rates to taxpayers' income will give larger returns than could otherwise have been secured, and I presume that the government anticipated and hoped for those larger returns.

BY MR. OLIVER:

Q. Now, perhaps we can clarify it a little more. We talk about groups of fixed income such as university professors yes, we will take the university professors or the instructor, and say that he was a fortunate man getting $2500 a year in 1939. He is not getting very much more now, is he?

(Page 2724)

A.

Presumably not. I have no knowledge.

Q. At that same time, there was a working man-let us say this: We will assume there is a working man in the same town who was getting an income of $2000 a year at that same time, and that working man, because of wage increases, is now getting $2500 a year, and the government levies a tax because the number of working men is much greater than the number of university professors, based on the increase of $500 in that man's income. They are both getting $2500, but the university man who has been living on that $2500-if he could— is paying a tax now which arises out of the expanded purchasing power of the rest of the community, and he has not had that expanded purchasing power, isn't that the situation?

A.

Q.

A.

Q.

A.

I would have to say yes, but I must confess I do not get your point.

Well, it is the situation, is it not?

I said yes.

That a tax

May I answer by saying that your man with the lower income formerly of $2,000, has now become the recipient of an income of $2500, and is on a level with the hypothetical instructor to whom you referred,

(Page 2725)

and assuming the exemptions and deductions are the same, they would be paying the same amount of income tax.

Q. And the university man's living standards would be shrunken below his earlier standard, whereas that working man's standard would not, isn't that true?

A. In fact, the working man might have a higher standard than before.

Q. So, so far as sacrifices are concerned in those circumstances, there would not be equality of sacrifices, but the university man would be making a much greater sacrifice than the working man, wouldn't he?

A. What of it? He would be lowering his customary standards, which would be true of anyone with a fixed income when his outlay must be increased.

Q. You do not object to inequalities of sacrifices? I understood you spoke something about inequalities of sacrifices.

A. Inequality of sacrifices as a tax theory is so extremely difficult of application that I prefer to use in general the ability to pay, or factual theory. If you wish to get into that sort of thing, all right.

(Page 2726)

Q. The net effect is that as a result of the fiscal policy on taxes and the virtual compulsory savings, the university man, or any wage earner whose wages have not increased with the general level, is paying taxes and is under pressures to buy war saving bonds based on the increase in the purchasing power of the other fellow, isn't that right?

A. And I may supplement that by saying the same thing would be true probably to a greater degree and with greater inequities if he had to make the sacrifices through a rise in prices, which would be inflation. Q. And the price rise has been greater in this war than in the preceding war?

MR. ARONSON: Now, we have just one or two items to clear up. Mr. Loomis, do you have that supplemental exhibit?

Mr. Chairman and gentlemen of the Board, when Mr. Loomis was on the witness stand and identified and presented in evidence Carriers' Exhibit No. 16, some inquiry was made for corresponding figures for the year 1940. We now offer in evidence and suggest that there be marked as Carriers' Exhibit 16-A the compilation which will give that supplemental data.

I do not at the moment recall who it was made the inquiry. It may have been either Mr. Mulholland or some member of the Board. Mr. Loomis is here to verify or to vouch for the figures, if there is any question about them. In the absence of any such question, we will offer this in evidence.

THE CHAIRMAN: This supplementary exhibit will be received in evidence as Carriers' Exhibit No. 16-A.

(The document was thereupon received in evidence and marked Carriers' Exhibit No. 16-A.)

MR. ARONSON: May we do this, now that we are closing our presentation for the roads that are represented by us in the general wage case: make this minor correction? I think it is a minor correction.

(Page 2728)

While Mr. Barriger was on the witness stand there was some discussion, as you will recall, concerning the current procedures under the new depreciation order of the Interstate Commerce Commission with reference to track materials. At the time Mr. Barriger had explained that the new depreciation order of the Interstate Commerce Commission became mandatory as of January 1, 1943 with reference to fixed property. I think the statement was made by the witness that depreciation was applicable to all fixed property including track material, rail and ties and other track material. He asks me to correct that statement. Subsequent check has indicated what some of us thought was the case at the time, that the depreciation order does not include rail, ties and other track material, and if there is no objection may his testimony be corrected accordingly in that respect?

MR. MULHOLLAND: That is all right.

MR. ARONSON: Now, that concludes our evidence in the general wage case. take it, do not now want to call any of our witnesses for cross examination?

Mr. Mulholland, you, I

(Page 2729)

MR. MULHOLLAND: No. I have excused all witnesses in reference to whose testimony I reserved the right of further cross examination.

MR. ARONSON: Thank you.

MR. MULHOLLAND: Having examined their testimony, I prefer at a later date to handle it by affirmative witnesses.

MR. ARONSON: Then we now ask, if there is any rebuttal evidence in the general wage case, that it be submitted, because we are now resting in our defense.

