point other than the retail sales price, at a 10-percent rate. Of Of course, if you raised the tax rate higher, that would make it prohibitive. Despite the testimony of the retailers before the Ways and Means Committee, in opposition to the proposed tax on the retail price, and despite their suggestions to Ways and Means Committee to have the tax shifted to some other point, the Ways and Means Committee, after a careful study of the subject, accepted the recommendations of the Treasury Department and voted that the tax of 10 percent be imposed on articles made of fur, and on articles of which fur is the component part of chief value, when sold at retail. As a tax on fur articles appears unavoidable, and the revenue for governmental needs is imperative, we concur with and approve the action of the Ways and Means Committee in imposing a tax of 10 percent on the retail sales price of articles made of fur and of articles of which fur is the component material of chief value because— (a) It will indisputably yield the greatest amount of revenue. (b) It will be least burdensome and disturbing to the industry. (c) No one will have to finance or advance the tax, and it will be payable by the retailer only when the article will have been sold to the consumer. (d) It is simple and specific. (e) It is easily collected and offers no administrative difficulties. There was some mention made of the difficulties to be experienced in collecting this tax from about 40,000 retailers. The answer to this is that the Government has been collecting our income taxes from 13.000,000, and it is now proposed to increase that number to 23,000,000 individuals. I can't see that is a valid objection to a tax on the retail sales price. (f) It is not an experimental tax and will create no confusion. (g) It is most fair to the consumer, as it only increases the normal cost of the article by 10 percent, which is the fixed amount of tax. It is unscientific despite that they have it in Canada. The Treasury Department has investigated the Canadian system. Mr. Beldock was in error when he said that this system had not been before the committee. I think the committee will remember distinctly that in 1932 the same thing was urged upon it. At that time there was an excise tax on the manufacturer, and we urged the adoption of the Canadian tem, feeling that the change might give some relief to manufacturers, but the committee decided, after investigating the matter fully, that it would not work here, that it was not acceptable, and they discarded it, and so did the Treasury Department. sys Point II. Shifting of the tax to the skins at the point of dressing, as advocated by the retailers, would be confusing and experimental; would not yield the required amount of revenue; and would unnecessarily disturb and burden the industry without any benefit either to the Government, the industry, or the consumer. The retailers are the only ones that advocate the shifting of the tax from the sale at retail of fur articles to the skins at the point of dressing. No other branch of the industry supports the shifting of the tax. From advertisements sponsored by the retailers, appearing in trade papers, we are apprised that they are soliciting large contributions for the obvious purpose of influencing the Senate and organizing an effective lobby to bring this about. They admit having engaged a well-known firm of public-relations counsel to formulate protests and flood the Senate with them. They further announce their intention to retain nationally known attorney's to present their case before the Senate Finance Committee. We are constrained to disapprove of the methods employed by the retailers in endeavoring to accomplish their object of shifting the tax, for if there were any merit to their objections to the tax as voted by the House, and if the shifting of the tax to the skins would benefit the trade, there would be no need of this great pressure campaign to influence the Congress, as every branch of the fur industry would support it; but recognizing that the shifting of the tax would be injurious to the trade, every branch, except the retailers, is opposed to it. The retailers have not advanced a single sound, constructive, or convincing reason that would justify the Congress to change and shift the tax from the retail sales price to the skins at the point of dressing. I say they have not advanced any good argument, because we do not know what arguments they are going to advance, and I might say at this time I regret that the retailers advocating this change would not appear today, because they are here; they were originally scheduled to be heard at the same time we were, but presumably they wanted to hear what we had to say and so asked to be heard next week. In the main, the contention of the retailers is that a tax on the retail sales price will engender price resistance on the part of the consumer, whereas a tax on the skins at the point of dressing would be hidden in the sale price and would not have this effect. There is no merit to this contention. Taxes on sales price are universal and have been accepted by the consuming public, and they have not caused sales resistance in other commodities. The buying public today is tax-conscious, and it is the intent of the Government to make the people tax-conscious. There is no advantage in resorting to any effort to hide the tax from them. Every woman will know that there is a tax somewhere which she must pay when she buys a garment, and a tax on the retail sale price will eliminate all uncertainties or conjectures. If the tax is shifted to the skins, it would not make the garment cheaper, but, on the contrary, it would even be higher because a tax on the skins at the point of dressing will be incorporated in the cost of production and successive increments of mark-up for overhead, sales cost, and profit will be computed thereon by manufacturers, distributors, and retailers, so that by the time the articles reach the consumer the tax will have multiplied itself to the detriment of the consumer and without any increase of revenue for the Government. As a matter of fact, if you were to place a tax at the point of dressing, there the tax would be ever so much less because, supposing we would value the skin-and, by the way, the Canadian system says that the tax is fixed upon the current market value. Now, who is to say what the market value is? It may be that if you adopt that you would have to employ some expert that would value the article, or would you want to leave it to the manufacturer to make the valuation? If you did, naturally the manufacture will not value it at a higher, but at a lower price, so we would pay less taxes. Another objection on the part of the retailers: They say that the buyer would resist if she knows of the tax. For instance, the buyer would resist and say they didn't want to pay a $100-tax on a $1,000dollar coat. They don't have to disclose it. They may include the tax in the sales price. The article sells for $1,000, the tax included |