View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

1^6' 0

Annual Report
of the

Secretary of the Treasury
on the

State of the Finances
For the Fiscal Year Ended June 30, IPSO

^.






LETTER OF TRANSMITTAL
TREASURY DEPARTMENT,

Washington, D. C , February 15,, 1951.
SIRS: 1 have the honor to report to you on the finances of the Federal Government for the fiscal year ended June 30, 1950.
JOHN W . SNYDER, .

Secretary of the Treasury.
T H E PRESIDENT OF THE SENATE.
T H E SPEAKER OF THE H O U S E OF REPRESENTATIVES.




m

TREASURY DEPARTMENT
DOCUMENT NO. 3168
Secretary

UNITED

STATES

GOVERNMENT

PRINTING

O F F I C E , WASHINGTON

:

1951

For sale by Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. C.
Price $l.7S (Paper)




CONTENTS
R E P O R T ON O P E R A T I O N S
Page

S u m m a r y of fiscal o p e r a t i o n s . . Budget receipts
Budget expenditures
L
T r u s t accounts, etc., receipts and expenditures
'..
General fund
--:
Public debt operations and ownership of Federal securities--_
Public debt operations
Ownership of Federal securities
Corporations and certain other business-type activities of the GovernmentSecurities owned by t h e Government
Taxation developments
International finsLncial and monetary developments
Estimates of receipts
E s t i m a t e s of expenditures
_i

3
3
9
12
13
14
16
27
32
34
34
44
'50
56

ADMINISTRATIVE R E P O R T S
Administrative management
-.
Comptroller of the Currency, Bureau of the
Customs, Bureau of
^
^
Engraving and Printing, Bureau of
^
Fiscal Service
_-_
^
-.^
I n t e r n a l Revenue, Bureau of
International Finance, Office of
.
Legal Division
Mint, Bureau of the
-._
Narcotics, Bureau of
"
1-^
Practice, Committee on
Tax Advisory Staff
-•
Technical Staff, Office of the
.
United States Coast Guard
United States Savings Bonds Division
United States Secret Service--

-

-..

61.
65
68
77
80
102
108
109
111
115
117
118
118
120
..
130
, 132

EXHIBITS
PUBLIC DEBT OPERATIONS

Treasury certificates of i n d e b t e d n e s s , Treasury notes, and Treasury
bonds
1.
2.
3.
4.
5.

Offering of IJ^ percent certificates of Series G-1950
139
Details of certificate issues and allotments
^-_ ,^ 140
Offering of V/s percent Treasury notes of Series A-1954
^ 142
Details of Treasury note issues and allotments
143
Call, August 12, 1949, for redemption on December 15, 1949, of three
issues of Treasury bonds
-147
6. CaU, November 14, 1949, for redemption on March 15, 1950, of 2 percent Treasury bonds of 1950-52, dated October 19, 1942
148
Treasury bills

7.
8.
9.
10.

Inviting tenders for Treasury bills dated July 7, 1949
'__
'.
Acceptance of tenders for Treasury bihs dated July 7, 1949---Summary of Treasury bill information contained in press releases
Fifth amendment, July 25, 1950, to D e p a r t m e n t Circular No. 418, relating to the issue and sale of Treasury bills




•

V

148
150
150
153
'

VI

CONTENTS
Treasury savings notes, depositary bonds, and United States savings
bonds
Page

11. First amendment, August 11, 1949, to Department Circular No. 833,
relating to payment of accrued interest in purchasing Treasury .
savings notes of Series D - - .
153
12. First amendment, November 10, 1949, to the First Supplement to
Department Circular No. 660, terminating the issue of 2 percent
depositary bonds. Second Series
154
13. Sixth amendment, January 4, 1950, to Department Circular No. 530,
Sixth Revision, prescribing regulations governing United States
savings bonds
.
154
14. Fourth supplement, March 15, 1950, to Department Circular No. 653,
Second Revision, discontinuing sales of the $10 denomination of
Series E savings bonds
155
OBLIGATIONS GUARANTEED BY THE UNITED STATES

15. Partial redemption, before maturity, of 2% percent housing insurance
fund debentures. Series D (sixth call)
16. Summary of information contained in circulars pertaining to calls for
partial redemption, before maturity, of insurance fund debentures

155
157

PUBLIC DEBT MANAGEMENT

17. Statement by Secretary of the Treasury Snyder before the Subcommittee 'on Monetary, Credit, and Fiscal Policies of the Joint Committee on the Economic Report, December 2, 1949
18. Letter of Secretary of the Treasury Snyder, October 31, 1949, to the
Chairman of the Subcommittee on Monetary, Credit, and Fiscal
Policies of the Joint Committee on the Economic Report, replying
to a questionnaire on monetary, credit, and fiscal policies

159

171

TAXATION DEVELOPMENTS

19. Message from the President, January 23, 1950, transmitting a request
for a revision of the tax laws
1
20. Statement of Secretary of the Treasury Snyder before the House Ways
and Means Committee, February 3, 1950, on the President's tax
program
.
.__
21. Statement of Secretary of the Treasury Snyder before the Senate
Finance Committee, July 5, 1950, on H. R. 8920, a bill to reduce
excise taxes, and for other purposes
22. Letter of the President, July 25, 1950, to the Chairman of the Senate
Finance Conimittee recommending prompt enactment of an interim
revenue measure
23. Statement of Secretary of the Treasury Snyder before the Senate
Finance Committee, August 2, 1950, on the President's recommendation for the enactment of interim tax legislation
24. Miscellaneous revenue legislation enacted during the fiscal year 1950
25. Individual incoihe tax liabilities and effective rates under the Revenue
Acts of 1913-50
26. Federal taxes of the United States, 1940-50

181
186
207
225
227
243
245
251

INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS

27. Report of activities of the National Advisory Council on International
Monetary and Financial Problems, April 1 to September 30, 1949
28. Second Special Report of the National Advisory Council on the operations and policies of the International Monetary Fund and the International Bank for Reconstruction and Development covering the
two-year period ended March 31, 1950:.
29. Report of activities of the National Advisory Council on International
Monetary and Financial Problems, October 1, 1949, to March 31,
1950
J
.




281

323
348

CONTENTS

VII

SELECTED STATEMENTS BY THE SECRETARY OF THE TREASURY
Page

30. Address by Secretary of t h e Treasury Snyder before t h e American Life
Convention, Chicago, I I I , October 6, 1949
31. Address by Secretary of t h e Treasury Snyder before t h e American
Bankers Association, San Francisco, Cahf., November 1, 1949
-.
32. Address by Secretary of t h e Treasury Snyder before the U. S. Savings
Bonds Conference, Washington, D. C , March 29, 1950
33. Address by Secretary of t h e Treasury Snyder before t h e American
I n s t i t u t e of Banking, Minneapolis, Minn., J u n e 12, 1950
^
9

411
414
417
419

ORGANIZATION AND PROCEDURE

34. Treasury D e p a r t m e n t orders relating t o organization and p r o c e d u r e . .

422

MISCELLANEOUS

35. Letters of Secretary of t h e Treasury Snyder t o t h e Chairman of t h e
Government Operations Subcommittee of t h e IJouse Committee on
Expenditures in t h e Executive D e p a r t m e n t s concerning the rate of
interest paid on p u b h c debt securities issued to t r u s t funds
36. An act to authorize t h e President to determine the form of the national
budget and of d e p a r t m e n t a l estimates, to modernize and simplify
governmental accounting and auditing methods and procedures,
and for other purposes
'
37. Supplement 6, M a y 10, 1950, to D e p a r t m e n t Circular No. 655, prescribing regulations relating to delivery of checks and warrants t o
addresses outside t h e United States, its Territories and possessions..
38. Letter of t h e Postmaster General, to t h e Secretary of t h e Treasury
certifying extraordinary expenditures contributing to the deficiencies of postal revenues for t h e fiscal year 1950
.

424

427
437
438

TABLES
Explanation of bases used in tables

443

Description of accounts through which Treasury operations are effected. _

444

FISCAL OPERATIONS

1. S u m m a r y of fiscal operations, 1932-50 a n d monthly 1950

446

RECEIPTS AND EXPENDITURES

2. Receipts and expenditures, 1789-1950
,448
3. Budget receipts and expenditures, in detail, monthly for 1950 and totals
for 1949 and 1950
454
4. T r u s t accounts, etc., receipts and expenditures, in detail, monthly for
1950 and totals for 1949 and 1950
472
5. Budget receipts and expenditures, by major classifications, 1942-50
480
6. T r u s t accounts, etc., receipts and expenditures, bv major classifications,
1942-50
1
482
7. I n t e r n a l revenue collections, by t a x sources, 1929-50
483
8. Customs collections a n d refunds, 1949 a n d 1950
.
488
9. Amounts deposited by t h e Federal Reserve Banks in t h e Treasury as
miscellaneous receipts representing interest charges on Federal Reserve notes, 1948-50
-_.
. 488
10. Postal receipts and expenditures, 1911-50
489
PUBLIC DEBT, GUARANTEED OBLIGATIONS, ETC.

Outstanding public debt, guaranteed obligations, etc.
11.
12.
13.
14.

Principal of t h e public debt, 1790-1950
Public debt and guaranteed obligations, J u n e 30, 1934-50
P u b h c debt, by security classes, J u n e 30, 1 9 4 0 - 5 0 - - . .
.
Guaranteed obligations held outside t h e Treasury, classified by issuing
Government corporations and other business-type activities, June
30, 1940-50
-




490
492
493
495

VIII

CONTENTS
,

,

Page

,15. Contingent liabilities, J u n e 30, 1 9 4 0 - 5 0 . . . .
.
.
16. Summary of public debt a n d guaranteed obligations, by security classes,
June 30, 1950
.
.
17. Description of public debt issues outstanding J u n e 30, 1950
18. Description of guaranteed obligations held o\itside t h e Treasury, J u n e
30, 1950
.
-.
19. Description of contingent liabilities outstanding J u n e 30, 1950
20. Statutory limitation on t h e public debt and guaranteed obligations,
June 30, 1950
....
.
Operations in the public debt, etc.

496
496
498
512
514
515

,

21. Public debt receipts a n d expenditures, by security classes, m o n t h l y for
1950 and totals for 1949 and 1950
....
22. Changes in public debt issues, 1950
..
23. Issues, maturities, and redemptions of interest-bearing public debt
securities, excluding special issues, July 1949-June 1950
24. Pubhc debt increases and decreases, and balances in t h e general fund,
1916-50....
1
...
25.' Statutory debt retirements, 1918-50
26. Cumulative sinking fund, 1921-50
.
27. Transactions on account of t h e cumulative sinking fund, 1950
..

516
524
538
555
556
.557
557

United States savings b o n d s and Treasury savings notes
28. Summary of sales a n d redemptions of savings bonds by series, 1935-50
a a d monthly 1950
....
29. Sales and redemptions of Series E, F , and G savings bonds by series,
1941-50 and monthly 1 9 5 0 . . . .
.
30. Sales of Series E, F , a n d G savings bonds by denominations, 1941-50
and monthly 1 9 5 0 . .
.
31. Redemptions of Series E, F , and G savings bonds b y denominations,
1941-50 and m o n t h l y l 9 5 0
.'.
32. Sales of Series E, F , a n d G savings bonds by States, 1950 a n d cumula->
tive.....
.........
33. Percent of savings bonds sold in each year redeemed t h r o u g h each
yearly period thereafter, by d e n o m i n a t i o n s . .
1.34. Sales and redemptions of Treasury notes, t a x a n d savings series,
August 1941-June 1950.

558
559
561
563
564
565
569

I n t e r e s t on public debt and g u a r a n t e e d obligations
35. Amount pf interest-bearing public debt outstanding, t h e computed
annual interest charge, a n d t h e computed rate of interest, J u n e 30,
1916-50, and a t end of each m o n t h during 1950
...
36. Interest on t h e public debt becoming due a n d payable, by security
classes, 1948-50
.
37. Interest paid on t h e . p u b l i c debt a n d guaranteed obligations, by t a x .
status, 1934-50
,
_.-'

570
571
572

Prices and yields of securities
38. Average vields of long-term Treasury bonds, b y m o n t h s , J a n u a r y 1930June 1950
..
39. Prices and yields of-marketable public debt issues, J u n e 30, 1949 a n d
1950, and price ranges since first t r a d e d —-_

573
574

GOLD, SILVER, AND GENERAL FUND ASSETS AND LIABILITIES

40. Assets and habilities of t h e Treasury, J u n e 30, 1949 a n d 1950

576

TRUST AND SPECIAL FUNDS FOR WHICH INVESTMENTS ARE MADE
BY THE TREASURY DEPARTMENT ,

41. Holdings of Federal securities by Government agencies and accounts,
J u n e 30,.1940-50
42. Adjusted service certificate fund
\




578
580

CONTENTS

IX
Page

43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.

Ainsworth Library fund, Walter Reed General Hospital581
Alien property trust fund
•
.
582
Civil service retirement and disability fund
582
District of Columbia teachers' retirement and annuity fund—Assets
held by the Treasury Department...
.
.
584
District of Columbia water fund—Investments held by the Treasury
Department
'.
.
; 585
Assets held by the Treasury Department under relief and rehabilitation, Workmen's Compensation Act within the District of Colum- •
bia
....
.
.
-585
Federal old-age and survivors insurance trust f u n d . . .
586
Railroad retirement account..
.
587
Unemployment trust fund
;......
588
Foreign service retirement and disability fund
. . . ^ 591
Library of Congress trust fund
---592
Relief and rehabilitation, Longshoremen's and Harbor Workers' Cohi- .'
pensation Act, as amended—Assets held by the Treasury Department . . .
.
.
.
594
National Archives gift f u n d . . . .
.
594
National Cancer Institute gift fund
..
595
National Institute of Health gift fund
......
..
..
596
National park trust fund
:...
597
National service life insurance fund
:
598
Pershing HaU Memorial f u n d . . . .
599
United States Government life insurance fund—Investments.--600
United States Naval Academy general gift fund
600
CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE ACTIVITIES OF
THE GOVERNMENT

63. Borrowing power and outstanding issues of Government,corporations
and certain other business-type activities whose obligations are
guaranteed by the United States or issued to the Secretary of the
Treasury, June 30, 1 9 5 0 - . . . .
601
64. Treasury holdings of bonds and notes issued by Gdvernment corporations and other business-type activities, June 30, 1940-50
602
65. Description of Treasury holdings of bonds and notes issued by Government corporations and other business-type activities, June 30, 1950.
603
66. Transactions relating to Treasury holdings of bonds and notes issued
by Government corporations and other business^type activities,
1950..:
.
...
-605
67. Comparative statement of the combined net investment of the United
States with respect to Government corporations and certain other .
assets and liabilities pertaining to business-type activities, June 30,
1941-50
.
.
...
606
68. Balance sheets of Government corporations and certain other businesstype activities, June 30, 1950
.
..
608
69. Income and expense of Government corporations and certain other
business-type activities, 1950..
^
---612
70. Source and application of funds of Government corporations and
certain other business-type activities, 1950
^....
616
71. Restoration of capital impairment of the Commodity Credit Corporation through June 30, 1950
620
72. Reconstruction Finance Corporation notes canceled through June 30,
1950, and recoveries during 1950
.
^
..
620
73. Securities owned by the Government (other than World War I foreign
government obligations), June 30, 1950, and changes during 1950..
621
74. Capital stock of Federal home loan banks held on June 30, 1949 and
1950, repayments on capital stock, and dividends earned by the
Treasury during 1950
.
..
626
75. Securities acquired under the Transportation Act of 1920, or in exchange for securities so acquired by reason of subsequent railroad
reorganizations, and held by the Treasury and the Reconstruction
Finance Corporation, June 30, 1950
.
..--.
'.
626
76. Dividends, interest, etc., received by the Treasury from Government
corporations and other enterprises, 1950
[
..
'627




X

CONTENTS
STOCK AND CIRCULATION OF MONEY IN THE UNITED STATES
, '

77. Stock of money, money in t h e Treasury, in t h e Federal Reserve Banks,
and in circulation, by kinds, J u n e 30, 1950
'
^
78. Stock of money, money in t h e Treasury, in t h e Federal Reserve Banks,
and in circulation, J u n e 30, 1913-50
79. Stock of money, by kinds, J u n e 30, 1913-50
80. Money in circulation, by kinds, J u n e 30, 1913-50
81. Paper currency issued and redeemed during 1950, a n d outstanding
J u n e 30, 1950, by classes a n d denonainations

Page

628
629
630
631
632

CUSTOMS STATISTICS

82. Surnmary of customs collections and expenditures, 1950
, 633
83. Customs collections and p a y m e n t s , ^by districts, 1950
.
634
84. Values of dutiable and taxable imports for consumption and estimated
duties and taxes collected by tariff schedules, fiscal years 1 9 4 8 - 5 0 . .
636
85. Estimated customs duties, value of imports entered for consumption,
and ratio of duties to value of imports, calendar years 1939-49 a n d
monthly J a n u a r y 1948-June 1950
637,
86. Estimated customs duties, value of dutiable imports, and ratio of
duties to value of imports, by tariff schedules, calendar years 1939-49
and monthl}^ J a n u a r y 1948-June 1950.
•._
638
87. Value of dutiable imports and estimated duties collected, by countries,
1948-50
.642
'88. N u m b e r of entries of merchandise, 1949 a n d 1950
644
89. Vehicles a n d persons entering t h e United States, 1949 and 1 9 5 0 . .
644
90. Airplanes and airplane passengers entering t h e . U n i t e d States, 1949
. and 1950
. 645
91. Drawback transactions, 1949 and 1950
646
'92. Principal commodities on which drawback was paid, 1949 and 1 9 5 0 . .
646
93. Seizures for violations of customs laws, 1949 a n d 1950
647
94. • Seizures for violations of customs laws, by agencies participating, 1950648
95. Investigative and patrol activities, 1949 and 1950
648
FEDERAL AID TO STATES

96." Expenditures for Federal aid to States, individuals, etc., 1920, 1930,
1940, and 1950
.
97. Expenditures m a d e by t h e Government as direct p a y m e n t s to States
under cooperative arrangements and expenditures within States
which provided relief and other aid, 1950
^

649
655

GOVERNMENT LOSSES IN SHIPMENT

98. Status J u n e 30, 1950, of the revolving fund estabhshed,under authority
of the Government Losses in Shipment Act
99. Reported value of shipments made by or for t h e account of Government
. departments a n d agencies under coverage of t h e Government Losses
in Shipment Act, as amended, 1938-50
1
100. Estimated a m o u n t s of insurance premium savings to t h e Government
on shipments m a d e by or for t h e account of Government departments a n d agencies under coverage of t h e Government Losses in
Shipment Act, as amended, 1938-50
101. Agreements of indemnity issued by t h e Treasury under, a u t h o r i t y of
t h e Government Losses in Shipment Act, as amended, August 10,
1939-June 30, 1950
102. Number a n d a m o u n t of claims m a d e a n d settled under a u t h o r i t y of
t h e Government Losses in Shipment Act, as amended, August 15,
1937-June 30, 1950

668
668

669
669
670

INTERNATIONAL CLAIMS

103. Status of t h e Mexican claims fund, J u n e 30, 1950
104. N u m b e r and a m o u n t Of awards of t h e Mixed Claims Commission,
United States and Germany, certified t o t h e Secretary of t h e
Treasury by t h e Secretary of State, t h e a m o u n t paid, a n d balance
due, t h r o u g h J u n e 30, 1950




671

672

CONTENTS

XI

MISCELLANEOUS
Page

105. Treasury cash income and outgo, 1941-50
674
106. Federal fiscal operations and the Nation's financial structure, 1941-50.
678
107. Status June 30, 1950, of the special trust account-for the payment
of bonds of the Philippines, its provinces, cities, and municipalities,
issued prior to May 1, 1934, under authority of acts of Congress..
680
108. Assets and liabilities of the exchange stabilization fund, June 30,
1949 and 1950.
.,
681
109. Foreign currehcy transactions, 1950, and holdings by the Treasury,
June 30, 1949 and 1950
.
683
110. Indebtedness of foreign governments to the United States arising
from World War I, and payments thereon as of November 15, 1950.
684
111. World War I indebtedness of Germany to the United States and
amounts paid and not paid, June 30, 1950
.
• 686,
112. Accounts receivable under active agreements with foreign governments involving lend-lease articles and surplus property, Jurie 30,
1950 (World War I I ) . . . . '
..687
OWNERSHIP OF GOVERNMENTAL SECURITIES

113.' Estimated ownership of all interest-bearing governmental securities
outstanding, classified by type of issuer, June 30, 1937-50
114. Estimated distribution of interest-bearing governmental securities
outstanding June 30, 1939-50, classified by tax status and type
of issuer
.
115. Summary of Treasury survey of ownership of interest-bearing public
debt and guaranteed obligations, June 30, 1949 and 1950

688
690
692

BUDGET ESTIMATES

116. Budget receipts and expenditures, actual for 1950 and estimated for
1951 and 1952
.
.
117. Trust accounts, etc., receipts and expenditures, actual for 1950 and
estimated for 1951 and 1952
.
118. Effect of financial operations on the public debt, actual for 1950 and
estimated for 1951 and 1952
.
1...

698

INDEX

701

....:

...:

694

699

NOTE

In tables where figures have been rounded to a specified unit, the components
may not necessarily add to totals. Percentages are calculated on unrounded
figures.







SECRETARIES, UNDER SECRETARIES, AND ASSISTANT SECRETARIES
OF THE TREASURY DEPARTMENT FROM MARCH 4,1933, TO NOVEMBER 15, 1950,^ AND THE PRESIDENTS UNDER WHOM THEY SERVED
Served Under-

Term of service
Official

Secretary of the Treasury President

From—

To-

Mar. 4,1933
Jan. 1,1934

Dec. 31,1933
July 22,1945

July 23,1945
June 25,1946

June 23,1946

May 19,1933
Nov. 17,1933
May 2,1934

Nov. 16,1933
Dec. 31,1933
Feb. 15,1936

Jan. 29,1937
Nov. 1,1938
Jan. 18,1940

Sept. 15,1938
Dec. 31,1939
Dec. 31,1945

Mar. 4,1946
Jan. 23,1947
July 15,1948

Jan. 14,1947
July 14,1948

0 . Max Gardner, North Carolina.. Vinson, Snyder.
A. L. M. Wiggins, South Carolina. Snyder
Edward H. Foley, Jr., New York.. Snyder...

Apr.
June
June
Dec.
Feb.
July
June

Feb.
Sept.
Dec.
Nov.
Feb.
Oct.
Dec.

Lawrence W. Robert, Jr., Georgia..
Stephen B. Gibbons, New York...
Thomas Hewes, Connecticut.._
Josephine Roche, Colorado
Wayne C. Taylor, Illinois.John W. Hanes, North Carolina...
Herbert E. Gaston, New York

Secretary of the Treasury
Roosevelt.
Roosevelt,
Truman.
Truman.
Truman.

William H. Woodin, New York
Henry Morgenthau, Jr;, New York.
Fred M. Vinson, Kentucky.
John W. Snyder, Missouri..
Under Secretary
Dean G. Acheson, Maryland
Henry Morgenthau, Jr., New York
Thomas Jefferson Coolidge, Massachusetts.
Roswell Magill, New York
John W. Hanes, North Carolina...
Daniel W. Bell, Illinois

Woodin
Woodin
Morgenthau.

Roosevelt.
Roosevelt.
Roosevelt.

Morgenthau
......
Morgenthau
Morgenthau, Vinson.

Roosevelt.
Roosevelt.
Roosevelt,
Truman.
Truman.
Truman.
Truman.

Assistant Secretaries
18,1933
6,1933
12,1933
1,1934
19,1936
1,1938
23.1939

15,1936
30,1939
12,1933
1,1937
28,1939
31,1938
2,1945

Jan. 18,1940
Jan. 24,1945

Nov. 30,1944
May 1,1946

Apr. 15,1946
July 16,1948
Feb. 8,1949

July 14,1948

Woodin, Morgenthau.
Woodin, MorgenthauWoodin...
Morgenthau. _
Morgenthau
^
Morgenthau
...
Morgenthau, Vinson..

John L. Sullivan, New Hampshire. Morgenthau
Harry D . White, Maryland
Morgenthau, Vinson..
Edward H. Foley, Jr., New York.. Vinson, Snyder...
John S. Graham, North Carolina... Snyder
William McChesney Martin, Jr., Snyder
N ew York.

Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt.
Roosevelt,
Truman;
Roosevelt.
Roosevelt,
Truman,
Truman.
Truman.
Truman.

Fiscal Assistant Secretary
Mar. 16,1945

Edward F. Bartelt,Illinois

Aug. 2,1950

William W. Parsons. California

. . . Morgenthau,
Snyder.

Vinson,

Roosevelt,
Truman.

Administrative Assistant Secretary
Snyder..

Truman.

» For officials since 1789 see annual report for 1932, pp. xvii to xxi, and corresponding table in annualreport
for 1933.
.




XIII

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS OF THE
TREASURY DEPARTMENT AS OF NOVEMBER 15, 1950
SECRETARY
Edward H. Foley, Jr
..
John S. Graham
William McChesney Martin, Jr
Edward F. Bartelt
.
William W. Parsons
Thomas J. Lynch 1
George C. Haas
.
William J. Bray
A. L. M. Wiggins
Frank A. Southard, Jr

JOHN W. SNYDER
'
Under Secretary of the Treasury.
Assistant Secretary of the Treasury.
Assistant Secretary of the Treasury.
.
Fiscal Assistant Secretary ofthe Treasury.
Administrative Assistant Secretary.
GeneralCounsel.
Director of the Technical Stafl.
Assistant to the Secretary.
Assistant to the Secretary.
Special Assistant to the Secretary.

OFFICE OF T H E UNDER SEORETARY EDWARD H. FOLEY, Jr.i
Elmer T. Acken.
Assistant to the Under Secretary.
James J. Maloney. _
Chief Coordinator, Treasury Enforcement Agencies.
OFFICE OF ASSISTANT SECRETARY JOHN S. GRAHAM i
Kennedy C. Watkins.L
Executive Assistant to Assistant Secretary.
OFFICE OF ASSISTANT SECRETARY WILLIAM McCHESNEY MARTIN, Jr.i
George H. Willis
Director, Office of International Finance.
OFFICE OF T H E FISCAL ASSISTANT SECRETARY EDWARD F. BARTELT i
William T. Heffelfinger
'.
Assistant to the Fiscal Assistant Secretary.
Edward D. Batchelder
Technical Assistant to the Fiscal Assistant Secretary.
Martin L. Moore
Technical Assistant to the Fiscal Assistant Secretary.
Frank F. Dietrich
Technical Assistant to the Fiscal Assistant Secretary.
Eldon B. Smith. _
Administrative Assistant to Fiscal Assistant Secretary.
Gilbert L. Cake..
Head, Fiscal Service Operations and Methods Staff.
OFFICE OF ADMINISTRATIVE ASSISTANT SECRETARY WILLIAM W. PARSONS
William L. Lynch
Assistant to the Administrative Assistant Secretary.
Willard L. Johnson
.
. . . Budget Officer.
George H. Jones.
..^
Assistant Budget Officer.
James H. Hard I I . _
Director of Personnel.
Joseph A. Jordan
.
Assistant Director of Personnel.
Paul McDonald
Director of Administrative Services.
Denzil A. Right
Superintendent, Division of Treasury Buildings.
Edward E. Berney.
Chief, Division of Treasury Space Control.
Henry L. Merricks
Chief, Division of Office Services.
OFFICE OF T H E GENERAL COUNSEL THOMAS J. LYNCH
Elting Arnold
Assistant General Counsel.
Philip Nichols, Jr
".
Assistant General Counsel.
John K. Carlock
Assistant General Counsel.
Vance N. Kirby.
Tax Legislative Counsel.
Frederick C. Lusk
Assistant Tax Legislative Counsel.
Raphael Sherfy.
Assistant Tax Legislative Counsel.
Hugo A. Ranta
Assistant to the General Counsel.
George Bronz.
Special Assistant to the General Counsel.
Lawrence Linville
.... Special Assistant to tbe General Counsel.
James J. Saxon
Special Assistant to the General Counsel.
Kenneth S. Harrison
^. . Chief*Counsel, U. S. Coast Guard.
John F. Anderson
Chief Counsel, Office of the Comptroller of the Currency.
Robert Chambers
Chief Counsel, Bureau of Customs.
Charles Oliphant
Chief Counsel, Bureau of Internal Revenue.
Elting Arnold
Chief Counsel, Office of International Finance.
Alfred L. Tennyson
Chief Counsel, Bureau of Narcotics.
Theodore W. Cunningham
Chief Counsel, Bureau ofthe Public Debt.
George F. Reeves
:
Chief Counsel to the Fiscal Assistant Secretary.
1 See organization chart.
XIV




PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
O ' F F I C E O F T H E TECHNICAL STAFF
George C. Haas
Edmund M. Daggit
Thomas F. Leahey
Robert P. Mayo
Sidney G. Tickton
Cedric W. Kroll
Anna M. Michener
Wilham M. Weir
Isabella S. Diamond

. XV

.

Director of the Technical Staff.
Assistant Director.
Assistant Director.
Assistant Director.
Assistant Director.
Acting Government Actuary.
Assistant to the Director.
Administrative Assistant to the Director.
Librarian.

1

OFFICE OF INTERNATIONAL FINANCE
George H. Willis
Charles Dillon Glendinning:
William L. Hebbard
Arthur F. Blaser, Jr
Morris J. Fields
Donald W. Curtis
Arthur W. Stuart
Robert J. Schwartz
John S. deBeers
George A. Eddy
Mary C. Hall
Charlie E. Miller

Dii'ector.
Deputy Director and Secretary, National'Advisory Council.
Assistant Director.
Acting Chief, British Commonwealth and Middle East
Division.
Chief, Commercial Policy and United Nations Division.
Acting Chief, European Division.
Chief, Far Eastern Division.
Acting Chief, International Statistics Division.
Chief, Latin American Division.
Chief, Stabilization Fund, Gold and Silver Division.
Administrative Assistant to the Director.
1 Acting Budget Officer.

.

TAX ADVISORY STAFF OF T H E SECRETARY
L. L. Ecker-Racz.
F. Newell Campbell
Richard E. Slitor
Robert B. Bangs
Joseph A. Pechman
George E. Lent.

:

.

Director.
Associate
Assistant
Assistant
Assistant
. . Assistant

Director.
Director.
Director.
Director,
Director.

OFFICE OF THE COMPTROLLER OF THE CURRENCY
Preston Delano
J. L. Robertson...
R. B. McCandless
L. A. Jennings
W. P. Folger

...'.
_

Comptroller of the Currency.
First Deputy Comptroller of the Currency.
Second Deputy Comptroller of the Cm-rency.
Third Deputy Comptroller of the Currency. .
Chief National Bank Examiner.

BUREAU OF CUSTOMS
Frank Dow
D. B. Strubinger
W.R.Johnson
Charles Stevenson
C. A. Emerick
W. H. Ziehl
G. H. Griffith
W. E: Higman
H. E. Sweet
J. F. Williams..
F. W. Gast

Commissioner of Customs.
Assistant Commissioner of Customs.
Special Assistant to the Commissioner.
' .
Deputy Commissioner of Appraisement Administration.
Deputy Commissioner of Investigations.
Deputy Commissioner of Management and Controls.
Chief, Divisionof Drawbacks, Enforcement, and Quotas.
Chief, Divisionof Classification, Entry, and Value.
Chief, Division of Marine Admuiistration.
Chief, Division of Laboratories.
Chief, Division of Engineering and Weighing.
BUREAU OF ENQRAVING,AND P R I N T I N G

Alvin W. Hall
Henry J. Holtzclaw.
Thomas F. Slattery

Director, Bureau of Engraving and Printing.
Assistant Director.
Assistant Director (Production).
BUREAU OF ACCOUNTS (IN T H E FISCAL SERVICE)

Robert W. Maxwell
Gilbert L. Cake
Harold R. Gearhart.
Edmund C. Nussear
Wallace E. Barker, Jr
Stephen P. Gerardi
Paul D. Banning
.Julian F. Cannon
Charles 0 . Bryant
George E. Jones
_
George Friedman.
Boyd A. Evans

._

Commissioner of Accounts.
Associate Commissioner.
Deputy Commissioner.
Assistant Deputy Commissioner.
Assistant Commissioner for Administration.
Executive Assistant to the Commissioner.
Chief Disbursing Officer.
Assistant Chief Disbursing Officer.
i._ Assistant Chief Disbursing Officer.
Chief Accountant.
Technical Assistant to the Commissioner.
Special Assistant to the Associate Commissioner.

BUREAU OF T H E PUBLIC D E B T (IN T H E FISCAL SERVICE)
Edwin L. Kilby..
Donald M." Merritt
Ross A. Heffelfinger, Jr
Charles D. Peyton




Commissioner of the Public Debt.
Assistant Commissioner.
Deputy Commissioner in Charge, Washington Office.
Deputy Commissioner in Charge, Chicago Office.

XVI

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS

OFFICE OF T H E TREASURER OF T H E U N I T E D STATES (IN'THE FISCAL SERVICE)
Georgia Neese Clark
Marion G. Banister
Michael E. Slindee
Frederick L. Church
Grover C. Emerson...

.

._

.:

Treasurer of the United States.
Assistant Treasurer.
Deputy and Acting Treasurer.
Assistant Deputy Treasurer.
Staff Assistant.

BUREAU OF INTERNAL REVENUE
George J. Schoeneman.
Fred S. Martin
Daniel A. Bolich
T. C. Atkeson
Eldon P. King
E. I. McLarney
A. H. Cross...
.'.
Victor H. Self...
Charles J. Valaer
Carroll E. Mealey..
Aubrey R. Marrs:
William H. Woolf.
Henry J. Merry.

..:....

BUREAU OF T H E M I N T
Nellie Tayloe Ross.
Leland Howard

Director of the Mint.
Assistant Director.
BUREAU OF NARCOTICS

Harry J. Anslinger
George W. Cunningham
Malachi L. Harney

Commissioner of Narcotics.
Deputy Commissioner.
Assistant to the Commissioner.'

.

U N I T E D STATES COAST GUARD
Vice Admiral Merlin O'Neill
Rear Admiral Alfred C. Richmond
Rear Admiral Kenneth K. Co wart

Commandant, U. S. Coast Guard.
Assistant Commandant.
Engineer in Chief.

U. S. SAVINGS BONDS DIVISION '
Vernon L. Clark.
Leon J. Markham
Bill McDonald.....

National Director.
Director of Sales.
Executive Officer.

I

U N I T E D STATES SECRET SERVICE
U. E. Baughman
Carl Dicl^son
Harry E. Neal
George W. Taylor

:

.

..:•

Chief, U.S. Secret Service.
. . . Assistant Chief.
Executive Aide to the Chief.
Administrative Officer.

STANDING DEPARTMENTAL COMMITTEES
TRE.ASURY AWARDS C O M M I T T E E
William L. Lynch
Herbert E. Stats
,
John K. Carlock
James H. Hard II
William T. Heffelfinger
Henry J. Holtzclaw
Leland Howard
.:
Willard L. Johnson
James J. Maloney
...:....
Justin F. Winkle
Captain Russell E. Wood
Wilbur H. Ziehl...

Chairman.
Vice Chairman.
. . Member.
Member.
Member.
.
Member.
Member.
Member.
Member. •
Member.
. Member.
•.
Member.

;,

LOYALTY BOARD
James H. Hard II
Hugo A. Ranta.-._.
William T. Heffelfinger

Chairman.
. . . . Member.
Member.
C O M M I T T E E ON PRACTICE

John L. Graves
Hessel E. Yntema
Huntington Cairns




:

. :
.

Commissioner of Internal Revenue.
Assistant Commissioner.
Assistant Commissioner.
Assistant to the Commissioner.
Special Deputy Commissioner.
Deputy Commissioner, Income Tax Unit.
Deputy Commissioner, Accounts ahd Collections Unit.
Deputy Commissioner, Employment Tax Unit.
Deputy Commissioner, Miscellaneous Tax Unit.
Deputy Commissioner, Alcohol Tax Unit.
: . Head, Technical Staff.
. . . Chief, Intelligence Unit.
Chairman, Excess Profits Tax Council.

Chairman.
Member..
Member.

\

PRINCIPAL ADMINISTRATIVE AND STAFF OFFICERS
WAGE BOARD
James H. Hard II
:
Willard L. Johnson
George Billard

Chairman.
Member.
Member.

TREASURY D E P A R T M E N T M A N A G E M E N T COMMITTEE
William W. Parsons
T. C. Atkeson
.
John K. Carlock
William T. Heffelfinger
Henry J. Holtzclaw:
Leland Howard
James J. Maloney
Rear Admiral Alfred C. Richmond
David B. Strubinger

Chairman.
Member.
Member.
Member.
Member.
Member.
Member.
Member.
Member.

I N T E R D E P A R T M E N T A L SAVINGS BOND COMMITTEE
Edward F . Bartelt.

Chairman.
FAIR E M P L O Y M E N T OFFICER
James H. Hard II

907795—51-




XVII

DEPARTMENT OF THE TREASURY
November 15,1950
THE SECRETARY
OF THE
TREASURY

THE UNDER SECRETARY
OF THE
TREASURY

GENERALCOUNSEL
FOR THE
TREASURY




ASSISTANT SECRETARY

ASST. TO THE
SECRETARY IN
CHARGE OF U.S.
SAVINGS BONDS
DIVISION

ASSISTANT SECRETARY

DIRECTOR OF
THE OFFICE OF
INTERNATIONAL
FINANCE

DIRECTOR OFTAX ADVISORY
STAFF

DIRECTOR OF
THE TECHNICAL
STAFF

ASSISTANTS
TOTHE
SECRETARY

ENFORCEMENT

^^^-^S-*^

Bureau of
Engraving and
Printing

U. S. Sovings
Bonds
Division

Oftice ot the
Treasurer of the
United States

Office of the
Comptroller of
Ihe Currency

CHART

1.

R E P O R T ON




OPERATIONS




REPO'RT ON OPERATIONS

3

SUMMARY OF FISCAL OPERATIONS

Budget expenditures"of the United States Government totaled $40.2
billion in the fiscal year 1950 compared with $40.1 billion in 1949. Net
budget, receipts of $37.0 billion in 1950 compared with $38.2 billion in
1949. The excess of expenditures of $3.1 billion was $1.3 billion more
than the budget deficit of $1.8 billion in 1949. The increase in the
deficit was due almost entirely to the reduction of $1.2 billion in net
budget receipts.
T h e deficit of $3.1 billion and a rise in the general fund balance of
$2.0 billion were met by an increase in the public debt of $4.6 billion
and an increase in net receipts in trust accounts, e t c , of $0.6 billion.
The cash balance in the general fund stood at $5.5 billion on June 30,
1950. On that date the public debt, amounted to $257.4 billion.
The frame of the fiscal operations of the Government in the past two
years is shown in the table following. The figures are on the basis of
the daily Treasury statement. Annual data for 1932-50 and monthly
for 1950 are contained in table 1 in the tables section of this report.

Budget results: •
Netreceipts
Expenditures

.

.-_.

Deficit

Less:
General fund balance, increase (—), or decrease
....
. Trust accounts, net expenditures (—), or net receipts L.

Equals: Public debt net increase.
1 Includes' clearing account for outstanding checks and interest coupons, and telegraphic reports from
Federal Reserve Banks.

BUDGET RECEIPTS

; Net budget receipts, which consist of total receipts less the appropriation to the Federal old-age and survivors insura;rice: trust"-fund
and refunds of receipts, amounted to $37.0 billion in the, fiscal year
1950 and were $1.2 billion less than in 1949. In both years the receipts
were below the average level in the fiscal years 1946 through 1.950, a
lever exceeded only by the high receipts in the war years of 1944 and
1945. The receipts of $37.0 billion i n 1950 compared with receipts
of $42.2 billion in 1948, the highest since 1945.
V .,
From the record of $44.8 billion in 1945, receipts declined to, $40.0
billion in 1946. This decline resulted from the part-year effect of the
Revenue Act of 1945 which reduced individual and corporation income taxes and repealed the excess profits tax effective January 1,




4

1 9 5 0 REPORT OF THE' SiECRETARY OF T H E TREASURY

1946; aild also from the effects on receipts of the Tax Adjustment
Act of 1945, and a decrease in taxable incomes.
Ih 1947, net budget receipts remained at the same level as in 1946.
The progressively greater effect of the tax reductions enacted in 1945
reduced collections from the corporation income and excess profits
taxes substantially. Collections from all other major tax sources,
however, increased as a result of rising income levels and greater
availability of taxable goods and services. A significant increase in
the nontax source "Miscellaneous receipts'' resulted from a very
large rise in receipts from sales of surplus property, offset in part by a
decline in receipts from renegotiation of war contracts.
Sharply rising incomes accounted for the increase in net budget
reiceipts to $42.2 billion in 1948; but, in 1949, receipts declined because
of individual income tax reductions enacted in 1948 and because of the
tapering off of surplus property sales. The decrease in receipts continued in 1950 as corporation profits declined and as miscellaneous
receipts continued to decrease.
As indicated by the estimates of budget receipts for 1952, page-50,
net budget receipts in the fiscal year 1951 are expected to approximate
the highest of the war years, while net budget receipts in 1952 will be
much larger than those in any previous year. Chart 7 shows total
receipts by major sources for the years 1944 through 1950. Detailed
information for these and earlier years is contained in the tables section
of this report.
Receipts in the fiscal years 1949 and 1950, on the daily Treasury
statement basis, are compared by major sources, in the following table.
Increase, or decrease ( - )
1949

1950

Source

Amount
In billions of dollars

Tndivirlnal ineome tax i
. . _ _
Corporation income and excess profits taxes

17.9
n.6

17.4
10.9

Total income and-'excess profits taxes
Miscellaneous internal revenue
:
Employment taxes 2
Customs
. - .
Miscellaneous receipts '....

29.5
8.3
2.5
.4
2.1

28.3
8.3
2.9
.4
L4

42.8

4L3

1.7
2.8

2.1
2.2

. . .

Total receipts
Deduct:
(a) Appropriation to Federal old-age and survivors
insurannp. tmst. fimd
(b) Refunds of receipts
Net budget receipts

..

38.2

37.0
•3

•Less than $50 million.
1 See t^ble 116, footnote 3.
2 Includes Railroad Unemployment Insurance Act receipts.




-0.5
-.7
-L2

(*)
(*)

.4

-.6
-1.5
.4
-.7
-1.2

-2.9
-6.1
-4.1
-.5
16.3
9.9
-31.0
-3.4
24.6
-23.9
—3.1

REPORT ON OPERATIONS

TOTAL RECEI PTS. CUASSI RED BY; M A J ® SOURCES




CHAET

7.

6

19 5 0 REPORT OF THE: SE'CRETARY OF T H E TREASURY

All major tax sources with the exception of customs and employment taxes showed decreases in 1950 as compared with 1949.
Individual and corporation income and excess profits taxes remained
the most important sources of revenue, accounting for $17.4 billion
and $10.9 billion of receipts, respectively, and together constituted
slightly more than two-thirds of total receipts. Only relatively small
changes took place in other major sources of receipts. As a percentage
of total receipts, miscellaneous internal revenue increased for the
second successive year and employment taxes also continued to
increase. All other sources declined for the third consecutive year.
R E C E I P T S F R O M INCOME AND E X C E S S P R O F I T S

TAXES

Receipts from income and excess profits taxes amounted to $28.3
billion in the fiscal year 1950, a decrease of $1.2 billion as compared
with receipts of $29.5 billion in 1949.
Individual income taxes.—The details of the yield of the individual
income tax are shown in the following table.
Increase, or decrease (—)
1949

1950

Som-ce

Amount
In millions of dollars

Withheld (daily Treasury statement basis)

9,842

10, 073

•232

2.4

Not withheld (collection basis)
Adjustment to daily Treasury statement basis L . _

7,996
+91

7, 264
+71

.-732
-20

—9.2

8,087

7,335

-752

—9.3

17,929

17,408

-520

—2.9

Not withheld (daily Treasury statement basis; .
Total individual income taxes

^. .
1 See table 116, footnote 3.

Receipts from withheld taxes iacreased slightly in the fiscal year
1950 w:hile receipts from taxes not withheld dropped substantially.
The decrease in receipts from taxes not withheld reflected a drop in
the profits of unincorporated businesses whose taxes are collected by
means of declaration payments.
Corporation income and excess profits taxes.—Receipts from this
source were $10,854 million or $699 million less than the $11,554
million received in the fiscal year 1949. This decrease resulted
primarily from a lower level of profits in the calendar year 1949 as
compared with previous years. Another factor in the smaller receipts
was the tapering off of back excess profits tax collections, which
dropped from $194 million in 1949 to $87 million in 1950.




REPORT ON OPERATIONS

7

R E C E I P T S FROM A L L OTHER SOURCES

Miscellaneous internal revenue.—Receipts from the major groups of
taxes included in this category are shown in the following table.
Increase, or decrease (—)
1949

1950

Source

Amount
Percent
I n millions of dollars
797

706

-90

-11.3

Excise taxes:
L i q u o r taxes
Tobacco taxes
.
S t a m p taxes
M a n u f a c t u r e r s ' e x c i s e taxes 1
R e t a i l e r s ' excise taxes
. . .
Miscellaneous excise taxes (including repealed) 2 3._

2, 211
1,322
73
1,761
449
1, 759

2, 219
1,328
85
1,827
409
1,721

9
7
12
66
-40
. -38

. .4
.5
16.2
' 3.7
-8.9
-2.1

T o t a l excise taxes 13_
A d j u s t m e n t t o d a i l y T r e a s u r y s t a t e m e n t basis *

7,575
-23

7, 589

15
+31

.2

7,551

7, 597

45

.6

8,348

8,303

—45

—.5

E s t a t e a n d gift taxes

T o t a l excise taxes * ^

.

... . . . .

.

_

T o t a l miscellaneous i n t e r n a l r e v e n u e ^ ^

+8

IExcludes taxes collected on firearms, shells, and cartridges which are included.in "Miscellaneous
receipts."
2 See table 116, footnote 7.
3 Excludes collections of the hydraulic mining tax, which are included in "Miscellaneous receipts."
. See table 7, "Note."
4

Estate and gift taxes.—Estate and gift taxes amounted to $706 million
in the fiscal year 1950, a decrease of $90 million from 1949. The
Revenue Act of 1948 which reduced both estate and gift tax liabilities
was responsible for the decline in receipts from this source.
Excise taxes.—Receipts from excise taxes increased to $7,597 million
in the fiscal year 1950. The increase of $45 million resulted fromincreases in liquor taxes, tobacco taxes, stamp taxes, and manufacturers' excise taxes partially offset by decreases in retailers' excise
taxes and miscellaneous excise taxes. Manufacturers' excise taxes
increased $66 million. Record levels of automobile production resulted in an increase of $119 million in collections from the tax on
passenger automobiles, which continued their increase for the sixth
successive year. T h e largest decline in this group was ia parts and
accessories for automobiles, which fell $31 million.
Retailers' excise taxes declined for the third straight year and were
$40 million less than in 1949.
Miscellaneous excise taxes decliaed by $38 million ia the fiscal year
1950. Decliaes in collections from the taxes on admissions, transportation of persons, and transportation of property were the principal
sources responsible for the decrease ia collections. The most substantial increase in revenue ia this group was from the tax on local
telephone service, which rose $23 million.




8

195 0 REPORT OF THE SECRETARY OF THE TREASURY

Liquor taxes and tobacco taxes showed slight iacreases over collections in 1949.
Stamp taxes increased 16.2 percent in the. fiscal year 1950. Collections from taxes on issues and transfers of securities and on the sale
of playing cards increased in 1950.
Employment taxes.—The yields of the various employment taxes,
on the daily Treasury statement basis, are shown in the following table.
'

Increase, or decrease (—)
1949

1950
Amount

Source

Percent
I n millions of dollars
Federal I n s u r a n c e C o n t r i b u t i o n s A c t
Federal U n e m p l o y m e n t T a x A c t . .
Railroad R e t i r e m e n t T a x A c t
Railroad U n e m p l o y m e n t I n s u r a n c e A c t ' _

1,690
223
564
10

2,106
226
550
9

416
3
-14
-1

T o t a l e m p l o y m e n t taxes
D e d u c t : A p p r o p r i a t i o n to F e d e r a l old-age a n d survivors i n s u r a n c e t r u s t fund .
.
.

2,487

2,892

405

16.3

1,690

2,106

416

24.6

796

786

-11

-1.4

N e t e m p l o y m e n t taxes

. .

24.6
1.6
-2.4
-6.3

1 Not classified as an employment tax under Internal Revenue Code.

Total receipts from employment taxes amounted to $2,892 million
in the fiscal year 1950, an increase of $405 million, or 16.3 percent,
over receipts in 1949. The railroad taxes showed decreases which
were offset by higher receipts from the other employment taxes.
The Federal Insurance Contributions Act showed a sizable increase
resulting principally from higher tax rates and a change in collection
procedure. The tax rate increased from 1 percent each on
employer and employee to IK percent effective January 1, 1950.
Also effective January 1, 1950, collections of this tax from certain
employers are payable on a monthly basis iastead of a quarterly basis.
This change in the method of collection resulted ia receipts in the
fiscal year 1950 of more than one year's normal receipts.
Customs.—Customs receipts in the fiscal year 1950 were $423
million, or 9.9 percent, more than in 1949.
Miscellaneous receipts.—Miscellaneous receipts amounted to $1,430
million ia the fiscal year 1950 and were $642 million less than in
1949. The decrease reflected the continuing decline in receipts from
the sales of surplus property and certain accounting changes which
reduced miscellaneous receipts but had no effect on the surplus or
deficit.
Refunds of receipts.—Refunds of receipts amounted to $2,160
million m. the fiscal year 1950, a decliae of $678 million from 1949.
The 1950 refunds represent a normal figure as compared with the




9

REPORT ON OPERATIONS

abnormal refunds in the fiscal year 1949. These abnormal refunds in.
1949 resulted from the overwithholding of individual income tax,
in the first four months of calendar year 1948, caused by the passage
of the Revenue Act of 1948.
BUDGET EXPENDITURES

The budget expenditures total of $40.2 billion in the fiscal year 1950
closely approximated the total in 1949. The 1949 and 1950 level of
expenditures represented an increase from the postwar low of $34
billion in 1948 but was still considerably below the- total of over
$60 billion in the demobilization year of 1946. The declines following
1946 were due mostly to curtailments in national defense expenditures,
although in 1948 a part was due to decreases ia outlays for international finance and aid and for veterans. The rise which followed in
1949 and 1950 resulted primarily from growiag expenditures for special
domestic programs and also from expenditures for the European
Recovery Program. At the close of the fiscal year 1950, with the
beginning of the action in Korea, it was apparent that tbtal expenditures would increase significantly ia 1951 and in 1952 under the impact
of the expanded defense program. Estimates of expenditures for
these years are shown on page 57.
I n 1949 and 1950, as in the other postwar years, the combined outlays for national defense, international finance and aid, and veterans
accounted by far for the greater share of the total. Although the
levels of total expenditures in 1949 and 1950 were similar, in 1950
there were some substantial differences in the amounts expended for
several major purposes. These are shown, on the daily Treasury
statement basis, in the accompanying tabulation. Details for these
and earlier years are given in chart 8 and in tables 2, 3, and 5 in
the tables section of this report.
National
defense
and related
activities

Year

International
finance
and aid i

Interest
onthe
public
debt 2

Veterans'
Administration

Other

Total»

In billions of dollars
1949
1950

.

.

.

12.2
12.4

6.0
4.7

5.3
5.7

6.9
6.5

9.7
10.9

40.1
40.2

1 For comparison with other years, transactions in 1949, and also in 1948, relating to the Foreign Economic
Cooperation trust fund, established under the Economic Cooperation Act of 1948 (62 Stat. 150), sec. 114 (f),
have been consolidated with budget expenditures.
2 Beginning Nov. 1, 1949, interest on the public debt is reported as an expenditure when such interest
becomes due and payable rather than on the basis of interest payments.




10

1 9 5 0 REPORT OF THE: SEiGRETARY OF T H E TREASURY

EXRlNifTURlijSll^fe^

Fiscal Years 1944
Through 1950

National
Defense, etc.

, ^ ^ International
Finance

1944

1945




1946

1947

1948

CHART

1949

8.

1950

REPO'RT ON OPERATIONS

^

11

National defense expenditures of $12.4 billion in 1950 were only
slightly above similar outlays in both 1948 and 1949, following the
demobilization. I n 1950, expenditures were $3.5 billion for the Department of the Air Force, $4.1 billion for the Department of the Army,
and $4.1 billion for the Department of the Navy. Stockpiliag of
strategic and critical materials accounted for $439 million of expenditures in 1950.
Expenditures of $4.7 billion in 1950 for international finance and
aid were $1.4 billion less than ia 1949. This was the largest change
from 1949 in any major group of expenditures. I t occurred raainly
in outlays for government and relief in occupied areas, and for the
aid provided by the Economic Cooperation Act. The decline reflected in part the recovery made in the economies of the occupied
areas since the beginning of the program.
Expenditures for the program of international finance and aid,
which became significant for the first time in 1946 with a total of
$727 million, averaged more than $4.9 billion during the next 4 years.
The principal purposes in the first 3 years were the credit of $3,750
million to the United Kingdom, the provisions imder the Bretton
Woods Agreements Act, and loans by the Export-Import Bank. Expenditures for government and rc^lief in occupied areas ia 1947
amounted to $514 million, rose to $1,333 million in 1949, and were
$753 million ia 1950. These expenditures, which were made by the
Army, were mainly for shipments of goods to prevent disease and
unrest. The expenditures in 1949 were augmented by the assumption
on the part of the United States of all dollar costs of imports for
relief in the bizonal area of Germany. Expenditures under the
Economic Cooperation Act totaled more than $4.0 billion in 1949,
and more, than $3.5 billion in 1950.
. I n this year the United S.tates began to provide military assistance
to nations who have joiaed us in the mutual defense assistance program under the North Atlantic Treaty. Expenditures under this
program amounted to $44 million.
.Interest on the public, debt .of $5.7 .billion in .1950 compared with
$5.3 billion inf 1.949. -.TEalf.o^^^^^
however,, was due to .a
(change, in the .r%orting„ method during the year. Since November 1,
1949, interest has been reported as an expenditure when such interest.
bpcomes due and payable, as distinguished from the previous practice
of showing the.expenditure on the basis of interest paid by the Treasurer of. the. United States. During th^ 5 years ended with 1950
iaterest on the public debt gradually increased from $4.7. billion to
$5.7.billipn.
...
- . . / . :
Yeterahs'' Administration expenditures. at, .|6 • 5 billion in .1950 were
nearly $0.4 bniionI&^^ than in 1'949. . There was an over-all decrease.




12

19 50 REPORT OF THE: SECRETARY OF THE TREASURY

of $0.7 billion which primarily represented the tapering off of the
readjustment benefit programs which, grew out of World War I I .
This decrease was partially offset by an increase of $0.4 billion in
transfers to cover the share of the Government in the costs of the
national service life iasurance fund. The figures shown here, of course,
refer only to budget expenditures for veterans, and therefore exclude
the payment of dividends and other benefits to veterans out of the
national service life insurance fund.
The remaining expenditures, classified as '^Other," represented outlays maialy for special domestic programs, and also for the running
expenses of the Government. The total was $10.9 billion in 1950,
which was $1.2 billion more than ia 1949. The iacrease consisted ia
large part of additional aid to agriculture, public assistance, and mortgage purchases by the Federal National Mortgage Association, which,
throughout the year, was an affiliate of the Reconstruction Fiaance
Corporation.
Total expenditures in this classification increased in each succeeding postwar year. In the earlier years of this period, as in 1950,
the increase was accounted for almost entirely by expansion of the
special domestic programs rather than expenditures for general
government. In 1950, expenditures for aid to agriculture ainounted
to $3.0 billion (including $1.7 billion net expenditures of the Commodity Credit Corporation) and constituted more than 27 percent of
this total; while social security budget expenditures accounted for a
total of $2.0 billion, which was more than 18 percent of these expenditures. Public works ia 1950 accoimted for about $1.6 billion, or 15
percent of the total ia this group. Other expenditures in this classification include outlays by the Atomic Energy Commission, aids to
education, labor, finance, commerce, industry, housing, and transportation, as well as the expenses of the legislative, executive, and
judicial departments of the Government not classified elsewhere.

TRUST ACCOUNTS, ETC., RECEIPTS AND EXPENDITURES
In addition to budget receipts and expenditures of the Government,
certain other receipts and expenditures are classified separately in the
daily Treasury.statement under the title ''Trust accounts, etc." The
trust account receipts for the most part represent moneys received by
the Government for the benefit of individuals or classes of individuals.
Moneys held in trust as such are payable to or for the use of beneficiaries: only and therefore are not included in the budget expenditures
of the: Government.
Payioients from the general fund to various trust accounts, such
as the Government's payment to Federal employees' retirement funds
and the national service life insurance fund, are included in budget



REPORT ON OPERATIONS

13

expenditures and under the various trust account receipts as transfers
from the general fund.
^
The net transactions in trust accounts, etc., for the fiscal years 1932
through 1950 are summarized ^in table 1 of this report, and receipts
and expenditures for the fiscal years 1942 through 1950 are shown in
table 6 by major classifications. Details by months for 1950 and
totals for 1949 and 1950 are shown in table 4.
GENERAL FUND

The general fund of the Treasury represents all moneys of the
Government deposited with-and held by the Treasurer of the United
States.
The assets in the general fund are certain gold, silver, currency,
coin, and unclassified collection items, and deposits to the credit of
the Treasurer of the United States in Federal Reserve^ Banks, special
depositaries, and national, foreign, and other bank depositaries.
The liabihties of the general fund include outstanding Treasurer's
checks, deposits of certain Government officers consisting of balances
to the credit of the Post Office Department, the Board of Trustees of
the Postal Savings System, and postmasters' disbursing accounts, etc.,
uncollected items, and exchanges.
The difference between total assets and total liabilities is the general
fund balance. On the basis of the daily Treasury statement, the
general fund cash balance at the close of the fiscal year 1950 amounted
to $5,517 million, an increase of $2,047 miUion during the year.
The net change in the balance of the general fund during the fiscal
year is accounted for as follows:
Balance June 30, 1949
Add:
Budget receipts, net
Trust accounts, etc., receipts
Net increase in gross public debt
Deduct:
Budget expenditures, including wholly owned Govern, ' . ment corporations
Trust accounts, etc., expenditures
Clearing account for outstand-.
ing checks and interest
coupons, and telegraphic
reports from Federal Re" serve Banks: Excess of receipts
•Balance June 30, 1950

^__-_




$3, 470, 403, 311. 67
-

37, 044, 733, 557. 37
6, 668, 734, 224. 25
4, 586, 992, 490. 71
51,770,863,584.00

40,166,835,914.82
6, 569, 596, 863. 78
46, 736, 432, 778. 60

482, 656, 886. 25
•
46, 253, 775, 892. 35
.i____i_-

5,517,087, 691. 65

14

195 0 REPORT OF THE:. SECRETARY OF THEf TREASURY

A comparative analysis of the assets and liabilities of the general
fund is shown as of June 30, 1949 and 1950, in table 40.
PUBLIC DEBT OPERATIONS AND OWNERSHIP OF FEDERAL SECURITIES

The public debt amounted to $257.4 billion on June 30, 1950,
which was $4.6 billion larger than on June 30, 1949.
Most' of the net change in the public debt was accounted for by a
rise of $4.7 billion in the nonmarketable interest-bearing debt, chiefly
in. Treasury saviags notes, but also in United States savings bonds.
Marketable interest-bearing debt increased by $162 million, the flrst
net rise in any flscal year since 1946. This rise was'the result of a
net increase in bills of $2.0 billion, which was offset for the most part
by unexchanged portions of maturing issues. Nonbank holdings of
the debt increased $3.0 billion during the year, continuing the longterm trend to reach a new high record.
The computed annual interest rate on the interest-bearing debt
was 2.200 percent on June 30, 1950, a slight decrease from t h e r a t e
of 2.236 percent at the beginning of the year. Exchanges of maturing
and called securities for new issues bearing lower average interest
rates were the principal factor in the decline in the annual rate.
The volume of the public debt and guaranteed obligations outstanding since 1943 is shown in chart 9. The following table shows the
public debt by class of security and the guaranteed obligations outstanding at the close of the flscal years 1949 and 1950, on the basis of
the daily Treasury statement. Guaranteed obligations held by the
public, a very minor part of the total of the public debt and guaranteed
obligations outstanding, amounted on June 30, 1950, to approximately $20 million, a decrease of nearly $8 million during the year.
Historical detail on the public debt and guaranteed obligations is
given in tables 12 through 20.
Increase,
June 30, 1949 June 30. 1950 decrease (or
-)

Class of debt

In billions of dollars
Public debt:
Interest-bearingPublic issues:
Marketable.- ' . . ._
Nonmarketable

._

_

Total public issues
Special issues to Goverhment investment accounts.. .
Total interest-bearing public debt
Matured debt on which interest has ceased.....
Debt bearing no interest
Total public debt .
Guaranteed obligations not held by Treasury
Total public debt and guaranteed obligations
*Less than $50 million.




155.1
•62.8

155.3
67.5

0.2
• 4.7

218.0
32.8

222.9
32.4

4.9
-.4

250.8
.2.
1.8

255.2
.3
1.9

252.8

257. 4

(*)

252.8

(*).

257, 4

4.4

(*)
(*)

.1
4.6
4.6

REPORT

ON

15

OPERATIONS

PUBLIGi SEBTiplSlilifiiiS^l^iAMBE[5;;?0BW©ATlbg§ OUTSTANDING
DOLLARS
Billions

1943

'

'

1944

907795—51

1945

3




1946

1947

C H A R T 9.

1948

1949

1950

16

1 9 5 0 REPORT OF THE: SECRETARY OF T H E TREASURY

Public debt operations and changes in ownership of the debt for
the flscal year 1950 are given in the two sections which follow. .
PUBLIC D E B T OPERATIONS
MARKETABI-E ISSUES

^

The net increase of $162 million in the marketable interest-bearing
debt brought the total to $155.3 billion on June 30, 1950, compared
with $155.1 billion a year earlier. Net increases occurred, as is
shown in the following table, in Treasury notes and in Treasury bills.
J u n e 30, 194.9 J u n e 30, 1950

Increase, or
decrease (—)

Class of s e c u r i t y
I n billions of dollars
Treasury bills.
Certificates of i n d e b t e d n e s s
Treasury notes
Treasury bonds
1
O t h e r b o n d s (postal savings, etc.)
T o t a l m t e r e s t - b e a r i n g m a r k e t a b l e issues.

11.5
29.4
3.6
110.4
.2

13.5
18.4
20.4
102.8
.2

155.1

155. 3

2.0
-11.0
16.8
-7.6

(*)

*Less t h a n $50 million.

Bonds, notes, and certificates of indebtedness. —Treasury bonds,
notes, and certiflcates of indebtedness in the amount of $40.7 billion
matured or were called for redemption during the flscal year 1950.
Of this total, the securities exchanged for new issues amounted to
$38.8 billion, while the small remainders of the matured or called
issues turned in for cash redemption rather than exchange aggregated
$1.8 billion. The accompanying tables summarize the flnancing
transactions during the year. Additional details are contained in
exhibits 1 through 6 and in tables 22 and 23.




17

RE.PORT ON OPBRATrONS

Public offerings of bonds, notes, and certificates of indebtedness, fiscal year 1950^
[In millions of dollars]
Issued in
Issued for exchange
cash
1 for other
securities'

Description of security

Date of issue

Total
issued

Marketable issues
1949
July 1
Sept. 15
Oct. 1
Dec. 15
1950
Jan. 1
Feb. 1
Mar 1
Mar. 15
Apr 1
June 1

Certificates of indebtedness:
* 1H% Series F-1950, due July 1,1950
I W o Series G-1950, due Sept. 15, 1950
1H% Series H-1950, due Oct. 1,1950
m % Treasury notes. Series A-1954, due M:ar. 15,
1954,

5,601
1,197
6,248
4,675
5,373

1, 918
2,741
5, 365
886
4,818

38,822

Total Treasury notes and certificates of
indebtedness.

5, 373

1,918
2,741
5,365
886
4,818

1H% certificates of indebtedness. Series A-1951,
due Jan. 1, 1951.
Treasur.y notes:
1H% Series A-1951, due Oct. 1, 1951
1H% Series B-1951, Sue July 1, 1951
1H% Series A-1955, due Mar. 15, 1955
1K% Series C-1951, due July 1, 1951
1K% Series D-1951, due July 1, 1951

5,601
1,197
fi, 248
4,675

38,822

Nonmarketable issues
Various

Do

.United States savings bonds:
Series E.....:..
Series F and G

'

Total savings bonds and savings notes
Total all issues

2 4,887
21^ 763

6, 650
6,150

Subtotal savings bonds
Treasury savings notes. Series D

2 4,887
2 1, 763

6,650
6,150
12, 800

12, 800
i

12,800

38,822

51, 622

1 Exclusive of special series of certificates of indebtedness; adjusted service bonds; armed forces leave
bonds; depositary bonds; special notes of the United States: International Monetary Fund series; United
States savings stamps; and guaranteed obligations.
2 Includes accruals.
.
•
•




18

1950 REPORT OF THE: SECRETARY OF T H E TREASURY

Disposition of maturing or redeemable public issues of bonds, notes, and certificates
of indebtedness, fiscal year 1950 ^
, [Dollars in millions]

Dateof
refunding

D e s c r i p t i o n of s e c u r i t y

1949

I M % certificates of i n d e b t e d n e s s . Series F-1949. d u e
J u l y l , 1949.
2% T r e a s u r y b o n d s of 1949-51.
\ \ ^ % certificates of i n d e b t e d ness:
Series G-1949, d u e O c t .
1, 1949.
Series H-1949, d u e D e c .
15, 1949.
T r e a s u r y b o n d s , d u e D e c . 15,
1949:
2% of 1949-51
3 3 ^ % of 1949-52
2 \ i % o i 1949-53

Exchanged
for n e w
security

Total

182

5,601

5,783

96.9

96

1,197

1,292

92.6

Percent
exchanged

M a r k e t a b l e issues

Julyl_..-

Redeemed
for cash or
carried t o
matured
debt

D a t e of issue

S e p t . 15__
'
Oct. 1_'_.Dec. 1 5 . . .

J u l y l , 1948
M a y 15, 1942

288

6,248

6,535

95.6

D e c . 15, 1948

Oct. 1, 1948

....

35

• 484

519

93.2

J u l y 15, 1942
D e c . 15, 1934
D e c . 15, 1936

70
•24
90

2,028
467
1,696

2,098
491
1.786

96 7
95 1
94 9

219

4,675

4,894

95 5

J a n . l , 1949

322

5,373

5,695

94.3

F e b . 1, 1949

75

1,918

1,993

96.2

M a r . 1, 1949.

180

2,741

2,922

93.8

Oct. 19, 1942

102

1,861

1,963

94.8

92

3,504

3,596

97.5

S u b t o t a l , D e c . 15
1950
Jan. 1
Feb. l - . v
Mar. 1....
Mar. 15...
Apr. 1 . . . -

Do
June 1

I M % certificates of m d e b t e d ness:
Series A-1950, d u e
Jan. 1 , 1950.
Series B-1950, d u e
F e b . 1, 1950.
Series C-1950, d u e
M a r . 1, 1950.
2% T r e a s u r y b o n d s of 1950-52,
d u e M a r . 15, 1950.
1 % % T r e a s u r y n o t e s . Series
A-1950, d u e A p r . 1,1950.
1M% certificates bf m d e b t e d ness:
Series D-1950, d u e A p r . 1,
1950.
Series E-1950, d u e J u n e 1,
1950.
Total T r e a s u r y bonds,
n o t e s , a n d certificates
of i n d e b t e d n e s s .

S e p t . 15, 1948

A p r . 1, 1949

76

963

92.1

J u n e l , 1949

201

4,818

886.

5,019

96.0

1,832

38,822

40, 654

95.5

N o n m a r k e t a b l e issues
V a r i o u s . _ U n i t e d S t a t e s savings b o n d s :
Series A - D
SeriesE
Series F a n d G
Do
Do

M a r c h 1935-April
1941.
1 Since M a y 1941 on /
/ c o n t i n u o u s sale. I

S u b t o t a l savings b o n d s . .
T r e a s u r y tax a n d savings Since Aug. 1, 1941..
notes.
2 \ ^ % T r e a s u r y b o n d s , i n v e s t - Oct. 1, 1947..
m e n t series, A-1965.
' Total savings b o n d s , tax
a n d savings n o t e s .
and bonds, investm e n t series. 1
Total 1
_

1,081

1,081

3,521
821.

3,521
821

5,422
2 2, 549

5,422
2 2, 549

1

1

2 7, 972

2 7, 972

2.9, 804

38,822 2 48,626

1 Marketable issues in this table are exclusive of special series of certificates of indebtedness, postal
savings bonds, and other debt items. Nonmarketable issues are exclusive of adjusted service bonds;
armed forces leave bonds; depositary bonds; excess profits tax refund bonds; special notes of the United
States: International Monetary Fund series; United States savings stamps; and guaranteed
obligations.'
2 Includes tax and savings notes in the amount of $1,039 million surrendered in payment of taxes.




REPO'RT ON OPERATIONS

'

19

The matured and called securities consisted of flve issues of Treasury
bonds, eight issues of one-year certiflcates of indebtedness, and one
issue of Treasury notes. These issues were refunded into six issues of
Treasury notes and four issues of one-year certiflcates of indebtedness.
The flrst note issued carried a maturity of 4}^ years; four of the notes
carried maturities ranging from 13 to 20 months; and one note was
for a flve-year period.
The refunding of $7.6 billion of Treasury bonds into these intermediate and short-term securities resulted in the largest decrease in
outstanding Treasury bonds in any one year, from $110.4 billion on
June 30, 1949, to $102.8 billion on June 30, 1950. The decrease was
entirely in bank-eligible bonds, bringing the total outstanding at the
close of the year to $53.2 billion from $60.8 billion a year earlier.
Table 13 shows the amounts outstanding at the end of the flscal
years 1940-50.
The flrst flnancing operation of the flscal year 1950 was anticipated
by the Secretary of the Treasury with his announcement on June 16,
1949, that the Treasury would offer to holders of the $5.8 billion of
one-year Iji percent certiflcates of indebtedness. Series F-1949,
maturing July 1, an issue of one-year 1}^. percent certiflcates in exchange. Subscriptions accepted for the new issue. Series F-1950,
totaled $5.6 billion. This refunding contiaued the interest rate of
Iji percent per annum which had characterized the certiflcate issues
since October 1, 1948.
This short-term rate was changed, however, in the refundings
of September-October 1949 which the Secretary of the Treasury
announced on August 22. The announcement stated that the
Treasury would offer a new one-year 1}^ percent certiflcate on August
31 to holders of the 2 percent Treasury bonds of September 15, 194951, called for redemption on September 15, 1949; a new certiflcate to
refund the certiflcates maturing October 1, 1949; and a new Treasury
note in exchange for the three Treasury bond issues called for redemption on December 15, 1949. Subsequently, one-year V/i percent
certiflcates, Series G-1950, due September 15, 1950, and Series
11-1950, due October 1, 1950, were issued to subs^cribers in the respective amounts of $1.2 billion and $6.2 billion,
An announcement by the Secretary of the Treasury on November
30, 1949, stated that the Treasury note issue to refund the three
Treasury bond issues redeemable on December 15 would be offered
also in exchange for the 1% percent certiflcates maturing December 15.
The new notes bear an interest rate of 1% percent and a maturity of
four and one-quarter years. The announcement stated also that an
issue of one-year 1}^ percent certiflcates would be offered in exchange




20

195 0 REPORT OF THE; SECRETARY OF THE TREASURY

for the certiflcates maturing January 1. Subscriptions accepted for
the 1% percent Treasury notes, dated December 15, 1949, amounted
to $4.7 billion. Exchanges of the certiflcates maturing January 1
for the new one-year 1}^ percent certificates. Series A-1951, amounted
to $5.4 bilhon.
.
On January 13, 1950, the Secretary of the Treasury announced
a new issue of 20-month 1% percent Treasury notes to refund the
one-year 1% percent certiflcates maturing February 1. Exchanges
amounted to $1.9 billion.
Three new issues of Treasury notes were announced by the Secretary of the Treasury on February 14, 1950, to refund the four March
and April maturities of certiflcates, Treasury bonds, and Treasury
notes. Pursuant to the announcement the following offerings were
made. An issue of 16-month Iji percent Treasury notes, Series
B-1951, was exchanged for the one-year Iji percent certiflcates
maturing March 1. Subscriptions accepted amounted to $2.7 billion.
An issue of 5-year 1% percent notes. Series A-1955, was offered in
exchange for the 2 percent Treasury bonds of 1950-52 (dated October
19, 1942). This note issue was reopened in exchange for the 18^.month lYs percent Treasury notes which matured April 1, 1950°.
Subscriptions accepted for Series A-1955 totaled $5.4 billion. An
issue of 15-month 1% percent notes, Series C-1951, was offered to
refund the one-year Iji percent certiflcates which matured April 1,
1950. Exchanges of the new Treasury notes amounted to nearly
$0.9 billion.
The flnal flnancing operation of the year was announced by the
Secretary of the Treasury on May 4, 1950, when he stated that the
Treasury would off'er new issues of 13-month Iji percent Treasury
notes dated June 1 and July 1, in exchange for the one-year Iji percent
certiflcates of indebtedness maturing on those dates. Subscriptions
to the flrst of these note issues. Series D-1951, dated June 1, 1950,
amounted to $4.8 billion.
Treasury bills.—Weekly offerings of Treasury bills were made in
the flscal year 1950. The three-year record of a substantial net retirement of bills was broken in 1950 when, in contrast, there was a net
increase of $2.0 billion, the flrst in any flscal year since 1945. This
amount takes account of the miaor differences involved between, the
maturing issues and the new securities when the maturing issues
were refunded into new series of Treasury bills. The year's issues
consisted of 50 carrying terms of 91 days; one, on August 25, 1949,
a term' of 92 days; and one, on November 25, 1949, a term of 90 days.
The 13 issues outstanding at the end of the flscal year 1949 totaled
$11,536 million; the 13 issues outstanding at the end of the flscal
year 1950 totaled $13,533 million.




21

REPORT ON OPERATIONS

Of the total increase in bill offerings, $800 million took place
in the six weeks beginning August 4. Eaich of the offerings of August
4 and 18 exceeded the maturing issue by $200 million. The other
four offerings were $100 million in excess of each issue maturing.
From September 15 through April 6, the offerings were for the amount
of the maturities. ^ Between April 13 and June 29, however, offerings
exceeded maturities by $1,200"million, with each offering exceeding
the maturing issue by $100 million.
'
Average rates on new Treasury bills during the year ranged from
a low of 0.923 percent for the July 14, 1949, issue to a high of 1.179
percent for the June 8, 1950, is^ue. The average rate for the July 7,
1949, issue was 1.052 percent, and for the June 29, 1950, issue,
1.172 percent. There was some fluctuation in the rates in the flrst
half of the flscal year which ranged from the low of 0.923 percent
to 1.115 percent for December 8 and 15. From January 12 to the
end of June, there was a gradual rise from 1.076 percent to 1.172
percent. Weekly rates on new bills throughout the year are shown
in exhibit 9. Bids on the flxed price basis averaged about $92 million a
week and amounted in the aggregate to about 9 percent of all bids
accepted.
Additional inforraation on Treasury bills is contained in exhibits
7 through 10, and in table 23.
NONMARKETABLE ISSUES

Nonmarketable public securities issued during the flscal year
1950 totaled $13.2 billion and redemptions, $8.3 billion. The increase
of $4.7 billion in the nonmarketable interest-bearing securities outstanding was due mainly to the rise of $3.6 billion in Treasury savings
notes and also to the rise of $1.3 billion in United States savings bonds
outstanding. The table following shows the.changes in the amounts
of the nonmarketable interest-bearing classes of securities outstanding
at the end of 1949 and 1950.

Class of security

Increase, or
June 30, 1949 June 30, 1950 decrease (—)
In billions of dollars

United States savings bonds (unmatured):
Series D
SeriesE
.
Series F and G

1.9
33.1
2L2

0.9
34.5
22.1

-1.0
1.4
.9

Total
_
Treasury tax and savings notes ("unmatured)

56.3
4.9

57.5
8.5

1.3
3.6

Total savings bonds and tax and savines notes
Other _

61.1
1.7

66.0
1.5

4.9
— .2

67.5

4.7

Total interest-bearing nonmarketable issues




62.8-

•

22

1 9 5 0" REPORT OF THE^ SE'CRETARY OF T H E TREASURY

United States savings bonds.^Ssdes of Series E, F, and G savings
bonds (including accrued discount) exceeded redemptions during the
year by $2.3 billion. Sales amounted to $5.7 billion, issue price. On
June 30, 1950, the $57.5 billion of unmatured bonds (Series D-1940
through Series G) outstanding (at current redemption value) were
22.3 percent of the total outstanding public debt and guaranteed
obligations, the same proportion as a year earlier. Since 1935, when
savings bonds were flrst sold, the volume of Series A-G bonds issued,
including accrued discount, has totaled $93.7 billion, while redemptions have totaled $36.0 billion. On June 30, 1950, the redemption
value of the bonds outstanding was 62 percent of the amount issued
(including accruals).
. Redemptions of savings bonds (Series A-G) during the year totaled
$5.4 billion, an increase of $355 million over those in 1949. The
increase resulted from the larger volume of matured bonds in the
total, and the increasing amount of accrued discount which reflects
the lengthening periods in which the bonds have been outstanding.
Series A - D redemptions included $667 million of matured bonds
which were redeemed ia the six months ended June 1950, the flrst
period for which the data have been tabulated to show matured
redemptions separately from those unmatured. Redemptions of
Series A-D bonds in 1950 totaled $1,081 million compared with $703
million in 1949. On June 30, 1950, there were $895 million unmatured
Series D bonds outstanding compared with $1,927 million a year
earlier. By the end of April 1951 all Series D bonds will have matured.
In May 1951, Series E bonds will begin to mature.
Series E bonds sold in 1950 amounted to almost $4.0 billion, issue
price, a decrease of $286 million from sales in 1949. Series E sales
were 70 percent of all savings bonds sold in 1950. Redemptions of
Series E bonds amounted to $3,521 million in 1950, as compared with
$3,530 million inl949\ The amount outstanding as of June 30, 1950,
was $34.5 billion, an increase of $1.4 billion during the year.
Sale of the $10 denomination of Series E bonds was discontinued at
the close of business on March 31, 1950, following an announcement
by the Treasury Department on March 15. .Series E bonds of $10
maturity value were authorized on June 7, 1944, for issuance exclusively to members of the armed forces.
Sales of Series F and Series G bonds together totaled $1,680 million,
issue price, in 1950. This compared with sales of $1,737 million,
issue price, in 1949, which is exclusive of sales of $1,126 million in the
special offering of Series F and G bonds in July 1-15, 1948, to certain
institutional investors who were allowed to purchase these bonds in
excess of the $100,000 annual limitation up to $1,000,000, issue price,




23

REPORT ON OPERATIONS

in the aggregate for the institutions concerned. (See table 29.)
Redemptions of $199 million of Series F bonds during the year compared with" $216 million in 1949. Redemptions of Series G bonds of
$621 million were $2 million more than in 1949.
The redemption experience of savings bonds by yearly series is
summarized in the following table. An analysis of these data by
denominations is shown in table 33.
Percent of savings bonds sold in each year redeemed through each yearly period
thereafter ^
[On basis of Public Debt accounts, see p. 443]

-

R e d e e m e d b y e n d ofSeries a n d calendar year in which issued
1
year

2
4
6
3
5
7
8
9
y e a r s y e a r s y e a r s years y e a r s y e a r s years years
Series A t h r o u g h E

A-1935 .
'..--B-1936
C-1937
C-1938
D-1939
D-1940
.. . .
D-1941 a n d E-1941
_
E-1942
_
E-1943
:.
_
E-1944
E-1945
E-1946
E-1947
E-1948
E-1949
....r
Average, Series A - E issued
D e c . 31, 1941

-

...
.
through

Average, Series E issued from J a n . 1,
1942...
...:

5
6
7
5
4
4
3
8
15
19
28
23
21
20
22

11
12
12
lb
9
8
7
15
24
33
38
34
30
30

16
17
17
15
13
11
10
21
34
41
45
40
37

20
21
20
18
15
13
13
29
41
47
50
45

23
24
23
19
17
15
17
35
47
52
54

26
26
25
21
18
•18
21
40
51
56.

28
28
26
22
20
20
25
44
65

29
29
27
24
23
22
28
.48

31
30
29
26
25
25
31

5

10

14

17

20

22

24

26

28

20

29

36

43 •

47

49

49

48

.

Series F a n d G
F-1941 a n d G-1941 .
F-1942 a n d G-1942
._
F-1943 a n d G-1943
F-1944 a n d G-1944
F-1945 a n d G-1945
F-1946 a n d G-1946
F-1947 a n d G-1947
-...
F-1948 a n d G-1948
F-1949 a n d G-1949...
__.
Average, Series F a n d G issued from
.
M a y 1, 1941

1
1
2
2
2
„ 3
3
2
3
2

3
4
6
6
7
7
8
5

5
7
10
10
11
12
12

7
11
14
14
14
15

10
14
19
18
18

13
18
22
21

15
21
26

18
24

20

6 .

10

13

16

19

21

21

20

NOTE.—The percentages shown in this table are the proportions of the value of the bonds sold in any
calendar year which are redeemed before July 1 of the next calendar year, and before July 1 of succeeding
calendar years. Both sales and redemptions are taken at maturity value. The average percentages
shown above are simple averages of the percentages for the applicable annual series.
\
1 Percentages by denominations may be found in table 33.

"Detailed information on savings bonds from March 1935, when
this security was flrst offered, through June 1950 is published in
tables 28 through 33,




24

1 9 5 0 REPORT OF THE SIECRETARY OF T H E TREASURY

Treasury notesy tax and savings series.—wSales of Treasury savings
notes amounted to more than $6.1 billion (face amount) in the flscal
year 1950, nearly $2.2 billion more than sales in 1949 and the largest
volume sold since 1945. The increase was concentrated in the first
two months of the flscal year. Redemptions, including both tax and
savings notes, amounted to over $2.5 billion during the year. Of the
redemptions, $1.0 billion was applied to payment of taxes and $1.5
billion was paid in cash. Unmatured savings notes on June 30, 1950,
totaled $8.5 billion compared with $4.9 billion a year earlier. (See
table 34.)
An amendment to the initial terms (dated August 17, 1948) relating
to the purchase of Treasury savings notes. Series D, was announced
on August 10, 1949. Effective August 11, 1949, these notes are sold at
par and accrued interest from the flrst day of the month in which
purchased to the day, inclusive, on which payment is made in cash
or other immediately available funds. The amo*unt of accrued interest
payable by the purchaser is computed at the rate at which interest
accrues on the notes ($0.80 per month per $1,000 par amount) for the
actual number of days in the month in which the purchase is made.
(See exhibit 11.) Previously the notes were dated as of the flrst day
of the month in which payment, at par, was received and credited.
Special short-term certificates of indebtedness.—Special short-term
certiflcates of indebtedness were sold twice during the year to cover
overdrafts on Treasury balances at the Federal Reserve Banks in
anticipation of the imminent receipt of iacome taxes. The flrst
instance consisted of. an issue of $108 million on March 15, 1950.
The securities were retired in full on March 16. The second was on
June 15, when an issue of $105 million was sold to the Federal Reserye
Banlcs. These certiflcates were redeemed on the followirig day.
Interest on the issues was paid to the Federal Reserve Banks at the
rate of one-fourth of one percent per annum.
Special issues to Government investment accounts.—Outstanding
interest-bearing securities issued by the Treasury for the investment
of trust and other funds deposited in the Treasury decreased $420
million during the year. The decrease compared with an increase of
nearly $2.6 billion in 1949. The decline in 1950 was the net result of
$1.9 billion of redemptions of special issues held by the national
service life insurance fund in connection with the pa3''ment of special
dividends, of a decrease of $0.7 billion in issues to the unemployment
trust fund, an increase of $1.4 billion issued to the Federal old-age arid
survivors insurance trust fund, and increases totaling $0.8 billion in
the remaining accounts. Special issues outstanding totaled $32.4
bilhon on June 30, 1950, compared with $32.8 billion a year earlier.