MR. MULHOLLAND: Mr. Chairman, any rebuttal evidence we have to offer, if any, will be offered in connection with our complete rebuttal. We do not want to have six or seven rebuttals, because the rebuttal which we will offer here will also have a bearing on the case involving the Short Lines, so-called, the Express Company and the Refrigerator Car Companies. This is not a separate hearing we have had here today. It was merely, as I understood, to allow the Class I carriers to put in their testimony without any interruption of the other

(Page 2730)

people who are also carriers in this case, and our rebuttal will be put in when we have closed the whole wage

case.

MR. ARONSON: There are some mechanical difficulties in connection with that. This does not militate against the contention or theory, valid or invalid, of whether it is one wage case or two or three wage cases. The Chairman, I thought, had made that clear sometime ago.

But the point is just this: For one thing, we want to release our witnesses, because we have, as a matter of necessity, the responsibility of preparing for the operating case, which is in the offing, as is generally known and are waiting undoubtedly just a matter of days before there will be an announcement of the appointment and assembling of an Emergency Board to hear that. We have not only that difficulty, but we have also the question of the writing of a brief that we would suppose might be of some help to the Board, and in the very nature of things we cannot undertake to assemble a brief if the evidence in the general case is not complete.

MR. HARTUNG: I wish to say for the Express Agency, that if there is to be any rebuttal to the Express Agency case we should like to have that introduced at the end of the evidence of the case in chief. To have our witnesses await the disposition of the railroad case would mean just taking two or three bites at one cherry. We want to have the Express Case tried at one time and completely tried. Perhaps there will be no rebuttal, but if there is I should like to have it run continuously and not be separated or broken in two.

MR. MULHOLLAND: Of course, Mr. Chairman, that is what they want. It is absolutely unjust to our side. of this case.

We have a wage case here involving certain carriers who are defined as carriers under the Railway Labor Act. It was suggested in the beginning of this hearing that we allow what they call separate groups of carriers to put in their testimony independently of the testimony offered by the other groups. You are going to have in this case for the Short Lines, for the Express Company, for the Refrigerator Car Companies practically the

(Page 2732)

same defense as has been offered here by the Class I Carriers.

Now, they are saying to us that when one group is finished we must rebut; when the other group is finished we must rebut. Our rebuttal will be to similar testimony offered by each of these groups, in the event we have any rebuttal at all. It is no hardship, because they have to come back here for our Union Shop Case which we now set down, at the suggestion of the Board, to the foot of the list, and if we have any rebuttal we propose to offer it just before we put in our Union Shop case.

MR. ARONSON: I would like to have the record corrected. I did not understand the Union Shop case was set down later at the request of the Board. I thought it was for your convenience, Mr. Mulholland. MR. MULHOLLAND: Well, take it either way. I will stand corrected, if that is true.

THE CHAIRMAN: I may say that the Board has tried, as far as possible, simply to carry out the wishes of the parties. It may have made some suggestions as a basis for discussion, but in all instances we have followed

(Page 2733)

the procedure which we felt was for the convenience of all concerned.

I do want to say that about this case: of course, it is up to counsel as to what witnesses they want to keep and what witnesses they want to release. We shall want all of the parties here toward the end of the case, no matter what procedure we follow as to hearing one part of it or another.

MR. ARONSON: Quite right. We expect that.

THE CHAIRMAN: Until such time as the entire hearing is adjourned and the Board takes the case under advisement and gets to work preparing its report. Up to that time we want to be in a position to have any and all of the parties subject to call by the Board.

This is an investigation. We are trying to learn all we can. We may have lots of questions at the end that we want to put to both sides, regardless of the formalities of the presentation of the evidence and rebuttal and those other things.

(Page 2734)

Now, as for the matter that was up for discussion about putting in rebuttal evidence, I should think that thing could be settled as all previous matters of procedure have been settled, by agreement of the parties, and I would like at this moment simply to ask Mr. Mulholland whether he has any additional witnesses to put on in connection with this wage case. In fact, I was given to understand that maybe some testimony was going to be produced of some sort or another to supplement or correct something that has gone in before. I may be mistaken. But, in any event, if Mr. Mulholland hasn't anything further to present at this time it was our understanding that Mr. Miller would start the case-either Mr. Mulholland or Mr. Miller-at any rate, consideration of the Short Line railroads would be started. I wish that counsel for the Class I carriers and counsel for the fifteen cooperating railway labor organizations would get together and try to work out some scheme that will be reasonably convenient to all concerned. It seems to me there is no big matter of principle concerned; it is merely a matter of the convenience of everybody.

MR. MULHOLLAND: I supposed we had worked that out in my talk with you yesterday, Mr. Aronson.

(Page 2735)

that we would have our rebuttal when you came back; that you were going away for a week or ten days. MR. ARONSON: I didn't understand it that way.

THE CHAIRMAN: May I suggest off the record

(Discussion off the record.)

THE CHAIRMAN: We will recess at this point for a few minutes.

(Whereupon, a short recess was taken.)

THE CHAIRMAN: Mr. Mulholland, could we have a statement for the record as to any arrangement that counsel for the unions and for the carriers may have made with respect to procedure?

MR. MULHOLLAND: I will see if I can state my understanding of it. We propose, if we have any rebuttal, to offer it at the completion of the wage case. For the convenience of counsel for the carriers I will endeavor to let them know, in so far as I am able, the character of our rebuttal prior to that, so that they can have their necessary personnel and exhibits present. For instance, if I desire to offer testimony for further analysis of some exhibit they have offered, I will endeavor to notify them in advance so that they may not only have

the exhibit, but their witnesses present.

(Page 2736)

THE CHAIRMAN: Is that your understanding, Mr. Aronson?

MR. ARONSON: Just as Mr. Mulholland stated, and that will be entirely satisfactory.

THE CHAIRMAN: Do you have anything further now you wish to put in?

MR. MULHOLLAND: Not at this time. We are ready to proceed with the so-called Short Lines case. THE CHAIRMAN: Now, in connection with the problems of the Short Lines, do you wish to present anything by way of opening, or is it your understanding that Mr. Miller, on behalf of the Short Line railroads wil present his case?

MR. MULHOLLAND: My understanding with Mr. Miller is we will have no opening statements. I have two witnesses to offer in the way of affirmative proof prior to the introduction of his testimony. THE CHAIRMAN: So that you will start the case in connection with the Short Lines. MR. MULHOLLAND: Yes, I am prepared now to proceed.

THE CHAIRMAN: All right.

(Page 2737)

MR. ARONSON: The only remaining thing Mr. Mulholland and I discussed was the matter of briefs. It would be our expectation to submit a brief to the board at the time of the oral arguments. Mr. Mulholland agrees with that except that he said the physical limitations are such that he may not have it at the time of the arguments, but if that comes about he will file it not later than the following day. Is that the way we left it' MR. MULHOLLAND: Yes. Because, Mr. Chairman, I have no staff except what assistance I get from my own office. We will be prepared to offer the brief either at the time of the argument of the case or the day after THE CHAIRMAN: That will be entirely satisfactory, and may I assume, Mr. Aronson, that if counsel for the Class I railroads withdraw at the present time-and of course I need hardly say they are welcome to be here and participate in any way-that we will be able to reach counsel and the parties in the usual way, at the addresses and telephone numbers and so on we already have spread on the record?

MR. ARONSON: Yes, and beyond that, Mr. McCarthy and Mr. Filer will, between them, be present, one

(Page 2738)

or the other of them, at all of the sessions, so that if the board has anything to communicate, or Mr. Mulholland. to our group, they will be here for any purposes that are appropriate.

THE CHAIRMAN: That will be very helpful.

MR. ARONSON: I take it we may be excused.

THE CHAIRMAN:

Surely.

(Whereupon the Board proceeded to the consideration of the dispute involving the so-called Short Lines.)

(Page 2739)

SHORT LINES DISPUTE

Presentation on behalf of the Employees.

THE CHAIRMAN: All right, Mr. Mulholland, we are ready.

W. M. HOMER

called as a witness on behalf of the Employees, testified as follows:

DIRECT EXAMINATION

BY MR. MULHOLLAND:

Q. Will you please state your full name?

A. W. M. Homer.

Q. You are the same W. M. Homer who heretofore appeared in these proceedings?

Q. Mr. Homer, I have handed the Board an exhibit captioned "Intercorporate Relationship of Involved Class II and Class III Line Haul Railroads, and Class I, II and III Switching and Terminal Companies to Class I Line Haul Railroads, and Other Companies". Did you prepare that exhibit?

MR. MULHOLLAND: Mr. Chairman, I offer this as Employees' Exhibit No. 79.

THE CHAIRMAN: This exhibit will be received in evidence as Employees' Exhibit No. 79.

BY MR. MULHOLLAND:

Q. Will you proceed now, Mr. Homer

(The document was thereupon received in evidence and marked Employees' Exhibit No. 79.)

MR. MILLER: Will you please hold that just a minute, as I have not received a copy of the exhibit. MR. MULHOLLAND: Yes.

MR. MILLER: All right, you may proceed.

BY MR. MULHOLLAND:

Q. Mr. Homer, you may proceed with your explanation of Employees' Exhibit No. 79.

A. In my previous testimony I explained that we have no current information on the operations of the smaller railroads and switching and terminal companies. For that reason the data presented with respect to these so-called short line railways was limited to portraying the status of their finances as of the calendar year

(Page 2741)

1941. In presenting that material, however, I endeavored to point out that a large number of short line rai lroads indeed a majority of the short line railroads were controlled by other railroads or by industrial concerns. Those figures which I presented in my testimony related to all Class II and Class III railways. Exhibit 79 shows that the extent of ownership or control by companies of the Class II and Class III line haul railways and the switching and terminal companies which are actually involved in this dispute.

BY MR. FISHER:

Q. Excuse me, just a moment, please. Just to refresh my recollection, are the classes of switching and terminal companies divided on the same gross earnings basis as the classes on the line haul railroads? In other words, are Class I switching and terminal companies those that have gross revenues of over a million dollars?

A. I believe that is true, yes.

We have separated the railroads by classes, that is, we have shown first the Class II line haul railways, following which we have displayed the Class III line haul railways. Then, we have shown the switching and