REPORT ON OPERATIONS

CHART

25

10.

NOTE.—The wholly tax-exempt Panama Canal bonds of 1961 and the bank-eligible 2i/^'s of 1967-72 have
been omitted from the chart in order to avoid undue complexity. Issues for which an exchange offer has been
made or which are due or callable in less than 3 months are also excluded.
AU bank-restricted issues are callable and all partially tax-exempt issues are bank-eligible.




26

1950 REPORT OF THE: SE'CRETARY OF THE TREASURY

INTEREST ON THE PUBLIC DEBT

•

Interest on the public debt during the year amounted to $5,750
million, compared with $5,339 million in 1949, daily Treasury statement basis. Nearly $225 million of the $411 million increase was a
nonrecurring addition resulting from a change in reporting methods.
(See table 36.) Under the new method, which was effective November 1, 1949, interest on the public debt is reported as an expenditure
when the interest becomes payable rather than when actually paid.
The increase in interest payments reflected also the accelerated accrual
of interest on savings bonds as they approach maturity. The increase
was due also to the rise in the public debt and the changes in its
composition during the year.
The yields on marketable Government securities as of June 30 in
1949 and 1950 are shown in chart 10.
SINKING FUND

Credits accruing to the cumulative sinking fund in 1950 amounted
to $620 million which, added to the unexpended balance of $6,582
million brought forward from the previous year, made available
$7,201 million. Of this amount, $2 million was used for the retirement
of 4K percent Treasury bonds of 1947-52, which had been called
October 1947. The unexpended balance of $7,199 million was carried
forward to the flscal year 1950.
Tables 26 and 27 show the transactions on account of this fund
since its inception on July 1, 1920.
STATUTORY LIMITATION
OBLIGATIONS

ON

THE

PUBLIC

DEBT

AND

GUARANTEED

Section 21 of the Second Liberty Bond Act, as amended (31. U. S. C.
757b), limits the amount of obligations issued under authority of the
act to $275 billion outstanding at any one time. This liiriitation
applies to the public debt and to those obligations of Government
corporations and other business-type activities which are fully
guaranteed by the United States (except such obligations held by the
Treasury).
As of June 30, 1950, the unused borrowing authorization was $18
billion. An analysis of the public debt and guarariteed obligations
outstanding as affected by the debt limitation is shown in table 20,




REPORT ON OPERATIONS
OWNERSHIP

OF F E D E R A L

'

27

SECURITIES ^

Approximately two-thirds of the $4.6 billion increase in gross Federal
debt during the flscal year 1950 was accounted for by the increase of
$3.0 billion in the holdings of Federal securities by nonbank investors.
Because of the large volume of alternative private investments available there was no signiflcant active demand for marketable Federal
securities on the part of long-term investors during the year. The
increase of $3.0 billion in nonbank holdings was more than accounted
for by the net purchases of savings bonds by individuals and of savings
notes and short-term marketable securities by commercial, industrial,
and mercantile corporations.
Debt ownership by nonbank investors reached an all-time peak of
$173.5 billion by June 30, 1950, or more than $10 billion above their
holdings at the conclusion of the Victory Loan. In contrast to this
upward trend of nonbank investment, there was a decline of almost
$33 billion in the holdings of Federal securities by the banldng system—
that is, commercial banks and Federal Reserve Banks—between the
peak of the debt on February 28, 1946, and the end of the flscal year
1950. ' Bank holdings continued to decline after June 30, 1950, as
well and during the flrst part of the flscal year 1950 they reached a
poiat lower than at any other time in the last 6 years. On June 30,
1950, as was also true a year earlier, the bankiag system held only 33
percent of the total debt outstanding, as compared with 42 percent
at the peak of debt and 39 percent before our entry into World War II.
The flgures on bank and nonbank ownership, together with pertinent detail on the holdings of Federal securities by the various
investor classes, are shown in the following table.
1 Gross pubhc debt, and guaranteed obligations of the Federal Government held outside of Treasury.




28

19 50 REPORT OF THE: SECRETARY OF THE TREASURY

Ownership of Federal securities, by investor classes, for selected dates, 1941-50 ^
H o l d i n g s as of^
Class of i n v e s t o r
J u n e 30.
1941

F e b . 28,
1946 2

J u n e 30,
1949

J u n e 30,
1950

Change
during
fiscal
y e a r 1950

A m o u n t s in billions of dollars
Estimated ownership by:
N o n b a n k investors:
Individuals 3
O t h e r n o n b a n k investors:
I n s u r a n c e companies
M u t u a l savings b a n k s .
Corporations ^...
s t a t e a n d local g o v e r n m e n t s . . .
Federal G o v e r n m e n t investm e n t accounts.
Miscellaneo^us investors 8.
Total
T o t a l n o n b a n k investors
Banks:
Commercial b a n k s . . .
Federal Reserve B a n k s .
Total banks
T o t a l gross d e b t o u t s t a n d i n g

11.2

63.7

66.6

67.2

-fO.6

7.1
3.4
2.0
.6
8.5

24.7
11.1
19.9
6.7
28.0

20.8
11.6
15.1
8.0
38.3

20.1
11.6
18.3
8.2
37.8

-.7
— .1
-f3.2

.7

9.1

10.0

10.2

+.3

22.3

99.4

103.8

106.3

+2.4

33.5

163.1

170.4

173. 5

+3.0

19.7
2.2

93.8
22.9

63.0
19.3

65.6
18.3

+2.6
-1.0

+.2
-.5

21.8

11617

82.4

83.9

+1.5

55.3

279.8

252.8

257.4

+4.6

P e r c e n t of total
Percent owned by:
N o n b a n k investors:
Iridividuals 2Other..
Total.Banks.
' T o t a l gross d e b t o u t s t a n d i n g

20
41

23
35

26
41

26
. 41

61
39

58
42

67
33

67
33

100

100

100

100

1 Gross public debt, and guaranteed obligations of Federal Government held outside of Treasury.
2 Peak of debt.
3 Includes partnerships ,and personal trust accounts. Nonprofit institutions and corporate pension trust
funds arc included under "Miscellaneous investors."
< Exclusive of banks and insurance companies.
5 Includes savings and loan associations, nonprofit institutions, corporate pension trust funds, dealers and
brokers, and investments of foreign balances and international accounts in this country.

Individuals continued during 1950 to increase their ownership of
Federal securities. During the year they added over a billion dollars
to their holdings of savings bonds and by June 30, 1950, they owned
savings bonds totaling approximately $50 billion, with $34K billion
in Series E bonds alone. Individuals' holdings of other securities declined slightly during the year. As is noted in the table above, individuals constitute the largest single investor group in the entire
Federal debt ownership structure, reflecting the widespread distribution of the debt throughout the Nation.




REPORT ON OPERATIONS'

29

Holdings of Federal securities by insurance companies on June 30,
1950, amounted to about $20 billion. Three-fourths of the total was
in the hands of life insurance companies, whose investments are predominantly in long-term securities. Life insurance companies reduced their holdings of Federal securities by a little over $1 billion
during the year, following the trend which began 3 years ago as new
private investment opportunities appeared in the form of an increased
supply of mortgages and corporate securities. Liquidation of Federal
securities was smaller during 1950, however, than it had been during
the two preceding years. The decline in life insurance company holdings was off'set in part by continued additions to the Federal se-'
curity portfolios of flre, marine, and casualty insurance companies.
In total, therefore, insurance company holdings were down by only
$0.7 billion during the year.
Mutual savings bank holdings of Federal securities totaled $11.6
billion on June 30, 1950, with $9.4 billion invested in bank-restricted
bonds. Mutual savings banks have also been actively engaged in increasing their mortgage and corporate security portfolios duringthe
last few years, but their holdings of Federal seeurities on June 30,
1950, were only $0.6 billion below their all-time peak. Their holdings declined by only $0.1 billion during the flscal year 1950.
Corporations, other than banks and insurance* companies, showed
an increase" of over $3 billion in their holdings of Federal securities
during the flscal year 1950. Their holdings of $18.3 billion in June
1950 were just about midway between their peak holdings of $22.9
billion reached 5 years ago and the low point in the postwar period of
$13.5 billion on June 30, 1948. Manufacturing corporations alone
accounted for over $10 billion of holdings of Federal securities as of
June 30, 1950, with holdings concentrated in the hands of the producers of automobiles and other heavy industrial products.
Miscellaneous investors held approximately $10 billion of Federal
securities as of June 30, 1950. About one-third of this amount was
accounted for by holdings of securities by various international
organizations and by the investment of foreign balances in the United
States. Private pension trusts accounted for approximately $2 billion
of the total, with the remainder reflecting the holdings of nonproflt
institutions, dealers and brokers, savings and loan associations, and
certain smaller groups. There was very little change in the holdings
of miscellaneous investors in the aggregate»during the year, with
more than the entire increase of $0.3 billion accounted for by expanded
investments of foreign balances.




30

1 9 5 0 REPORT OF T H E SE'CRETARY OF T H E TREASURY

Holdings of Federal securities by State and local governments as of
June 30, 1950, amounted to $8.2 billion, with very little change being
reported by these investors during the year. State and local pension
funds held approximately a third of the $8.2 billion, with sinking
funds holding a little over $1 billion; the balance was accounted for
by various 'operating and special funds. State governments alone
accounted for $5.6 billion of the total, with local government funds
currently holding about $2.6 billion.
Federal Government investment accounts held $37.8 billion of
Federal securities on June 30, 1950, of which $32.4 billion were in
special issues. Total holdings of Federal Government investment
accounts declined by half a billion dollars during the year, in contrast to the usual iacreases which have characterized each year prior
to 1950. There was a continued increase in the investments of the
old-age and survivors insurance trust fund, railroad retirement account. Government employees' retirement funds, and several other
funds, but these were more than offset by the effect on trust fund
investments of (1) the payment of $2.6 billion in dividends to veterans
out of the national service life insurance trust fund during the last
half of the flscal year, and (2) the increased payment of unemployment beneflts out of the unemployment trust fund during the year.
' Commercial banks held $65.6 billion of Federal securities at the end
of the flscal year 1950. About $40 billion of this total was invested
in bank-eligible bonds, over 75 percent of which were due or callable
within 5 years. Commercial banks also held $22 billion of bills,
certiflcates, and notes. The average length to flrst call or maturity
of their total holdings of marketable debt amounted to slightly over
3 years as of June 30, 1950, reflecting the policy of maintaining the
Government portion of bank portfolios in a relatively liquid position.
Commercial bank holdings rose by $2.6 billion during the year, a
large part of which was accounted for by the release of $1.8 billion in
reserves whea reserve requirements were reduced during the early
part of the period. As a matter of fact, commercial bank holdings of
Federal securities actually declined by $1.2 billion from December
1949 through June 1950. Federal Reserve Bank holdings of Government securities also declined both for the entire year (a decrease of
$1.0 billion) and for the last 6 months of the period (a decrease of
$0.6 billion).
An analysis of the estiriiated changes in bank versus nonbank ownership of Federal securities during the flscal year 1950 is shown in the
following table by type of issue.




R E I P O R T ON

31

OPERATIONS

Estimated changes in bank versus nonbank ownership of Federal securities by type
. o f issue, fiscal year 1950 ^
[In billions of dollars]
Change accounted for by—
Total
change
in
Banks
amount Nonbank
outstandinvesing
tors
Commer- Federal
Total
cial
Reserve

. Class of security

Marketable securities:
Treasury bills
Certificates of indebtedness
Treasury notes
Treasury bonds

2.0
-11.0
16.8
-7.6

1.5
-5.0
3.8
-1.8

0.5
-6.0
13.0
-5.8

1.0
-4.5
9.8
-3.7

—0 5
—1.5
3.1
-2.2

.2

. . . .

-1.5

1.0

2.7

—1.0

1.4
3.5

-.1
.1

-.1
.1

Total marketable
Nonmarketable securities, etc.:
United States savings bonds . . . .
Treasury savings notes
Treasury bonds, investment series
Armed forces leave bonds
Special issues to Government investment accounts . . .
Notes to International Bank and Monetary
Fund
Other

1.3
3.6

(*)

-.1
-.4
.2
-.1

(*)

-.1
-.4
.2

-.1

-.1

Total nonmarketable, etc ._.

4.4

4.5

-.1

-.1

Total change

4.6

3.0

1.5

2.6

- (*)
^

—I.U

*Less than $50 million.
1 Gross public debt, and guaranteed obligations of Federal Govemment held outside of Treasury,

For marketable securities as a whole the total increase during the
year was only $0.2 billion, consisting of an increase of $2.0 bilhon in
bills outstanding and a net decline of $1.8 billion because of the
unexchanged portions of maturing issues in the other three categories.
Despite the fact, that nonbank investors (principally nonflnancial
corporations) absorbed three-fourths of the new bill offerings during
the year, their holdings of marketable securities continued to decline,
reflecting in large part the liquidation of securities by life insurance
companies. Long-term investors bought most of the $1}^ billion of
long-term bonds which were sold in the market during the year by
the Federal Reserve Banks. However, these long-term investors,
had a large volume of alternative investments available in the form
of new mortgages and corporate securities. As a result, their purchases
of long-term bonds from the Federal Reserve Banks did not result
in any net acquisition of Federal securities over the period, since they
in turn sold shorter-term obligations to pay for the long-term securities.
The dominant factor in the increase of $4.4 billion in nonmarketable
securities during the year was the neb sale of $3.6 billion of savings
notes, primarily to corporations other than banks and insurance
companies. Savings bonds increased by $1.3 billion during the year,
largely absorbed by individuals.
907795—51

4




.

.

32

<^1950 REPORT OF THE: SECRETARY OF THE TREASURY

. The decline of $22 billion in Federal debt from the February 1946
peak through June 1950 compares with an increase of over $80 billion
in all of the private debt of the country combined during the same
period (debt of individuals, corporations, arid State and local governments). Nevertheless, Federal securities still account for one-half
of the total debt of the United States, more than double the ratio a
decade ago. Furthermore, Federal securities continue to dominate
the investment portfolio of the large flnancial institutional groups
throughout the country and account for signiflcant portions of the
liquid assets of individuals and the current assets of corporations.
Nonbank investment in Federal securities of $3 billion during the
flscal year accounted for about half of the total increase in liquid
assets of nonbank investors during the year. Savings accounts in
commercial banks increased by $0.4 bilhon during 1950, while checking
accounts increased by $3.2 billion and currency holdings were unchanged. Both the Federal Government deflcit of $3.1 billion during
the year and the fact that private credit extended by commercial
banks increased by over $5 billion resulted in a larger net increase in
liquid assets this year than in the flscal years 1948 and 1949.^
CORPORATIONS AND CERTAIN OTHER BUSINESS-TYPE ACTIVITIES
OF THE GOVERNMENT

In accordance with the President's recommendation in his 1948
Budget Message and certain provisions of law, the Treasury during
the flscal year 1950 continued to adjust the interest rates on advances
to Government corporations and certain agencies to keep such rates
closely in line with the interest cost to the Treasury on its borrowings.
Generally, the interest rates now charged the corporations and
agencies are .based upon the average rate on outstanding marketable
obligations of the United States, and in actual practice are stated in
terms of the nearest one-eighth of 1 percent under such average rate.
On June 30, 1950, the computed average interest rate on outstanding
marketable obligations of the United States was 1.958 percent, resulting in a rate of 1% percent for the corporations and agencies involved. Where the advances by the Treasury are of a short-term
character* or involve special considerations, lower rates have been
established to coordinate these rates with the interest cost to the
Treasury of its short-term borrowings. •
During the flscal year 1950, there were several signiflcant legislative
changes affecting the borrowing authority of Government corporations. Under the provisions of Public Law 579, 81st Congress, approved June 28, 1950, the borrowing authority of the Commodity
1 Table 106 presents data on the relationship between Federal fiscal operations and the Nation's financial
structure for the 10-year period 1941-50.




REPORT ON OPERATIONS

33

Credit Corporation was increased by $2 billion, making its total borrowing authority $6,750 million. The Federal home loan banks and
the Federal Savings and Loan Insurance Corporation in accordance
with Pubhc Law 576, 81st Congress, approved June 27, 1950, were
authorized to borrow from the Secretary of the Treasury amounts
limited by the provision that the aggregates outstanding at any one
time ma^T^ not exceed $1 billion and $750 million, respectively.
The National Housing Act of June 27, 1934, as amended (12 U. S. C.
1701-1748g), was further amended during 5b.e year, thereby increasing
.by $4,050 million the amount of mortgages that could be insured.
The increases under the various acts enacted during the year are,as
follows:
•

Acts enacted during 81st Congress

Title
National Housing Act, as
amended:
Title T, section 8
Title II

Title VI.

Title VIII

..

Public Law 475, approved Apr. 20, 1950.-.
Public Law 171, approved July 15,1949, and letter of the President dated July 25, 1949.
Public Law 278, approved Aug. 30,1949, and letter of the President dated Aug. 30, 1949,
Public Law 387, approved Oct. 25,1949, and letter of the President dated Nov. 18,1949.
Public Law 475, approved Apr. 20, 1950
.
Public Law 387, approved Oct. 25,1949, and letter of the President dated Nov. 18, 1949.
Public Law 387, approved Oct. 25,1949, and letter of the President dated Feb. 23, 1950.
Public Law 475, approved Apr. 20, 1950
..
Public Law 211, approved Aug. 8, 1949
.

Increase
(in millions).

i$100
200
500
750
21, 000
200
300
500
3 500
4.050

1 Could be increased by $150 million upon approval of the President,
2 A further increase of $1,250 milhon could be made upon approval of the President. A partial increase
of $650 million was authorized by letter from the President dated July 18, 1950.
3 Could be increased by $500 million upon approval of the President.

In addition, the Housing Act of 1950 (Public Law 475, 81st Congress, approved April-20, 1950) extended to July 1, 1955, theFederal
Housing Admiaistration authorization (title 1) to insure lenders
against losses on home modernization and repair loans. The total
amount of such outstanding insured loans shall not exceed $1,250
million at any one time. The unused mortgage insurance authorizations at the end of the flscal year 1950 amounted to $317 million.
The amount of borrowing power of each Government corporation
and agency and the total amounts of obligations outstanding as of
June 30, 1950, segregated as to Treasury holdings and securities held
by others, are shown in table 63.
Balance sheets received from corporations and certain business-type
activities of the Government are published quarterly in the daily
Treasury statement. These balance sheets show the amount " and
^
classiflcation of assets, liabilities, and capital of the various corpora-




34

195 0 REPORT OF THE: SE'CRETARY OF THE TREASURY

tions and activities, together with the capital owned by the United
States and that privately owned. The balance sheets as of June 30,
1950, will be found in table 68 of this report.
Table 67 shows the combined net investment of the United States
in such corporations and other business-type activities for the flscal
years 1941-50; and table 69 shows the income and expense of individual corporations and activities for the flscal year 1950. The source
and application of funds for the flscal year 1950 are shown in table 70.
SECURITIES OWNED BY THE UNITED STATES GOVERNMENT

-On June 30, 1950, the United States owned securities consistiag of
capital stock, bonds, and notes of Government corporations; securities
representing loans made to railroads, farmers, home owners, foreign
governments, etc.; and receipts evidencing United States subscriptions to the International Bank for Reconstruction and Development
and to the International Monetary Fund. The net face value of
these securities amounted to $18,321 million; and the principal amount
of obligations of foreign governments arising out of World War I
amounted to $12,660 million. A stateinent of the securities owned
at the end of the flscal year 1950, exclusive of World War I foreign
government obligations, is shown in table 73, together with an explanation of each increase or decrease during the year.
TAXATION DEVELOPMENTS

No major revenue legislation was enacted during the flscal year 1950.
A tax revision bill (H. R. 8920) was passed by the House on June 29,
1950, but developments in Korea led to substantial changes in the bill
and the Revenue Act of 1950 was not approved flnally until September 23, 1950. Section I which follows summarizes the suggestions for
the 1950 tax program made to the Congress by the President and the
Secretary of the Treasury and describes the major provisions of the
Revenue Act of 1950. Section I I summarizes the Social Security
Act Amendments of 1950 which were approved on August 28, 1950.
Miscellaneous revenue legislation taking effect during the flscal year
is listed in exhibit 24.
I. R E V E N U E A C T OF 1950
A . THE P R E S I D E N T ' S REVENUE PROGRAMS

The President's special tax message to the Congress on January 23,
1950, included two major recommendations: (1) T h a t excise taxes be
reduced to the extent, and only to the extent, that the resulting loss
in revenue could be replaced by closiag loopholes in the present tax




REPORT ON OPERATIONS

35

laws, and (2) that additional revenues of $1 billion be provided by
revising and improving the corporation income tax and the estate
and gift tax. In addition, he reconamended certain revisions with
respect to taxation of income derived from foreign investments which
were designed to facilitate the extension of flnancial and technical
assistance to underdeveloped regions of the world under, the Point Four
Program; (See exhibit 19.)
Secretary Snyder appeared before the House Committee on Ways
and Means on February 3, 1950, to discuss the details of the President's
program. He emphasized the necessity for limiting the amount of
excise tax reduction and specifled as most urgently in need of reduction the excises on transportation of property and persons, long distance
telephone and telegraph communications, and the retail excises. I n
the interest of tax equity, he recommended that the manufacturers'
excise tax on radios be extended to television. He discussed in detail
the loopholes which, should be closed to provide replacement revenues
for excise tax reduction. (See exhibit 20.)
Recommendations regarding corporate income tax revision iacluded
an iacrease in the general corporate rate from 38 to 42 percent, elimination of the '^notch rate," and extension of the period for carrying
over losses tlirough provision of a flve-year carry-forward and a oneyear carry-back in place of the two-year carry-forward and two-year
carry-back.
With respect to revision and strengtheniag of estate and gift taxes,
the Secretary suggested correction of four major weaknesses: (1) The
overly favorable treatment of property placed in trust for several
generations, (2) the opportunity to escape the higher estate tax rates
by making gifts subject to lower tax rates, (3) the large exemptions, and (4) the iaeff ecti ven ess of the present rate schedule.
On June 29, 1950, the House passed the tax revision bill, H. R. 8920,
which provided excise tax reduction on a substantial list of comriiodities and services. Replacement revenues were to be obtained
from closing tax loopholes and from an increase iii the corporation
income tax. Provision was made also for exteirision of income tax
withholding to dividends at a flat 10 percent rate and for a gradual
speed-up of corporate tax payments over a flve-yeai* period.
The Senate Committee on Finance began hearings on H. R. 8920 on
July 5, 1950, with the understanding that action on the bill could be
halted if iaternational' developments indicated it would be unwise to
proceed with the legislation. The Secretary appeared before the
Committee on the opening day to discuss the House bill on the basis
of this understanding. (See exhibit 21.) A few days later, July 11,
the Secretary recommended to the Chanman of the Committee that
action on H. R. 8920 be suspended.




36

195 0 REPORT OF THE: SECRETARY OF T H E TREASURY

On July 25, 1950, the President in a letter to the Chairman of the
Senate Coramittee on Finance recommended that, as an interim
revenue measure, action should be taken immediately to revise and
enact the tax bill so as to increase tax collections substantially for
the taxable year 1950. (See exhibit 22.) The President's recommendations for interim tax legislation were discussed in the Secretary's
statement of August 2, 1950, before the Senate Finance Committee.
(See exhibit 23.)
I t was suggested that H. R. 8920 serve as the basis for the legislation with the following adjustments: (1) Eliminate the excise tax
reductions and other revenue-losing sections in the bill but retain the
provisions for closing loopholes, withholding of dividends, and life
insurance company taxation, (2) increase the corporation income tax
rates in the bill, effective for 1950 incomes by an additional four
percentage points, making the top rate 45 instead of 41 percent, as
provided in the bill, and (3) increase individual income taxes, effective
October 1, 1950, by removing for 1950 incomes one-quarter of the
reductions made by the Revenue Acts of 1945 and 1948 and by eliminating such reductions entirely, beginning with the year 1951.
The Senate Finance Committee began work on the proposals in
executive sessions on August 3 and reported a bill on August 22,
With few major changes, this bill became the Revenue Act of 1950.
B. PROVISIONS OF THE ACT

The Revenue Act of 1950 increased individual and corporation
income tax rates and made a number of other revisions in the income
tax, estate tax, and excise tax provisions.
1. Individual income tax
a. Rates.—The act increased individual income tax rates at all
income levels by eliminating the percentage reductions from ^'tentative tax" which were in effect during 1948 and 1949. The combined
normal and surtax rate was thus increased from 16.6 to 20 percent in
the flrst taxable iacome bracket and from 82.1 to 91 percent ia the
top bracket. The maximum effective rate limitation was increased
from 77 to 87 percent. (See exhibit 26 for detail of rates.) The
income-splitting provisions and the increase in exemptions enacted
in 1948 were retained. Tax liabilities and effective rates uhder the
Revenue Acts of 1948 and 1950 are compared in exhibit 25.
The full increase in rates applies to incomes in 1951 and subsequent
years. Approximately one-quarter of the increases were applicable
to calendar year 1950 incomes. The withholding rate applicable to
wages and salaries in excess of personal exemptions was iacreased from




REPORT ON OPERATIONS

37-

15 to 18 percent, beginning with October 1, 1950, in order to keep
collections on a current basis for those subject to withholding.
The increase in tax liabilities of individuals under the act is estimated at $700 million on 1950 incomes and $2.9 billion on 1951
incomes.
b. Exclusion for members of the armedforces.—The act provided
special income tax treatment for members of the armed forces while
serving in combat zones. All pay of enlisted men and warrant officers
and the flrst $200 per month paid to commissioned officers is excluded
from taxable income. The President is authorized to designate as a
combat zone any area in which armed.forces of the United States
engage in combat in the period from June 24, 1950, to December 31,
1951.
'
2. Corporation income tax
a. Rates.—The act made an important change in the structure of
corporation "income tax rates. Under prior law, a '/notch r a t e " of
53 percent was provided to bridge the gap between the lower.rates
applicable to incomes under $25,000 and the general rate on incomes
of $50,000 or more. Under the 1950 act, rates were increased and
the ''notch r a t e " was entirely eliminated by the adoption of a simple
dual rate system as follows: a normal tax of 25 percent applicable
to the proflts of all corporations, and a surtax rate of 20 percent
applicable to proflts in excess of an exemption of $25,000. Thus,
the rates became 25 percent on incomes below $25,000 and 45 percent on amounts of income's in excess of $25,000.
The combined effect of the higher rates and the elimination of the
"notch" was a relatively small increase in tax for corporations with
net incomes under $31,250, incidental reductions for corporations with
net incomes between $31,250 and $71,400, and a general increase
ranging up to 7 percentage points for larger corporations.
The new rates apply in full to taxable years beginniag after June 30,
1950. A transition schedule was provided for the calendar year 1950
consistiag of a normal tax of 23 percent applicable to entire proflts
and a surtax of 19 percent on incomes above $25,000. For flscal
years beginning before July 1, 1950, and ending after June 30, 1950,
the old rates applied to income allocated to the period prior to July 1,
1950, and the new rates to income allocated to the period after June
30, 1950.
I t is estimated that the increase in rates added about $1.5 billion of
revenue on an annual basis, at calendar year 1950 income levels, after
taking account of the reduction in individual income taxes resulting
from the estimated reduction in dividend payments.




38-

195 0 REPORT OF THE SECRETARY OF THE TREASURY

b. Acceleration of tax payments of corporations.—The act also provided for acceleration of tax payments of corporations. Beginning
with taxable years ending on or after December 31, 1950, corporations are to speed up payments gradually over a 5-year period until
they are on a two-installment (instead of the present four-installment)
basis. When the two-installment system is iullj effective, one-half
the corporation iricome tax will be collected 6 months earlier than
under prior law.
While the speed-up of corporation tax payments does not increase
corporation tax liabilities, it will increase collections of the Federal
Goverriment ia the flscal years 1951-55. I t is estimated that flscal year
1951 tax receipts will be increased by $856 million; receipts in each
of the four succeeding flscal years will increase by a somewhat larger
amount.
c. Carry-forward of business losses.—The provisions respecting carryovers and carry-backs of net operating losses were amended to provide
for a system of one-year carry-back and a flve-year carry-forward
instead of the former two-year carry-back and two-year carry-forward.
The effect of this change is to extend the period over which business
income may be averaged from 5 to 7 years.
d. Life insurance company taxation.—The formula used in determining the income taxes of life insurance companies was revised for the
years 1949 and 1950. This new formula, which is the same as that
contained in House Joint Resolution 371, 81st Congress, second session, was designed as a stopgap to provide a tax contribution by life
insurance companies pending the development of a permanent solution to this problem. (The operation and effect of this formula are
explained in detail in Senate Report No. 1434, 81st Congress, second
session,.accompanying House Joint Resolution 371.)
* .
e. Amortization of emergency facilities.—The act provides special
amortization with respect to emergency facilities completed after December 31, 1949, which are certifled as essential to national defense by
the certifying authority designated by the President. Taxpayers
erecting new defense facilities will be allowed to write off, over a
period of flve years, the portion of the cost of such facilities which is
certifled as attributable to defense purposes.
Gains from sale of emergency facilities will be subject to tax at
ordinary rates, rather than at capital gains rates, to the extent that
they represent the difference between the special amortization deductions and ordinary depreciation.
f. Excess profits tax resolution.—The Joint Committee on Internal
Revenue Taxation was directed to make a full and complete study of
the problems involved in the taxation of excess proflts. The House




REPORT ON OPERATIONS

39

Committee on Ways and Means and the Senate Committee on Finance
were also directed to report out an excess proflts tax bill (retroactive
either to July 1 or October 1, 1950) as soon as practicable after November 15, 1950.
3. Tax-exempt organizations and charitable trusts
The act provides, under carefully specified conditions, for the imposition of income taxes on business income of educational, charitable,
and certain other tax-exempt organizations, foundations, and trusts.
Restrictions were placed on the accumulation or investment of income
by certain exempt organizations or trusts and also on the transactions
of these entities with donors or founders. As a corollary, deductions
for income, estate, and gift tax purposes are denied to donors to
organizations which engage in prohibited transactions.
The act makes subject to income tax business income, in excess of
$1,000, of certain tax-exempt organizations, largely so-called charitable
and educational organizations, if the business is not substantially
related to the-performance of the functions upon, which the organization's exemption is based. Certain rental income, generally that
accruing from so-called purchase and leaseback transactions, is included in unrelated income.
Paralleling the changes for charitable and educational organizations
is the provision that the unlimited charitable deductioa allowed to
trusts may no longer be taken with respect to income from^ any
regularly carried on trade or business and certain rental income.
The act also makes explicit that charitable and similar organizations
will not be exempt if they engage in specifled flnancial transactions
favoring substantial contributors or founders, their families, or
corporations controlled by them. In addition, a trust engaging in the
prohibited transactions is not allowed the unlimited charitable deduction but is limited to a deduction of 15 percent of net income.
Denial of exemption from income tax or of the unlimited charitable
deduction is also provided if accumulations of income are unreasonable
in amount and duration, are used to a substantial degree for other
than exempt purposes, or are invested in a manner to jeopardize the
performance of the exempt function. As a corollary, when exemption
is denied or the unlimited charitable deduction is not permitted, gifts
or bequests will not be allowed as a charitable deduction to the donor
or to the decedent's estate for income, estate, or gift tax purposes.
Provision was made also for the flling of information returns showing
such items as income, expenses, and charitable disbursements, in the
case of foundations and certain other charitable organizations, and
trusts claiming unlimited charitable deductions. The returns are
to be available for public inspection.
^




40

19 50 REPORT OF THE: SECRETARY OF T H E TREASURY

4. Capital gains and losses
Several changes were made in the provisions relating to capital
gains and losses, most of which were directed at loopholes which permit conversion of ordinary income into capital gains, or short-term
gains into long-term gains. One amendment provided in effect that
the income realized by amateur artists and authors by the sale of their
work will be taxed at ordinary income tax rates instead of receiving
capital gains treatment.
Rules were provided as to the tax consequences of certain short
sales of property. Where a sale of substantially identical property
is made, and thereafter simultaneous "long" and "short" positions
are maintained so as to give an actual short-term transaction the •
appearance of a long-term transaction, any resulting gain will be
treated for tax purposes as short-term gain.
Provisions were added which were designed to close the loophole
resultirig from use of tlie device of the ^'collapsible" corporation to convert ordinary income into long-term capital gain. Gains from the
sale or exchange (including liquidation) of stock in ''collapsible"
corporations will be taxed as ordinary income if (a) the stockholder
owns 10 percent or more of the stock, (b) more than'70 percent of the
gain on the stock is attributable to the property produced by the
corporations, and (c) the gain is realized within three years after the
prop(^rty is produced.
Capital gains of nonresideat aliens not engaged in trade or busiaess
in the United States will be subject to tax, at a 30 percent rate, if
they are in this country temporarily. Those present in the United
States for less than 90 days in the year will be taxed only on gains
realized during this period. Those present for more than 90 days
will be taxed on all their gains from transactions in this country during
the taxable year.
5. Estate tax
Transfers by gift made more than three years before death will not
be subject to tax as a transfer in contemplation of death. In the case
of a transfer made less than three years before death, the'burden of
proof that it was not made in contemplation of death rests on the
estate.
•
The deduction for support of a decedent's dependents during
settlement of the estate was eliminated.
Proceeds of insurance purchased by a decedent upon his own life
with premiums paid before January 10, 1941, will not be included in
his gross estate by reason of his retention of a reversionary interest
after that date unless this interest arose by the express terms of the
life insurance policy or other instrument, and at some time after




REPORT ON OPERATIONS

41

January 10, 1941, had a value in excess of 5 percent of the value of
the policy.
•
^
6. Excise taxes
The act includes a number of excise tax amendments, the most
important of which are provisions for extending the 10 percent manufacturers' tax on radios to television sets and the 10 percent manufacturers' tax on refrigerators to deep freeze units. The annual
occupational tax on coin-operated gaming devices was increased from
$100 to $150,
The taxes on transportation of property and persons were extended
to cover payments made outside the United States for travel which
begins and ends in the United States or for tKe transportation of
property from one point in the United States to another.
To avoid discrimination against regular retail sales outlets, sales of
fur and jewelry at auction on behalf of a person not engaged in the
business of selling these articles were made subject to the retail taxes.
However, an exemption was granted for the flrst $100 for fur and
jewelry sold at auction at the home of a person on whose behalf the
sale takes place.
Articles sold at retail by the United States or by any of its instrumentalities or agencies,. such as post exchanges and,ships' service
stores, were made subject to the retail taxes.
7. Miscellaneous income tax amendments
The act also made a number of amendments to the income tax
provisions of the Internal Revenue Code.
Dealers in tax-exempt securities will be requir3d to amortize
premiums paid with respect to "short-term municipal bonds" which
are held more than 30 days and have a maturity or call date not more
than 5 years from the date of acquisition.
The privilege of amortizing a bond premium will be denied where the
-premium is attributable to a conversion feature of the bond.
Newspapers and periodicals will be permitted to deduct as ordinary
expenses all expenditures incurred in connection with building up
circulation except expenditures for the purchase of land or depreciable
property or for the acquisition of circulation through the purchase of
other newspapers or periodicals.
Filing and payment dates for flduciaries of estates and trusts are
changed.
Tax withheld at source on the income of nonresident aliens and
foreign corporations will be paid on or before March 15 instead of
June 15.




42

19 5 0 REPORT OF THE: SECRETARY OF THE TREASURY

The act restores, with respect to certain corporate distributions
made pursuant to liquidations during 1951, the provisions relating to
election by stockholders as to recognition of gain.
Gross income from mineral properties, which is the basis for computing percentage depletion, may include transportation expenses to
plants in which ordinary treatment processes are applied, if the plants
are not more than 50 miles from the mine. Transportation for a
greater distance may be allowed under a determination by the Secretary of the Treasury that it is necessary to transport the mineral a
greater distance to the plant.
Rules are provided for the treatment as taxable dividends of certain
corporate distributions by a subsidiary corporation to its stockholders
in payment for stock in its parent corporation.
Corporate distributions in redemption of stock included in a decedent's gross estate, if made for the purpose of paying death taxes,
will not be treated as taxable dividends.
Anew section is added to liberalize the tax treatment of the income
realized by an individual as a result of the exercise of certain types of
stock options granted by his employer corporation.
A number of amendments were made with respect to the application of the income tax to citizens arid aliens resident ia Puerto Rico.
Regulated investment companies will be permitted to treat as
dividend distributions duruig the taxable year certain dividends declared after the close of the year.
IL

SOCIAL SECURITY ACT AMENDMENTS OF

1950

The Social Security Act Amendments of 1950 which were approved
on August 28, 1950, had been under consideration in Congress since
early in 1949. The President in his Message on the State of the Union
on January 5, 1949, recommended to the Congress that the social
security program be expanded both as to size of beneflts and extent of
coverage. Following extensive public hearings on the Administration's social security program before the House Committee on Ways
and Means, Chairman Doughton introduced H. R. 6000. The House
passed the measure on October 5, 1949. The Senate Committee on
Fiaance held public hearings on the bill early in 1950. An amended
bill was passed by the Senate on June 20, the conference committee
flled its report on August 1, and the act was flnally approved on August
28, 1950 (Pubhc Law 734, 81st Congress).
The most important changes made by the law relate to the oldage and survivors insurance system and to the public assistance and
child welfare provisions of the Social Security Act. Coverage under




REPORT ON OPERATIONS

43

old-age and survivors insurance was extended to about 10 million
additional persons. The new categories include nonfarm . self-employed, domestic workers, regularly employed farm workers, employees
of nonproflt organizations (voluntary coverage), employees of State
and local governments (voluntary coverage except for a small number
of transit workers who would be compulsorily covered). Federal civilian
employees not under a retirement system, employees outside the
United States, employees in Puerto Rico and the Virgin Islands, and
certain other groups, such as salesmen and industrial home workers,
which were speciflcally included in the new deflnition of "employee,"
The new coverage provisions are effective January 1, 1951.
• Beneflts were increased for those currently receiving beneflts by
about 77K percent on the average. Increases ranged from about
50 percent for the highest beneflt group to about 100 percent for the
low beneflt groups. * The average primary beneflt of approximately
$26 per month for a retired insured worker was increased to about $46.
Beneflt increases became effective September 1950.'
A new beneflt formula for persons retiring in the future was adopted.
Beneflts based on the new formula were to be paid flrst in May 1952.
Persons coming on the rolls before that time would have their beneflts
computed under the present formula, together with the increases provided for those now receiving beneflts. Average beneflt. amounts in
the next decade would be about 110 percent higher than under existing
law.
,
Eligibility requirements for insurance beneflts were revised so that
many persons now 65 or over would be able to draw retirement beneflts
ioimediately and the aged in the newly covered groups would be able
to qualify more quickly for benefits.
Major revisions were made in the flnancing provisions of old-age
and survivors insurance. The maxiaium amount of annual earnings
subject to tax was iacreased from $3,000 to $3,600, beginning January 1, 1951. The payroll taxes on employers and employees would
remain at the present Iji percent rate on each until January 1, 1954.
The rates on each thereafter would be: 1954-59, 2 percent; 1960-64,
2}^ percent; 1965-69, 3 percent; 1970 and thereafter, 3% percent. The
rate for self-employed would be IK times the above rates or % of the
combined employee-employer rates.
A number of amendments were made to the public assistance and
child welfare programs. Federal aid to the States for these programs
would be increased by about $180 million to $200 million annually.
The provisions for Federal loans to State unemployment insurance
agencies was extended for the two years 1950 and 1951.




44

195 0 REPORT OF THE SECRETARY OF THE TREASURY
I N T E R N A T I O N A L F I N A N C I A L A N D MONETARY DEVELOPMENTS

In the course of the flscal year under review'many countries, particularly in Europe, made substantial progress in restoring their economies.
The physical volume of production generally increased, and important
steps were taken toward bringing the world economy into better balance.
The devaluation of currencies taking place in September 1949 was the
most conspicuous of these steps. The course of steady adjustment in
the postwar world continued through most of the year, and progress
was made toward greater balance in iaternational trade and payments.
Shortly before the close of the flscal year the invasion of the Republic
of Korea presented the countries of the free world with a new range of
problems. I t made clear the necessity for more extended defense
measures, which are having important repercussions on international
monetary and flnancial affairs.
U N I T E D STATES ECONOMIC ASSISTANCE PROGRAMS

United States economic assistance, from all sources, to countries
participating in the European Recovery Program in the flscal year 1950
aggregated $4.0 billion, compared with $5.0 billion utilized in 1949.
As originally expected, the need for extraordinary assistance from the
United States was greatest in the initial period of the program when
the European economies lacked essential foodstuffs and raw materials
to keep their economies in operation and to restore their standards of
living. Consequently, a tapering oft' of United States assistance,
contemplated from the beginning, was carried into effect in the course
of the flscal year.
An important change in the form of United States assistance to
Europe was the increasing proportion made available in grants. In
the flrst appropriation made under the Economic Cooperation Act,
$4.0 billion was provided to be used as loans or grants by the Administrator in consultation with the National Advisory Council. The act
also made available a sum of $1.0 billion derived from public debt
transactions which could be used only for makiag loans and guaranties.-^ The laws governing operations in the flscal year 1950 provided
$150 million restricted to loans. The legislation continuing the program for 1951 eliminated a mandatory requirement of loans as part of
the European Recovery Program. In the flscal year 1950 assistance
utilized by the participating countries under the program amounted to
$3.4 billion. Of this sum, $2.7 billion was in the form of grants, about
$586 million in the form of conditional aid, and $132 million in the
form of loans.
1 Of this amount J300 million was made available for guaranties of exchange convertibility of income and
repatriation of American private capital investments in E R P countries.




REPORT ON OPERATIONS

45

In addition to assistance voted to the European countries by the
Congress, appropriations were made for economic assistance to nonEuropean countries, principally in Asia. There was a special program
for economic recovery in Korea administered by the Economic Cooperation Administration for which appropriations for the flscal year were
$120 million. There w^ere other programs of assistance to Asiatic
countries, principally Japan and the Philippines. The total assistance
utilized by all Asiatic countries totaled $614 million in grants and
$94 million in credits.
TECHNICAL ASSISTANCE

The President's Point Four Program has the objectives of extending
technical assistance and encouraging capital investment in-the underdeveloped areas of the world. In June 1949 the President, in a message
to the Congress, recommended enactment of legislation to authorize
the program, and implementiag bills were introduced in the Congress.
Extensive hearings were held during 1949, but Congress adjourned
before action was taken on the proposed legislation. During 1950
the technical assistance program was considered by the Congress and
included in title IV of the Foreign Economic Assistance Act of 1950
as the Act for International Development. The Congress authorized
$35.0 million for the purpose of the Point Four Program.
Under the technical assistance program the United States will, in
some cases, provide funds to the United Nations and other international agencies, and in other cases will make cooperative agreements
with particular countries. These programs will thus be, in part, an
extension of activities already in effect. Certain existing technical
assistance programs with special objectives, such as those under the
Econoniic Cooperation Administration, will not be included under the
new authority.
EUROPEAN

RECOVERY

The countries participating in the European Recovery Program as
a whole continued to raise their levels of production. By June 1950,
in most instances, industrial production had exceeded prewar levels.
Agricultural production also had increased considerably over the preceding years. This recovery in industrial and agricultural production
was reflected, in part, by changes in the commodity composition of
United States assistance to the European countries which, to an increasing degree, was directed toward supplying industrial equipment
to replace worn out or obsolete capital goods and facilitating a rise
in the per capita standards of living. I t also brought into clearer
focus the basic problem of trade, both within Europe and between




46

1950 REPORT OF THE: SECRETARY OF THE TREASURY

Europe and the United States and other parts of the world. With
more production, the possibilities of economically desirable and
profltable trade increased. But the expansion of trade did not keep
pace with the increase in production. I t w:as for this reason that
particular importance attaches to the currency readjustments and to
other measures designed to increase the flow of trade. In the course
of the year several of the participating countries made further progress
toward internal flriancial stability as indicated by relatively stable
price levels. In the second half of the year they also were able to
reduce their trade deflcits with the dollar area without impairing
their levels of production and standards of living.
To deal with the problem of trade in Europe, the countries participating in the European Recovery Program reached an Agreement on
Intra-European Payments and Compensations in October 1948.
This agreement was projected to deal with the problem of intraEuropean trade under prevailing conditions of currency inconvertibility and inadequate monetary reserves. This arrangement was
made at a time when the recovery; and hence the trade, of the European countries had developed at uneven rates. The mechanism
established provided for the settlement of balances arising in the
trade of European countries with each other by the extension of socalled "drawing rights," which the countries with a surplus would
make available to countries with a deflcit on their current account
transactions. The United States supported this device by making
part of its assistance available to the participating countries in the
form of "conditional aid," i. e., the grants to some countries were
made on condition that they provide drawing rights for others. While
this method did not increase the total of United States assistance, it
facihtated the operation of the payments mechanism. The 1948
agreement, however, did not provide for any speciflc reduction of the
trade restrictions already in existence.
The European Payments Union, which came into effect in 1950,
represents a more advanced attempt to deal with the problem of
European trade and to fui'ther European integration. Under the
new plan the countries participating agreed to undertake successive
reductions in their trade barriers, while at the same time balances
arising could be settled multilaterally through the payments mechanism estabhshed. The Congress, in the Foreign Economic Assistance
Act of 1950, authorized the Administrator for Economic Cooperation
"to transfer funds directly to any central institution . . . to be used
on terms and conditions specifled by the Administrator to facilitate
the development of transferability of European currencies, or to
promote the liberalization of trade by participating countries with
one another and with other countries."



REPORT.ON OPERATIONS

47

EXCHANGE R A T E ADJUSTMENTS

The rates of exchange for the currencies of the world had been set,
for the most part, during the war and the period immediately following
it. With changes in price levels, production, and trade, these rates,
had become increasingly less satisfactory as means of bringing about
equilibrium in the balances of payments of the countries of the world
with each other and with the United States economy. While the
International Monetary Fund provided a mechanism for the orderly
adjustment of exchange rates, most countries had been reluctant to
change their rates until such time as they could briag about better
control of their internal flnances and until increased levels of production would enable them more easily to expand foreign trade. The
pressure for exchange rate adjustment had, accordingly, increased in
the postwar period and the need became greater with the slump in
international commodity trade in the course of 1949. The devaluation
of the pound sterling in September 1949 by 30.5 percent was followed
by the devaluations of many other currencies. The extent of the
adjustment varied from country to country as shown by the reports
of the National Advisory Council. (See exhibit 27, infra p. 309.)
The revaluation of currencies in relation to the dollar made possible
the adjustment of trade with the Western Hemisphere and so contributed to the reduction in the current dollar deflcits of other countries.
By the close of the flscal year trade had begun to increase again and,
in some instances, countries had increased their monetary reserves.
UNITED
FUND
AND

STATES PARTICIPATION
AND

THE

IN THE INTERNATIONAL MONETARY

INTERNATIONAL

BANK

FOR

RECONSTRUCTION

DEVELOPMENT

The National Advisory Council, established by the Bretton Woods
Agreements Act, continued to exercise its function of coordinating the
activities of the United States representatives on these international
bodies with the activities of the fiaancial agencies of the United States
Government. In accordance with law, the Council submitted its
semiannual reports and its Second Special Report (biennial) on the
Fund and the Bank (see exhibits 27, 28, and 29).
The International Monetary Fund has as one of its purposes "to
assist in the establishment of a multilateral system of payments in
respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of
world trade." The Articles of Agreement provide, however, for an
initial transitional period duriag which restrictions already in effect
can be continued. After 1952 the Fund must be consulted on the
907795—51

5




48

'19 50 REPORT OF THE: SECRETARY OF T H E TREASURY

retention of restrictions on' current account transactions. As one of
the steps in carrying out its responsibilities, the Fund presented its
first annual report on exchange restrictions (March 1, 1950) in accordance with the requirements of its Articles. Wliile this report regretfully notes the relatively slight progress made since the war in elinainating such restrictions, the Fund's comprehensive study of the. regulations in force is a step toward the realization of one of the Fund's
basic objectives.
.
The International Monetary Fund has coritinued to play an important role in advising its members on international exchange and
monetary problems. At the request of its members, it has sent missions to them and consulted with the governments in the adjustment
of exchange rates, currency controls, and exchange practices. The
exchange adjustments which took place in 1949 were made in accordance with the Fund's Articles and in agreement with the Fund, after
extensive studies of the problem by the member countries, as well as
the Fund. In view of the conditions which prevailed through this
period', the Fund's exchange transactions were relatively small. The
importance of its activities, however, should not be measured in
terms of the amount of currency sold, but rather in terms of the
Fund's influence on the development of a code of fair practice in the
fleld of international currency and exchange arrangements.
As shown iri greater detail in the reports of the National Advisory
, Council, the International Bank for Reconstruction and Development
expanded its loans in the course of the year, especially for economic
development programs, e. g., India, Mexico, Brazil, El Salvador, and
Iraq. In the course of the flscal year new loans aggregating $166.3
million (less cancellations of $7:4 million) were made by the Bank.
These loans were flnanced in large part from the United States subscription. The Bank has also floated its securities on the. United
States market and in January 1950 refunded an earlier issue of $100
million of its bonds and so reduced the cost of funds borrowed in our
markets. In the course of the year the Banl^ further expanded its
technical assistance activities in the member countries b}^ sending
missions to assist them in formulating development programs and to
supply technical assistance in other related flnancial matters.
T H E EXPORT-IMPORT B A N K OF WASHINGTON

The Export-Import|Bank bf Washington, as the agency of the
United States Government established to make foreign loans, has
consulted with the Council on proposed credits. During the flscal
year the Export-Import Bank authorized new credits totaling approximately $405.5 million, principally loans to Latin American countries




REPORT ON OPERATIONS

49

and Indonesia. The Bank also continued to administer the loans
under the Foreign Assistance Act of 1948, as amended,, on behalf
of the Economic Cooperation Administration.
;
T H E U N I T E D STATES-MEXICAN STABILIZATION AGREEMENT

In 1947 the Secretary of the Treasury made an agreement for the
stabilization of the Mexican peso-dollar exchange rate whereby
inter alia the Treasury undertook to purchase, on request, pesos
up to the equivalent of $50 million. In 1948 Mexico ceased to support
the par value of the peso. In June 1949, following the acceptance
by the International Monetary Fund of a new par value of 8.65
pesos to the dollar, the Secretary entered into a Supplemental Stabilization Agreement which added $12 million to the $13 million
remaining unutilized under the original agreement. Mexico did not
flnd it necessary to sell pesos to the Stabilization Fund under this
supplemental agreement. The experience of Mexico under the new
rate has been notably successful as indicated by the substantial
increase in its monetary reserves. On January 2, 1950, Mexico
repurchased pesos from the United States Stabilization Fund in, an
amount equivalent to $22 million, and, after the close of the flscal
year, an additional sum of pesos equivalent to $15 million. Thus
all of the pesos previously purchased by the Stabilization Fund have
been repurchased by Mexico. The Stabilization Agreement continues
in effect until July 1, 1951.
GOLD POLICY AND TRANSACTIONS

During the year the Treasury maintained without change its policy
of standing ready to buy gold at the official price of $35 per flne troy
ounce from all legal holders and also to sell gold freely, at the official
price, to foreign governments and central banks for all legitimate
monetary purposes. A handling charge of )^ of 1 percent is applied
to both types of transactions. ^The Treasury also continued to sell
gold for industrial, professional, and artistic purposes.
Concrete evidence of the improvement in the international financial
positions of other countries as a whole appeared during the fiscal
year in the monetary gold transactions of the Treasury. Iri the
fiscal years 1947, 1948, and 1949, net sales of monetary gold by
foreign countries to the United States Treasury totaled $1.8 billion,
$2.5 billion, and $1.0 billion, respectively. Net sales at such rates
could not have been kept up for very long. In the fiscal year 1950,
gross sales of gold to the United States decreased to $422.7 million,
and gross purchases of gold from the United States by foreign governments and central banks increased to $706.8 miUion, leaving a net




50

195 0 REPORT OF THE: SECRETARY OF THE TREASURY

movement to other countries of $284.1 milhon. The turning point
from a net movement of gold to the United States to a net movement
from the United States coincided with the currency devaluations in
September 1949, but the change at that time was a^' continuation
of trends toward increasing foreign purchases of gold from the United
States and decreasing foreign sales of gold to the United States,
which were already clearly in evidence.
The gold and short-term dollar assets of foreign countries (exclusive
of the Soviet Union and international organizations) dropped from
$19.9 billion on June 30, 1945, to $14.7 billion on June 30, 1949,
and then rose to $16.6 billion by June 30, 1950. Thus, in the last
year there has been some reconstruction of reserves on the part of
some countries, but it has not as yet progressed to the point where
most countries have reestablished reserves equal to those formerly
maintained. The gold stock of the United States on June 30, 1950,
was $24.2 billion.
ESTIMATES OF RECEIPTS

(On the basis of existiag legislation)
The Secretary of the Treasury is required each year to prepare and
submit ia his annual report to the Congress estimates of the public
revenue for the current fiscal year and for the fiscal year next ensuing
(Public No. 129, 59th Congress, February 26, 1907). The estimates
of receipts from taxes and customs are now made by the Treasury
Department each year on the basis of legislation existiag at the time
of making the estunates. The estunates of miscellaneous receipts
are prepared hi general by the agency deposituig the receipts in the
Treasury.
The details of estimated and actual receipts are shown in table
116, which includes receipts under proposed legislation. The term
"net budget receipts" as used ia this report has the same significance
as the term "budget receipts" used in the Budget document.
TOTAL AND N E T BUDGET R E C E I P T S

Net budget receipts are estiraated to be $44,511.9 million in the
fiscal year 1951 and $55,138.4 million in the fiscal year 1952. The
amount estimated to be received ia 1952 represents the all-time peak
in receipts and is $10,376.8 million greater than the previous record
of $44,761.6 million received in 1945. The estimated iacreases in
receipts in 1951 and 1952 result prunarily from the estimated large
increases in receipts from the corporation iacome and excess profits
taxes and the individual uicome tax.
Total receipts (daily Treasury statement'^basis), before deductions
for refunds and appropriation to the Federal old-age and survivors




RE.PO'RT ON

51

O'PE'RATIONS

insurance trust fund, are estimated in the amounts of $49,807.5
million in 1951 and $61,664.3 million in 1952. Both estimates
represent substantial increases over actual total receipts of $41,310.6
million in 1950.
As shown in the following table of percentage distribution, the
individual income tax and corporation income and excess profits taxes
continue to be by far t h e two most important sources of receipts.
The corporation tax remains the lesser of the two but shows a decided
gain in the fiscal year 1952. As a result of the large increases in
receipts from individuals and corporations, miscellaneous internal
revenue shows a decline percentagewise in both the fiscal years 1951
and 1952, although increasing in absolute amount for both years.
Employment taxes show a steady increase from 1949 principally as a
result of iacreases in the tax rates and coverage. Customs receipts,
although uicreasuig in absolute amounts, are estimated to decluie as a
percentage of total receipts in 1952. Miscellaneous receipts are
expected to decline percentagewise in both 1951 and 1952.
Percentage distribution of total receipts, by sources
Actual,
1949

Source

Actual,
1950

Estimated, Estimated,
1952
1951

42,0
27.0
19.5
5,8
,9
4,8

42.1
26.3
20.1
7.0
LO
3.5

43.3
27.2
18.0
. 7.6
L2
2.7

42.2
32,4
14.6
7.6
LO
2,2

100.0

Individual income tax
Corporation income and excess profits taxes
Miscellaneous internal revenue
Employment taxes i
Customs
Miscellaneous receipts

100.0

100.0

100,0

•..
_.

Totalreceipts
1 Includes Railroad Unemployment Insurance Act receipts.
FISCAL Y E A R

1951

Actual receipts in the fiscal year 1950 and estimated receipts in 1951
are compared by major sources in the following table.
•
Source

Actual,
1950

Estimated,
1951

Increase, or
decrease (—)

I» millions of dollars
Individual income tax
Corporation income and excess profits taxes
Miscellaneous internalrevenue
Employment taxes L
Customs..
Miscellaneous receipts

17.408.3
10.854.4
8.303.1
2,892.0
422.7
1.430.2

21, 599.0
13, 560.0
8,950.0
3,773.8
600.0
1,324,7

4,190.7
2, 705,6'
646.9
881.8
177.3
-105,6

Totalreceipts..
Deduct:
Appropriation to Federal old-age and survivors insurance
trustfund
Refunds of receipts .

41,310.6

49,807.5

8,496.9

2,106.4
2,169. 5

2,960.0
2,335. 5

853,6
176.0

37,044. 7

44, 511.9

• 7,467.2

Net/budget receipts

._._..

1 Includes Railroad Unemployment Insurance Act receipts.




52

1950 REPORT OF THE: SECRETARY OF THE TREASURY

Net budget receipts in the fiscal year 1951 are estimated to amount
to $44,511.9 million, an increase of $7,467.2 million over actual net
budget receipts in 1950. All major tax sources of receipts contribute
to the increase. The largest estimated increases are in the individual
income tax and corporation income and excess profits taxes.
Individual income taxes.—^^The details of the yield of the individual
income tax are shown in the following table.
Actual,
1950

Source

Estimated,
1951

Increase

In millions of dollars
Withheld
Not withheld.
Total individual income tax

.

_

10,073.2
7,335.1

13, 202.0
8,397. 0

3,128.8
1,061.9

17,408.3

21, 599. 0

4,190.7

Receipts from income tax withheld are estimated to iacrease sharply
as a result of an estimated increase in salaries and wages and the iacreased withholding tax rates enacted by the Revenue Act of 1950
which were increased effective October 1, 1950. Receipts from income tax not withheld are estimated to increase as a result of expected
higher levels of income and the increased tax rates effective on calendar
year 1950 incomes under the Revenue Act of 1950.
The Revenue Act of 1950 increased individual income tax liabilities
substantially for the calendar year 1951 and increased calendar year
1950 liabilities by approximately one-quarter of this amount. Individual income tax receipts not withheld for the fiscal year 1951
represent principally calendar year 1950 liabilities and therefore do
not refiect the full effect of the Revenue Act of 1950.
Corporation income and excess profits taxes.—Corporation taxes in
the fiscal year 1950 reflect iacomes of the calendar years 1948 and
1949, while receipts in the flscal year 1951 reflect iacomes of the
calendar years 1949 and 1950.
>
The substantial increase of $2,705.6 million in receipts estimated
for the flscal year 1951 over actual collections of $10,854.4 million in
1950 is attributable to several factors. Corporation iacomes in the
.calendar year 1950 were at a very high level. In addition, several
changes in the laws affecting income and excess proflts taxes on corporations will result in increased collections from this source.
The Revenue Act of 1950 iacreases tax rates on incomes for the
taxable year 1950 up to four percentage points. I t also provides
for an acceleration in corporation tax payments, which will result ia
a larger proportion of the 1950 tax liability being collected in the
fiscal year 1951. A second revenue measure, the Excess Profits Tax




53

REPORT OlS^ OPERATIONS

Act of 1950, approved January 3, 1951, reuistituted an excess profits
tax, which will affect approximately one-half of the 1950 iacome.
Miscellaneous internal revenue.—Collections from this source.by
major groups are listed in the following table.
^
Actual,
1950

Estimated,
•' 1951

Increase,
or decrease

(-)

Source
In millions of dollars
Estate and gift taxes
^.
Liquor taxes
..
Tobacco taxes
Stamp taxes
Manufacturers' excise taxes
Retailers' excise taxes
._
Miscellaneous taxes
Adjustment' to daily Treasury statement basis
Total miscellaneous internal revenue

706.2
2, 219. 2
1, 328. 5
84.6
1,826. 7
409.1
1, 721. 2
+7.5

710.0
2, 396.0
1,365.0
107.0
2, 088.0
455.0
1, 829.0

3.8
176.8
36.5
22.4
261.3
45.9
107.8
-7.5

8, 303.1

8, 950.0

646. 9

Estate and gift tax collections are estimated to increase slightly in
the fiscal year 1951. The large increase in estimated receipts from
the excise taxes in 1951 over actual receipts in 1950 refiects anticipated higher levels of income. Contributing to the increase are the
war-scare purchases a t t h e outbreak of the Korean conflict, especially
in the manufacturers^ excise taxes and liquor taxes. Collections
from the other excise taxes reflect current consumption trends.
Employment taxes.—Receipts from the various employment taxes
are summarized in the following table.
•

Actual,
1950
Source

Estimated,
1951

Increase

Inmillions of dollars
Federal Insurance Contributions Act
Federal Unemployment Tax Act
.-.
Railroad Retirement Tax Act
Railroad Unemployment Tnsnrancft Act i

2,106.4
226.3
550.2
9.1

2,960.0
239.0
565.0
9.8

853.6
12.7
14.8
.7

Total employment taxes.•
Deduct: Appropriation to Federal old-age and survivors insurance
trustfund

2, 892.0

3,773.8

881.8

2,106.4

2, 960.0

853.6

785.6

813.8

28.2

Net employment taxes..

1 Not classified as an employment tax under the Internal Revenue Code.

The estimated increase in employment tax receipts in the flscal
year 1951 is attributable primarily to the increase in receipts under
the Federal Insurance Contributions Act. Receipts from this tax
reflect the full-year effect of the iacrease in the tax rate from 1 percent
to IK percent each on employer and employee, effective January 1,
1950; and, in addition, collections in the latter part of the flscal year
1951 will be affected by two important changes effective January 1,
1951. These are an uicrease in the tax base limitation from $3,000
to $3,600 and a signiflcant extension of coverage. Receipts from all




54

1950 REPORT OF THE: SECRETARY OF THE: TREASURY

employment taxes are expected to increase because of anticipated
higher salaries and wages..
Customs.—Customs receipts are estimated to amount to $600.0
million in the> flscal year 1951, an increase of $177.3 iriillion over actual
receipts of $422.7 million in 1950.
Miscellaneous receipts.—Miscellaneous receipts are estimated to be
$1,324.7 million in the flscal year 1951, a decrease of $105.5 million
from 1950.
Refunds of receipts.—Refunds of receipts are estimated to be
$2,335.5 milhpn in the flscal year 1951 as compared with $2,159.5
million in 1950.
FISCAL YEAR

'

1952

Estimated receipts in the flscal years 1951 and 1952 are compared
by major sources in the following table.
Estimated, Estimated,
1951
1952

Increase

Source
In millions of dollars
Individual income tax
Corporation income and excess profits taxes..
Miscellaneous internal revenue
.
Employment taxes i
_
Customs.
Miscellaneous receipts...

21, 599.0
13, 560.0
8, 950. 0
3, 773.8
600.0
1, 324. 7

26, 025.0
20, 000.0
8, 977. 0
4, 709.0
620.0
1, 333.3

4, 426.0
6, 440. 0
27.0
935.2
20.0

Totalreceipts
.„
Deduct:
Appropriation to Federal old-age and survivors insiirance trust
fund
Refimds of receipts
:...

49,807. 5

61, 664. 3

11, 856. 8

2,960.0
2, 335. 5

3, 823. 0
2, 702.9

863.0
367.4

44, 511.9

55,138.4

Net budget receipts..

10, 626. 5

1 Includes Railroad Unemployment Insurance Act receipts.

Net budget receipts ia the flscal year 1952 are estimated to amount
to $55,138.4 million, an iacrease of $10,626.5 million over 1951 and
$10,376.8 million greater than the previous peak year of 1945. All
major sources of receipts contribute to the increase, with the largest
increases appearing in corporation income and excess proflts taxes and
iadividual iacome taxes.
Individual income taxes.—The detail of the yield of the iadividual
income tax is shown ui the following table.
Estimated, Estimated,
1951
1952

Source

Increase

In millions of dollars
Individual income tax:
Withheld...
Not withheld
Total individual income tax




.....
_

_

•

13,202.0
8,397.0

16,358.0
9,667.0

3,156,0
1, 270.0

21, 599.0

26,025,0

4,426.0

55

REPORT ON OPERATIONS

Receipts from income tax withheld are estimated to increase by
$3,156.0 million in 1952, principally because of an estimated increase
in the level of salaries and wages for 1952. In addition, the flscal
year 1952 reflects a whole year of withholdings at the increased rates
of the Revenue Act of 1950 which are effective for approximately
three quarters of the flscal year 1951. Income tax not withheld
increases as a result of the higher level of income and the higher rates
imposed by the Revenue Act of 1950, which are fully effective on the
incomes reflected in flscal year 1952 receipts.
Corporation income and excess profits taxes.—Corporation income
and excess proflts taxes are estimated to amount to $20,000.0 million
in the fiscal year 1952, an increase of $6,440.0 million over 1951.
The large increase in estimated receipts arises from the higher level of
corporate profits and from the progressively greater effects of changes
embodied in the Revenue Act of 1950 and the Excess Profits Tax
Act of 1950.
' The Revenue Act of 1950 increases the combined normal and surtax
rates on calendar year corporations from 42 percent of 1950 net income
to 45 percent of 1951 net income. The Excess Profits Tax Act of 1950.
increases the corporation surtax rate by an additional 2 percent for
taxable years beginning on or after July 1, 1950.
The impact of the excess profits tax wiU also become progressively
greater on calendar year 1951 incomes. In the calendar year 1950 the
taxis proportionate to the partof the taxable year after June 30,1950,
whereas all iacome for the calendar year 1951 is taxable.
Collections from both the iacome tax and the excess profits tax in
the fiscal year 1952 will also be increased by the continued acceleration
of instaUment payments provided in the Revenue Act of 1950.
Miscellaneous internal revenue.—Collections from this source by
major groups of taxes are shown in the table following.
Estimated, Estimated,
1961
1952

Source

Increase, or
decrease (—)

In millions of dollars
Estate and gift taxes
Liquor taxes
Tobacco taxes
Stamp taxes
Manufacturers' excise taxes
Retailers' excise taxes
Miscellaneous taxes

.._

Total miscellaneous internal revenue

_.

.

___

45,0
173.0
26.0

710.0
2,396,0
1,365,0
107,0
2,088.0
456.0
1,829,0

_.
_

.

. 765.0
2,569,0
1,391,0
107.0
1, 757.0
497.0
1,901,0

-331,0
42.0
72.0

8,950.0

8,977.0

27.0

All major groups except manufacturers' excise taxes and stamp
taxes contribute to the iacrease ia estimated receipts from miscellaneous iaternal revenue for the fiscal year 1952. Manufacturers'




56

1 9 5 0 REP0R:T OP T H E SECRETARY OF THE TREASURY
.

excise taxes are estimated to decline sharply as a result of expected
material shortages. Other excise tax groups iacrease generally as a
result of an anticipated increase in levels of uicome. Estate and
gift tax collections are estimated.to continue to increase.
Employment taxes.—The yields of the various employment taxes
under existing legislation are shown in the following table.
Estimated,
1951

Estimated,
1952

Increase

Source
I n millions of dollars
Federal Insurance Contributions Act
Federal Unemployment Tax Act
Railroad Retirement Tax Act..
Railroad Unemployment Insurance Act i

..

.. .. .

T o t a l e m p l o y m e n t taxes
.
..
..
.
. .
D e d u c t : A p p r o p r i a t i o n to F e d e r a l old-age a n d survivors insm-ance
t r u s t fund
..
..

2,960.0
239.0
565.0
9.8

3, 823.0
263.0
613.0
10.0

863,0
24.0
48,0
.2

3, 773. 8

4, 709.0

935.2

2, 960.0

3, 823,0

863.0

813. 8

886,0

72.2

Net employment taxes...

1 Not classified as an employment tax under the Internal Revenue Code.

Receipts from employment taxes in the fiscal year 1952 are estimated to increase over fiscal year 1951 receipts as a result of higher
levels of salaries and wages, of the full-year effect of the iacrease ia
the tax base limitation from $3,000 to $3,600, and of the extended
coverage under the Federal Insurance Contributions Act effective
January 1,. 1951. An additional factor is that receipts in the fiscal
year 1952 will reflect for the flrst time collections from the self-einployed category of the new coverage. •
Customs.—Customs receipts are estimated to be $620.0 million in
the flscal year 1952, an increase of $20.0 million over 1951.
- Miscellaneous receipts.—^Miscellaneous receipts are estimated at
$1,333.3 million in the flscal year 1952, approximately the same as
1951.
Refunds of receipts.—Refunds of receipts in the flscal year 1952 are
estimated to increase to $2,702.9 milhon from $2,335.5 million in 1951
as a result of the higher level of withholding tax receipts in the calendar
year 1951.
ESTIMATES OF EXPENDITURES

Actual expenditures for the flscal year 1950 and estimated
expenditures for the flscal years 1951 and 1952 are summarized in the
following table. Further details will be found ui table 116. The
estimates are based upon flgures submitted to the Congress ia the
Budget for 1952.




57

KEPORT ON OPE'RiATTONS

Actual budget expenditures for the fiscal year 1950 and estimated expenditures for
1951 and 1952 i
[In millions of dollars. On basis of 1952 Budget document]
Actual, Estimated, Estimated,
fiscal year fiscal year fiscal year
1950 2
1951
1952
Agriculture Department:
Commodity Credit Corporation
Other
....._..
Atomic Energy Commission
....
Civil Service Commission
Commerce Department:
Maritime activities
Other
Defense Department:
Military functions..
Civil functions...
Export-Import Bank of Washington
.
Federal Civil Defense Administration
Federal Security Agency
Fuiids appropriated to the President:
Economic Cooperation Administration
Mutual defense assistance
Mutual assistance, military and ecdnomic.
Other
General Services Administration:
strategic and critical materials..
Other...-.
1-.
Housing and Home Finance Agency 3
Interior Department.
Labor Department
Philippine War Damage Commission
Post OflB.ce Department (generalfund)
Railroad Retirement Board.
..
Reconstruction Finance Corrio'ration 3
.
State Department
1
Tennessee Valley Authority
Treasury Department:
Interest on the public debt
Other
-.
Veterans' Administration
.'.
Reserve for contingencies
Allother
,1
Adjustment to daily Treasury statement basis.
Total budget expenditures..

1, 674.4
1,284.4
550.2
323.4

-149. 5
1,332.3
817.6
325.6

253.4
1,375.9
1, 277.0
343.2

99.8
763.3

• 766.1

364,0
761.9

11, 889.1
1,344.7
49.2

40,000.0
856.9
105.6
265.0

1, 443. 6

20,000.0
1,064.0
100.6
10.0
1, 736. 6

3, 404. 5
39.1

2, 600. 0
1, 000.0

1, 200.0
2, 500.0
3,000.0
1, 636.8

2,164. 6

183.4

554.8

438.0
136.4
-305. 0
568.4
257.0
136.3
592.7
596.3
556.5
361.2
19.2.

900.0
216.3
305.4
704.4
217.8
89.0
631.8
605.1
-79.1
353.4
170.6

1,300.0
360.9
-568.1
609.9
220.8

5, 720.4
676.0
6, 626.1

6, 625.0
774.5
5, 820.4
45.0
484.2

5,800.0
739.7
4, 912.7
175.0
522,0

47,210.5

71, 594.3

408.7
-+-329.6
40,166.8

160,0
656.0
22.7
871.9
236.6

1 These figures are derived from the 1952 Budget document. The actual figures for thefl-scalyear 1950
are based upon the Treasury's Combined Statement of Receipts, Expenditures and Balances, and therefore
differ from figures published ui the daily Treasury statement.
2 Includes $11.0 million representing net investment in Federal securities by wholly owned Government corporations and agencies; such transactions are excluded from budget expenditures in the fiscal
years 1961 and 1962.
3 The Federal National Mortgage Association was transferred from the Reconstruction Finance Corporation to the Housing and Home Finance Agency, eflective Sept. 7,1950.







ADMINISTRATIVE




REPORTS

59




ADMINISTRATIVE MANAGEMENT

The importance of improving the admiaistration of the Government was reaffirmed on July 29, 1949, when the President issued
Executive Order 10072, calling for aggressive, systematic appraisal
and improvement of operations. Shortly after, on August 9, the
Secretary of the Treasury assigned to the Treasury Department
Management Committee responsibility for advisiag and assisting
him in carryiag out the directives of the Executive order and accelerating the Department management program established in 1946.
Supportiag the work of this Committee are the management committees of the several offices. The Department program has been
directed toward reducing costs, iaiproving efficiency, and giviag
better service to the public. While many diverse, technical changes
in management and operating procedures are involved, they amount
Ul the aggregate to substantial savings ia terms of dollars. In many
instances these saviags are recurring and cumulative.
Summarized here are some of the management developments in the
Treasury Department which have occurred during the year. These
will iadicate the progress made duriag 1950 on the foimdation described ia the 1949 annual report on pages 35 through 58. The
administrative reports of the individual organizations of the Department integrate management unprovements with their operations
(pages 65 through 136).
Of Government-wide scope is the contiauiag work on the program
to hnprove Federal accountiag and financial reportiag. This project
was announced joiatly ia January 1949 by the Secretary of the
Treasury, the Comptroller General of the United States, and the
Director of the Bureau of the Budget, who are directiag the undertakiag. In addition to establishiag ia all departments and agencies
accountiag and reporting principles and standards suited to the
Government's requirements, objectives iaclude the strengtheniag of
the facilities ia the Treasury as the center for current accountiag
and over-all'financial reports; makiag available for executive and
legislative purposes more iaformative financial data at lower accounting costs; improviag budgetary processes; and improving audit and
control.
Legislation to provide a modern budget, accountiag, and audit
law was iatroduced and considered by the Congress during the fiscal
year. The measure did not become law, however, until September
12, 1950. This law, the Budget and Accounting Procedures Act of
1950 (see exhibit 36), was cited by the President as the most important
piece of legislation ia its field since the Budget and Accountiag Act,
1921, was enacted almost t h h t y years before. The new law assigns
important responsibilities to the General Accounting Office, Bureau
of the Budget, Treasury Department, and every other executive
department and agency in the related fields of budgeting, accounting,
financial reportiag, ahd auditing. While the law makes a clear
division of responsibilities and duties, it provides for their exercise
in proper relationship and in harmony with the common objectives




61

62

195 0 REPORT OF THE« SECRETARY OF THE TREASURY

of achieviag an iategrated system for the Government. Significant
features of the legislation are the followiag: (1) Recognition is given
to the joint accounting program of the General Accountiag Office,
Treasury Department, and Bureau of the Budget as a permanent
function, (2) a performance type of Budget is called for with considerable latitude for the President to determiue the form ui which
the Budget shall be presented, (3) the prescribiag of accounting
requirements, by the Comptroller General is to be largely on the basis
of priaciples, standards, and related matters of fundamental importance rather than detailed procedures, (4) the responsibility for
establishiag and maintaining systems of accounting and iaternal
control, which will fulfill certaia specified needs, is placed dh-ectly
with each executive agency, (5) responsibility is placed on the Secretary of the Treasury to furnish over-all reports on the results of the
financial operations of the Government and to organize the Treasury
Department's accounting and reporting in a manner to provide an
operating center for that purpose, (6) authority is given the Secretary
of the Treasury and Comptroller General jointly to modify procedures
which iavolve the issuance and countersignature of warrants for the
receipt, retention, and disbursement of public moneys and trust,
funds, in the interest of simplification and economy, (7) authority is
given the Comptroller General to discontinue ui the General Accountuig Office appropriation, expenditure, limitation, receipt, and personal
ledger accounts, (8) authority is given the Comptroller General to
make comprehensive audits at the site of operations and leave documents supportiag financial transactions with the agencies whose
accounts are audited, and (9) authority is given to the heads of
executive agencies to decide where the administrative examination of
fiscal officers' accounts will be performed and for the Comptroller
General, ia appropriate circumstances, to waive the requirement for
such examinations.
Within the Treasury Department, revisions of fiscal and accounting
systems in accord with this program were under way in several large
organizations. In the Bureau of Engraving and Printing the industrial nature of the operations makes them ideally suited to businesstype procedures and to a working-capital method of financing.
Substantive legislation for this purpose was obtained by the passage
of Public Law 656, Eighty-First Congress, approved August 4, 1950.
Although this law does not take effect until July 1, 1951, the new
system of accounting and budgeting required will be installed during
the fiscal year commencing July 1, 1950. Under the new system the
Bureau of Engraving and Printing will recover all its costs of operation from the agencies which it services in producing currencies,
securities, stanips, and other classes of engraved work.
A modern accounting system was established in the Coast Guard
Headquarters on October 1, 1949, and a pilot installation was made
in the 5th Coast Guard District (Norfolk) on March 1, 1950. Based
on the results of this experiment, installations were scheduled in five
other districts on July 1, 1950, in five more on September 1, 1950, and
in the last (Honolulu) on January 1, 1951. A commer cial-type
accounting system was being installed at the Coast Guard Yard at
Curtis Bay, Maryland, on July 1, 1950. This system is designed to




ADMINISTRATIVE REPORTS

63

-charge against work orders performed the direct costs and the proportionate share of overhead expenses including depreciation and
military personnel. Completion of the new system at the Yard was
expected by March 1951.
The entire accounting program in the Coast Guard has been conducted with the active cooperation and assistance of representatives of
the joint program for improvement of accounting in the Federal Government. Full time staff representatives have been provided by the
Accounting Systems Division of the General Accounting OflHice and
the Bureau of Accounts of the Treasury Department. Many innovations have been effected which required approval of the Secretary
of the Treasury and the Comptroller General. Certain of these are
being tested in the Coast Guard with a view to general adoption
throughout the Federal Government.
The 1949 annual report explained that the survey of a private management engiaeering flrm, completed in January 1948, was made the nucleus
of a Customs management improvement program. For the purpose
of implementing the flrm's recommendations in the accounting and
auditing fleld, a complete review of the accounting system of the
Bureau of Customs was made from the standpoint of the joint accounting program which is beiag carried forward under the leadership of
the General Accounting Office, Treasury Department, and Bureau
of the Budget. This review was completed in January 1949 and
resulted in a recommendation for a somewhat revised system of
accountiag and internal control with respect to the revenue collecting
activities of the Bureau of Customs. The proposed new system is
being carefully analyzed and considered by the Bureau of Customs
from the management standpoint.
In liae with the beginning made in the 1951 Budget in developing
a ^'performance budget" for the entire Government, a program was
undertaken in the Treasury Department to install this type of budget
in its bureaus, oflGi.ces, and divisions. This budget analyzes the cost
of each activity in relation to its essential purpose and its relative
ioiportance. As one means of attaining such a budget, several
bureaus have established a performance reporting system which makes
available appropriate management data.
In the Bureau of Internal Revenue the audit control program was
iastituted in 1950. This program, designed to increase compliance
with the revenue laws, employs a sampliag technique to determiue
the over-all pattern of error ia tax returns. Duriag 1950, the program was confined to individual income tax returns for the year 1948,
but Ul 1951 it will be directed to business-income and certain excise
returns for 1949. The study of samples of the 1948 individual income
tax returns revealed that (a) errors in tax liability, excludiag those
of less than two dollars, were foimd ia 14 million out of 52 million
returns; (b) 91 percent of the "errors" were against the Government;
(c) understatements ia iadividual income tax aggregated $1.3 billion,
overstatements $90 million; and (d) the major sources of errors iu
the 14 million defective returns were iacome reported iacorrectly, 54.9
percent, personal deductions reported incorrectly, 23.4 percent, exemptions claimed improperly, 16 percent, and mathematical errors,
only 5.6 percent.
Continuiag from last year's activities, procedures throughout the
907795—51

6




64

1 9 5 0 REPORT OF THE SIECRETARY OF T H E TREASURY

Treasury Departmeat were further improved and siaiplified during
1950 with some of them crossing bureau and agenc}^- lines.
Duriag 1950, the Fiscal Service, working through the Fiscal Service
Management Committee, effected management saviags totaliag more
than $6 million, includiag saviags resultiag from unprovements
initiated during the period 1947-49. Among the improvements
adopted by the Fiscal Service were several in the Bureau of Accounts.
One of these, a change in the form in which check accountuig material
is prepared b37- the Division of Disbursement, has expedited the
reconciliation by the General Accounting Office of checking accounts
of the Chief Disbursiag Officer and Regional Disbursing Officers.
The securing of lists of outstandiag checks at ah earlier date facilitates
the handling of check inquiries. The more current reconciliation has
reduced the niunber of requests for stopping payment, to the benefit of
the Division of Disbursement, the General Accounting Office, and
the Federal Reserve Banks. Earlier advice as to differences in the
depositary account is now available and necessary adjustments are
thereby accelerated.
In the Bureau of the Public Debt the reduction of five regional
oflices to three resulted ia an annual saviag of $250,000. In the Office
of the Treasurer of the United States the payinent of Government
checks is the operation havmg the greatest personnel requirements.
Cost and production analyses of this operation resulted in reductions
in the unit salary costs for processiag paper checks and card checks
paid in Washington, D . C , of 3 percent and 10 percent, respectively,
and 9 percent on card checks paid through the Federal Reserve Banks.
Effective January 1, 1950, the depositary receipt procedure was
extended by the Bm-eau.of Internal Revenue, in cooperation with
the Fiscal Service, to cover employment taxes, as well as income
taxes. Provision was made for payment to the Federal Reserve
Banks either directly or through commercial banks. This change
makes these funds available on a more current basis for investment
by the Federal old-age and sm-vivors insurance trust fund. Before
the new procedure was established, commercial banks were compensated for* accepting deposits and issuing receipts for withheld taxes.
For the half year the new procedure was in operation, savings from
elimination of compensation to the commercial banks amounted to
$500,000. In addition the Bureau of Internal Revenue was able to
reduce costs through the use of one combined form and one audit
for the two kinds of taxes.
Customs procedui:'es likewise were simplifled during the year. On
an international basis, technical discussions were held of customs
procedm-es and laws affecting trade am,ong 11 countries. A meeting
of customs and foreign trade experts of Britain, Canada, and the
'United States was held from October 31 through November 8, 1949.
Subsequently, similar discussions were held with representatives of
eight additional countries. Information was exchanged on customs
practices, and techniques were explored for classiflcation and valuation of merchandise, assessment of penalties, marking requirements,
accounting and auditing, sample-weighing and testing, and treatment
of currency exchange practices. The elimination of consular invoice
requirements for a substantial portion of imports was announced by
the Commissioner of Customs on March 24, 1950, and a new customs




ADMINISTRATIVE REPORTS

65

duty bond to expedite clearance of merchandise was provided, to go
into effect July 15, 1950.
Legislation was drafted and introduced in Congress to modernize
and simplify United-States customs requirements beyond the present
limits of adniinistrative action.
Mechanization of operations throughout the Department was continued, with a resulting saving of time and money. The use of electronic devices was expanded. Microfflming in the offices of the
Collectors of Internal Revenue of 163 'million income tax index cards
and S.S million tax retm'ns released for other use large numbers of
flling cabinets as^well as floor space^having^a substantial annual rental
value. . The modernization of the intaglio presses in the Bureau of
Engraving and Printing ultimately Vill increase the output of currency by approximately 30 percent. Savings are estimated at over
$1 million a year. Modern machines instaUed in the Miats have
effected great savings in hand labor and in costs.
Decentralization of certaia activities of the Bureau, of Internal
Revenue and cerotain delegation of authority have resulted in a substantial reduction in the number of employees in Washington. In
the fleld, on the other hand, by temporary centralization the clerical
facilities of one office were used for a mass mailing for seven large •
collection districts. This procedure is to be expanded to handle
forms for 37 collection districts and 42 million taxpayers.
A number of bureaus have initiated higher recruiting standards and
comprehensive training programs. The Treasury Department's incentive program, designed to increase efficiency by stimulating employee participation in management, is twofold. Cash awards are
paid to employees for operating improvements which result in monetary savings. This new program was established by authority of
Public,Law 429, 81st Congress, approved October 28, 1949. Second,
honorary recognition is granted for exceptional or meritorious service.
Provisions for these awards are contained in Treasury Department
Order No. 79, dated March 28, 1950.
As the fiscal year closed one of the new awards was granted to a
group of 54 employees in the Division of Disbursement, Bnreau of Accounts, for efficiency in the tremendous job of issuing checks for the
national service life insurance dividends. An estimated savings
of $158,000 were attributed to the work of this group and cash awards
totaled $1,500. In addition, there were twenty individual awards
during the year throughout the Department for superior accomplishment. Six employees received exceptional civilian service medals
and emblems. Under the cash awards program, there were 2,939
employee suggestions during the year. Of the number acted upon,
915 merited adoption. Of those adopted, 783 were.considered eligible
for cash awards totaling $16,355. Savings accruing to the Department from the suggestions adopted were estunated at $252,000.
BUREAU OF THE COMPTROLLER OF THE CURRENCY i
The Bureau of the Comptroller of the Currency is responsible for
the execution of laws relating to the supervision of national banking
associations. Duties of the office include those incident to the forma1 More detailed information concerning the Bureau of the Comptroller of the-Currency is contained in
the annual report of the Comptroller.




66

1950 REPORT OP THE SIECRETARY OF THE TREASURY

tion and
lishment
of State
preferred
.

chartering of new national banking associations, the estabof branch banks, the-consolidation of banks, the conversion
banks into national banks, the issuance and retirement of
stock, and the issuance of Federal Reserve notes.

CHANGES IN THE CONDITION OF ACTIVE NATIONAL BANKS

The total assets of the 4,977 active national banks in the United
States and possessions on June-30, 1950, amounted to $89,937 million,
as compared with the total assets of 4,993 banks amounting to $85,099
million on June 30, 1949, an increase of $4,837 million during the
year. The deposits of the banks in 1950 totaled $82,660 million,
which was $4,208 million more than in 1949. The loans and securities
totaled $68,917 million, an increase of $5,209 million during the year.
Capital funds of $6,195 million were $367 million more than in the
preceding year.
The assets and liabilities of the active national banks are shown in
the following statement.
Abstract of reports of condition of active national banks on the date of each report
from June 30, 1949, to June SO, 1950
[In thousands of dollars]
June 30,1949 Nov. 1,1949 Dec. 31,1949 Apr. 24,1950 June 30,1950
(4,988
(4,981
(4,982
(4,993
(4,977
banks)
banks)
banks)
banks)
banks)
•

ASSETS

Loans and discounts, including overdrafts. 22, 578,120 23, 438, 583 23, 928, 293 24,135, 464
U. S. Government securities, direct obligations
36, 595, 411 38, 332,370 38, 268, 473 37, 611, 919
Obligations guaranteed by U. S. Government
_
2, 060
2, 087
, Obligations of States and political subdivisions
_
3, 410, 267 3, 718, 789 3, 747, 200 4,188,866
Other bonds, notes, and debentures
1,959, 419 2, 027, 769 2, 023, 642 2,053, 616
Corporate stocks, including stocks of Federal Reserve Banks
:
162, 609
166,486
169, 639
166, 216
Total loans and securities.

68,707,918

Cash, balances with other banks, including,
reserve balances, and cash items in process of collection..
.
20,376,181
Bank premises owned, furniture and fixtures
587,617
Real estate owned other than bank premises
12,351
Inyestrnents and other assets indirectly
representing bank premises or other real
estate
__
_.
48, 414
. Customers' liabihty on acceptances....
75,325
Income accrued but not yet collected
150,161
Otherassets
141,488
Totalassets.-




_

86, 099, 450

24, 671,880
37, 649, 227
2,019
4, 294,138
2,127,187
172, 098

67, 682,727

68,186,048

68,159, 604

68,916,549

19,676,846

21, 044, 958

18,'876, 766

19, 962,172

601,720

599,582

611,428

613,526

12, 725

12,184

14,383

14, 593

• 50, 992
83, 416
196,139
146, 609

61,831
106, 421
166, 663
121, 507

51,856
79,169
170,393
112,369

54,442
90, 312
172,621
112, 497

88; 449, 073

90, 239,179

88,075,858

89, 936, 612

67

ADMINISTRATIVE REPORTS

Abstract of reports of condition of active national banks on the date of each report
from June SO, 1949, to June SO, 1950—Continued
[In thousands of dollars]
June 30,1949 Nov. 1,1949 Dec. 31,1949 Apr. 24,1960 June 30,1950
(4,993
(4,988
(4,981
(4,982
(4,977
banks)
banks)
banks)
banks)
banks)
'

LIABILITIES

Demand deposits of individuals, partnerships, and corporations
Time deposits of individuals, partnerships,
and corporations
Deposits of U. S. Government and postal
savings
_
Deposits of States and political subdivisions
Deposits of banks
Other deposits (certified and cashiers'
checks, etc)
Total deposits

44,470,804

46,415, 997 47,362, 731

19,008,719

18, 935, 621 18, 954, 970 19,149,165

46,161, 980

46, 787, 942
19,218,390

2, 025, 538

2,030, 693

1,944,094

2, 402,109

5,398,970
6, 946,245

6,182, 966
7, 717,139

6, 423, 285
8,279, 678

5, 367, 726
7,196, 001

6, 683, 478
7,363, 254

1,175, 252

1,105, 524

1, 302, 961

1,081,308

78, 451, 468 81, 382, 786 83,344,318

_

1, 461,478

80,880, 273

82, 659, 791

Demand deposits
58,367, 215
20,084,258
Time deposits..
_
Bills payable, rediscounts, and other liabilities for borrowed money
14,123
Mortgages or other liens on bank premises
and other real estate
_
274
Acceptances outstanding
_
83,860
Income collected but not yet earned
.
116, 661
Expenses accrued and unpaid. _
225, 396
Otherliabilities
379, 765

1, 204, 618

63, 293,252
20, 051,066

60, 645,433
20,234,840

62,299, 629
20, 860,162

170, 075

7,662

76,171

24, 783

260
123, 927
138, 910
231, 581
458,280

249
86,450
166,813
265,192
554,153

244
98,880
165, 606
248, 282
544, 059

79, 271, 547 82, 464, 962 84, 304,838

Totaliiabilities

61,374,688
20,008,102

82,019,301

83, 741, 545

260
96, 579
135, 279
272, 400
408, 684

CAPITAL ACCOUNTS

Capitalstock
,
Surplus
_.
. Undivided profits
Reserves and retirement account for preferred stock
Total capital accounts

...

1, 907, 958
2, 606, 653
1, 084, 283
329, 009
5,827, 903

1, 913, 907
2, 621, 377
1, 213, 773
335,064
5, 984, 111

1, 916, 340
2, 639, 440
1,067, 664
310,897
6, 934,341

1, 943,108
2, 680,807
1,121,893
310, 749
6,066, 657

Total liabilities and capital accounts. 85, 099, 450 88, 449,073 90, 239,179 88, 075,858

1, 979, 941
2, 770, 630
1,133,190
311,306
6,195, 067
89,936,612

SUMMARY OF CHANGES IN N U M B E R AND CAPITAL STOCK OF NATIONAL
BANKS

The authorized capital stock of the 4,979 national banks ui existence
on June 30, 1950 (including 2 banks that had discontiaued busiaess
although not ia formal liquidation as of that date), consisted of common stock aggregating $1,964 million, an uicrease during the year of
$78 million; and preferred stock aggregathig $17 million, a decrease
duriag the year of $6 million. The total net iacrease of capital stock
was $72 million. Duriag the year charters were issued to 15 national
banks haviag an aggregate capitalof $3 million of common stock only.
There was a net decrease of 15 in the number of national banks in the
system by reason of voluntary liquidations and statutory consolidations.




68

1 9 5 0 REPORT OF T H E SIECRETARY OF T H E TREASURY

More detailed iaformation regarding the changes in the number and
capital stock of national banks in the fiscal year 1950 is given in the
following table.
Organisations, capital stock changes, and liquidations of national banks, fiscal
year 1950
Number
of banks

Charters in force June 30, 1949, and authorized capital
^ stock 1
...
Increases:
Charters issued..
_.:
Capital stock:
130 cases by statutory sale
250 cases by statutorv stock dividend
...
33 cases by stock dividend under articles of association
10 cases by statutory consolidation
.^
2 cases by increase in par value of stock Total increases ..

.

15

Common

$1, 885,616,492

Preferred

$22, 566, 975

2,875,000
40, 014,850
" 37,032,070
1, 887, 375
1,818, 500

156, 500
616, 000

15

83,627, 795

772, 500

26
4

__ . . _

Decreases:
Voluntary liquidations
Statutory consolidations
Capitalstock:
82 cases by retirement
2 cases by statutory reduction
Total decreases.-

4,994

Capitalstock

5, 530, 000

280, 000

82,000

6,492,282

Charters in force June 30, 1950, and authorized capital
stock 1
._
,

30

5, 612, 000,

6, 772,282

-16

..

Net change

78, 015, 795

- 6 , 999, 782

4,979

1, 963,631,287

16, 567,193

1 These figures differ from those shown in the preceding table. June 30,1949, figures include 1 bank with
common stock, that was chartered but not open for business on. that date. June 30,1950, figures include
2 banks that had discontinued business but were not in formal liquidation on that date.

BUREAU OF C U S T O M S

The principal functions of the Bureau of Customs are to enter and
clear vessels; supervise the discharge of cargo; ascertain the quantities
of imported merchandise,-appraise and classify such merchandise, and
assess and collect the duties thereon; control the customs warehousing
of imports; inspect international traffic by vessel, highway, railway,
and air; review protests against the payment of duties; determine and
certify for payment the amount of drawback due upon the exportation
of articles produced from duty-paid or tax-paid imports; prevent
smuggling, undervaluations, and frauds on the customs revenue; issue
documents and signal letters to vessels and prepare publications and
reports in connection therewith; apprehend violators of the customs
and navigation laws; enforce the Antidumping and Export Control
Acts; and perform certain duties under the Foreign Trade Zones Act.
MANAGEMENT PROGRAM

Management improvement efforts in the Bureau were again directed
into the five areas covered by the program in 1948 and 1949, and the
savings in 1950, both monetary and manpower, were used to cope
With the continuing increase in Customs business.




ADMINISTRATIVE REPORTS

^

69

Trade agreement activities.—-The Bureau participated in the Annecy
Trade Agreement conference which extended the General Agreement
on Tariff's and Trade to ten new countries; and, in cooperation with
the Department of State, reviewed the proclamations issued in connection with the Annecy and other trade agreements. The Bureau
cooperated with the Tariff Commission also in the preparation of a
schedule of all United States import duty rates in force on July 1,
1950, for publication by the Commission.
Aids to trade.—Following the Tripartite economic conference, the
Bureau carried on discussions of procedural problems aff'ecting trade
with representatives of the United States, Great Britain, and Canada^,
and subsequently with representatives of eight other foreign countries
who had similar problems. These discussions pointed up the difficulties experienced by exporters to the United States, and it is believed
were of great benefit to the United States and to the participating
foreign governments in their efforts to facilitate world commerce.
Procedure simplification.—The use of scientific control weighing and
testing procedures, which were adopted in 1949 for sugar, wool, and
tobacco, was extended to other products in 1950, and resulted in
savings of more than twice the amount which had been estimated.
The system of joint Customs-Immigration preliminary questioning
of pedestrian and vehicular traffic at land border ports was extended
during 1950 and now is installed on both Canadian and Mexican
borders. With a single Government official performiag these duties
for both the Customs and Immigration Services, substantial savings
to each organization resulted, as well as better service to the traveling
public.
Q
A modification in customs regulations relieves importers in many
cases from the necessity of supplyiag certified consular invoices on
several significant categories of importations.
A new customs duty bond and new bonding procedures for import
transactions, promulgated late in.the fiscal year 1950, will simplify
the methods for payment of duties found owing to the Government
after the merchandise has left Customs custody and will permit speedier release from Customs custody of packages retained for examination.
In line with the over-all training program of the Bureau, indoctrination of supervisors in work simplification techniques was completed
during 1950,
Public educational aids.—The pamphlet. Customs Information for
Exporters to the United States, was completed during 1950 and its
initial distribution received widespread approval. As in the case' of
Customs Hints, every effort is being made to widen its distribution.
I t has already been translated into 5 foreign languages.
Public response to Customs invitation to visit its local offices in
order to present and discuss problems far exceeded expectations.
Other management control measures.—During 1950, additional
authority and responsibility were delegated to the field offices with
respect to fiscal and budgetary operations and in connection with the
functions directly related to the processing of imported merchandise.
A scientific analysis to determine the number of bales of wool which
would have to be sampled in order to accurately gauge the clean
content resulted in a reduction in the required number of such bales
to be sampled.




70

195 0 REPORT OF THE SECRETARY OF THE TREASURY

Preparatory work was completed ''during'^, 1950 [on the legislative
changes required to place ia effect many management improvement
recommendations, and the Customs Simplification Act of 1950 was
iatroduced ia Congress ia May 1950. As of the close of the fiscal
year, no action had been taken on the bill.
Proposed legislation to revise, consolidate, and codify the navigation
laws administered by Customs will be submitted to Congress hi the
near future. This legislation is designed to facilitate the admiaistration of these laws and to elimiuate requhements which burden shippiag interests without serving any essential official need.
"

R E V E N U E COLLECTIONS

The total revenue coUected by Customs in the fiscal year 1950 was
$560,565,350 as compared with $515,241,518 ia 1949, an increase of
9 percent. These totals include items collected for other governmental agencies such as internal revenue taxes for the Bureau of
Internal Revenue and head taxes for the Immigration Service. Actual
collections from duties, navigation fines, violations of the custoras
laws, etc., amounted to $428,891,788, an iacrease of more than 10
percent from the .previous year's total of $388,470,747. The bulk of
customs collections consists of duties paid by importers at the time
of the entry of merchandise and when withdrawn from warehouse for
consumption. The types of collections for the past two years are
shown in table 8.
The increase ia collections duriag the fiscal year 1950 reflected a
generally highej level of foreign trade than prevailed duriag 1949
which more than offset the decrease in rates of duty provided by the
Annecy Protocol some of which became efl-'ective January 1, 1950,
with other subsequent changes in rates of duty as additional signatory
nations came under the terms of the Agreeinent. These changes in
rates of duty, however, were less drastic and less numerous than
those resultiag from the General Agreement on Tariffs and Trade,
much of which became effective January 1, 1948.
Customs collections, which had decliaed almost continuously
duriag the last 10 months of the fiscal year 1949, began to rise very
early in the fiscal year 1950. Collections during each of the last 9
months of 1950 were larger than for each of the corresponding months
of the previous fiscal year. This trend paralleled the trend ia the
quantity and value of imported merchandise but was not affected by
any increase in prices since the iadex of the unit cost of imported
articles was slightly lower than during the previous year.
The chief source of customs revenue, raw wool, yielded approximately $50 million, an increase of 30 percent over the revenue from
this source duriag the fiscal year 1949. Importations of wool which
yielded $150 million of revenue in 1946 declined sharply duruig the
following three years. The iacreased revenue from wool imports ia
1950 as compared with the previous year marked the first change in.
trend suice the end of World War I I .
Imports of cane sugar, another important source of customs revenue,
were almost 700 million pounds smaller hi 1950 than duriag the previous year and yielded only $3,4 million in duties as compared with




ADJVIINISTRATIVE REPORTS

71

^•$38 million in 1949. Importations of free sugar from the Philippine
Islands were practically the same as during the previous year.
Another important source of customs revenue, distilled liquors,
showed very little increase. The volume imported increased from
13,522,000 gallons in 1949 to 13,980,000 gallons hi 1950, while the
revenues mcreased from $20,050,000 t a $20,603,000.
The many changes in commodity classifications and the rates of
duty resulting from the General Agreement on Tariffs and Trade
made it impossible until recently to compute duty collections by
tariff schedules and countries for many months of the fiscal years
1948 and 1949. Therefore, tables 84 and 87, showing duty collections by tariff schedules and by countries, which were omitted ia the
1949 annual report, are published ia this report for the fiscal years
1948, 1949, and 1950. Table 86, duty collections by tariff schedules,
shows the months for which computations were not available when
the 1949 report was being prepared.
The largest amount of revenue continued to be collected at New
York City where almost $174 million, or 41 percent of the total customs collections for all districts, was turned over to the Treasury.
This constitutes a small increase of $9 million over the total collected
hi New York in 1949. Customs collections at the Atlantic and Pacific
Coast customs districts were generally at a higher level than in 1949,
only Maiae, North Caroliaa j and Oregon showing reduced collections.
Collections along the land border were far from uniform. Five of
the Canadian border districts reported increased revenues, while an
equal number collected a smaller amount than in 1949. Two of the
five Mexican border districts showed increased collections, but none
of the districts on the Gulf of Mexico collected more than during tlie
previous year.
At Boston, where approximately three-fourths of all customs collections are the result of importations of unmanufactured wool, the
iacreased importations of that commodity resulted in an increase in
collections of almost 39 percent. At PhiladelpLia, another important
wool importing district, there was an increase of 21 percent in collections. Customs collections by customs districts are shown in table 83.
The increase in customs collections was accompanied by an increase
inthe valueof dutiable imports of from '"$2,849 million in 1949 to $3,060
million in 1950. This increase in value appears to be due entirely
to an increased volume of imported commodities since the unit cost
was slightly lower in 1950 than iu the previous year.
MOVEMENT

OF PERSONS BY VESSELS, T R A I N S ,
AUTOMOTIVE VEHICLES

AIRPLANES,

AND

The iacrease ia passenger travel evidenced since the end of the war
continued during the fiscal year 1950. Almost 87 million persons
arrived at this country's seaports and crossed the land borders during
1950, an increase of more than 3 million over the precediag year.
For the first time in many years travel by aircraft was slightly lower
than for the previous year. Sixteen hundred fewer planes arrived
' Revised.




72.

195 0 REPORT OF THE SECRETARY OF THE TREASURY

from abroad and 3 thousand fewer passengers used this means of
transportation. Almost half of the planes aud more than half of the
airplane passengers arrived at the airports in New York City and
Miami, Fla. The number of passengers arriving at New York, for
the first time since ^ the establishment of LaGuardia and Idlewild
fields, exceeded those arriviag at the Miami fields. Tables 8,9 and 90
show the volume of traffic into the United States in 1949 and 1950.
During the year Annex 9 to the Convention on International Civil
Aviation became effective.^ This annex contains international cus^toms, immigration, public health, and agricultural quarantine procedures applicable to air traffic. As far as customs is concerned the
United States has been among the foremost in bringing its customs
procedures into agreement with those adopted by the International
Civil Aviation Organization.
E N T R I E S OF MERCHANDISE

Commercial importations as represented by consumption entries,
warehouse entries, and warehouse withdrawals showed a substantial
increase over the previous year. The continued increase in tourist
travel was reflected in an increase of 7 percent in the number of
baggage entries filed, although the amount collected on baggage
entries declined as a result of the increase in the exemptions granted
to returning travelers. The number of maU entries continued to
decline, although collections on such entries were larger than in 1949.
Informal entries remained at practically the same level as in the
previous year. Table 88 shows the number of important types of
entries for the fiscal years 1949 and 1950.
DRAWBACK TRANSACTIONS

Drawback, amounting to 99 percent of the customs duties paid at
the time the goods were entered, is allowed on the export of merchandise manufactured from imported materials. The drawback allowed
in 1950 was $8,442,133 as compared with $9,378,768 in 1949, a decrease
of 10 percent. More than 90 percent of the drawback allowed in each
year was due to the export of products manufactured from imported
raw materials. The more important raw materials used ih manufacturing the exported products in 1950 were sugar, wool, tobacco, crude
petroleum, and several of the metals. Tables 91 and 92 show the
drawback transactions for 1949 and 1950.
PROTESTS AND APPEALS

There was a sharp increase in the number of protests filed by
importers against the rate and amount of duty assessed and other
actions by the collectors as compared with 1949. Appeals for reappraisement filed by importers who did not agree with the appraiser
as to the value of merchandise were also much more numerous than
during the previous year. Both increases were presumably due to
the continuation of the use of dual currency in many countries with
resultiag confusion as to the true value of merchandise for customs




ADMINISTRATIVE

73

REPORTS

purposes. The following table shows the number of protests and
appeals filed and acted upon in 1949 and 1950:

Protests:
Filed with collectors by importers
Allowed by collectors
.
Denied by collectors and forwarded to customs court...-.
Appeals for reappraisement filed with collectors
_.

APPRAISEMENT

Percentage
increase

1949

Protests and appeals

1950

10,635
579
9,563
11,114

17,759
3,104
13,029
16, 495

67,0
436.1
36.2
48,4

OF MERCHANDISE

The conthiued increase in the importation of foreign merchandise,
both in volume and variety pf commodities, is indicated by the
examiaation of 543,772 packages at the public stores during the fiscal
year 1950, as compared with 484,760 packages examined during the
previous year. The imports in 1950 required the processing of
1,197,539 accompanying invoices as compared with 1,105,646 invoices
m 1949.
..
The handling of foreign mail at Los Angeles, Calif., has been
transferred to the buUding occupied by the appraiser of merchandise.
This works to the mutual advantage of the post office and customs
and has released needed space to the post office.
CUSTOMS INFORMATION

EXCHANGE

Under a system which has been hi effect for many years, appraising
officers are Tequired to report to the Customs Information Excliange at
New York, N . Y., a cross section of importations of merchandise
received at their ports. This serves as a spot check on the classification and valuation of merchandise at the various ports, and makes
possible greater uniformity of action by all appraising officers. The
number of reports increased during 1950 as the result of increased
importations. The following table is indicative of the work of this
office.
Percentage
increase, or
decrease (—)

1949

Activity

A p p r a i s e r s ' reports of value or classification received
Differences in classification reported
DifCerences i n value r e p o r t e d . _'
R e q u e s t s for foreign investigations

31,936
2,819
3,805

38, 615
2,940
3,357
634

20.9
4.3
-11.8
1.0

LABORATORIES

The ten customs laboratories, maintained for the purpose of testing
representative samples of imported merchandise to aid in the correct
assessment of duties, tested 83,429 samples, an increase of 14 percent
oyer the total tested in the previous year. The number of samples
of ores, metals, and wool increased while those of sugar declined.
Samples of ores, sugar, and wool constituted more than 50 percent of
the total number analyzed.




74

195 0 REPORT OF THE SECRETARY OF THE TREASURY

The operation of the laboratory at Honolulu, which was discontinued
after the attack on Pearl Harbor, was resumed during 1950. /Plans
for the installation of a new customs laboratory at San Juan, Puerto
Rico, were initiated and considerable progress was made toward its
completion.
Most of the samples tested in the laboratories were taken from
regular imports in 1950; however, there were^369 samples taken from
export shipments and 2,032 samples from customs seizures.
In cooperation with other activities the customs laboratories
assisted in determining whether samples of Government stockpile
purchases of strategic materials complied with contract specifications.
The laboratories provided technical supervision, equipment, and
space for the analysis.
L A W ENFORCEMENT ACTIVITIES

The law enforcement activities of the Customs Service consist of
the seizm-e of merchandise which has been fraudulently declared or
illegally introduced into this .country and of the investigation of viola, tions discovered after the entry of merchandise. Fewer seizures were
made in 1950 than in 1949, but the value of such seizures was alraost
as large as during the previous year. Practically the same number of
automobiles and trucks were seized as in 1949, but the value of these
seizures was considerably less than in the previous year. Five more
boats were seized than in 1949 and the total value of such seizures was
over a million dollars greater than in the previous year. Liquor
seizures increased slightly in number, gallonage, and value, but the
-nuinber of prohibited articles seized in 1950 was considerably less than
the previous year. Seizures of ordinary merchandise were also less
numerous and of considerably less value than in 1949.
There were 210 fewer seizures of narcotics and the reported value
of such seizures was less than the year before. As compared with
1,735 ounces of raw opium seized in 1949, only 645 ounces were seized
during 1950.. The quantity of morphiae, lieroia, and cocaine seized
also declined sharply from the preceding year. The decrease in the
quantity of seizures of cocaine was the result of the breaking up of an
extensive ring operating between Peru and the United States as a
consequence of the joint iavestigation by customs and narcotics
agents. Seizures of smoking opium, however, were made in greater
quantity in 1950 than in the previous year, 1,038 ounces being seized
dming 1950 and 855 ounces in 1949. Marihuana seizures continued
extremely heavy, amountiag to 33,291 ouuces as compared with
38,086 ounces in 1949, most of these being made on the Mexican
border. There were also numerous seizures, in small quantities, of
marihuana in the form prepared in India, Turkey, Tunisia, and South
Africa. A notable feature of the marUiuana seizures along the Mexican border during the past two years has been the large quantity contained in single seizures, in some cases as much as 100 pounds in a
single seizure.
Seizures for violations of customs laws are shown ia tables 93
and 94.




ADMINISTRATIVE REPORTS

75

INVESTIGATIVE ACTIVITIES

The investigative arm of the Customs Service, the Customs Agency
Service, investigates all important crimiaal cases covering the violations of the customs laws and also conducts many other examiaations
where expert investigative ability is needed. Probably the most important case of the use of false invoices and entries involved the
importation of Swiss watches which resulted in a claim agaiast the importer for more than $6.8 mUlion. Several attempts to smuggle diamonds and jewelry were discovered during the year and in two cases
the amounts involved exceeded $100 thousand each. One unusual
smuggliag at°tempt at San Ysidro involved 40 live parrots, 20 of
which were in a wire mesh cage underneath the seat of a truck and 20
more in cardboard cartons on top of the motor. Since the importation
of live parrots is prohibited, the truck was seized, the driver jailed,''
and the parrots destroyed.
I n the enforcement of the export control regulations a number of
planes were seized which were apparently destined for the east European area. A number of shipments of gold, one of which was concealed in an electric refrigerator, and a private yacht, which was being
used to transport merchandise for pay, were also seized. Investigations of the violation of the Neutrality Act iavolved a number of.
seizures of firearms and ammunition.
A steamship which was wrecked at an isolated spot on the coast of
the Seattle district was looted by local residents, crews of passing
fishing vessels, and Indians from a nearby reservation. Most of the
fishing vessels iavolved were seized and 60 cases are pending against
other looters. The cargo of lumber will probably never be salvaged
completely since some of it broke loose and drifted out to sea. About
one-half mUlion feet, however, were landed and seized at various ports
in the Washington district.
In the course of their regular duties customs personnel often discover violations of other than customs laws. During 1950, 11,670
seizures were made for other governmental agencies, 11,584 of which
were for the Department of Agriculture. In addition, 50 persons
were apprehended, of whom 33 were for the Immigration and Naturalization Service.
Table 95 summarizes the investigative activities during the last two
years.
FOREIGN TRADE ZONES

During the thirteenth year of its operation, Foreign Trade Zone No.
1 on Staten Island handled a somewhat smaller volume of business
than duriag the preceding year, although there was an increase in
duties collected on goods entering customs territory from the zone.
The decline ia volume was due to the fact that the storage space in
the zone was fully occupied siace a large part of the merchandise remained in the zone for longer periods than formerly. Up to the end of
the year the space formerly withia zone territory had not yet been
restored by the Army for zone use. In addition the number of manipulations (such as fumigating, sorting, sampling, marking, labeling,
repacking, etc.) performed in zone territory increased considerably
over, previous years.




76

195 0 REPORT OF THE SECRETARY OF T H E TREASURY

Operations in Foreign Trade Zone No. 2 at New Orleans continued
at a high level b u t involved a large volurae of goods exported after
manipulation so that the dutiable merchandise entering customs territory was comparatively small.
For the second full year of its operations Foreign Trade Zone No. 3
at San Francisco handled approximately the same tonnage as in 1949
but the value of the goods entering the zone was more than double
that received during the first year of its operation.
Foreign Trade Zone .No. 4 at Los Angeles was opened for business
on September 9, 1949, and Foreign Trade Zone No. 5 at Seattle on
September 1 of the same year. Both zones received a wide variety
of products and appear to have made a successful start.'
Foreign Trade Zone No. 6 has been authorized at San Antonio,
Tex., and wUl be the first inland foreign trade zone, the first zone
operated at an ahport, and the first zone operated by a private concern.
The followiag is a brief summary of the foreign trade zone operations:
o

Trade zone

New York
New Orleans
San Francisco
Los Angeles.
Seattle

Number of
entries

7,916
(0
4,671
(0
238

Received in zone
Long tons
(0
29, 223
• 10,021
6,967
2,957

Value
0)
$13, 627, 729
7, 231, 346
2, 238, 350
1,623,118

Duties collected
$3,679,312
174, 024
1, 069, 710
(1)

233,519

1 Not reported.
L E G A L PROBLEMS AND PROCEEDINGS

Considerable attention was given during the year to problems in
connection with the establishnient of new foreign trade zones. Questions arising in connection with the conversion of foreign currency for
which two or more rates of exchange have been certified by the Federal
Reserve Bank of New York continued to rec^uire considerable time.
General regulations, prepared for the conversion of all currencies for
which multiple rates are" certified, have expedited the conversion of
such rates and obviated the necessity for the issuance of special histructions for each such currency.
,
Although the bulk of the large number of overtime cases pending iu
the Court of Claims has been disposed of on the basis of rulings in the
cases of Myers Y. United States (320 U. S. 561; 321 U. S. 750) and
O'Rourke v. United States (109 Ct. Cls. 33), a considerable amount of
work contiaued throughout the year on special problems in connection
with the cases not previously settled and on other questions arisiag in
connection with the overtime laws.
MISCELLANEOUS

Changes in customs ports and stations.—The customs port at Guayanilla, Puerto Rico, and stations at Port Orchard and Bremerton,
Wash., Manistee, Mich., Boquillas and Dolores, Tex., were abolished
and a port established at Neah Bay, Washiagton. The name of the
port of Senoyta, Ariz., was changed to LukevUle, Ariz.




77

ADMINISTRATIVE REPORTS

Cost of administration.—During the fiscal year 1950 the Customs
Service incurred expenses of $35,689,921 for collecting the revenue
and for priating, excluding expenses of enforcing the renewed export
control regulations. This was $700,236 more than during the previous
year. The increase in expenditures was due to the raise in pay authorized by the Eighty-First Congress and to the automatic within-grade
raises provided by the Meade-Ramspeck law. The expenses, moreover, do not include salaries paid to customs personnel for overtime
and other services authorized by law for which reimbursement was
made to the appropriation by parties interested. The increased collections more than offset the increase in expenditures, so that the cost of
collecting $100 of revenue declined from $6.79 in 1949 to $6.37 in 1950.
A summary of the collections and expenditures for 1950 will be found
in table 82.
^
BUREAU OF ENGRAVING AND PRINTING

The Bureau of Engraving and Printing designs, engraves, and prints
currency, bonds, certificates, stamps and various other official documents and forms. Deliveries of finished work during the fiscal year
1950 totaled 729,297,594 sheets, a decrease of 16,901,967 sheets, or
approximately 2.3 percent, as compared with the quantity delivered
during the previous year.
A comparative statement of deliveries of finished work in the fiscal
years 1949 and 1950 follows:
Sheets

Face value,
1950

Class
1950
Currency:
* United States notes
Silver certificates
Federal Reserve notes.
Total
Bonds, notes, bills, certificates, and debentures:
Bonds:
Panama Canal
Postal savings
Treasury
United States savings
Depositary...
Consolidated Federal farm loan for the twelve
Federal land b a n k s . . .
Home Owners' Loan Corporation
Home Owners' Loan Corporation: Obsolete en• graved stock dehvered to Destruction Committee and destroyed
Insular Puerto Rican
Joint stock farm loan: Obsolete engraved stock
delivered to Destruction Committee and
destroyed
Government of the Republic of the Philippines.
Notes:
Treasury
....
Consolidated, Federal home loan banks
Special United States, International Monetary
Fund series.
Obsolete engraved stock dehvered to Destruction Committee and destroyed:
Commodity Credit Corporation
..
Federal National Mortgage Association
Reconstruction Finance Corporation
U. S. Housing Authority
Treasury bills
_..._.,




3, 610,000
102, 390, 000
34, 220, 000

4, 065, 000
100, 935, 000
31, 977, 000>

$206,460, 000
1, 949, 460, 000
. 4,348, 020,000

140, 220, 000

136,977, 000

6, 503,940,000

2,900
3,238
123,486
64,451, 000

20,900, 000
1, 253, 000
891,118, 000
7,145, 625, 000

66, 000
125

316, 360, 000
125,000,000

2,000
2,690

217,150
I, 714, 000
1,550

1, 076,188
12,120
200

•132, 620
60,090
100, 696
504
468, 000

200, 000

1,019, 325
22, 200

66, 627,800,000
500, 000,000

200

808, 550
32,800

200,000, 000

539, 600

76, 500,000,000

78

195 0 REPORT OF THE SECRETARY OF THE TREASURY
Sheets

Face value,
1950

Class
1949
Bonds, notes, bills, certificates, and debentures—Con,
Certificates:
Indebtedness...
Cuban silver
:.
Military,.
Philippine Treasury
Philippine Treasury: Surplus stock delivered for
destruction and destroyed
Postalsavings
.:
Interim transfer, postal savings bonds
Debentures:
Collateral trust of the Central Bank for Cooperatives ....
Consolidated collateral trust for the Federal
intermediate credit banks
Obsolete engraved stock delivered to Destruction Committee and destroyed:
Federal ship mortgage insurance fund
War housing insurance fund
.'
Specimens:
Bonds
Notes
_
Certificates
•
_
Debentures
Proof sheets, military certificates
_
Total.

Stamps:
Customs.-..
_
Internal revenue:
To offices ofissue
Specimens..
:
Puerto Rican revenue:
To offices of issue
Obsolete delivered to Destruction Committee
and destroyed
Virgin Islands revenue
_
_
United States war savings..
1
Postage:
United States
Specimens, United States.._
Canal Zone
:
Philippine: Obsolete delivered to Destruction
Committee and destroyed
Adhesive postal note.
District of Columbia beverage tax-paid
_
Federal migratory-bird hunting
Foreign service fee...
1
Total.
Miscellaneous:
Checks
_
1
_
Warrants..
Commissions
.
Certificates
Drafts..
Government requests for transportation.
Other miscellaneous
Specimens...
Blank paper..
Military payment orders: Obsolete stock delivered
to Destruction Committee and destroyed

1,170,050
885, 300
473,192
2, 599,000
> 3, 302, 700
•
1,000

1960

478, 650 $25, 275, 000, 000
678, 333
7, 414, 000
46, 046
10, 282, 000
868, 400
2, 504, 200
1,000

1, 748, 267, 000

3,940
39, 500
2,222

44,000,000

78, 550

929, 250, 000

2,106

5, 000, 000

55
8
3
61
- 80, 013, 952
•

71, 877, 933 179, 347, 469, 000
Number of
stamps, etc.,
1950

362, 500

462, 600

4,626,000

291,124, 982
684

298, 666, 758
376

21, 213, 382,100
780

1,681,400

1, 751, 763

105,198, 575

61,000
300
455, 488

550
486,315

55, 000
50, 243, 026

214, 353, 803
214
107, 850

200, 920, 496
261
31,170

20,883,126,204
13, 272
• 2, 697, 000

103, 658
735, 928
1, 041, 200
36, 976
» 11,489
•

740, 363
592, 300
83,465
1,800

74, 036, 300
29, 615,000
9,348,080
180, 000

^ 510,117,371

503, 627,117

42,372,420,33,6-

9, 528, 936
301, 548
649, 591
625,325
285, 846
r 4, 455, 782
11
1,200

9, 538, 519
9,548
50,396
1, 020, 686
38, 250
259, 514
6,462, 280
90
1,000
435, 261

2,176,306

Total

^ 15, 848, 238

16, 816, 644

59, 616, 079

Grand total..

746,199, 561

729, 297, 594

» Revised to adjust classification.




47, 713, 265
5,674
37, 725
929, 686
. 10,500
1, 297, 570
7,444, 904

• 450

ADMINISTRATIVE REPORTS

79

Orders were received and dies were engraved for new issues of postage stamps as follows:
,,
Issue
Grand Army of the Republic Commemorative, Series 1949
Edgar Allen Poe Commemorative, Series 1949
75th Anniversary of the Universal Postal Union Commemorative, Air Mail, Series 1949..
75th Anniversary of the Universal Postal Union Commemorative, Air Mail, Series 1949..
75th Anniversary of the Universal Postal Union Commemorative, Air Mail, Series 1949..
Wright Brothers Commemorative, Air Mail, Series 1949
.:
.
.
American Bankers Association Commemorative, Series 1950..
Samuel Gompers Commemorative, Series 1950
National Capital Sesquicentennial Commemorative, Series 1950
j
Railroad Engineers of America Commemorative, Series 1950
Gateway to the West Commemorative, Series 1950
Executive, National Capital Sesquicentennial Commemorative, Series 1950
Boy Scouts of America Commemorative, Series 1950
Indiana Territory Sesquicentennial Commemorative, Series 1950
.
.
Judicial, National Capital Sesquicentennial Commemorative, Series 1960...
Canal Zone, Series 1949
_

Denomination
(cents)
3
3
10
15
25
6
3
3
3
3
3
3.
3
3
3
2

Under the management program, comprehensive modernization of
the Bureau, begun during the previous fiscal year, was continued
during 1950.
The installation of auxiliary polishers and semi-automatic feedboards on 251 of the old style intaglio plate printing presses, used for
printing currency and other engraved work, was completed during
the year. As a result of this conversion the output of these presses
ultimately will be increased approximately 30 percent, thereby effecting estimated annual savings of over $1 mUlion.
The five modern offset presses installed during the year print revenue stamps in 800-subject sheets, thereby doubling the output of the
old-type presses; and the three new typographic presses for overprinting revenue stamps and checks have a productive capacity about
25 percent greater than the obsolete presses which they replaced.
An improved method of packing sheets of postage stamps for delivery was adopted during the year. In lieu of the previous practice of
wrapphig the packages in kraft paper, the stamps are shipped in
cardboard cartons which are sealed by a stapling machine. The new
method facUitates the packing operation and affords greater protection
to the stamps whUe in transit.
In accordance with the general policies and objectives of the joint
program for improving accounting procedures in the Federal Government, representatives of the General Accounting Office, the Bureau
of the Budget, and the Bureau of Accounts of the Treasury Department have worked in close collaboration during the year with the
accounting staff of this Bureau in a suryey of its fiscal activities. As
stated in the report '^Administrative Management,'^ conclusions of
the survey were that the industrial nature of this Bureau's operations
and its relationships with other agencies make it especially adaptable
to busiaess-type procedures and to a working-capital fund method of
financing.
An illustrative budget was prepared on this basis and
was submitted to the Appropriations Committees of Congress,
together with a request for legislation authorizing this Bureau to
operate on a wholly reimbursable basis beginning with the fiscal year
1952. Work is progressing satisfactorUy to effect the necessary
907795—51

7




80

195 0 REPORT OF THE SECRETARY OF THE TREASURY

changes required in the existing financing and accounting procedures
in accordance with the plan, of action recommended by the joint
committee assigned to this project:
The Classification Act of 1949, Public Law 429, 81st Congress,
approved October 28, 1949, exempted those Bureau employees
formerly in the clerical-mechanical service and specified that the
compensation of such employees shall be fixed and adjusted from
time to time as nearly as is consistent with the public interest in
accordance with prevailing rates. In conformity with this provision
of the law, wage surveys were conducted by the Bureau and rates of
pay comparable to those paid by the Government Printing Office for
simUar work were recommended to the Treasury Wage Board. In
April 1950 the rates of pay for these,positions were approved by the
Administrative Assistant to the Secretary. The new rates, which
were made effective on April 30, 1950, aff'ected approximately 4,000
employees and resulted in a salary increase for a majority of these
employees. The total annual cost of these wage increases wUl be
approximately °$1,115,000.
I n order to develop a more effective personnel program, the functions of the industrial relations office and the activities of the 'personnel division have been consolidated arid are now administered
under a newly created industrial relations division.
The total personnel at the beginning of the fiscal year comprised
6,070 employees. There were 1,353 appointments and 1,176 separations, leaving a total of 6,247 employees on the rolls at the end of
the year.
Expenditures amounted to $25,081,019.73 which is a decrease of
$1,767,392.50 or approximately 7 percent less than the total expended
during the previous fiscal year. The following tabulation shows the
appropriations, reimbursements, and expenditures for the fiscal years.
1949 and 1950.
Increase, or
decrease (—)

1949

Total
Expenditures:
Salaries and expenses
Unexpended balance

other

$15,660,000.00

$15, 825, 000. 00

$165, 000.00

11, 223, 848.44

9, 299, 243.81

-1,924,604.63

26, 883, 848.44

25,124, 243.81

-1,759,604,63

26,848,412.23

25, 081, 019, 73

-1,767,392,60

35, 436, 21

Appropriation:
Salaries and expenses
Reimbursements to appropriation from
bureaus for work completed: i
Salaries and expenses

1950

43, 224, 08

7, 787.87

1 Additional amounts of $1,565.65 for 1949 and $7,316.26 for 1950 were received from employees for recoveries
of Government property lost or damaged, refunds of terminal leave compensation, recoveries for jury service, and collections to correct discrepancies in the paper accounts; and from firms for empty drums returned
by Bureau, recoveries of excess cost over contract price, repayments of lapsed appropriations, settlement
of claim for damage to property, and proceeds from sale of offset printing presses.

FISCAL SERVICE—BUREAU OF ACCOUNTS

. Receipts and expenditures.—The Government's central accounts for
revenues, appropriations, and expenditures of departments and establishments are-maintained, under existing provisions of law, in the
Bureau of Accounts. Under the act of July 31, 1894 (5 U. S. C. 264),
this Bureau prepares annuaUy for the Secretary a report to the



ADMINISTRATIVE REPORTS

81

Congress, classifying receipts wherever practicable by districts. States,
and ports of collection, and the expenditures under each separate
head of appropriation. Receipts and expenditures of the Government
for the fiscal year 1950 are shown in the summary of Federal fiscal
operations appearing on page 3 of this report, whUe a more detaUed
statement is included as table 1.
Accounting improvements.^^In the report ^ Administrative Manage^
ment,'^ beginning on page 61, reference was made to the program to
improve the Government's accounting under the joint leadership of
the Comptroller General of the United States, the Secretary of the
Treasury, and the Director, of the Bureau of the Budget. The
accounting staff of the Bureau of Accounts from the standpoint of the
Treasury Department has carried on the work under this program at
the joint working level with the General Accounting Office and the
Bureau of the Budget. This accounting staff also during the year
rendered technical advice and assistance to the various bureaus and
offices of the Treasury Department, principally the United States
Coast Guard, the Bureau of Engraving and Printing, and the Bureau
of Customs. Substantial progress was made under the joint accounting program as set forth on page 135 of the annual report of 1949.
Under the new Budget and Accounting Procedures Act of 1950 the
accounting staff of the Bureau of Accounts will be actively engaged
in the work of organizing the accounting and reporting activities of
the Treasury Department for the purpose of implementing that act
(see exhibit 36).
Management improvement.—Under the improvement program in
the Bureau of Accounts further changes in procedures were adopted
during the year and increased mechanization of operations was
effected. Certain of these developments are described in the report
/^Administrative Management,'' pages 61 to 65. These included the
extension of the withholding tax procedure to employment taxes; the
preparation of check accounting material in a form to facUitate earlier
reconcUiation and settlement of Treasury checking accounts; and the
efficient preparation and delivery of the 15 mUlion dividend checks to
veterans of World War I I who held national • service life insurance
policies.
A wide variety of other procedural improvements were instituted
during the year. These are described in the following paragraphs.
.A new form of Government check has been designed which will show
the amount at one place on the check instead of two places. This
change will not only facilitate payments of the checks but will effect
saviags in the preparation of addressograph plates and in modifications
of these plates.
Procedure has been placed in operation to effect benefit payments in
local currencies of foreign countries for the Veterans' Administration,
Social Security Administration, Civil Service Commission, and Railroad Retirement Board. Payments in Poland, Czechoslovakia, and
Hungary are made through the United States Disbursing Officers
of the Department of State.
Payments in certain foreign countries were further facilitated by a
new procedure effective May 1, 1950, permittiag the drawing of checks
on the Treasurer of the United States by the United States Disbursing
Officers of the Department of State in lieu of makiag drafts on the




82

1 9 5 0 REPORT OF T H E SIECRETARY OF T H E TREASURY

Secretary of State. This plan wUl be extended to other countries as
rapidly as possible.
, To facilitate the issuance of PhUippine peso checks and to provide a
more economical operation, account No. 3 of the Chief Disbursing
Officer was established with the Manila Branch of the National
City Bank of New York. This account, operated from Washington,
D. C , is to pay certain beneficiaries of the Veterans' Administration
and for other purposes.
To establish a better control and to simplify the accounting and
disposition of PhUippine pesos reclaimed by the Treasurer of the
United States on peso checks negotiated on forged endorsements,
there was established special deposit account No. 4 to which amounts
reclaimed in PhUippine pesos are credited and from which payments
are made. The account is administered by the Division of Investments, Bureau of Accounts.
Daily Statement of the United States TVeastzr?/.—Commencing
November 1, 1949, interest on the public debt is reported hi the
daUy Treasury statement as an expenditure when such interest
becomes due and payable, as distinguished from the previous practice
of showing the expenditure on the basis of interest paid by the
Treasurer of the United States.
During the year procedures were installed on an experimental
basis whereby expenditures of the Departments of the Air Force and
the Army were reported to the Treasury through the use of teletype
facilities. Commencing in July 1950, the expenditures of these
Departments are included in the daUy Treasury statement on the
basis of teletype reports. This moves in the direction of the change
commencing July 1, 1948, when the expenditures of the departments
and establishments of the Government serviced by the Division of
Disbursement were first reported in the daUy Treasury statement as,
of the day on which checks are issu.ed in payment of Government
obligations rather than the day the reports of checks paid were received
by mail in Washington, D . C .
Disbursement activities.—The Division of Disbursement maintains
27 regional disbursing offices in the continental United States and
Territories and other disbursing facilities in foreign countries, serving
all executive departments and agencies except the Post Office Department, United States Marshals, the Panama Canal, the Department of
Defense, and certain Government corporations. The number of payments, collections, and savings bonds issued by the Division of Disbursement during the fiscal years 1949 and 1950 are as follows:
Number
Classification

Fiscal year
1949

Payments (checks and cash):
Social security •.
Veterans' benefits
Special dividend program
_
Tax refunds.. .
'
. _ . .
Other
1
Collection items.-- .
.._.._..
Savings bonds issued to Federal employees in payroll savings plan
Total

_




_

38, 407,651
28, 368, 258
5, 787, 078
• 2, 402, 927

33,878, 237
80, 264,384
14, 731, 388
29,412,534
31, 450,036
5,875, 718
2,485, 644

183,926, 581

198,097, 940

28,822, 250
80,137,417
.

._

.

Fiscal year
1960

ADMINISTRATIVE REPORTS

83

The improvements in disbursing practices and procedures during
the year are summarized on pages 64 and 65 of this report.
National service life insurance special dividend program.—Commencing in January 1950 the Division of Disbursement issued for the
Veterans' Administration 14,731,388 dividend checks, totaling $2.6
billion to veterans of World War I I who held national service life
insurance policies.. To accomplish this task within the shortest
period of time possible, a branch of the Washington Regionah Office
was established and staffed with the best qualified supervisory personnel available. The • operation was geared to produce 200,000
checks a day. I n view of the magnitude of the program, many innovations and precautionary measures were introduced to provide every
safeguard and to facilitate efficient preparation and prompt delivery
of the check to the veteran. The transfer posting process of preparing checks was used. This method, having proved expedient on
previous tax refund programs, reduced the overall cost of the operation
to a unit figure of 3)^ cents, which was considerably less than the
original estimate. As a result, the Secretary of the Treasury presented cash awards to those supervisory employees of the Division of
Disbursement who were instrumental in effecting the economies.
The savings realized resulted from the comprehensive training of the
employees assigned to responsible functions and from the adoption of
the production line principle which prevented duplication of effort
and minimized the possibility of error. See also the report ^^Administrative Management."
Withheld foreign checks.—Regulations of the Treasury Department
relating to the delivery of Government checks to payees residing in
foreign countries were amended to allow delivery in all places in the
world except the Russian Zone of Occupation of Germany; the
Russian Sector of Occupation of Berlin, Germany; and in Albania
and Bulgaria. A copy of the amendment appears as exhibit 37.
Government losses in shipment.—The value of shipments reported
by Government departments and agencies during the year under
coverage of the Government Losses in Shipment Act, as amended
(5 U. S. C. 134-134h), amounted to $418,044,811,084, as compared
with $405,111,163,200 for the fiscal year 1949. Clauns totaling
$105,917.65, which includes $102,890.20 on account of United States
savings bonds and armed forces leave bonds redemption cases, were
paid out of the revolving fund during the year, and recoveries during
the year amounting to $100,094.59 were deposited to the credit of
the fund, leaving a net expenditure of $5,823.06 for losses. The
cumulative amount of estimated insurance premium savings to the
Government from the inception of the act in 1937, based ori rates in
effect at that time, totaled $31,537,726.30. Information concerning
the operation of this self-insurance plan by the Government will be
found in tables 98 to 102.
Bonding of Government employees.—During the year the Treasury
Department was requested to report on legislation introduced in the
Congress to provide for the purchase of blanket position schedule
bonds, from funds made "available for administrative expenses, to
cover officers and employees of the Government. The Treasury was
in favor of the proposed legislation to relieve employees of the personal




84

19 5 0 REPORT OF THE SECRETARY OF THE TREASURY

expense of providing surety bonds and to reduce, administrative expenses of handling the individual bonds.
Authorized surety ' companies.—A list of the surety companies
authorized to write bonds in favor of the United States is published
by the Treasury semiannually. During the year certificates of
authority were issued to 13 additional companies qualifying them as
sole sureties on bonds in favor of the United States.. A totai of 47,124
bonds and consent agreements were approved by the Treasury as to
corporate surety during the year.
Depositaries of public moneys.—The Division of Deposits handles
the administrative work relating to the designation of depositaries
of public moneys. Cash balances held by the various classes of
depositaries are shown in the table on page 99.
The Division completed arrangements with approximately 1,000
additional commercial banks during the year to furnish drafts to
officers of the Farmers' Home Administration, the Public Housing
Administration, and other agencies for transmitting their collections
of Government funds to Federal Reserve Banks for account of the
Treasury. The extension of this program facilitates .the transmittal
and deposit of Government funds at certain points where volume is
small.
Effective * January 1, 1950, the Bureau of Internal Revenue, in
cooperation with the Fiscal Service, adopted a procedure whereby
tax returns covering withheld taxes and social security taxes are
combined. Under this new procedure employers deposit witliheld
taxes with Federal Reserve Banks either directly or through commercial banks. The commercial banks, through which deposits of
withheld taxes are made, render such services as a convenience to
their customers without cost to the Government. Prior to the new
procedm-e commercial banks were compensated for accepting deposits
and issuing receipts for withheld income taxes.
Investments of trust funds.—Under various provisions of law, the
Secretary of the Treasury is responsible for investing certain trust
funds. A summary of the various investment accounts for which he
is responsible is shown as table 41.
The. revision effective January 1, 1950, in the procedure followed
by the Treasury Department in collecting and accounting for deposits
of social security taxes provides a basis for earlier collection of employment taxes and for appropriating on a current basis from the general
fund of the Treasury to the Federal old-age and survivors insurance
trust fund amounts equal to funds received. In view of this change,
the practice of making investments for the fund was changed from'a
quarterly to a monthly basis. Under this change, the earher use of
tax collections accrues to the benefit of the trust fund.
Interest payments to trust funds.—The Treasury Department and
the Bureau of the Budget have been giving consideration to interest
payments by the Government on securities issued to trust funds and
not available to the public. In some cases Congress has provided
specific guides as to the rate of interest to be paid on. public debt
securities issued to trust funds, but in other cases specific guides have
not been provided. The Secretary of the Treasury has taken the
position that, in the absence of specific guides or directives by the
Congress to the contrary, the rate of interest paid on such securities




ADMINISTRATIVE REPORTS

85

should be the average interest rate paid on all interest-bearing public
issues of the public debt outstanding at any one time (see exhibit 35).
Transfer of Canal Zone and Alaska Railroad retirement funds to
civil service retire7nent and disability fund.—Pursuant to Public Law
180, 81st Congress, approved July 21, 1949, which provided for consolidation of the accounts for the Canal Zone and Alaska Railroad
retirement funds with the civil service retirement and disability
fund, the Treasury transferred assets from the abolished accounts
amounting to $294,123.83 in cash and $17,539,500 in. special issues
of securities to the civil service retirement and disability fund.
Collections under section 16 of Federal Reserve Act, as amended {12
U. S. C. 41I{.).—T)uTm.g the fiscal year 1950 there was deposited inthe Treasury as miscellaneous receipts by the Federal Reserve Banks
the sum of $191,875,030.82, representing interest levied by the
Board of Governors of the Federal Reserve System on basis of the
amount of Federal Reserve notes in chculation. Such deposits are
made quarterly and the above amount covers the last three quarters
of the calendar year 1949 and the first quarter of the calendar year
1950. Comparative figures of amounts deposited by each Federal.
Reserve Bank for the fiscal years 1948 through 1950 appear in table 9.
Loans and capital subscriptions.—In suppl3n.ng funds required by
Government corporations and agencies which are authorized to borrow
money for operations, the Treasury made cash advances aggregating
$7,203,723,545.91 in 1950. The Treasury received repayments of
$5,631,828,343.55, resulting in net advances of $1,571,895,202.36. A
statement showing obligations of Governirient corporations and other
agencies held by the Treasury as of June 30, 1950, appears as table 66.
Cancellations by the Treasury of obligations of Government corporations and agencies amounted to $73,202,146.01 in 1950, of which
$73,000,000 applied to capital stock.
The Treasury's holdings of capital stock in Government corporations
decreased by $236,270,800 during the year as a result of cash pa3mients
in the amount of $163,270,800 and the canceUations'of $73,000,000.
Dividends, interest, and like payments received by the Treasury from
Government corporations and other enterprises in which the Government has a financial interest aggregated $144,922,557.29. Certain'
transactions of particular interest are described below, and a tabulation showing dividends, interest, and like payments received from
Government corporations and other enterprises in which the Government has a financial interest appears as table 76.
'uLoans to Administrator for Economic Cooperation.—Pursuant to
pfovisions in the act of April 19, 1949 (63 Stat. 50), and Public Law
327, 81st Congress, approved October 6, 1949, which further amended
the Economic Cooperation Act of 1948 (22 U. S. C. 1501-1522), the
Treasury accepted additional notes of the Administrator for Economic
Cooperation in the amount of $122,300,000 for the purpose of guaranteeing investments in private enterprises undertaken in foreign countries and $150,000,000 for the purpose of loans to participating
countries. As of June 30, 1950, the Treasury had accepted $150,000,000 face amount of guaranty notes and $1,122,300,000 face
amount of loan notes.
The agreement between the Administrator and the Secretary of the
Treasury provides that the notes constitute allocations against which




86

1 9 5 0 REPORT OF T H E SIECRETARY OF T H E TREASURY

the Export-Import Bank -of Washington may draw as funds are
required. By June 30, 1950, the Bank had drawn $444,373.08
against the guaranty notes and $963,979,000 against the loan notes,
leavhig undisbursed balances of $149,555,626.92 and $158,321,000,
respectively. Of the $444,373.08 drawn against the guaranty notes,
$12,389.33 was repaid to the Treasury, leaving $431,983.75 unpaid
as of June 30, 1950.
The Foreign Economic Assistance Act of 1950 (Public Law 535,
81st Congress, approved June 5, 1950) authorized an additional
$50,000,000 for guaranty purposes. As of the end of the year the
Admhiistrator had not presented any notes to the Treasury for
purchase against this authorization.
Loans to District of Columbia for expansion of the water system.—
Public Law 533, 81st Congress, approved June 2, 1950, authorized
the Commissioners of the District of Columbia to accept, and the
Secretary of the Treasury to make, loans not exceeding $23,000,000
to finance the expansion and improvement of the District of Columbia
water system when sufficient sums are not available from the District
, of Columbia water fund. Any advances must be repaid to the Secretary of the Treasury m the period 1961-80 in such annual amounts as
the Congress shall hereafter direct, and interest shall accrue as of the
dates the advances are credited to the water fund. No advances under
this authority were made during the fiscal year 1950.
Loans to Housing and Home Finance Administrator.—Pursuant to
the Housing Act of 1949, Public Law 171, 81st Congress, approved
July 15, 1949, the Treasury agreed to purchase notes.of the Administrator of the Housing and Home Fhiarice Agency for the purpose of
providing funds fc)r carrying out the provisions of title I of the act for.
slum clearance and community development and redevelopment.
As of June 30, 1950, the Treasury had purchased one note of the
Administrator in the amount of $500,000. The agreement between
the Administrator and the Secretary of the Treasury provides for
payment of interest to the Treasury at the average rate on outstanding
interest-bearing marketable public debt securities of the United States
subject to a provision that the rate during each fiscal year will be
adjusted to the average rate which pertains as of the close of the
precediag fiscal year.
In accordance with title IV of the Housing Act of 1950, Public
Law 475, 81st Congress, approved April 20, 1950, the Administrator
may assist educational institutions in providing housiag for their students and faculties by making loans of funds to such institutions fer
the construction of such housing. To obtahi funds for loans uncfer
this title, the Administrator may issue and have outstanding at ariy
one time notes and obligations for purchase by the Secretary of the
Treasury in an amount not to exceed $300,000,000. As of June 30,
1950, the Administrator had not issued any notes or obligations under
this title.
Production credit corporations.—Production credit corporations,
through the Department of Agriculture, returned to the Treasury
$4,000,000 durhig the fiscal year 1950, which together with $30,000,000
repaid in the fiscal year T949 reduced the capital stock owned by the
Government as of June 30, 1950, to $42,235,000.
Commodity Credit Corporation.—The appraised value of the liabUities




•ADMINISTRATIVE REPORTS

87

and capital of the Commodity Credit Corporation as of June 30, 1949,
as determined by the Secretary of the Treasury under, the act of
March 8, 1938, as amended (15 U. S. C. 7 l 3 a - l ) , exceeded the value
of the assets by $66,698,457.34. An amendment to the general
appropriations bill, 1951 (H. R. 7786), authorized the Secretary of the
Treasury to discharge this indebtedness of the Corporation by canceling notes in the amount of $66,698,457.00. A statement showing the
results of annual appraisals appears in table 71.
The acts of December 17, 1947 (61 Stat. 934), and December 23,
1947 (61 Stat. 941), required the Secretary of the Treasury to cancel
notes of the Corporation in the amount of the losses incurred by the
Corporation through the sale of commodities in connection with
the foreign-aid program. No notes were canceled during 1950.
Notes canceled under this provision previous to 1950 amounted to
$56,239,432.11.
Interest on capital stock, Commodity Credit Corporation.—Pursuant
to the Commodity Credit Corporation Charter Act of June 29, 1948
(62 Stat. 1072), the Corporation paid to the Treasury $2,000,000 as
interest on its capital stock. The interest rate of 2 percent was
determined by the Secretary of the Treasury on the basis of the
average interest rate on outstanding interest-bearing marketable
pubhc debt securities of the United States on June 30, 1949.
Dividends received from the Reconstruction Finance Corporation.—
Under the act of M a y 25, 1948 (62 Stat. 261), which requires ari annual
payment, between July 1 and December 31, of the amount, if any,
by which the accumulated net income of the Reconstruction Finance
Corporation exceeds $250,000,000, the Corporation paid into the
Treasury on December 31, 1949, as miscellaneous receipts, a dividend
of $1,345,185.29 on its capital stock.
Cancellations of notes,. Reconstruction Finance Corporation.—In
accordance with the act of June 30, 1948 (62 Stat. 1187), the Secretary
of the Treasury in 1950 canceled notes of the Reconstruction Finance
Corporation in the amount of $202,146.01, which equaled the costs
incurred by the Corporation subsequent to June 30, 1947, for handling,
storing, processing, and transporting critical materials to stock piles. .
As also required by the act, the Corporation deposited in the
Treasury as miscellaneous receipts the recoveries less related expenses,
made subsequent to June 30, 1947, of national defense, war, and
reconversion costs, which in 1950 amounted to $25,022,694.56.
A statement showing aU cancellations and recoveries by the Treasury
in connection with Reconstruction Finance Corporation notes is
shown in table 72.
Dividends on and repayments of capital stock of Federal home loan
banks.—Dividends amountiag to $1,260,268.75 on capital stock holdiags of the Treasury in Federal home loan banks were deposited ia the
Treasury as miscellaneous receipts. The banks also made repayments
totalmg $27,270,800 on capital stock, of which $3,723,300 was required
under section 6 (g) of the Federal Home Loan Balnk Act, as amended
(12 U. S. C. 1426 (g)), and $23,547,500 was voluntary. A statement
showing dividends and stock repayments by banks appears as table 74.
Dividends on capital stock of the Federal Farm Mortgage Corporation.—The Federal Farm Mortgage Corporation paid to the Treasury
duriag the fiscal year 1950 as dividends $17,000,000, in accordance




88

195 0 REPORT OF THE SECRETARY QF THE TREASURY

with the act of June 29, 1949 (63 Stat. 347). This sum was deposited
as,misceUaneous receipts.
Federal intermediate credit banks.—^The Agricultural Credits Act of
1923, as amended (12 U. S. C. 1072), requires each credit bank, at
the end of each fiscal year, after all necessary expenses and costs of
operation for the year have been provided or paid for, to apply its
remaiaing net earnings to (1) making up any losses in excess of
reserves, (2) eliminatiag capital impairment, (3) creathig reserves'
agaiast unforeseen losses, and (4) paying 25 percent of the amount then
remaiaiag to the United States as a franchise tax. Duriag the fiscal
year 1950, $260,665.80 was deposited iato the Treasury.
Panama Railroad Company.—Duriag the year the Panama RaUroad
Company paid to the Treasury $1,000,000 as dividends on capital
stock owned by the Governnaent.
Smaller War Plants Corporation.—Duriag the fiscal year the Reconstruction Finance Corporation, as liquidation agency, paid to the
Treasury $10,000,000 for retirement of capital stock of the Smaller
War Plants Corporation, reducing the June 30, 1950, holdiag of the
stock by the Treasury to $44,400,000.
^^
Home Owners^ Loan Corporation {in liguidation).—The Treasury
received durhig the year final payment on $125,000,000 face amount
of Home Owners' Loan Corporation bonds and iaterest. Repayments
of capital stock reduced the Treasury holdings of $200,000,000 to
$74,000,000 on June 30, 1950.
Federal Savings and Loan Insurance Corporation.-—The Treasury
received from the Federal Savings and Loan Insurance Corporation
$28,981,112.27 representing iaterest on its capital stock at 2 percent
from June 27, 1934, to June 30, 1950, less dividends previously paid
by the Corporation to the Home Owners' Loan Corporation. The
payment was made pursuant to Public Law 576, 81st Congress,
approved June 27, 1950, which also contains provisions for future
payments to the Treasury of interest on its capital stock at a rate to
be determined by the Secretary of the Treasury, and for the retirement of capital stock annually in amounts equal to 50 percent of net
'income for the fiscal year.
Federal savings and loan associations.—During the fiscal year 1950
the Treasury received $136,600.00 which completes the repayments
on $49,300,000 of shares of Federal savings and loan associations
acquired under the act of Jurie 13, 1933, as amended (12 U. S. C. 1464
g-j). Dividends received duriag the year amounted to $1,670.50,
which brhigs the total amount of dividends tkrough June 30, 1950, to
$10,563,393.85.
Federal Crop Insurance Corporation.—Pursuant to Public Law 268,
81st Congress, approved August 25, 1949, which amended the Federal
Crop Insurance Act (7 U. S. C. 1501-1519), the Treasury canceled,
without any payment beiag made by the Corporation, outstandiag
receipts for payments of $73,000,000 of capital stock of the Federal
Crop Insurance Corporation, thus redliciag the stock of the Corporation held by the Treasury to $27,000,000, ^
Obligations of foreign governments.—The iadebtedness to the United
States from foreign governments arising from World War I amounted
to $16,134,787,078.95 as of November 15, 1950, uicludhig $11,434,794,809.51 on account of pruicipal and $4,699,992,269.44 on



ADMINISTRATIVE REPORTS

89

account of iaterest. The priacipal figure does not include the World
War I indebtedness of Germany amounting to $1,225,023,750
(3,037,500,000 reichsmarks). Tables 110 and 111 show the status of
the iadebtedness of foreign governments to the United States arising
from World War I.
The indebtedness of foreign governments arising from World War
II, representing amounts receivable on Iend4ease settlement agreements, collections on which are being handled by the Treasury,
surplus-property sales agreements, and other lend-lease accounts,
totaled $2,394,002,510.82, details concerning which are shown in
table 112. This amount hicludes $291,215,172.64 due the United
States for the value of silver transferred to foreign governments under
the lend-lease program which is to be repaid ia kind. Final settlement agreements have not been reached with all foreign governments.
Payments by Finland on World War I indebtedness.—During the
fiscal year 1950 the Treasury received $424,041.98 in payment of
Finland's indebtedness under the funding agreement of May 1,
1923, and the moratorium agreements of May 1, 1941, and October
14, 1943. Public Law 265, 81st Congress, approved August 24, 1949,
provides that the amounts paid by Finland after August 24, 1949, shall
be placed in a special deposit account which shall be available to the
Department of State to finance educational and technical instruction
and training in the United States for citizens of Finland, American
books and technical equipment for institutions of higher education in
Finland, and participation of United States citizens in academic and
scientific enterprises in Finland. In accordance with the act, the
amount received was made available to the Department of State.
Lend-lease and surplus-property fiscal operations.—The billing and
collecting from foreign governments for reimbursable supplies and
services furnished under lend-lease and reciprocal aid agreements
and surplus-property sales agreements negotiated by the Department
of State were continued. Collections made by the Treasury on these
accounts during the fiscal year 1950 amounted to $34,484,200.82,
bringing the total collections to $545,340,889.32.
Articles and services furnished under agreements as authorized by
the Lend-Lease Act were reported in the amount of $13,904,353.38,
bringing the total defense aid provided to $50,242,673,031.59 between
March 11, 1941, and June 30, 1950. The increase in the total defense
aid provided was the net result of the receipt of heretofore unreported
charges affecting both reimbursable and nonreimbursable accounts.
Reverse lend-lease, consisting of articles and services furnished by
foreign governments to the United States up to September 2, 1945,
amounted to $7,819,322,790.90. Between March 11, 1941, and June
30, 1950, funds received from foreign governments amounted to
$1,766,243,220.78. ^ Of this amount $1,281,178,939.71 has been covered into the United States Treasury as miscellaneous receipts,
$221,517,703.91 net has been allocated to the procuring agencies
under the cash reimbursement program, $171,035,317.10 has been
returned to foreign governments, $88,299,000.00 was. reappropriated
to the President by the act of June 30, 1944 (58 Stat. 627), $1,578,332.85 was reimbursed to other agencies, and the remainder of
$2,633,927.21 is being held in the Treasury pending settlement of
accounts.




90

1950 REPORT OF THE SECRETARY OF THE TREASURY

Foreign currencies.—During the fiscal year the Treasury continued
the operation of central facilities for receipt and utilization by the
United.States of foreign currencies received under surplus property
and lend-lease agreements, and excess foreign currencies acquired by
sales of surplus property and lend-lease goods. Economic Cooperation
Administration counterpart and guaranty funds, and other operations
in foreign countries. These currencies are sold to various Government
agencies as required. In accordance with provisions for educational
exchange programs conducted between the United States and certain
countries as authorized in section 32 (b) (2) of the Surplus Property
Act of 1944, as amended (50 U. S. C. 1641 (2)), the currencies in the
following statement were delivered in the fiscal year 1950 to the
Department of State without receipt of the equivalent amount in
United States dollars:
Country
Australia
Belgium
Burma.
China
Egypt
France.....
Great Britain..
Greece
India..
Iran
Italy
Netherlands...
New Zealand..
Norway
•...
Philippines

Foreign currency
11,548 pounds
7,037,062.50 francs
1,616,500 rupees
68,000,000,000 gold yuan i
5,033,820 pounds....
.
279,905,000 francs
213,238 pounds
:
5,004,200,000 drachmas..142,794 rupees
550,000 rials__.I
354,400,000 lire
1,513,212.60 guilders
41,039 pounds
1,091,811.60 kroner
803,000 pesos

Total

.

Equivalent
dollar value
$37,280.00
160,000.00
400,000.00
29,000.00
14,500.00
810,000.00
750,000.00
350,000.00
30,000.00
13,750.00
557, 232. 70
500,000.00
115,000.00
220, 000.00
400, 000.00
4,376,762.70

1 Currency delivered during fiscal year 1949.

The amounts of foreign currencies held by the Treasury on June 30,
1949, transactions during the fiscal year, and balances on June 30,
1950, in foreign currencies and approximate United States dollar
values are shown in table 109.
Liguidation of Institute of Inter-American Transportation.—On
August 21, 1946, a certificate of dissolution of this Corporation was
filed with the Secretary of the State of Delaware. Liquidation was
completed under the direction of the Department of State as of
August 21, 1949. Since that date various small collections have been
deposited in the Treasury as miscellaneous receipts.
Liquidation of other war agencies.—Public Law 446, 81st Congress,
approved February 9, 1950, relieved certifying officers .of terminated
war agencies in liquidation by, the Treasury Department of liability
for bona fide pa3anents which had been suspended or disallowed by
the General Accounting Office. These suspensions and disallowances
have been removed from the accounts of the certifying officers. As
of June 30, 1950, the liquidation of the residual fiscal affairs of certain
war agencies was completed, except the final disposition of the remaining fiscal documents and the processing of a few miscellaneous claims
that are received from time to time. The terminated war agencies
include the Division of Central Administrative Services of the Office
for Emergency Management, Office of CivUian Defense, War Refugee



.

ADMINISTRATIVE REPORTS

91

Board, Office of Censorship, Office of War Information, Committee
on Fair Employment Practices, and Price Decontrol Board.
Liguidation of railroad obligations.—The Treasury received
$528,950.75 during the year on account of securities acquired by the
United States in connection with loans which were made to railroads
under sections 207 and 210 of the Transportation Act of 1920 (41
Stat. 462 and 468). Of this amount $524,550.75 was collected as
interest and dividends on securities of the Seaboard Air Line Railway
Company, which are administered by the Reconstruction Finance
Corporation pursuant to Executive order, and $4,400.00 represents
earnings on railroad securities owned by the Treasury, other than
those held by the Reconstruction Fiaance Corporation. A statement
concerning the liquidation of railroad obligations appears as table 75.
Bonds of the Republic of the Philippines.—An additional $1,700,000
was paid by the Republic of the Philippines to the Government of the
United States for deposit to the special trust account which was
established in the Treasury for the purpose of paying principal and
interest on pre-1934 Philippine Government bonds. The money was
invested in accordance with the act of August 7, 1939 (53 Stat. 1229/).
The amounts of cash and investments in the special trust account as
of June 30, 1950, are shown in table 107.
'Deposits of the Republic of the Philippines.—Under authority of the
act of June 11, 1934, as amended by the act of August 7, 1946 (22
U. S. C. 1333), and agreements with the Republic of the Philippines,
the Treasmy maintains two interest-bearing time deposit accounts
for public moneys of the Republic. The authority to maintain the
accounts will expire July 1, 1951. As of June 30, 1950J the accounts
consisted of deposits of $55,000,000 at 2 percent interest and $70,000,000 at 1 percent interest.
Settlement of prewar Philippine depositary account.—In connection
with the reconstruction of the account of the Treasurer of the United
States with the Treasury of the Philippine Islands at the time of the
Japanese invasion, a balance of $525,705.09 was computed from records
available to the Treasury Department. Additional information,
based on records of the Philippine Treasury as audited by the General
Auditing Office of the PhUippine Government, indicated a balance of
$422,674.11. After taking into consideration certain transactions
which were known to the United States Treasury, a balance of $433,060.57 w^as determined to be due the Philippine Treasury. The
Comptroller General approved a settlement with the Philippine
Government on that basis. Settlement was made with the Philippine
Government on December 7, 1949, by the transfer of $433,060.57
to the demand deposit account of the Central Bank of the PhUippines.
A residual balance of $157,689.70 representing the net excess of
unidentified credits over unidentified payments was placed in a special
deposit account, of the Secretary of the Treasury, where these funds
were held until such time as the General Accounting Office had completed the audit and reconciliation through December 31, 1941, of the
accounts of those disbmsing officers who customarily used the Philippine Treasury as a depositary. Under date of M a y 8, 1950, the
Comptroller General advised the Secretary of the Treasury that all
of the checking accounts involved had been reconciled through
December 31, 1941, and there appeared to be no objection to clearing




92

195 0 REPORT OF THE SECRETARY OF THE' TREASURY

the special deposit account. Accordingly, the balance of $157,689.70
in the account was deposited in the general fund of the United States
Treasury in June 1950. This completed all necessary action on the
settlement of the account of the Treasurer of the United States with
the Philippine Treasury.
American-Mexican Claims Commission.—The Treas.ury received
from ;the Government of the United States of Mexico $2,500,000 in
November 1949 as an installment on the $40,000,000 which Mexico,
in the Convention of November 19, 1941, agreed to pay in full settlement of the claims of American nationals as adjudicated by the
American-Mexican Claims Commission. The amount enabled a
further distribution of 6.2 percent on the unpaid principal amount of
each award, making a total distribution of 65.1 percent. A statement
of the Mexican claims fund appears as table 103.
Mixed Claims Commission, United States and Germany.—No further
funds were received by the Treasury from the Department of Justice
for distribution on the awards of the Mixed Claims Commission in
accordance with the Settlement of War Claims Act of 1928, as amended
(50 App. U. S. C. 9). A statement showing the payments by classes
and status of the accounts to date is shown as table 104.
International Claims Settlement Act of 1949.—Public Law 455, 81st
Congress, approved March 10, 1950, provides for the settlement of
certain claims of the Government of the United States, on its own
behalf and on behalf of American nationals against foreign governments, arising out of World War I I . An International Claims Commission has been established in the Department of State to receive
claims, conduct hearings, and adjudicate and render final decisions
with respect to such claims. Awards of the Commission will be
certified to the Secretary of the Treasury for payment to awardees or
their successors or assigns in accordance with the provisions of the act.
FISCAL SERVICE--BUREAU OF THE .PuBLIC D E B T

The Bureau of the Public Debt performs the administrative work in
connection with the management of the public debt, iacluding the
preparation of offering chculars and regulations, the issuance of
securities and processing of transactions relating thereto, the final
audit and custody of securities retired, the keeping of accounts for
registered securities, and the drawing of interest checks. Two
principal offices are maintained—one in Washington, D. C , for all
functions relating to the issuing, servicing, and retiring of public debt
securities except those relating to savhigs bonds foliowing^ their issue
to the public, and the other in Chicago, 111., where the functions consist
of transactions relating to savings bonds after their issue to the public.
In addition to these offices, three field regional offices, located in New
York, Chicago, and Cincinnati, are maintained for the purpose of
decentralizing the auditing of redeemed savings bonds;
Management improvement.—^The ,Bureau continued its program
aimed at the reduction of the cost of all functions wherever such reductions could be effected without sacrificing any of the security
controls. The improvements made during the year will produce
annual saviags of nearly $500,000. In addition, savings resulting
from improvements installed ia the period 1947-49 amounted to $2.5
mUlion in 1950.




ADMINISTRATIVE REPORTS

93

The regional offices of the Register of the Treasury in St. Louis and
Los Angeles were abolished and their functions transferred to the
Chicago and Cincinnati regional offices. This action substantiail}^
reduced administrative costs without impairment of operating
efficiency.
The issuance of duplicate savings bonds resulting from claims cases
was transferred from the Bureau of the Public Debt in Washington,^
D. C , to the Federal Reserve Bank of Chicago. There this function
was consolidated with other bond issue activities of the Bank. The
cost of issuing duplicate bonds was thus reduced and delivery of the
bonds to their owners was expedited.
A summary of public debt operations handled by the Bureau
appears on pages 14 to 26 of this report, and a series of statistical
tables dealing with the public debt will be found in tables 11 to 27
and 35 to 3.9.
The public debt of the United States falls into two bro~ad categories:
(1) public issues, and (2) special issues. The public issues are classified as to marketable obligations, consisting of Treasury bills, certificates of indebtedness. Treasury notes, and Treasury bonds; and
nonmarketable obligations, consisting mainly of United States savirigs
bonds and Treasury savings notes.
During the fiscalyear 1950 the gross public debt increased by
$4,586,992,491 and the guaranteed obligations held outside the
Treasury declined by $7,772,374. Total public debt issues, including
issues in exchange for other securities, amounted to $125,610,332,406
during 1950, and retirements amounted to $121,023,339,916. A
summary showing the effect of Government operations on the public
debt will be found on page 3 of this report.
On June 30, 1950, there were 4,670 employees on the rolls of the
Bureau of the Public Debt, as compared with 5,848 on June 30, .1949.
The decrease of 1,178 employees was made possible through a reduced
work load and improved operating procedures.
United States savings bonds.—In terms of volume of work, the issue
and redemption of United States savings bonds represent by far the
largest administrative problem of the Bureau. Since these bonds are
in registered form and in the hands of millions of American people,
the task of maintaining both alphabetical and numerical records of
over 1.3 billion of these bonds, the replacement of lost or stolen bonds,
and the handling of erroneous redemptions by financial institutions
throughout the country on forged signatures involves a major administrative task.
Receipts from the sales of savings bonds during the year were
$5,672,735,862 and accrued discount, charged to the interest account
and credited to the savings bonds principal account, amounted to
$1,045,108,870, making a total of $6,717,844,732. Expenditures for
redeeming savings, bonds, including matured bonds, amounted to
$5,422,086,571. The amount of savings bonds of all series outstanding on June 30, 1950, including accrued discount, was $57,628,701,716, an increase of $1,295,758,161 over the amount outstanding
on June 30, 1949. Detailed information regarding savings bonds
will be found in tables 28 to 33.
During the fiscal year .1950 approximately 67.8 million stubs
representing issued savings bonds of Series E were received for




94

195 0 REPORT OF THE SECRETARY OF THE TREASURY

registration, making a total of 1,314.8 million, including reissues,
received through June 30, 1950. These stubs are sorted alphabetically by name of owner and microfilmed, and then are sorted in
numerical sequence of their bond serial numbers and microfilriaed,
after wliich the original stubs are destroyed." The microfilms serve
as permanent registration records. Of the 1,314.8 million Series E
bond stubs received as of June 30, 1950, 1,254.9 million have been
completely processed and 1,218.1 of the latter have been destroyed.
The great backlogs in these operations which resulted from the manpower shortage during World War I I have been almost entirely eliminated, as indicated in the following table which shows the processing,
at various stages, of the registration stubs of Series E savings bonds.
s t u b s of issued Series E savings b o n d s i n Chicago oflBce
(in millions of pieces)

Period
stubs
received

Alphabetically
sorted
A l p h a - Destroyed
Numeribetically
after
. cally
filmed
Restricted F i n e sort
filming
'filmed
prior to
basis
filming 2
sorti

Total

1,042.3

1,022.1

958.9

535.4

317.9

265.6

. 76.8
61.7
66.2
67.8

76. i
66.2
58.9
6.0

120. 4
72.4
58.5
91.1

37.9
323.1
290.5
88.1

120.1
318.4
382.8
115.7

152.3
196.2
447.4
156.6

1,314. 8

C u m u l a t i v e t h r o u g h J u n e 30, 1 9 4 6 . . . :
Fiscal year:
1947
1948
1949..
1950
..:

1,229.3

1,301. 3

1,275. 0

1,254.9

1,218.1

1 Not complete alphabetical arrangement but sorted to a degree whereby individual stubs can be
located. Includes those stubs fine sorted.
2 Completely sorted.

The registration records of stubs of issued savings bonds of Series
F and G are maintained in Chicago.
The audit of retired savings bonds is conducted • in the regional
offices of the Register of the Treasury. There were 84.4 million retired savings bonds of all series received in the regional offices during the year. Retired bonds are audited and then microfilmed, after
wliich the bonds may be destroyed. Destruction of bonds commenced
in the fiscal year 1950 when 317.2 mUlion were destroyed. The bonds
of all. series received in these offices have been audited, microfilmed,
and destro^'^ed to the extent indicated in the following table.
R e t i r e d savings b o n d s of all series in regional oflices
(in millions of pieces)
Period

C u m u l a t i v e t h r o u g h J u n e 30,1946
Fiscal year:
1947
1948
1949
1950
Total




Bonds
received
in
regional
olfices

Audited

Microfilmed

Balance
unaudited

Balance
unfilmed

Destroyed

27.9

19.2

8.7

27.9

. 113.3
95.1
. 85.7
84.4

118.4
94.6
86.8
83.0

61.7
171.4
153.3

3.6
4.1
3.0
4.4

141.2
184.6
98.9
29.9

317.2

406.4

402.0

376.6

4.4

29.9

317.2

ADMINISTRATIVE

95

REPORTS

After the retired bonds have been audited in the regional offices, a
listing of the serial numbers is transmitted to the Chicago departmental
office where the serial numbers are posted to. numerical registers, and
the postings verified. The following statement shows the status of
the posting of all series of retired savings bonds.
Retired savings bonds of all series in the Chicago oflfice
(in millions of pieces)
Period

Number
of retired
bonds
reported

Status of posting
Posted

Verifled

Unverified

Unposted

464.2

313.5

70.2

195.7
105. 2
96.8
81.2

256.5
110.8
94.9
82.2

12.4.
6.7
2.4
3.8

866.7

Total

384.0

137.9
• 99.6
92.5
82.6

Cumulative through June 30,1946
Fiscal year:
1947..
. . . .
1948
1949
.
1950-.

862.9

857.9

3.8

70.6
9.7
4.1
6.0
- 5.0
5.0

Of the 78.8 million Series A - E savings bonds redeemed prior to
release of registration and received in the.regional offices during the
year, 76.9 million,, or 97.6 percent, were redeemed by over 16,000
paying agents, who were reimbursed for this service, in each quarter
year, at the rate of 15 cents each for the first 1,000 bonds paid' and 10
cents each for all over the first 1,000. The total amount paid to agents
on this account during the year was $9,558,666, which was at an average rate of 12.44 cents per bond.
The following table shows the number of issuing and payiag agents
for Series A - E savings bonds, by classes.
Post
oflFices

June 30

Banks

Building
andflsavings'and
loan

Credit
unions

Companies
operating
payroll
plans

All
others

^Total

Issuing agents
1947
1948
1949...
19501

26,420
26,179
24, 944
25,060

:. .

15,178
15,178
16,206
15, 225

1,856
1,706
1,621
1,567

719
616
565
522

2,910
3,289.
3,192
3,052

1,320
605
595
560

47,403
46, 572
46,122
46, 966

63
50
64
57

16,052
16, 508
16,624
16, 691

Paying agents
1947
1948
1949
1950

__
•
L

15,176
16, 627
15, 559
. 15,623

683
786
863
874

140
146
138
137

During the fiscal year, 8,728,509 Series G bond interest checks
were issued with a value of $446,579,998. This is an increase of
about 145,000 checks over the number issued during 1949.
There were 37,213 applications during the year for the issue of
duplicates of lost, stolen, or destroyed savings bonds, in addition to
907795—51-




96

1950 REPORT OF THE SECRETARY OF THE TREASURY

2,710 cases on hand at the beginning of the year, making a total of
39,923 cases, of which 9,179 were credit cases referred to Washington
for settlement. In 8,518 cases the bonds were recovered, and in
20,142 cases the issuance of duplicate securities was authorized. On
June 30, 1950, only 2,084 cases remained unsettled.
Registered^ accounts for other than savings bonds.—During the year
14,000 individual accounts covering publicly held registered securities
other than savings bonds were opened and 38,000 were closed, leaving a total of 358,000 such accounts open on June 30, 1950, covering
registered securities in the principal amount of $14.5 bUlion. There
were 715,000 interest checks issued to owners of record during the
year, which was a decrease of 43,000 from 1949.
Armed forces leave bonds.—Through June 30, 1950, armed forces
leave bonds aggregating $2,088,672,000 in face value had been issued
and $1,783,447,000 had beeri retired, leaving a balance of $305,225,000
outstanding on that date. The issues and retirements of armed
forces leave bonds monthly during 1950, on the daily Treasury statement basis, are shown in table 21, and the accumulated issues and
retirements of the issues outstanding on June 30, 1950, on the Public
Debt accounts basis, are shown in table 17. The following statement shows the issues, retirements, and outstanding for selected
periods:

October 1, 1946, to April 30, 1947
May 1, 1947, to August 31, 1947
September 1, 1947 to October 31, 1947
November 1, 1947, to June 30, 1948...
June 1, 1948, to June 30, 1949...
June 1, 1949, to June 30, 1950
Total

1,721,045
38,151
205, 557
23,457
90,568 1 1,047,022
63, 866
408, 252
7,490
171,054
147
95, 511
2,088, 672

1, 682, 893
1,864,993
908,540
564,153
400,589
305, 225

1, 783, 447

1 Redemption on and after September 1, 1947, at owner's option, was provided in amendment to Armed
Forces Leave Act, approved July 26, 1947.

The total number of armed forces leave bonds issued, including
reissues, through June 30, 1950, was 10,113,171 and the number
retired was 8,693,772. Of the total bonds issued, 6,927,881 were
issued by the Army, 2,611,757 by the Navy, 415,354 by the Marine
Corps, 157,540 by the Coast Guard, and 639 by the Division of Loans
and Currency. This Division is now the only agency which issues
these bonds.
Redeemed currency.—On July 1, 1949, the Division of Loans and
Currency (Washington) had on hand 22,248 unaudited bundles (4,000
half-notes each) of United States currency that had been retired from
circulation as unfit. During the year 333,634 bundles were received,
an increase of 12,119 bundles over 1949; and 331,945 bundles were
audited, leaving a balance of 23,937 unaudited bundles on hand on
June 30, 1950.




97

ADMINISTRATIVE REPORTS

The Destruction Committee supervised the incineration of redeemed
canceled currency during the year as follows:
Class of currency
Gold certificates
Silver certiflcates.. . . . .
United Statesnotes
T r e a s u r y notes of 1890.
.
F e d e r a l Reserve notes
F e d e r a l Reserve B a n k notes
N a t i o n a l B a n k notes
Fractional currency
Total

Pieces

Value

• 86,035
1, 278, 874,012
48,531,291
119
. . . . . . . . .
^ 457, 681, 301
.
. . .
_ . .
1, 760, 245
402, 797
1,114
.
. . . .
. .

- -

$2,065,120
1, 867, 590,960
199,465, 521
355
. 5,629,633,865
36,066, 428
6, 219,374
212

1, 787, 336,914

7, 741, 041,835

FISCAL SERVICE—OFFICE OF T H E T R E A S U R E R O F T H E U N I T E D S T A T E S

The Office of the Treasurer of the United States is essentially a
banking facility of the Government. The responsibilities of the
Treasurer include the receipt of all public moneys; custody, issue,
and redemption of United vStates currency and coin; payment of
Government checks; custody of securities deposited in the Treasury
as collateral or for safekeeping; and payment of principal and interest
on the public debt. The Office of the Treasurer of the United States
prepares the Daily Statement of the United States Treasury, which
recapitulates all transactions in the accounts of the Treasurer, and
issues monthly statements of the public debt and of currency outstanding.
Management improvement.—The Office of the Treasurer continued
its program of improviag operations and eff'ectmg economies. The
major activity of the Office from the standpoiat of personnel required
is the payment of Government checks. Studies and reviews of this
activity, facilitated by means of a system of cost and production
reports, resulted ia reductions in the unit salary costs for processing
paper checks and card checks paid ia Washuigton, 3 percent and
10 percent respectively, and 9 percent on card checks paid through
the Federal Reserve Banks.
Constant effort is directed toward the streamliniag of procedures,
one result of which was the discontuiuance of the audit of paid interest
coupons prior to their transmittal to the Register of the Treasury for
final audit. This wUl result m annual saviags of approximately
$80,000 in the Office of the Treasurer.
Money received and disbursed by the Treasurer.—Moneys collected
by Government officers are deposited with the Treasurer at Washington, D . C , and in Federal Reserve Banks and designated Government
depositaries for credit of the account of the Treasurer of the United
States, and all payments are charged against this account. Total
receipts and payments for 1949 and 1950 are shown in the followiag
table on the basis of the daUy Treasury statement.




98

195 0 REPORT OF THE SECRETARY OF THE TREASURY
1950

Receipts:
B u d g e t a r y (net) 2
T r u s t accounts, etc.3
Public debt <
'

___
_

_

Subtotal

Balance in general fund b e g i n n i n g of year
Total
Expenditures:
Budgetary *
T r u s t accounts, etc.3
•__
:
Clearing account for o u t s t a n d i a g checks, interest coupons,
a n d telegraphic reports from Federal Reserve B a n k s
P u b l i c d e b t 4..
..
Subtotal
B a l a n c e LQ general fund at close of year
Total

$38,245,667,810.11
5, 714, 426, 671.10
118, 201, 295, 620. 89

$37, 044, 733, 657. 37
6, 668, 734, 224. 26
125, 610, 332, 406. 21

162,161,390,002.10
4, 932, 021,477. 07

169,323,800,187.83
3,470,403, 311. 67

167,093,411,479.17

172, 794, 203, 499. 50

40,057,107, 857. 79
6, 209,160,036. 37

40,166,835,'914.82
6, 569, 596,863. 78

6 366, 441, 900. 21
117, 723,182,173. 55

8 482, 656,886. 26
121,023, 339, 915. 50

163, 623, 008,167. 50
3, 470, 403, 311. 67

167, 277,115,807.85
6, 517, 087, 691. 65

167,093, 411,479.17

172, 794, 203,499. 50

1 See table 1, footnote 7.
2 T o t a l b u d g e t receipts less a m o u n t s a p p r o p r i a t e d to Federal old-age a n d survivors insurance t r u s t f u n d
a n d refunds of receipts. See also table 1, footnote 3. F o r details of receipts for 1950, see table 3.
» F o r details for 1950, see table 4.
* F o r details for 1950, see table 21.
.
« See table 1, footnotes 3 a n d 4. F o r details for 1950, see table 3.
6 Excess of credits ( d e d u c t ) .

Assets and liabilities of Treasurer's accounts.—The assets of the
Treasurer consist of gold and silver bullion, ^coin and paper currency,
and deposits in Federal Reserve Banks and commercial banks designated as Government depositaries.
A summary of the assets and liabilities in the Treasurer's account
at the close of the fiscal years 1949 and 1950 is shown in table 40.
Gold.-—Gold receipts during 1950 amounted to $484.7 million and
disbursements totaled $720 million, a net decrease of $235.3 million.
This decrease reduced the total gold assets to $24,230.6 million on
June 30, 1950. LiabUities against these assets were $23,022.9 million
of gold certificates and credits payable in gold certfficates and $156.0
million for gold reserve against currency. The balance, $1,051.6
million, was in the general fund on June 30, 1950.
Credits during the year to the gold increment account, as a result
of the revaluation of gold in relation to the dollar, amounted to
$82,444.84. This makes a total doUar increment from 1934 through
the fiscal year 1950 of $2,819,221,746.09.
Silver.-—During the year 26.5 million ounces of silver bullion, which
had been carried in the general fund at a cost value of $23.2 mUlion,
was monetized at a monetary value of $34.3 million. This $34.3
million increase in silver assets was offset by a decrease of $6.3 mUlion
in holdings of silver dollars, making a net increase of $28.0 mUlion in
assets during the year. As of June 30, 1950, the sUver assets of the
Treasurer (exclusive of subsidiary coin and bullion held in the general
fund at cost and recoinage value) amounted to $2,342.9 million.
LiabUities against silver at the end of the year amounted to $2,324.6
million for silver certificates outstanding and $1.1 million for Treasury
notes of 1890 outstanding, leaviag a net balance of $17.2 million in the
general fund.
The sUver bullion held in the general fund at cost value (exclusive
of the $17.2 million at monetary value) increased from $88.3 mUlion on




ADMINISTRATIVE

99

REPORTS

June 30, 1949, to $97.6 million on June 30, 1950. This increase of
$9.3 million is accounted for as follows: $36.7 mUlion net purchases
of silver less $23.2 million of silver monetized and less $4.2 million
of silver used for coinage.
Subsidiary silver and minor coins.—Shipments of subsidiary silver
and minor coins from United States mints during the year for circulation usage amounted to $25,048,480.52 as compared with $47,693,386.39 the year before. The following table shows the shipments by
denominations:
Denomination

1949

Half dollars
Quarters
Dimes
Nickels
Cents

1950

Total

$5,660,021.00
13, 799, 511. 50
14, 380, 474. 50
7, 473,102.15
6, 380,277. 24

$5 110 016 00
7, 752,009. 00
6, 578, 501. 20
2,183,851.05
3,424,103. 27

47, 693,386.39

._

26,048,480.52

Paper currency.—Under the laws of the United States the Treasurer
is the agent for the issue and redemption of United States currency
and coiri.
'
Table 81 shows by class and denoiriiaation.the value of paper currency issued and redeemed during 1950, and the amounts outstanding
at the end of the fiscal year.
A comparison of the amounts of paper currency of all classes issued,
redeemed, and outstanding, follows:
Fiscal y e a r 1949
Pieces
O u t s t a n d i n g at begiiming of y e a r
Issues d u r i n g year
R e d e m p t i o n s d u r i n g year
O u t s t a n d i n g a t e n d of year

.

Amount

2,825,197,185 $30,446,677,581
1, 724,113,091
7,246,488,000
1,748, 990, 671
7, 757, 292,946
2,800, 319, 705 29,935, 772,636

Fiscal y e a r 1950
Pieces

Amoimt 1

2,800,319, 705
1, 761,917, 277
1, 799,873,896
2, 762,363,086

$29,935, 772,636
7,440,477,100
7,870,101,672
29,506,148,063

For further detaUs on stock and circulation of money in the United
States, see tables 77 to 81. '
Depositaries.—The followiog table shows the number of each class
of depositaries and balances at the end of the year:
Class

Federal Reserve Banks and branches
Other banks in continental United States:
General depositaries
Special depositaries. Treasury tax and loan accounts.
Insular and territorial depositaries
.:...
Foreign depositaries
Total..

Deposits to the
credit of the
Trea'surer, U. S.,June 30, 1950
$i;093,218,624.22
245,447,846.91
3, 267,784,040. 29
24,545,466.08
33,211, 716.82
4,664,207,682.32

1 Does not include limited depositaries which have been designated for the sole purpose of receiving
deposits made by Government ofBcers for credit in their oflQcial checking accounts with such depositaries
and which are not authorized to accept deposits for credit of the Treasm'er of the U. S.




100

1 9 5 0 REPORT OF THE SECRETARY OF T H E TREASURY

For detaUs on the administrative work relating to designation of
depositaries, see page 84.
Checking accounts of disbursing officers and agencies.—During the
year the Treasurer maintained 4,567 checking accounts of disbursing
officers and Federal agencies, including those maintained at the
Federal Reserve Banks as fiscal agents of the United States. The
number of disbursing officers' accounts by classes and the number of
checks paid during the fiscal year were as follows:
1949
D i s b u r s i n g officers

Treasury
Army
._
Navy...
Air Force
Other

N u m b e r of
disbursing
officers'
accounts

Total--..

.

.
.

N u m b e r of
checks
paid

N u m b e r of
disbursing
officers'
accounts

N u m b e r of
checks
paid

767
887
1,395
140
1,276

.
.
1

1950

•

177, 886, 692
25,136, 684
25,193, 254
4,191, 637
23, 992, 604

1,295
854
1,275
270
873

191, 475, 228
25, 024, 627
22, 842,117
4, 979, 383
24, 999, 304

4,465

. 256,400,871

4, 567

269, 320, 659

Of the 269,320,659 checks paid in the fiscal year 1950, 223,366,186
were in the form of card checks. There were 204,696,414 checks paid
by the Federal Reserve Banks acting as fiscal agents of the Treasurer
and the remaining 64,624,245 were paid by the Treasurer in Washington.
The amount to the credit of checking accounts of disbursing officers
and agencies on the books of the Treasm'er of the United States on June
30, 1950, was $7,627,516,906.60 as compared with $7,135,391,447.41
on June 30, 1949.
Check claims.—During the year the Treasurer of the United States
issued 25,239 checks totaling $1,838,315.03 in settlement of claims for
the proceeds of checks which had been paid bearing forged or unauthorized endorsements. The Chief Disbursing Officer issued 40,225
substitute checks totaling $8,570,897.75 to replace unpaid checks
which, it was claimed, had not been received, or were lost, destroyed,
etc. Many additional claims were received but not honored because
they were not well founded. Cases involving forgeries are investigated
by the United States Secret Service. For information on check
forgeries see the report of the United States Secret Service, page 134.
Treasurer's Cash Room.—The commercial checks, drafts, postal express money orders, etc., deposited by Government officers with the
Treasurer's Cash Roorir in Washington for collection aggregated
3,501,748 items for the fiscal year 1950, as compared with 3,327,236
items for the fiscal year 1949.
Treasurer's Securities Division.—The public debt securities and
interest coupons examined by the Division of Securities of the Treasurer's Office are as follows:




ADMINISTRATIVE

101

REPORTS

Pieces
1949
Marketable securities:
Principal
•.
Interest coupons '
Nonmarketable securities:
Armed forces leave bonds 2
United States savings bonds 2.
United States savings stamps 3
Other
,
Total..

1960

139,876
213,801
5,986
57, 310
,
2, 141, 780
320, 380

2, 409
54, 310
960, 745
186, 989

19,879,132

:.....

1,233,708
4, 781,324

7, 219, 485

1 Effective Nov. 1,1949, interest coupons paid by Federal Reserve Banks are sent directly to the Register
of the Treasury by the Federal Reserve Banks.
2'Arraed forces leave bonds and United States savings bonds paid by Federal Reserve Banks are sent
directly to the Register of the Treasury by the Federal Reserve Banks.
3 Effective Mar. 1, 1950, United States savings stamps paid by Federal Resesve Banks are sent directly
to the Register of the Treasm'y by the Federal Reserve Banks.

The Treasurer issued and redeemed the following savings bonds
during the fiscal years 1949 and 1950:
1949
Number
Issues: ^
E
F
G

1950
Amount

Number

Amount

76, 544
575
2,712

$4,756,387.50
602, 582. 00
3, 280, 400. 00

9, 538, 043. 25

73, 745

8, 639, 369. 50

3, 055,132:07
2, 345, 555. 91
2,111,251.09
5, 202, 878.19

13,316
32, 281
3,030
5, 683

3, 801, 283.00
2, 059,043. 75
2,486, 585.00
5, 366, 664.00

57, 310

Total

70,961
. 501
2,283

9,555
39, 485
2,935
5,336

Total
Redemptions: '
A-D
E
F.
G

$5, 464, 931. 25
506,012.00
3, 567,100.00

79, 831

.
:...

12, 714,817. 26

54, 310

13, 713, 565. 75

1 For the most part Uirited States savings bonds are issued and redeemed by issuing and paying agents
throughout the couritry (see p. 95).

Savings bonds placed in safekeeping with the Treasurer and then
withdrawn therefrom are as follows:
Number
• 1949
740,809
75, 507

694, 750
74, 614

..

816,316
121, 566

769,364
95, 725

-.

694, 750

673, 639

I n safekeeping a t beginning of year
P l a c e d in safekeeping
W ith dra^vn from safekeeping
I n safekeeping at e n d of y e a r




1950

.

102

195 0 REPORT OF THE SECRETARY OF THE TREASURY

Securities held in safekeeping.—The face value of securities held by
the Treasurer in safekeeping on June 30, 1949, and June 30, 1950, is
shown in the following table:
Purpose for which" held

June 30, 1949

To secure deposits of public moneys in depositary banks
To secure deposits of postal savings funds
.
For District of Columbia:
Teachers' retirement and annuity fund
Waterfund
Other
:
.
United States savings bonds held for various depositors
For the Board of Trustees, Postal Savings System
For the Secretary of the Army
.._._
For the Secretary of the Treasury:
Foreign obligations (World War I)
.
Obligations on account of sales of surplus property
Capital stock and obligations of Government corporations and
agencies
..^
Other...
-...
For Federal Deposit Insurance Corporation
._
For Attorney General K.
,
Miscellaneous...
Total

June 30, 1950
$311, 029, 800
9, 314, 000

14, 902,850
1, 773,000
6, 586, 670
54, 239, 280
2, 358, 542, 660
6,895, 480

16, 248, 500
1, 773, 000
740, 670
53, 089, 060
2,109, 539,160
6, 895,480

12, 071, 934, 757
46, 737,095

12, 071, 934, 757
46, 737, 096

9, 463, 984, 645
12, 218, 987
923, 000,000
21,151,134
110, 491, 352

10, 727, 700, 686
265,452, 456
1,065,000,000
21,151,134
107, 486, 277

25, 402, 999, 910

..

$304, 462, 200
7,079,800

26,814, 091, 075

1 Noninterest-bearing participating certificate for funds deposited in German special deposit account.

Servicing of securities for other Federal agencies.—In accordance
with agreements between the Secretary of the Treasury and the several
Government corporations and agencies and insular .governments, the
Treasurer of the United States acts as special agent for the payment
of principal of and interest on their securities. The amounts of such
payments during the fiscal year 1950, on the basis of the daily Treasury
statement, were as follows:
Principal

F e d e r a l h o m e loan b a n k s .
: . . . . $416,146,000. 00
F e d e r a l farm loan b o n d s . . '
146, 846, 800. 00
Federal F a r m Mortgage Corporation...
346, 500. 00
Federal H o u s i n g A d m i n i s t r a t i o n
2, 870,100. 00
H o m e Owners' Loan Corporation
647,000.00
Public Housing Administration
1, 000. 00
Philippine Islands
.
Puerto Rico-..^
1 300, 550.00
Total

566,156, 950. 00

Interest paid
incash

Registered
interest

Coupon
interest

$4, 894, 082.12
2, 981. 75
1, 366.13
36,742.42
262. 50

..-..,......-

2, 595. 00

$163, 782. 50
96, 706. 00

56,321. 62
68.75
1, 030, 757. 60
349,582.50

4, 937,029. 92

260, 487. 50

12, 412,443. 54

$10, 950 460. 96
25, 262. 21

1 Includes $50 premium.

BUREAU OF INTERNAL REVENUE
The Bureau of Internal Revenue is responsible for the collection of
the iuternal revenue and for the enforcement of the laws relating
thereto. These laws include such statutes as the Federal Alcohol
Administration Act (49 Stat., 977), as amended (27 U. S. C. and Sup.
201-212); the Liquor Enforcement Act of 1936 (49 Stat., 1928, 27
U. S. C , 211-228); and the Federal Firearms Act (52 Stat., 1250,
15 U. S. C , 901-909), which are regulatory in purpose and do not
impose taxes.




ADMINISTRATIVE

103

REPORTS

Some of the major aspects of the Bureau's operations are discussed
herein. A more detailed account will be found in the Annual Report
of the Commissioner of Internal Revenue for 1950.
COLLECTIONS

Internal revenue collections for the fiscal year 1950 totaled $38,957,125,591, a decrease of 3.7 percent ifrom the total for the preceding
year. Decreases occurred principally in the collections of income and
profits taxes and miscellaneous internal revenue. The principal
increase was in the collection of employment taxes.
Collections by tax sources for the fiscal years 1929-50 are shown in
table 7 in the tables section of this report. A comparison of collections from the principal sources of tax revenue for the fiscal years
1949 and 1950 follows.
Fiscal year
1949

Fiscal year
1950

Source
I n t h o u s a n d s of dollars
I n c o m e a n d profits taxes:
I n d i v i d u a l (includinc: w i t h h e l d )
Corporation.T o t a l income a n d profits t a x e s . . .
E m p l o y m e n t taxes . .
.
.
E s t a t e a n d gift taxes
'._
L i q u o r taxes L . .
T o b a c c o taxes
S t a m p taxes
M a n u f a c t u r e r s ' e x c i s e taxes
Retailers'excise taxes
.:
Miscellaneous taxes 2
. . . .
T o t a l collections L. .

.

Percent
increase.
crease (—)

18, 051, 822
11, 553, 669
.
._

.

.

.
.

._

_

_.

17,153,308
10, 864, 351

• -6.0
-6.1

29, 605, 491
2, 476,113
796, 538
• 2,210,601
1, 321, 876
72, 828
1, 771, 533
449, 211
1, 758, 930

28, 007, 659
2, 644, 575
706, 227
2. 219,196
1, 328, 464
84, 648
1, 836; 053
409,128
1, 721,175

-5.4
6.8
-11.3
0.4
0.5
16.2
3.6
-8.9
-2.1

40, 463,119

38, 957,126

-3.7

1 Excludes collections for credit to trust accounts.
2 Includes repealed taxes.

ENFORCEMENT ACTIVITIES

The campaign that was started in 1946 to strengthen the Bureau's
enforcement program was vigorously pursued in the fiscal year 1950.
The recruitment and training during the year of additional deputy
collectors, auditors, revenue agents and special agents raised the
enforcement personnel strength of the Bureau to a total approaching
the number on the rolls prior to the personnel reductions made at the
beginning of the fiscal year 1948. However, the benefits from the
recruitment and training of additional enforcement personnel are
cumulative, rather than highly fruitful for the first year or two.
Consequently, they are not reflected to any substantial degree in the
results of the Bureau's enforcement activities during the fiscal year
1950.
Additional assessments resulting from enforcement operations in
1950 totaled $1.7 bUlion, as compared with approximately $1.9 billion
the preceding year. Distraint warrant collections, however, showed a




104

1 9 5 0 REPORT OF T H E .SECRETARY OF T H E TREASURY

6 percent increase, reaching a total of $368 million for the year.
comparison of the 1950 totals with earlier years is as follows:
Additional
assessments

Fiscal year

Distraint
warrant
: collections i 1

Additional
assessments

Fiscal year

In thousands of dollars
1942
1943
1944
1946 .
1946

--

...i.:

.

438, 441
566, 058
730, 974
922,428
1, 280, 218

A

Distraint
warrant
collections i

In thousands of dollars

62, 572
73,127
83, 339
166, 488
198, 731

1947
1948
1949
1950

1, 928, 610
1.897, 015
1, 891, 679
1, 747, 592

.

209, 466
280,184
346 509
368,386

1 Distraint warrant collections represent primarily collections of undisputed araounts which taxpayers
have failed to pay when due. Occasionally, it becomes necessary to collect additional assessments by distraint warrant, but these cases represent only a small portion of the total distraint warrant collections.

Audits and investigations of income and profits tax cases accounted
for 89 percent of the additional assessments made in 1950. These
assessments resulted primarily from errors and omissions discovered
in the routine audit of returns. Not counting special fraud investigations, 3,545,169 returns of all kinds—including 2,980,534 individual
income tax returns and 190,778 corporation income and profits tax
returns—were examined or investigated through direct contact,
either personally or by correspondence, with taxpayers. The number
of returns subjected to these enforcement activities was 15.4 percent
greater than in the preceding year. There remains a large backlog of
returns for the tax year 1947, which require prompt examination in
order that assessment of the taxes properly due may not be prevented
by statutory limitations. In addition, there are the many millions of
returns for the tax years 1948 and 1949, which have a high potentiality
of additional revenue upon audit.
In addition to the foregoing examinations, 3,120 fraud investigations were made, resulting in criminal prosecution recommendations
against 1,048 individuals. Cash penalties of a civil nature were assessed in many cases which did not warrant criminal prosecution.
Numerous investigations were made also under various regulatory
statutes, especially the Federal Alcohol Administration Act (49 Stat.,
977), as amended'(27 U. S. C. and Sup., 201-212).
The effectiveness of enforcement efforts is further indicated by the
increasing number of persons convicted on tax evasion charges. The
record of convictions, beginning with the fiscal year 1945, is as follows:
Individuals
convicted

Fiscal year
1946
1946
1947
1948
1949
1950

:......




-.

.

-

.

....
....

65
149
182
315
346
385

ADMINISTRATIVE REPORTS

105

WORK-LOAD

More than half of the total man-hours avaUable to the Bureau duriug the year were spent in providing necessary facilities and services
for the millions of taxpayers who settle their tax accomits voluntarUy.
Tax returns and dhectly related information documents aggregating.
220 mUlion were received, controlled, and filed. The taxes reported
were assessed and accountuig operations were performed ia connection
with the amounts paid in. In addition, the income tax liability of the
more than 16 million taxpayers filuig returns on Form 1040-A was
computed for them, and income tax refunds and credits were scheduled
for more than 29 mUlion individuals whose prepayments exceeded
their liabilities.
The total number of returns of all types avaUable for enforcement
action during the year was 160,383,997, consisting of 78,999,820 returns
on hand at the beginning of the year and 81,384,177 returns filed or
reopened during the year. The number of returns disposed of was
96,313,237, leavuig a backlog of 64,070,760 returns awaiting action
at the close of the year—a decrease of 18.9 percent as compared with
the number at the beginning of the year. Of the number disposed of
during the year, 3,545,169 returns were subjected to audit as described
in the ^^Enforcement Activities" section of this report. There were
92,768,068 returns disposed of without audit or investigation. The
wide variance in the amount of attention tax returns require; the fact
that expenditure of investigative resources would be uneconomical
in m a n y cases; and the lack of enforcement personnel necessary for
wider audit coverage are the primary reasons for disposing of such a
large number of returns after only superficial examination.
In addition to the processuig of an enormous quantity of returns
and related information documents, the Bureau's work-load includes
the disposition of many thousands of claims for adjustments based on
section 722 and the various '^carry-back" provisions of the Internal
Revenue Code. Under the provisions of section 722, which allows
relief from excess profits tax for corporations mider certain circumstances, there had been filed as of the close of the year more than 54,482
applications for excess profits tax reductions totaling more than $6
bUlion. There were 15,302 claims totaling $4.5 bUlion stUl pending
on Jmie 30, 1950. ^'Carry-back" allowances of more than $265 million
were made during the year under the ''quick refund" provisions of the
Tax Adjustment Act of 1945.
Although mucih less numerous than the returns to be processed, the
complexity and importance of these so-called "section 722 claims",
and the carry-back adjustments, require the full-time attention of a
large percentage of the best-qualified technicians in the Bureau'.
MANAGEMENT IMPROVEMENT PROGRAM

The Bureau continued in 1950 to place major einphasis upon management improvement., Notable progress was made in the utUization
of time-saving operating equipment and in the development of more
efficient procedures. Management savings during the year were
estimated at 480 man years, exclusive of recurring savings from improvements made in prior years.




106

195 0 REPORT OF THE iSECRETARY OF THE TREASURY

The use of punch card tabulating machines was extended to one
more collector's office, and additional applications of the punch card
technique were made in the six establishments already using such
equipment. Several high-speed electronic calculators were installed
in collectors' offices in seven of the largest cities, for use in the computation of the individual income tax on Form 1040-A and in the
mathematical verification of individual income tax returns on Form
1040. Successful tests were made in four collectors' offices of the use
of continuous-feed electric typewriters to speed up preparation of
identification and account records, and also of new high-speed posting
machines to make both original and subsequent postings direct to
unit ledger cards, in lieu of assessment lists. The installation of
metering devices for the collection of liquor taxes, in lieu of the conventional stamp, was authorized during the year, and a pilot model
of such a device was constructed and demonstrated prior to testing
by the Bureau of Standards.
Procedural improvements in the Bureau were many and varied.
A combined return form for reporting both income tax withheld and
Federal Insurance Contributions Act taxes was placed in use on a
Nation-wide basis effective with the quarter beginning January 1,
1950. The combination of the two tax returns into one return form
cuts in half the number of such returns that must be filed by employers
and handled by collectors' offices. At the same time, the depositary
receipt procedure was extended to Federal Insurance Contributions
Act taxes, with provision for making deposits directly with Federal
Reserve Banks or through authorized local banks.
A program for an excliange of income tax audit information by the
Federal and State Governments was initiated. Under this program
it is contemplated that one audit made by either the Federal or State
Goverriment wiU serve the requirements of both Governments, thereby
reducing the inconvenience to taxpayers caused by multiple audits
and at the same time offering considerable possibility of operating
economy.
An operational cost reporting system covering all office and field
i activities was introduced in twenty-seven collectors' offices as a means
. of obtaining information for general management purposes and statistics for the liew performance type budget. The system will be
extended to all collectors' oflices during 1951.
Under the Bureau's decentralization program, material reductions
were effected in the Washington office in the number of clerical and
technical operations involved in specific activities. One measurable
result of this program was a reduction during the year of 251 in the
number of Washington office personnel.
Results in the first year of the audit control program, designed to
increase compliance with the revenue laws, are summarized in the
report "Administrative Management." The program for testing 1949
returns, which will be dhected principally to business-income returns,
has been extended to cover the returns of sinaller corporations and to
include returns of certain - Federal excises. This is a long-range
program, the benefits from which will be realized progressively over
a period of years.




ADMINISTRATIVE

107

REPORTS

PERSONNEL

The number of employees on Bureau rolls at the close of the year
was 55,551, consisting of 4,303 employees in the departmental service
and 51,248 in the field service. At the close of the preceding year, the
number of persons employed totaled 52,266, comprised of 4,554
departmental employees and 47,712 field employees.
Changes during the year in numbers of employees in the various
branches of the internal revenue service are shown in the following
table:
S u m m a r y of personnel, Bureau of Internal Revenue, J u n e SO, 1949, as compared
with J u n e SO, 1950
Number on payroll
asof—
Branch of service
June 30,
1949
Departmental service. _

_

4,554

2,868
6

10, 012
85
4,083
17
1,622
628
147
430
1,356

835
—1
26
2
152
21
-2
21
^391

61,248

3,636

52, 266

.

32, 776
92

9,177
86

Total field service

-251

29,908
86

:..

4,303

47, 712

Field service:
Olfices of collectors of internal revenue . .
Supervisors of accounts and collections
Internal revenue agents' forces:
Income, profits, estate, and gift taxes.
Miscellaneous and sales taxes
Alcohol Tax Unit:
Olfices of district supervisors
.. ......
Field inspection force. ...
. . .
Intelligence Unit
Technical Stafl...
Excess Profits Tax Council
Ofl5.ce of the Chief Counsel
Processing Division
_

Grand total...

June 30,
1950

Increase,
or decrease ( - )

56,651

3,285

4,058
15
1,470
607
149
4091,747

C O S T OF. ADMINISTRATION

The entire cost of the Bureau's operations during the year, including
all items of expense except amounts refunded to taxpayers, was
$230,408,200. The amount appropriated for administrative expenses
was $230,500,000; thus, there was an unexpended balance of $91,800.
The cost of collecting $38,957,131,768 during the year was approxiniately 59 cents per $100 of revenue, compared with 52 cents per $100
in 1949, when collections were higher and expenditures were lower.
Data on the annual cost of administration, although of interest
and value for certain purposes, can not be relied upon either as a
guide to the proper scale of administrative activity or as a measure
of relative efficiency of operation from year to year. An annual ratio
of cost to collections is determined by many factors, most of which
have no relationship to these objectives, To Ulustrate, the higher
the level of tax rates and the more numerous the levies that are
inherently economical to collect, the lower will be the average cost
ratio. The prevaUing level of salaries paid to Bureau personnel and
the volume of essential services performed for taxpayers are other
examples of these determinative factors. The increase in administrative costs during 1950 is due primarily to additional salary obligations




108

195 0 REPORT OF THE SECRETARY OF THE TREASURY

arising from a sizable increase in Bureau personnel and from the
general pay increases provided for by the Classification Act of 1949
(63^Stat. 971).
REFUNDS

Refunds of internal revenue taxes and the interest thereon, as
required by law, are paid out of an appropriation separate from that
covering the Bureau's adniinistrative expenses. The total amount of
these payments for the fiscal year 1950 was $2,216,834,210, as,compared with $2,902,742,898 in the preceding year. The decrease was
attributable in part to the fact that many individual income tax
refunds paid during the fiscal year 1949 were 1948 refunds deferred
for payment because of the exhaustion of the 1948 appropriation for
tax refunds. Interest payments ouTefunds increased from $86,346,884
in 1949 to $91,563,575 m 1950.
SETTLEMENT OF D I S P U T E S

In a large proportion of the tax disputes arising from the Bureau's
investigative operations, settlements are reached through conferences
with taxpayers, thereby avoiding expensive and time-consuming
litigation. Of 55,241 income, profits, estate, and gift tax returns with
respect to which the examiners' findings had been protested by the
taxpayers, 47,321 were settled by the Bureau and 7,920 were appealed
to the Tax Court. As a result of further hearings conducted by the
Bureau in cases pending before the Tax Court, settlement by stipulation was effected with respect to an additional 4,864 returns, thereby
reducing substantially the number of cases to be tried.
OFFICE OF INTERNATIONAL FINANCE

The Office of International Finance, under the general direction of
an Assistant Secretary, advises and assists the Secretary of the Treasury in the formulation and execution of policies and programs in international financial and monetary matters. The Director of the
Office is assisted by advisers on financial policy and by a staff organized into divisions correspondhig to geographic areas or to the functional activities of the Office. These divisions are: National Advisory
CornicU Secretariat; Stabilization Fund, Gold and SUver Division;
International Statistics Division; Commercial Policy and United
Nations Division; European Division; British Commonwealth and
Middle E a s t Division; Latin American Division; and Far Eastern
Division. The Office also maintains Treasury representatives in
several foreign countries.
By direction of the Secretary, the Office of International Finance
is responsible for the Treasury's activities in matters of international
financial and monetary policy, including international monetary and
exchange problems, and gold and sUver policy; the Bretton Woods
Agreements Act and the operations of the International Monetary
Fund and the Intemational Bank for Reconstruction and Development; foreign lending and assistance programs; the activities of the
National Advisory CouncU on Intemational Monetary and Financial
Problems; the Anglo-American Financial Agreement; and the United
States Exchange StabUization Fimd.




ADMINISTRATIVE REPORTS

, 1 0 9

The Office makes continuing studies of the flow of capital funds into
and out of the United States and of the international accounts of foreign countries with speciah attention to transactions in gold and dollars. In carr3dng out its functions, the Office also studies the legislation and policy of foreign countries relating to finance, gold and sUver,
exchange rates and exchange controls, and other relevant matters.
The Office also provides economic analyses of the customs activities of the Department and advises the Secretary on international
financial aspects of matters arising in connection with his responsibUities under the Tariff Act. The Office acts for the Treasury on the
financial aspects of international treaties, agreements, and organizations in which the United States participates. It also participates in
negotiations with foreign governments with regard to matters included within j t s responsibilities.
The Office of International Finance represents the Treasury in the
work of the National Advisory CouncU on International Monetary
and Financial Problems (of which the Secretary of the Treasury is
Chairman) and its subordinate organs. Professional personnel of the
Office perform staff and secretariat functions of the CouncU. (See
exhibits 27 and 29.)
The Office of International Finance advises Treasury officials and
other departments and agencies of the Government concerning exchange rates and other financial problems encountered in operations
involving foreign currencies. In particular, it advises the State
Department and the Department of Defense on financial matters
related to their normal operations in foreign countries and the special financial problems arising from military operations and in areas
occupied by United States forces. The Treasury representatives in
foreign countries act 'as financial advisers to the diplomatic missions,
to the occupation authorities, and to the missions of the Economic
Cooperation Administration.
LEGAL DIVISION

The General Counsel is by statute the chief law officer of the
Treasury Department. He is directly responsible to the Secretary
for the work of the Legal Division and performs other legal activities
whicii the Secretary assigns or which arc required by law. The
Legal Division consists of the legal staff in the Office of the General
Counsel, including the Tax Legislative Counsel, and the legal staffs
of the Bureau of the Comptroller of the Currency, Bureau of Customs,
Bureau of Internal Revenue, Office of International Finance, Bureau
of Narcotics, Bureau of the Public Debt, and the United States
Coast Guard.
The Office of the General Counsel advises the units of the Department not having legal staffs, including the immediate Office of the
Secretary, Bureau of Accounts, Office of Administrative Services,
Bureau of Engraving and Printing, Bureau of the Mint, Committee
on Practice, Office of the Treasurer of the United States, United States
Savings Bonds Division, and United States Secret Service.
The Office of the Generah Counsel coordinates the legislative work
in the Department and does the related legal work. This includes
appearances before congressional committees, the drafting of legisla-




110

195 0 REPORT OF THE SECRETARY OF THE. TREASURY

tion, and the preparation of reports to committees of the Congress
and to the Bureau of the Budget. Similar work is done in connection
with Executive orders and proclamations and departmental rules and
regulations.
In addition to responsibilities in connection with tax legislation, the
General Counsel, through the Tax Legislative Counsel, aids in the
negotiation of treaties involving taxation; advises the United States
delegate to the United Nations Fiscal Commission regarding international tax problems; studies proposals for amending the tax laws;
reviews all proposed closing agreements with taxpayers; participates
in the periodic revision of forms necessary to the administration of
the revenue laws; and reviews proposed Treasury decisions amending
regulations on internal revenue taxation.
Special fields hi which the Office operates include gold and silver
transactions and administration of the stabilization fund; Treasury
participation in the activities of the National Advisory Council on
International Monetary and Financial Problems, which coordinates
the foreign financial and lending operations of the IJnited States
Government, including the policies and operations of the United
States representatives on the International Monetary Fund and the
International Bank for Reconstruction and Development; payments
of Mexican claims and payments to holders of awards of the Mixed
Claims Commission; and compromise settlement of general claims of
the United States.
The Office also coordinates the Department's activities and handles
the legal work in respect to a variety of other problems affecting the
Treasury, such as the necessary pretrial work in litigation involving
Treasury activities, the settlement of tort claims against the Treasury,
the claims of Treasury employees for losses sustained in connection
with assignments abroad, disclosure of official information, the patent
rights of Treasury employees, the employee loyalty program under
Executive Order 9835, and the licensing and disbarment of practitioners before the Department.
The activities of the Legal Division include consideration of the
legal problems relating to broad financial, economic, and social programs, and hiternational cooperation in the monetary and financial
fields. The Division's activities also embrace all legal matters arising
in connection with the duties and functions of the various bureaus,
divisions, and branches of the Department. A more complete
description of the scope of these activities is to be found in the
separate administrative reports of these organizations.
During the fiscal year 1950, the Legal Division handled a number of
special problems, which are summarized in the paragraphs which
follow. These included legal matters arising in connection with the
National Security Resources Board and the Foreign Trade Zones
Board, of which Boards the Secretary is a member. The Legal
Division represented the Department on various interdepartmental
committees, including one to recommend revisions in the inspectional
overtime laws, and on various National Security Resources Board
committees.
In the.fields of international finance and aid, the Legal Division




ADMINISTRATIVE REPORTS

111

dealt with legal problems arising in connection with financial, fiscal,
and foreign exchange aspects of the European Recovery Program;
assisted in formulating the financial and economic aspects of the
programs and legislation relating to military assistance, technical cooperation, and measures to encourage American capital to be invested
in foreign countries; participated in the meetings of the Contracting
Parties to the General Agreement on Tariffs and Trade; and participated in the Transport and Communications Commission of the
United Nations.
Technical assistance was given to congressional committees in connection with the drafting of legislation to implement the President's
taxation and social security programs. The Legal Division studied
proposals for the modification of excise tax laws, the closing of tax
loopholes, changes in the estate tax structure, tax changes to implement
extension of aid to underdeveloped areas, and changes in the corporate
rate structure in connection with the general tax program; other miscellaneous revenue bills were also studied. I t participated in preparing
regulations under the Technical Changes Actof 1949 (PublicLaw378,
81st Congress, approved October 25,1949) pertaining to minor changes
in the income, estate, and gift tax laws. Assistance was also given in
the negotiation of tax conventions with the Governments of the Union
of South Africa, Colombia, Venezuela, Cuba, Canada, Uruguay,
Mexico, Switzerland, and Argentina; the negotiation of a treaty of
friendship, commerce, and navigation with the Argentine Government;
and in negotiations with the United Kingdom for the establishment
of an agreement for joint government of the Canton and Enderbury
Islands.
During the fiscal year 1950, the Legal Division coordinated and
assisted in drafting legislation to reform customs procedures, the
proposed Customs Simplification Act of 1950; and aided in many other
aspects of the Department's program to simplify and modernize
customs procedures. I t participated in handling many special problems of importance under the statutes relating to foreign products
which are dumped, subsidized, improperly marked, or produced by
forced labor. I t assisted in conducting the tripartite talks with
Great Britain and Canada, and in following up and implementing
decisions.
BUREAU OF THE MINT

The principal functions of the Bureau of the Mint consist of the
manufacture of domestic and foreign coins; the acquisition of gold and
s-ilver, payments for which are made on the basis of mint assays; the
safeguarding of the Government's holdings of the monetary metals,
including coins in processing stages until finished and issued; the
refining of gold and silver; the administration of regulations pertaining
to gold and silver, including the issuance of licenses for the acquisition,
ownership, possession, use, and exportation of gold for industrial;
professional, and artistic purposes; and the production of medals and
other decorations.

907795—51-




112

195 0 HEPPRT OF THE SECRETARY OF THE TREASURY

The.office of^the^Director of the Mint in\Washington'administers all
activities of the Bureau of the Mint. During the fiscal year. 1950
seven field institutions were in operation: Coinage mints in Philadelphia, San Francisco, and Denver; assay offices in New York City
and Seattle; the gold bullion depository in Fort Knox, Ky.; and the
sUver bullion depository in West Point, N. Y., w-hich operates as an
adjunct of the New York Assay Office. Electrolytic refineries are
maintained at the San Francisco, Denver, and New York City institutions. The Medal Department is located at the Philadelphia Mint.
At the close of the fiscal year 1950 there were 943 persons employed
in the departmental and field institutioris compared with 1,272 at the
beginning of the year.
The operations of the field institutions durmg the fiscal year 1950
and the report of this Bureau on the production and consumption of
gold and silver in the United States dm-ing the calendar year 1949 are
summarized herein. Further detailed information is contained in the
Annual Report of the Director of the Mint, Fiscal Year Ended June SO,
1950.
Management program.—A management improvement program
vigorously projected in 1950 and directed toward continuing improvements in operating procedures has produced revolutionary results in
the manufacturing processes of coinage during the'present fiscal year.
The massive melting and rolling equipment in the Denver Mint,
, which a year ago was in the experimental stage of operation, has. been
brought to a high state of efficiency. In it is processed a 400-pound
bronze ingot in place of the 6-pound ingot, formerly processed in small
rolling mUls. I t has also eliminated the hand pouring method heretofore used. Coincident with the installation of modern annealing
equipment now pending, this equipment wUl be used for nickel and
sUver coinage.
A new type water-cooled mold, invented by mint technicians at
the PhUadelphia Mint, has resulted in a 23 percent reduction in sUver
ingot melting costs during the year. Experiments are now being
conducted to utilize this equipment for production of nickel and
bronze ingots. Recent realignment of the melting operations and
other mechanical changes at the Philadelphia Mint wUl result in
important economies.
With the installation of more powerful motors on the rolling mUls
at the San Francisco Mint provision will be made for the processing
of longer and wider ingots, and as a result an increase can be made of
100 to 300 percent in the production of coin blanks without increasing
personnel. The output of 1-cent blanks wUl be doubled and dimes
quadrupled; other denominations wUl come within that range.
OPERATIONS OF THE M I N T S , ASSAY OFFICES, AND BULLION
DEPOSITORIES

Domestic coinage.—Production of United States coins during the
fiscal year 1950 totaled 497,271,759 pieces with a value of $22,107,498.66. Denominations were as follows:




113

ADMINISTRATIVE REPORTS
Number of
pieces produced

Denomination
•Half dollars 1
'Quarter dollars
Dimes
6-cent pieces
1-centpieces..

1
..•

•

16,118,222
15, 938,994
28, 582i 573
70, 976, 554
365, 656,416

$8. 059, 111. 00
3,984,748.50
2, 858, 257.30
3, 548,827. 70
3, 656,554.16

497, 271„759

..

Total.......

Face value

22,107, 498. 66

»Includes 636,099 Booker T. Washington commemorative half dollars.

Foreign coinage.—Coins produced for seven other governments
during the fiscal year 1950 totaled 94,267,944 pieces, as follows:
Number of
pieces produced

Government
China . .
El Salvador
Ethionia
Haiti
Honduras

.

.

. . .

17,640,000
2,000,000
32,000,000
16,000,000
9,000,000

Number of
pieces produced

Government
Mexico
Venez.uela

... .

Total.:..

760,000
17, 877,944

...

:

94, 267, 944

Issue of domestic coins.—United States coins issued by the mints
duruig the fiscal year totaled 500,914,823 pieces with a value of
$31,261,074.82. Denominations were as follows:
Denomination
Silver dollars..
Half dollars
Quarter dollars
Dimes
6-cent pieces
1-cent pieces—
Total

Number of
pieces issued

Face value

5,961,406
10,674,887
31,210,860
65, 784, 522
44,178,226
343, 214,932

$5,951,406.00
5, 287,443. 50
.7,802,712. 50
6, 578,452. 20
2,208,911.30
3,432,149.32

500,914. 823

^1,261,074.82

Stock of coins.—The estimated stock of coins in the United States
as of June 30, 1950, totaled $1,872,619,658, of which $492,582,858
were silver dollars, $1,001,573,600 were subsijiiary coins, and $378,463,200 were minor coins.
Medals.—The number of service medals and other distinguishing
devices delivered to the Department of Defense and other Government departments and agencies totaled 29,570 during the fiscal year
1950. In addition, there were 6,073 medals sold to the public.
Bullion deposit transactions.—BuUion deposit transactions at the
mints and assay offices totaled 10,589, including 16 intermint transfers
during the fiscal year 1950. These transactions requhed 17,905 assay
determinations, including 638 determinations for intermint transfers.
Acquisitions of gold.—Deposits and purchases of gold during the
fiscal year totaled $585,760,504.89, classified as follows:
Value

Purchases at $20.67+ per fine ounce
Increment to $35 per fine ounce.
Purchases at $35 per fine ounce
Domestic coin transferred (melted)
Intermint transfers
Total value at $35 per ounce




$2,412.48
" 1, 673. 45
572, 191, 745. 88
257, 993. 35
13,306, 679. 73
: _ _ _ _ _ _ . ^ _ 585, 760, 504. 89

114

195 0 REPORT OF THE SECRETARY OF THE TREASURY

Acquisitions of silver:—During the fiscal year deposits and purchases of silver totaled 107,885,995 fine ounces, classified as follows:
Number of fine
ounces

Newly mined domestic silver
Silver contained in gold deposits, etc
Silver received in exchange for Government-stamped bars
Recoinage bullion from uncurrent subsidiary coin
Recoinage bullion from uncurrent silver dollars
Intermint transfers of silver
Deposits of silver in trust by foreign governments
Redeposits i__
Total_

38, 228, 805
. 95, 326
380, 883
1, 860, 299
205, 400
117, 373
11, 991, 097
55,006, 812
107, 885, 995

J Consists of Treasury stock previously held by certain agencies of the Federal Government.

Refinery production of gold and silver.—During the fiscal year the
refineries produced 2,267,708 fine ounces of gold and 2,317,468 fine
ounces of silver by the electrolytic process. In addition, 3,078,190
fine ounces of gold and silver were subj ect to fire process only.
Issue bars manufactured.—The mints and assay offices manufactured
79,899 issue bars containing 18,179,815 fine ounces of gold and 1,197
issue bars containing 310,343 fine ounces of silver duririg the fiscal year.
Stock of unrefined bullion.-—At the close of the fiscal year the stock
of unrefined bullion at the mints and assay offices, in terms of the
assayed fine metal content, amounted to 953 tons of gold and 510 tons
of silver.
Monetization of silver buUion.—Silver certificates in the amount of
$34,275,555 were issued b}^ the Treasury during the fiscal year against
26,510,000 fine ounces o.f silver bullion, valued at $1.29+ per fine
ounce, the statutory monetary value of silver. Seigniorage, representing the difference between the cost and the monetary value of
silver, amounted to $11,026,197.04.
Sales^ of gold and silver for industrial use.—Sales of gold bars to
licensed purchasers for industrial, professional, and artistic use
totaled $82,724,085.89 during the fiscal year. Under the act of July
31, 1946 (60 Stat. 750), whicii authorized sales of silver, there were no
transactions during tli,e year.
Stock of monetary bullion.—The United States stock of gold bullion
held by the mint institutions totaled 692,304,800 fine oimces valued
at $24,230,633,002 on June 30, 1950. On the same date the mint
institutions held 1,151,473,202 fine ounces of sUver bullion and, in
addition, 180,714,089 fine ounces of silver bullion in a special custody
account for the Treasurer of the United States. The silver in this
account was formerly held by the Office of Reconstruction Finance
Corporation, and is being melted and cast into regular mint bars.
PRODUCTION AND CONSUMPTION OF GOLD AND SILVER IN THE
U N I T E D STATES

During the calendar year 1949 the total production of gold and
silver refined from ores mined in the several States and Alaska was
as follows: Gold—1,921,949 fine ounces valued at $67,268,215; and
sUver—34,944,554 fine ounces.
Gold issued for use in the industrial arts,in the United States during




ADMINISTRATIVE REPORTS

115

the calendar year 1949 aggregated $148,975,571, and the return from
industrial use of secondary materials, including old jewelry, plate,
scrap, etc., amounted to $40,133,100, giving a net consumption of gold
of $108,842,471.
Silver issued for use in industry and the arts in the United States
during the calendar year 1949 aggregated 110,660,459 fine ounces, and
the return from industrial use of secondary materials including old
silverware, scrap, etc., amounted to 22,660,459 fine ounces, giving a
net consumption of silver of 88,000,000 fine ounces.
BUREAU OF NARCOTICS i

The Bureau of Narcotics is charged with the investigation, detection,
and prevention of violations of the Federal narcotic and marihuana
laws and of the Opium Poppy Control Act of 1942 (56 Stat. 1045),
and related statutes. The scope of its activities is gradually enlarging
as additional drugs are made subject to these laws. Under'the act
of March 8, 1946 (60 Stat. 38), eleven new synthetic drugs have been
brought under control through findings by the Secretary of the Treasury, proclaimed by the President, that the drugs possessed addiction
liabUity similar to morphine. A significant aid to the Bureau in t h e '
discharge of its duties was provided by Public Law 365, 81st Congress,
approved October 20, 1949, under which moneys expended from
appropriations of the Bureau for the purchase of narcotics, including
marihuana, and subsequently recovered are reimbursed to the appropriation for the enforcement of the narcotics and marihuana laws
current at the time of the deposit.
The Bureau directs its activities toward the suppression of the
illicit traffic in narcotic drugs and marihuana and the control of the
legitimate manufacture and distribution of narcotics through the
customary channels of trade. I t issues permits for import of the
crude narcotic drugs and for export, and in-transit movements of
narcotic drugs and preparations. I t supervises the manufacture and
distribution of narcotic substances within the country, and has
authority to issue licenses for the production of opium poppies to
meet the medical needs of the country if and when such production
should be found in the public interest. I t cooperates with the'Department of State in the discharge of the international obligations of
the United States concerning the abuse of narcotic drugs and marihuana.
Management was improved throughout the Bureau of Narcotics
during the fiscal year 1950. The Bureau made every effort to improve operating methods so that funds thus saved could be used to
develop investigations of major violations of the narcotic laws.
Arrests for narcotic law violations were 1,048 more than during 1949.
These results were achieved without any increase in personnel and with
an additional appropriation of only $50,000 avaUable for this activity.
The scope of enforcement activities is gradually enlarging to the
point where additional money and personnel will be required to combat
the increasing illicit narcotic traffic.
During the year procedures were simplffied and forms were revised
and consolidated or eliminated, as circumstances warranted, iri order
1 Further information concerning narcotic drugs is available in the separate annual report of the Commissioner of Narcotics.




116

1950 REPORT OF THE (SECRETARY OF THE TREASURY

to relieve agents in the field of as much paper work as possible without
sacrificing essential controls or lessening accounting responsibilities.
During the fiscal year 1950 the total quantity of narcotic drugs
seized in the internal Ulicit traffic amounted to 1,698 ounces, in
comparison with 1,726 ounces seized in 1949. Seizures of marihuana
amounted to 752 pounds bulk, 23 pounds seeds, 21,313 cigarettes, and
64 growing plants, as compared with 707 pounds bulk, 6 pounds
seeds, 25,591 cigarettes, and 59 growing plants in 1949.
The table following shows for the fiscal year 1950 the number of
violations of the narcotic and marihuana laws by persons registered
with collectors of internal revenue to engage in legitimate narcotic
and marihuana activities and by persons who have not qualified by
registration to engage in such activities, as reported by .Federal
narcotic enforcement officers.
Number of, violations of the narcotic and marihuana laws reported during the fiscal
year 1950, with their dispositions and the penalties
Narcotic laws
Registered persons
Federal
Court

Federal
Court .

State
Court

State
Com-t'

Nonregistered persoiis
Federal
Court

State
Court
481

2, 724
1,379

640
1,112

727

Total to be disposed of..

1,307

290
18

Convicted:
Federal
Joint
Acquitted:
Federal
Joint
Dropped:
Federal _
Joint
Compromised: 2
Federal
Joint

5, 410

2,233

..
-- --

12
7

4
1
321
15

963
435

68

.

383
483

105
312

55
31

17
23

12
10

375
119

6
2

1,216
564

24
8

45
5

_

101
102

108
144

21
51

1

486

Pending June 30,1950
Sentences imposed:
Federal
, Joint

.

...
.

.

.

3,994

1,669

241

Total disposed of.

.

Nonregistered persons

419

Pending July 1,1949
Reported during 1950
Federal i . . . . . .
Joint 1

Total.

Marihuana law

1,416

564

Yrs. Mos.
98
3
13

Yrs. Mos.
11
6
9
2

Yrs. Mos.
1,913 10
884
4

Yrs. Mos. Yrs. Mos.
1,024
4
593 11
461
3 . 646 . .

Yrs. Mos.
75
3
277
1

111

20

2,798

1,485

352

3

Fines imposed:
Federal. . .
Joint
:

$26, 552

Total

26, 552

8

2

7

1,239

11

4

$3, 250

$72, 889
18, 792

$7, 092
16, 569

$11,125
5,468

$928
5,449

3,250

91,681

23,661

16, 593

6,377

1 Federal cases are made by Federal oflicers working independently while joint cases are made by Federal and State officers working in cooperation.
2 Represents 69 cases which were compromised in the sum of $12,020.

The importation, manufacture, and distribution of opium and its
derivatives are subjected to a system of quotas and allocations
designed to secure their proper distribution for medical needs. Addi


ADMINISTRATFVE REPORTS

117

tional quantities of opium were imported during the year. Coca leaf
imports were sufficient for medicinal purposes, and additional supplies
were available for the manufacture of nonnarcotic flavoring extracts.
The quantity of narcotic drugs exported was slightly higher than in
1949, but the total exported is not significant when compared with the
amount used domestically. The manufacture of opium derivatives
continued high principally by reason of the high medical consumption
of codeine and papaverine.
Thefts of narcotics decreased during 1950, both in the number and
quantity of drugs stolen.
. There were approximately 400,000 registrations under the Federal
narcotic and marihuana laws during the fiscal year.
C O M M I T T E E O N PRACTICE

The Committee on Practice receives and acts upon applications of
attorneys and agents for admission to practice before the Treasury
Department. I t makes inquiries, holds hearings and in general acts
as the administrative and advisory agency in all matters pertaining
to practice, makes recommendations to the Secretary of the Treasury,
and performs other duties prescribed b y Department Circular 230,revised.
The Committee also receives and acts upon applications of individuals, corporations, associations, and partnerships for customhouse
brokers' licenses, issues customhouse brokers' licenses, makes recommendations to the Secretary of the Treasury, and performs other
duties as prescribed by Department Circular 559, revised May 1, 1947.
The following statement summarizes the work of the Conimittee
for the fiscal year 1950:
Attorneys and agents:
Number
Applications for enrollment approved
^_ 5, 550
Applications for enrollment disapproved
14
Applications withdrawn on advice of Committee
98
Applications abandoned by Committee
80
Applications withdrawn with prejudice
^
1
Resignations in good standing__
1
Special enrollment t o practice before t h e Bureau of I n t e r n a l Reveriue:
Applications approved by reason of examination
4
Applications approved p u r s u a n t t o s t a n d a r d s a n d procedures based
upon former service with t h e Treasury D e p a r t m e n t
51
Applications of former employees denied
22
Applications abandoned
180
Applications withdrawn
11
Complaints disposed of p u r s u a n t to section 5 (b) of t h e Administrative
Procedure Act, as amended (5 U. S. C. 1004 (b)):
Resignations submitted in order to evade proceedings in disbarment
and accepted by t h e Committee. Names ordered stricken from t h e
roll
11
Resignations accepted with prejudice
1
F o r m a l complaints against enrolled persons
4
Disposed of by disbarment
1
Pending J u n e 30, 1950
Customhouse brokers:
Applications for licenses approved
Applications withdrawn
Applications abandoned
Applications for licenses disapproved
Licenses canceled
1




3
i
.,,^i__-

84
4
25
1
18

118

195 0 REPORT OF THE -SECRETARY OF THE TREASURY

Since the organization in 1921 of the Committee on Practice 92,565
applications for enrollment have been approved and 853 disapproved,
257 practitioners have been disbarred from further practice before the
Treasury Department, 140 have been suspended from practice for
various periods, 184 have been reprimanded, and 50 resignations have
been accepted.
TAX ADVISORY STAFF

The Tax Advisory Staff of the Secretary has as its principal responsibility the economic analysis and preparation of material for use by
the Secretary in the formulation of Treasury tax policies.
In assisting the Secretary to discharge his responsibilities in the field
of Federal taxation, the Staff explores the basic economic considerations involved in the form.ulation of the Administration's tax programs
and in tax questions presented to the Secretary by the President,
committees of the Congress, individual Members of Congress, other
Government agencies, and the public. This requires broad economic
surveys of tax problems, the assembly and presentation of statistical
materials -and analysis of the effects of alternative programs or measures for meeting revenue requirements. Upon request, information
is furnished to the House Committee on Ways and Means, the Senate
Finance Committee, and the Joint Committee on Internal Revenue
Taxation.
These responsibilities also involve the - consideration of State and
' local taxation in relation to Federal tax problems and the relationship
between United States and foreign tax systems.
During the fiscal year 1950 the work of the Tax Advisory Staff was
concerried primarUy with the preparation of material for an excise
revision program with the resulting revenue loss to be compensated for
by increases from other sources, including the closing of the most
serious tax loopholes. This program was outlined to the Ways and
Means Committee of the House of Representatives by the Secretary
on February 3, 1950.^
In the field of international tax relations the Staff assisted in the
development of proposals designed to implement the President's Point
IV Program and participated in the negotiation of tax treaties with
several foreign countries. I t also assisted in the Secretary's cooperative undertaking with representatives of State and local governments
to arrive at a basis for an action program on some of the principal
problems requiring coordination of Federal with State and local fiscal
policies.
OFFICE OF THE TECHNICAL STAFF

The Office of the Technical Staff in the Office of the Secretary serves
as a technical staff for the Secretary on matters relating to Treasury
financing, public debt management,, and various general economic
problems arising in connection with Treasury activities.
For use in policy decisions in these fields the Technical Staff works
out possible courses of action, and keeps Treasury officials informed of
shifts in the basic economic and fiscal situation. Primary factors in
' The outbreak of hostilities in Korea on June 25; 1950, caused a drastic change in the proposed 1950 tax
revision program while the bill was pending in the Senate. H. R. 8920, as modified, was enacted in Septem
ber 1950,




ADMINISTRATIVE REPORTS

119

debt management policy are the outlook for net cash flow into or out
of the Treasury and the outlook for Federal budget receipts, expenditures, surplus or deficit, the debt, and the cash balance.
In particular financing operations the Technical Staff draws up
alternative plans, including what specific securities might be offered
to tap various sources of new funds or in exchange operations. Terms
for such, securities are reviewed, including rate of interest, maturit}^,
call period, negotiability, eligibility as collateral, redemption privileges
accorded to holders, and restrictions as to the amount of purchases or
holdings by different classes of investors.
The Technical Staff analyzes the relation" of these securities to the
maturity schedule and interest cost of the public debt, the effect of
their issuance on the market prices and ownership distribution of
outstanding Government securities, and the impact of the Treasury's
public debt operations on the banking system, the money suppty, and
the over-all credit structure. Alternative courses of action are weighed
as to the probable effect on the general economy, with particular reference to their inflationary or deflationary impact.
The Technical Staff also works out analyses of the assets and the
investment position of the various classes of investors, with particular
reference to their problems in managing their Federal security portfolios. Itreviewstherelative desirability of cash pa37--off's to, and additional borrowing from, each.hivestor class, and the types of securities
best suited to the requirements of each class.
The Technical Staff work also includes discussions with consulting
committees composed of leading bankers, insurance men, bond dealers,
and others. The committees represent the American Bankers Association, the Investment Bankers Association, the Life Insurance
Association of America and the American Life Convention, the National Association of Mutual Savings Banks, the Government Security
Dealers group, and others. The groups confer with the Secretary from
time to time and discuss their particular situations as well as the
general aspects of public debt management. On these occasions the
Secretary usually has the Technical Staff review developments and
outline the problems ahead in the field of debt management. After
these meetings the Technical Staff prepares reports for the Secretary
to integrate the various reports and recommendations which were
received.
The facilities of the Technical Staff also are utilized by the Secretary for the preparation of official estimates of Government receipts
for incorporation in the President's Annual Budget Message and
in intervening budget revisions. ShnUarly, estimates of the revenue
effects of proposed and pending legislation are prepared.
Technical mathematical analyses needed in connection with financing and public debt problems are also prepared. This work is under
the supervision of the Government Actuary, who is an Assistant
Director of the Technical Staff. He is responsible for reports on
actuarial matters involved in Treasury operations, and prepares
actuarial estimates required by statute with respect to the operations
of Government trust funds. The Secretary of the Treasury is charged
with the duty of handling the investments and other operations for
most of these funds.




120

1950 REPORT OF THE SECRETARY OF THE TREASURY
UNITED STATES COAST GUARD

The operations of the Coast Guard during the fiscal year ended
June 30, 1950, embraced in general terms: Maritime law enforcement;
saving of life and property at sea; providing navigational aids to
marithne commerce and to transoceanic air commerce; promoting the
efficiency and safety of the American merchant marine; and maintenance of a state of military readiness.
Throughout the year the Coast Guard utilized its available personnel and facUities to the best advantage in carrying out these activities.
However, lack of sufficient personnel and facilities prevented a desired
expansion in the field of assistance, search, and rescue. Operations
hi the field of electronic navigational aids to maritime and air commerce were restricted below a desired minimum level for the same
reason.
Pursuant to a directive from the Bureau of the Budget to the Secretary of the Treasury, an objective survey, conducted by a special
panel of Coast Guard officers, was completed. The recommendations
of the Board concerning ^^specific lifeboat stations, light stations, and
light vessels which could be disestablished in the interests of economy
without increasing maritime hazards" have been submitted to the
President.
Another special objective survey is being conducted by a panel of
Coast Guard officers to re-evaluate the requirements for air stations,
air detachments, and aircraft.
During the year several projects in the management field were
carried forward. Principal among these was the development of new
internal accounting and supply systems. The new accoimting system
is described in the report ''Administrative Management" and the
supply system in the section which immediately follows.
MANAGEMENT IMPROVEMENT

The benefits derived from the study of the Coast Guard operations
during the fiscal year 1948 by a private firm of management consultants have demonstrated the effectiveness of this procedure to further
management improvement. Two additional contracts have been
signed m t h private consultants to conduct studies of current major
problems. The first of these studies wUl constitute a complete survey
of the Coast Guard Yard at Curtis Bay, Maryland, the Service's principal industrial plant and shipyard. This study wUl embrace the
organization and administrative practices and controls at the yard,'
and its production management and industrial processes. The second study wUl be a detailed classification survey of the mUitary and
civilian jobs at t h h t y selected ' ' t y p e " shore stations. This wUl serve
as a basis for the future Service-wide program on job analysis, specification, evaluation, classification structure, and coding, and on the
development of comprehensive information looking toward ex:pansion
of the present work measurement program. I t is expected that both
of these special studies will be completed during the calendar year
1950.
Under the supply improvement program ifour of the ten authorized
district supply depots were established durhig the fiscal year 1949 and




ADMINISTRATIVE REPORTS

121

the remaining six should be in operation by the end of the calendar
year 1950. Formal agreements were recently made imder which the
Navy wUl supply the Coast'Guard with items of equipment and consumables common to the two Services. This procedure will eliminate
the necessity for frequent open market purchases by the Coast Guard.
A special survey board has been appointed to evaluate, and make,
recommendations with respect to the location, disposition, utilization,.
effectiveness, etc., of existing air facilities and aircraft. The objective
of this study is general hnprovement in the efficiency, economy, and
effectiveness of the Coast Guard aviation program. Completion of
this study is scheduled for the end of the calendar year 1950.
The first phase of the program to strengthen the statistical system
of the Coast Guard by a further centralization of statistical services
and the establishment of a strong central reports review and control
has been accomplished. Increased effectiveness wUl be realized during the fiscal year 1951 with the proposed establishment of a central
statistical service division at Headquarters.
Durhig 1950 the central management group initiated a series of field
management surveys to make systematic reviews of operations looking toward general improvement in management practices. One survey trip on the east coast and another on the west coast have been
completed.
The Administrative Management Division has completed a longterm revision of the Organization Manual of the Service, which, with
a new Filing Manual, also recently conipleted, wiU provide more
effective guidance to the several administrative levels of the Coast
Guard organization.
L A W ENFORCEMENT

I n addition to the general enforcement of Federal laws on the high
seas and territorial waters of the United States, the Coast Guard
assisted those departments and agencies of the Government having
primary responsibility in the enforcement of the OU Pollution Act,
Anchorage Regulations, laws relating to internal revenue, customs,
immigration, quarantine, and laws and regiUations for the conservation and protection of wUdlife and the fisheries. Only 39 reports of
oU pollution violations were received which reflected considerable
improvement over the fiscal year 1949, during which twice that
number of violations were reported. Full cooperation in law enforcement matters was extended to all Federal, and to many State and
municipal, law enforcement agencies.
Coast Guard districts were divided into law eriforcement zones
and a captain of the port, under the district commander, was designated for each zone in order to facilitate execution of the Coast
Guard's Federal law enforcement function.
ASSISTANCE OPERATIONS

I n carrying out responsibilities with respect to search and rescue—
the saving of life and property—the Service maintains an established
organization of inshore and offshore surface rescue vessels, aircraft,
lifeboat stations, and radio stations, together with rescue coordinatiori




122

195 0 REPORT OF THE SECRETARY OF THE TREASURY

centers in each Coast Guard district. The assistance rendered by
stations, vessels, and aircraft during the year is reflected in the
following statistics:
Number of assistance calls responded to
•Number of instances of major assistance
Number of instances of minor assistance
Value of vessels and. air craft assisted
^
Value of cargo of vessels and aircraft assisted
Lives saved or persons rescued from peril
\

:

10, 440
3, 860
4, 782
'
$210, 489, 172
$22, 932, 918
:__
7, 619

The term ''major assistance" signifies the rescue of persons from
water or from drifting ice, the removal of persons from endangered
vessels, the towing to safety of vessels on which personnel are endangered, and, during floods, the removal of persons to safety when
danger of drowning threatens.' Wlien Coast Guard aircraft are
employed,"major assistance" includes open-sea landings and take-offs
under abnormally hazardous conditions.
The diff'erence in the number of calls responded to and the number
of instances of assistance reflects those cases in which the Coast Guard
responded but assistance was given by some other source or was no
longer possible.
In collaboration with other Government agencies, the Red Cross,
and local authorities, the Coast Guard rendered extensive assistance
in evacuating citizens and salvaging property during the floods which
occurred in the vaUeys of the Mississippi, the Red Riv^er of the North,
the Red River of the South, and the Columbia River.
Considerable assistance was rendered to marine commerce on the
Great Lakes in the breaking of ice for the passage of vessels. Although
the opening of the Lakes to navigation was somewhat later than usual
this year, the ice breaker U. S. C. G. C. Mackinaw, with a helicopter
attached, was instrumental in an earlier opening than would otherwise
have been possible.
INTERNATIONAL I C E PATROL

The postseason activities of the International Service for Study
and Observation of Ice Conditions in the North Atlantic for the 1949
season continued into the fiscal year 1950 and consisted of an oceanographic survey in Baffin Bay and Davis Strait and a census of icebergs
in Baffin Bay. The oceanographic survey was carried out by the
U. S. C. G. C. Evergreen during the month of July 1949 whUe the
iceberg census was accomplished by two long-range aircraft and the
U. S. C. G. C. Winnebago.
The 1950 Ice Patrol season was inaugurated by aerial ice reconnaissance flights on February 24, 1950. Beginning March 26, because
of the menace of icebergs in the United States-Europe shipping lanes,
a continuous surface vessel patrol was established by the U. S. C. G. C.
Acushnet and the U. S. C. G. C. Tampa. When the ice situation no
longer presented hazards to the shipping lane, the surface patrol was
discontinued on June 10. The service of International Ice Patrol for
the 1950 season was discontinued on June 26, 1950.
The scientific aspects bf the International Service of Ice Observation and Ice Patrol were carried out by the oceanographic vessel,
U. S. C. G. C. Evergreen;, and, as last year, a postseason oceanographic
cruise to Davis Strait and Baffin Bay is planned.



ADMINISTRATIVE REPORTS

/

B E R I N G SEA PATROL

123
'

.

The Bering Sea Patrol was continued this year. The purpose of.
the patrol is the protection of life and property; protection of thes seal
herds and other wUd life; law enforcement and transportation of a
floating court in the administration of justice; and the furnishing of
medical and dental assistance to natives and others in remote localities
in the areas contiguous to the Bering Sea and Arctic. Ocean. The
major part of this.patrol was accomplished by the U. S. C. G. C.
Northwind.
OCEAN STATIONS

.

During the year, the number of ocean stations niaintained by the
Coast Guard in the North Atlantic was decreased from 7)^ to 5%.
This was brought about by the. discontinuance of 2 stations and a
charige in the agreement with Canada for joint occupation of 1 station
whereby the Coast Guard became responsible for its maintenance for
two thirds rather than for one half of the time. In the North Pacific,
the number of stations maintained was increased from 2 to 3. While
engaged in this duty. Coast Guard vessels made 56,456 weather reports, made 19,660 radio contacts with aircraft, gave assistance in 63
-cases, and cruised 668,643 miles.
AIDS TO NAVIGATION

On June 30, 1950, 37,702 aids to navigation were maintained in the
navigable waters of the United States, its Territories, and its possessions, and at overseas mUitary bases. These aids consisted of many
different devices, ranging from simple unlighted wooden spar buoys
to light stations, lightships, and complex loran (electronic long-range
aids to navigation) netw^orks. During the year, 2,093 new aids were
established and 1,746 aids were discontinued, resulting in an increase
of 347 compared with the number maintained on June 30, 1949.
This increase was due principally to the establishment of aids to
navigation required for the marking of completed rivers and harbors
improvements.
^
In addition to 8 loran stations in the United States, 22 others,
located in widely separated and isolated localities (Greenland,
Labrador, Newfoundland, Alaska, the Philippines, and the islands of
the Pacffic), provide navigators traversing the mUitary and civil air
and sea routes of the North Atlantic and Pacific Oceans with means
for accurate and quick determination of their positions at all times,
regardless of weather conditions. Coast Guard cutters and aircraft
were utilized in providing frequent logistic service to these isolated
and distant stations.
M A R I N E INSPECTION AND SAFETY MEASURES -

Among the duties which the Coast Guard performed in promotirig
safety in the merchant marine and on navigable waters were approval
of plans for the construction, repair, and alteration of vessels; approval
of materials, equipment, and appliances;, issuance of certificates of
inspection; administration of leadline requirements; licensing and
certfficating of officers, pilots, and seamen; investigation of marine




124

195 0 R E P O R T O F THE: SEiCRETARY OF THE TREASURY

casualties; enforcement of manning requirements, citizenship requirements, and requirements for the mustering and drilling of crews; control of logbooks; shipment, discharge, protection, and welfare of merchant seamen; promulgation and enforcement of rules for lights, signals, speed, steering, saUing, passing, anchorage, movement, and towlines of vessels, and of regulations governing the transportation of
explosives and other dangerous cargoes aboard vessels; numbering of
undocumented vessels; prescription and enforcement of regulations
for outfitting^ and operation of motorboats; licensing, of motorboat
operators; and the regulation of regattas and marine parades.
A digest of certain phases of the marine inspection activities follows:/
Number of
vessels

Annual inspections completed ^
Drydock examinations
Reinspections
Special surveys (passenger vessels)
Special examinations by traveling inspectors on passenger vessels and ferries
Miscellaneous inspections-Undocumented vessels numbered under provisions
of the act of June 7, 1918, as amended (46 U. S. C.
288) (this is an increase ot 6,219 over the previous
fiscal year)

6, 125
5, 090
2, 949
176

Oross tonnage
of vessels

16, 847, 851.
19, 610„185
12, 146, 075

9 0 ' A.^
12, 586 .-'^

. _:

452, 327

1 Includes 234 vessels, totaling 490,004 gross tons, which were conversions or new construction completed
during the year.

There were 2,731 marine casualties reported of which 2,239 were
investigated, 18 of'these by formal Marine Casualty Investigation
Boards. Of the 272 lives lost in 119 casualties, only five passengers
lost their lives on inspected and certificated vessels and no vessels of
over 1,000 gross tons were lost as a result of marine hazards.
Two serious marine casualties occurred and were investigated by
the Coast Guard. The first of these was the explosion of munitions
while being loaded on barges at South Amboy, N. J., which caused 31
persons to lose their lives. The second was the collision between the
Norwegian freight ship Ravnefjell and the Great Lakes passenger
steamer City of Cleveland I I I , which resulted in the death of four passengers on the steamer.
Under the provisions of the act of May 27, 1936, as amended (46
U. S. C. 369), requiring approval by the Commandant of the Coast
Guard of all contract plans and specifications for building or altering
passenger vessels of the United States of one hundred gross tons and
over, 13,388 vessel plans were examined to determine conformance
with applicable regulations. Plans covering items of equipment
which require approval by the Commandant for use on merchant
vessels were reviewed and 178 such items were approved.
I n order to assess the fire hazard which exists with modern types
of stateroom construction, a fire test, using an actual size stateroom,
was conducted with the National Bureau of Standards. The stateroom was constructed of alumirium and was furnished with metal beds
and metal furniture. The draperies, bedspreads, mattresses, and
chair upholstery were given a fire retardant treatment, and in the
room was placed actual baggage such as might be brought aboard by
the passengers. The fire severity obtained during the test was




ADMINISTRATIVE REPORTS

125

measured and recorded, and the results will provide a factual basis
for use in the development of standards for fireproof construction to
safeguard properly a vessel against fire in this type of space.
The monthly periodical entitled "The Proceedings of the Merchant
Marine Council," United States Coast Guard, was published to promote safety of life at sea and was distributed free to seamen, ship
owners, operators, and the various Government agencies concerned
with the merchant marine. This publication contained feature
articles of interest to the merchant marine, lessons taken from actual
casualties occurring in the merchant marine, advance notices regarding changes in regulations, and other statistics of interest to the merchant marine.
MERCHANT M A R I N E PERSONNEL

The licensing and certificating of merchant marine personnel
covered the issuance of 75,148 documents. Of this number, 15,246
were issued to men who had not previously served in the merchant
marine, and 1,264 were licenses issued to radio officers under the
provisions of the act of May 12, 1948 (62 Stat. 232). In the process
of regulating the orderly conversion of the merchant marine from wartime to peacetime operation, 236 individual waivers of manning requirements were issued. Shipping commissioners supervised the
execution of 13,699 sets of shipment and discharge shipping articles.
Merchant Marine Investigating Units in major domestic ports and
Merchant Marine Details in certain foreign ports conthiued to operate
in the administration of discipline in the merchant marine as required
by the act of February 28, 1871, as a^mended (46 U. S. C. 239). Merchant Marine Details in London, Antwerp, Bremerhaven, Naples,
Trieste, and Piraeus operated throughout the year. The detail in
Antwerp was reestablished July 1, 1950, after having been closed for
about two years. During the year, 6,050 investigations of cases
involving negligence, incompetence, and misconduct were made.
As a result of these investigations charges were preferred and hearings
held on 806 cases by civilian examiners.
PERSONNEL

On June 30, 1950, the military„personnel strength of the Coast
Guard.on active duty consisted of 2,073 commissioned officers (1,734
Regular, 206 temporary service, 133 Reserve), 406 commissioned
warrant officers (350 Regular, 56 temporary service), 427 warrant
officers (82 Regular, 345 temporary service), 296 cadets, and 19,988
enlisted men.
The authorized force of civilian employees at Coast Guard Headquarters on June 30, 1950, was 734. In the field service there were
1,419 salaried personnel, 2,589 wage board employees, and 665 lamp^lighters.
Upon the enactment of Public Law 351, 8,1st Congress, approy^dj
October 12, 1949, new procedures with respect to physical disability
retirements were instituted and the reevaluation of personnel retired
for physical disability prior to October 1, 1949, was begun. Also pursuant to the law and prescribed regulations, warrant officers were
distributed in various grades for pay purposes^




126

.1950

REPORT OF T H E SECRETARY OF T H E TREASURY

On June 2, 1950, 68 cadets graduated, after satisfactorily completing
the 4-year course at the Coast Guard Academy, and were commissioned as ensigns. In the 1950 Nation-wide competitive examination
for appointment as cadets, 507 candidates from among 1,351 participants received passing grades; and it is expected that 215 will be appointed as the class of 1954. The 1950 summer practice cruise for
practical sea training was made aboard the cutters Campbell and Eagle,
and included visits to European ports.
An officer procurement program was carried on during the year.
Regular officers for the Coast Guard are being obtained from the
inactive Coast' Guard Reserve, by the selection of commissioned warrant and warrant officers, or enlisted men in the Coast Guard who
formerly held temporary commissions, and from among qualified
merchant marine officers.
Of the 13,806 men who applied for enlistment in the Coast Guard,
3,227 were enlisted, 3,327 were rejected for physical reasons, 6,314
were rejected for other reasons, 595 were accepted but failed to enlist,
atid 343 applications were pending on June 30, 1950. " There were
2,369 recruits received during the year at Cape May, N. J., Receiving
Center, and beginning in September 1949 the recruit training period
was increased to 12 weeks.
Public Law 351, 81st Congress, approved October 12, 1949, provides
that, in the case of any member whose total compensation on September 30, 1949, exceeded the amount of total compensation to which
he would have become entitled under the act, if application is made
within one year from October 1, 1949, the effective date of the act, he
shall be discharged. During the period from October 1, 1949, to June
30, .1950, 961 enlisted men were discharged pursuant to this provision
of law, and this loss contributed greatl}^ to the deficiency in enlisted
personnel strength at the end of the year.
On June 30, 1950, 17 medical officers, 28 dental officers, 10 nurse
officers, 1 scientist officer, and 1 sanitary engineer officer of the Public
Health Service were on detail to the Coast Guard.
COAST GUARD RESERVE

The revitalization of the Coast Guard Reserve and the initiation
of a large scale training program were not possible during the year
since no funds were appropriated for those purposes. Estimates of
appropriations were again submitted by the President for the consideration of the Congress for training Reserve personnel to enable
the Coast Guard when operating as a part of the Navy in time of war
or national emergency to perform those duties which have been delegated to the S.ervice.
Reserve Directors in the respective Coast Guard districts established volunteer training units where personnel and facilities permitted. Where circumstances did not permit Coast Guard Reserve
officers to form such units, arrangements were made for them to
associate with naval activities. Additional training was provided by
offering Naval Reserve correspondence courses to members of the
Coast Guard Reserve and approximately 1,000 such courses were
ppmpleted b j Reserye officers. Through the cooperatiori pf the Naval




ADMINISTRATIVE REPORTS

-

127

Reserve Air Training Command, a limited number of Coast Guard
Reserve aviators were permitted to participate as individuals in volunteer units of the Naval Reserve Air Training program.
During the year, 116 Coast Guard Reserve volunteer training units
were established, and of this number 71 were scheduling drills and
meeting regularly. Some 3,200 officers were assigned to these 71 units
and of this group approximately 28 percent were regularly participating in unit training activities. I t is estimated that 25 percent of the
total Reserve officers (4,132) were participating in volunteer training
during the year.
Reappointments were offered to 1,440 Reserve officers, of which 882
accepted. At the end of the year, the Reserve numbered, 4,132
commissioned and warrant officers and 391 enlisted personnel.
COAST GUARD AUXILIARY

The Coast Guard Auxiliary is a nonmilitary organization sponsored
by the Coast Guard to assist it in promoting safety and in effecting
rescues on and over the high seas and on navigable waters; in promoting efficiency in the operation of motorboats and yachts; in
fostering a wider knowledge of, and better compliance with, the laws,
rules, and regulations governing the operation of motorboats and
yachts; and facilitating other operations of the Coast Guard. The
Auxiliary had a membership of 12,164 on June 30, 1950, with an
affiliated ownership of 6,251 boats, 317 planes, and 156 radio stations.
In addition to the requirements that members maintain a high standard of efficiency in engineering, safety, navigation, and operating
practices, the members gave approximately 15,000 courtesy motorboat inspections and small-boat seamenship training to approximately
2,400 nonmembers, provided safety patrols for regattas and marine
parades, and carried on a vigorous program of safety education and
self-help under the general auspices and guidance of the Coast Guard.
FACILITIES AND EQUIPMENT

Floating units.—On June 30, 1950, the floating units in active commission consisted of 177 cutters of various t3rpes, .50 patrol boats,
37 lightships, 41 harbor tugs, and 10 buoy boats. During the year
these vessels cruised 2,085,952 miles in carrying out Coast Guard
duties.
In addition to the larger floating units there were 177 motor lifeboats, 1,577 motorboats, and 2,295 nonpowered craft in operation
aboard ships and at shore, installations of the Service.
Shore establishments .—The 17th Coast Guard District was reestablished on July 1, 1949, with the district office located in Juneau,
Alaska. This district embraces the Territory of Alaska and adjacent
waters. Its reestablishment increased the number of Coast Guard
districts to twelve.
Authorized shore units as of June 30, 1950, included 9 air stations,
12 bases, 41 depots, 170 lifeboat stations, 429 manned light stations,
78 light attendant stations, 30 loran transmitting stations, 49 marine
inspection offices, 12 primary radio stations, 1 shipyard, 2 supply
,907795—51

ip




128

1 9 5 0 REPORT OF THE: SEICRETARY OF T H E TREASURY

centers, 9 supply depots, 1 academy, 1 training station, and 1 receiving
center.
Aircraft.—During the year the Coast Guard operated 79 fixed and
rotary wing aircraft deployed from nine continental air stations and
eight air detachments. One new air detachment was Established and
cominissioned at San Juan, Puerto Rico. Other air detachments
beyond the continental limits of the United States were located at
Argentia, Newfoundland; Honolulu, T. H.; Guam, M. I.; Sangley
Point, P. I.; Annette Island, Alaska; and Kodiak, Alaska.
In carrying out the aviation program of the Coast Guard, the
aircraft were flown approximately 11,333 sorties for a total of 31,183.7
hours.
Communications.—The Coast Guard maintained and operated an
extensive communications system to provide for rapid, essential communications between its units. This includes the operation of rescue
control centers which provide for liaison, and coordinated communications with all rescue agencies using multiple circuits both mUitary and
commercial.
*
Navy and other Government facilities are used where avaUable to
avoid duplication. Commercial landlines, where available, are
augmented by Coast Guard-owned landlines and submarine cables to
connect isolated units.
Strategically located, primary, secondary, base, and radio stations
(aero) provide communications with cutters, patrol craft, and aircraft.
These facilities are employed for handling distress traffic and for
broadcasting both routine and urgent marine information.
Isolated shore units having no landline facilities available are radio
equipped. More important shore units are also radio equipped to
provide for a casualty circuit in the event of landline failure.
Excess vessels and property.—During the year, excess vessels with an
acquisition value of $2,121,530.36 and other excess property with an
acquisition value of $1,711,111.17 were disposed of.
CONSTRUCTION AND DEVELOPMENT

Maintenance, repair, and modernization of the Coast Guard's
22,000 fixed structures, and the repair and improvement of mechariical
equipment continued throughout the year. Approximately 6,000
projects for construction, repair, and maintenance were undertaken.
A continuing program of test and development was carried on
during the year in technical fields directly related to the Coast Guard's
statutory responsibUities. Emphasis was placed on those developments showing long range promise of effecting substantial economies
in performing present duties. As a result of the development program new standards for shipboard and buoy painting were placed
in effect, which lower material cost and give improved performance.
The adoption of more eft'ective techniques of maintaining wooden
boats will extend their useful life and reduce annual hull maintenance
costs. Technical requirements as to construction of staterooms on
passenger vessels were validated by a full scale fire test.
Significant development programs which are in progress are:
Fiberglass and aluniinum boat construction ^ m e d at producing longer




ADMINISTRATIVE REPORTS

* 129

lived boats at lower annual costs; redesign of standard buoys to better
serve radar equipped vessels; improving radar beacons so as to provide a practical tool at reasonable cost; preventing deterioration of
service material so as to reduce annual maintenance and replacement
costs; studying practicable methods of improving iriotorboat safety
and investigation of methods of making present loran service more
useful to mariners.
Two lightships under construction by a ^commercial shipbuilder in
East Boothbay, Maine, were launched, and completion and dehvery
are scheduled for the fall of 1950. Construction was begun on S third
L
lightship at the Coast Guard Yard! These three vessels will replace
overage lightships now in service.
Reconstruction of 15 loran stations in the Hawaiian, Japanese, and
Marshall chains was started, including relocation of the Marianas
chain.
Two new lighthouses in the Aleutian Islands were completed during
the year at Scotch Cap and Cape Sarichef.
A chain stopper for use on buoy tenders in servicing buoys was
designed and installed on several vessels for testing. This chain
stopper eliminates much of the manual handling of buoy chain in
the operations of removing and replacing buoys arid experience to
date indicates that it speeds up the work and greatly reduces the
hazard to personnel.
Production was begun on a 40-foot utUity boat for replacement, as
such becomes necessary, of 38-foot cabin picket boats, 30-foot rescue
boats, and various miscellaneous craft. This boat is a development
of a single prototype 38-foot utility boat buUt last year for testing
and evaluation.
Several installations of modern postwar search radar have been
made at shore lifeboat stations and further operational information is
being collected regarding the usefulness of this equipment for protection of life and property on our coasts.
Helicopters were equipped with added safety devices designed in
former years, with particular reference to emergency flotation.
StabUization was further investigated with gratifying results. Helicopters were modernized and steps taken to standardize all of a type
to insure greater famUiarity and safety in operation. Hydraulic
controls were added for reduced pUot fatigue and greater operational
efficiency.
The Ship Structure Committee, through joint efforts of the Army,
Navy, Coast Guard, Maritime Administration, and the American
Bureau of Shipping, has made considerable progress during the year
toward the solution of the problem of cracking or breaking apart of
welded ships' hulls. With the advantages of welded construction
clearly apparent and with fractures stUl occurring the Ship Structure
Committee has attacked the problem through basic research programs
in^the flelds of design, materials and fabrication, with the assistance
and cooperation of the National Academy of Sciences, the National
Bureau of Standards, the American Iron and Steel Institute, the
Welding Research CouncU, and the British Admhalty Welding
Committee.




130

' 1 9 5 0 REPORT OF THE! iSElCRETARY OP THE TREASURY
F U N D S AVAILABLE, OBLIGATIONS, AND BALANCES

During the fiscal year 1950 the sum of $625,900 was expended for
mustering out payments under the provisions of the act of February
3, 1944, as amended (38 U. S. C. 691). In settlement of unused leave
under the Armed Forces Leave Act of 1946 (60 Stat. 963), $2,511
was paid to 15 claimants.
The following table shows the amounts avaUable for the Coast
Guard during 1950, and the amounts of obligations and unobligated
balances:
Funds
available

Current operating appropriation:
Salaries, oflice of Conimandant
Pay and allowances--.
Civilian employees (field)
General expenses
-.-

.

_ _ _.
. --.
-

$2, 515,000
82, 520,000
4, 400, 000
39,385, 000

-

Subtotal

N e t total
obhgations

$2,
80,
4,
39,

502,030
477, 401 .
368, 836
026, 854

Unobligated
balances

$12 970
2,042, 599
31,164
358,146

128, 820,000

2,990

6,097,030

3, 902, 970

2,074, 398
2,877,963
467, 599
2,516

1, 564, 757
2,489,818
426, 981
2, 249

509, 641
388,145
40, 618
267

15, 422, 476

10, 580,835

4 841,641

158,106, 476

Total appropriated funds

2, 444,879

13, 861, 010

10,000, 000

Acquisition, coiistruction, and improvements:
Total appropriation, 1950
Prior year unobligated balances:
Acquisition, construction, and improvements
Acquisition of vessels and shore facilities
Establishing and improving aids to navigation
Special projects, aids to navigation
Subtotal
.
_

126, 375,121

13, 864, 000

Retired pay

150, 816, 966

7 289 510

81, 324

1, 300

80,024

17, 229

17, 227/

469, 843

31,075

Miscellaneous funds:
Payments, Armed Forces Leave Act of 1946 (allotment to •
Treasury, Coast Guard)
Proceeds of sales of Coast Guard sites, Treasm-y Department ^
Coast Guard Academy, donations for chapel. Treasury
Department
Fund for management improvement, Executive Office
of the President (allotment to Treasury, Coast Guard)
Total miscellaneous furids

..,

Total working funds
Grand total-.-

69, 000

69, 000

637,396

118, 602

518,794

307, 777
57,175
414, 012
20, 000
1,015

•

Working funds established by advances from other Government agencies:
Department of Defense:
Department of the Navy
Department of the Army
Federal Security Agency
Department of Commerce
Veterans' Administration

2
438,768

267, 263
52,402
413,933
14,023
1,015

40,514
4,773
79
5,977

799, 979

...

748, 636

51, 343

159, 543, 851

151, 684, 204

7.859, 647

UNITED STATES SAVINGS BONDS DIVISION

The principal function of the United States Savings Bonds Division
of the Treasury Department is to promote and effect the sale of
United States savhigs bonds.
The Savings Bonds Division is headed by a National Dhector,
serving without compensation, who is also an Assistant to the Secretary of the Treasmy. His chief aide is a National Director of Sales
under whom function the following eight divisions: Publicity and
Promotion, Payroll Savings, Banking and Investments, Education,




ADMINISTRATIVE REPORTS

131

Labor Organizations, Community Activities, Agriculture, and Advertising. A Nation-wide organization of volunteers, under the
direction of State and local advisory chahmen and aicied by more
than 25 national advisory committees, all serving without compensation, carry forward the sales activities of the Division.
The (}Ost of promoting the savings bond program is held to a minimum because of contributions of advertising by newspapers, magazines,
radio and television industries, outdoor and transportation advertising
businesses, and various other media, as well as by a great many national and local advertisers. These contributions by national advertisers and their agencies are made through the Advertising Council,
Inc., a voluntary nonprofit organizatioii of the advertising industry
for the'support of public service programs.
The ^Tndependence Drive," having as its theme the encouragement
of thrift and the fostering of public interest in the affairs of the Government, was the major campaign effort of the year. The Drive was
conducted from May 15 througli July 4, 1950, and the national sales
quota of $650 mUlion in Series E bonds was exceeded by 10 percent.
The volunteer efforts of thousands of workers and the contribution of
all types of promotional media contributed greatly to the success of
the Drive.
The symbol for the Drive was the Liberty Bell, exact reproductions
of which were displayed in each of the 48 States and in Alaska, Hawaii,
Puerto Rico, the Virgin Islands, and the District of Columbia. At
the conclusion of the .Drive, these reproductions were presented by
the Secretary of the Treasury to the geographical units in which they
had been exhibited, with the intention that the bells should be kept
permanently on public, noncommercial exhibition. A bronze plaque
accompanied each bell memorializing the purpose of the gift. The
plaque named the six American copper companies which provided
funds for the purchase of the bells; the steel company which furnished
supports for the bells, and the copper fabricating company which
donated the plaques.
Throughout the year the Savings Bonds Division, effectively
supported by an Industrial Advisory Committee made up of 28
nationally known industrialists and bankers, as well as by numerous
industrial and trade organizations, carried out an intensified campaign
to increase participation in the payroll savings plan. This plan
facUitates regular investment in savings bonds by wage and salary
earners. The stimulation of payroll savings contributed materially
to the extension of the plan, particularly in the steel, petroleum, glass,
and railroad industries.
The Interdepartmental Savings Bond Committee, allied with the
Federal Payroll Savings Section to promote savings bond sales to
Government employees, reported total sales during the year of
$319 mUlion, a gain of $25 mUlion over the preceding year. This
gain was accomplished despite a considerable reduction in the total
number of Government employees.
Gross sales of savings bonds of all series during the fiscal year 1950
amounted to $5,673 mUlion. DetaUs of these sales, as well as of
redemptions and amounts outstanding, wUl be found on pages 22 and
23 and 558 through 568.
In accord with the Treasury Department's management program,




132

1950 REPORT OF THE SECRETARY OF THE TREASURY

a Committee on Materials was organized in the Savings Bonds.Division
to analyze all requests for the prhiting and reproduction of promotional materials and to approve only those requests which meet
essential requirements. In addition to the immediate economies
effected in this program, plans are under way to transfer all excess
stocks of promotional materials from the field offices to the warehouse of the Chicago MaUing Division for redistribution. Savings
of materials as well as the freeing of space for essential needs wUl
result.
There was developed a better correlation of distribution and
requirements of mats, plates, and engraved blocks to newspapers and
magazines which contribute advertishig space. This close control
resulted in substantial savhigs in procurement costs,' with no loss
in the amount of contributed advertising space.
Final plans were formulated for the establishment of an inventory
control systeria whereby property in the field and departmental
offices will be more readUy identifiable for management purposes.
This system is currently being installed and should be infull operation by the end of the calendar year 1950.
UNITED STATES SECRET SERVICE
The Secret Service protects the President of the United States and
members of his famUy, the President-elect, the Treasury BuUding and
other buildings housing Treasury Department, activities, and the currency and other obligations and securities of the United States in production, storage, and transit. The Secret Service is also charged with
the suppression of counterfeiting, forging, or alteration of obligations
and securities of the United States and foreign countries, and of
counterfeiting of foreign and domestic coins. The Secret Service
investigates forged endorsements on, or the fraudulent negotiation of,
United States Treasury checks and bonds; losses of valuables in shipments by Government agencies; violations of the Gold Reserve Act;
and other offenses as specffied in 18 U. S. C. 3056.
Management improvement by the Secret Service during 1950 was
concentrated mainly on more effective suppression of counterfeiting
and on a reorganization of the Field Force.
With counterfeiting more prevalent than at any time since 1935, the
Secret Service took a number of steps toward its more effective suppression. The Service established extensive, centralized files on aU
•counterfeiting offenders and suspects, in order to coordinate the^ investigations by field offices; participated in the '^Counterfeit Clinics"
:sponsored by several of the Federal Reserve Banks, and distributed
several thousand post card-size warnings of counterfeit notes in circulation and new framed exhibits of genuine and counterfeit bills for
the information of banks, merchants, civic organizations, business
groups, etc.; participated in the Third International Conference of
the Central Offices for the Suppression of Counterfeiting at The Hague
in an effort to stamp out the foreign counterfeiting of United States
money; and drafted legislation to strengthen the currency laws. This
legislation was introduced in both Houses of Congress and is awaiting
action.




ADMINISTRATIVE REPORTS

133

During the year plans were made for a reorganization of the Field
Force of the Secret Service. The 56 field offices, instead of being
under the control of 14 supervising agents, wUl be independent units,
each imder a special agent in charge, who will report directly to the'
Chief of the United States Secret Service. Four regional-inspectors,
acting under the Chief's delegated authority and with headquarters
in the Chief's office, wUl make regular systematic inspections of the
field offices in their respective regions, so that there wUl be direct and
continuing liaison between the Chief and the special agent hi charge
of each field office. Under this system, reports and correspondence
wUl be sent direct to the Chief; and appraisals of personnel and field
administration wUl be of assistance in the utUization of available manpower in the most efficient manner.
Other management improvements included the installation of a
standardized filing system in all Secret Service offices, and the preparation of a new manual prescribing the procedure for all Secret Service
personnel.
_,,...-.'

-

' PROTECTIVE,AND SECURITY

ACTIVITIES

In connection with its protection of the President, the Secret Service
also protected certahi distinguished visitors to the United States, including the President of Chile, the Prime Minister of Pakistan, and
the President of the Philippine Republic.
The Uniformed Force of the Secret Service safeguarded more than
$194 billion of currency, stamps, and other obligations in transit, and
$801 bUlion of securities in production and storage.
ENFORCEMENT ACTIVITIES

Counterfeiting continued to increase durhig the year. The force of
less than 200 Secret Service agents seized $1,289,281 in counterfeit
bffis and corns, $554,154 of which was captured before it could be
passed on the public. Coimterfeit bills and coins seized in 1949
totaled $957,764.
There were 208 new coimterfeit note issues during the year, 58 of
which were of foreign origin. Agents captured 13 plants for the manufacture of 75 issues of notes, and arrested 542 persons who were charged
with counterfeiting offenses. Arrests for counterfeitmg . exceeded
arrests iriade m 1949 by 161.8 percent.
Undercover agents, playmg hazardous roles as racketeers, disrupted
several well-organized counterfeiting gangs. After one agent negotiated to buy $200,000 in counterfeit $20 bUls, the counterfeits
were seized and five important distributors were arrested. All were
sentenced to terms ranghig from 10 to 25 years. Continumg the
investigation, a special squad of agents apprehended seven more prmcipals, including the printer and engraver who were responsible for
manufacturing 34 issues of counterfeit $10 and $20 Federal Reserve
notes representing $800,000, and of coimterfeit Canadian $10 notes
representing $500,000. The nptes were passed in 28 States, and 62
passers were taken into custody. The gang had also printed thousands
of coimterfeit Irish Sweepstakes tickets, 3-cent postage stamps, and




134

195 0 REPORT OF THE SECRETARY OF THE TREASURY

lottery tickets. Their counterfeiting technique had been learned from
their extensive counterfeiting of OPA ration stamps during World
WarlL
V In another case the Secret Service ended a 12-year-old manhunt
with the arrest of a notorious 'Uone-wolf" counterfeiter in Chicago,
where agents also seized his plant for the manufacture of counterfeit
$5 and $10 notes. He was promptly sentenced to serve 15 years.
A young couple arrested in Amsterdam, N . Y., for passing counterfeit $10 notes surrendered the equipment they had used to manufac' ture the counterfeits. Their notes had been passed in seven States.
The man, 18, and his wife, 17, are now awaiting trial.
In San Francisco agents arrested a perfectionist who had been striving for nine years to produce a perfect counterfeit bill. They captured
an elaborate'counterfeiting plant with 16 plates, 205 film negatives,
and a quantity of completed counterfeit $20 bUls. The offender even
manufactured his own currency paper, but never attempted to pass
any of his counterfeits during his 9-year criminal venture. He pleaded
guilty and was sentenced and
fined.
'
^ ^ ... ,
Agents m New York arrested 16 persons for the manufacture^ of6 million counterfeit 3-cent postage stamps and $400,000 in counterfeit
American Express travelers' checks. A perforating machine used in
preparing the stamps was recovered by a Navy diving team from the
ocean off Long Beach, N . Y., where it had been thrown by the
counterfeiters.
In New York and Miami four members of another counterfeiting
gang were arrested by Secret Service agents and charged with the sale
of counterfeit $10 and $20 notes to a representative of a Cuban smuggling ring. These arrests followed the apprehension of several Cubans
in Havana and the seizure of $20,000 in counterfeit notes. The four
were convicted in New York and sentenced to terms ranging from
15 to 25 years each.
With agents diverted to counterfeiting cases, check and bond
forgery cases continued to accumulate. Agents investigated 30,059
forged Government checks worth $2,066,226 and 6,162 forged bonds,
and arrested 2,336 persons charged with forgery. Convictions in
forgery cases, hicluding cases pending from prior years, totaled 2,080.
As of June 30, 1950, there were 14,373 forged checks and 3,019 forged
bonds awaiting investigation.
I n Michigan an alien, who had been in a Japanese conceritration
camp in Shanghai and who later entered the United States UlegaUy,
was arrested for stealing and forging nearly 200 checks, includmg 20
Government checks. After marrying an American woman he made




ADMINISTRATIVE

135

REPORTS

his living by stealing checks from the mails for more than a year.
He pleaded guilty and was sentenced to six years.
Arrests for all offenses aggregated 3,168, and there were 2,667 con,victions in cases of all types, representing 97.3 percent of convictions
in the cases which went to trial. Prison sentences aggregated 3,245
years and additional sentences of 2,737 years were suspended or
probated. Fines in criminal cases totaled $30,592.70.
The following tables constitute a statistical summary of Secret
^ Service activities for 1950:
Counterfeit money seized, fiscal years 1949 and 1950
.Increase, or
decrease (—)

Percentage
increase, or
decrease'(-)

1949

$331, 021. 00
618, 721.10

T o t a l --

-

-- •

Counterfeit corns seized:
After being circulated
Before being circulated

-

._

..

Total

--

G r a n d total

$727, 086. 33
553, 315. 00

$396, 065.33
-65,406.10

119.6
-10.6

949, 742.10

1,280,401.33

330,659.23

34.8

7, 041. 84
979.77

Counterfeit a n d altered notes seized:
After being circulated
.
_ *
Before being circulated

1950

8, 040. 73
839.20

998.89
- 1 4 0 . 57

14.2
^14.3

8,021.61

8, 879. 93

858. 32

10.7

957, 763. 71

.

1, 289,281.26

331, 517. 55

34.6

Nu7nber of investigations of criminal and noncriminal activities, fiscal years 1949
and 1950
1949

C r i m i n a l cases:
M a k i n g or passing: •
Counterfeit n o t e s
. , .
Counterfeit coins. .
Altered obligations . F o r g e r y of G o v e r n m e n t checks
Stolen or altered b o n d s
P r o t e c t i v e research cases
Other criminal cases
Total.
N o n c r i m i n a l cases
G r a n d total

..--

--.-..
-.-




.

1950

Increase, or
decrease ( —)

Percentage
increase, or
decrease ( - )

319
53
288
33,427
9,105
1,841
351
-.-

1,256
98
274
30, 059
6,162
2,610
300

937
45
-14
- 3 , 368
- 2 , 943
769
-51

293.7
84.9
—4.9
-10.1
-32.3
41.8
-14.5

45, 384
1, 735

40, 759
1,745

- 4 , 625
10

-10.2
•6

47,119

42, 504

-4,615

-9.8

136

1 9 5 0 REPORT OF T H E SECRETARY OF THEi TREASURY '
Number of arrests and cases disposed of, fiscal years 1949 and 1950 •
1949

Arrests for:
Makiiig or passing:
Counterfeit notes
_
. Counterfeit coins_ _ .
Altered obligations.
Forgery of Government checks
._.
Violation of Gold Reserve Act
Stolen, altered, or forged bonds
Protective research cases
Stamp and strip stamp cases
False claim cases
Theft of Treasury Department property
Miscellaneous
_
Total

:-




-.
...

489
53
61
2, 336
33
112
46
15
1

. 20L9
17.8
28.6
1, 550.0
-39.1
-11.5
• 400.0

22

' 2,346

3,168

822

35.0

105
31
73
1,676

295
49
57
2,080
6

190
18
-16
404
6
-1
-63
-11

181.0
58.1
-21.9
24.1

1
19

Cases disposed of:
Convictions in connection with:
Counterfeit notes
Counterfeit coinsAltered obligations
Forgery of Government checks. _
Violation of Gold Reserve Act
Violation of Farm Loan Act.-. . _
Stolen, altered, or forged bonds
Protective research cases
False claim cases
Theft of Treasury Department property
Miscellaneous
_..
Total
Acquittals
Dismissed, not indicted, or died before trial
Total cases disposed of _

162
45
61
1, 817
2
184
52
3

327
8
519
31
-72
-6
12
1
-1
3

, .
_..

Percentage
Increase, or increase, or
decrease (—) decrease (—)

1950

i

-100.0
15.8

-ioo.o

-36. 4
—21.6

173
51
1
1
13

110
40
1
29

-1
16

-100.0
123.1

2,125
45
131

2, 667
75
197

542
30
66

25.5
66.7
50.4

2,301

2.939

638

27.7




EXHIBITS

137




PUBLIC DEBT OPERATIONS
TREASURY CERTIFICATES OF INDEBTEDNESS. TREASURY NOTES. AND TREASURY
BONDS
Exhibit 1.—Offering of iVs percent certificates of Series G-1950 ^
[Department Circular No. 849. Public Debt]
TEEASURY

DEPARTMENT,

Washington, August S l , 1949.
I. O F F E R I N G OF CERTIFICATES

1. T h e Secretary of the Treasury, p u r s u a n t to t h e a u t h o r i t y of t h e Second
Liberty Bond Act, as amended, invites subscriptions, a t par, from t h e people of
t h e United States for certificates of indebtedness of t h e United States, designated
lYs percent Treasury certificates of indebtedness of Series G-1950, in exchange
for 2 percent Treasury bonds of 19i49-51, dated M a y 15, 1942, called for r e d e m p tion on September 15, 1949.
II.

D E S C R I P T I O N OF CERTIFICATES

1. T h e certificates will be dated September 15, 1949, and will bear interest
from t h a t date a t t h e r a t e of IJ^ percent per a n n u m , payable with the principal
a t m a t u r i t y on Septehiber 15, 1950. T h e y will not be subject to call for r e d e m p tion prior to m a t u r i t y .
2. ' T h e income derived from t h e certificates shall be subject to all taxes, now or
hereafter imposed under t h e I n t e r n a l llevenue Code, or laws a m e n d a t o r y or
supplementary thereto. T h e certificates shall be subject to estate, inheritance,
gift or other excise taxes, whether Federal or State, b u t shall be exempt from all
taxation now or hereafter imposed on t h e principal or interest thereof by a n y
State, or any of t h e possessions of t h e United States, or b y any local taxing authority.
3. T h e certificates will be acceptable to secure deposits of public moneys.
They will not be acceptable in p a y m e n t of taxes.
4. Bearer certificates will be issued in denominations of $1,000, $5,000, $10,000,
$100,000 a n d $1,000,000. T h e certificates will not be issued in registered form.
5. T h e certificates will be subject t o t h e general regulations of*the Treasury
D e p a r t m e n t , now or hereafter prescribed, governing United States certificates.
III.

SUBSCRIPTION AND ALLOTMENT

1. Subscriptions will be received a t t h e Federal Reserve Banks and branches
a n d a t t h e Treasury D e p a r t m e n t , Washington. Banking institutions generally
m a y submit subscriptions for account of customers, b u t only t h e Federal Reserve
Banks and t h e Treasury D e p a r t m e n t are authorized to act as official agencies.
2. T h e Secretary of t h e Treasury reserves t h e right to reject a n y subscriptibn,
in whole or in p a r t , to allot less t h a n t h e a m o u n t of certificates applied for, a n d
to close t h e books as to a n y or all subscriptions a t a n y time without notice; a n d
a n y action he m a y t a k e in these respects shall be final. Subject to these reservations, all subscriptions will be allotted in full. Allotment notices will be sent out
p r o m p t l y upon allotment.
IV.

PAYMENT

1. P a y m e n t a t p a r for certificates allotted hereunder must be made on or
before September 15, 1949, or on later allotment, and m a y be made (Only in
Treasury bonds of 1949-51, called for redemption on September 15, 1949, which
will be accepted a t par, and should iaccompany t h e subscription. P a y m e n t of
final interest due September 15 on bonds surrendered will be paid, in t h e case of
coupon bonds, by p a y m e n t of September 15, 1949, coupons, which 'should be
detached by holders before presentation of t h e bonds, a n d in t h e case of registered
bonds, by checks drawn in accordance with t h e assignments on t h e bonds
surrendered.
»Details of Department Circular No. 847, dated June 20, 1949, covering
certificates of Series F-1950, dated July 1, 1949, will be found in exhibit 2.




the

offering

139

of

140

1 9 5 0 REPO'RT OF THEI SE'CRETARY OF THEI TREASURY
V. ASSIGNMENT OF R E G I S T E R E D B O N D S

1.. Treasury bonds of 1949-51 in registered form 'tendered in p a y m e n t for
certificates offered hereunder should be assigned b y t h e registered payees or
assignees thereof to ' ' T h e Secretary of t h e Treasury for exchange for Treasury
certificates of indebtedness of Series G-1950 to be delivered to
;—,"
in accordance with t h e general regulations of the Treasury D e p a r t m e n t governing
assignments for transfer or exchange, and thereafter should be presented a n d
surrendered with t h e subscription to a Federal Reserve B a n k or branch or to t h e
Treasury D e p a r t m e n t , Division of Loans a n d Currency, Washington, D . C.
T h e bonds m u s t be delivered at t h e expense and risk of t h e holders.
VI.

GENERAL PROVISIONS

1. As fiscal agents of t h e United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on t h e basis and up
to t h e a m o u n t s indicated by t h e Secretary of t h e Treasury to t h e Federal Reserve
Banks of t h e respective districts, t o issue allotment notices, to receive p a y m e n t
for certificates allotted, to make delivery of certificates on full-paid subscriptions
allotted, and t h e y m a y issue interim receipts pending delivery of t h e definitive
certificates.
2. T h e Secretary of t h e Treasury m a y a t a n y time, or from time to t i m e ,
prescribe supplemental or a m e n d a t o r y rules a n d regulations governing t h e
offering, which will be communicated p r o m p t l y to t h e Federal Reserve Banks.
J O H N W . SNYDER,

Secretary of the Treasury.

Exhibit 2.—Details of certificate issues and allotments
Circulars pertaining t o issues of Treasury certificates of indebtedness during
t h e fiscal year 1950 are similar in form t o t h e circular shown in exhibit 1, and
therefore are not reproduced in this report. However, t h e essential details
regarding each issue are summarized in t h e following table, and t h e final allotments of new certificates in exchange for m a t u r i n g or called securities are shown
in t h e succeeding table.
Summary of information contained in circulars pertaining to Treasury certificates of
indebtedness issued during the fiscal year 1950

Date of
circular

Numberof
circular

1949
June 20

847

Aug. 31

849

Sept. 21

850

Dec. 19

855

Certiflcates of indebtedness issued, and
securities exchanged for new issues

1M% Series F-1950__-_
Exchanged for 1 ^ % Series F-1949
certificates maturing July 1,1949.
VA% Series G-1950
Exchanged for 2% Treasury bonds
of 1949-51 (dated May 15, 1942)
called for redemption on Sept. 15,
1949.
1H% Series 11-1950...
Exchanged for 1K% Series G-1949
certificates maturing Oct. 1,1949.
VA% Series A-1951...
Exchanged for 1 ^ % Series A-1950
certificates maturing Jan. 1, 1950.

Date of
issue

Date of
maturity

Date
subscription
books
closed

1949.
July 1

1950
July 1

1949
June 23

1949
1 Julyl.

Sept. 15

Sept. 1.5

Sept. 3

2 Sept. 15.

Oct.

Oct.

Sept. 24

lOct. 1.

1951
Jan. 1

Dec. 22

1950
iJan. 3.

1

1950
Jan. 1

Allotment
payment
date on or
before (or
on later
allotment)

1 Interest due on the certificates surrendered was paid to the subscriber following acceptance of the
certificates.
2 Final hiterest due Sept. 15, 1949, on bonds surrendered was paid as follows: On coupon bonds, by
payment of Sept. 15, 1949, coupons; and on registered bonds, by checks drawn in accordance with
assignments, on bonds surrendered.




141

EXHIBITS

Treasury certificates of indebtedness issued in exchange for matured or called securities,
by Federal Reserve districts, fiscal year 1950
[In thousands of dollars]

1 M % Series
F-1950
certificates
exchanged for
1 H % Series
F-1949
certificates
maturing
J u l y 1, 1949

Federal R e s e r v e d i s t r i c t

Boston
NewYork
Philadelphia
Cleveland
Cincirinat.i
Pittsburgh
Richmond
<..
Baltimore - . .
Charlotte
Atlanta
Birmingham
Jacksonville
Nashville
NewOrleans
Chicago
St. L o u i s . L i t t l e Rock
Louisville...
Memphis
M u m e a p o l i s __
Kansas City
Dallas.E l Paso
Houston
San A n t o n i o .
San Francisco
_
Los Angeles
Portland
Salt Lake C i t y
Seattle
Treasury

1 K % Series
G-1950
certificates
exchanged for
2% Treasury
b o n d s of
1949-51 (dated
M a y 15. 1942)
called for red e m p t i o n on
S e p t . 15, 1949

1 H % Series
H-1950
certificates
exchanged for
1 M % Series
G-1949
certificates
maturing
Oct. 1,1949

82,632
3,881, 256
105,130
98,348
17,617
31, 272
18,086
9, 263
28, 502
39,842
10,470
8,440
10,420
32,170
492, 737
93, 279
4,674
31, 297
14,864
103,296
. 150,558
45,842
2,710
27,921
17, 536
135,317
82,069
3,662
4,368
12,158
5,289

74,693
670,837
40, 308
24, 249
5 437
8,787
6,333
5,180
1,847
7,733
811
6, 648
3,499
2,976
158,353
15,455
133
3, 317
673
29,036
32, 803
12,070
224
4,435
4,919
34, 638
34, 570
1,885
263
2,160
2,522

155,8.34
3, 500,760
138 386
122,191
33 350
33, 934
46,725
26, 771
25,460
53,719
15, 262
19,428
21, 258
49,908
727,958
112,660
8,709
. 43,967
26,054
179, 274
243,121
70, 202
6,915
38, 275
46,079
191, 552
217,390
16,256
3,849
12, 731
60, 609

119,748
2, 873, 283
101,646
124,115
30,838
49 864
25,124
30 567
12,643
54 662
14,423
8 865
14, 213
28 529
806, 607
93 545
9,105
48,911
12, 223
167 568
168,906
53,197
5,109
57,357
31,008
179, 608
193,752
8,866
12,488
29,479
6,419

5, 601, 025

1,196, 794

6, 247, 587

5, 372, 668

181,865

95,650

287. 574

321, 928

5,782,890

1, 292, 444

6, 535,161

5,694,696

.
.

...
..

.,.
.

T o t a l a l l o t m e n t s on exchanges
M a t u r i n g or called securities red e e m e d for cash or carried to
matured debt
T o t a l m a t u r e d or called securities..




•1H% Series
A-1951
certificates
exchanged for
1 M % Series
A-1950
certificates
. maturing
Jan. 1, 1950

142

1050 REPORT OF THE! SECRETARY OF THE; TREASURY
Exhibit 3.—Offering of V/s percent Treasury notes of Series A-1954
[Department Circular No. 854, Public Debt]
TREASURY

DEPARTMENT,

.

Washington, December 5, 1949.
I.

O F F E R I N G OF

NOTES

1. T h e Secretary of t h e Treasury, p u r s u a n t to t h e authority of t h e Second
Liberty Bond Act, as amended, invites subscriptions, a t par, from t h e people of
the United States for notes of t h e United States, designated 1% percent Treasury
notes of Series A-1954, In p a y m e n t of which any of the following listed Treasury
securities, singly or in combinations aggregating $1,000 or multiples thereof, may
be tendered:
Treasury certificates of indebtedness:
l}i percent certificates, Series H-1949, dated December 15, 1948, m a t u r i n g
December 15, 1949.
Treasury bonds:
2 percent bonds of 1949-51, dated July 15, 1942, due December 15, 1951,
called for redemption December 15, 1949,
3}i percent bonds of 1949-52, dated December 15, 1934, due December 15,
1952, called for redemption December 15, 1949,
2y2 percent bonds of 1949-53, dated December 15, 1936, due December 15^
1953, called for redemption December 15, 1949.
II.

D E S C R I P T I O N OF N O T E S

1. T h e notes will be dated December 15, 1949, and will bear interest from t h a t
date a t the rate of V/i percent per a n n u m , payable on a semiannual basis on
September 15, 1950, and thereafter on IVIarch 15 and September 15 in each year
until t h e principal a m o u n t becomes payable. T h e y will m a t u r e IVIarch 15, 1954,
and will not be subject to call for redemption prior to m a t u r i t y .
2. T h e income derived from t h e notes shall be subject to all. taxes, now or
•hereafter imposed under t h e I n t e r n a l Revenue Code, or laws a m e n d a t o r y or
supplementary thereto. T h e notes shall be subject to estate, inheritance, gift
or other excise taxes, whether Federal or State, b u t shall be exempt from all
taxation now or hereafter imposed on t h e principal or interest thereof by any
State, or any of t h e possessions of t h e United States, or by any local taxing
authority.
3. T h e notes will be acceptable to secure deposits of public moneys. T h e y will
not be acceptable in p a y m e n t of taxes.
4. Bearer notes with interest coupons a t t a c h e d will be issued in denominations
of $1,000, $5,000, $10,000, $100,000 a n d $1,000,000. T h e notes will not be issued
in registered form.
5. T h e notes will be subject to the general regulations of t h e Treasury D e p a r t ment, now or hereafter prescribed, governing United States notes.
III.

S U B S C R I P T I O N AND ALLOTMENT

1. Subscriptions will be received a t t h e Federal Reserve Banks a n d branches
and a t t h e Treasury D e p a r t m e n t , Washington. Banking institutions generally
m a y submit subscriptions for account of customers, b u t only t h e Federal Reserve
Banks and t h e Treasury D e p a r t m e n t are authorized to act as official agencies.
2. T h e Secretary of t h e Treasury reserves t h e right to reject any subscription,
in whole or in p a r t , t o allot less t h a n t h e a m o u n t of notes applied for, a n d to close
t h e books as to any or all subscriptions a t any time without notice; and any action
he m a y t a k e in these respects shall be final. Subject to these reservations, all
subscriptions will be allotted in full. Allotment notices will be sent out promptly
upon allotment.
IV.

PAYMENT

1. P a y m e n t a t p a r for notes allotted hereunder m u s t be made on or before
December 15, 1949, or on later allotment, a n d m a y be made only in Treasury
certificates of indebtedness of Series H - 1 9 4 9 , m a t u r i n g December 15, 1949, or in
Treasury bonds of 1949-51, Treasury bonds of 1949-52 or Treasury bonds of




EXHIBITS

^

143

1949-53, all called for redemption December 15, 1949, which will be accepted a t
par, and should accompany t h e subscription. T h e full year's interest on t h e
certificates surrendered will be paid to t h e subscriber following acceptance of
the certificates. Final interest due December 15 on bonds surrendered will be.
paid, in t h e case of coupon bonds, by p a y m e n t of December 15, 1949 coupons,
which should be detached by holders before presentation of the bonds, and in
t h e case of registered bonds, iDy checks drawn in aiccordance with the assignments
on t h e bonds surrendered.
V.

A S S I G N M E N T OF R E G I S T E R E D B O N D S

1. Treasury bonds of 1949-51, Treasury bonds of 1949-52 or Treasury bonds
of 1949-53 in registered form tendered in p a y m e n t for notes offered hereunder
should be assigned by t h e registered payees or assignees thereof to ''The Secretary
of t h e Treasury for exchange for Treasury notes of Series A-1954 to be delivered
to
", in accordance, with t h e general regulations of t h e Treasury
D e p a r t m e n t governing assignments for transfer or exchange, and thereafter should
be presented and surrendered with t h e subscription to a Federal Reserve Bank
or branch or to t h e Treasury D e p a r t m e n t , Division of Loans a n d Currency,
Washington, D . C. T h e bonds must be delivered a t t h e expense and risk of the
holders.
VI.

GENERAL PROVISIONS

1. As fiscal agents of t h e United States, Federal Reserve Banks are authorized
a n d requested to receive subscriptions, to make allotments on the basis and up
to the a m o u n t s indicated by the Secretary of t h e Treasury to t h e Federal Reserve
Banks of t h e respective districts, to issue allotment notices, to receive p a y m e n t
for notes allotted, to make delivery of notes on full-paid subscriptions allotted,
and they m a y issue interim receipts pending delivery of t h e definitive notes.
2. T h e Secretary of t h e Treasury m a y a t any time, or from time to time, prescribe supplemental or a m e n d a t o r y rules and regulations governing the offering,
which wiU be communicated p r o m p t l y to t h e Federal Reserve Banks.
J O H N W . SNYDER,

Secretary of the Treasury.
Exhibit 4.—Details of Treasury note issues and allotments
Circulars pertaining to issues of Treasury notes during t h e fiscal year 1950 are
similar in form to t h e circular shown in exhibit 3, and therefore are not reproduced
in this report. However, t h e essential details regarding each issue are summarized
in t h e following table, and t h e final allotments of new notes in exchange for
m a t u r i n g or called securities are shown in the succeeding table.
o

907795—51

11




144

1950 'REPORT OF THE ISEC'RETARY OF THEi TREASURY

Summary of information contained in circulars pertaining to Treasury notes issued
during the fiscal year 1950

Date of
circular

Number of.
circular

1949
Dec. 5

854

1950
Jan. 20

856

Feb. 17

858

Do....

859

Mar. 20

860

Do..--

861

May 22

866

June f21

867

Treasury notes issued, and securities exchanged for new issues

Date of
issue

Date of
maturity

Date
subscription
books
closed

1949
1949
m % Series A-1954
Dec. 15 Mar. 15,1954 Dec. 8
Exchanged for—
1M% Series H-1949 certificates maturing Dec. 15,
1949.
Treasury bonds called for
redemption on Dec. 15,
1949, as follows:
2% of • 1949-51 (dated
July 15, 1942).
3H% of 1949-52 (dated
Dec. 15, 1934).
2M% of 1949-63 (dated
Dec. 15, 1936).
1950
1950
1M% Series A-1951
. . : . Feb. 1 Oct. 1,1951 Jan. 24
Exchanged for 1H% Series
B-1950 certificates maturing
Feb. 1,1950
1M% Series B-1951
Mar. 1 July 1,1951 Feb. 21
Exchanged for l } i % Series
C-1950 certificates maturing
Mar. 1, 1960.
1M% Series A-1955
Mar. 15 Mar. 15,1955 —do
Exchanged for 2% Treasury
bonds of 1950-52 (dated Oct.
19, 1942) called for redemption on Mar. 16, 1960.
1M% Series C-1951
Apr. 1 July 1,1951 Mar. 23
Exchanged for 1M% Series
D-1950 certificates maturing
Apr. 1, 1950.
1M% Series A-1955 (additional Mar. 15 Mar. 15,1955 .-.do
issue).
Exchanged for 1H% Series
A-1950 notes maturing Apr.
1, 1950.
1M% Series D-1951.
•. June 1 July 1,1951 May 25'
Exchanged for 1M% Series
E-1950 certificates maturing
June 1, 1950.
1M% Series E-1951
July 1 Aug. 1,1951 June 24
Exchanged for 1}4% Series
F-1950 certificates maturing
July 1, 1960.

Allotment
payment
date on or
before (or
on later
allotment)
1949
»2 Dec. 15.

1950
Feb. 1.

Mar. 1.
3 Mar. 15.

4 Apr. 1.

1 Apr. 1.

1 June 1.

1 July 1.

1 Interest due on the certificates surrendered was paid to the subscriber following acceptance of the
certificates.
2 Final interest due Dec. 16, 1949, on bonds surrendered was paid as follows: On coupon bonds, by
payment of Dec. 15, 1949, coupons; and on registered bonds, by checks drawn in accordance with
assignments on bonds surrendered.
3 Final interest due Mar. 15, 1950, on bonds surrendered was paid as follows: On coupon bonds, by
payment of Mar. 16, 1950, coupons; and on registered bonds, by checks drawn in accordance with
assignments on bonds surrendered.
* Accrued uiterest from Mar. 16 to Apr. 1, 1960 ($0.69293 per $1,000), on notes allotted was paid by
the subscriber when subscription was tendered. Ftual tuterest due Apr. 1, 1960, on notes surrendered
was paid on Apr. 1, 1950, coupons.




Treasury notes issued in exchange for matured or called securities, by Federal Reserve districts, fiscal year 1950
[In thousands of dollars]
IH% Series A-1954 notes exchanged f o r 2% Treasury
314% Treasury
bonds of 1949-51 bonds of 1949-52
i i i % Series
H-1949 certifi- (dated July 16,1942) I (dated Dec. 15,
called for re1934) called for
cates maturing
demption on
redemption on
Dec. 15, 1949
Dec. 15, 1949
Dec. 15, 1949

Federal Reserve district

Boston
J
New York
Philadelphia
Cleveland
Cinciimati
Pittsburgh
Richmond.
Baltimore..
Charlotte
Atlanta
Birmingham
Jacksonville
Nashville
New Orleans
Chicago..r
St. Louis
Little Rock
Louisville
Memphis
Minneapolis
Kansas City
Dallas
El Paso...
Houston
San Antonio
San Francisco
Los Angeles
Portland
Salt Lake City
Seattle..
Treasury

...
•

"..
.......

.

...s
.

.
.
...

Total allotments on exchanges
^
.
Maturing or called securities redeemed for cash or carried to
matured debt
:
Total matured or called securities




2 H % Treasury
bonds of. 1949-53
(dated Dec. 16,
1936) called for
redemption on
Dec. 16, 1949

Total

1M% Series
A-1951 notes
exchanged for
1M% Series
B-1950 certificates maturing
Feb. 1, 1950

24, 983
261,198
8,694
20,812
628
923
772
45
62
.477
86
1,136
1,033
880
79,100
2,483
28
5,366
61
9,328
19, 611
622
41
144
35
18, 595
8; 400
557
366
. 614
269

52, 217
872, 062
63, 322
94,501
5,859
21, 584
10,017
2,883
557
6,044
348
1,210
5,040
1,867
270,346
23,019
58
2,123
1,664
27,370
41,000
13,812
1,278
6,424
2,979
96,327
67, 713
667
318
8,422
6,984

180, 631
2,303, 761
133,656
157,879
26,383
65,861
32, 452
25, 727
5,754
20,752
3,692
6,723
9,883
13,604
820, 521
72,190
1,447
25, 295
4,935
114,611
153, 679
40, 953
2,258
18,974
15, 274
264,112
124, 247
9,246
1,838
17,194
21, 638

73,047
875, 465
58,428
52, 476
12, 695
12, 632
8,168
6,811
3,691
23, 739
7,603
7,590
8,362
14, 540
258, 673
39, 797
4,129
26,. 187
5,777
65,470
80, 539
36,912
2,582
12, 468
9,349
65, 545
97,110
4,666
2,484
48,908
3,724

2,028,016

467,316

1, 695, 893

4, 675,069

1,918,367

69, 599

24, 059

90, 217

219,184

2,097,615

491, 376

1, 786,110

4,894, 263

8,424
225,477
5,448
7,918
3,007
13,841
1,484
6,027
666
2,525
261
2,517
448
1,490
135, 845
7,680
154
3,062
1,004
8,799
13,162
6,471
211
2,464
677
16,131
6,457
463
27
994
1,820

94,907
946,024
66,192
34, 649
16,889
19, 513
20,180
16, 772
4,679
12, 706
2,997
1,860
3, 362
9,377
335, 230
39,008
1, 207
14, 765
2,316
69,114
79,906
20,048
728
10,942
11, 583
123,059
42, 677
7, 558
1,127
7,164
12, 575

483,844
35, 309
519,163

74,883
1, 993, 250

§

Treasury notes issued in exchange for matured or called securities, by Federal Reserve districts, fiscal year 1950—Continued
[In thousands of dollars]
1 3 ^ % Series A-1966 notes exchanged f o r 1 M % Series
B-1951 n o t e s
exchanged for
I K % Series
C-1950 certificates m a t u r i n g
M a r . 1, 1950

Federal Reserve district

Boston
New York
Philadelphia
Cleveland
Cinciimati
Pittsburgh
Richmond
Baltimore
Charlotte
Atlanta
Birmingham
•Jacksonville
Nashville
N e w Orleans
Chicago. 1
S t . Louis
L i t t l e Rock
Louisville
Memphis
Minneapolis
.
K a n s a s Ci t y
Dallas
E l Paso
Houston
San A n t o n i o
S a n Francisco
Los Angeles
Portland
Salt L a k e C i t y
Seattle
Treas ury

:....

.. .

- -1 - . .
.
:

..
.....
^

T o t a l a l l o t m e n t s on exchanges
M a t u r i n g or called securities r e d e e m e d for cash
« or carried to m a t u r e d d e b t

t a l i n a t u r e d or called
To


securities

2% Treasury
b o n d s of 1950-52
( d a t e d Oct. 19,
1942) called for
r e d e m p t i o n on
M a r . 15, 1950

1 M % Series
C-1961 n o t e s
exchanged for
1 M % Series
D-1950 certificates m a t u r i n g
A p r . 1, 1950

m % Series
A-1960 n o t e s
maturing
A p r . 1, 1950

1 M % Series
D-1951 n o t e s
exchanged'for
1 M % Series
E-1960 certificates m a t u r i n g
J u n e 1, 1960

1 M % Series
E-1961 n o t e s
exchanged for
1 M % Series
F-1960 certificates m a t u r i n g
J u l y 1, 1950

. 61, 488
1, 610, 227
52, 376
32,873
25, 769
27,883
24,957
13, 822
4, 574
23, 670
10,899
6,150
7,448
28,752
304, 621
52,809
2,921
28,043
6,805
81,892
87, 245
29, 674
2,023
23,710
10, 963
70,871
87, 554
4,798
3,042
5,481
17, 790

59,738
1,077, 435
66,106
31, 270
13,888
16, 903
21,162
11,812
9.409
7,058
3,688
1,787
6,387
9,142
231.834
33, 282
912
9,683
830
54,693
41, 053
13, 657
1,130
10,584
3,421
67,303
38,960
4,880
2,338
3,342
- 8,185

130,045
1, 647, 279
76,433
148,017
28,396
28,138
19, 240
23,881
3,801
22,802
4,537
9,928
5,389
19,815
601,376
82, 2676,010
39,843
6,976
96, 275
166,061
25,848
4,351
16,138
29,084
148, 690
88,173
10, 736
3,635
17,123
4,021

189, 783
2, 724, 714
142, 639
179,287
42, 284
45,041
40,402
35,693
13, 210
29,860
8,225
11,715
10, 776
28, 957
833, 210
115, 549
6,922
49,426
7,805
150,968
197,114
39, 505
5,481
26, 722
32,505
215,993
127,133
16, 616
5. 973
20, 465
12, 206

21,854
366, 050
23,896
15,042
10, 367
9,631
5,617
7,768
18,114
10, 985
3,695
2,954
6,208
8,412
124. 576
22,198
3,034
17, 643
4,300
41, 863
46, 485
11, 343
1,006
14, 864
5,292
33,191
29, 846
2,035
2, 735
2,030
13, 352

132, 413
2, 811, 778
106, 777
102, 616
29, 000
35,996
19,810
45,1.30
24, 731
40,834
10, 641
21,146
13, 47.4
23, 267
594, 651
79, 919
11.026
32, 678
17,357
80,343
158, 927
61,254
6.543
29,319
24, 288
164,633
107, 723
8,549
7,951
18, 644
6,325

88,879
, 566,801
132,880
82, 220
26, 440
34, 436
18, 065
8,522
28, 741
35, 894
10,857
9,419
8,935
25,177
557,145
78, 468
6,033
27, 933
17, 412
89, 008
154, 943
43. 661
3,531
27, 967
14, 318
169, 481
67, 545
4,998
4,783
12, 733
3, 927

2, 741,130

1,860,772

3, 504,307

5, 365, 079

886, 286

4, 817. 642

5. 351,142

180, 406

101,915

91, 690

193, 605

76, 258

201,146

2, 921, 536;'

1, 962, 687

6, 658, 684

962, 544

5, 018, 788

3, 596,997

249,883
5, 601,025

CO

cn
O

d
o

Q

SI

o

S3

>
Ul

JEXHIBITS

147

Exhibit 5.—Call, August 12, 1949, for redemption on D e c e m b e r 15,1949, of t h r e e
issues of Treasury bonds (press release August 12, 1949)
T h e Secretary.of t h e Treasury announced t o d a y t h a t the bonds of three outstanding issues which m a y be redeemed a t t h e option of the United States on
December 15, 1949, are called for redemption on t h a t date. These issues are t h e
2.percent Treasury bonds of 1949-51, dated July 15, 1942, due December 15,
1951; SYs percent Treasury bonds of 1949-52, dated December 15, 1934, due
December 15, 1952; a n d 2}^ percent Treasury bonds of 1949-53, dated December
15, 1936, due December 15, 1953. There are now outstanding $2,097,615,100 of
t h e 2 percent bonds, $491,375,100 of the 3% percent bonds, and $1,786,110,450 of
t h e 2^2 percent bonds.
T h e texts of t h e formal notices of call are as follows:
TWO PERCENT TREASURY BONDS OF 1949-51 (DATED JULY 15, 1942)

To Holders of 2 Percent Treasury^Bonds of 1949-51 {Dated J u l y 15, 1942), a n d
Others Concerned: .
1. Public notice is hereby given t h a t all outstanding 2 percent Treasury bonds
of 1949-51, dated July 15, 1942, due December 15, 1951, are hereby called for
redemption on December 15, 1949, on which date interest on such bonds will
cease.
2. Holders of these bonds may, in advance of the redemption date, be offered
the privilege of exchanging all or any p a r t of their called bonds for other interestbearing obligations of t h e United States, in which event public notice will hereafter be given a n d an official circular governing the exchange offering will be
issued.
3. Full information regarding the presentation and surrender of the bonds for
cash redemption under this call will be found in D e p a r t m e n t Circular No. 666,
d a t e d July 21, 1941.
JOHN W .

SNYDER,

Secretary of the Treasury.
THREE A N D O N E - E I G H T H PERCENT TREASURY BONDS OF 1949-52
(DATED DECEMBER 15, 1934)

To Holders of S)i Percent Treasury Bonds of 1949-52 {Dated December 15, 1934),
and Others Concerned:
1. Public notice is hereby given t h a t all outstanding 3)^ percent Treasury
bonds of 1949-52, dated December 15, 1934, due December 15, 1952, are hereby
called for redemption on December 15, 1949, on which date interest pn such
bonds will cease.
,
2. Holders of these bonds may, in advance of the redemption date, be offered
t h e privilege of exchanging all or any p a r t of their called bonds for other interestbearing obligations of t h e United States, in which event public notice will hereafter be given a n d an official circular governing t h e exchange offering will be
issued.
3. Full information regarding t h e presentation and surrender of t h e bonds,
for cash redemption under this call will be found in D e p a r t m e n t Circular No. 666,
dated July 21, 1941.




J O H N W . SNYDER,

Secretary of the Treasury.

148

1950 REPORT OF THE SEC'EETARY OF THE! TREASiURY
TWO A N D O N E - H A L F PERCENT TREASURY BONDS OF 1949-53
(DATED'DECEMBER 16, 1936)

To Holders of 2yi Percent Treasury Bonds of 1949-53 {Dated December 15, 1936),
and Others Concerned:
1. Public notice is hereby given t h a t all outstanding 2/2 percent Treasury bonds
of 1949-53, dated December 15, 1936, due December 15, 1953, are hereby called
for redemption on December 15, 1949, on which date interest on such bonds will
cease.
*
2. Holders of these bonds may, in advance of t h e redemption date, be offered
t h e privilege of exchanging all or any p a r t of their called bonds for other interestbearing obligations of t h e United States, in which event public notice will hereafter be given a n d an official circular governing t h e exchange offering will be
issued.
3. Full information regarding t h e presentation and surrender of t h e bonds for
cash redemption under this call will be found in D e p a r t m e n t Circular No. 666,
dated July 21, 1941.
JOHN W . SNYDER,

Secretary of the Treasury.
Exhibit 6.—Call, November 14, 1949, for redemption on IVIarch 15, 1950, of 2
percent T r e a s u r y bonds of 1950-52, dated October 19, 1942 (press release
N o v e m b e r 14, 1949)
T h e Secretary of t h e Treasury announced t o d a y t h a t all outstanding 2 percent
Treasury bonds of 1950-52, dated October 19, 1942, due IVLarch 15, 1952, are
called for redemption on IVIarch 15, 1950. There are now outstanding $1,962,687,300 of these bonds.
T h e text of t h e formal notice of call is as follows:
To Holders of 2 Percent Treasury Bonds of 1950-52 {Dated October 19, 1942),
and Others Concerned:
1. Public notice is hereby given t h a t all outstanding 2 percent Treasury bonds
of 1950-52, dated October 19, 1942, due IVEarch 15, 1952, are hereby called for
redemption on IVIarch 15, 1950, on which date interest on such bonds will cease.
. 2. Holders of these bonds may, in advance of t h e redemption date, be offered
the privilege of exchanging all or any p a r t of their called bonds for other interestbearing obligations of t h e United States, in which event public notice will hereafter be given a n d an official circular governing t h e exchange offering will be
issued.
3. Full information regarding t h e presentation and surrender of t h e bonds for
cash redemption under this call will be found in D e p a r t m e n t Circular No. 666,
dated July 21, 1941.
J O H N W . SNYDER,

Secretary of the Treasury.
TREASURY BILLS

Exhibit 7.—Inviting t e n d e r s for Treasury bills dated July 7, 1949 (press release
J u n e 28, 1949)
T h e Secretary of t h e Treasury, by this public notice, invites tenders for
$900,000,000, or thereabouts, of 91-day Treasury bills, for cash and in exchange
for Treasury bills m a t u r i n g July 7, 1949, to be issued on a discount basis under
competitive a n d noncompetitive bidding as hereinafter provided. T h e bills of
this series will be dated July 7; 1949, and will m a t u r e October 6, 1949, when t h e




EXHIBITS

149

face a m o u n t will be payable without interest. T h e y will be issued in bearer
form only, and in denominations of $1,000, $5,000, $10,000, $100,000, $500,000,
and $1,000,000 ( m a t u r i t y value).
Tenders will be received a t Federal Reserve Banks and branches up to t h e
closing hour, two o'clock p . m.. E a s t e r n Daylight Saving time, Friday, July 1,
1949. Tenders will not be received a t t h e Treasury D e p a r t m e n t , Washington.
E a c h tender m u s t be for an even multiple of $1,000, and in t h e case of competitive
tenders t h e price offered must be expressed on t h e basis of 100, with not more
t h a n t h r e e decimals, e. g., 99.925. Fractions m a y not be used. I t is urged t h a t
tenders be made on t h e printed forms and forwarded in t h e special envelopes
which will be supplied by Federal Reserve Banks or branches on application
therefor.
Tenders will be received without deposit from incorporated banks and t r u s t
companies and from responsible and recognized dealers in investment securities.
Tenders from others m u s t be accompanied by p a y m e n t of 2 percent of t h e face
a m o u n t of Treasury bills applied for, unless t h e tenders are accompanied by an
express g u a r a n t y of p a y m e n t by an incorporated b a n k or t r u s t Company.
. Immediately after t h e closing hour, tenders will be opened a t t h e Federal
Reserve Banks and branches, following which public announcement will be made
by t h e Secretary of t h e Treasury of the a m o u n t and price range of accepted bids..
Those submitting tenders will be advised of t h e acceptance or rejection thereof.
T h e Secretary of the Treasury expressly reserves t h e right to accept or reject any
or all tenders, in whole or in p a r t , and his action in any such respect shall be
final.
Subject to these reservations, noncompetitive tenders for $200,000 or
less without stated price from any one bidder will be accepted in full a t t h e
average price (in three decimals) of accepted competitive bids. Settlement for
accepted tenders in accordance with t h e bids m u s t be made or completed a t t h e
Federal Reserve Bank on July 7, 1949, in cash or other immediately available
funds or in a like face a m o u n t of Treasury bills m a t u r i n g July 7, 1949. Cash
and exchange tenders will receive equal t r e a t m e n t . Cash adjustments will be
made for differences between the par value of maturing bills accepted in exchange
and t h e issue price of t h e new bills.
T h e income derived from Treasury bills, whether interest or gain from t h e sale
or other disposition of t h e bills, shall not have any exemption, as such, a n d loss
from t h e sale or other disposition of Treasury bills shall not have any special
t r e a t m e n t , as such, under t h e I n t e r n a l Revenue Code, or laws a m e n d a t o r y or
supplementary thereto. T h e bills shall be subject to .estate, inheritance, gift or
other excise taxes, whether Federal or State, b u t shall be exempt from all taxation
now or hereafter imposed on t h e principal or interest thereof by any State, or
any of t h e possessions of t h e United States, or by a n y local taxing a u t h o r i t y .
For purposes of taxation t h e a m o u n t of discount a t which Treasury bills are
originally sold by t h e United States shall be considered to be interest. Under
sections 42 and 117 (a) (1) of t h e I n t e r n a l Revenue Code, as amended by section
115 of t h e Revenue Act of 1941, t h e a m o u n t of discount a t which bills issued
hereunder are sold shall not be considered to accrue until such bills shall be sold,
redeemed or otherwise disposed of, and such bills are excluded from consideration
as capital assets. Accordingly, t h e owner of Treasury bills (other t h a n life
insurance companies) issued hereunder need include in his income t a x return
only t h e differencie between t h e price paid for such bills, whether on original
issue or on subsequent purchase, and t h e a m o u n t actually received either upon
sale or redemption a t m a t u r i t y during t h e taxable year for which t h e r e t u r n is
made, as ordinary gain or loss.
Treasury Department-Circular No. 418, as amended, and this notice, prescribe
t h e t e r m s of t h e Treasury bills and govern t h e conditions of their issue. Copies
of t h e circular m a y be obtained from any Federal Reserve Bank or branch.




150

1950 REPORT OF THE SECRETARY OF THEi TREASURY

Exhibit 8.—Acceptance of tenders for Treasury bills dated July 7, 1949
(press release July 2, 1949)
The Secretary of the Treasury announced last evening that the tenders for
$900,000,000, or thereabouts, of 91-day Treasury bills to be dated July 7 and to
mature October 6, 1949, which were offered 'on June 28, were opened at the
Federal Reserve Banks on July 1.
•
^
The details of this issue are as follows:
Total applied for. _ $1,696,622,000.
Total accepted
$900,537,000 (includes $56,520,000 entered on a noncompetitive basis and accepted in full at the average
price shown below).
Average price
99.734 + . Equivalent rate of discount approxiniately
1.052% per annum.
Range of accepted competitive bids:
High__.
99.740. Equivalent rate of discount approximately
1.029% per annum.
Low
99.732, Equivalent rate of discount approximately
1.060% per annum.
(78 percent of the amount bid for at the low price was accepted.)
Federal Reserve district
Boston
New York
Philadelphia..
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis..
Kansas City..
Dallas
San Francisco.
" Total....
,

Total applied
for

Total accepted

$11, 214, 000
1, 354,209,000
29, 679,000
28, 140,000
2, 820,000
7, 683, 000
147, 536, 000
22, 893,000
4, 530,000
20, 862,000
13, 807,000
53, 249,000

$5,614,000
747, 670, 000
13, 679,000
12, 700,000
1,820,000
2,383,000
49, 712,000
.10,165,000
3, 280,000
5,462,000
4, 257, 000
43,796j 000

1, 696, 622,000

900, 637,000

Exhibit 9.—Summary of Treasury bill information contained in press releases
Press releases pertaining to Treasury bill issues during the fiscal year 1950
were similar in form to exhibits 7 and 8, and are, therefore, not reproduced here.
The essential details regarding each issue are summarized in the following table.




Summary of inf ormation contained in press releases ^ pertaining to Treasury bills issued during thefiscal year 1950
Prices and rates

A m o u n t s (in t h o u s a n d s )
Total b i d s accepted

T e n d e r s accepted
b a t e of
issue

1949
July

Date
of maturity

Days
to maturity.

Total
applied
for 2

C o m p e t i t i v e b i d s accepted
Low

High
T o t a l accepted 2

On competitive
basis 2

On noncompetitive
basis 2 3

F o r cash

I n exchange

Average
price p e r
hundred

Equivalent
average
r a t e < (percent)

Price per
hundred

Equivalent
r a t e ^ (perceiit)

Price per
hundred

Equivalent
r a t e * (percent)

1949

7
14
21
28
Aug. 4
11
18
25
Sept. 1
8
16
22
29

6
13
20
27
Nov. 3
10
17
25
Dec. 1
8
15
22
29

Oct.

Jan.

Oct.

91
91
91
91
91
91
91
92
91
91
91
91
91

$1, 696, 642
1, 799, 601
1, 626, 606
1, 428,487 •
1, 390, 980
1, 656, 368
1, 586,093
1, 625,308
1, 620,353
1, 579, 940
1, 472, 268
1, 550,059
1, 462, 344

$900, 669
900, 714
901, 722
900,467
1, 000,032
1, 001, 642
1,000, 784
1, 000, 510
1, 001, 678
1,000,238
904, 782
900, 828
901, 592

$844,019
795, 241
816, 675
834,140
923, 621
906, 925
898, 785
916, 440
921, 525
924, 676
800, 746
810,090
832, 457

$56, 540
105, 473
85, 047
66, 327
76, 511
94, 717
101, 999
84,070
80,063
75, 663
104, 036
90, 738
69,136

$608, 666
660,154
662,147
678, 207
737, 258
978, 945
982,884
984, 250
636, 342
657, 743
671, 367
482, 516
515, 926

$291,893
240, 560
239, 576
222, 260
262, 774
22, 697
17,900
16, 260
365, 236
342,495
233,415
418,312
386, 666

99. 734
99. 767
99. 766
99. 743
99. 739
99. 746
99. 743
99: 737
99. 734
99. 733
99. 732
99. 732
99.728

91
91
91
91
91
91
91
90
91
91
91
91
91

1, 699, 535
1,706,766
1, 777, 593
1, 619, 078
1, 608, 224
1, 525,190
1, 643, 090
1, 656,847
1, 587, 853
1, 505, 880
1,486. 313
1, 624, 214
1, 482, 259

900,178
900, 776
903, 256
900, 603
1,000, 827
1,001,836
1, 000, 530
1,003, 211
1,000, 772
1, 002,121
903, 483
900, 608
900, 943

• 829,155
793, 616
804, 764
816, 268
915, 505
904, 568
902,005
905,121
917, 222
916, 988
805, 411
809, 768
834. 090

71, 023
107, 260
98, 502
84, 335
85. 322
97, 278
98, 525
98, 090
83, 550
85,133
98, 072
90, 840
66,863

496, 639
638, 886
820, 794
667, 516
697, 504
686, 275
669, 659
977, 277
766,108
641, 630
601, 368
468, 608
530, 248

403, 539
261, 890
. 82,462
233,087
403, 323
315, 561
330,871
25, 934
244, 664
360,491
302,115
432,000
370, 695

99. 732
99. 736
99. 740
99. 738
99. 731
99. 728
99. 733
99. 737
99. 720
99. 718
99. 718
99. 726
99. 725

•

1.052
.923
. 927
1.017
1.032
1.007
1.017
1.031
1.054
1. 056
1.069
L061
1.076

99. 740
99. 785
99. 800
99. 775
99. 751
99. 751
5 99. 752
6 99. 760
99. 747
99. 746
99. 746
99. 746
99. 742

1.069
1.049
1.027
1.036
L063
L074
1.056
1.052
1.108
1.116
1.116
1. 087
1.087

99. 745
99. 750
99. 744
99. 746
99. 746
99. 755
99. 742
7 99. 750
99. 750
.8 99.735
9 99. 735
99. 736
99. 740

1.029
.851
.791
.890
.985
.985
.981
.978
1.001
1.005
LOOS
L005
1.021

99. 732
99. 763
99. 763
99. 739
99. 736
• 99. 743
99. 740
99.734
99. 732
99. 732
99. 732
99. 730
99. 726

1.060
.938
.938
1.033
1.048
L017
1. 029
1. 041
LOOO
1.060
1.060
1.068
1.084

g

1960
6
13
20
27
Nov. 3
10
17
26
Dec. 1
8
15
22
29

5
12
19
26
Feb. 2
9
16
23
Mar. 2
9
16
23
30

•

1.009
.989
L013
1.005
1.006
.969
1.021
1.000
.989
1.048
L048
1.048
1.029

99. 731
99. 733
99. 739
99. 737
99. 729
99. 726
99. 732
99. 734
99. 717
99. 717
99. 717
.99.723
99. 724

L064
L066
L033
L040
L072
L084
1. 060
L064
1.120
1.120
1.120
L096
1. 092

Footnotes at end of table.




cn

S u m m a r y of information contained i n press releases ^ pertaining to Treasury bills issued during the fiscal year 1950 — C o n t i n u e d
A m o u n t s (irI t h o u s a n d s )

Prices a n d rates

T e n d e r s accepted
D a t e of
issue

Date
of maturity

Days
t o ma- .
turity

Total
apphed
for 2

Total b i d s accepted

T o t a l accepted 2

F o r cash

I n exchange

Average
price p e r
hundred

Equivalent
average
r a t e < (percent)

CR

C o m p e t i t i v e b i d s accepted
High

On noncompetitive
basis 2 3

On competitive
basis 2

=

CO

Low

o
Price per
hundred

Equivalent
r a t e ^ (percent)

Price per
hundred

Equivalent
r a t e < (percent)

o
pd

1950
Jan.

Feb.

Mar.

Apr.

May

June

1950

5 Apr.
12
19
26
2 May
9
16
23
2 June
9
16
23
30
6 July
13
20
27
4 Aug.
11
18
25
1
8 Sept.
15
22
29

6
13
20
27
4
11
18
25
1
8
16
22
29
6
13
20
27
3
10
17
24
31
7
14
21
28

91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91
91

$1, 782,369
$904,986
1,646,715
906, 762
1, 683,756
903,026
1, 614,132
902.846
1, 686, 669
1,002, 780
1, 637, 051
1,004, 410
1, 551, 479
1, 003, 684
1, 554, 884
1,000,930
1, 664, 390
1,000,048
1, 625, 461
1,001,102
1, 641,473
902. 542
1, 478, 007
900, 473
1, 423, 792
901, 943
1, 428, 598
901, 759
1, 368,352
1,001, 609
1, 658, 682
1,001, 640
1, 549, 288
1,000,032
1, 700,145
1,102. 229
1, 739, 542
1,102, 803
1, 784,438
1,103, 862
1, 638, 046
1,102, 992
1, 714, 684
1,103, 908
1, 603, 624
1,102, 096
1, 613,036 . 1,003,875
1,824,473
1, 002,829
1, 730, 737
1, 003, 464

$828,308
787,513
788, 229
796, 599
908,119
900,869
918,108
901, 737
912, 464
910,183
802,846
805, 950
820, 736
824, 909
895, 200
891,988
894, 466
1,003,416
985,912
1,001,893
1,007, 684
1,014, 776
1,016,451
904, 503
914,080
921,807

'

$76,677
118, 249
114,797
106, 247
94, 661
103, 561
85,476
99,193
87, 594
90, 919
99, 696
94, 523
81, 207
76,860
106,409
109, 562
105, 566
98,814
116,891
101.969
95,308
89,132
86, 645
99, 372
88,749
81, 647

$784, 783
876,006
615, 530
630,800
674, 040
784, 378
568, 229
721, 662
636,. 508
606, 785
683,152
611, 232
566,190
775,350
869,046
682, 376
666, 518
716, 721
705, 274
626. 458
. 804,916
662, 906
742, 726
753.733
606, 677
706,781

NOTE.—Amount of matured issues will be found in table 22.
1 Press release inviting-tenders for Treasury bill issue is dated 6 days before date
of issue. Press release announcing acceptance of tenders is dated 2 days before date
of issue. Closing date on which tenders for issue are accepted is 3 days before date
of issue.
2 Figures, at maturity value, are final and differ in most cases from those shown in
press releases aimouncing details of particular issue.

»Noncompetitive tenders for $200,000 or less without stated price from any one
bidder were accepted in full at average price of accepted competitive bids.
http://fraser.stlouisfed.org/

Federal Reserve Bank of St. Louis

$120,202
29, 766
287, 496
272,046
328, 740
220,032
436,355
279, 268
464, 640
394,317
319, 390
389, 241
336, 753
126, 409
142, 563
319,164
334, 514
386,508
397, 529
478,404
298,076
441,002
359,370
250,142
396,162
296, 673

99. 727
99. 728
99. 722
99. 721
99. 717
99. 717
99. 714
99. 714
99. 713
99. 712
99. 714
99. 712
99. 711
99. 710
99. 707
99. 706
99. 706
99. 705
99.706
99. 705
99. 705
99. 706
99. 702
99. 703
99. 703
99. 704

1.081
1.076
1.101
1.103
1.119
1.119
1.131
1.132
1.137
1.139
1.131
1.138
1.145
1.148
L160
1.162
1.166
1.166
1.166
1.165
1.167
1.168
1.179
1.176
1.174
1.172

99.733
99. 733
99. 736
99. 735
99. 736
99. 730
99. 730
99. 722
99. 720
99. 720
99. 717
99. 717
99. 716
99. 715
99. 716
99. 712
99. 713
99. 710
99. 715
99. 710
99. 709
99. 709
99. 709
99. 706
99. 709
99. 707

* Bank discount basis.
« Except $1,075,000 at 99.775.
6 Except $100,000 at 99.770 and $300,000 at 99.764.
7 Except $700,000 at 99.766.
8 Except $200,000 at 99.750.
9 Except $100,000 at 99.760.

1. 056
1.056
1.048
L048
1.048
L068
1.068
1.100
L108
1.108
1.120
1.120
1.124
1.127
1.127
L139
1.135
1.147
L127
1.147
L151
1.151
1.151
1.163
1.161
1.159

99. 726
99. 726
99. 720
99.720
99. 716
99. 716
99. 713
99. 712
99. 711
99. 710
. 99. 713
99. 710
99. 709
99. 709
99. 705
99. 705
99. 704
99. 704
99. 704
99. 704
99. 704
99. 703
99. 700
99.701
99. 702
99. 703

1.084
1.084
1.108
1.108
1.124
1.124
1.135
1.139
1.143
1.147
1.135
1.147
1.151
1.151
1.167
1.167
1.171
1.171
1.171
1.171
1.171
1.175
1.187
1.183
1.179
1.176

O
h9

ffi
ut
H:
Q
td
fei.
td
O

EXHIBITS

153

Exhibit 10.—Fifth a m e n d m e n t , July 25, 1950, to D e p a r t m e n t Circular No. 418,
relating to the issue and sale of Treasury bills
TREASURY DEPARTMENT,

Washington, J u l y 25, 1950.
P a r a g r a p h 8 of D e p a r t m e n t Circular N o . 418, as amended, dated F e b r u a r y 28,
1941, is hereby amended to read as follows (31 C R F 309):
" S E C . 309.8. Tenders should be submitted on t h e printed forms and forwarded
in t h e special envelopes which will be supplied on application t o a n y Federal
Reserve Bank, or branch. If a special envelope is not available, t h e inscription
^Tender for Treasury Bills' should be placed on t h e envelope used. T h e instructions of t h e Federal Reserve Banks with respect t o t h e submission of tenders
should be observed. Others t h a n banking institutions will not be permitted t o
submit tenders except for their own account. Tenders from incorporated b a n k s
and t r u s t companies, a n d from responsible a n d recognized dealers in investment
securities will be received without deposit. Tenders from all others m u s t be
accompanied by a p a y m e n t of such percent of t h e face a m o u n t of t h e Treasury
bills applied for as t h e Secretary of t h e Treasury-may from time t o time prescribe;
Provided, however, T h a t such deposit will not be required if t h e tender is accompanied by an express g u a r a n t y of p a y m e n t in full b y an incorporated b a n k or
t r u s t company. Forfeiture of t h e prescribed p a y m e n t m a y be declared by t h e
Secretary of t h e Treasury, if payraent is not completed, in t h e case of accepted
tenders, on t h e prescribed d a t e . ' '
J O H N W . SNYDER,

Secretary of the Treasury.
TREASURY SAVINGS NOTES, DEPOSITARY BONDS, AND
UNITED STATES SAVINGS BONDS

Exhibit 11.—First a m e n d m e n t , August 1 1 , 1949, to D e p a r t m e n t Circular No. 833,
relating to payment of accrued interest in purchasing Treasury savings notes
of Series D ,
TREASURY DEPARTMENT,

Washington, August 11, 1949.
P A Y M E N T OF A C C K U E D I N T E R E S T IN P U R C H A S I N G N O T E S

1. T h e first p a r a g r a p h of section I is amended t o read as follows:
" 1 . Offering of notes.—The Secretary of t h e Treasury, p u r s u a n t to t h e a u t h o r i t y
of t h e Second Liberty Bond Act, as amended, offers for sale t o t h e people of t h e
United States, a t p a r a n d accrued interest from t h e first d a y of t h e m o n t h in
which purchased t o t h e day, inclusive, on which full p a y m e n t is made in cash or
other immediately available funds, a n issue of notes of t h e United States,
designated Treasury savings notes. Series D , which notes, if inscribed in t h e
n a m e of a Federal taxpayer, will be receivable as hereinafter provided a t p a r
a n d accrued interest in p a y m e n t of income, estate and gift taxes imposed by t h e
I n t e r n a l Revenue Code, or laws a m e n d a t o r y or supplementary t h e r e t o . "
2. T h e first p a r a g r a p h of section I I is amended t o read as follows:
" 1 . General:—Treasury savings notes. Series D , will in each instance be dated
as of t h e first d a y of t h e m o n t h in which p a y m e n t , a t p a r a n d accrued interest,
if any, is received a n d credited by an agent authorized t o issue t h e notes. They
will m a t u r e three years from t h a t date, a n d m a y not be called b y t h e Secretary
of t h e Treasury for redemption before m a t u r i t y . All notes issued during a n y
one calendar year shall constitute a separate series indicated b y t h e letter *D'
followed by year of m a t u r i t y . At t h e time of issue t h e authorized issuing agent"
will inscribe on t h e face of each note t h e name a n d address of t h e owner, will
enter t h e date as of which t h e note is issued and will imprint his dating s t a m p
(with current d a t e ) . T h e notes will be issued in denominations of $100, $500,
$1,000, $5,000, $10,000, $100,000, $500,000 and $1,000,000. Exchange of authorized denominations from higher t o lower, b u t n o t from lower t o higher, m a y be
arranged a t t h e office of t h e agent t h a t issued t h e n o t e . "
3. T h e second p a r a g r a p h of section I I I is amended to read as follows:
" 2 . Applications and payment.—Applications-will be received b y t h e Federal
Reserve Banks a n d branches, a n d b y t h e Treasurer of t h e United States, Washington, D . C. Banking institutions a n d security dealers generally m a y submit
applications for account of customers, b u t only t h e Federal Reserve Banks a n d




154

19 50 REPORT OF T H E iSECRETARY OF THEI TREAiSURY

their b r a n c h e s . a n d t h e Treasury D e p a r t m e n t are authorized to act as official
agencies. . T h e use of an official application form is desirable b u t not necessary.
Appropriate forms m a y be obtained on application to any Federal Reserve Bank
or branch, or t h e Treasurer of t h e United States, Washington, D . C. Every
application m u s t be accompanied by p a y m e n t in full, at p a r and accrued interest,
if any. The a m o u n t of accrued interest payable by t h e purchaser will be computed
a t the r a t e a t which interest accrues on t h e notes ($0.80 per m o n t h per $1,000
p a r amount) for the actual number of days in t h e m o n t h in which t h e purchase
is made. One day's accrued interest in a 31-day m o n t h is $0.02581 per $1,000,
in a 30-day m o n t h $0.02667, in a 29-day m o n t h $0.02759 and in a 28-day month
$0.02857. Any form of exchange, including personal checks, will be accepted
subject to collection, a n d should be drawn to t h e order of t h e Federal Reserve
Bank or of t h e Treasurer of t h e United States, as payee, as t h e case m a y be.
T h e date funds are made available on collection of exchange will govern the issue
date of t h e notes. Any depositary, qualified p u r s u a n t to the provisions of Treasury
D e p a r t m e n t Circular No. 92, Revised, as amended, will be permitted t o make
p a y m e n t by credit for notes applied for on behalf of itself or its customers- up to
any a m o u n t for which it shall be qualified in excess of existing deposits."
JOHN W .

SNYDER,

Secretary of the Treasury.
Exhibit 12.—First a m e n d m e n t , November 10, 1949, to the First Supplement to
D e p a r t m e n t Circular No. 660, terminating the issue of 2 percent depositary
bonds. Second Series
TREASURY

DEPARTMENT,

Washington, November 10, 1949.
T h e issue of 2 percent depositary bonds. Second Series, under t h e First Supplement, dated J u n e 29, 1943, to D e p a r t m e n t Circular No. 660, is hereby terminated as of t h e close of business J a n u a r y 1, 1950.
All 2 percent depositary bonds. Second Series, outstanding on F e b r u a r y 28,
1950, will be redeemed as of t h e close of business on t h a t date. . Notice of redemption will be given to t h e holders of such bonds as provided by t h e terms
thereof.
JOHN W .

SNYDER,

Secretary of the Treasury.
Exhibil 13.—Sixth a m e n d m e n t , J a n u a r y 4, 1950, to D e p a r t m e n t Circular No. 530,
Sixth Revision, prescribing * regulations governing United States savings
bonds
TREASURY

DEPARTMENT,

Washington, J a n u a r y 4, 1950.
To Owners of United States Savings Bonds and Others Concerned:
P u r s u a n t to section 22 (a) of t h e Second Liberty Bond Act, as amended (55
Stat. 7, 31 U. S. C. 757c), section 315.9 (d) (4) and section 315.23 (c) of D e p a r t ment Circular No. 530, Sixth Revision, dated F e b r u a r y 13, 1945 (31 C F R 1945
Supp. 315), as amended, are further amended, effective J a n u a r y 1, 1950, to read
as follows:
' ' S E C . 315.9 (d) (4). W i t h respect to bonds of Series E, those purchased with
t h e proceeds of m a t u r e d bonds of Series A, Series C-1938, Series D-1939 and
Series D-1940, where such m a t u r e d bonds are presented by an individual (natural
person in his own right) owner or coowner for t h a t purpose and the Series E
bonds are registered in his n a m e in any form of registration authorized for t h a t
series.
" S E C . 315.23 (c). Series G—Redemption at par before maturity.—A bond of
Series G (but not of Series F) will be redeemed at par before m a t u r i t y , in whole
or in p a r t , in a m o u n t s corresponding with authorized denominations, not less
t h a n six m o n t h s from t h e issue date, (1) upon t h e d e a t h on or after J a n u a r y 1,
1950, of an owner or coowner, if a natural person, or (2) in t h e case of bonds held
by a trustee or other fiduciary estate upon t h e termination of t h e t r u s t or other
fiduciary estate by reason of t h e death on or after J a n u a r y 1, 1950, of any person,
except t h a t if t h e t r u s t or fiduciary estate is t e r m i n a t e d only in part, redemption
a t p a r will be m a d e to t h e extent of not more t h a n t h e pro r a t a portion of t h e
t r u s t pr .fiduciary estate so t e r m i n a t e d . E e d e m p t i o n a t par will be made a t t h e




ExtiiBits

,

166

6ption of t h e person entitled to t h e bonds a n d such option m a y be shown by a
signed request for p a y m e n t or by express written notice {in either case specifying
that.redemption at par is desired); p a y m e n t will be made as of t h e first day of the
first m o n t h following by a t least one full calendar m o n t h t h e date of receipt of
t h e bonds or t h e request by t h e Treasury D e p a r t m e n t , Division of Loans and
Currency, Merchandise M a r t , Chicago 54, Illinois, or a Federal Reserve Bank.
If desired a n d so stated in t h e request for p a y m e n t or notice of intention, p a y m e n t
m a y be postponed to t h e second interest date following t h e date of d e a t h ; otherwise, p a y m e n t will b e made in regular course. A d e a t h certificate or other
competent proof of d e a t h must accompany t h e bonds or t h e notice a n d if separate
notice is given t h e bonds must be surrendered to t h e same agency to which t h e
notice is given, not less t h a n t w e n t y days before t h e effective redemption d a t e .
I n no case of redemption at par before maturity will interest be paid beyond the
second interest payment date following the date of death. I n cases in which t h e
death of t h e owner, coowner, or person whose death t e r m i n a t e d a fiduciary estate,
took place before J a n u a r y 1, 1950, redemption a t par will be governed by t h e
regulations in force a t t h e date of d e a t h . "
J O H N W . SNYDER,

Secretary of the Treasury.
Exhibit 14.—Fourth supplement, M a r c h 15, 1950, to Department Circular No.
653, Second Revision, discontinuing sales of the $10 denomination of Series E
savings b o n d s
TREASURY DEPARTMENT,

Washington, March 15, 1950.
T h e first supplement to D e p a r t m e n t Circular No. 653, Second Revision, which
supplement is dated J u n e 7, 1944 (31 C. F . R. 316.12), is hereby withdrawn
effective a t t h e close of business March 31, 1950, a n d thereafter no sales of United
States savings bonds of Series E of t h e denomination of $10.will be made.
•

E . H. FOLEY, Jr.,

Acting Secretary of the Treasufy.
O B L I G A T I O N S G U A R A N T E E D BY T H E U N I T E D S T A T E S
Exhibit 15.—Partial redemption, before maturity, of 2 % percent housing insurance
fund d e b e n t u r e s . Series D (sixth call)
[Department Circular No. 851. Public Debt]
TREASURY. DEPARTMENT,

Washington, September 27, 1949.
To Holders of 2}i Percent Housing hisurance Fund Debentures, Series D :
I.

N O T I C E OF S I X T H CALL FOR PARTIAL R E D E M P T I O N , B E F O R E M A T U R I T Y , OF 2^^
PERCENT HOUSING INSURANCE FUND DEBENTURES, SERIES D

T h e Federal Housing Commissioner, with t h e approval of t h e Secretary of the
Treasury, has issued t h e following notice of call for partial redemption a n d offer
to purchase with respect to 2Jl percent housing insurance fund debentures. Series
D:
" P u r s u a n t t o t h e autljority conferred by t h e National Housing Act (48 Stat.
1246; U. S. C , title 12, sec. 1701 et seq.) as amended, public notice is hereby
given t h a t 2Ji percent housing insurance fund debentures, Series D , of t h e denominations a n d serial numbers designated below, are hereby called for redemption,
a t p a r a n d accrued interest, on Januar3^ 1, 1950, on which date interest on such
debentures shall cease:
• 2% percent housing insurance fund debentures, Series D
. . .
Denomination:

$50
$100
$500
$1,000___
$5,000
$10,000




Serial numbers
(all numbers inclusive)

_.

.

6 to 7
29 to 31
:.-- 6 to 7
28 to 29
:7
-- 1,065 to 1,113

166

1 9 5 0 REPORT OF T H E SECRETARY OF THEI TREAiSitJtlY

" T h e debentures first issued as determined by t h e serial numbers were selected
for redemption by t h e Commissioner, Federal Housing Administration, with t h e
approval of t h e Secretary of the Treasury.
" N o transfers or denominational exchanges in debentures covered by the.foregoing call will be made on t h e books maintained. by the Treasury D e p a r t m e n t
on or after October 1, 1949. This does not affect t h e right of t h e holder of a
debenture to sell and assign the debenture on or after October 1, 1949, and provision will be made for t h e p a y m e n t of final interest due on J a n u a r y 1, 1950,
with t h e principal thereof to t h e actual owner, as shown by t h e assignments
thereon.
" T h e Commissioner of t h e Federal Housing Administration hereby offers t o
purchase any debentures included in this call a t any time from October 1, 1949,
t o December 31, 1949, inclusive, a t par and accrued interest, to date of purchase.
"Instructions for t h e presentation and surrender of debentures for redemption
on or after J a n u a r y 1, 1950, or for purchase prior to t h a t date will be given by
t h e Secretary of t h e T r e a s u r y . "
II.

T R A N S A C T I O N S IN S I X T H - C A L L E D

DEBENTURES

1. The debentures included in t h e foregoing notice of call for partial redemption
on J a n u a r y 1, 1950, are hereby designated sixth-called 2Ji percent housing insurance fund debentures, Series D , and are hereinafter referred to as sixth-called
debentures.
.
•
2. Transfers a n d denominational exchanges in sixth-called debentures will
terminate a t t h e .close of business on September 30^ 1949.
III.

R E D E M P T I O N OR P U R C H A S E

1. Holders of sixth-called debentures will be entitled to have such debentures
redeemed and paid a t p a r on J a n u a r y 1, 1950, with interest in full to t h a t date, a t
t h e r a t e of $13.75 per $1,000. Interest on sixth-called debentures will cease on
J a n u a r y 1, 1950.
.
2. Holders of sixth-called debentures have t h e privilege of presenting such
debentures a t any time from October 1 to December 3 1 , 1949, inclusive, for
purchase a t p a r a n d accrued interest, a t t h e r a t e of $0.074728 per $1,000 per day
from July 1, 1949, to date of purchase.
IV.

R U L E S AND R E G U L A T I O N S G O V E R N I N G R E D E M P T I O N AND

PURCHASE

1. T h e United States Treasury D e p a r t m e n t is t h e agent of t h e Federal Housing
Commissioner for t h e redemption and purchase of sixth-called debentures. I n
accordance with regulations adopted by t h e Federal Housing Commissioner a n d
approved by t h e Secretary of t h e Treasury, t h e assignment, redemption, and
purchase of sixth-called debentures will be governed by t h e general regulations
of t h e Treasury D e p a r t m e n t with respect to United States bonds a n d notes, so
far as applicable, except as otherwise provided herein.
2. Sixth-called debentures presented for redemption on J a n u a r y 1, 1950, or
for purchase from October 1 to December 3 1 , 1949, inclusive, m u s t be assigned
by t h e registered payee or assignee thereof or by their duly constituted representatives in t h e form indicated in p a r a g r a p h 3 of this section, a n d should thereafter be presented a n d surrendered to any Federal Reserve Bank or to t h e
Division of Loans and Currency, Treasury D e p a r t m e n t , Washington 25, D . C ,
accompanied by appropriate written advice. (Use ^ F o r m P D 2218.) T h e
debentures m u s t be delivered a t t h e expense and risk of t h e holders. (See
p a r a g r a p h 8 of this section.) I n all cases checks in p a y m e n t of principal a n d
final interest will be mailed to t h e address given in t h e form of advice accompanying t h e debentures when surrendered.
3. If t h e registered payee or an assignee holding under proper assignment from
t h e registered payee desires t h a t p a y m e n t be made to him, t h e debentures should
be assigned by such payee or assignee or by a duly constituted representative to
" T h e Federal Housing Commissioner for r e d e m p t i o n " or to " T h e Federal Housing
Commissioner for p u r c h a s e , " according t o whether t h e debentures are t o be
presented for redemption on J a n u a r y 1, 1950, or for purchase prior to t h a t date.
If it is desired for any reason t h a t p a y m e n t be made to some other person without
intermediate assignment, t h e debentures should be assigned to " T h e Federal
Housing Commissioner for redemption (or purchase) for t h e account of
, " inserting t h e n a m e a n d address of t h e person t o whom
p a y m e n t is to be made.




EXHIBITS

157

4. An assignment in blank or other assignment having similar effect will be
recognized, b u t in t h a t event p a y m e n t will be made to t h e person surrendering
t h e debenture for redemption or purchase since, under such an assignment, t h e
debenture becomes in effect payable to bearer. Assignments in blank or assignments having similar effect should be avoided, if possible, in order not to lose t h e
protection afforded by registration.
5. Final interest on a n y sixth-called debentures, whether purchased prior to
or redeemed on or after J a n u a r y 1, 1950, will be paid with t h e principal in accordance with t h e assignments on t h e debentures surrendered.
6. All assignments m u s t be made on t h e debentures themselves unless otherwise directed by t h e Treasury D e p a r t m e n t . Detached assignments will be recognized and accepted in any particular case in which t h e use of detached assignments is specifically authorized by t h e Treasury D e p a r t m e n t . Any assignment
not made upon t h e debenture is considered a detached assignment.
7. A sixth-called debenture registered in t h e n a m e of, or assigned to, a corporation, will be paid to such corporation on or after J a n u a r y 1, 1950, upon an
appropriate assignment for t h a t purpose executed on behalf of t h e corporation
b y a duly authorized officer thereof. An assignment so executed and duly a t t e s t e d
in accordance with Treasury D e p a r t m e n t regulations will ordinarily be accepted
without proof of t h e officer's authority. I n all cases coming under this provision
p a y m e n t will be made only by check drawn to t h e order of t h e corporation. Proof
of t h e a u t h o r i t y of t h e officer assigning on behalf of a corporation will be required,
in accordance with t h e general regulations of t h e Treasury D e p a r t m e n t , in t h e
case of assignments for purchase prior to J a n u a r y 1, 1950, and in case of assignments for redemption on or after J a n u a r y 1, 1950, for t h e account of any person
other t h a n t h e corporation.
8. Debentures presented for redemption or purchase under this circular must
be delivered to a Federal Reserve Bank or to t h e Division of Loans and Currency,
Treasury D e p a r t m e n t , Washington 25, D . C , a t t h e expense and risk of t h e
holder. Debentures bearing restricted assignments m a y be forwarded by registered mail, b u t debentures bearing unrestricted assignments should be forwarded
by registered mail insured or by express prepaid.
9. I n order to facilitate t h e redemption of sixth-called debentures on J a n u a r y 1,
1950, any such debenture m a y be presented and surrendered in the manner herein
prescribed in advance of t h a t date b u t not before December 1, 1949. Such early
presentation by holders will insure p r o m p t p a y m e n t of principal and interest
when due.
V.

GENERAL

PROVISIONS

1. Any further information which m a y be desired regarding t h e redemption of
sixth-called debentures under this circular m a y be obtained from any Federal
Reserve Bank or from t h e Division of Loans and Currency, Treasury D e p a r t m e n t ,
Washington 25, D . C , where copies of t h e Treasury D e p a r t m e n t ' s regulations
governing assignments m a y be obtained.
2. As fiscal agents of t h e United States, Federal Reserve Banks are authorized
a n d requested to perform any necessary acts under this circular. T h e Secretary
of t h e Treasury m a y a t any time or from time to time prescribe supplemental
a n d a m e n d a t o r y rules and regulations governing t h e m a t t e r s covered by^ this
circular, which will be communicated p r o m p t l y to t h e registered owners of sixthcalled debentures.
JOHN W .

SNYDER,

Secretary of the' Treasury.
Exhibit 16.—Summary of information contained in circulars pertaining to calls
for partial redemption, before maturity, of insurance fund d e b e n t u r e s
During t h e fiscal year 1950 there were five calls for partial redemption, before
m a t u r i t y , of insurance fund debentures. T h e essential details contained in t h e
circulars covering these calls are summarized in t h e following table. T h e first
circular, covering t h e sixth call for partial redemption of Series D housing insurance fund debentures, is shown as exhibit 15. T h e other four circulars have been
omitted, b u t t h e general rules and regulations contained in t h e omitted circulars
are, with t h e exception of t h e applicable dates, t h e sanae as those shown \i\

exhibit 15.




Summary of information contained in circulars pertaining to insurance fund debentures called for redemption during the fiscal year 1950
2 H % war housing i n s u r a n c e fund d e b e n t u r e s
2 % % housing i n s u r a n c e fund d e b e n t u r e s .
Series D
Series H
Series J, first call
Sixth call
D e p a r t m e n t circular covering call
Redemption date
Serial n u m b e r s called, b y d e n o m i n a t i o n s :
$50
-- -$100
•
:
$500
$1,000
:
. $6,000
$10 000
; Final d a t e for transfers or denominational
exchanges ( b u t n o t for sale or assignment).
R e d e m p t i o n on call d a t e , a m o u n t paid a t
par w i t h i n t e r e s t in full, a t r a t e of.
T r e s e n t a t i o n for p u r c h a s e prior to call
date:
PeriodA m o u n t paid a t p a r a n d accrued uit e r e s t a t r a t e of.




N o . 851, S e p t . 27,
1949.
Jan. 1, 1950
6-7
29-31
6-7..
28-29
7
1,065-1,113
S e p t . 30. 1949

S e v e n t h call
N o . 862, A p r .
1960.
J u l y 1, 1960

1,114-1 159
M a r . 31, 1950...

Sixth call
5,

S e v e n t h call

N o . 852, S e p t . 27,
1949.
Jan. 1, 1950
3,033-3,075
8,102-8,253
4 , 0 3 6 ^ , 076
9,130-9,272
1,024-1,072
6,102-5, 254
Sept. 30, 1949

2 H % mutual mortgage i n s u r a n c e
fund
d e b e n t u r e s . Series E ,
fifth caU

No. 864, A p r .
1950.
J u l y 1, 1950

3,076-3,139
8,264-8,545
4,076-4,147
. . . 9,273-9,536
1,073-1,174
6 256-5,529
M a r . 31, 1950

td
5,

N o . 864, A p r . 5,
1960.
J u l y 1, 1960 . . . .

1.
. . . . &-11
2
4-6

No. ^'863, A p r
1950.
J u l y 1, 1950.

5,

48-141
M a r . 31, 1950.

2,002-2,023. ^
2,002-2,081.
28-2, 525.
6,001-6,091.
1, 202-1, 214.
301.
M a r . 31, 1950.

$12.50 per $1,000

$12.50 per $1,000

$13.75 per $1,000.

Apr.
1-June
30,
1960.
$0.069061 p e r $1,000
per
day
from
Jan. 1, 1950, to
d a t e of p u r c h a s e .

1-June
30,
Apr.
1-June ' 30, A p r .
1950.
1960.
$0.069061 p e r $1,000 -$0.075967 per $1,000
per'
day
from
per
day
from
Jan. 1, 1950, to
Jan. 1, 1950, to
d a t e of p u r c h a s e .
d a t e of p u r c h a s e .

.

o

n
o

m
$13.75 p e r $ 1 , 0 0 0 . . . . . $13.75 per $1,000

Oct.
1-Dec.
31,
1949.
$0.074728 p e r $1,000
per
day
from
J u l y 1, 1949, to
d a t e of p u r c h a s e .

$12.50 per $1,000

Apr.
1-June
30, Oct.
1-Dec.
31,
1950.
. 1949.
$0.075967 per $1,000 $0.067935 per $1,000
per
day
from
per
day
from
Jan. 1, 1960, to
J u l y 1, 1949, to
d a t e of p u r c h a s e .
d a t e of p u r c h a s e .

I
s

td

o

td

>

EXHIBITS

159

PUBLIC DEBT M A N A G E M E N T
Exhibit 17.—Statement by Secretary of the Treasury Snyder before the Subcommittee on Monetary, Credit, and Fiscal Policies of the Joint Committee on
the Economic Report, D e c e m b e r 2, 1949
Mr. Chairman and Members of the Subcommittee of the Joint Committee on
the Economic R e p o r t : I am pleased to have t h e opportunity of appearing before
you t o d a y to discuss questions on t h e monetary, credit, and fiscal policies of t h e
United States Government. I should like a t this time to take a few minutes to
talk a b o u t some of t h e current factors in the outlook for Treasury financing a n d
d e b t m a n a g e m e n t policies in the light of the budget estimates t h a t have been released since I sent m y answers to your questionnaire to the Committee. In discussing some of the figures, I shall refer occasionally to a booklet of charts which
we have prepared.
The budget position is a m a t t e r of first importance. The new budget estimates
show a deficit of $5.5 billion for the present fiscal year. Expenditures are estirnated a t $43.5 bilhon a n d receipts a t $38 bilhon, as is shown in chart A in the booklet. I t seems to me, however, t h a t in times as prosperous as these we should have
a balanced budget. National income t o d a y is close to t h e highest level i n our
history; and, by every s t a n d a r d of sound government finance, the t i m e ' t o have a
balanced budget is now.
This is t h e position I have t a k e n consistently since I became Secretary of the
Treasury in June 1946. In t h e s t a t e m e n t which I made a t t h a t time, I said:ff* * * I t is the responsibility of the Government to reduce its expenditures
in every possible way, to maintain a d e q u a t e tax rates during this transition period,
a n d to achieve a balanced budget—or better—for 1947."
I t was, therefore, a source of great satisfaction to me to be'able—as Secretary
of t h e T r e a s u r y — t o announce a t t h e end of the fiscal year 1947 t h a t t h e Federal
Government h a d operated with a budget surplus. In t h e following fiscal year,
which ended on June 30, 1948, we again had a budget surplus—-it amounted to
$8.4 billion and was, in fact, the largest budget surplus in t h e history of t h e United
States Government.
I n t h e past three years, I have restated t h e urgent need for an excess of receipts
over expenditures on m a n y occasions—notably when the Congress was considering
tax reduction measures in 1947 and 1948.
Furthermore, President T r u m a n has repeatedly urged the necessity of reducing
the pubhc debt under t h e circumstances which have existed since the end of the
war. I n his message to the Congress on April 2, 1948, in which he returned, without approval, t h e tax reduction bill, H . R. 4790, he s t a t e d :
"* * * I repeat w h a t I have so often said before—if "we do not reduce the
public debt b y substantial a m o u n t s during a prosperous period such as the present,
there is little prospect t h a t it will ever be materially reduced."
You will recall t h a t it was this tax reduction measure which the Congress passed
over t h e President's veto, and which resulted in a loss of revenues to t h e Federal
Government amounting to approximately $5 billion annually. I t is largely as a
result of t h e enactment of this legislation t h a t we had a budget deficit of $1.8
billion in t h e fiscal year which ended last J u n e 30, and t h a t we have a prospective budget deficit, of $5.5 billion in the current fiscal year.
About $3 billipn of t h e deficit for t h e fiscal year 1950 has already occurred. I t
has been financed principally by increases in t h e weekly Treasury bill offerings and
by increased sales of Treasury savings notes. T h e t o t a l a m o u n t of Treasury bills
outstanding rose approximately $800 million between August 4 and September 8,as a result of six successive offerings in excess of the a m o u n t s maturing. The .
a m o u n t of Treasury savings notes outstanding has increased by over $2>2 bilhon
since the end of June.
T h e Treasury cash balance is currently running between $4 billion and $5 billion.
W i t h o u t any further new financing, the balance should remain near this level for
the next four months, as shown in chart B . If everything works out exactly as
calculated in present estimates, t h e balance would run down to approximately
$3 billion by next April 30.
.
There are always, however, a n u m b e r of variables which could have an i m p o r t a n t
influence on the picture. There is the possibility t h a t revenues might vary from
the a m o u n t shown in t h e budget estimates. We knew, for exaniple, at the time
the revenue estimates were made, t h a t it was very difficult to gauge t h e full effect
of strikes on incomes and corporate profits. I t still is not possible to do so. There
^07795—51
rl2




160

1 9 5 0 REPORT OF T H E SECRETARY OF THEI TREASiURY

is bound to be considerable range in expenditure estimates for such programs as
farm price supports, R F C mortgage purchases, and various types of p a y m e n t s to
veterans. These considerations are i m p o r t a n t in our estimate of cash balance
levels.
T h e picture of how t h e various Government operations affect the cash balance
is one t h a t I have before me daily as I consider debt m a n a g e m e n t decisions and
plolicies. We revise our appraisals constantly as new information comes in. I t
looks a t this time as though we will have to do some additional new-money
financing later in this fiscal year.
There are three main sources which we might t a p for new borrowing. These
are nonbank institutional investors, such as insurance companies, m u t u a l savings
banks,' and savings a n d loan associations; other private nonbank investors,
including individuals and pension funds; and t h e commercial banks of the country.
We keep close watch a t all times on the position of the various investor classes
which comprise t h e m a r k e t for Government securities.
I n addition to t h e problem of new borrowing, the Treasury will find itself faced
next year—as it has been in each of t h e postwar years—with a large refunding
task. Approximately $1 billion of Treasury bills m a t u r e each week; there will be
a number of issues of certificates of indebtedness and notes maturing, totaling
a b o u t $33 billion; and there will be four Treasury bonds amounting to about
$11 billion which m a t u r e or are callable next year. This is shown in chart C.
T h e budget deficit makes it clear t h a t there will not be a n y reduction during the
fiscal year 1950 on these maturities, except for tail-ends of maturing securities
not t u r n e d in for refunding. There will not be any official budget estimates for
the fiscal year 1951, of course, until t h e President's Budget Message is released in
J a n u a r y . T h e total of m a t u r i n g or callable marketable securities in the calendar
year 1950 is approximately $56 billion; and, on net balance, it appears t h a t
nearly t h e entire aniount w i l l b e refunded into securities m a t u r i n g in t h e future.
Two-thirds of the securities which m a t u r e in 1950 are held by the commercial
banking system. A significant portion of t h e remainder is held by industrial,
commercial, and mercantile corporations. T h e ownership of maturing^ issues,
as well as t h e ownership of t h e remainder of t h e public debt, is, of course," one of
t h e considerations which we m u s t take into account in making our debt managem e n t decisions.
T h e debt is broadly distributed, and we w a n t to keep it t h a t way. The present
widespread ownership is, to a large extent, the result of t h e Treasury's policy of
fitting its security offerings to t h e needs of various investor classes. This first
became of special importance during the war period when one of the major
objectives was to sell as great a portion as possible of t h e large wartime offerings
to nonbank investors. I t has had increasing importance in the postwar period,
when we wished to maintain a large nonbank holding of Government securities,
especially among individuals, under varying circumstances of business reconversion and then expansion.
A central consideration in fitting Government securities to t h e needs of different
classes of investors has been setting the appropriate maturities for each class.
Industrial, commercial, and mercantile corporations, for example, have been sold
short-term securities primarily, since their purchases are generally made with
reserves which they m a y w a n t to have readily convertible. T h e same t y p e of consideration was kept in mind in fitting Government security offerings to the needs
of other classes of investors. The net results of this policy can be observed by an
analysis of t h e portfolios of t h e leading investor classes. Information on this
account appears in chart D which shows changes in the estimated average n u m b e r
of years to m a t u r i t y of t h e Government security portfolios of three i m p o r t a n t
investor groups—life insurance companies, m u t u a l savings banks, and commercial
banks.
Life insurance companies a n d m u t u a l savings b a n k s are, of course, generally
longer-term investors. During t h e war, insurance companies acquired a large
volume of Governments; and it was the Treasury's policy to sell t h e m longer-term
securities. T h e results are evident. T h e average length of Government securities
held by life insurance companies increased from a b o u t 10 years in 1941 to a b o u t
16 years in 1945. Since then, there has been a gradual decline; and, a t t h e
present time, t h e figure is 14 years.
T h e picture with respect to m u t u a l savings banks differs somewhat from t h a t
of t h e hfe insurance companies. The average length of t h e Government security
holdings of these banks increased during the war finance period from 9 years to
14 years; and has declined subsequently to 12 years. Savings banks also were




EXHIBITS

.

161

sold longer-term securities, but their investment needs resulted in the acquisition
of more medium-term securities than were acquired by life insurance companies.'
Because there have been no new offerings of long-term marketable securities
since the end of 1945, the average length of the outstanding marketable Federal
debt has been automatically shortened during this period. Investors who are
primarily bondholders have this reflected in their investment portfolios to a
greater degree, of course, than do investors who hold primarily short-term debt.
The average length of the holdings of life insurance companies and of mutual
savings banks would have declined more sharply since 1945, therefore, if these
institutions had not bought long-term issues in the market and sold, shorter-term
issues. They offset thereby, to some extent, the automatic shortening of their
portfolios.
Commercial banks have been offered principally short-term securities throughout the war finance period and as a part of our postwar program. This has been
a major factor in keeping their portfolios short on the average. The average
length to first call or maturity date of the Government security holdings of
commercial banks has declined from 7 years in June 1941 to about 3 years at the
present time.
There is considerable variation among banks throughout the country in the
maturities of the Governments which they hold. Estimates of the average number of years to maturity of Governments held by commercial banks, by Federal^
Reserve Districts, are shown in chart E. Longer-term securities are generally
held in the eastern areas—with the exception of New York City—than in the
western areas. There are three districts in which the average length of Govern-.
ments held is less than 2}^ years; and, as you can see from the chart, these areas are
in the western part of the country. The shortest average length, 2 years, is found
in the Kansas City Federal Reserve District; while the longest average length,
4% years, is in the New York District, excluding New York City. In this connection, it is interesting to note that as we go farther west, commercial banks also
have more loans in proportion to their capital.
I have gone into these matters at some length to indicate how the present maturity distribution of the public debt developed. Our objective has been a smoothly
functioning economy, and securities have been issued to the various investor classes
to suit their needs and the requirements of the economy.
In handling the new-money and refunding operations that are in prospect for
next year, the interest cost of the debt to taxpayers must also be one of the considerations in our debt management program. The interest cost of the debt comprises over 13 percent of the Federal budget for the fiscal year 1950. The total
annual cost is likely to grow, even without any increase in the debt, because the
rate of interest on savings bonds increases as they approach maturity, and because
an increasingly large proportion of the debt represents the accumulation of trust
funds invested at an average interest rate which is higher than the present average
rate on the total debt.
Even a relatively small increase in the average interest rate on the debt would
add a substantial amount to the total annual interest cost. It is estimated that
the interest on the debt will amount to $5.7 billion in the calendar year 1949.
About $1K billion would be added to this amount, if the average interest rate
were }^ of 1 percent higher. The annual interest cost wpuld be more than $5
billion larger, if the average interest rate were equal to the average borrowing cost
of World War I—which was approximately 4>i percent. The annual saving in the
taxpayers' money as a result of the present level of interest rates is an important
factor in the budget picture of the Federal Government.
The distribution throughout the economy of the interest on the public debt is,
of course, determined by the ownership of the debt. The next chart, which is
chart F, shows interest on the Federal debt, by class of recipient, from 1946
through 1949.
It seems to me that the outstanding fact in this connection is the increase during
this period in the interest on the Federal debt going to individuals. Their share
during the current calendar year is one-third of the estimated $5.7 billion total.
It rose from $1.4 billion in 1946 to an estimated $1.9 billion in the current year.
The share received by Government investment accounts also rose during this
period, while interest payments to other nonbank" investors declined slightly.
The share received by commercial banks also declined. This was largely due to
the Treasury's policy of concentrating debt reduction in the holdings of commercial banks.




162

19 50 REPORT 6F. T l i B SEC^'RETARY OF THEI TMASitrHY

Another way of looking a t t h e interest cost of t h e debt is to consider t h e burden which it represents when compared with t h e gross national product of t h e
country, from which it m u s t b e p a i d . The public debt is nearly 10 times as large
as it was a t t h e World War I peak in August 1919, as is shown in chart G. But,
because we were able to finance the Second World War a t a borrowing cost about
one-half as great as the average borrowing cost of World War I, t h e interest cost
of t h e public debt t o d a y is only 5 times, rather t h a n 10 times, as large as it was in
1919.
This does not, however, mean an interest burden 5 times as great. For, in
the meantime, our gross national product has risen from less t h a n $80 billion in
1919 to. an estimated annual r a t e above $250 billion a t t h e present time. We
have a tremendously increased product out of which to p a y the interest on the
debt, and the present interest cost is only 2.3 percent of gross national product.
This compares with 1.4 percent in 1919.
One of the, i m p o r t a n t refunding m a t t e r s which will come before t h e Treasury in
1950—and in greater volume in 1951, 1952, and subsequent years—will involve
the Government security holdings of individuals. These holdings amounted to
$69>^ bilhon on October 31, 1949, up from $65 bihion on December 31, 1945, and
from $10>4 billion before t h e war, as shown in chart H .
Ownership of Government securities by millions of individuals is good for the
country .as well as for those individuals. I t gives t h e people of the country an
increased interest in t h e affairs of their Government and causes t h e m to participate
more actively in those affairs. We have continued to promote the saie of savings
bonds in order to encourage thrift. Thrift has played a vital p a r t in the building of
our Nation, and, today, it is as i m p o r t a n t to our well-being as it has ever been in the
past. At t h e end of October, $48>^ billion of savings bonds of aU series were held
by individuals. Savings bonds comprised 70 percent of their total holdings of
Goverhment securities. . Holdings of E bonds alone—the bond which is designed
to meet t h e needs of small investbrs—amounted to $33)^ billion.
T h e savings bonds held by individuals a t the present tinie are distributed
broadly t h r o u g h o u t t h e country. In chart I, t h e United States is divided into
geographical areas to show t h a t t h e $48J^ billion of savings bonds outstanding in
t h e h a n d s of individuals are distributed approximately as follows: $16)^ billion
held in t h e northeastern area of t h e country; $10 billion held in t h e States of
Michigan, Illinois, Indiana, and Ohio; $6 billion held in the southern p a r t of t h e
United States; $6 billion held in t h e seven States which are t h e farthest west; a n d
$10 billion held in t h e large block of central States which is bounded roughly by
the Mississippi on t h e east, the Rocky Mountains on the west, and stretches from
C a n a d a t o Mexico. These savings bonds comprise a tremendous a m o u n t of
assets in t h e hands of individuals. The $48}^ billion t o t a l seems particularl}^
significant, if we recall t h a t a t t h e b o t t o m of t h e depression.—in 1933—national
income in the country was only $ 3 9 ^ billion. Across t h e Nation, people now
have a cushion of reserves to fail back upon t h a t is greater t h a n the total income
in t h e Nation in t h a t year.
You m a y remember t h a t during t h e latter years of the war there was considerable speculation as to- t h e probable redemption experience with Series E bondsas soon as the war had ended. The opinion was freely expressed t h a t t h e large
quantities of bonds which were being sold under the pressure of patriotism and
intensive wartime selling methods would be redeemed speedil}^ as soon as t h e war
was ended. Instead, as I have noted, we have continued to sell savings bonds
and to increase the t o t a l a m o u n t outstanding. Redemption experience with
Series E bonds is, in fact, more favorable t h a n t h e postwar rate of turnover in
other forms of savings. Chart J shows t h e annual rate of savings account
withdrawals and savings bond redemptions, from 1943 to date, expressed as a
percentage of t o t a l a m o u n t s outstanding. The r a t e of redemption of Series E
bonds has been substantially lower t h a n t h e rate of withdrawals from savings
accounts. Furthermore, since the end of the war, savings bond redemptions as
a percentage of t h e a m o u n t outstanding have followed a downward trend, while
the r a t e of t u r n o v e r of other forms of savings has followed an u p w a r d trend.
We have not, however, encouraged t h e sale of savings bonds a t t h e expense of
other types of savings. From December 31, 1945, through October 31, 1949, t h e
increases in practically all other forms of individuals' savings were substantially
greater relatively t h a n t h e increase in savings bond holdings.
I have been talking a b o u t some of the technical m a t t e r s t h a t will have to. be
'considered in connection with Treasury borrowing and refunding. Uppermost in
our minds in making all of our policy decisions is t h e fact t h a t t h e foremost responsibility of t h e Secretary of the Treasury is to maintain confidence in t h e credit




EXHIBITS

163

of the United States. One hundred and fifty years ago, t h e main financial problem of our newly born Nation was to establish t h a t credit. Confidence in our
Government's financial soundness was successfully established; a n d it has been
t h e responsibility of Secretaries of t h e Treasury for a century and a half to
maintain it.
B u t never before has this responsibility been so great as since t h e end of World
War I I . T h e public debt increased more t h a n fivefold during t h e war. I t
represents more t h a n half of all of t h e debt of t h e country, public and p r i v a t e .
I t comprises a substantial proportion of t h e assets of t h e leading investor classes;
and t h e decisions which are m a d e with respect to it are of immediate and vital
significance to each and every one of us.
T h e primary concern of t h e Secretary of t h e Treasury in formulating debt
m a n a g e m e n t policies is to promote sound economic conditions in t h e eountYy.
Because t h e debt is so great, because it is such a large proportion of t h e t o t a l d e b t
of t h e country, a n d because it is interwoven in t h e financial structure of t h e
country, t h e policies and decisions made in t h e Treasury D e p a r t m e n t are of
tremendous importance and significance to t h e economic and financial welfare
of t h e Nation.
Figures on t h e total debt of t h e country—public a n d private—are shown in
chart K. At t h e end of 1939, t h e debt of t h e Federal Government a m o u n t e d t o
$47J^ billion and accounted for 23 percent of t h e t o t a l debt of t h e entire country.
At t h e present time, t h e pubhc debt a m o u n t s to $257 billion and comprises 51
percent of all debt.
T h e estimated distribution of the ownership of t h e debt oh October 31 of this
year is shown in chart L. N o n b a n k investors held $172 billion of Government
securities—two-thirds of t h e $257 billion of Federal debt outstanding on t h a t
date. I t is particularly significant t h a t t h e holdings of individuals are so large.
T h e y totaled $69% billion, as I mentioned earlier. Insurance companies held
$203^ billion of Government securities. M u t u a l savings bank holdings totaled
$11}^ billion. Government investment accounts, principally Government t r u s t
funds which are required by law to be invested in Government securities, held
$39J4 billion of t h e public debt. T h e holdings of " o t h e r " nonbank investors—
which include State and local governments, corporations, pension funds, and
charitable institutions—were $31 billion.
One-third of t h e debt—$85 billion—was held by t h e commercial banking
system. Commercial banks held $67J^ billion; and the remainder, $17}^ billion,
was held by t h e twelve Federal Reserve Banks.
These figures are large, in dollar t e r m s ; a n d t h e y are also a substantial proportion of t h e assets of t h e various investor classes, as shown in chart M. In t h e
case of commercial banks, for example, holdings of Governments are equal to 56
percent of earning assets—a large percentage, but a sharp decline from F e b r u a r y
28, 1946, when Government securities comprised over 70 percent of the earning
assets of these institutions.
N o n b a n k investors—both financial and nonfinancial—also have a large share
of their assets invested in Goverriment securities. On October 31, mutual savings b a n k holdings of Governments represented 54 percent of their total assets;
life insurance companies had 27 percent of total assets invested in Government
securities; and other insurance companies—fire, marine, and casualty—^had 47
percent. Nonfinancial corporations had 13 percerit of their current assets in
this form. And, when we t u r n to individuals, we find t h a t Government securities
accounted for 34 percent of their liquid assets—that is, their combined holdings
of Government securities, savings and checking accounts, and currency—which
approximated $200 billion on October 31.
These figures are unmistakable evidence t h a t the decisions which are made
with respect to t h e public debt affect every segment of our economy. They
indicate t h e compelling necessity for considering not only the effect of our- decisions upon t h e financial structure of t h e Government itself, b u t their effect on
the financial a n d economic structure of the whole country.
I t is for this reason t h a t Treasury and Federal Reserve authorities have cooperated to keep the m a r k e t for Government securities stable during the postwar
period. Under the circumstances which existed, stability in the Government
bond m a r k e t has been of tremendous importance to the country. I t contributed
to the underlying strength of the country's financial system and eased reconversion,
not only for the Government, b u t also for industrial, and business enterprises.
This is in marked contrast to t h e situation after World W a r I, when prices
of Government securities were permitted to decline sharply—with disastrous




164

1 9 5 0 REPO'RT OF THEi SECRETARY OF THEI TREASiURY

results. Investors suffered serious financial losses. And t h e decline contributed
i m p o r t a n t l y to the business collapse t h a t occurred in the early post-World War I
period. These things happened a t a time when the public debt was a much less
powerful element in t h e economy t h a n it is a t the present time. I t seemed obvious
to. us t h a t widely fluctuating Government bond prices would have even more
serious repercussions after World War I I .
I t is now four years since Victory Loan 2>^'s were issued. C h a r t N shows t h e
price history of t h e Victory Loan 2}^'s after World War I I , as compared with
t h e price history of the F o u r t h Liberty Loan 4>^'s during t h e corresponding period
after World War I. At the end of t h e fourth year. Victory Loan 2}^'s are above
p a r ; a t the end of a similar period. F o u r t h Liberty Loan 4J4's were in the vicinity
of par. But the price movements within the two periods differed radically.
Victory •Loan 2y2S have always been, above par. The F o u r t h Liberty Loan 4>i's
dropped substantially below par, reaching a low of about 82J^^. F r o m this point,
t h e y had a long climb back before reaching par.
I n the short-term area of t h e Government security market, we also had to
consider the possible effect of our actions on t h e financial markets. When interest
rates on short-term Government securities were raised, beginning in mid-1947,
they were raised gradually in order not to disrupt these markets. When they
were reduced, the change was small for the same reason.
I n the four years since VJ-day, the United States has achieved a record level
of prosperity. There can be no doubt t h a t world-wide confidence in the financial
soundness of the Government of the United States played a prominent role in
achieving this prosperity.
I have gone into some of t h e current matters of public debt management with
you in some detail in order to round out t h e entire picture for your Committee.
M a n y of the answers to t h e questions submitted by your Committee to me an d
t o other Government officials and agencies touched on some of the points t h a t I
have mentioned; b u t I felt t h a t it would make for better understanding of t h e
problems a n d considerations involved, if I summarized the current situation as
it looks from my position as Secretary of the Treasury.
CHART" A

1945 47

49 '50




1945 47
FISCAL

49 '50
YEARS-

1945 47

49 '50

J

165

EXHIBITS
CHART B

$Bil.

•4
Estimated " ^ ^

\

J

F

M

A

M

J

J

A

1949

S

O

'

CHART C

5NlTltiiMi^iii<EliiBi;iii
$Bil.

10

-

8
Bills^^^
6

-

4
Certificafes
andNotes
2

» Callable bonds in months of earliest call dates.




N

D

J

F

M

A

M

1950

J

166

19 50 REPORT OF T H E SECRETARY OF THEI TREAS'I|RY
CHART D

AVERAGE NUMBER OR^EftRSlW^
:
: • FEDERAL:SEGURltYiH(5li^lil6S^;£l#^ ;
Life Insurance Companies

Mutual Savings Banks

Commercial Bonks

15

10

fi

wm

iio|

June 30. Dec. 31. Oct. 31.

1941

45

49

June 30. Dec. 31,

1941

45

Oct. 31,

49

m il

June 30. Dec.31,

1941

' 1 Callable bonds to earliest call date.
CHART E

GOMMERC(Ali^BANl(^HOll0INGt# E i B l « SEGU
:;Ci|AVERAGE NUMBER QEYEARS;TCi
By Federal Reserve Districts. Oct. 31,1949

YEARS

V^
Wk
^
• I

Under Z'/g
2'/2 to 3'/4
J ^ to 4
4 or over

» Callable bonds to earliest call date.




45

2^
Oct.31,

49

167

EXHIBITS
CHART F

jNTElEST^QNifflE-FEbERAL^PEBr?^
^ •: •|%:;!e|diS'-of:;PpiRiiitt;,:i^|f^
$Bli.

5.0

;;;l.9;;;

'Individuals

;;?i4^;;^------------

2.5

'"'^^ Other Nonbank Investors
^^^^Federal Reserve Banks
'^-'^ Commercial Banks
1946
^

1947 1948
Calendar Years

1949^
^

' Estimated.
CHART G

ifBURDEPdFlHftiE&ERA$iEBSa^
tompgrisbn of world ;W6riDebtiqnd:Pr«^
Debt

Interest Cost as %

Interest Cost^

of Gross Notional Product^

10 times as high....

5times as high....

About ii^g times as high..

m

:$257BII
S5.7Bil.i

i

fxXVN

779777777J

J$27Bil/
mesa—
Aug.

Oct.

Aug.

Oct.

Aug.

Oct.

1919

1949

1919

1949

1919

1949

1 Annual rates.




168

1950

REPORT OF T H E SECRETARY

OF THEI TREASiURY

CHART H

:OWNERSH(B)FJ^EDiiWi[iB|M^
$Bil.
69^2

Mar/cetabies
and Other

60

i
;;l3^2;;j

40

Savings
Bonds

48^2

20

E
10/2

A-D

/

iMMi
Dec.31.
1939

Dec. 31.
1945

Oct. 31,
1949

CHART I

5:6BD6RiiPH(G;DlSliliiil6i'til^MlNGS^
IfSiKliWEDliiNiVfpUA^




169

EXHIBITS
CHART J

CHART K

tchAlMRAi®
$Bil.

400-

' Private
Debt

200

Fed Gov't
Debt

Dec.31,

1939

45 Feb. 28.
1946

Oct. 31.

1949

' Includes State and local and nonguaranteed Federal agency debt. Figures based on Department of
Commerce estimates. Oct. 31,1949, is Treasury estimate.




170

1950 REPORT OF TliEl SECRETARY OF THE! TREASiURY
CHART L

OWNERSHIP OFTHE FEDERAL DEB^ 0Ct3l,J949
Nonbank Investors

Total

Bqnks

$Bil.

$85 Bil.

§172 Bil.

17^2

257

|67!'2

200

^ \ Federal
Reserve
"^Commercial

Others
Government ^
Investment Accts

''Z^'

39l'2;

100
Mut'iSav.
Bant(s V ^
11^2

L \ ^^•'m'Individuals

m\

20/2; i '^^Insurance Cos.

CHART M

ptlMPORlANGE'OFFEDERAeSEGURITlES^:^
• TO3ELEGtED^iNVES1^vGLASSESi?0Ct
FINANCIAL INSTITUTIONS

OTHER
yoOf:
Current
Liquid
Assets
Assets

% o f Total Assets^
100

75

Other
^ Assets

50

wm

25

;Com'l
Banks

Life
Other
L Insurance Cos. J

1 Earning assets of commercial banks.




Mutual
Sav. Bks.

Federal
^ Securities
Nonfin. Individuals
Corps.

171

EXHIBITS
CHART N

TREASURY BdND^PRIGES; AFTER WORLD M R r ^
1945
N

Dollars'

1946
J

M M J

1947
S

N

J

1948

M M J
I

'

'

I

S
'

'

N

J

M M

J

1949
S

N

J

M M

J

3

N

I

I Victory Loan 21^2 s

i ' '••'•....

•-•,

IOO

90

80

N J
1918

M

M J S
1919

N

J

M

M J S
1920

N

J

M

M

J S
1921

N

J

M

M

J S
1922

N

Exhibit 18.—Letter of Secretary of t h e Treasury Snyder, October 3 1 , 1949, to the
Chairman of the Subcommittee on Monetary, Credit, and Fiscal Policies of the
Joint Committee on t h e Economic Report, replying to a questionnaire on
monetary, credit, and fiscal policies
TREASURY

DEPARTMENT,

Washington, October S l , 1949.
M Y D E A R M R . CHAIRMAN: This is in reply to your letter dated August 22, 1949,
in which you enclosed a questionnaire which you asked me t o answer in connection with a comprehensive s t u d y relating t o t h e effectiveness a n d coordination
of monetary, credit, a n d fiscal policies, which has been undertaken by t h e Joint
Committee on t h e Economic Report, b y direction of Congress.
T h e subject m a t t e r of t h e questions falls into several main categories. All of t h e
questions are answered; b u t , since m u c h of t h e material would be repetitive if each
question were answered separately, I have taken t h e liberty of answering t h e
questions b y groups r a t h e r t h a n question-by-question.
T h e first eight questions relate t o t h e monetary a n d debt management policies
of t h e Treasury a n d their coordination with t h e policies of t h e Federal Reserve
System. T h e questions are as follows:
•
1. W h a t are t h e principal guides a n d objectives of t h e Treasury in
formulating its monetary a n d debt m a n a g e m e n t policies? W h a t a t t e n t i o n is paid
to t h e interest costs on t h e Federal debt? T o t h e prices of outstanding Governm e n t obligations? To t h e state of employment a n d production? T o t h e behavior
of price levels in general? T o other factors?
2. T o w h a t extent a n d by w h a t means are t h e m o n e t a r y a n d debt
m a n a g e m e n t policies of t h e Treasury coordinated with those of t h e Federal
Reserve? Describe in detail t h e procedures followed for these purposes.
3. W h a t were t h e principal reasons for t h e particular structure of interest
rates maintained during t h e war a n d t h e early postwar period?
4. T o w h a t extent, if a t all, would a monetary a n d debt management
policy which would have produced higher interest rates during t h e perigd from
J a n u a r y 1946 t o late 1948 have lessened inflationary pressures?




172

1 9 5 0 REPORT OF T H E SEGRETARY OF THEI TREASiURY

5. When there are differences of opinion between t h e Secretary of t h e
Treasury a n d t h e Federal Reserve authorities as to desirable support prices a n d
yields on Government securities, whose judgment generally prevails?
6. What, if anything, should be done to increase t h e degree of coordination of Federal Reserve and Treasury policies in t h e field of money, credit, a n d
debt management?
T. W h a t would be the advantages and disadvantages of providing t h a t
the Secretary of the Treasury should be a member of the Federal Reserve Board?
On balance, would you favor such a provision?
• 8. W h a t are the advantages a n d disadvantages.of offering for continuous
sale savings bonds of t h e E, F, and G Series with their present yields, maturities,
and hmitations on t h e annual a m o u n t to be purchased by each buyer? Does this
policy lessen the supply of private savings for equity capital and riskier private
loans? W h a t are the advantages and disadvantages of promoting the sale of these
securities duririg periods of recession? Should the terms of these securities and
the a m o u n t t h a t each buyer m a y purchase be varied with changes in economic
conditions?
T h e primary concern of t h e Treasury in formulating its monetary a n d debt
management policies is to promote sound economic conditions in the country.
When I took office as Secretary of the Treasury, the country had only started the
tremendous task of converting the economy from a wartime to a peacetime basis.
Federal expenditures, which h a d raised the o u t p u t of the United States to the
highest levels on record during t h e war j^.ears, h a d been cut back sharply as soon as
t h e war ended. I n t h e fiscal year 1945, Federal expenditures h a d been just under
$100 billion, and had accounted for nearly one-half of t h e gross national product;
in t h e fiscal year ending J u n e 30, 1946, they dropped to a little over $60 billion.
This p r o m p t cut in Federal expenditures after t h e close of the war was necessary
a n d desirable; b u t it left the Nation facing the problem bf replacing t h e production
which had gone for war purposes with civilian production as rapidly as possible.
There were m a n y who felt t h a t the reconversion could be achieved only after t h e
country had experienced serious unemployment and severe economic dislocation.
Government and business, farmers, and labor were all worried a b o u t m a n y factors
on the economic scene.
N o t t h e least of t h e economic factors which were causing concern was t h e size
of t h e public debt—-which h a d increased more t h a n fivefold during t h e war years.
I t was difficult a t t h e time t o forecast how so large a debt might be handled.
The size was unprecedented, b o t h in terms of t h e dollar a m o u n t involved and of
t h e debt's relation t o t h e economy of t h e country. On F e b r u a r y 28, 1946, a t its
postwar peak, t h e Federal public debt stood at. nearly $280 billion. I t consti-.
t u t e d over 60 percent of all outstanding debt, public a n d private. At t h e end
of 1939, before t h e United States started its defense and war finance program,
t h e t o t a l public debt h a d stood a t $48 billion—this was only 23 percent of t h e
entire debt of t h e country.
At t h e end of t h e war, t h e public debt was widely held. This b r o a d ownership
m a d e it possible for t h e debt to play its p a r t in t h e flexible fiscal policy which was
necessary t o promote economic stability in t h e postwar period. T h e particular
composition of t h e debt was t h e result of conscious planning by t h e Treasury as
a. p a r t of its policy of fitting Government securities t o t h e needs of various t y p e s
of investors. Practically all of t h e securities sold to commercial banks, for
example, have been short-term, in order t h a t t h e portfolios of banks would be
k e p t highly liquid. This was essential if banks were to be in a position to finance
reconversion needs. Business corporations likewise have been provided with
short-term securities for t h e t e m p o r a r y investment of their reserve funds. Insurance companies and savings banks, on t h e other hand, have held longer-term
securities—largely with maturities over ten years. Savings bonds have been, of
course, t h e principal t y p e of Government security held by individuals. At t h e
same time, However, t h a t broad ownership of t h e debt contributed to easing t h e
problems of postwar debt management, it m a d e good debt m a n a g e m e n t particularly vital, since every segment of t h e economy was affected.
When I became Secretary of t h e Treasury, t o t a l Government security holdingsof individuals, including marketable as well as nonmarketable issues, a m o u n t e d
to $64 billion—a significant change from t h e situation prior t o t h e war, when
they owned only about $10 billion of Government securities. Over $43 billion
of t h e Government securities held by individuals were savings bonds. Other
n o n b a n k investors also held large a m o u n t s of Government securities. Financial
institutions h a d a substantial proportion of their assets invested in t h e public




EXHIBITS

173

debt issues of the Federal Government. For mutual savings banks, it amounted
to $ i m billion—about 64 percent of their total assets. All insurance companies—
life, fire, casualty, and marine—held $25)^ billion of Government securities.
Life insurance companies alone had holdings of $22 billion—over 46 percent of
their total assets. Federal agencies and trust funds, which are by law required
to invest their accumulated funds in Government securities, held $29 billion.
Other noribank investors, which include business corporations. State and local
governments, and other small groups of investors, held $32 billion.
The commercial banking system held $108 billion of Government securities.
Commercial banks held $84H billion of the total. This comprised 71 "percent of
their earning assets. The balance, $23H billion, was held by the Federal Reserve
Banks.
It was obvious that the decisions which had to be made with respect to a
public debt which was so large, and which was interwoven in the financial structure
of the entire economy, would significantly affect the economic and financial welfare of the country. It was essential, under these circumstances, that debt
management be directed toward promoting and maintaining a stable and smoothly
functioning economy. In the nature of things, the Federal Government must
exercise firm control of debt management as long as the debt remains so large
and so important. In the course of forraulating debt management policies, I
have consulted with advisory committees representing a cross-section of American
business, for an exchange of views and information. These consultations have
been helpful in determining the soundest possible debt management policies;-but,
in the final analysis, the responsibility for these policies belongs.to the Secretary,
of the Treasury and under the law cannot be delegated.
As I have said, the overriding consideration in debt management policy is the
economic welfare of the country. The Secretary of the Treasury has many
responsibilities; but his primary one is that of maintaining confidence in the
credit of the United States Government. In addition, in prosperous years such
as we have enjoyed since the end of the war, it is important to reduce the total
amount of the public debt and to reduce bank ownership of Federal securities
and widen the distribution of the debt. Accordingly, these have been the principal objectives of the Treasury's debt management program during the postwar
period.
1. To maintain confidence in the credit of the United States Governrrient.—
It is for this reason that stability in the Government bond market has been a
continuing policy during the postwar period. Stability in the Government bond
, market during the transition period has been of tremendous importance to the
country. It contributed to the underlying strength of the country's financial
system and eased reconversion, not only for the Government, but also for industrial and business enterprises. This is in marked contrast to the situation after
the First World War, when the severe decline in the prices of Government securities contributed to the business collapse that occurred within two years after
the war's end.
• ^
The particular structure of interest rates maintained during World War II
was, with only minor variations, the one which existed at the time we began our
defense and war finance program. It was apparent almost from the beginning of
this program that it would require a large increase in the public debt; and an
important consideration was the cost of the borrowed funds. It was especially
fortunate, therefore, that interest rates were at a relatively low level. It made it
possible to finance the war cheaply without disrupting the financial structure of,
the country.
Stabihty in the Government bond market since the end of the war has.been
achieved through the cooperative efforts of the Federal Reserve System and "the
Treasury Department. Some of the stabilizing measures—notably, of course,
the operations of the Federal Operi Market Committee—have been primarily the
responsibility of the Federal Reserve System. Others have been primarily the
responsibility of the Treasury Department.
In naaintaining stability in the Government bond market," flexibility in adapting
policies to changing economic conditions has been essential. It has been necessary
at times to take steps to prevent too sharp a rise in Government security prices;
and, at other times, declining prices have been halted.
o
Beginning in the spring of 1947, the Federal Reserve and the Treasury took
action to control an incipient boom in the Government bond market. Long-term
borids were sold from some of the Government investment accounts, the Investment Series of bonds was offered to institutional investors, and interest rates on




174

1950 REPO'RT OF THE SECRETARY OF THE TREASURY

short-term Government securities . were increased. All of these operations
combined to t a k e upward pressure off t h e market. When conditions changed,
and a downward pressure on bond prices developed, t h e m a r k e t was stabilized
through purchases of long-term bonds. Short-term interest rates—which had
been permitted to rise beginning in mid-1947—were held steady from t h e fah of
1948 until this summer. Then, in mid-September of this year, they were reduced.
All of these actions have been t a k e n with a view toward promoting confidence
in t h e Nation's business and financial structure and t h e a t t a i n m e n t of a high level
of employment a n d production in t h e economy.
2. To reduce the amount of the debt.—In t h e s t a t e m e n t which I made
when I took office as Secretary of t h e Treasury in June 1946, I said:
''* * * I t is t h e responsibility of t h e Government to reduce its expenditures '
in every possible way, t o maintain adequate t a x rates during this transition
period, and to achieve a balanced budget—or better—for 1947.''
During t h e first two fiscal years after I took office, t h e Federal Government
operated with a budget surplus. I n t h e fiscal year 1948, t h e surplus was, in fact,
t h e largest in t h e history of t h e country. Starting in March 1946, t h e large cash
balances t h a t h a d remained at t h e end of t h e Victory Loan were applied to t h e
reduction of t h e public debt. These balances were largely expended during t h e
calendar year 1946, and subsequent debt reduction was effected through pay-offs
from t h e budget surpluses of t h e fiscal years 1947 and 1948. At its postwar peak
on February 28, 1946, t h e p u b h c debt stood a t $279.8 bilhon; on J u n e 27 of this
year, it reached a postwar low of $251.3 billion.
There is no longer a budget surplus, however, largely because of t h e t a x reductions
enacted by Congress in 1948, over t h e President's veto. As a result, t h e debt
has been rising steadily in recent m o n t h s ; a n d a t t h e end of September it stood
a t $256.7 billion. Both President T r u m a n and I have stressed t h e importance of
continuing debt reduction in years of prosperity such as we have enjoyed since t h e
end of t h e war. This was one of t h e reasons why t h e President on three occasions
vetoed measures reducing taxes a t a time when t h e economic condition of t h e
country permitted continued retirement of t h e debt. .
3. To reduce bank ownership of Federal securities and widen the distribution
of the debi.—Strong inflationary pressures existed during most of t h e postwar
period. I n order t h a t debt reduction would have t h e greatest possible antiinflationary effect, under these circumstances, it was concentrated on debt held
by t h e commercial banking system. T h e concentration of debt reduction in bank
holdings was facilitated by t h e Treasury's policy Of fitting t h e debt to the.needs
of investors, which had placed a large volume of short-term debt in t h e hands of
t h e banking system. T h e reduction in t h e public debt held b y t h e commercial
banking system has been actuallj^ greater t h a n t h e reduction in t h e total d e b t .
• T h e total public debt was reduced $28.5 billion from its postwar peak of $279.8
billion to t h e postwar low of $251.3 billion. During t h e same period, bank-rield
debt was reduced by approximately $34 billion. This came a b o u t because t h e
Treasury was able t o increase t h e Government security holdings of nonbank
investors. F u n d s from t h e sale of savings bonds a n d other nonmarketable issues
to n o n b a n k investors were available for t h e retirement of maturing issues of b a n k held debt, in addition t o t h e budget surpluses of t h e fiscal years 1947 a n d 1948.
There has been an increase of $5.4 billion in t h e debt, however, since t h e low
point was reached in J u n e of this year; a n d a t t h e end of September, t h e total
a m o u n t of debt outstanding was $256.7 billion. Bank holdings have increased
approximately $2 billion since t h e end of June, so t h a t t h e n e t reduction in these
holdings from F e b r u a r y 1946 t o t h e end of September totals $32 billion.
Because of t h e social a n d economic benefits of broad ownership of public debt
securities, t h e maintenance of t h e widespread distribution of t h e debt h a s been
an essential p a r t of t h e Treasury's postwar debt m a n a g e m e n t policies. I t has
been one of t h e principal objectives in t h e continued promotion of savings bond
sales. Broad ownership of t h e public debt is good for t h e purchasers of Governm e n t securities a n d it is good for t h e country. I t gives to t h e people a greater
sense of economic security a n d an enhanced feeling of personal dignity. I t
causes t h e m to t a k e an increased interest in national issues. I t gives t h e m a
direct stake in t h e finances of t h e United States.
Another postwar objective of savings bond.sales was to combat inflationary
pressures. T h e sale of savings bonds was a two-edged weapon against inflation.
I t took purchasing power directly out of t h e h a n d s of consumers; a n d t h e funds
obtained from t h e sale of savings bonds were.available for t h e retirement of bankheld debt, thereby reducing t h e money supply to t h a t extent.




EXHIBITS'

175

We have continued actively to promote the sale of savings bonds to encourage
thrift on the part of Americans. Thrift is a vital factor in our present-day life.
The total amount of savings bonds, oustanding at the end of September was
over $56y2 billion, an increase of nearly $8% billion since the end of 1945. The
success of the postwar savings bond program is especially notable since it was
generally expected that a flood of savings bond redemptions would be one of the
major debt management problems as soon as the war ended. ^
Actually, the savings bond redemption experience has been better than the
turnover rate on other comparable forms of savings. For example, during 1949,
average monthly redemptions of Series E bonds have amounted to 0.91 percent
of the total of Series E bonds outstanding. For other forms of savings the ratios
of withdrawals to total deposits have been as follows: Postal Savings accounts,
3.57 percent; savings banks (in New York State), 2.32 percent; insured savings
and loan associations, 2.30 percent; savings accounts in commercial banks, 4.86
percent (1948 figure). Moreover, the trend of savings bond redemptions when
related to the total amount outstanding has been downward since the end of the
war, whereas the percentage trend of withdrawals in most other forms of savings
has been upward.
The sale of savings bonds has not, however, been at the expense of other types
of savings. During the period in which we were using the savings bond program
as an anti-inflationary weapon, the whole tone of our advertising was to encourage
personal savings in any practical form^rruot just to encourage the sale of savings
bonds. Individuals have increased their holdings of savings bonds by 13 percent
since the end of 1945. But, in this same period, individuals increased their
shareholdings in savings and loan associations by over 60 percent; their life
insurance by 30 percent; their deposits in mutual savings banks by 25 percent;
their savings accounts in commercial banks by 15 percent; their checking accounts
by about 10 percent; and their Postal Savings accounts by about 10 percent.
Of the various forms of liquid savings, only currency holdings in the hands of
individuals declined.
The reasons for offering Series E savings bonds are, of course, not the same as
those for offering Series F and G bonds. A ''small" savings bond program was
instituted in 1935 for the purpose of providing a risk-free investment for small
investors. When it was decided early in the war to sell as large a portion as
possible of the wartime security offerings of the Federal Government to nonbank
investors, and especially to individuals. Series E savings bonds became the keystone of that policy. This was done in order to prevent a repetition of the postWorld War I experience. After the war, the prices of Government bonds dropped
precipitously—one of the Liberty Bond issues sold below 82—and small investors,
inexperienced in the operations of security markets, were the greatest losers.
Series F and G bonds, which are intended for larger investors, than those reached
by the Series E bonds, were introduced early in 1941 as a part of the Treasury
policy of shaping offerings of Government securities to meet the needs of various
investor classes.
The savings bond program, like other parts of the debt management policies
of the Treasury Department, has been adapted to changing conditions in the
economy. You asked whether the terms of savings bonds and limitations on
purchases should be varied with economic conditions. We have done this to the
extent that seemed necessary. On March 18, 1948, the limitation ori holdings of
Series E savings bonds purchased in any one calendar year was raised from $5,000
.^(maturity value) for each individual to $10,000 (maturity value), effective be' ginning in the calendar year 1948. In the fall of 1947, the Treasury offered the
Investment Series bond—a savings bond type of issue—to certain institutional
investors. Again in order to meet the needs of these investors, we raised the
limitation on purchases of Series F and G bonds, for the period from July 1, 1948,
through July 15, 1948.
Achievement of the debt management objectives of the Treasury Department
requires day-to-day attention to debt operations. Decisions are made continuously.
There is, for example, the matter of refunding maturing issues. This is one of
the constantly recurring duties of the Department. There is a Treasury .bill
maturity each week. There are frequent maturities of certificates of indebtedness; and, in the postwar years, there have been several note and bond maturities
each year. In addition, there are savings bond and savings note maturities—,
and redemptions of these issues before maturity. The volume of refunding
carried thrpugh each year has amounted to approximately $50 billion—in itself a
907795—51

13




176

195 0 REPORT OF THEi^ SECRETARY OF THEI TREASURY

task of considerable magnitude. It exceeds the total of all security' refunding
engaged in by all other borro.wei-s in the country during the past twenty-five
years.
The interest cost of the debt to taxpayers is another of the many considerations
which must be taken into account in debt management policies. It is estimated
that the interest charge on the public debt during the fiscal year 1950 will be
$5,450 million. This item represents pver 13-percent of the Federal budget for
the year. The interest cost is likely to grow over a period of time—in the absence
of substantial debt reduction^—because the rate of interest on savings bonds increases as the bonds are held to maturity, and because an increasingly large proportion of the debt represents the accuniulatiori of trust funds-invested at rates
set forth in the law which are higher'than the present average interest rate on the
debt..
A general rise in interest rates would bring about a further rise iri the budget
charge for interest payments. An increase of as little as >^ of 1 percent in the
average interest paid on the debt would add about $1}^ billion to this charge.
The Treasury was able to finance the last war at an average borrowing cost of less
than one-half the borrowing cost of World War I. If this had not been done,
the interest charge at the present time would be more than $10 billion a year
instead of $5 billion a year. It is clearly evident that this $5 billion annual
saving in the taxpayers' money i^ a highly important factor in the budget picture
of the Federal Government.
It has been argued that if the Goverhment had permitted higher interest rates
on its long-term securities at the.end of the war—that is, had permitted Governnient bond, prices to drop below par^nflationary pressures would have been
lessened.
Fiscal-monetary weapons haye only limited effectiveness in combating inflationary pressures. They operate against inflation in an over-all fashion. They
can be used to cut down the total spending power of the economy and so are effective—and, in fact, indispensable—in periods of general price rise. Any curtailment of general spending power drastic enough, however, to bring special price
situations into line might set' off a severe deflationary spiral. , High prices in
special areas are most effectively dealt with by sp'ecific measures applied directly
to those areas; and it was with this in niind that President Truman repeatedly
asked Congress to enact appropriate legislation to deal with special areas of
inflationary pressures.
The Government's fiscal policy from January 1946 to late 1948 did, however,
have a direct counterinfiationary effect. Federal Government expenditures were
cut rapidly and sharply from their wartime peak, while revenues were maintained
at high levels. I have mentioned that President Truman on three occasions
vetoed tax measures designed to cut revenues because he recognized the urgency
of reducing the debt during this period. Debt reduction by the use of a surplus
of receipts over expenditures was, in fact, the most potent anti-inflationary fiscal
measure available to the Government.^ A surplus of Federal receipts over expenditures takes purchasing power directly out of the hands of consumers; and by
using this surplus to reduce bank-held debt, the Treasury to a large extent offset
the increase in the money supply due to other factors. I have already noted
also the promotion of savings bond sales as an anti-inflationary measure; and
that short-term interest rates were permitted to rise, starting in the summer of
1947.
The policy of stabilizing the Government bond market in itself made a subr
stantial contribution to economic stability. I do not agree with those who believe
that if the support prices of Government securities had been lowered below par,
sales of these securities to the Federal Reserve would have been stopped and inflationary pressures would have been lessened. It seemed to me that under the
circumstances which existed, we would have taken the risk of impairing confidence in the Government's credit if. the prices of Government bonds had been
permitted to go below par; and that as a result the Federal Reserve.might have
had to purchase more bonds below par than at a par-support level. This, of
course, would have increased bank reserves and to that extent would have been
inflationary, rather than anti-inflationary.
During the postwar period, the country has enjoyed a level of prosperity
never before achieved in peacetime. Personal income has reached the highest
level on record, and has remained near that level. Civilian employment likewise




EXHIBITS

177

attained the highest peak in our history, and today there are nearly 60 million
persons employed. There is nO doubt that the successful management of the
public debt and the maintenance of a continued period of stability in the Government bond market have contributed niaterially to the economic well-being of
the country during this period.
In the execution of its monetary and debt management policies, the Treasury
consults with the Federal Reserve. , The chairman of the Board of Governors
of the Federal Reserve System and I discuss policy matters thoroughly and
arrive at decisions which are mutually satisfactory. It does not seem to me that
statutory directives to increase the degree of coordination of Federal Reserve
and Treasury policies are needed. In my opinion, such policies can best be
coordinated as they are at the present time, by discussions between the Secretary
of the Treasury and the Chairman of the Board of Governors of the Federal
Reserve System.
Neither would there be any particular advantage in. providing that the Secretary of the Treasury should be a member of the Federal Reserve Board. The
Secretary of the Treasury did servie as a member of the Federal Reserve Board
from its inception until February .1, 1936. There is no evidence that the coordination of Federal Reserve and Treasury policies was carried out any more effectively during that period than it has been.subsequently..
The Secretary of the Treasury is the chief fiscal officer of the Government,
It seems tp me that any proposal to make him a member of the Board of Governors of the Federal Reserve System for the express purpose of bringing about
better coordination of Federal Reserve and Treasury policies would appear to
subordinate the responsibility of the Treasury Department in fiscal-monetary
matters. In the final analysis, the principahresponsibility in the fiscal-monetary
area must rest with the President and his fiscal officers, who are accountable to
the electorate for their actions.
Questions 9, 10, and 11 are. concerned with the monetary system of the United
States. The questions are as follows:
9. What would be the principal advantages and disadvantages of reestablishing a gold-coin standard in this country? Do you believe that such a
standard should be re-established?
10. Under what conditions and for what purposes, if any, should the
price of gold be altered? What consideration should be given to the volume of
gold production and the profits of gold mining? What effects would an increase
in the price of gold have on the effectiveness of general monetary 'and credit
policies? On the division of power over monetary and credit conditions between
the Federal Reserve and the Treasury?
11. What changes, if any, should be made in our monetary policy rela' tive to silver? What would be the advantages of any such changes?
I do not think that conditions require an alteration in the.monetary system.
As the Committee undoubtedly knows, I am. on record as being opposed to any
change in the price of gold; and the Treasury Department is firmly of the view
that a gold-coin standard should not be re-established in the United States.
The Department has considered the latter proposal in connection with a number
of bills which have been introduced in the Congress. For example, in the last
session of Congress, we submitted a report to the Senate Banking and Currency
Committee on bills S. 13 and S. 286. A copy of our report on those bills is
attached. 1
The present monetary policy of the United States relative to silver is laid down
in three acts of Congress; namely, the Silver Purchase Act of 1934, section 4 of
the act of July 6, 1939, and the act of July 31, 1946, which has largely superseded
the 1939 act. Under the third act, domestic silver mined since July 1, 1946,
may be delivered, at the owner's option, to United States mints for a return of .
90.5 cents per ounce. The Treasury has no discretion under this legislative provision. Since this price is considerably higher than the open market price (now
between 73 cents and 74 cents.per ounce), the effect of this act is to divert to the
United States Treasury at the 90.5 cent price substantially all of the current
production of silver in the United States. On previous occasions, the Treasuryhas stated that it would interpose no objection if Congress wished to repeal ail
the provisions relating to acquisitions of silver in the above-named act.
1 Omitted here." This was published in the 1949 annual report, p. 305.




178

19 50 REPORT OF THE SECRETARY OF THEI TREASiURY

Question 12 relates to the coordination of the lending and loan insuring and
guaranteeing policies of the various Governmerit agencies. The, question is as
follows:
12. To what extent and by what methods does the Treasury coordinate
the activities of the various Government agencies that lend and insure loans to
private borrowers? In what ways, if at all, should the Treasury's powers in this
field be altered?
f
^
The Treasury does not, of course, have statutory authority to coordinate the
activities of the various Government agencies that lend and insure loans to
private borrowers. The Department has been instrumental, however, in furthering consultations between the heads of these agencies, with a view to coordinating
lending, insuring, and guaranteeing policies. In the final analysis, it seems to me
that this voluntary type of corisultation is perhaps the best metht)d of coordinating
these policies. The heads of the lending, insuring, and guaranteeing agencies are
responsible to the President; and the decisions which they make must be made in
accordance with his policies. Furthermore, the policies and operations of these
agencies are subject to annual review by the Congress in connection with their
annual, budgets.
Such limited authority as the Treasury has with respect to the lending, insuring,
and guaranteeing policies of Government agencies is restricted almost entirely
to the methods employed by the agencies in borrowing funds which they, in turn,
are authorized to lend to private borrowers. For example, under the Government
Corporation Control Act, ''All bonds, notes, debentures, and other similar obligations which are . . . . issued by any wholly owned or mixed-ownership Government corporation and offered to the public shall be in such forms and denoininations, shall have such maturities, shall bear such rates of interest, shall be subject
to such terms and conditions, shall be issued in such manner and at such times
and sold at such prices as have been or as may be approved by the Secretary of the
Treasury" except that any mixed-ownership Government corporation from which
Government capital has been entirely withdrawn is exempt from this provision
during the period it remains without Gbvernment capital. In addition, the
Federal intermediate credit banks, the production credit corporations, the Central
Bank for Cooperatives, the regional banks for cooperatives, and the Federal land
banks are specifically exempted from this provision, but are required to consult
with the Secretary of the Treasury prior to issuing securities; and, in the event
an agreement is not reached on the terms of the securities, the Secretary of the
Treasury may make a report in writing to the corporation involved, to the President, and to the Congress stating the grounds for his disagreement.
There are only a few cases in which the Treasury has any direct control over
lending operations of Government agencies.. Reconstruction Finance Corporation loans on the nonassessable preferred stock of insurance companies can be.
made only upon certification by the Secretary of the Treasury of the necessity
for such loans to increase the capital funds of the companies concerned. Also,
under section 103 of Public Law 901, 80th Congress, the Administrator of Veterans
Affairs has the authority, with the approval of the Secretary of the Treasury, to
raise the permissible rate of interest on loans guaranteed or. insured under title
III of the Servicemen's Readjustment Act of 1944 from the rate specified in the
law, namely 4 percent, to a maximum of 4}^ percent. In addition, the Secretary
of the Treasury, or an officer of the Treasury designated by him, is a member of
the Board of Directors of the Federal Farm Mortgage Corporation.
In the field of foreign loans, there is in existence a coordinating and policy
determining agency. The Secretary of the Treasury is Chairman of the National
Advisory Council on International Monetary and Financial Problems, established
by the Congress in the Bretton Woods Agreements Act, approved July 31, 1945.
Among other things, the statute directs the Council to coordinate the policies
and operations of the representatives of the. United States on the International
Monetary Fund and the International Bank for Reconstruction and Development, the Export-Import Bank of Washington, and all other agencies of the
Government "to the extent that they make or participate in the making of foreign
loans or engage in foreign financial, exchange or monetary transactions."
Question 13 asks my opinion on the Hoover Commission proposal that supervision of the Federal Deposit Insurance Corporation be vested in the Secretary
of the Treasury. The question is as follows:
13. What would be the advantages and disadvantages of adopting the
Hoover Commission proposal that supervision of the operations of the F. D. I. C.




EXHIBITS

179
I

be vested in the Secretary of the Treasury? ' On balance, do you favor this
proposal?
The recommendation that the supervision of the operations of the F. D. I. C.
be vested in the Secretary of the Treasury has been carefully considered. There
is much to be said for the independent status which this agency now enjoys. Its
policies are, in many cases, governmental policies which have been set after
consultation with the President and other Cabinet members; and the agency can,
therefore, function independently. However, it could also function as a part of
the Treasury. ,
Question 14 asks my' opinion with respect to the establishment of a National
Monetary and Credit Council of the type proposed by the Hoover Commission.
The- question is as follows:
14. What would be the advantages and disadvantages of establishing a
National Monetary and Credit Council of the type proposed by the Hoover Commission? On balance, do you favor the establishment of such a body? If such
a council were established, what provisions relative to its composition, powers, and
procedures would make it function most satisfactorily?
I am not opposed to the establishment pf a National Monetary and Credit
Council of the type proposed by the Hoover Commission. The establishment of
such a council would not of itself, however, solve any fundamental problem.
But, if such a council were established, the Trea,sury Department would be happy
to contribute the accumulated knowledge and earnest efforts of its various staff
groups. °
.
Questions 15 and 16 relate to Federal budget policy. The questions are as
follows:
15. What, in your opinion, should be the guiding principles in determining, for any given period, whether the Federal budget should be balanced, should
show a surplus, or should show a deficit? What principles should guide in determining the size of any surplus or deficit?
^
16. Do you believe it is possible and desirable to formulate automatic
guides for the Government's over-all taxing-spending policy? If so, what types
of guides would you recommend? What are the principal obstacles to the successful formulation and use of such guides?
The general economic welfare of the country should be the guiding principle in
determining for any given period whether the Federal budget should be balanced,
should show a surplus, or should show a deficit; §,nd in determining the size of any
surplus or deficit.
Since I took office as Secretary of the Treasury in June 1946, I have continuously urged a Federal budget that would permit debt retirement. Both President
Truman and I have stated on a number of occasions that it is essential to reduce
the public debt in years of prosperity, such as we have enjoyed since the end of
the war. This was one of the reasons why the President on three occasions vetoed
tax reduction measures. This has also been a major reason why the President
has constantly limited budget expenditures to the minimum amount necessary
to carry out the defense program and other essential domestic and international
programs.
I do not believe that it is feasible to attempt to formulate automatic guides for
the Government's over-all taxing-spending policy. The economic and social
variants which should determine the policy in any given period are so numerous
and for different periods are present in such different combinations that taxingspending policy can be determined only after the most careful consideration of the
situation existing at any given time. Budget receipts and expenditures for each
fiscal period must be examined item by item with due regard to their relative'
need and public service. This is a responsibility which can be discharged properly
only by Congress.
(3ne of the most frequently mentioned possibilities along these lines is that
automatic guides can be established based on levels of riational income. It obviously is not possible to say that under all circumstances the budget should be
balanced when the national income is at any particular level; and it is not possible
to provide by statute exemptions to cover all the cases when exemptions would
be necessary. In my opinion, policy formulation and action must, of necessity,
be left to the responsible authorities to be made in accordance with their best
judgment in view of economic developments as they occur.




180

1950 REPORT OF T H E SECRETARY OF THEI TREASURY

'• Questions'^ 17, 18, a n d 19 are concerned with t h e commercial bankirig system.
T h e questions are as follows:
17. W h a t were t h e aggregate a m o u n t s of interest p a y m e n t s by t h e
Treasury t o t h e commercial banking system during each year since 1940?
18. W h a t changes, if any, should be made in t h e ownership of t h e Federal
Reserve Banks? I n t h e dividend rates on t h e stocks of t h e Federal Reserve Banks?
19. W h a t changes, if any, should be made in t h e laws relating t o t h e
disposal of Federal Reserve profits in excess of their dividend requirements?
The following table shows t h e estimated distribution of interest p a y m e n t s on
t h e public debt, by class of recipient, for t h e calendar years 1940 t h r o u g h 1948:
Nonbank investors

Banks
Calendar year

Total
interest'
Total

Individuals

U.S.
Government investment
accounts.

.1
.1

0.8
.8
1.0
1.4
1.9

0.3
.3
.4
.5
.7

0.2
.S
.3
.3
.4

0.3
.3
.3
.6

.1
.1
.2
13

2.7
3.5
3.6
3.9

1.1
1.4
1.5
1.6

.5
.7
.7
1.0

1.1
1.5
1.4
1.4

Commer- Federal
cial
Reserve
bariks
Banks

Total

Other .
investors

Billions of dollars
1940.
1941.
1942.
1943.
1944.

1.1
1.1
1.5
2.2
3.0

1945.
1946.
1947.
1948.

4.1
5.0
5.0
5.4

0.3
.3
.4
-.7
1.0

0.3
.3
.5
•

. 8

1.1
1.4
1.5
1.4
1.4

1.3
1.4

'-\1.2

(*)
(*)0.1
.

*Less than $50 million.
1 Actual payments on the basis of daily Treasury statements.

I n t e r e s t payinents to commercial b a n k s a m o u n t e d t o approximately 27 percent of t h e total interest paid on t h e debt in 1940, b u t a m o u n t e d to only 20 percent in 1948. P a y m e n t s to t h e ^entire commercial banking system, t h a t is, to
commercial b a n k s a n d Federal Reserve Banks—which a m o u n t e d to a b o u t $350
million in 1940 and $1,450 million in 1948—similarly showed a decline as a percentage of total interest p a y m e n t s during this period.
Interest earnings on Federal-Reserve Bank holdings of Government securities
increased from $42 million in 1940 t o $299 million in 1948, as a result of t h e wartime credit and currency needs of t h e country. T h e Board of Governors of t h e
Federal Reserve System took t h e initiative in t u r n i n g over a p a r t of t h e Reserve
B a n k s ' relatively high earnings t o t h e Federal Government, by invoking its
a u t h o r i t y to levy an interest charge on Federal Reserve notes issued by t h e Banks.
I n its announcement on April 24, 1947, t h e Board stated t h a t t h e purpose of t h e
charge was t o p a y into t h e Treasury approximately 90 percent of the net earnings
of t h e Federal Reserve Banks in excess of theif dividend requirements. P a y m e n t s t o t h e T r e a s u r y as a result of this action a m o u n t e d t o $75 million in 1947
a n d $167 million in.1948.
If Congress wishes, it can, of course, set forth specific s t a t u t o r y directives
for t h e disposal of Federal Reserve B a n k profits in excess of their dividend
requirements.
With respect to t h e m a t t e r ' of stock ownership of t h e Federal Reserve Banks
a n d t h e dividend r a t e on this stock, I do not believe t h a t there is any urgent
need t o deal with these questions a t this tirrie.
<
Very truly yours,
J O H N W . SNYDER,

Secretary of the Treasury.
H O N O R A B L E P A U L H . DOUGLAS,

Chairman, Subcommittee on Monetary, Credit, and Fiscal Policies of the
Joint Committee on the Economic Report, United States Senate, Room 109,
Senate Office Building, Washington 25, D. C.




EXHIBITS

181

TAXATION DEVELOPMENTS
Exhibit 19.—Message from the President, January 23, 1950, transmitting a
request for a revision of the. tax laws
[House Doc. No. 461. 81st Cong., 2d sess.]

To the Congress of the United States:
The tax policy of the United States Government is of major significance to the
national welfare. Taxes are the means by which our people pay for the activities
of the Government which are necessary to our survival and progress as a Nation.
Decisions about Federal tax policy should be made in full recognition of the
economic and budgetary situation, and should contribute to our national objectives of economic growth and broader opportunity for all our citizens.
At the present time, I believe we should make some revisions in our tax laws
to improve the fairness of the tax system, to bring in some additional revenue,
and to strengthen our economy.
Our general objective should be a tax system which will yield sufficient revenue
in times of high employment, production, and national income to meet the necessary expenditures of the Government and leave some surplus for debt reduction.
In the budget message I estimated that receipts in the fiscal year 1951 will fall
short of meeting expenditures by 5.1 billion dollars. This defic t will be due
largely to the short-sighted tax reduction enacted by the Eightiieth Congress,
and to the present necessity for large expenditures for national security and
world peace. Moreover, owing to the time lag between corporation earnings and
tax payments, the 1949 decline in corporation profits will be reflected in lower
tax receipts in the fiscal year 1951.
The policies I am recommending to the Congress are designed to reduce the
deficit and bring about a budgetary balance as rapidly as we can safely do so.
These policies are threefold: First, to hold expenditures to the lowest level consistent with the national interest; second, to.encourage and stimulate business
expansion which will result in more revenue; and third, to make a number of
changes in the tax laws which will bring in some net additional revenue and at
the same time improve the equity of our tax system.
First, as to Government expenditures: I have recently transmitted to the
Congress a budget containing reconimendations for :appropriations and estimates
of expenditures for the fiscal year 1951. This budget was carefuUy prepared
with a view toward holding expenditures to the lowest possible levels consistent
with the requirements of national security, world peace, economic growth, and
the well-being of our people.
The decisions Of the Congress, as well as unpredictable changes in circumstances
over the next 18 months, may alter in many particulars the character and amount
of the expenditures contemplated in.this budget. Nevertheless, I believe the
estimates contained in the budget represent the most realistic appraisal that it
is possible to make at this tiriie of the -necessary expenditures in 1951. I believe
the Congress will generally concur in this view after it has had an opportunity
to consider these estimates carefully.
The expenditures estimated in the 1951 .budget have been reduced by about
$900,000,000 below the level estimated for the present fiscal year. The policies
recommended in the budget will permit further reductions in subsequent years
as the costs of some of the extraordinary postwar programs continue to decline.
To achieve these reductions we must continue to practice rigid economy. At
the same time it would be self-defeating to cripple activities which are essential
to our national strength. It will require wisdom and courage to find and hold
fast to the course of wise economy without straying into the field of foolish budget
slashes.
Second, as tb the strength and growth of our national economy: We cannot
achieve and maintain a balanced budget without a strong and prosperous economy.
A recession in economic activity would call for increased Government expenditures
at the same time that revenues were reduced, thus creating greater budget deficits.
At the present time the economy of the United States is growing, and we have
every reason to expect it to continue to expand if we follow the right policies. It
is largely the task of private business to achieve this growth. The Government,
however, can and should contribute to it. Through such cooperation, national
employment and income will grow. This will result, in time, in increasing Government revenues.




182

1950 REPORT OF THE iSECRETARY OF THE TREASURY

Just as the condition of our national economy has an overriding effect upon our
efforts tp balance the budget, so do our policies fof managing the Federal budget
have a decisive effect upon the national economy. Drastic reductions in Federal
expenditures in the wrong places and at the wrong time could have serious disruptive effects throughout our econoniy.
Government revenue policies are as important in our economy as Government
expenditure policies. Events of the last few years have proved that our economy
can grow and prosper, and that employment, production, and incomes can increase, at the same time that individuals and businesses are paying taxes which
are high by prewar standards. However, taxes can and do have an important
effect upon business conditions and economic activity. It should be our constant
objective to improve our tax system so that the required revenues can be obtained
without impairing the private initiative and enterprise essential to continued
economic growth.
We should always keep in fnind that the maintenance of a sound fiscal position
on the part of the Government is a long-range matter. Nothing could be more
foolhardy than to attempt to bring about a balanced budget in 1951 by measures
that would make it. impossible to maintain a balanced budget in the following
years.
Third, as to changes in the tax laws: If, over the next few years, we hold expenditures to the minimum necessary levels and at the same time follow policies
which contribute to stable economic growth, we can look forward to steady
progress toward a balanced budget. Nevertheless, we should not rely only upon
budgetary economy and upon economic expansion to produce a balanced budget.
We should accelerate the attainment of this objective by changes in the tax laws.
Drastic increases in tax rates, just as in the case of drastic cuts in essential expenditures, might prove to be self-defeating. Our primary objective should be
to improve and strengthen our revenue system forthe long run.
Under these circumstances, I am now recommending a number of important
revisions in our present tax system, to reduce present inequities, to stimulate
business activity, and to yield about $1,000,000,000 in net additional revenue.
In making changes in the tax laws, we should be sure they move toward, and
not away from, the major principles of a good tax system. ^ Our tax structure
should recognize differences in abihty to pay; it should provide incentives to new
undertakings and the expansion of existing businesses; it should support the objective of increasing opportunities for all our citizens to obtain a better standard
of living; and it should rigidly exclude unfairness or favoritism.
Over the yea-rs we have made important progress in building a good tax system.
However, much remains to be done. There is need further to improve the distribution of the tax load to make it conform better with taxpaying ability. There is
need to reduce taxes which burden consumption and handicap particular businesses. Moreover, we should eliminate tax loopholes which enable some few to
escape their share of the cost of government at the expense of the rest of the
American people.
Many of the important and desirable tax revisions which should be made must
be postponed until the budget situation improves. Nevertheless, a number of
those steps can and should be taken now.
First, I recommend that excise taxes be reduced to the extent, and only to the
extent, that the resulting loss in revenue is replaced by revenue obtained from
closing loopholes in the present tax laws.
The excise taxes are still at substantially their wartime levels. Some are depressing certain lines of business. Some burden consumption and fall with
particular weight on low-income groups. Still others add to the cost of living by
increasing business costs.
Since we are limited in the amount of reduction we can now afford, we should
choose for reduction those taxes which have the most undesirable effects. I
believe that reductions are most urgently needed in the excise taxes On transportation of property, transportation of persons, long-distance telephone and telegraph communications, and the entire group of retail excises, including such items
as toilet preparations, luggage, and handbags.
If these revisions are made, we will have reduced the most serious inequities
of our present excise taxes. We should go further just as quickly as budgetary
conditions permit. At present, however, we should reduce excises only to the
extent that the loss in revenue can be recouped by eliminating the tax loopholes
which now permit some groups to escape their fair share of taxation.




EXHIBITS

183

The continued escape of privileged groups from taxation violates the fundamental democratic principle of fair treatment for all, and undermines pubhc
confidence in the tax system. While few of these loopholes by themselves involve
major revenue losses, collectively they result in the loss of many hundreds of millions of dollars every year.
I wish to call the attention of the Congress to the more important of these loopholes. While some of them are of long-standing, their injustice has been aggravated as the taxes assessed against the rest of the population have been increased.
A tax concession to a favored few is always unfair, but it becomes a gross injustice
against the rest of the population when tax rates are high. The case for the
elimination of these inequities would be strong even if there were no need for
replacement revenue. It is compelling when excise relief depends on it.
I know of no loophole in the tax laws so inequitable as the excessive depletion
exemptions now enjoyed by oil and mining interests.
Under these exemptions, large percentages of the income from, oil and mining
properties escape taxation, year after year. Owners of mines and oil wells are
permitted, after deducting all costs of doing business, to exclude from taxation on
account of depletion as much as half of their net income. In the case of ordinary
businesses, investment in physical assets is recovered tax-free through depreciation deductions. When the original investment has been recovered, a depreciation deduction is no longer allowed under the tax laws. In the case of oil and
mining businesses, however, the depletion exemption goes on and on, year after
year, even though the original investment in the property has already been recovered tax-free, not once but many times over.
Originally introduced as a moderate measure to stimulate essential production
in the First World War, this special treatment, has been extended during later
years. At the present time these exemptions, together with another preferential
provision which permits oil-well investment costs to be immediately deducted
from income regardless of source, are allowing individuals to build up vast fortunes, with little more than token contributions to tax revenues.
For example, during the 5 years 1943-47, during which it was necessary to
collect an income tax from people earning less than $20 a week, one oil operator
was able, because of these loopholes, to develop properties yielding nearly
$5,000,000 in a single year without payment of any income tax. In addition to
escaping the payment of tax on his large income from oil operations, he was also
able through the use of his oil-tax exemptions to escape payment of tax on most
of his income from other sources. For the 5 years his income taxes totaled less
than $100,000, although his income from nonoil sources alone averaged almost
$1,000,000 each year.
This is. a shocking example of how present tax loopholes perriiit a few to gain
enormous wealth without paying their fair share of taxes.
I am well aware that these tax privileges are sometimes defended on the grounds
that they encourage the production of strategic minerals. It is true that we wish
to encourage such production. But the tax bounties distributed under present
law bear only a haphazard relationship to our real need for proper inceSatiyes to
encourage the exploration, development, and conservation of our mineral resources.
A forward-looking resources program does not require that we give hundreds of
millions of dollars annually in tax exemptions to a favored few at the expense of
the many.
Some tax loopholes have also been developed through the abuse of the tax
exemption accorded educational and charitable organizations. It has properly
been the policy of the Federal Government since the beginning of the income tax
to encourage the development of these organizations. That policy should not
be changed. But the few glaring abuses of the tax-exemption privilege should
be stopped.
Responsible educational leaders share in the concern about the fact that an
exemption intended to protect educational activities has been misused in a few
instances to gain competitive advantage over private enterprise through the conduct of business and industrial operations entirely unrelated to educational
activities.
There are also instances where the exemption accorded charitable trust funds
has been used as a cloak for speculative business ventures, and the funds intended
for charitable purposes, buttressed by tax exemption, have been used to acquire
or retain control over a wide variety of industrial enterprises.




184

1950 REPORT OF THE SECRETARY OF THEi TREA'SURY

• These and other unintended advantages can and should be removed without
jeopardizing the basic purposes of those organizations which should rightly be
aided by tax exemption.
A problem exists also with respect to life insurance companies. The tax laws
have always accorded'favorable treatrnent to the income received by individuals
from life insurance policies and have made special provision for the taxation of
life insurance companies. As a result of a quirk in the present law, however, life
insurance companies have unintentionally been relieved of income taxes since
1946. This anomalous situation has meant that neither the companies nor their
pohcyholders have paid taxes on more than 1.5 billion dollars of investment income
per year, derived from productive assets worth about 60 billion dollars.
I understand that the Committee on Ways and Means of the House of Representatives has already undertaken to correct this situation for the past years.
I urge that steps also be taken to develop a permanent system for the taxation of
life' irisurance companies which will remove the inequities of undertaxation in this
field without impairirig the ability of individuals to acquire life insurance protectiori.
• In addition to the tax loopholes I have described, there are .a number of others
which also represent inequities, and should be closed. Most of these permit
individuals, by one device or another, to take unfair advantage of the difference
between the tax rates on ordinary income and the lower tax rates on capital gains.
As one exaniple, under present law producers of motion pictures, and their star
players, have attempted to avoid taxes by creating temporary corporations which
are dissolved after making one film. By this device, their income from making
the film, which ought to be taxed at the individual income tax rates, would be
taxed only at the capital gains rate. Thus, they might escape as much as twothirds of the tax they should pay!
.All these loopholes have been under joint study by the Treasury Department
and the staff of the Congressional Joint Committee on Internal Reveriue Taxa.tion. A practical program which would go far toward closing these loopholes
can be enacted during the present .session of the Congress. This would be a
substantial step toward increasing .the fairness of our tax system, and should
add several hundred mihion dollars to its yield—^sufficient revenue to permit
substantial excise tax reduction where it is most urgently needed.
I wish to make it very clear that I could not approve excise tax reductions
unless they were accompanied by provision for replacement of the revenue lost,
because I am convinced that sound fiscal policy will not permit a weakening of
our tax system at this time. Under present conditions we cannot afford to reduce
excise taxes first, in the hope that action will be taken later to make up for the
loss in revenue.
Second, I recommend.that the Congress enact legislation to provide $1,000,000,000 in additional revenue, by revising and improving the estate and gift tax
and the corporation tax laws. I believe that, under present economic conditions,
this amount of additional revenue represents a proper balance between the objective of balancing the budget as soon as possible and the objective of coordinating
tax adjustments with the requirements of continued prosperity.
A substantial part of the additional revenue should be obtained from revision
of the estate and gift tax laws.
The Revenue Act of 1948 reduced the yield of the estate and gift taxes by onethird, or nearly $300,000,000. Even before that act, estate and gift tax yields
were out of line with other revenues, and that act made the situation worse.
In originally enacting the estate tax in 1916, the Congress pointed out that
"our revenue system should be more evenly and equitably balanced" and that a
"larger portion of our necessary revenues" should be collected from the "inheritances of those deriving most protection from the Government." Our estate and
gift tax laws at present fall far short of this objective. They now produce less
than 2 percent of internal revenues, compared with 7 percent 10 years ago. To
the extent that these taxes remain too low, the remainder of our tax structure
must bear a disproportionate load.
The low yield from the estate and gift taxes is due to serious weaknesses in the
present law.
These ">veaknesses include excessive exemptions, unduly low effective rates on
most estates, and the fact that the law as written favors large estates over smaller
ones, and leaves substantial amounts of wealth completely beyond the reach of
the tax laws. Large fortunes may be transmitted from one generation to another




EXHIBITS

"185

free of estate or gift tax through the use of life estates. By this means, vast
accumulations of wealth may completely escape tax over several generations.
Furthermore, the present law affords excessive opportunities for tax reduction
by splitting between the gift and estate taxes the total amount of wealth transferred by an individual. This makes the tax liability depend not upon the amount
of wealth which an individual leaves to his family but upon the manner in which
he arranges the disposition of his wealth. If a man leaves his estate of $300,000
at death, one-half to his wife and one-half to his three children, an estate tax of
$17,500 must be paid. If his equally well-to-do neighbor gives away $180,000
to his wife and three children over a 5-year period and leaves them the other
$120,000 at death, no estate or gift tax whatever is paid. This difference in tax,
whether it depends upon fortuitous circumstances or the caliber of legal counsel,
is obviously unwarranted.
To strengthen the estate and gift tax laws, several steps are necessary. The
laws concerning.the taxation of transfers by gift and by bequest, by outright
disposition and through life estates, need to be coordinated to provide uniform
treatment and a base for more effective taxation. In addition, the present exemptions should be reduced and the rates should be revised. These changes will
not only bring in more revenue, but they will also improve the fairness of the '
estate and gift tax laws and bring these taxes nearer to their proper long-term
place in our tax system.
The rest of the additional revenue should be obtained from adjustmentsan-the
corporation income tax. At the same time, certain improvements should be •
made in this tax.
I recommend a moderate, increase in the tax rate applicable to that part of a
corporation's income which is in excess of $50,000. At the same time, I recommend that the tax rate on corporate income between $25,000 and $50,000, which
is now taxed at the excessively high "notch" rate of 53 percent, be reduced to the
same rate that applies above $50,000.
These changes in the tax rate structure would go far toward removing the
handicaps which the present law places upon the expansion of small corporations.
The removal of the excessive "notch" rate would reduce the taxes paid by mediumsized corporations whose continued growth is so essential to the dynamic expansion
of our economy. The existing favorable tax rates for small corporations with
incomes below $25,000 would be retained. .The tax increase would be confined
to less than one-tenth of all corporations.
Furthermore, I recommend that the loss carry-forward provision be extended
from 2 to 5 years to provide more scope for offsetting losses of bad years against
profits of subsequent years. This extension will give increased incentive to
business investment affected by uncertain profit expectations. It will be particularly helpful to new businesses which, under the present provision permitting
losses to be carried forward only 2 years, may be required to pay taxes over a
period of several years during which they actually suffer a net loss.
At the same time that we make these changes in the tax laws to stimulate
investment at home, we should make certain changes in the tax laws concerning
income derived from foreign investments and personal services abroad. This
would provide significant support to our efforts to extend financial and technical assistance to underdeveloped regions of the world.
Among the steps which should be taken at this time are to postpone the tax on
corporate income earned abroad until it is brought home, to extend and generalize
the present credit for taxes paid abroad, and to liberalize the foreign-residence
requirement for exemption of income earned abroad. These changes, together
with the safeguards for our investors which we are in the process of negotiating,
with foreign governments, will provide real stimulation for the' expansion of
United States investment abroad.
The tax program I am recommending is designed to strengthen our ta,x system
so that it will yield revenues sufficient to balance expenditures as they are further
reduced over the next several years, and to provide some surplus for debt reduction.
Because of the time lag in collecting taxes after their enactment, these recommendations will not result in any substantial increase in receipts in the fiscal
year 1951, but they will result in larger revenues in subsequent years and, at the
same time, substantially improve the structure of our tax system for the long run.
A sharp increase in taxes under present economic conditions would be unwise.
However, in line with the policy of gearing changes in revenue laws to the needs
of our economy, I would not hesitate, if strong inflationary or deflationary forces
should appear, to support the use of all measures necessary to meet the situation,




186

19 50 REPORT OF THE SECRETARY OF THE TREASURY

including more pronounced adjustment of tax rates upward or downward, as
the case might be.
We have come through the war and a difficult transition period with the
financial strength of our Government maintained and an economy producing
far above prewar levels. We should continuously seek to sustain and improve
these indispensable foundations for progress. The tax program I am recommending is an important and necessary means to that end.
HARRY S. TRUMAN.
T H E WHITE HOUSE, January 23,

1950.

Exhibit 20.—Statement of Secretary of the Treasury Snyder before the House
Ways and Means Committee, February 3, 1950, on the President's tax program

I am pleased to have the opportunity of appearing before the mem'bcrs of this committee to discuss the President's tax program. As
Secretary of the Treasury, I am charged with the responsibihty for
managing the Nation's finances in such a way as to maintain the
soundness of the Government's fiscal position and, in so doing, to
promote the financial health of the economy. A part of that responsibility, in my view, involves giving the members of this committee
the most informative picture of which I am capable concerning the
current state of the Nation's finances and the measures which, in my
opinion, should be taken to assure continued soundness of Government
fiscal operations in the years ahead.
I am going to endeavor to give you that picture today. At the
outset, I should like to make one point clear beyond the possibility of
doubt. As chief fiscal ofiicer of the Nation, I do not look lightly on
Federal deficits. During my.period of ofiice as Secretary of the
Treasury, I have taken every opportunity to express to the members
of this committee and other congressional committees—as well as to
individual citizens and groups of citizens throughout the country—
my conviction that in prosperous periods such as the present, the
Government should be able to pay for current expenditures out of
current income; and that our revenue, in addition, should be suflficient
to yield a surplus which could be applied to the reduction of the
Federal debt.
As the President stated in his tax message of January 23, 1950,
''Our general objective should be a tax system which will yield sufficient revenue in times of high employment, production, and national
income to meet the necessary expenditures of the Government and
leave some surplus for debt reduction.'' As you know, we are now
enjoying a period of high employment, high production, and high
national income. The number of persons employed in 1949 held near
the 60-million level; and average employment during the year was
only 1 percent below 1948. Total production of all goods and services in 1949 was $259,000,000,000. This was only about Di percent
below the all-time record reached in 1948. Personal income in 1949
was virtually unchanged from the high level reached in 1948; and the
volume of retail sales, when adjusted for price changes, was actually
greater in 1949 than in the preceding year.
The business statistics are unmistakable evidence of the basically
strong economic situation which is being maintained throughout the
country. During the past year, the country met and safely passed a




EXHISIT^

187

period of inventory readjustment which completed the shift to normal
competitive markets. Yet—-as the figures which I have just cited
demonstrate—this period of readjustment resulted an very little
disturbance in the rate of activity and trade in the Nation as a whole.
Moreover, the accumulated demand for certain important goods and
services which was the result of shortages during the war and postwar
years has not yet been fully satisfied. Housing is an instance in point.
Since the beginning of the Second World War in 1939, 20,000,000
people have been added to our population. That is equal to all the
people in the Pacific Coast States at the beginning of the war, plus
those in the eight Mountain States and in practically all of Texas.
Moreover, the notable shift of population during and since the war—
particularly the heavy movement westward—has greatly enlarged
needs for new housing, and for new schools, churches, hospitals, and
other community facilities. These are generally recognized needs
which we can all see as we look around us; but it is important to
remember also that our great industrial development has been built
on a continuing progression of new products which have given successful support to business activity.
Today, we have the advantage of the unprecedented technical
developments of the war and postwar years, which are rapidly being
applied in bringing out new types of consumer goods, improving older
products, and reducing production costs. Many of them, like the
multitude of new plastic products, may be of small importance individually, but very important as a group. In other instances, single
products or developments, such as television, give indications of
occupying a major position in our national economy before long.
We stand, in fact, at the beginning of an era in which technical
achievements based on the new discoveries in electronics, in synthetic
and plastic materials, in' metallurgy, and in many other, areas of
scientific research, will play a substantial part in our industrial
progress.
Under the exceptionally favorable economic conditions which prevail today and the prospects for continued economic progress in the
future, a sound budgetary policy demands that Government receipts
and expenditures be balanced. It was with this objective in mind
that the Treasury opposed tax reduction legislation in 1947 and 1948.
The President recently has submitted tax recommendations to the
Congress which, if enacted into legislation, will lay the groundwork for
achieving a balanced budget without endangering the continuance of
our programs for the maintenance of a • strong domestic economy or
the continuance of needed measures in this country and elsewhere for
defense against aggression. In his tax message to the Congress on
January 23, 1950, the President outlined a fiscal program designed to
reduce the deficit and bring about budgetary balance as rapidly as
possible. The policies embraced in this program were threefold, having
to do with (1) reduced expenditures on the part of the Government,
(2) measures aimed at encouraging and stimulating business expansion—which, of course, would result in enlarging our revenuebase^
and (3) changes in the tax laws which would serve the double purpose
of bringing in some net additional revenue and improving the equity
of our tax system.




188

1950 REPORT OF THE SECRETARY OF THE' TREASURY

I might add here, parenthetically, that our estimates of revenue
receipts for the fiscal year 1951 are based on the assumption of a continued high rate of business activity. The President made this clear
in the budget message when he said:
•
The estimates of receipts assume economic activity at approximately the same
level as at the present time.

The decrease of $457,000,000 in^estimated receipts for the fiscal year
1951, as compared with the current fiscal year, is largely accounted
for by an expected decrease in collections from corporation income
taxes. This decrease reflects the fact that lower corporate profits in
the calendar year 1949, as compared with the calendar year 1948, will
not have their full eflFect on tax receipts until the fiscal year 1951.
The tliree policies outlined in the fiscal program of the President—
namely, reduced Government expenditures, stimulation to business,
and an enlarged and improved revenue system—are, as you will note,
intermeshed. The success of each one is bound up with the success
of the other two. I should like to discuss, first, the expenditure side
of the picture, and second, the fiscal measures designed to increase
our revenue and to distribute the tax burden more equitably among
the individual citizens and business concerns of the Nation. I shall
approach both of these questions from the point of view of their
relationship to the current Federal financial picture and to the health
and soundness of the national economy.
REnUCED GOVERNMENT EXPENDITURES
There is, first, the important matter of Government expenditures.
Contrary to a belief which we often hear expressed, the people in
Government are profoundly interested in improving the efficiency of
the Government, in increasing the service' which it renders to the
public, and in reducing the cost of these services to the public.
This is not an unsupported statement, and it is not based on wishful
thinking. Since the end of the war outstanding achievements have
been realized in improving the organization and operating methods of
the executive branch of the Government. The Congress recognized
the importance of these measures last year in authorizing a special
fund for use in extending management improvement throughout the
Government.
These programs, however—as the members of this committee are
well aware—do not make the headlines. They do not contain single
biUion-dollar items; and they relate, for the most part, to technical
changes in management and operating procedures which can only be
appreciated to their full extent by the members of the departments'
and bureaus concerned. In the aggregate, however, they not only add
up to important savings in terms of dollars; they reflect, to my mind,
a trend which is probably unique today among the governments of the
world and which provides one of the strongest assurances of the continued, success of democracy. We in this country are not endeavoring
to retain unneeded services, and we are not content with performing
essential services on the basis of costly or outmoded methods of
operation. Rather, we are engaged in an active campaign to improve
efficiency, increase service, and lower costs. I n the three and a half
years since I took office as Secretary of the Treasury, I have seen the




EXHIBITS

189

results of this campaign demonstrated in action; and I am convinced
that it is one of the most important programs being carried on in the
Government at the present time and one which is receiving far too
little attention.
I am most familiar, of course, with the improvements in management and operation which have been instituted in the Treasury
Department. At various times, I have reviewed these improvements
before' committees of the Congress. The most recent occasion was
the statement which I made last month before House and Senate
committees in connection with the Treasury's requests for appropriations for the fiscal year 1951. My time today does not permit a
detailed account of the things which we have been doing in the Treasury. Withm a few days, however, I shall submit to the Congress—
as a part of the Annual Report of the Secretary of the Treasury qn
the State of the Finances—a summary of important policies and
programs which the Treasury has pursued during the past 3K years,
including the programs for management improvement and greater
efficiency of operations.
You may be' interested at this time, however, in an example of the
concrete results which have been achieved in the Treasury Department in connection with one of the most important of our management improvement programs—that of the Bureau of Internal Revenue.
In this Bureau alone, our recent appropriation request shows that
improved procedures adopted during the past year or two have made
it possible for us to decrease the number of employees on nonenforcement work by 657, representing an annual saving of 1,400,000 manhours equivalent to a dollar saving of $2,800,000. These savings
have made it possible to concentrate an increasing part of the Bureau's
energies and resources on the work which is at the heart of its activities
and of our revenue system—enforcement of Federal tax legislation.
I need hardly emphasize to the members of this committee the
importance of enforcement work in protecting and maintaining the
great voluntary system of self-assessment and collection which is the
fundamental source of our financial strength as a democratic government.
The example which I have just cited is particularly pertinent to
the matters which are under consideration by the members of this
committee. But, throughout the Government, similar improvements
have been taking place; and, while I cannot take more of your time
to discuss them, I should like to add that a share of the credit for
these improvements should go to members of congressional committees such as your comniittee who have given their time and effort to
making certain that the people of this country get value received for
every tax dollar.
The improvements in methods of operation and management
which have taken place in the Government and which are planned
for the near future are refiected in the budget estimates for the fiscal
year 1951 submitted to the Congress by the President last month.
But there is no way that I know of to spotlight in these estimates
the savings which they represent, as compared with the costs of
comparable services rendered the public in former years. I believe,
however, that most fair-minded citizens who study the budget estimates for 1951 will agree with the President that they represent the




190

1 9 5 0 REPORT OF THE) SECRETARY OF THEi TREASURY

most vigorous application of a policy of holding the numerous activities of Government agencies in all fields to essential levels. As 4he
President has explained, many requests for additional funds for highly
meritorious purposes had to be denied in order to reverse the trend
toward higher governmental expenditures.
Under present conditions, however,, reductions in costs as a result
of improved efficiency in carrying on the ordinary activities of the
Government can have only a limited effect on the Federal budget.
Proponents of sharp reductions in Federal expenditures generally
base their recommendations on the thesis that the present high level
of Federal expenditures is not consistent with a return to normal
peacetime Government operations. But, although we are not now engaged in a war, we cannot consider the present period a normal peacetime period. In each of the postwar years, by far the largest proportion of Government expenditures has been required to pay for the
costs of past wars, to keep the Nation's defenses strong, and to further
the cause of world peace. I n the budget for the fiscal year 1951,
such expenditures account for 71 percent of the total budget.
I t seems to me that there is a general unawareness of the details of
the expenditures projected in the Federal budget. Accordingly, I
should like at this time to take a few minutes to go over some of the
more important budget figures to show why it would be difficult to
reduce the expenditures of the Federal Government below the estimates which President Truman sent to the Congress. In this connection, I will present some charts which I believe will make the discussion somewhat clearer.
As all of you know, of course, the President's budget message
estimates that receipts in the fiscal year 1Q51 will total 37.3 billion
dollars under existing tax legislation, and that expenditures will
amount to 42.4 billion dollars which gives the projected budget
deficit for the year of 5.1 billion dollars.- These figures are shown on "
chart 1*; which also shows the budget picture for each of the fiscal
years beginning with 1945. The budget deficit in 1945, the last full
fiscal year of the war, was 53.9 billion dollars. Expenditures were
reduced sharply in the following fiscal year, with the result that the
budget deficit was reduced to slightly more than $20,000,000,000
during that year. In the next two fiscal years, the Federal Government operated with a budget surplus. In 1947, it amounted to
about 800 million dollars; and in 1948, it reached the unprecedentedly
large sum of 8.4 billion dollars, primarily because of the continued
sharp decline in expenditures in that fiscal year. Due to our increased
domestic and international obligations, however, expenditures started
upward again in the fiscal year 1949; but, in the meantime. Congress
had enacted a tax reduction bill in April 1948, which cost us about
$5,000,000,000 of revenue annually. As a result, the Federal Government had a budget deficit of 1.8 billion dollars in the fiscal year
1949 and has operated with a deficit since then.
The estimated expenditures of 42.4 billion dollars in the fiscal year
1951 represent a decrease of $858,000,000 from the fiscal year 1950,
but an increase of 8.6 billion dollars over the postwar low of the fiscal
year 1948. I t is important, therefore, for us to examine the projected*0mitted in this exhibit.




EXHIBITS

191

expenditures, so that we may note just why this is so. Chart 2* shows
the-break-down of expenditures for the fiscal year 1951 by program.
As I have already mentioned, the bulk of Federal expenditures is
required to pay the costs of past wars and to promote world peace.
These cosis can be summed up in four categories—national defense
expenditures, veterans' expenditures, interest on the public debt, and
expenditures for international programs.
National defense expenditures continue to be the largest item in the
Federal budget—rnearly one-third of the total. In the fiscal year 1951,
they will amount to an estimated 13.5 billion dollars. At the present
time, nearly the whole world is in a state, of cold war. Under these
circumstances, the United States is making a vital contribution toward
the goal of world peace by keeping its defenses strong and by maintaining a position of relative military readiness. With that goal so
vitally important, it would be very easy to permit expenditures for
national defense to get out of hand. I t is, therefore, particularly
commendable that vigorous actions have been taken to keep these
expenditures within reasonable limits—and at levels which are within
the capacity of the economy to sustain.
Defense expenditures comprise a wide variety of programs. These
expenditures are analyzed by type of program, and by agency, in
chart 3.*
Over one-third of the estimated expenditures for 1951 is for inilitary
pay and support, although the figure is shghtly less than for the
current fiscal year. The other principal items of national defense
expenditures—so far as cost is concerned-—are operation and maintenance of equipment and facilities, and major procurement activities.
There are two lesser items—^so far as cost is concerned—whose
significance, it seems to me, must be apparent to everyone. These
are the proposed expenditures for the "stock piling of strategic and
critical materials, amounting to $650,000,000, and research and
development amounting to $606,000,000. I might mention that the
research and development programs classified under national defense
do not include the atoraic energy development program wliich, in
itself, requires expenditures of $817,000,000.
The remainder of national defense expenditures is for organized
reserves, adininistration, and other related minor items.
The second largest of the war and peace programs is that for
veterans' services and benefits. Expenditures for the various veterans'
programs are estimated at 6.1 billion dollars for the fiscal year 1951—
one-seventh of all budget expenditures for the year. When we add
these expenditures to those for national defense, we have already
accounted for 46 percent of the budget.
The size of the requirements for veterans' services and benefits
reflects the flvefold increase since 1939 in the number of veterans, and
the new readjustment benefits provided for World War I I veterans,
as well as increases in services and benefits to veterans generally.
Most of the expenditures for veterans' services and benefits depend
upon how many veterans or their dependents apply and qualify for
aid. There are some 300 laws under which payments may be made.
Expenditures for veterans' .programs are shown in chart 4.* They
are expected to be $825,000,000 lower in the fiscal year 1951 than in
*Omitted in this exhibit.
907795—51
14




192

1 9 0 REPORT OF THE) SECRETARY OF THE TREASURY
-5

the current fiscal year. This decline in trend should continue in the
next few years as the temporary readjustment benefits under" the
GI bill taper off or expire under existing legislation.
The next item in the war and peace group is one which cannot be
cut at all. I refer to the interest on the public debt. The amount
involved represents the contractual obligation of the Government to
pay interest at stipulated rates on public debt securities—predominantly issued to finance the last war. This is something, of course,
which is of direct concern to me, as Secretary of the Treasury. I t is a
large item—5.6 billion dollars—and comprises 13 percent of the budget.
You might note that 59 percent of the total budget is now accounted
for. The Treasury Department has been criticized as being too concerned with keeping the cost of servicing the debt low, without regard
for other considerations of debt management. I have tried to make
it clear that keeping the cost of the debt low is only one of many con' siderations involved in debt management decisions. The overriding
consideration is to promote sound economic conditions in the country.
The importance of maintaining confidence in the credit of the United
States Government—the core of our economic system—I feel cannot
be overemphasized.
The last program which we classify in the war and peace category
is the program for international affairs and finance. Estimated expenditures in the fiscal year 1951 will amount to 4.7 billion dollars,
which is 21 percent below the estimate for 1950. These expenditures
are shown in chart 5*. By far the largest portion of these expenditures
is for the European Recovery Program.
These four war and peace programs comprise, as I have said, 71
percent of the budget. There remains only 29 percent of the budget—
12.5 billion dollars—to finance the rest of the Government's operations.
Not all of these expenditures by any means, however, are what we
might call the running expenses of the Government.
Expenditures in this group finance the Government's programs in
many broad areas such as housing, education, social welfare, aids to
agriculture, research, transportation, and natural resources. They
include specifically such expenditures as those of the Atomic Energy
Commission and the postal deficit. They include expenditures for
flood control, for soil conservation, for reclamation, and for a score of
other activities which the Government must perform in order to
conserve our natural resources. More importantly, these expenditures finance functions which the Government must perform in order
to conserve our human resources. These include expenditures for
education, for private and public housing, for social security—for all
the Government programs which contribute to the vitality of the
American people.
In my appearance before your committee today, I have necessarily
had to restrict myself to a brief summary of the budget expenditures
proposed by the President. A detailed analysis of these items, however, will bear out the President's statement that the budget was
carefully prepared with a view toward, holding expenditures to the
lowest possible levels consistent with maintaining a strong domestic
economy and fostering national security and world peace.
*0mitted in this exhibit.




EXHIBITS
PROPOSED CHANGES IN THE TAX LAWS

193
'

The analysis of budget expenditures makes it clear that our best
hope of reducing the deficit and working toward a balanced budget at
this time is the adoption of measures which will increase Federal
revenues. President Truman in his special tax message to Congress
recommended a program which would result in increased tax revenues.
I turn now to a detailed discussion of these recommendations.
The President has made clear the necessity for integrating taxation
with our broad national economic objectives. Tax revision can contribute to the maintenance of national prosperity, continued economic
opportunity, and world peace.
The immense task of increasing tax revenues during the war overshadowed the equity considerations which in normal times could not
be disregarded. In meeting the unavoidable obligatioris imposed by
our postwar problems we have been compelled to postpone necessary
adjustments in the tax system. Most of the tax revision which must
ultiriiately be made will involve a sacrffice of revenue that is now
urgently needed to meet our greatly enlarged responsibilities. Some
revisions, however, should no longer be postponed. They have become essential to strengthening the economy and removing the most
serious inequities from the tax system,
The. tax program submitted by the President represents a careful
balance between revenues and expenditures in the light of present
arid prospective econoniic conditions. I t stresses those things which
should come first.
As the committee is aware, the Treasury has been giving continuous
study to the problems of postwar tax revision. Various aspects of
the tax system have been considered in terms of the requirements of
an expanding economy. As a part of this work, a number of technical studies have been prepared to assist your committee.. Work
has been conducted on a cooperative basis with the staff of the Joint
Committee on Internal Revenue Taxation, and similar conclusions
have beeri reached on many problems of tax revision.
M y views on the objectives of tax revision were outlined before
this committee nearly 3 years ^ago. At that time I set forth these
goals: The Federal tax system must produce adequate revenue, treat
taxpayers equitably, minimize interference with incentives to work
and invest, contribute to the maintenance of stable high-level production and employment, promote improved living standards, and
facilitate tax administration and compliance.
At that time substaritial future revenue leeway was anticipated for
constructive tax revision, and I presented in some detail the major
problems requiring attention. The large tax reduction which followed
a year later dissipated the revenue surplus and, m t h it, opportunity
to make desirable and necessary tax improvements.
The recommendations of the President to the Congress are designed
to place tax revision in proper perspective. If the right course is
pursued, most of the fundamental tax problems I listed for attention
3 years ago can be dealt with.
I t is important that a beginning be made now. I t is equaUy
important that we exercise forbearance and undertake no more than
can be afforded.
•
,




194

195 0 REPORT OF THEI SECRETARY OF THEi TREAisURY

To this end, the President has made two broad recommendations.
The first is that excise taxes be reduced to the extent that the
resulting loss in revenue is replaced by closing loopholes in the present
tax laws.
This means that excise tax reduction must be limited to about
$600,000,000.
The second recommendation of the President is that additional
revenue of $1,000,000,000 be provided by revising and improving the
estate and gift taxes and the corporation income tax.
I turn now to a detailed discussion of these recommendations.
EXCISE TAX REDUCTION

Since only a limited amount of revenue may be lost at this time,
we should select for reduction those excise taxes wliich are most harmful. The most urgently needed reductions, as the President indicated,
are in the excise taxes on transportation of property, on transportation
of persons, on long-distance telephone and telegraph communications,
and in the retail excises.
I should like to state briefly why these taxes have been considered
to have the most compelling claim for attention.
In our studies of excise tax problems we have had the benefit of
discussions with numerous taxpayers and their representatives, business and labor organizations, and civic and governmental groups.
We have carefully considered the facts and viewpoints presented in
determining which taxes are most burdensome to the industries
affected, which create most serious competitive problems, which fall
with undue weight on low-income groups, and which impose barriers
to investment and consumption.
The committee has had the benefit of our technical studies on
these taxes, and I shall be glad to supplement them with additional
information at the desire of the committee. Summary tables showing
the changes in excise tax rates since 1939 and the estimated revenues
for the fiscal year 1951 are attached to my statement (exhibit 1*).
The taxes on transportation of property, on transportation of persons, and on long-distance telephone ^and telegraph communications
have some defects in common. They all fall on regulated public
services, which are used widely and predominantly by business. The
tax on transportation of property is almost entirely a cost of doing
business. Excise taxes on business costs tend to be pyramided through
successive mark-ups by those handling goods in the various stages of
production and distribution. The cost of living of all consumers is
increased out of proportion to the tax imposed. In addition, the
taxes thus added to the prices of goods and services generally are the
most burdensome on lower-income groups.
The Members of the Congress through their own experience with
the 15 percent tax on passenger fares can readily appreciate the discrimination which businessmen face in paying for the transportation
of their salesmen, shipping their goods, and maintaining telegraph or
telephone contact with their markets.
The benefits from reduction of these taxes would be widely distributed among business and consumers. The reductions would be
•Omitted in this exhibit.




195

EXHIBITS

promptly refiected in the costs of those using the services. The
increased use of transportation and communication facilities would
involve little additional cost where excess capacity now exists and,
therefore, would improve the position of the businesses affected.
The retail excises were raised to their present 20 percent rate during
the war when the sales of the taxed articles were increasing under the
stimulus of excess consumer purchasing power. Under the competitive conditions prevailing today, this high rate of tax is working hardship on many businesses and their employees. Small businesses, often
of a family type, are penalized. .. A reduction in these taxes would
stimulate employment and production.
. Although only a limited revenue loss can be afforded at this time,
the President's program permits excise tax reduction which will relieve
the most serious inequities and should produce the most significant
benefits. Specifically, the program permits the elimination of the
freight tax, reduction of the 15 percent tax on transportation of persons to 10 percent, reduction of the 25 percent tax on long-distance
telephone and telegraph communications to 15 percent, and reduction
of all the 20 percent retail excises to 10 percent. The net cost of these
revisions, after allowing for the extension of the tax on radios to television, which is required in the interest of tax equity, would amount to
over $600,000,000. The details of this program are presented in the
following table.
Present rate

Tax

Transportation of property
Transportation of persons
Long-distance telephone and telegraph..
Retail excises:
Furs
-•
Luggage
_
Jewelry..
Toilet preparations ^

Reduced
rate

Percent

Perceiit

Total
..--Increase from including televisions in present manufacturers'
excise tax on radios
.
_

Estimated
revenue loss
on an annual
basis
Millions
• $310
75
120
25
35
80
50
695
40
655

Total revenue loss.
1 Estimated revenue loss allows for the exemption of baby oils, powders, and lotions.

. In suggesting these reductions I do not mean to imply that there are
no other competing demands for excise tax reduction or that some
of these taxes, particularly those on communications and transportation of persons, should not be further reduced when conditions
permit. However, in view of our budgetary situation we must defer
a while longer revisions in such areas as the manufacturers' excise
taxes.
CLOSING OF LOOPHOLES

The President has called attention to the more important loopholes
which should be closed to provide replacement revenue for excise
tax reductions.
I should like to emphasize the importance of this action by indicating its bearing on our work in administering the tax laws. One of




196

1 9 5 0 REPORT OF T H E SECRETARY OF THEi TREAISURY

my foremost objectives since I became Secretary of the Treasury has
been constantly to improve our relations with taxpayers.
We have taken great pains to mform taxpayers of their rights as
well as their duties in complying with the law.
We are using the most advanced management methods to facilitate
the filing of returns and the swift disbursement of refunds.
Continuous efforts are being made to achieve adequate detection
and correction of underpayment and overpayment of taxes.
We all know that the workability of our tax system and especially
of the income tax depends on the high regard our people have for the
fairness of our tax laws and their administration. We will strengthen
taxpayer confidence by closing loopholes which bestow unjustffied
benefits.
By arrangement with your committee, our staff has been working
with the staff of the Joint Committee on Internal Revenue Taxation
since last summer on developing legislative suggestions for eliminating
loopholes. The recommendations in this area represent the product
of this joint effort. Other loopholes are still under study and will'be
brought to the attention of your committee at some future time.
I should like to refer first to the special allowances for depletion.
SPECIAL DEPLETION ALLOWANCES

Depletion in ordinary accounting usage is intended to permit taxpayers to recover the cost of mineral properties over the producing
life of the properties. Depletion is the counterpart of depreciation
which is intended to permit recovery of the cost of other assets over
the period of their useful life. When the original investment has been
recovered, no further depreciation is allowed for tax purposes. Howr
ever, in the case of depletion, special provisions which allow recovery
of more than the cost of mineral properties have been in the law since
1918.
Under present law, special allowances are granted on the basis of
specified percentages of gross income for different types of minerals.
The percentage of gross income allowed is 27)^ percent for oil and gas,
23 percent for sulfur, 15 percent for metals and a large number of
nonmetallic minerals, and 5 percerit for coal.
Percentage depletion continues for the life of the property and generally results in the tax-free recovery of many times the cost. I t is
granted to those purchasing properties as well as to those operating
properties they have developed. The allowances have become more
valuable as tax rates have been increased.
Furthermore, the benefits from percentage depletion are increased
by provisions which permit development costs to be deducted as an
expense in the year incurred instead of being treated as a capital cost
to be recovered later through depletion deductions. This is equivalent
to a double deduction for the same costs, once when they are incurred
and again under percentage depletion. In the oil industry during
1946 and 1947, for every $3,000,000. allowed as percentage depletion;
another $2,000,000 was deducted as development costs.
The combination of percentage depletion and the expensing of
development costs provides a mechanism for pyramiding extensive
holdings in oil assets with pajmient of little or no income tax.




EXHIBITS

197

As the President has indicated,.miUions of dollars are made annually
from operating oil properties on which little or no income tax is, paid.
The President mentioned one outstanding example. You will find
others in the attached material (exhibit 2*). In the examples cited,
annual incomes, on the average, of over $1,000,000 were obtained on
which an average tax df only 22}^ percent was paid. This is the rate
now paid by persons with incomes of less than $25,000.
These illustrations suggest how much additional revenue theGovernment would gain by limiting some of these special allowances.
You will find from an examination of the materials I am submitting to assist the committee in considering revision of these
provisions that:
First, the estimated-revenue loss is between 400 and 500 million
dollars annually. This is as much as the yield of all the retail excises.
Second, the allowance is especially excessive in the case of oil and
gas and exempts a higher proportion of the earning of this industry
which may expense more of its development costs than the other
mineral industries.
Third, the provision has been found to be of little benefit to small
prospectors on whose behalf it is so frequently supported.
Fourth, these deductions enable high-income individuals to reduce
to negligible proportions taxes on income from sources totally unrelated to these industries.
There are a number of ways in which the necessary revision of
present allowances can be accomplished. I n general, these involve
either the limitation of percentage depletion or the termination of
the option to expense development costs. The benefits of expensing
development costs are confined to the finding of new properties.
Percentage depletion on the other hand may be obtained on established as well as new properties, and regardless of whether the recipient
contributed to the development of the property. The reduction of
percentage depletion would tend to reduce windfalls while protecting
incentives for exploration.
A reasonable way to reduce the excessive benefits would be to
Hmit the percentage of gross income which might be deducted as
depletion. A reduction in the present net income limitation would
leave the more excessive allowances untouched while reducing the
benefits on the small, less profitable properties.
Specifically it is proposed that percentage depletion for oil, gas, and
sulfur be reduced to 15 percent of gross income and that percentage
depletion for nonmetallic minerals be reduced to 5 percent. The
existing 15 percent rate for depletion aUowed to the metals would be
left unchanged.
It is further proposed that oil and gas operators who elect to expense
intangible drilling and development costs be required to reduce income
from the property by the amount of such expensed costs in computing
their depletion allowance. This requirement will reduce the extent
of the double deduction now enjoyed by oil and gas enterprises with
respect to certain of their capital costs. '
: Together these proposals would remove the more obvious inequities
of the present system without interfering significantly with production
incentives.
»
•Omitted in this exhibit.

•




198

1 9 5 0 REPORT OF T H E SECRETARY OF T H E TREASURY
BUSINESS OPERATIONS OF CHARITABLE AND EDUCATIONAL
ORGANIZATIONS

I suggest the consideration of legislatidn to eliminate the abuse of
tax exemption by charitable and educational organizations. These
exemptions reflect a long-standing Federal Government policy to
encourage the activities of such organizations.
The law has been interpreted by some courts to attach the exemption to the destination of the income rather than its source. Some
colleges and other institutions are engaging in a wide variety of
business undertakings, including the production of such, items as
automobile parts, chinaware, and food products, and the operation
of theaters, oil wells, and cotton gins.
Advantage is also being taken of the exemption by the purchase of
rental properties with borrowed fimds. In this type of operation the
nonprofit organization enjoys advantages over privately owned business which is measured by the amount of the tax privately owned
enterprise is required to pay. This advantage permits these institutions to apply a larger portion of rental receipts to repayment of
borrowed funds than is possible for a privately owned business paying
income tax. The exemption should be limited to income received from
ordinary investments which involves no abuse.
The correction of present abuses, which shift additional burdens
to the rest of the population, becomes essential for reasons of equity.
This calls for a solution which will eliminate the abuse but will not
interfere with the basic activities of these organizations.
To meet this problem, it is recommended that the income derived
by these institutions from the operation of businesses which are
clearly unrelated to their primary functions be taxed at regular
corporation income tax rates.
Another closely related abuse of tax exemption involves the establishment of so-called charitable foundations or trusts which serve as a
cloak for controlling businesses. The present law permits the transfer
of business investments to tax-exempt trusts and foundations for
these purposes without payment of estate or gift taxes. The income
subsequently received from the business by the trust or foundation
is exempt from income tax.
The abuse to which this type of device lends itself is the retention
and reinvestment of a major share of the trust income in a maimer
which will benefit the grantor.
One method to eliminate this abuse would be to require that such
trusts or foundations pay out substantially all net income within a
specified period after the close of every taxable year. A further
requirement should be a prohibition against dealings between the
trust and its creator or businesses under his control and against the
use of the trust for the personal advantage of the grantor.
LIFE INSURANCE COMPANIES

The President has urged legislation to terminate the undertaxation
of life insurance companies without impairing the abUity of individuals
to acquire life insurance protection.
The action you have recently taken in the House of Representatives
will correct the provision which unintentionally relieved this industry




EXHIBITS

199

of tax for 1947, 1948, and 1949. The spirit in which this was accomplished is highly gratifying. However, as you know, legislation is
also required to provide an equitable basis for the taxation of life
insurance companies in the future.
As the committee is aware, the staffs of the Treasury and Joint
Committee have devoted a great deal of attention to this matter. I
believe that the thorough consideration already given this probleni
has developed the information you wUl require in devising a satisfactory solution.
I n considering this matter I have been continuaUy impressed with
the magnitude of the stream of life insurance income amounting to
more than 1.5 billion dollars a year from investment income alone.
The $60,000,000,000 assets of this industry constitute an important
fraction of our total wealth. I do not believe that favored taxation
is in the best interest of this industry in the long run. Nor do I
believe t h a t it would be supported by the policyholders, who are a
majority of the population.
Since 1921 life insurance companies have been taxed on only one
source of income, namely, income from investments. I t is difficult
to develop an eqtiitable method for computing a deduction for obligations to policyholders when this income alone is taken into consideration. I consider the industry-wide average which has been
used since 1942 a most inequitable basis for permanent taxation.
The present system which is in effect a flat tax on gross income disregards the wide variations in profitability of operations between
different companies, and is at variance with the accepted principles of
taxing each corporation on its own net income.
Since insurance company operations generally are based on profits
from writing life insurance as well as investment income, a more
inclusive tax base would recognize underwriting profits as well, in
other words, total income. This method would permit more comprehensive treatment of the differences in forms of income and the
reserve policies of the iridividual companies. Several approaches to
the taxation of life insurance income are discussed iri material attached
to this statement (exhibit 3*).
OTHER TAX LOOPHOLES

Additional revenues should be raised by. closing a number of less
important loopholes which taken together constitute a substantial
barrier to effective and equitable taxation.
A number of tax loopholes together with proposed remedies are
described in a memorandum attached to this statement (exhibit 4*).
This list was developed jointly by the staffs of the Treasury Department and the Joint Committee on Internal Revenue Taxation.
A number of these loopholes arise out of defects in the capital gains
tax structure, which provides a maximum effective rate of 25 percent
on gains from capital assets held for more than 6 months. The
President, in his recent tax message to the Congress, gave an example
of one of these loopholes, the ^'collapsible" corporation, through
which individuals, engaged iri the business of producing certain types
*0mitted in this exhibit.




200

1950 REPORT OF THEi SE'CRETARY OF THE TREASURY

of property, have attempted to convert ordinary business and earned
income into long-term capital gains.
Another important loophole provides a ^'one-way street" for taxpayers selling property which they have used in their trade or business.^
At the present time, such taxpayers are allowed capital gains treat-'
ment when the sales result in a net gain, while net losses from such
transactions are allowed in full as offsets against ordinary income.
In addition, there is the loophole through which investors in securities and commodities, for some years now, and without any appreciable risk, have been able to corivert short-term gains into the rnore
favorably treated long-term gains, and to create largely fictitious shortterm losses, by means of short sales.
The tax laws also contain some, loopholes and tax havens through
which taxpayers are able to avoid tax completely. Domestic corporations, for example, are frequently able to avoid income tax on income
from operations abroad tlirough the formation and subsequent liquidation of foreign subsidiaries.
Another loophole has in the past enabled many corporations desiring
to sell property to avoid income tax upon such t];ansaction by first
distributing the property in kind to a parent company.
Also, the exemption provided in section 251 of the Internal Revenue
Code virtually relieves all Government employees working in posses-,
sions of the United States from income tax upon their salaries, and
enables many other American citizens to obtain exemption for all of
their foreign income from businesses and other sources.
I t is of course not possible to estimate with any degree of accuracy
the revenue consequences of an extensive loophole-closing program of
the type proposed by the President. This program will have direct
revenue effects by closing loopholes which now permit leakages
throughout the tax system. In addition, it will indirectly increase
revenues, since it wUl remove competitive disadvantages which now
retard taxable private enterprise. We belieye that in the long run
the closing of these loopholes, including the proposals on percentage
depletion and life insurance taxation, has a revenue poteritial of upwards of $500,000,000 a year assuming present economic levels.
The immediate revenue gain will be appreciably less.
The
$500,000,000 is exclusive of the approximately $90,000,000 which
will be produced by the committee's stopgap life insurance legislation.
ADDITIONAL REVENUE

The President has recommended that $1,000,000,000 in additional
revenue be obtained by revising and improving the estate and gift
taxes and the corporation income tax.
This additional reveriue is essential to the objective of balancing
the budget as rapidly as requirements of national economic policy
permit.
As the members of this Committee well know, I consider the protection of the financial position of our Government the major responsibility of my office. In the fiscal years 1947 and 1948 there was a
substantial surplus for debt reduction. The deficit which subsequently developed has given me serious concern and I have earn-




EXHIBITS

201

estly considered the ways in which a favorable budget position might
be restored.
As I pointed out earlier, the President has stressed the fact that
present expenditures are necessarUy at a high rate because of obligations undertaken at an earlier date, and that he expects reductions in
expenditures in subsequent years as the cost of some of the extraordinary postwar programs tapers off.
I believe that we would be ill-advised at this time to raise the general level of taxation sufficiently to cover the cost of all of the extraordinary expenditures embraced in the postwar adjustment programs.
The tax revisions recommended by the President provide a basis
for achieving the revenue goals necessary to maintain our Government
on a sound basis. The amount of net revenue immediately involved
in the President's program is not a full measure of what we can expect
from his recommendations. In the long run the removal of inequities
will make for a more vital economy, and this in turn will refiect itself
in higher tax yields.
REVISION OF ESTATE AND GIFT TAXES

The President has recommended that a substantial part of the additional revenue be obtained by revising and strengthening the estate
and gift taxes in a manner which would bring these taxes nearer to
their proper long-term place in our tax system.
As the President said:
To the extent that these taxes remain too low, the remainder of our tax structure must bear a disproportionate load.

The disparity in present tax burdens becomes striking when the
trends of the estate and gift taxes and the individual income tax are
compared. This comparison is shown in charts* appended to this
statement. They show that the estate and gift taxes have not kept
pace with the income tax.
The total yield from the estate and gift taxes has barely doubled
since 1939 while total internal revenue is 8 times as large and the
individual income tax is 18 times as great. This is shown in chart 6*.
Because of the relatively greater expansion in other tax revenues, the
estate and gift taxes produced only 2 percent of internal revenue in
1949 compared with 7 percent ten years earlier.
Chart 7* compares the current exemptions under the estate tax and
individual income tax with those in effect 10 years ago. You wUl
note that individual income tax exemptions have been reduced sub^
stantially during this period. By contrast, the estate tax exemption,
especially for married persons, has increased.
The estate tax reaches only a little more than 1 percent of adult
decedents, virtually the same proportion as 10 years ago. On the
other hand the individual incoine tax is paid by more than 40 percent
of all persons over 14 years of age, 10 times the proportion taxed in
1939. This comparison appears in chart 8*.
The effective rates of tax on incomes at all levels have increased
substantially. Those on estates, on the other hand, have actually
been reduced for married persons. This is illustrated by chart 9*.
•Omitted in this exhibit.




202

195 0 REPORT OF THE' SECRETARY OF THEi TREASURY

For example, the tax on an income of $10,000 has risen from 4 percent
to 16 percent. Tax on an estate of $250,000 has fallen from 11
percent to 4 percent.
The weakness of the present estate and gift taxes results from:
(1) the overly favorable treatment of property placed in trust for
several generations, (2) the opportunity to escape the higher estate tax
rates by making gifts subject to lower tax rates, (3) the large exemptions, and (4) the ineffectiveness of the present rate schedule. The
last two weaknesses were greatly magnified by the estate and gift
splitting provisions introduced by the 1948 act.
1. Life estates: If property is left outright to a child, it may
become taxable in the estate of the child. This may be avoided by
placing the property in trust for the child's life since the termination
of the child's interest in the trust is not considered a taxable event
under the present law. A study accompanying this statement reveals
that individuals with large estates are placing a substantial part of
their property in trust for more than one generation (exhibit 5*).
An examination" of several hundred large estate tax returns showed
that about 45 percent of the property available for distribution was
placed in trust. The trusts were frequently created to endure, not
only for the lives of the children, but also for the lives of more remote
descendants.
This widespread practice seriously depletes the base of the estate
and gift taxes and penalizes those less motivated by tax considerations
or lacking the opportunity or counsel to take advantage of it. Substantial additional revenue could be obtained by revising the present
treatment. The Treasury staff is prepared to present a proposal
clealing with this problem at the convenience of the committee.
2. Dual transfer tax system: The imposition of separate, unrelated taxes upon property disposed of during life and at death defeats
the objective of estate taxation. The property given away during
life is removed from the highest bracket of the estate, it is taxed at
only three-fourths the rate of the tax on an estate of equal amount,
and the gift tax unlike the estate tax is not included in the tax base.
An individual with $10,000,000 can, by giving away $2,000,000 of
this amount during life instead of at death, reduce his total taxes by
about $1,000,000. As is indicated in the attached study on property
transfers (exhibit 5*), the discrimination against transfers made at
death favors the larger estates and prevents equal treatment of transfers of the same amount distributed in different ways.
The discrepancies in present treatment would be removed by integrating the separate gift and estate taxes into a single transfer tax.
The same exemptions and tax rates would then apply to all property
whether transferred during life or at death. Under an integrated
estate-gift tax structure, it would be possible to provide incentives
for property distributions during life, in the event such encouragement
is deemed to be desirable.
A report based on a comprehensive study by an advisory committee
of the Treasury, consisting of prominent tax practitioners, which I
transmitted to your committee 3 years ago deals with this entire prob^
•Omitted in this exhibit.




203

EXHIBITS

Iem. The Department has since given further study to this matter
and is prepared to present proposals to the committee.
3. Exemptions and exclusions: The present estate tax exemption is
$60,000 and the gift tax exemption is $30,000. In addition, annual
exclusions of $3,000 for each of an unlimited number of donees are
accorded under the gift tax. By taking advantage of the 1948 amendments a man with a wife and three chUdren, who has $300,000 of
property, may give them $24,000 a year, plus an additional lump
sum of $60,000, without paying any gift tax. Upon his death, he has
another $60,000 exemption. If he leaves at least half of his estate to
his widow, then the $120,000 remaining at his death is totally exempt,
half as a result of the marital deduction and the other half as a result
of the exemption. Thus, during a 5-year period the family would have
received the entire $300,000 free of any tax.
The integrated transfer tax would require only a single exemption
of $45,000, all of which would be available to the estates of persons
making no gifts; $15,000 of the $45,000 exemption would be avaUable
for transfers during life.
The excessiveness of the $3,000 gift tax exclusion for each recipient
of gifts could be overcome by limiting tax-free gifts made by any one
individual each year to $3,000. An additional allowance of perhaps
$500 for each donee might be adopted to avoid the need to account for
small gifts.
4. Rates: There are two principal weaknesses in the present rate
schedule. First, the estate tax begins at the low rate of 3 percent
and the gift tax at 2% percent. Second, the higher rates in the present
schedule are reached only in the case of unusuaUy large estates. I t
would be necessary for a married person splitting his property under
the 1948 amendments to have an estate in excess of $20,000,000
before any part would be taxable at the top bracket rate. .
A rate schedule which would overcome these objections and raise
substantial revenue is attached. The schedule would start at 10
percent, and reach the present top rate of 77-percent at $3,000,000
instead of $10,000,000.
Comparison of alternative estate tax rate schedule with present law
T a x a b l e n e t estate
(in t h o u s a n d s )

Oto$10.—.
$10 to $20-$20 to $30-.
$30 to $40-$40 to $60...
$60 to $100.$100 to $150.
$150 to $200.
$200 to $250.
$250 to $300.
$300 to $400.
$400 to $500.
$500 to $600.
$600 to $700.
$700 to $850.




Present Alterlaw
native
Percent
3-7
11
14
18
22-25
28
30
30
30
32
32
32
35
35
35-37

Percent
10
13
16
19
22
26
30
33
36
.39
42
45
48
51
54

T a x a b l e n e t estate
(in t h o u s a n d s )

$850 to $1,000....
$1,000 to $1,200..
$1,200 t o $1,400..
$1,400 to $1,700..
$1,700 to $2,000..
$2,000 to $2,500..
$2,500 to $3,000..
$3,000 to $3,500..
$3,500 to $4,000..
$4,000 to $5,000..
$5,000 to $6,000..
$6,000 to $7,000..
$7,000 to $8,000..
$8,000 to $10,000.
$10,000 a n d over.

P r e s e n t Alterlaw
native
Percent
37
39
39-42
42-45
45
49
53
56
59
63
67
70
73
76
77

Percent
57
60
63
66^
69
72
75
77
77
77
77
77
77
77
77

204

1 9 5 0 REPORT OF THErSECRETARY OF THE; TREAISURY

Comparison of amounts and effective rates of Federal estate taxes under 1942 and 1948
laws and under proposed revision
...
Single person
N e t estate before specific
exemption

1942 a n d 1948
laws

M a r r i e d person 2

Proposed
revision i

1942 l a w

1948 l a w

Proposed
revision 1

A m o u n t of tax
$50,000
$100,000...-.
$150,000....
$200,000.....
$250,000..-..
$300,000-.-.
$400,000—..
$500,000
$750,000—..
$1,000,000...
$2,000,000...
$5,000,000...
$7,500,000--.
$10,000,000-

17,
31,
45,
59,
87,
116,
191,
270,
626,
2,038,
3, 454,
4, 975,

$500
9,100
21, 700
36, 050
51, 500
68, 450
105, 900
146, 350
257, 900
383, 250
962, 450
2, 941,850
4, 553, 250
6,115,850

$4,800
17, 500
31, 500
45, 300
59,100
87, 700
116, 500
191, 800
270, 300
626, 600
2,038,800
3, 454, 200
4, 975, 000

$1, 050
4,800
10, 700
17, 500
31, 500
45, 300
80, 500
116, 500
270, 300
830, 000
400, 900
038, 800

$500
3,900
9,100
15. 200
21, 700
36, 050
51, 500
96, 200
146, 350
383, 250
1, 281,900
2,116,550
2,941,850

0.7
2.4
4.3
5.8
7.9
9.1
10.7
11.7
13.5
16.6
18.7
20.4

0.5
2.6
4.6
6.1
7.2
9.0
10.3
12.8
14.6
19.2
25.6
28.2
29.4

Effective r a t e (percent)
$50,000$100,000
$150,000
$200,000.....
$250,000
$300,000
$400,000
$500,000
$750,000
$1,000,000...
$2.000,000...
$5,000,000...
$7,500,000...
$10,000,000..

1.0
9.1
14.5
18.0
20.6
22.8
26.5
29.3
34.4
38.3
48.1
58.8
60.7
61.2

4.8
11.7
15.8
18.1
19.7
21.9
23.3
25.6
27.0
31.3
40.8
46.1
49.8

1 A s s u m i n g t a x p a y e r s m a k e n o gifts d u r i n g life a n d reserve, full $45,000 e x e m p t i o n u n t i l d e a t h .
2 A s s u m i n g full use of m a r i t a l d e d u c t i o n .

These adjustments in rates and exemptions will do little more than
restore the yield of the estate and gift taxes to their strength prior
to the introduction of estate splitting between husband and wife by
the 1948 Revenue Act. If this provisiori were eliminated, the President's revenue objective could be obtained by relatively minor
changes in rates and exemptions.
In estate and gift tax revision, it would also be desirable to make
certain minor improvements in these taxes. These include repeal of
the deduction for support of dependents and the substitution of a
tax credit for the present deduction for prior taxed property.
I have stated in some detail the present deficiencies in these taxes
ih order to emphasize the urgent need for revisions. Only by taking
such action now can the full potentialities of these taxes be realized
in future years.
The changes I have outlined would increase the yield of estates and
gift taxes on an annual basis by about $400,000,000.
No other method of raising this additional revenue would have less
serious effects on the economy. The amount of tax on the estate involving a business which might properly be considered small would
not materially affect the normal developmerit of such a business. In
the infrequent instances in which liquidity is a problem, the extension
of tax payments permitted by present law up to a maximum of 10



205

EXHIBITS

years protects estates from having to make forced sales of property
at a serious financial loss.
REVISION

OF THE

CORPORATION

INCOME

TAX

The President has recommended revisions in the corporation income
tax to improve the present rate structure and provide additional
revenue.
During most of its history the corporation income tax law has
accorded preferential tax treatment to small business. To preserve
such treatment when the wartime rates were imposed, an excessively
high rate of 53 percent was applied to corporations with incomes
between $25,000 and $50,000. This so-caUed ''notch" rate provided
the transition from the low rates on small corporations to the generally
applicable higher rates. The elimination of this high ''notch" rate
would remove an obstacle to the expansion of small business.
This objective could be attained by applying the general corporation
tax rate above $25,000 and to aUow all corporations the reduced rates
below $25,000. This would substantiaUy reduce the tax on corporations in the present "notch" area and also accord some reduction to
corporations with incomes above $50,000.
The general corporation income tax rate should be increased to
recover the revenue loss associated wih the suggested "notch" rate
adjustment and also to contribute to the reduction of the budget
deficit.
I suggest that the present 38 percent general corporate rate be
raised to 42 percent. This would produce an estimated $675,000,000
additional revenue annuaUy, after aUowing for the revision in treatment of smaller corporations as suggested by the President.
Although the great majority of corporations are relatively small,
the large bulk of corporation income is concentrated among the very
large corporations. This is apparent from chart 10* which shows that
one-eighth of all corporations receive 90 percent of total income.
Under the revised program only those corporations with net income
above approximately $120,000 or less than 10 percent of all corporations would have increased tax liabUities. The taxes on corporations
with incomes between $25,000 and approximately $120,000 would be
reduced, the reduction reaching a maximum of almost 15 percent of
the present tax at $50,000. They represent about 15 percent of all
corporations. The relative changes in tax for corporations of different
size are shown iri chart 11* and in more detail in the following table:
T a x liability

Net income
$5,000
$10,000
$25,000
$30,000
$50,000
$60,000
$75,000....$100,000....
$118,750.-.
$250,000..$1,000,000..
$10,000,000.
$100,000,000
•Omitted in this exhibit.




Present law
$1,050
2,200
5, 750
8,400
19, 000
22, 800
28,500
38, 000
45,125
95, 000
380,000
3, 800,000
38,000, 000

.

Proposal
'

$1,050
2,200
5, 750
7,850
16,250
20,450
26,750
37,250
45,125
100,250
415,250
.4,195,250
41,995,250

Percent
change
0
0
0
-6.55
-14.47
-10.31
-6.14
-1.97
.0
+5.53
+9.28
+10.40
+10. 51

206

195 0 REPORT OF THE) SECRETARY OF THEi TREASURY

Corporate profits and dividends have increased substantiaUy since
the present rates were adopted in 1945. The proportion of profits
retained, and thus not subjected to tax in the hands of stockholders,
is considerably in excess pf the normal prewar proportions. In view
of the relatively strong position of large corporations at the present
time, I believe that the small tax increase proposed wUl have no important adverse effects on the economy.
I n addition to the revision of the corporate tax rates, I also recommend the extension of the period for offsetting losses against profits
of subsequent years. The need for giving business greater leeway
to recover losses has been widely recognized in discussions of postwar tax revision. Taxing profits without adequate recognition of
losses creates inequities and restrains risk-taking. A dynamic
economy requires a continued stream of new ventures, which often
result in losses for a series of years before they become profitably
established. A longer period for carrying over loss wUl be especially
beneficial to small and new businesses.
I recommend a 5-year carry-over with a 1-year carry-back: This
would provide a total period of 7 years in which losses might be offset
against profits. This provision would involve no immediate loss in
reveriue.
The President also referred to tax revisions which would facUitate
the extension of financial and technical assistance to underdeveloped
regions of the world. These recommendations are designed to implement in part the Point IV Program, and I should like to review them
briefiy.
As you laiow, the earnings of a foreign subsidiary of a domestic
corporation are not taxed until such earnings are transferred to the
parent corporation in the United States as dividends. An American
business which prefers to conduct its foreign operations as a branch
of a United States corporation does not have this advantage. I t
must include in the taxable income each year the current earnings of
its foreign branch. Foreign branch operations should be placed on
an equal footing with foreign subsidiaries by allowing postponement
of tax on their income untU it is returned to the United States. This
is not only a matter of equity, but would also encourage new investment abroad and the reinvestment of foreign earnings.
The credit for taxes imposed by other countries helps to eliminate
international double taxation, but it needs to be adapted to our policy
of encouraging private investment abroad. A United States corporation may now claim credit for the taxes paid by a foreign corporation
with respect to the dividends received from the foreign corporation
only when it owns * majority of the voting stock. One of the consea
quences of this requirement may be illustrated by the case of two
domestic corporations which pool their resources to form a foreign
subsidiary. If each owns 50 percent, neither one obtains a foreign
tax credit. Where the ownership is divided unequally, only the one
having majority control is allowed a credit. To facUitate joint
ventures abroad and to meet the requirements or desires of foreign
countries for local participation in these ventures, we should reduce
the present ownership requirement for foreign tax credit.
Foreign investment wiould also be encouraged by the liberalization




EXHIBITS

207

of the foreign tax credit in the cases where losses in one foreign country
offset profits in another.
Service abroad by American experts is essential to the Point IV Program, both in the provision of technical assistance in the strict sense
and in the functioning of private investment. We should remove
discouragement to Americans participating in those activities by
making the present exemption of their earnings applicable to the entire
period they reside abroad once they have established a bona fide foreign residence.
The foreign tax credit has worked successfully iri the income tax field,
and it can be extended with equally satisfactory results to the estate
tax. By so doing, we shall remove another of the barriers which sometimes keep able technicians and businessmen from undertaking assignments abroad, and I urge the committee to take such action. These
changes in tax provisions are discussed more fully in an attached
statement (exhibit 6*).
They should not be viewed as the only necessary incentives for
the participation of private capital in foreign economic development.
Their potential effects will be realized only if foreign countries take
positive steps to create conditions under which private capital cari
operate satisfactorily. This can be accomplished to an iinportant
degree by the negotiation of investment and tax treaties, which the
administration is endeavoring to secure.
[The charts * and exhibits omitted in this exhibit are published in Revenue
Revision of 1950—Hearings before the Committee on Ways and Means, House of
Representatives, 81st Congress, 2d session, volume 1.]

Exhibit 21.—statement of Secretary of the Treasury Snyder before the Senate
Finance Committee, July 5, 1950, on H. R. 8920, a bill to reduce excise taxes,
and for other purposes

I am pleased to have an opportunity to appear before the members
of this committee as you begin consideration of the tax revision bUl,
H. R. 8920, which the House of Representatives passed on June 29.
I read with great interest, Mr. Chairman, your statement that the
committee decided to proceed with tax legislation in the full knowledge
that present plans may need to be altered by developments in Korea.
I am glad that the committee has decided to prepare a bill for action
with the understanding that it could be halted if conditions later
indicate that it would be unwise to go through with the legislation.
I am in accord with this view of the committee and will present my
testimony on the basis of this understanding.
In strengthening our resources for possible eventualities, improvement in the Government's fiscal position is a basic requisite of national
preparedness.
At the outset I should hke to make it clear that the position which
I have taken on other occasions with respect to our revenue system
has not changed. I t is my conviction that our general objective must
be a tax system which yields sufficient revenue during prosperous
times to meet the necessary expenditures of the Goverriment and to
leave some surplus for debt reduction. This was thQ goal expressed
•Omitted in this exhibit.
907795—51
15.




...

_...

208

1950 REPORT OF THEI SECRETARY OF THE. TREASURY

by the President in his tax message to the Congress last January.
I t is the position I have taken on many occasions in appearances
before committees of the Congress. I t is the pnly position consistent
with my responsibility to the American people.
I n the 5 months since I appeared before the Committee on Ways
and Means of the House of Representatives in support of the President's tax program, it has become increasingly apparent that 1950 will
be one of the most productive business years in our history, in terms
of the actual output of goods and services. During recent months
there has been growing recognition that the strong upturn in business
this year is something more than a temporary, inventory replenishment, as some had characterized it earlier. I t is more than a mere
rebound from the lower production levels of 1949. There is no longer
reason to question that the business improvements this spring and
summer represent an important forward movement in our national
economy.
The strength of this movement, in fact, has been so widely recognized in recent weeks that I shall not take your time on this occasion
to go into the detaUs of the business situation. I should like to stress,
however, that personal and business incomes—the most important
elements in our revenue potential—^have continued during 1950 at a
very high level. Excluding the special insurance dividend to veterans,
personal incomes this year are well above the correspondirig period a
year ago, and not far from the record figures of 1948.
The earnings of business concerns, likewise, have contmued to be
exceptionally favorable. Corporate profits before taxes have been
advancing steadily throughout the past 12 months, and are estimated
for the first half of 1950 at an annual rate of a little under $33,000,000,000—almost $5,000,000,000 higher than a year ago, and not
far from the record annual total of approximately $35,000,000,000 in
1948. You may be interested to-note, in addition, that the present
level of corporation profits, on an annual basis, is more than three
times as high as the prewar record level of $10,000,000,000 in 1929.
Under these conditions of exceptional prosperity for both individuals and business concerns, we cannot justify less than a maximum
effort to meet current expenditures and to further the program for
reducing our outstanding debt. This principle is the foundation of
our financial strength. With relations between nations in a troubled
state, we cannot afford a short-range approach to the vital matter of
the financial soundness of the United States Government.
The Federal deficit for the fiscal year 1950 amounted to 3.1 billion
dollars and is estimated in the President's budget message of January
at 5.1 billion dollars for the fiscal year 1951. If we do not take active measures to reduce deficits during periods of high business activity,
we cannot hope to find our economic defenses at full strength to meet
emergencies—either in the domestic field, or on the international
front.
The financial strength of our Government, as you know, depends
in part on its income. I t depends on income derived from a revenue
system which is fair and equitable as between taxpayers, adequate
to meet governmental requirements, and of sufficient size during
prosperous times to make some repayment on debts incurred in the
past. Because of the size and importance of the Federal debt and of




EXHIBITS

209

Federal financial operations, it is important also to make certain that
our Federal revenue system does not hamper business and trade, but
as far as possible acts to stimulate it.
The revenue proposals embodied in the bill before you make progress toward these goals, which were outlined in the President's
tax message. But the House bill does not go the whole way. The
bill in its present form has the merit of making improvements in the
equity of our tax system. I t provides stimulation to business in
certain areas in the form of lowered excise taxes on various products
and services still taxed at wartime rates. It also provides lower
taxes for smaller corporations, together with various measures which
will be of direct assistance to business operations—for example, more
liberal provisions permitting the business losses of one year to be
deducted from the taxable income of other years. The proposals
which you are considering do not provide, liowever, for increased
revenue, although the need for keeping the finances of the Federal
Government in a sound condition is even greater now than it was at
the beginning of the year when the President made his tax recommendations.
I urge the members of this committee, therefore, to review fully
the proposals for improving our revenue system outlined in the President's program, which I submitted in detail to the Committee on Vf^ays
and Means of the House of Representatives on February 3, 1950.
I turn now to the discussion of the House bUl, first, in the light of
the President's program and, second, with respect to its detailed provisions.
T H E PRESIDENT'S PROGRAM

The President's program has a threefold purpose: (1) to improve
the fairness of the tax system, (2) to bring in some additional revenue,
and (3) to strengthen the economy.
In submitting this program to the Congress, the President recognized that in certain limited areas tax reduction was desirable. He
proposed a conservative excise reduction program which balanced
the most urgent needs for relief against the constraints imposed by an
unbalanced budget during prosperity.
The excise taxes are still at substantially their wartime levels and
their revision to better conform with present-day competitive business
. conditions is overdue. Judicious reductions in these taxes can make
an important contribution to an improved revenue system. Not only
wiir the tax system be made more equitable for consumers but the
changes will aid employment and sales in the industries affected.
Over the long run we should aim to reduce the role of excises in the
tax system.
I n view of our budgetary situation, however, the President recommended the closing of an accumulation of tax loopholes as a source of
replacement revenue for the excise tax reductions.
In addition, the President recommended that a moderate amount
of new revenue be obtained partly from the corporation income tax
and partly from the estate and gift taxes, which now are not making a
proportionate contribution to the Government's revenues.
Recent events have underscored the importance of the objectives
of the President's program. Improvement in the equity and effec-




210

1950 REPORT OF THE' SECRETARY OF THEi TREAISURY

tiveness of the tax structure is especially necessary at a time when
taxes must remain high. Taxpayers bearing disproportionate and
discriminatory burdens must be relieved. Favored groups must not
be provided with unwarranted opportunity to escape taxes intended
to apply generally.
The Committee on Ways and M.eans devoted more than 4 months
to an intensive study of the President's program and gave most careful
consideration to the separate proposals. I t also explored other
potential revisions in the tax system and developed a revenue bill
which goes a long way toward meeting the objectives set by the President. When important tax revisions are undertaken, it is to be expected that the shape of complex legislation covering a wide variety of
problems will not accord precisely with any single conception of the
desired objectives. Compromise is characteristic of the democratic
legislative process.
The House bill provides for excise tax reduction on a substantial
list of commodities and services of mass consumption and relieves a
number of industries that are in a relatively unfavorable position.
By closing serious loopholes in the present law, the bill would
improve both the equity and administration of our tax system and
also produce substantial revenue offsets to the excise tax reductions.
The revision.of the corporation income tax contained in the bill
would recoup most of the remaining revenue lost from excise tax
reduction at the same time that it reduces taxes and eliminates the
inequitable ^^riotch" provision for the benefit of smaller corporations.
The principal deficiency of the House bill is its failure to add as
much strength to the revenue system as the President recommended.
I t does not reduce the present excessive depletion allowances granted
oil and mineral producers under the income tax but rather extends
these allowances to new areas. Moreover, it fails to revise and
strengthen the structure of the estate and gift taxes.
In addition, the bill contains some provisions which would create
new inequities. I will call your attention to these in my discussion
of the detailed provisions of the bill, to which I now turn.
DETAILED PROVISIONS OF THE B I L L
EXCISE TAX REDUCTION

The President indicated that reductions are most urgently needed
in the excises on transportation of property, transportation of persons,
long-distance telephone and telegraph communications, and the four
retail excises.
The plan for implementing the President's recommendations which
I outlined to the Committee on Ways and Means would involve a
net revenue loss of $655,000,000. The excise tax reductions made
in the House bill amount to $1,010,000,000 and cover some groups
not encompassed by the Presiderit's proposals.
The reductions in the retail excises on jewelry, fur, luggage, and
toUet preparations from 20 percent to 10 percent would amount to
$240,000,000, including the elimination of the tax on handbags and a
number of miscellaneous items, such as baby oils, powders, and
lotions. These reductions have a high priority because in recent




EXHIBITS

211

3^ears the 20 percent rate has depressed sales and employment in the
taxed industries.
The transportation tax reductions amount to about $230,000,000.
The bill would reduce the tax on transportation of persons from 15
percent to 10 percent and the tax on the transportation of property
from 3 percent to IK percent. The President had recommended that
the 3 percent tax be entirely eliminated, because it increases the cost
of production and hence the prices of practically every commodity
sold iri this country. The transportation taxes discriminate against
those geographical areas farthest removed from markets or sources of
supply. A reduction of these taxes wUl benefit businessmen and
consumers generally.
The reductions in the communications taxes provided in the biU
would aggregate about $125,000,000. This is approximately the
amount of the reductions proposed to the Ways and Mearis Committee. However, the House bill spreads the reduction over both local
and long-distance telephone use whereas the President recommended
that it be confined to long-distance communications because these
taxes enter into business costs and create competitive inequities.
The tax on telephone-toll messages would be decreased from 25
percent to 20 percent, and the tax on domestic telegraph messages
cut from 25 percent to 10 percent, while the tax on local residential
use would be reduced from 15 percent to 10 percent.
I t will be noted that while the House bill includes all of the items
in the President's program it also includes a number of others. These
consist principally of a reduction in the admissions tax which would
lose a little over $200,000,000 and cuts in a number of manufacturers'
excises which in total would lose another $200,000,000. Moreover,
some of the changes contained in the House bill raise the question of
whether the rates adopted in all cases result in the proper alinement
of related taxes. The Treasury staff will be prepared to present to
the committee at your convenience materials bearing on this question
and related matters.
REPLACEMENT REVENUE FOR EXCISE REDUCTIONS

The excise reductions would be approximately offset by replacement
revenues obtained from closing tax loopholes and other administrative
improvements together with the increase in the corporation income
tax.
The internal improvements in the tax structure achieved in the
House bill cover a large number of changes. These embrace essential
reforms referred to in the President's tax message and other changes
as well, which on the whole are desirable.
Business operations of charitable and educational organizations
Our tax laws have long recognized the principle that organizations
operated for worthy public purposes should be encouraged by tax
exemption. I am thoroughly in sympathy with this policy and fear
that it is in danger of being discredited because a minority has abused
it. The President called this general problem to the attention of the
Congress, and the Treasury Department presented to the Committee
on Ways and Meaas recommendations for handling it. •




212

1 9 5 0 REPORT OF THE) SECRETARY OF THEi TREA'SURY

The House bUl incorporated the remedies developed cooperatively
by the Department and the staff.of the Joint Committee on Internal
Revenue Taxation. These provisions preserve .the tax-free status
of the legitimate activities of educational and charitable organizations
and, at the same time, correct the abuses which properly have received
so much general condemnation.
Business "operations of charitable and educational institutions
clearly unrelated to their exempt furictions generally would be subjected to the regular corporation income tax. This would apply to
organizations now engaging in such unrelated business activities as
the manufacture of food products, leather goods, vegetable oUs, and
the distribution of petroleum products. The bill would not tax their
income from related activities, such as the operation of bookstores,
dining halls, dormitories, or experimental farms, customarily carried
on by educational and charitable organizations. Income from investments, such as interest, dividends, most rents, and royalties, would
also continue to be exempt.
The bill would prevent these organizations from trading on their
tax exemption where they acquire with borrowed funds properties
subsequently leased to business concerns. The members of this
committee are doubtless familiar with such arrangements. The
transaction. is profitable to exempt organizations since, in effect, it
enables them to capitalize their tax exemption. I t is also profitable
to the lessee corporation because it enables it to share indirectly the
nonprofit organization's tax exemption. The House bill corrects
this discrimination against other inyestors, while safeguarding the
existing exemption of educational and charitable organizations on
investment income derived entirely from their own funds.
The House bill also contains provisions for preventing private
exploitation of charitable trusts and foundations for tax avoidance
purposes. The institutions affected are privately, controlled and do
not obtain financial support from the general public. Some of them
were established with a view to securing unintended tax benefits for
the founders and members of their families by enabling them to retain
control over business activities. The provisions of the bill can be
expected to reduce the use of nominally charitable and educational
organizations for the purpose of bestowing tax exemption on private
interests.
Increased extension of the tax-exemption privilege by nonprofit
organizations and charitable trusts and foundations threatens to
make substantial inroads on the revenue. While the present revenue
loss is not large, it will increase unless preventive measures are promptly adopted. The prospective annual loss, in the absence of effective
remedies, would be in the neighborhood of $100,000,000.
Lije insurance companies
As you know, the President requested, the Congress to correct the
present inadequate taxation of life insurance companies on a permanent basis which would afford equitable treatment and at the same
time safeguard the interests of policyholders. He endorsed steps
that had been taken by the Ways and Means Committee to correct
the situation for a number of recent years.
I t should be our minimum goal to assess for those years in which no




EXHIBITS

213

tax was paid the amount called for by the House bill. The industry
has the required resources and has been prepared to pay the amount in
question. In 1948, for example, the increase in surplus was about,
10 times the tax liability which would be imposed under the House
bill for that year. For the smaller companies the ratio is even more
favorable. There is evidence that at least some of the insurance'
companies have set up special tax reserves to cover the tax liabilities
under this legislation which has been under discussion since 1947.
The investment income of life insurance companies now exceeds
1.7 billion dollars annually. Their investment assets, now aggregating more than $60,000,000,000, comprise an important part of the
total national wealth. Continued inadequate taxation of the life
insurance industry would be detrimental to our economy and to the
long-run interest of the industry itself.
In view of the shortness of time for considering methods of permanent revision of the life insurance tax provisions this year, I
recognize the need for extending the House-proposed stopgap formula to 1950. Such extension is included in the House bUl. *This
would yield $55,000,000. However, I believe that the Congress
should make clear that this is intended only as a temporary solution.
I urge active consideration of permanent revision. The Department
is prepared to cooperate with the congressional committees in developing a solution to this problerii.
Miscellaneous loopholes
The bUl also contains technical provisions restricting the opportunities for tax avoidance. The most important of these in terms of
the revenue to be gained is the correction of the present advantage
permitted in the case of sales of business property. When such sales
result in profit, the profit is taxed at the reduced rates allowed longterm capital gains; when the sales are unprofitable, the loss is allowed
in full as an offset against ordinary income. This inconsistency and
tlie resulting prejudice to the revenue can be eliminated either by
treating both gains and losses as ordinary income and loss or by
treating them both as capital transactions. The Ways and Means
Committee adopted the latter solution but faUed to act upon a related
recommendation as to the tax treatment of sales of livestock.
Present court decisions have held livestock regularly culled from a
dairy or breeding herd to be depreciable property used in trade or
business and, thus, any gain resulting from their sale to be capital
gain. In light of the regularity with which such livestock is sold, and
since cattlemen or dairymen are permitted to deduct the cost of raising
the livestock currently from ordinary income, it seems appropriate
to treat the profits therefrom as ordinary income. The Treasury
•Department is continuing its litigation of this important question.
However, I believe that legislation specifically classifying these profits
as ordinary income is desirable, regardless of which solution your
committee adopts as to business property generally.
Other devices, such as the collapsible corporation and short sales
of security or commodity futures, allow taxpayers unintended access
to the more favorable rates of tax levied on long-term gains by permitting conversion of short-term gains or ordinary income into longterm gains. These devices have been curtaUed by the bill.




214

1950 REPORT OF THEI SECRETARY OF THEi TREASURY

There are a. number of other loophole-closing provisions in the
House bill dealing with specific situations resulting from court interpretations, unforeseen business practices, or the development of tax
avoidance techniques.
In most cases the loophole-closing provisions of H. R. 8920 will
cope effectively with the tax avoidance against which they are directed
and will raise about $125,000,000. Additional loophole-closing provisions will be recommended at the appropriate tiihe. The closing of
technical gaps in the law is necessarUy a continuing process, required
to preserve the fundamental equities of taxation and especially
important when tax rates have to be kept high. We cannot expect
to preserve the confidence of taxpayers in our revenue system without
continued vigilance and aggressive action to overcome technical
defects in the law as they develop.
Withholding on dividends
The House adopted a provision which woiUd extend income tax
withholding to dividends at a fiat 10 percent rate. While this provision was not specifically recommended by the President, it is a reform
which the Department has carefully studied for some time with a view
to determining the advantages it would afford.
The available evidence indicates that there is considerable underreporting of dividends on individual income tax returns. A large
part of this unreported dividend income is received irregularly, in
small amounts, and probably is not reported by stocldiolders through
inadvertence or careless bookkeeping. Noncompliance cannot be as
readily uncovered by the Bureau of Internal Revenue under the
present information return system as through a withholding system.
Withholding provides an economical method of securing substantially improved compliance in this area, as it has in the case of
wages and salaries.
Under the system proposed by the House bill, the corporation
would withhold 10 percent from each dividend check. Stockholders
would receive from the corporation either at the end of the year or
after each dividend payment a statement, iri any form convenient to
the paying corporation, showing the amount of the dividends and the
tax withheld. The stocldiolder would report his total dividends,
including amounts withheld, on his tax returns and would claim credit
against his total tax liability for the amount withheld on dividends.
In those instances where the total tax withheld and other prepayments
are larger than the total tax liability, the excess would be refunded.
The dividend withholding system adopted by the House differs in
one important respect from the system now employed for wages and
salaries. For the convenience of the corporatioji, the bill provides
that information on the amount of dividends and tax withheld may
be made ayailable to stockholders either on a separate statement, on a
check voucher, or as part of the information on the check itself.
Although stockholders would be required to itemize on their returns
the dividends they receive from each corporation and the amount of
tax withheld, they may not be able to attach documentary proof of
their claim for taxes withheld.
This method will be less effective than the one used for tax withholding on wages and salaries. Names and addresses on.income tax




215

EXHIBITS

returns will not necessarily be identical with those of record on the
corporations' books. Since the matching of information forms fUed
by corporations with the lists attached to indiyidual income tax
returns would be costly and imperfect, I believe it would be desirable
to provide for a stockholder's receipt—either once a year or with eaph.
individual payment—similar in form to the wage withholding receipt.
Most taxpayers are already familiar with the operation of the withholding system as it applies to wages and the extension of this system
would cause no confusion for the average dividend recipient. The
existence of such receipts would permit the Government to make
prompt refunds with more assurance that they were due.
I t is estimated that the adoption of the withholding provision of
the biU would raise $160,000,000 in a fuU year.
CORPORATION INCOME TAX

H. R. 8920 incorporates the first major change in the structure of
corporation income tax rates since 1938, when the, present limited
form of graduation was adopted as a basis for providing reduced rates
to small corporations. This method results in the present high
^'notch r a t e " of 53 percent required to bridge the gap between the
lower rates applicable to incomes under $25,000 and the general rate
on corporations with income of $50,000 or more. The present rate
schedule is shown in table I.
T A B L E I.—Details of present corporate income tax rate structure

Normal
tax.

Net income

0 to $5,000
$5,000 to $20,000$20,000 to $25,000
$25,000 to $50,000--$50,000 and over-

..
-

--

Percent
15
17
19
31
-..24

Surtax

Percent
6
6
6
22
14

• Combined
normal
tax and
surtax
Percent
21
23
25
53
2 38

Cumulative tax to
top of bracket
Amount

$1.050
i 500
5,750
39,000

Percent

21
22.5
23
138

1 The bracket rates on the first $50,000 average 38 percent, as follows:
Percent
(a) Effective rate on first $25,000
...:
23
(b) Effective rate on next $25,000 (the "notch")---53
(c) TotaL
.76
(d) Dividing by 2, gives.an average rate of
....1
38
J Instead of applying the bracket rates, corporations with incomes above $50,000 are taxed at the rate of
38 percent on their entire income.

The President urged the elimination of this method in order" to
reduce this discriminatory rate and encourage the expansion of
smaller corporations.
The "House bill replaces the present complicated and repressive
provision with a simple rate schedule. The proposed normal'tax
rate of 21 percent would be applicable to the profits of all corporations.
In addition, a surtax rate of 20 percent would be levied on profits
in excess of an exemption of $25,000, making a combined normal
tax and surtax of 41 percent on the amount of profits above $25,000,
The changes in rates under the House bill would reduce the taxes
of all corporations with net incomes between $5,000 and about $167,000




216

1950 REPORT OF T H E SECRETARY OF THEi TREASURY

^nd would increase, the taxes of corporations with net incomes of
more than this amount. Over 170,000, or almost half of the taxable
corporatioris, would have their taxes reduced. This should provide
substantial encouragement to an important segment of our busiriess
population. Less than 19,000 large corporations, constituting only
5 percent of all taxable corporations, would be subject to higher taxes.'
The tax liabilities for corporations of different size under the proposed,
rates and present law are compared in table I I and in chart 1*. The
maximum tax reduction would occur at the top of the present ''notch"
area on net incomes of $50,000 and would amount to $3,500. The
maximum tax increase would amount to three percentage points for
the largest corporations.
T A B L E II.—Comparison of corporation income tax liabilities under present law and
under House bill, H. R. 8920
Tax liabilities

Effective rates

Net income
Present law House bill Present law House bill

$6,000.

$10,000
$25,000
$30,000-—..
$50,000
$60,000
$75,000
$100,000
$166,667
$250,000
$1,000,000...
$10,000,000..
$100,000,000.

$1,050
' $1,050
2,200
2,100
5,750
5,250
8,400
7,300
19,000
15, 500
22, 800
19, 600
28,500
25, 750
38, 000
36,000
63,333
63,333
95, 000
97, 500
380, 000
405, 000
3, 800, 000 4, 095, 000
38, 000, 000 40,995,000

Percent
2L00
22.00
23.00
28.00
38:00
38.00
38.00
38.00
38.00
38.00
38.00
38.00
38.00

Percent
21.00
2L00
21.00
24.33
. 31. 00
32.67
34.33
36.00
38.00
39.00
40.50
40.95
4L00

Increase
(+) or decrease (—)
Percent
0
-1.00
-2.00
-3.67
-7.00
-5.33
-3.67
-2.00
0
+1.00
+2.50
+2.95
+3.00

The revised rate schedule, including the increased rate on larger
corporations, would raise an estimated $410,000,000 additional
revenue. This is after allowance for the reduction in taxes amounting
to about $135,000,000, which would go largely to corporations with
incomes of less than $100,000.
As I indicated earlier in my statement, corporate profits are not
far from 1948 record levels. This high level of profits has permitted
corporations to pay dividends at a record rate and still retain about
$10,000,000,000 of earnings, or four times the amount of profits
retained in 1929.
The bulk of corporation income is concentrated in the very large
corporations. As shown in chart 2*, 5 percent of all corporations
receive 81 percent of total corporation income. Recent profit trends
for corporations of different size reveal an unmistakable improvement
in the relative position of the largest corporations' These trends are
shown in chart A.
•Omitted in this exhibit.




EXHIBITS

217

CHART A

i^^'t^^MxTi}^^^^^^^

Un<l0r,2$O

.

<" 250-1,000 : : . , l,000r5.000

. S.OOO/'iOO.OOO, / ; 100.0(X) owliwef.

The strength of corporate business is also shown by the trend in its
working capital position. At the end of 1949, th^ net working
capital of all nonfinancial corporations amounted to nearly three
times the 1939 figure. During this period liquid assets increased
from less than one-half to three-fourths of their current liabilities.
At the end of 1949, corporations held more than $40,000,000,000 in
cash and United States Government securities.
.
The President's recommendation forTcvision of the treatment of
business losses is also carried out in the bill. Present law permits
taxpayers to offset their losses in any given year against profits in the
two prior years and to carry forward any remaining loss to be offset
against income in the two succeeding years. The proposed revision
would increase the carry-forward from 2 to 5 years and would reduce
the carry-backs to 1 year. This would provide a total period of 7
years in which losses might be offset against profits as compared with
the present 5-year period and thus reduce the tax advantage now
enjoyed by stable as compared with unstable businesses.
More liberal loss offsets would be of particular benefit to new and
small business and would promote their expansion. New concerns
often experience losses or irregular earnings in their early history,
since the development of a new business generally involves large
initial costs which cannot be recovered immediately. Small business
in general encounters great difficulties in withstanding the financial
strain of hard times. Large firms on the other hand have a greater
opportunity to average their own incomes because they are more
likely to have diversified products and markets. Losses sustained




218

1950 REPORT OF THE) SECRETARY OF T H E TREASURY

from one activity or locality can often be offset in the same year
against income from other sources.
The relief provided for small business by the revisions in the corporate rate structure and in the loss offsets accords with our objective
to foster the development of this segment of the economy.
SUMMARY OF REVENUE INCREASES

The revenue-raising provisions of the bill would yield $890,000,000
in a full year of operation and about $525,000,000 in the fiscal year
1951, as follows:
Full year
Corporation tax increase
.;
Life insurance companies. Charitable and educational institutions'-.
Miscellaneous loopholes
Withholding on dividends
Reduction in interest rate on tax refunds
Total.-

-...

Fiscal year 1951

$410,000, 000
55, 000, 000
100, 000, 000
125, 000, 000
160, 000, 000
40, 000, 000

$160, 000, 000
125, 000, 000

890, 000, 000

526,000, 000

109, 000, 000
127, 000, 000
5, 000, 000

This total falls short of matching the excise reductions by
$120,000,000 on a full-year basis. You will note that the total includes
$40,000,000 resulting from the reduction in the interest rate on tax
refunds. I n my view this cannot be construed as an improvement
in the tax structure or an administrative reform, and is an inequitable
method of meeting our revenue requirements.
The figures I have given indicate the revenue that would be raised
before allowing for certain provisions in the biU involving the loss of
approximately $50,000,000. I shall return to these undesirable
provisions later in my statement.
Exclusive of increased fiscal year collections which would result
from the system of speeding up corporation income tax payments
adopted by the House, the'bill as it stands involves an estimated
revenue loss of about $170,000,000.
SPEED-UP OF CORPORATION TAX COLLECTIONS

The provision of the bill changing the system for installment payment of corporation income tax liabilities would substantially increase
collections over a 5-year period beginning with the fiscal year 1951.
This change does not alter the tax liabUities of corporations b u t merely
the timing of the tax payments. > •
The objective of the provision is to reduce the lag in corporate tax
payments. At present, two-thirds of all taxable corporations, accounting for 97 percent of total corporation income tax liability, pay
their taxes in quarterly installments during the year following the
close of the taxable year. On the average, the corporation income
tax is now collected 7 months after the close of the taxable year.
When this provision becomes fully effective 5 years hence, this lag
will be reduced to an average of 4 months.
Operation of the plan is shown in table I I I and chart B. I t would
gradually replace the present four-quarter payment privilege by a




219

EXHIBITS

system providing for payment of the full tax liabUity in the first two
quarters following the end of the taxable year. However, this would
be accomplished over a 5-year period during which each year the tax
paid iri the third and fourth quarters would be reduced and the tax
•paid in the first and second quarters correspondingly increased.
Wlien the two-installment system is fully effective, one-half the corporation income tax wUl be collected 6 months earlier than at present.
TABLE III.—Corporation tax payments under present law and under House bill,
H.R.,
[Assuming a constant liability of $100 in calendar years 1949-54]
Date of payment

Present
law

House
bill •

1950—Mar. 15-1
June 15
Sept. 15
Dec. 15-..1951—Mar. 15-...
June 15- .-- .
Sept. 15
:
Dec. 15
-.
1952—Mar. 15
JunelS
Sept. 15
Dec. 15-

$25
25
25
25
25
25
25
25
25
25
25
26

$25
25
25
25
30
30
20
20
35
35
15
15

-.-

_-.-

Present
law

Date of payment
1953—Mar. 15
Jn-ne 15
Sept. 15
Dec. 15
1954—Mar. 15. .
June 15
Sept. 15Dec. 15
1955—Mar. 15
June 15.
Sept. 15
Dec. 15--

...

$25
25
25
25
25
25
2525
25
25
25
25

House
bill

-

$40
40
10
10
45
45
5
5
50
50

CHART B
"P.'^-.T'?: :?''^v'-f -p'/'f T ' " ^ ^i^' -"-i^/xr-rr;^

_jtmrtmu%m^w^^mm\
"TT:"TTn''"^/"^''-''"

'^l^^'^W.^'X^"^'^""^^"^

,

.„.„

'f(M0^ji5:0^^

The gradual transition to the more current system provided for in
the'bill is desirable to prevent impairment of the working capital position of corporations that have not set aside funds to meet their accrued
tax liabilities. Larger corporations generally fund their tax liabUity




220

195 0 REPORT OF THE! SECRETARY OP THE TREASURY

currently by buying tax anticipation notes or marketable securities as
profits are earned. Accelerated tax payment wUl not affect the
operations of these corporations except to deprive them of part of the
small interest income from their tax funds. The 5-year transition
should be sufficient to permit smaller corporations to adjust their
payments without hardship. Moreover, the Commissioner of Internal Revenue can make extensions of time if it should become
necessary.
At the present level of corporate profits and under the rates of the
House bill, this speed-up in collection will increase fiscal year 1951
tax receipts by nearly $800,000,000 and receipts in each of the four
succeeding fiscal years by a somewhat larger amount.
This provision, in my opinion, is a desirable tax reform. I t will
bring corporations closer to the current payment basis which applies
to business income of individuals, and wUl make corporation income
tax revenue more promptly responsive to changes in tax rates or
economic conditions. However, I should like to emphasize that the
speed-up in corporate tax pajnnents is not a revenue-raising measure
and therefore cannot be regarded as an offset to the revenue lost from
excise tax reductions.
°
REVISIONS IN THE BILL

Some provisions of the bill conflict with sound taxation, andT urge
you to consider their modification or deletion. These include the
further expansion of already excessive percentage depletion allowances
and revisions affecting the estate tax.
Percentage depletion
The most objectionable provision of the Hous^.bill is the extension
of percentage depletion to some 20 types of nonmetallic minerals not
covered by present law and the increase in the rate of percentage
depletion for coal from 5 to 10 percent of gross income.
This action represents a continuation of the movement for expanding depletion allowances which gathered momentum under the guise
of wartime necessity. In 1942, when percentage depletion was first
granted to b a l l a n d sagger clay, producers of other clays complained
of discrimination and inequitable taxation. So in later years percentage depletion was extended to bentonite and china clay. The
House bUl now proposes further extension to refractory clays, fuller's
earth, fire clays, and brick and tile clays. Such extension would give
rise to further claims of discrimination by producers of miscellaneous
clays and in turn by producers of synthetic and reworked materials
competitive with clay.
The basis for these allowances is so vague that it can be readily
applied to practically every situation. Each industry, for example,
can argue that it is essential to national defense. The last war showed
conclusively that practicaUy every industry is essential to an economy
devoted to war. After one mineral has been given favorable treatment, no end is in sight to the list of minerals that can plead for inclusion on the ground of competitive inequity. The special conc.essions now in the law create serious competitive discriminations because of unreasonable disparities in the percentage depletion rates.
There is even greater discrimination betweeri the groups favored with




" EXHIBITS

221

concessions and other industries and classes of taxpayers not so
favored. In consequence, persistent pressure may be expected to
obtain equality by raising the lower rates to the higher level and by
extending benefits to other industry areas. The bill as passed by
the House of Representatives goes^so far as to concede special tax
relief to those who strip hUlsides of gravel. This could be justified
because similar treatment is to be given to those who scoop sand off
the seashore.
Because each group feels that special tax exemption can be equally
justified in its case as a means of fostering the growth of that particular industry, the result is the developnient of a system of concessions
which is not only incongruous in a sound and equitable tax system
but which is also Ul-suited for a sound national policy of mineral
development and conservation.
Taxpayers in the favored industries, and particularly a few large
corporations, benefit at the expense of the rest of the business community. The advantage is defended on the grounds of special risks in
the oU industry which, incidentally, is regarded as a favored investment by conservative investment trusts. A businessman desiring to
invest in a new product might incur greater risk but is limited in
determining his taxes to the recovery of his actual investment costs
over the life of the property. The allowance for tax purposes of
deductions many times the investment that may be made in oil
properties means that many other types of businesses are now paying
more taxes than they should in order to enable the Government to
recoup the tax leakage from percentage depletion.
Improvement of the equity and strength of the tax system requires
that we definitely reject the undesirable extensions made in this bill
and move toward elimination of these special privileges. The high
level of revenue requirements which necessitates even the retention of
some onerous excise taxes makes this improvement the more urgent.
Consequently, I wish to urge upon your committee the changes which
were proposed to the Ways and Means Committee which would carry
out the recommendation of the President that the more excessive
special depletion allowances permitted urider present law be reduced.
This would reduce the revenue loss from these provisions by over.
$200,000,000. The staff is prepared to present to the committee the
results of the Department's study of this subject, covering the amount
of the benefits and their effect on the economy.
Estate and gift taxes
Another conspicuous weakness of the House bill is the omission
of the long overdue estate and gift tax revisions. The need for
strengthening these taxes in the revenue system is widely recognized.
Such a program has been repeatedly urged by the administration,
most recently by the President in 1948 and 1949 and again this year.
The revisions proposed in these taxes would make an important
contribution to additional revenue.
The present weakness of the estate tax and the failure of this levy
to keep pace with the income tax are clearly illustrated in charts C to F.
The estate and gift taxes are now weak because (1) the imposition of
separate, unrelated taxes upon property disposed of during life and
at death permits undue escape from taxation, (2) property left in




222

1 9 5 0 REPORT OF T H E SECRETART OF THEi TREASURY

trust is accorded extensive advantages over property left outright,
and (3) changes made in 1948 result in,excessive exemptions and
unreasonably low effective rates for married persons. The program
which was outlined to the Ways and Means Committee would correct
most of these defects and would restore the revenue from these taxes
to a level somewhat above that reached prior to the 1948 act.
The House bill makes no provision for a general overhauling of the
estate and gift tax structure. Moreover, it contains two provisions
which are undesirable.
One of these would weaken the estate tax law by excluding certain
gifts made in contemplation of death from the estate tax base. As I
pointed out to the Ways and Means Committee, the best over-all
solution, of the contemplation of death problem would be to integrate
the estate and gift taxes into a single transfer tax>. Pending a review
by your committee of the proposal for an integrated tax, I urge that
the House amendment to the contemplation of death provision not
be adopted.
Another objectionable provision in the bUl would exempt from
income tax, in cases where a closely held corporation is the principal
asset in the estate, the dividends paid by the corporation to the
estate up to the amount of liability for death taxes. While this is
intended to meet a special problem, the solution proposed would invite extensive tax avoidance. I t would be preferable to deal with
this problem on a more limited basis or defer it untU the broader
question of estate tax revision is considered.
CHART

C

.,.^^rt:.
teMfeMiiZlJN'FEI^^Ij.lRE^iNliJEFIDEIjllVEDJ FROMlv3 y ) Y ^ ^ |

Dollar A m o u n t s (billions)

Percent o f Total

40.5-.-




8 times prewar

IO
O
'"'•/'/'

'^Individual Income..
' ^ 18 times prewar

'/.'/..'/.',
'/.'/.'/.'r

•/.•/.•/.;

yEstate and Gift..
>-^ 2 times prewar

IOO:.. Total InternalRevenue

/
//
//

WL
%
^^•"-2

/././.;

y Individual Income....
fT
2'/4 times prewar

M45ffl

d

•nHHL

^Estate and Gift^
/T
^3 of prewar

223

EXHIBITS
CHART

D

mi^sf^^
III jgv;: g^1%jrE^-1^ISx^^

^NB •94a::
Estate Tax Exemptions

Individual Income Tax Exemptions

$120,000
. Change,
l939tol949:
Married,down52%
Single,(Jown.-40%

Change,
I939t0l949:
Married, up, 200%
Single, up-...507o

«2,500

$60,000

1949
$1,000

$1,200

J
$600

t9J9-

Singte

Married:

;;; Singler::;;, -^-^ M j n ^ IC
CHART

' \ ,•-

E

l6^ffiiiFMfelfflici)H®iffl
-' -' ^ '!" > -f' i ' y -;

^l>Ct.

Individual Income Tax
Percent of popuiatlor)(l4and over)
with taxable Incomes

Estate Tax
Percenfof dctult decedents
with taxable estates.

4i%..J0 times prewar

im

i«

4%

m.

i.1%

1.2%—Same as prewar

MS^^ij :;;[9*r ^ J j^ fli? J;:!: i; l^]Kf ^m:;;;:i If 45!^

807795—51--—la




224

1950 REPORT OF THE) SECRETARY OF THE. TREASURY
CHART

F

M5iiiiMl;V'INDBieOAtlNGOMEHit^NiESTATEvT^^^
t£ff^JI>ii«EfrrovrES,^l939^3ANp-^ISi*9-?l«f
Pet.

Married Person

Estate Tax'

Individual Income Tax
Individual income tax rose at.all-levels,
but estate'tax fell..

W.I

10.5

7.3
/ / x/ /

////
////
//^
/ / / //
/ / T /.

7

i

1

/////
'.////
f/ / / /
/ / // // //
'/ / / / /
/

/ / // y/
////
/ /

y/ / /
y/ / /
/ y/ /

////

Fomi^ I V tax proposals
The House bill contains no legislation carrying out those parts of
the President's tax recommendations which derived their impetus from
the Point IV Program. These recommendations relate to the tax
treatment of income derived abroad and are designed to remove tax
deterrents to the movement of private investment and technicians to
foreign countries.
One of these recommendations would treat the income of foreign
branches established by domestic corporations as the tax laws now
treat simUar income obtained through foreign subsidiaries. The tax
would be postponed until the foreign earnings are brought home.
Such a provision would eliminate tax differentials as a factor in determining the organizational form of a foreign business operation and
would afford greater flexibility to those contemplating investments
abroad. I t would also permit reinvestment of foreign earnings abroad
without current tax consequences.
A corporation receiving dividends from a foreign subsidiary is now
permitted a credit for the income taxes paid abroad by the subsidiary.
This provision helps to eliminate international double taxation.
However, it applies only to a domestic fixm which owns a majority of
the voting stock of the foreign corporation. Consequently, when two
or more U. S. firms undertake to share the risk of a foreign enterprise,
only one of them, at most, can be safeguarded against double taxation.
One of the Department's proposals in this field would lower the majority control requirements so that ownership of any substantial interest
in a foreign corporation would qualify a U. S. firm for the foreign




EXHIBITS

225

tax credit. This would encourage joint ventures abroad, and would
facUitate the participation of local capital in such enterprises.
There is need also for liberalizing the foreign tax credit proyisions
as they apply to firms that derive income in one foreign country but
incur an offsetting loss in another and for extending it to the estate
tax.
The scope of the exemption how accorded individuals on income
earned abroad requires adjustment. The present exemption begins
to apply only with the first full taxable year of bona fide foreign
residence. There is no sound reason why the earnings of the first
11 months, say, of an individual's foreign residence should be taxed
when it is clear that it is part of long-term employment abroad.
Accordingly, the Department has proposed that, once an individual
qualifies for exemption as a foreign resident foi* a taxable year, the
exemption should apply retroactively to his earnings throughout the
entire period of his stay abroad.
In presenting my comments on the House bill I have undertaken
also to provide your committee with the background of the program
which the President asked the Congress to consider.
The House bUl makes an important contribution toward meeting the
objectives of the President's program presented in January. However, it does not go far enough and should be improved. I earnestly
urge you to consider the changes which would bring the bill more in
accord with our present requirements.
I want to say once more that I am sure that the future course of
world events is very much in your minds, as it is in mine. Increased
disturbance to world peace would involve increased demands upon us
which would require additional fiscal measures.
The effect of recent international developments on our expenditures
wUl become clearer as events unfold. Therefore, if during the course
of your consideration of this legislation it appears that we are confronted with a substantial increase in defense expenditures and strains
on the economy, I shall not hesitate to so advise you. As the President
indicated in his tax message, we must be ready to gear changes in the
revenue laws to the needs of our economy.
These are times when our political and economic institutions are.
challenged and we should not hesitate to protect and perfect them.
A healthy economy, a sound fiscal and tax policy, fair and adequate
taxation are all parts of our pattern for national strength and world
leadership.
..
Exhibit 22.—Letter of the President^ July 25, 1950, to the Chairman of the Senate
Finance Committee recommending prompt enactment of an interim revenue
measure
MY DEAR M R . CHAIRMAN : The. increased military appropriation requests
transmitted to the Congress on July 24, 1950, together with other requests I shall
transmit at a later date, will entail sharply increased Federal expenditures. We
embark on .these enlarged expenditures at' a time when the Federal budget; is
already out of balance. ^This makes it imperative that we increase tax revenues
promptly lest a growing deficit create new inflationary forces detrimental to our
defense effort.
We must make every effort to finance the greatest possible amount of needed
expenditures by taxatibn, arid we must design taxatiori methods which prevent
profiteering, and distribute the tax burden fairly among the different groups of
our people.




226

195 0 REPORT OF THE] SECRETARY OF THE TREASURY

I appreciate t h a t t h e development of a comprehensive revenue program adeq u a t e for our present needs will require careful congressional consideration. Our
wartime experience will need to be reviewed and alternative approaches explored.
Under the. most auspicious circumstances, such a comprehensive t a x program
could not be completed for some time.
I n the present situation, however, speed is of the essence and delay would be
costly.
I recommend t h a t , as an'^ interim Ve venue measure, action should be t a k e n
immediately to revise and enact t h e t a x bill now pending before your Committee,
so as to increase tax collections substantially for t h e taxable year 1950. Specifically, I suggest t h a t t h e revenue-raising provisions of t h e pending bill be retained
a n d supplemented by increases in t h e corporate a n d individual income tax rates.
This could be done without interfering in any way with t h e development of a
more comprehensive revenue program as soon as practicable.
Three adjustments would be required in t h e pending bill:
First, to eliminate t h e excise tax reductions and other revenue-losing provisions,
b u t retain the loophole-closing, dividend withholding, and life insurance company
provisions.
Second, to adjust t h e revised corporate r a t e structure contained in t h e pending
bill by increasing t h e normal corporate r a t e from 21 to 25 percent. Taking into
account t h e 20 percent surtax contained in t h e present bill, a n d t h e $25,000
exemption from surtax, this would result in a 25 percent tax on t h e first $25,000
of a corporation's income, and a 45 percent t a x on t h e balance.
Third, to increase individual income tax rates to the ' ' t e n t a t i v e " levels adopted
in 1945, by removing t h e reductions froni those levels m a d e in 1945 a n d 1948.
This would leave unchanged t h e income-splitting provisions of present law, a n d
t h e present personal exemptions of $600. per .person. These r a t e schedules are
familiar to t h e Congress, since they were involved in t h e consideration of t h e
tax reductions adopted in 1945 and 1948.
T h e increased corporate income t a x rates should be m a d e applicable beginning
with 1950 corporation incomes, as t h e pending bill would do. W i t h respect to
individual income taxes, t h e increased rates should be applicable beginning with
one-quarter of each taxpayer's 1950 income. This would require an increase i n
t h e withholding r a t e from t h e present 15 percent t o 18 percent, beginning with t h e
last quarter of 1950.
These adjustments in t h e pending t a x bill would increase t h e Government's
revenue, on a full-year basis, by about $5 billion a t present income levels. Clearly,
this will not meet our long-run revenue requirements. As an interim step, however, it will h a v e a timely effect on t a x revenues and our financial preparedness.
I t will serve to restrain inflationary forces generated by increased defense expenditures. W i t h o u t this action, we would face very substantial deficits before any
additional taxes could begin to be collected.
I n addition to increasing revenues, e n a c t m e n t of t h e revenue legislation I a m
recommending would improve t h e soundness of our t a x system. T h e loopholeclosing provisions of t h e pending bill will strengthen t h e t a x structure and m a k e it
more equitable. This is particularly desirable in view of t h e higher t a x rates in
prospect, which would surely increase t h e incentive to exploit present t a x loopholes.
Moreover, t h e corporate income tax structure will be substantially improved by
eliminating t h e present " n o t c h " rate, which, bears heavily on smaller corporations. This will moderate t h e effect of increased rates on business incentives.
I believe t h a t p r o m p t interim legislation along these lines will provide tangible
evidence of our determination to conduct our national finances in a sound manner,
consistent with t h e national effort we are required tb make. I t will also be a major
step t o w a r d preventing inflation during t h e time necessary to develop a carefully
balanced t a x program suited t o our longer-range requirements. I expect t o
t r a n s m i t further recommendations to t h e Congress concerning a more comprehensive t a x program when we have additional information on t h e extent of
our needs.
I a m grateful for your cooperation in working out arrangements for t h e p r o m p t
consideration of these interim proposals. I earnestly hope t h a t t h e y will be favorably acted upon by t h e Congress a t an early date.
I a m sending a copy of this letter to t h e Chairman of t h e Ways a n d Means
Committee of t h e House of Representatives, who, as you know, participated in
working out t h e procedure for p r o m p t action recommended in this letter.
Very sincerely yours,




HARRY S. TRUMAN.

EXHIBITS

,

227

Exhibit 23.—Statement of Secretary of the Treasury Snyder before the Senate
Finance Committee, August 2, 1950, on the President's recommendation for
the enactment of interim tax legislation
I am glad to have this opportunity to discuss with you the President's recommendation for the prompt enactment of interim tax legislation.
In the four weeks since I appeared before your Committee in connection with
your consideration of H. R. 8920 the events in Korea and the messages of the
President have demonstrated to every citizen in the Nation that both our expenditures and our revenues will have to be very much greater in the period ahead
than we had formerly anticipated. Since July 11, when I recommended to your
Chairman that action on the tax bill be suspended, the President has transmitted
a series of messages to the Congress outlining our defense requirements for the
immediate future and the measures which are urgently needed in relation tq
them.. In these messages, the President has asked for over $15 billion of additional appropriations to be available now for purposes of defense. Concurrently,
he has recommended interim revenue legislation which will immediately increase
Federal tax receipts by $5 billion on an annual basis.
As the President has emphasized, the additional revenue asked for at this time
is only a first step in the necessary adjustment of our revenue system to bring it
more closely in line with current and prospective outlays needed for defense
against unprovoked and unlawful attack upon the rights and territories of peaceful
people. This must be followed as soon as possible by a more comprehensive
program to increase very substantially the productiveness of our revenue system
and to adjust the added tax burden on a basis which will be fair and equitable to
all of our citizens.
With respect to the President's program, I should like to make it clear that
the revenue measures which are urged for immediate enactment represent the
minimum requirements of financial preparedness at this time. As you know, the
finances of the Government were not balanced at the beginning of the Korean
crisis. Our deficit fof the fiscal year 1950 amounted to over $3 billion aind a
deficit of approximately $5 billion was in prospect for; the fiscal year 1951. In
times like the present it is not only desirable, it is vital to the entire defense effort
that the finances of the Government be placed in the strongest possible position
for meeting the demands which wilL be made on them for defense against unscrupulous destroyers of peace. This program is an essential first step—though
it is a first step only—toward utilizing our reyenue system to strengthen the
ecoriomic defenses of the Nation.
Besides improving the fiscal position of the Government, the increase in our
revenues at this time will serve another important purpose. As the President
has pointed out, it will aid.in restraining inflationary forces generated by increased
defense expenditures. Every person in the Nation is aware of the primary importance of these objectives. Now is the time to take action toward maintaining
an environment which will discourage, rather than encourage, the growth of inflationary pressures. Larger tax paynients from current incomes—both business
and personal—are an essential feature of an effective anti-inflationary program.
I share the confidence of the President that every citizen stands ready to make this
necessary contribution to our national security.
As I emphasized in. my appearance before your Committee on July 5, both
corporations and individuals are in an exceptionally favorable financial position
at the present time. Personal incomes this year, excluding the insurance dividends
to veterans, have already risen to a level close to the peak reached in the last part
of 1948. Corporate profits are also running near the 1948 record totals. Industrial
production in June surpassed the previous peacetime high of November 1948 and
civilian employment passed 61. million in June, a record high for the nionth. The
whole economy, in fact, appears to be surging forward at an accelerated pace and
the need for increased output for military purposes will intensify this trend.
Under these circumstances and in view of the increasing evidence during recent
weeks that inflationary pressures are already having a strong impact on the price
structure, we cannot fail to make an earnest effort to pay for a larger proportion
of current governmental expenditures out of current incomes. In order to do this
it is essential that legislation increasing taxes be passed promptly.. A major
tax program would consume a substantial period of time and could not result in
an immediate increase in tax payments. Present inflationary developments
could not be curbed by the enactment of taxes after the crucial transition period
has passed, regardless of how high they might later be raised.




228

1950 REPORT OF THEI SEiCRETARY OF THE TREASURY

The development of a tax program fully adequate to meet the demands of a
continued mobilization effort will require consideration of many basic problems.
Our present effort should preserve freedom of action with respect to these problems.
The Congress will later wish to re-examine our wartime experience with a view to
devising the most appropriate methods for dealing with the complex problems of
excessive profits, measures to stimulate defense production, and the interrelationships between taxation and direct economic controls. These problems raise some
of the most difficult issues in the field of taxation. It will be necessary to have a
fuller understanding of the future course of our mobilization plans in order to
resolve them in a manner which will make the maximum contribution to the
effectiveness of economic programs.
The interim tax measure recommended by the President and developed in
cooperation with the congressional leadership is based upon a careful evaluation
of all of these elements in the present situation. The President has recommended
'that H. R. 8920 serve as a basis for the desired legislation, with the following
adjustments:
••
First, that the excise tax reductions and other revenue-losing sections in the
bill now pending before your Committee be eliminated, but that the provisions
for closing loopholes, for instituting a withholding tax on dividends, and for
adjusting the taxation of life insurance companies be retained,
Second, that the corporation income tax rates in the pending bill be raised by
an additional four percentage points^ effective for 1950 incomes, and
, Third, that the pending bill be amended to include increases in individual
income taxes by removing one-quarter of the reductions from ''tentative" tax
for 1950 incomes, and by eliminating such reductions entirely beginning in 1951.
As the-President has stated, these measures together would raise approximately
$5 billion of revenue on a full-year basis. It is fortunate that when the need for
additional revenue became apparent your Committee and the Committee on
Ways and Means of the House of Representatives had already laid the groundwork for-the program now recommended by the President. The careful consideration which the pending tax bill has already received has prepared the way
for the measures which must now be taken to adjust" our revenue system to the
new requirements of national defense. The changes in the pending bill to incorporate these revisions could be made with a minimum of drafting problems
for the Committee to consider.
•
• .
The details of the three major proposals of the President with respect to
revenue measures which are recommended for immediate enactment follow. •
1. THE ELIMINATION OF REVENUE-LOSING PROVISIONS AND CLOSING OF LOOPHOLES

The need for revenue at this time requires the retention of all present revenue
sources. This means that the excise taxes now in existence should be continued.
In urging the Committee to eliminate the excise reductions provided in the bill,
I should not like to leave the impression that these taxes in their present form are
a desirable and necessary permanent feature of our revenue system. When the
Congress undertakes a comprehensive tax program to meet increased defense
needs, consideration can be given to the proper composition of excise taxes.
For the purpose of immediate legislation, however, two extensions of existing
excises should be, considered in the interest of competitive equality. One is the
extension of the present tax on household refrigerators to deep-freeze units,, a
provision already incorporated in the pending bill. The second is the extension
of the 10 percent radio tax to television sets, as I previously recommended.
Television now is a strong competitor with alternative forms of entertainment,
such as the radio, motion pictures, and professional sporting events, all of which
are subject to Federal excise tax.
In my statement to your.Committee on July '5, I called attention to certain
other revenue-losing provisioris of the bill which are highly objectionable on
equity grounds. Present circumstances strengthen the case for removing these
provisions from the bill.
As the President pointed out, the loophole-closing,- dividend withholding,
and life insurance proyisions of the bill should be retained. The retention of
the loophole-closing provisions of the bill is particularly desirable in view of the
higher tax rates which are certain to increase the exploitation of tax loopholes.
We should not encourage the opportunities for tax avoidance that have been brought
tO' the attention of. your Conimittee. Necessary technical changes in these pro-




229

EXHIBITS

visions to meet the problems that have been raised will be presented by the.
Treasury staff.
The provisions of the bill for the taxation of the life insurance industry become
increasingly more important as other segments of the economy are required to
pay higher taxes.
Withholding on dividends will be particularly helpful since it will assure more
effective tax compliance at a time when the rising level of taxation necessitates
more intensive enforcement efforts.
. , *.
,The significance of these measures extends beyond their imriiediate revenue
effect. If imperfections are permitted to survive in our tax laws, increasingly
larger amounts of revenue will be lost. Inequities under present circumstances
would tend to reduce taxpayer morale.
The full-year revenue effect of the loophole provisions of the pending bill, and
the excise adjustments, is estimated at more than $500 million.
2. CORPORATION INCOME TAX

The second element in the President's interim revenue program is an increase
in -the corporation income tax of 4 percentage points above the rates contained
in the pending tax bill. The corporate normal tax included in the House bill
would be increased from 21 percent to 25. percent which, with the 20 percent
surtax provided in the bill, would result in a combined top rate of 45 percent
(table I). It is proposed that these increased rates apply to the 1950 incomes of
corporations as the present bill provides.
TABLE I.—Corporate income tax rates under present law and the House bill {H. R.
8920) compared with the proposed rates
Present law
Net income

Oto $5,000$5,000 to $20,000..
$20,000 to $25,000.
$25,000 to $50,000.
$50,000 and over.

Normal
tax

Surtax

Combined
rates

Proposed rates

House bill
Normal
tax

Surtax

Combiaed
rates

Normal
tax

Surtax

Combined
rates

Percent Percent] Percent Percent Percent] Percent Percent Percent Percent
15
21
6
17
23
6
21
25
21
25
19
25
6
31
22 , • 53
45
20
24 . 1 4
»38

1 Instead of applying the bracket rates, corporations with incomes above $50,000 are taxed at the rate
of 38 percent on their entire income.

The recommended increase in corporation tax rates would add, on an annual
basis at calendar year 1950 income levels, about $1 billion of revenue to the*
amount provided under the pending bill, representing a total increase in corporate
tax yield over present law of $1.5 billion.
< The tax increases as compared with present law would vary at different income
levels as a result of the" desirable substantive changes made in the corporate rate
structure by the House bill. - The bill eliminates the "notch" provision which, as
the Committee knows, has existed since 1938 for the purpose of making the
transition from the reduced rates provided for small corporations to the fiat rate
applicable to the total income of all other corporations.. The 53 percent "notch"
rate in the present law has long been recognized to be an obstacle in the path of
small, growing corporations. If this method of transition were left unchanged,
the corporate rate increase in the bill with the Jadditional increase recommended
by the President would require raising the "notch" rate to a highly inequitable
level. The elimination of the "notch" under the bill .provides in effect a flat
corporate income tax rate w:ith a $25,000 exemption from surtax, which continues
to accord incentive tax treatment to small corporations.;
The combined effect of the higher rates and the elimination of the "notch" is a
relatively small increase in tax for small corporatioris,; incidental reductions for
corporations in and immediately above the."notch" area, and a general increase




230

1950

REPORT O F THEI SEiCRETARY OF THEI

TREASURY

of 7 p e r c e n t a g e p o i n t s for larger c o r p o r a t i o n s .
As s h o w n in c h a r t A a n d t a b l e
I I , t h e effective r a t e s of c o r p o r a t i o n income t a x liabilities u n d e r t h e P r e s i d e n t ' s
r e c o m m e n d a t i o n would be 4 p e r c e n t a g e p o i n t s higher a t all levels t h a n u n d e r t h e
p e n d i n g bill.
CHART A

6

10

20

40 60

I O
O

200

400 600 1.000 2.000

Taxable Net Income (Thousands of Dollars)
T A B L E I I . — C o m p a r i s o n of corporation income tax liabilities under present law, the
House bill (H. R. 8920), and proposed rates

Tax liabilities

Effective r a t e s

N e t income
Present
law

$5,000
$10,000
$25,000
$30,000
,
$50,000
$60,000
$71,429
$75.000
$100,000_„.
$125,000
$166,667
$250,000.—
$1,000,000...
$10,000,000-.
$100,000,000.




House
bill

$1,050
2,200
5,750
8,400
19,000
22,800
27,143
28, 500
38,000
47, 500
63,333
95,000
380,000
3,800,000
38,000,000

$1,050
2,100
5,250
7,300
15,500
19,600
•24,286
25,750
36,000
46,250
63,333
97,500
405,000
4,095,000
40,995,000

Proposed
rates

Present
law

House
bill

Proposed
rates

Percent Percent Percent
21.00
21.00
25.00
$1, 250
22.00
21.00
25.00
2, 500
23.00
21.00
25.00
6,250
28.00
24.33
28.33
8,500
38.00
31.00
35.00
17, 500
38.00
32.67
36.67
22,000
38.00
34.00
38.00
27,143
38.00
34.33
38.33
28, 750
38.00
36.00
40.00
40,000
37.00
41.00
51, 250 • 38.00
38.00
42.00
70,000
38.00
39.00
43.00
107, 500
38.00
40.50
44.50
445,000
38.00
40.95
44.95
4,495,000
38.00
41.00
45.00
44,995,000
38.00

Increase ( + )
or decrease
(—) i n effective
r a t e s as compared w i t h
p r e s e n t law

House
bill

Pro- "
posed
rates

Percent Percent
+4.00
0
+3.00
-1.00
+2.00
-2.00
-3.67
+.33
-7.00
-3.00
-5.33
-1.33
-4.00
0
-3.67
+.33
-2.00
+2.00
-1.00
+3.00
+4.00
0
+5.00
+1.00
+6.50
+2.50
+6.95
+2.95
+7.00
+3.00

231

EXHIBITS

T h e major increases would be paid by 41,000 large corporations. These
corporations, as shown in chart B, account for 88 percent of taxable corporate
net income, although t h e y represent 11 percent of all taxable corporations. As
shown in chart C, those with net incomes above $71,400 would pay, on t h e average, 16 percent more t a x t h a n under present law. Smaller increases would be
paid by t h e 296,000 corporations with incomes under $31,250. T h e maximum
increase for this group of smaller corporations would be $500, payable by corporations with net incomes between $20,000 and $25,000. T h e increase for a
corporation with $5,000 net income would be $200.
.Because of elimination of t h e " n o t c h , " a b o u t 33,000 corporations with incomes
between $31,250 and $71,400 would have a net reduction in tax. T h e m a x i m u m
reduction would a m o u n t to $1,500 and would occur at the top of the present
" n o t c h " area on net incomes of $50,000.

CHART B

Distribufibh of Gorpibratibn^ ahd^fThir^^
Pet.

75
H%ol0H«or$>or«tlQna h t v i m 8 0 %
0fcorpordt@i^icorrMi

50

% o f Number
^ o f Corporations

\//////

25

'/////A
;34%

:437o;

\/////,

^X'A

IVo

Under 5

% o f Taxable Income
4%_

3%

2%

5-25
25-50
50-71.4
- Taxable Net Income (Thousands of Dollars) -




'^Estimated

71.4 and over
: /-

232

1950 REPORT OF THEI SECRETARY OF THEI TREAS'URY
CHART C

Amount of CorpOrOtelhodm^lTbx^^
PresemtLm and Proposed. tyf^Siz^ of inepi^
$Bil.
12.8

— 1 5 % Incr."

10Net Income
Classes

I

16% Incr*

$71429andover

5-

$31,25071,429

4 % Deer*

Under $ 3 I , 2 5 0 < ^

11% Incr*

Present Law

Proposed

* Computed from unrounded figures.

It will be recalled that the President recommended in January 1950 an increase
in the corporate rate to 42 percent. The Ways and Means Committee began
hearings on February 3, 1950, and the pending bill, as passed by the House of
Representatives, adopted a corporate rate of 41 percent. Therefore, businessmen have had reason to anticipate an increase in the tax on corporate profits
effective as of January 1, 1950.
When the House bill was passed, corporate profits were estimated at an annual
rate of $31 billion and the indications were that the full-year rate would be somewhat higher. Profits at this level would, have permitted corporations, after the
increased taxes under the House bill, to pay record dividends and to retain larger
profits than last year. Moreover, current prospects for corporate profits in 1950
are steadily improving.
In connection with the application of the proposed corporation tax increases
to 1950 incomes, the Committee will be interested in the record of past changes
in the corporation income tax (tablie III). Beginning with the corporation tax
in 1909, the Congress has generally made corporate rate changes applicable to
the income of the calendar year in which the legislation was enacted, even in those
years in which legislative consideration of the corporate tax increase was not
completed until the closing months of the year. In two instances (the Revenue
Act of 1918, enacted February 24, 1919, and the Revenue Act of 1926, enacted
February 26, 1926) the tax increases were made effective as of January 1 of the
preceding year.




233

EXHIBITS

TABLE III.—Date of enactment and effective date of chahges in corporation income
taxes under Federal tax laws, 1909 to date
Type of change

Federal tax law
Act of—
Aug. 5, 1909
Oct. 3, 1913
Revenue Act of—
1916 . .
1917
1918
-•1921
• 1926

Initial tax
__-- Eliminated specific credit

--.-

1...'.

1928
—
Joint Resolution No. 133—
1929
Revenue Act of— ,
1932
.
1936
..—__
1938
1940
—.
1940 (2d)
1941
1942
1945

-

--

.
- - Increased rate.
do
Increased rate for 1918; reduced
rate for 1919.
Increased rate
_
--. Increased rate for 1925; further increase for 1926.
Reduced rate..^
_
do..._

Increased rate...
. . . . Increased normal tax rate and
adopted surtax on undistributed
profits.
— - Increased rates
.....do
do
--do
. . do
^_.—.- Reduced r a t e s . .

Date of
enactment

Effective
date of
change^

Aug. 5,1909
Oct. 3,1913

Jan
1 1909
Mar. 1,1913

Sept. 8,1916
Oct. 3,1917
Feb. 24,1919

Jan.
Jan.
Jan.
Jan.
Jan.
Jan.
Jan.
Jan.

1,1916
1,1917
1,1918
1,1919
1,1922
1,1925
1,1926
1,1928

Nov. 23,1921
Feb. 26,1926
May 29,1928

Dec. 16,1929 iJan.

1,1929

June 6,1932
June 22,1936

Jan.
Jan.

1,1932
1,1936

May 28,1938
June 25,1940
Oct. 8,1940
Sept. 20,1941
Oct. 21,1942
Nov. 8,1945

Jan.
Jan.
Jan.
Jan.
Jan.
Jan.

1,1938
1,1940
1,1940
1,1941
1,1942
1,1946

1 Applicable to taxable year 1929 only.

The present schedule for payment of accrued corporation taxes makes it esseur
tial that the proposed increases apply to 1950 incomes. Taxes on 1951 incomes
will not be payable until 1952 and will be fully collected only by December 15/
1952—almost 2% years hence...
Further changes in the corporate tax area can be made with respect to 1951
incomes after full consideration of the various alternatives and in the light of
subsequent developments in the economic situation and expenditure riequirements.
3. INDIVIDUAL INCOME TAX

The third element in the President's interim revenue program is an increase in
the rates of the individual income tax. The President recommended that this be
accomplished by removing the present percentage reductions from "tentative"
tax provided for 1948 and 1949, but that only one-fourth of these reductions be
removed in computing tax liabilities for the current year 1950. The increase
in tax on 1950 incomes would be coordinated with an increase in withholding,
effective October 1 of this year.
You will recall that in 1945 this Committee developed an income tax schedule
which was 3 percentage points lower in all brackets than the wartime rate scheduleenacted in 1944. In addition, your Committee provided for a flat 5 percent
reduction from these rates in determining the final liability.
When income taxes were again reduced in 1948, the general 5 percent reduction
was replaced by a series of reductions amounting to 17 percent on the first $400
of tentative tax; 12 percent between $400 and $100,000; and 9.75 percent for
tax in excess of $100,000. The net effect of this complex schedule is to produce
rates rising from 16.6 percent in the first bracket to 82.1275 percent in the highest
(table IV).




234

1950 REPORT OF THE! iSEiCRETARY OF THEi TREASiURY
TABLE IV.—Individual income tax rate schedules

PROPOSED RATES FOR 1950 AND 1951 COMPARED WITH THE R E V E N U E ACTS OF 1944,
1945, AND 1948

Surtax net income

Oto $2,000..-$2,000 to $4,000.
$4,000 to $6,000
$6,000 to $8,000__
$8,000 to $10,000
$10,000 to $12,000
$12,000 to $14,000
$14,000 to $16,000
$16,000 to $18,000
$18,000 to $20,000
$20,000 to $22,000
$22,000 to $26,000
$26,000 to $32,000
$32,000 to $38,000
$38,000 to $44,000
$44,000 to $50,000
$50,000 to $60,000
$60,000 to $70,000
$70,000 to $80,000-..$80,000 to $90,000
$90,000 to $100,000
$100,000 to $136,719.10.
$136,719.10 to $150,000.
$150,000 to $200,000...
$200,000 and over 2....

1944 act
(highest
wartime
rates)

1945 act 1

Percent

Percent

23
25
29
33
37
41
46
50
53
56
59
62
65
68
72
75
78
81
84
87
90

19.00
20.90
24.70
28.50
32.30
36.10
40.85
44.65
47.50
50.35
53.20
56.05
58.90
61.75
65.55
68.40
71.25
74.10
76.95
79.80
82.65

92
93
94

84.55
85. 50
86.45

1948 act 1
(present
law)
Percent
16.60
19., 36
22.88
26.40
29.92
33.44
37.84
41.36
44.00
46.64
49.28
61.92
54.56
57.20
60.72
63.36
66. 00
68.64
71.28
73.92
76. 56
78.32
80. 3225
81. 2250
82.1275

Proposed rates
1950 1
Percent
17.40
20.02
23.66
27.30
30.94
34.58
39.13
42.77
45.50
48.23
50.96
, 53. 69
56.42
59.15
62.79
65.52
68.25
70.98
73.71
76.44
79.17
80.99
82.77
. 83.70
84. 63

1951

20
22
26
30
34
38
43
47
50
53
56
59
62
65
69
72
75
78
81

90
91

NOTE.—The rates under the proposed change for 1950 have been computed by rounding the
one-fourth reduction from tentative tax. Reductions from tentative tax of exactly one-fourth would
result in the following changes: The 17 percent reduction would be reduced to 12.75. 12 percent to 9,
and 9.75 percent to 7.3125. These reductions were rounded to 13 percent, 9 percent, and 7 percent,
respectively, in computing the 1950 bracket rates in table IV and the effective rates in.table V.
The maximum difference in tax due to rounding would be relatively small.
1 After reductions from tentative tax.
* Subject to the followmg maximum rate limitations: Revenue Act of 1944, 90 percent; Revenue Act
of 1945, 85.5 percent; Revenue Act of 1948, 77 percent; proposed rates for 1950, 80 percent; proposed rates
for 1951, 90 percent.

Under the President's proposal, the percentage reductions would be eliminated
for 1951 and the ''tentative" rates would become the actual rates. In terms of
effective rates, the Increases over present law would be 3.4 percentage points at
the top of the lowest tax bracket and about 9 percentage points in the highest
bracket (table V).




T A B L E V.—Comparison of individual income tax liability under present law and under proposed rates for 1950 and 1951
SINGLE PERSON—NO

N e t income before exemption

Proposed r a t e s

Proposed rates

1950

. $35
70
157
244
428
84S
1,604
2,201
4,032
6,301
8,898
23, 997
•60,770
397, 209
2 800,000

$40
80
180
280
488
944
1,780
2,436
4,448
6,942
9,796
26,388
66, 798
429, 274
884,274

1950

1951

Percent
$600
$800
$1,000
$1,500
$2,000
$3,000.....
$5,000
$8,000
$10,000
$15,000....
$20,000.-..
$25,000.--.
$50,000
$100,000.-$500,000--$1,000,000-

770,

1950

Present
law

Present
law

4.2
6.6
10.0
11.6
13.6
16.2
19.3
21.2
26.0
30.4
34.4
46.4
58.8
177.0
1 77.0

1950 increase as a
percentage of—

Increase u n d e r proposed r a t e s

. Effective r a t e s

A m o u n t of tax

DEPENDENTS

1951

Percent

Percent

4.4
7.0
10.4
12.2
14.3
16.9
20.0
22.0
26.9
31.5
35.6
48.0
60.8
79.4
2 80.0

5.0
8.0
12.0
14.0
16.3
18.9
22.3
24.4
29.7
34.7
39.2
52.8
66.8
85.9
88.4

Amount

Effective
rate

0.2
.3
.5
.6
.6
.6
.7
1.1
1.2
1.6
2.0
2.4
3.0

$7
14
31
48
79
133
234
312
554
853
1,196
3,187
8,036
44, 274
114, 274

Tax
under
present
law

Net
income
after tax
under
present
law

Tax
under
present
law

Net
income
after tax
under
present

Percent

Amount

Percent
$2
3
7
11
19
32
57
77
137
212
. 298
796
2,008
12, 209
30, 000

1951 increase as a
percentage of—

Percent

Percent

Percent

Percent

0.9
1.4
2.0
2.4
2.6
2.7
2.9
3.1
3.7
4.3
4.8
6.4
8.0
8.9
11.4

4.8
4.8
4.8
4.8
4.6
4.0
3.7
3.6
3.5
3.5
3.5
3.4
3.4
3.2
3.9

Effective
rate

1.0
1.2
1.5
1.8
3.0
4.9
10.6
13.0

20.5
20.5
20.5
20.5
19.2
16.4
15.1
14.7
14.2
14.0
13.9
13.7
13.7
11.5
14.8

0.9
1.5
2.3
2.7
3.0
3.2
3.6
4.0
5.0
6.1
7.3
11.9
19.5
38.5
49.7

w

i-i
bd

F o o t n o t e s a t e n d of table.




fcO
CO
Cn

T A B L E V.—Comparison of individual income tax liability under present law and under proposed rates for 1950 and 1951—Continued

to

M A R R I E D PERSON—NO D E P E N D E N T S

00

A m o u n t of tax

1950 increase as a
percentage of—

Increase i m d e r proposed r a t e s

Effective r a t e s

1961 increase a s a
percentage of—

CO
01

o

N e t income before exemption

Proposed r a t e s

Proposed rates
Present
law

Present
law
1950

1950

1951

Percent
$1,200
$1,500-.
$2,000-.
$3,000-..$6.000
$8,000
$10,000
$16,000
$20,000
$25,000
$50,000
$100,000 - - $500,000
$1,000,000---

1951

Percent

Percent

3.6
7.0
10.4
13.2
15.7
16.9
19.6
22.0
24.3
35.6
48.0
74.3
79.4

4.0
8.0
12.0
15.2
17.7
18.9
21.7
24.4
26.9
39.2
52.8
80.7
86.9

Amount

Tax
under
present
law

Net
income
after tax
under
present
law

Tax
under
present
law

Net
income
after tax
under
present
law

Percent

Percent

Percent

Percent

Percent

0.7
1.4
2.0
2.6
2.6
2.7
2.9
3.1
3.4
4.8
6.4
8.8
8.9

4.8
4.8
4.8
4.8
4.2
4.0
3.7
3.6
3.6
3.5
3.4
3.2
3.2

1951

1950
Effective
rate

Amount

Percent

Effective
rate

i
Q

—
$52
$50
139
133.
.
313
299
661
631
1,257
1,206
1,621
1,686
2,829
2,-935
4,402
4,247
6,087
5,877
17,797
17,201
46,403 - 47,994
359,662
371,268
794,418
1 770,000

$60
160
360
760
1,416
1,888
3,260
4,872
6,724
19, 592
62, 776
403,548
858, 548

3.3
6.6
10.0
12.6
15.1
. 16.2
18.9
2L2
23.5
34.446.4
71.9
177.0

$2
6
14
30
50
66
106
164
210
696
1,591
11,606
24,418

0.2
.3
.5
.6
.6
.6
.7
.8
.8
L2
L6
2.3
2.4

$10
27
61
129
210
267
431
625
847
2,391
6,373
43,886
88, 648

0.2
.3
.5
.7
.7
.8
.9
1.0
Ll
L8
3.0
8.3
10.6

20.6
• 20.5
20.5
20.5
17.4
16.4
15.2
14.7
14.4
13.9
13.7
12.2
1L6

0.7
L6
2.3
3.0
3.1
3.2
3.5
4.0^
4.4
7.3
1L9
31.3
38.6

Q

-o
M A R R I E D PERSON—TWO D E P E N D E N T S
$2,400
$3,000
$5,000
$8,000
$10,000
$15,000
$20,000
$25.000
$50,000
$100,000.-.
$600,000—.
$1,000,000-.

$100
432
974
1,361
2,612
3,888
5,476
16, 578
46, 643
358,677
769,314

$104
452
1,016
1,417
2,607
4,030
6,672
17,152
47, 208
370, 252
793,402

NOTE.—See note to table I V .

1 Taking
http://fraser.stlouisfed.org/into account maximum effective
2 Taking into account maximum effective
Federal Reserve Bank of St. Louis

$120
520
1,152
1,692
2,900
4,464
6,268
18, 884
51, 912
402, 456
857,456

3.3
8.6
12.2
13.6
16.7
19.4
21.9
33.2
45.6
71.7
76.9

rate limitation of 77 percent.
rate limitation of 80 percent.

3.5
9.0
12.7
14.2
17.4
20.2
22.7
34.3
47.2
74.1
79.3

4.0
10.4
. 14.4
15.9
19.3
22.3
25.1
37.8
51.9
80.6
85.7

$6
21
43
66
95
142
196
575
1,565
11, 576
24,088

0.2
.4
.5
.6
.6
.7
.8
Ll
1.6
2.3
2.4

$20
88
178
231
388
576
792
2,306
6,269
43, 779
88,142

0.7
1.8
2.2
2.3
2.6
2.9
3.2
4.6
6.3
8.8
8.8

4.8
4.8
4.4
4.1
3.8.
3.6
.3.6
3.5
3.4
3.2
3.1

0.2
.5
.6
.6
.8
.9
LO
1.7
2.9
8.2
10.4

20.6
20.6
18.3
17.0
15.4
14.8
14.5
13.9
13.7
12.2
1L5

0.7
1.9
2.5
2.7
3.1
3.6
4.1
6.9
n.5
31.0
38.2

>

237

EXIDBITS

The proposed tax liabilities applicable to 1951 incomes are shown in charts D
and E, compared with those in effect since 1944 when the highest wartime rates
were enacted. Under the President's recommendation, the split-income provisions
and the increase in exemptions enacted in 1948 would be retained. Thus married
persons filing joint returns will continue to benefit from having twice as much
income taxable at the lower rates as they did prior to the 1948 act.
Chart D shows the tax liabilities for single persons with different incomes.
For a single person with a net income of $5,000, the tax would be increased from
16.2 percent under present law to 18.9 percent under the proposal. This compares with the tax under the 1944 act of 22.1 percent. At the $25,000 level, the
present effective rate of 34.4 percent would be raised to 39.2 percent under the
proposal, which compares with 42.4 percent under the 1944 act.
Chart E shows that for married persons the proposed rates would be substantially below those in effect at the end of the war. On a net income of $5,000, a
married person with two dependents now pays a tax of about 8.6 percent. Under
the President's proposal, this would be increased to 10.4 percent for 1951 or
about two-thirds of the tax under the 1944 act. At $25,000, where incomesplitting gives about the largest relative advantage, the effective rate would be
increased from 21.9 percent to 25.1 percent. The proposed tax would then be
13.7 percentage points lower than the highest wartime tax of 38.8 percent at this
level.
Under the President's recommendations, less than 5 percent of taxpayers,
mostly single persons, would actually pay higher taxes than they did under the
1945 act.
The proposal would increase tax liabilities of individuals by about $700 million
on 1950 incomes and by $2.9 billion on 1951 incomes. About 55 percent of this
additional revenue would come from taxpayers with net,incomes under $5,000.
As shown in chart F and table VI, this group now accounts for 91 percent of all
taxpayers and for 69 percent of net income of taxable individuals before exemptions. The remaining 45 percent of the revenue would come from those with
incomes above $5,000, who represent 9 percent of all taxpayers and receive 31
percent of the net income of taxable individuals.
CHABT D

JFirbpbsal ^ r ^




5
10
20
50 e
100
Net Income (Thousands of Dollars)

200

500

238

1 9 5 0 REPORT OF T H E SEiCRETARY OF T H E TREASURY
CHART E

Pr6pq$qlfdifl95lM^^

5
10
20
50
IOO
Net Income (Thousands of Dollars)

200

CHART F

j?fn^htaoe pistrlNtlioh 6f ^^1^
For Calendar Year 1950
Inconies
Under $ 5 , 0 0 0 " ^
Number of
Taxpayers
(Single Persons and
Married Couples)..

Net Income
(Before Personal
Exemptions)...

Present
Tax Liability-.




Note: Estimated.

Incomes
Over S S . O O O " ^

500

TABLE

VI.-

-Estimated number of taxable returns, net income before exemptions, and total tax under present law and under the ^proposea rates,
distributed by net income classes at calendar year 1950 income levels
[ N u m b e r of r e t u r n s in t h o u s a n d s ; m o n e y a m o u n t s in millions]
T o t a l tax i
N e t income classes

U n d e r $1,000...
$1,000 t o $2,000$2,000 to $3,000$3,000 t o $4,000$4,000 t o $5,000U n d e r $5,000.
$5,000 t o $ 1 0 , 0 0 0 - - • . $10,000 t o $ 2 5 , 0 0 0 . . - - .
$25,00Oto $ 5 0 , 0 0 0 . - - $60,000 t o $100,000
$100,000 to $250,000--.
$250,000 t o $500,000--.
$600,000 to.$1,000,000$1,000,000 and. o v e r - . .
.$5,000 a n d o v e r .
TotaL------

N u m b e r of
taxable
returns

N e t income
before
exemptions

Under
present
law"

Under
• proposed
rates

Increase

3, 201.1
10,781. 6
12,374. 7
8, 517.1
4,046. 9

$2, 634. 7
17,172. 6
30, 713. 9
29, 293.0
•17, 983.1

$106. 4
1, 265. 7
2,483. 7
2, 417. 6
1, 676. 2

$127.0
1, 524. 9
2, 990. 2
2,901. 0
2,013. 5

38,921.6

97, 697. 3

7,948. 6

9,566. 6

1,608.0

2, 916.1
884.8
194.4
37.4
10.0
- . .7
.2
.1

19, 046. 7
12, 950. 7
6, 605. 6
2,546.0
1, 428. 7
248.0
148.4
148.0

2,334. 7
2,387.0
1,887. 9
1,052. 6
766.6
155.4
IOL 8
103.8

2, 768.8
2, 750. 5
2,162.3
1,187. 5
848.3
171. 5
111.6
112. 6

434.1
363.5
264. 4.
134.9
92.7
16.1
9.8

4,043. 7

43,122.0

8,778. 7

• 140,819.3

16, 727. 3

19,659.8

C3
/

10,103. 2

42, 966. 2

$21. 6269.2
606.-6
483.6
337.3

2,932.-5

N O T E . — F i g u r e s are r o u n d e d a n d will n o t necessarily a d d t o t o t a l s .
1 I n c l u d e s s u r t a x , n o r m a l tax, a n d a l t e r n a t i v e tax.




ro:
00-

T A B L E VII.—Cumulative number of taxpayers, their surtax net income, and combined surtax a n d normal tax, distributed by surtax net income
classes at calendar year 1950 levels of income

o-

(Number of taxpayers in thousands; money amounts in millions]
Cumulative humber of taxpayers i
Surtax net income class
Total

Under $2,000
$2,000 to $4,000$4,000 to $6,000
$6,000 to $8,000-----.
$8,000 to $10,000
$10,000 to $12,000--..
$12,000 to $14,000.-..
$14,000 to $16,000.--.
$16,000 to $18,000—.
$18,000 to $20,000—.
$20,000 to $22,000....
$22,000 to $26,000....
$26,000 to $32,000..-.
$32,000 to $38,000-...
$38,000 to $44,000-.-.
$44,000 to $50,000-...
$50,000 to $60,000—.
$60,000 to $70,000-..
$70,000 to $80,000-$80,000 to $90,000--.
$90,000 to $100,000..
$100,000 to $150,000..
$150,000 to $200,000.
Over $200,000..---..

67, 152.9
576.3
483.9
379.9
904.3
627.8
474.3
363.8
269.8
193.3
180.9
137.4
87.4
60.7
38.6
3L1
22.6
15.0
8.6
6.8
5.1
3.4
1.2
.7

Married
persons

Single
persons,
estates,
and trusts

48,375. 4
5, 266. 6
2,027. 8
1,164.9
764.1
626.0
395.3
300.3
216.2
148.2
142.2
103.9
6L8
43.0
25.5
20.4
14.1
9.1
4.4
3.7
2.4
1.5
.4
.2

TotalNOTE.—Figures are rounded and will not necessarily add to totals.
1 Married couples are counted as two taxpayers whether or not both spouses have income.




18, 777. 5
3,309. 7
456.1
215.0
140.2
IOL 8
79.0
63.5
' 63.5
46.1
38. 7
33.6
25.6
17.7
13.0
10.7
8.5
6.0
4.2
3.2
2.6

L9
.8
.4

Combined surtax and normal tax
(present law)

Surtax net income

Total

$60, 582
8,395
3,664
2,234
L503
1,094
833
658
617
378
296
418
443
304
211
164
184.
. 126
80
64
40
101
48
160
82, 461

Married
persons

$40, 596
6,111
3,031
1,867
1,254
909
687
639
416
292
222
299
310
208
138
97
113
76
44
25
19
39
18
56

Single
persons,
estates,
and trusts
$19, 986
2,283
633
367
250
185
146
119
101
86
. 73
119
132
96
73
67
70
49
36
29
21
63
30
95
25,097

Total

$10,057
1,625
838.
590
450
366
316
272
227
176
146
217
241
174
128
97
121
86
57
40
30
80
39
124

Married
persons

$6,739
1,183
694
493
375
304
260
223
183
136
110
166
169
119
84
61
75
52
31
18
14
30
14
46
11, 569

Single ,
persons,
estates,
and trusts

o

O

$3,318 O
442
146
97
75
62
55
49
- 44
40
36
62
72
65
44
36
46 o
34
26
21
16 •
49
25
78
4.926

>

EXHIBITS

241

As a result of the large concentration of income below the $5,000 level, a sub'
stantial part of income tax revenue must of necessity be obtained from this group*
Moreover, a relatively small increase in the rate in the lowest brackets contributes more revenue than a larger increase at the higher income levels. For,
example, a 1 percentage point increase in the first bracket rate is equivalent in
revenue to a 3 percentage pbint increase for all other brackets together (table

Vir).

The method of increasing individual income taxes proposed by the President
has been selected with regard for simplicity in the face of the need for prompt action. It will provide substantial revenue on an equitable basis. The rate
schedule is contained in the present law. The Congress is familiar with the
schedule and with the development of the reductions from tentative tax provided
in the 1945 and 1948 acts. The President's recommendation provides simply for
eliminating one-quarter of these reductions for 1950 incomes and the entire
reductions for 1951.
.
,
'
.
The proposed revision in individual income taxes will involve no complex
additional computations. In contrast, a fiat percentage increase in tax liabilities
combined with the existing three separate tentative reductions would make the
present computations even more complex. The introduction of a new rate
schedule would require consideration of issues which can best be deferred until a
more comprehensive program is considered.
The adoption of the President's proposal will permit the adjustment of the
withholding rate applicable to wages and salaries in excess of personal exemptions
from 15 percent to 18 percent beginning with October 1 of this year. The new
withholding rate, after allowing for the standard deduction, would roughly
account for the full increase in tax proposed for the calendar year 1950 for those
subject to withholding.
Prompt enactment of legislation is necessary for the Bureau of Internal Revenue
to institute withholding at the higher rate. New instructions and withholding
tables will have to be printed and distributed to over 3 million employers in time
to be used by October 1. Taxpayers who pay tax in four quarterly installments
will also have to be provided with new forms to adjust their final quarterly
payments.
4. SUMMARY OP REVENUE FROM PRESIDENT'S PROGRAM

The following summary indicates the revenues to be obtained under the President's recommendations on a full-year basis and for the fiscal year 1951. The
combined effect of the three-point program is to increase.liabilities over present
law by nearly $5 billion on an annual basis. About $2.9 billion of this increase
would be from the increase in individual income taxes, $1.5 billion from the
increase in corporation rates, and over $500 million from the loophole-closing
provisions and excise tax adjustments.




242

195 0 REPORT OF THE SIECRETARY OF THE TREASURY

'TABLE YITl;—^Summary of the estimated revenue effect of the proposed interim tax
' • ''
. . . '
'legislation
':

• •

[In millions of dollars .
Estimated increase in
revenue over present
law
Full-year
effect 1

Increase corporation income tax r a t e s - - . - — . - - - : . . . . ..:'.
j
^..
Remove tentative tax reductions under the indiyidual.income tax.-i..^-^..
Life insurance companies
1
..l.-"-.
Charitable and educational institutions and charitable estates and trustsMiscellaneous loophole-closing provisions-..•
.•..:_._.--...._.'......'.
Withholding on.dividends.----.--...'..^..
.-.......----j
.-•
Tax television sets and deep-freeze units
--...
'.
^....
Total:.---.-ILL-J:--"-

-.

'.

—-

-—

-

1,455.0
'2,932.5
63.1
< 100. 0
150.9
• 175.0
48.6
4,925.1

Fiscal
year 1951 2

.

572.1
1,725. 0
129.2
124.5
110.0
3L7
2, 692;.5

• Estimates affecting income .taxes are. based on levels" of income estimated for the calendar
year 1960 and take into account interrelated effects of changes in corporation :and individual income
tax liabilities. Estimates affecting estate and gift taxes, and. excise taxes are based ou levels of
incbme for the fiscal year 1951.
..
•
2. Provisions ofthe revenue bill of 1950 (as passed by the' House of-Representatives June 29. 1950)
are assumed tO'' have an effective date as provided • by the bill. It • is also assumed that the
increase in tax on- television- sets and .deep-freeze units will be effective September 1, 1950,
and that the increase in corporation income tax rates will be effective with taxable years ending
on or after December .31, 1950. The higher individual income- tax withholding rate is assumed to
take effect October 1,1950. :
. . . . . .
3 The individual income itax provisions affecting, calendar year 1950 are estimated to yield $703miUion. • . ,
. .
4 Does not represient, for the; m.ost part, aii' increase over present revenues. The estimate
represents the long-run revenue loss estimated to occur if provisions are not adopted.

The fact that this is an interim program should be emphasized. The relationship between -the • proposed increases iii liabilities can be" reconsidered when a
mor^ comprehensive program is developed with appropriate attention to other
sources of, reyenue. The enactment of H! R. 8920 revised as recommended will
adjust bur reve.nue structure i n t h e direction necessary to discharge-the responsibilities we have undertaken to meet. In doing this, an immediate,substantial,
contributiori will be made to current revenue needs, and the possibilities of
inflationary spending from 1950 incomes will be reduced.
.
I should like to leave one concluding thought with you. The three-point tax
program placed before you by the-President to meet our immediate requirements
was developed in the conviction that our people are prepared for the sacrifices and
responsibilities which the defense of our Nation and of our institutions demands.
I feel sure that they want to begin now to prepare for meeting the expenditures
that lie ahead. I know that you will consider the President's program in this
spirit.




EXHIBITS

243

Exhibit 24.—Miscellaneous revenue legislation enacted during the fiscal year 1950
EIGHTY-FIRST CONGRESS, FIRST SESSION

. . . . . .

Public Law 240, August 17, 1949, by adding a new. section 3182, exempted
certain volatile fruit flavor concentrates, from t h e .tax oh liquors imposed .under
subchapter E of Chapter 26 of.the Internal Revenue: Code. .
Public Law 241, August 17, .1949, by amending"se.ctibri 2 of t h e a c t of December
5, 1942, extended t o J u l y 1,, 1951, .the existing privilege of^ free importation pf
bona fide gifts from members of the. armed forces of, t h e United States o n i d u t y
abroad.
..
.
, . . ' . . . ' /
Public Law 261, August 23, 1949, amended sections .3150, 3.152, 3157, 31.58,
and 3159 of the I n t e r n a l Revenue Code to permit.fhe,use of stamp, or. m e t m
machines as an alternative means.of paying t h e t a x ' o n fermehted rnalt liquor, to
authorize t h e bottling of malt, liquors on brewery, premises and to provide for
t a x p a y m e n t on its removal.
,
. / . , . . : . . . , , . .
.. ,
Public Law 271, August 27, 1949, (1) accorded privileges of free importation
to members of t h e arnied.forces of other nations or their families, provided such
natibns g r a n t reciprocal t r e a t m e n t ; (2) amended Public Law 828 .(80th Congress,
2nd session), to extend to December 3 1 , 1950, the, time for claiming refunds with
respect to war losses; (3) amended sections 22 (b) (9) a n d (10) .of t h e I n t e r n a l
Revenue Code to extend, to December 3 1 , 1950,.the time during, which a m o u n t s
a t t r i b u t a b l e to discharge of indebtedness m a y be excluded from grpss income;
(4) added to C h a p t e r 38 of t h e I n t e r n a l Revenue Code section 3809, whiqh
prescribes criminal penalties for falsei returns .wlie.re made under penalties of
perjury, and repealed I n t e r n a l Revenue Code sections 51 (d), 145. (c), and-1630
relating to t h e same subject m a t t e r ; (5) repealed I n t e r n a l Reyenue Code section
148 (f) relating to reports and public listing of compensation bf corporate officers
a n d employees in excess of $75,000; (6) repealed I n t e r n a l Revenue Code sectibn
1626 (c) a n d amended section 1631 to prescribe t h e p e n a l t y f o r the failure of an'
employer to file a return or pay over-withheld t a x ; (7) amended Internal Revenue
Code section 3310 to g r a n t to t h e Commissioner authority.to prescribe regulations
with regard to returns a n d . p a y m e n t of .certain excise taxes a n d to authorize t h e
use of Government depositaries for receiving any internal revenue tax;:section 8
of t h e Second Liberty Bond Act (31 U. S. C , sec. 771), was also,amended to allpw
t h e Treasury .to leave t h e proceeds of any internal revenue tax on deposit in commercial b a n k s ; (8) amended I n t e r n a l Revenue Code Chapter 35 to a d d . t h e r e t o
section 3647, authorizing t h e Commissioner to delegate, t h e power pf assessment
to field officers; (9) amended I n t e r n a l Revenue Code sectibn 3770.(a) (4) t o permit
t h e Commissioner to credit overpayment of one class of,tax against another class
.of tax due, added a n.ew p a r a g r a p h (5) to authorize him to delegate, to collectors
a u t h o r i t y to m a k e refunds not in excess of $10,000 and amended Internal Revenue
Code section 3772 by adding subsection (e) to allow.a credit f or, overpay nient ;of
any tax against a . t a x liability to be t r e a t e d as a p a y m e n t of such satisfied tax
liability in a suit for a refund; (10) repealed I n t e r n a l Revenue Code section 377.6
requiring reports t o Congress of refunds in excess of-$500, and amended I n t e r n a l
Revenue Code section 3777 to require.reports by .the .Commissioner.of-estate,
gift, and income t a x refunds a n d credits t o t h e Joint ;Committee on Internal
Revenue Taxation only if t h e y are in excess of $200,000; (11).amended I n t e r n a l
Revenue Code section 3944 (b) t o eliminate t h e $7,500 limitation on t h e salaries
of collectors; and (12) aniended I n t e r n a l Revenue C)ode.section 3792. to eliminate
approval by t h e Secretary of each informer's, award. .
•
Public Law 351, October 12, 1949, relating to p a y and allowances for members
of t h e armed forces, provided in section 402 (h) a rule for .computing.that, p a r t of
disability retirement p a y which would not be tax-exempt for the, purposes of
section 22 (b) (5) of t h e I n t e r h a l Revenue Code.
, .. :
. ,
Public Law 378, October 25, 1949, (1) amended I n t e r n a l R e v e n u e Code section
60 (a), to provide t h a t farmers m a y file income tax returns for, a.taxable year pn
or.before J a n u a r y 31 of t h e succeeding taxable year in: lieu of declarations of
estimated tax due on or before January. 15 of such succeeding. taxable :year,;
(2) amended I n t e r n a l Revenue Code section 131. (c) to provide t h a t in a redetermination of United States t a x because of a refund of tax paid to a foreign country,
such redetermination shall t a k e into account only t h e net a m p u n t of t h e refund
received by t h e t a x p a y e r and to impose no interest on .any .deficiency, resulting
from such redetermination except to t h e extent interest thereon has been paid by
t h e foreign country for such period; (3) amended I n t e r n a l Revenue Code section




244

1950 REPORT OF THE SECRETARY OF THE TREASURY

23 (q) to provide an election for corporations on an accrual basis to include in
their charitable contributions for any taxable year after 1942 amounts contributed and paid within 2}^ months following the close of.the taxable year in
which such gifts were authorized; (4) amended Internal Revenue Code section
1802 (b) to exempt from stamp taxes transfers of stock between a corporation and
its registered nominee; (5) added subsection (d) to Internal Revenue Code section
165 to provide that contributions by employers to certain employee annuity
trusts established prior to 1942 shall be included in the taxable income of the
employee only in the year in which the annuity payments are received by the
employee; (6) amended Internal Revenue Code section 1000 and other relevant
provisioris of law to exempt from gift and estate taxes the relinquishment on or
before December 31, 19,50, of powers over certain reciprocal trusts created prior
to January 1, 1940; (7) amended Internal Revenue Code section 811 (c) to provide
that a transfer of property made prior to "March 4, 1931, shall not be subjected to
estate tax by reason of the retention of a life estate or power over income if the
transferor either dies before 1950 or divests himself of the life estate or power
before 1951; (8) added to section 811 (c) of the InternaL Revenue Code paragraph (2), providing that a transfer of property made before October 8, 1949,
shall not be subjected to estate tax by reason of the retention of a remote reversionary interest, and paragraph (3), providing that a transfer of property
made after October 7, 1949, which is intended to take effect in possession or
enjoyment at or after the transferor's death shall be subjected to estate tax
whether or not he retained any interest; (9) amended paragraph 1798 of the
Tariff Act of 1930 by raising to $200 the exemption from import duty for articles
brought in by returning tourists; (10) added to the Internal Revenue Code a new
section 939, to provide an exemption from the additional estate tax for the estates,
of members of the armed forces dying between December 7, 1941, and January 1,
1947, as a result of war services.
EIGHTY-FIRST CONGRESS, SECOND SESSION

Public Law 442, February 7, 1950, amended section 5 of the Federal Firearms
Act (52 Stat. 1252) to make subject to seizure and forfeiture, and to the provisions
of the Internal Revenue Code relating thereto, firearms or ammunition involved
in any violation of the act.
Public Law 448, February 21, 1950, (1) amended Internal Revenue Code section
2800 (a) (1) to provide for the use of additional means, including stamp machines,
for the payment of tax on domestically produced distilled spirits and for criminal
penalties with respect thereto;'(2) amended Internal Revenue Code section 2877
(a) to broaden the requirements for storekeeper-gaugers' records; (3) amended
Internal Revenue Code section 2901 to revise the provisions relating to loss allowances; (4) amended Internal Revenue Code section 2903 (a) to eliminate the provisions for bottling distilled spirits in bond after tax payment: (5) made various
technical amendments to Internal Revenue Code sections 2802, 2844 (a), 2861 (a),
2882 (a), 2884 (a), 2886 (a), 2887, and 2915 (a); (6) repealed Internal Revenue
Code sections 2906 and 3302; (7) amended Internal Revenue Code section 3112
(b) to extend so far as applicable the provisions of section 2800 (a) (1) (A) and (B)
to alcohol produced in the United States or imported for industrial purposes under
section 3125; (8) amended Internal Revenue Code section 2883 to provide legislation of a permanent nature to supersede existing provisions of that section which
included a number of temporary war emergency provisioris.
Public Law 459, March 16, 1950, repealed, effective July 1, 1950, Internal
Revenue Code sections 2301 (relating to the tax on oleomargarine) and 3200-3202,
inclusive (relating to the occupational tax on manufacturers, wholesalers, and
retailers of oleomargarine).
Public Law 566, June 17, 1950, amended section 3 of the act of June 18, 1934
(48 Stat. 998), relating to the establishment of foreign trade zones, to provide
liberalizing provisions in determining taxes to be imposed on importation of foreign
products, and to permit transfers of domestic articles to the zone to be considered
exportation for drawback and refund purposes.
Public Law 578, June 27, 1950, amended sections 403 (d) (3) and 452 (c) of
the Revenue Act of 1942 to extend through June 30, 1951, the period within
which the release, or the possession at death without exercise, of a power of appointment created on or before October 21, 1942, will nbt be subject to estate or
gift tax.




245

EXHIBITS

Exhibit 25.—Individual income tax liabilities and effective rates under, the
Revenue Acts of 1913-50
TABLE I.—Individual income i ax liabilities-—Singl e person with no ^dependents
Selected a m o u n t of n e t income
Revenue
act

Income
year
$525

19131916
1917
1918

3/1/13-12/31/15
1916
1917
1918
1919-20
1921
1921
1922
1923
1924..-_
1924
1926
1925-27
1928
1928,1930-31
1929
1932. „
1932-33
19341934-35
1936,19381936-39
19401940 1
1941..1941
1942 2
1942
1943 2 3
1944 4
1944-45
194.5
1946-47
1948-49
1948..1950
1950
1951

$600

$800

$900 $1, 000 $2, 000 $3,000 $5, 000

$6, 000

$20
40
120
240
160
160
160
120
60
40
40
13
160
140
140
172
483
920
1,105
1,105
922
811
843
944

$30
60
170
370
250
250
240
180
90
66
66
22
240
216
216
255
649
1,174
L401
1,395
L169
1,040
1,080
1,204

^

$6
5

$15
17
23
19

$3
52
62
69
57
33
35
40

71
85
92
76
50
52
60

$4
21
89
107
115
95
66
70
80

$20
60
40
40
40
30
15
6
6
2
40
32
32
44
117
273
333
345
285
232
244
280

$40
120
80
80
80
60
30
17
17
6
80
68
68
84
221
472
574
585
485
409
428
488

$8, 000

•

$50
100
275
650
450
450
420
315
150
101
101
62
420
378
378
449
1,031
1,742
2,052
2,035
1, 720"
1, 546
1,604,
1,780

$10, 000
$70
140
395
950
670
670
600
450
225
154
154
90
600
660
560
686
1,493
2,390
2,783
2,755
2,347
2,124
2,201
2,436

Selected a m o u n t of n e t incorae
Eevenue
act

Income
year
$15,000

3/1/13-12/31/15
1916
1917
1918
1919-20
1921
1921
1922
1923
1924—
1924
1926
1925-27
1928
1928,1930-31
1929
1932
1932-33
1934
1934-35
1936,1938.
1936-39
1940
19401
1941—
1941
1942
1942 2
1943 2 3
1944 <—_
1944-45
1945
1946-47
1948
1948-49
1950
1950
1951

1913
1916
1917
1918

$20,000

$25,000

$50,000

$120
240
770
1,790
1,310
1,310
1,140
855
585
386
386
285
1,140
1,104
1,104
1,476
2,994
4,366
4,968
4,930
4,270
3,894
4,032
4,448

$170
340
1,220
2,750
2,070
2,070
1,800
1,350
1,045
694
694
555.
1,800
1,834
1,834
2,666
4,929
6,816
7,626
7,580
6,645
6,089
6. 301
6, 942

$270
490
1,820
3,840
2,960
2,960
2,640
1,980
1, 635
L234
1,099
922
2,640
2,804
2,804
4,253
7,224
9,626
10,644
10,590
9,362
8,600
8,898
9,796

$770 $1, 520
1,340
2,490
5,220 . 9,970
11,150 21,590
9,270 18, 710
9, 270 18, 710
8,720 17,910
6,540 13, 433
6,165 13, 215
4,954 10,184
4,664
9,894
. 4, 250
9,230
8,720 17, 910
9,334 18,884
9,334 19, 484
14, 709 28, 481
20,882 36,487
25,811 44, 366
28, 058 48,001
27, 945 48,000
25,137 43, 477
23, 201 40,182
23,997 41,556
26.388 45, 684

Footnotes at end of table VI.




$75,000 $100, 000 $500,000 $1,000,000 $5,000,000
$2, 520
3,940
16, 220
35,150
31, 270
31,270
30, 220
22,665
22,645
16,134
15,844
14, 930
30, 220
31, 404
33, 354
44, 268
53, 214
64, 641
69,665
69,870
63, 541
68, 762
6 0 770
66, 798'

$25, 020
42, 940
192, 720
323,150
303, 270
303, 270
260, 720
195, 640
199, 646
. 116,134
115,844
110,930
263, 720
264, 844
305, 224
330,933
345, 654
414,616
441,863
444, 350
407,897
5 385,000
396, 221
429, 274

$60, 020
$340, 020
102,940
687,940
475, 220 3,140, 220
703,150 3, 783,150
663, 270 3, 583, 270
663, 270 3, 583, 270
550, 720 2,870, 720
413, 040 2,163, 040
429,645 2, 269, 645
241,134 1,,241,134
240, 844 1,240,844
230,930 1,190,930
671, 220 3,091, 220
572, 324 3, 092, 314
680,184 3, 790,164
718, 404 3,917, 390
733,139 3,923,124
854,616 4,374,616
5 899,500' 5 4,499,500
«900, 000 5 4,500.000
840,147 «4, 275.000
5 770,000 5 3,850,000
5 800.000 5 4,000,000
5870, 000 5 4,350,000

2.46

1 9 5 0 REPORT OF T H E , SECRETARY OF T H E

TREASURY

TABLE.'II.-—-Indiviciual income tax liabiliiies:—'Married [person' with no, dependents
;.
Revenue
act

Selected a m o u n t of n e t income

•

,

• •tncdiiie ••
year
$600

1913..„_._ 3/1/13-12/31/16
'
1916
1916 •
1917
1 9 1 7 . — .-1918 .
1918
1919-^20
i
1921'
1921
. 1922 .
1923 •
1924
,
1924
1925-27
1926
1928, 1930-31
1928
1929
1932..___1932-33
1934
193i4-35
1936,19381936-39
1940
•
1940 1
1941
L
1941
1942
1942 2
1943 2 3 . • $1
;944 * : _ „
,3
1944-46
1945
i946-47'
1948:.._.i
1948-49.
1950
1950
. 1951

$800

$1,000

$2,000

$2,600

$3,000

$10
30
20

•
$8
9

$15
16

$42
140
. 188
245
190
133
139
160

11
90
232
297
360
285,
216
226
260

$5,000

$8,000

$20 • $40
$10
40
^20
80
80
130
235
180
250
, 530
120 : ' 1 7 0 ". 370
170
100
370
100
160
340
120
255
75
38
53
105
17
56
28
17
28
56
6
10
22
140
100
300
80
116
248
116 • 248
80
110
150
317
621 . 873
376
746
992
1,532
1,780
894
1,173
1,885
975
1,265
1,577
798
1,045
1,206
819
: 631
1,257
856
661
1,416
760
976

$20 •
60
40
20
20
15
.
8

20
8
8
31
138
324
405
475
380
299
313
360

$6,000

$10,000
$60
120
- 355
830
690
690
520
390
165
101
101
52
480
415
415
528
1,305
2,152
2,467
2,585
2,185
1,621
1,686
1,888

Selected a m o u n t of n e t i n c o m e
Revenue
act

Income
year
$15,000

1913
19161917
1918
1921—
1924-___.
1926-:.:
1928-.__:
1932:._1934-_v.
1936,1938.
1940:.„_
1941—
1942—
1944<...1945.-.:
1948.-.-..
1950:---

$20,00.0

$25,000

$50,000

$75,000 $100,000 $500,000 $1,000,000 $5,000,000

$260
$760 $1, 510
3/1/13-12/31/15
$110 - $160
1916
220
320
470
1,320
2,470
1917
730
1,180 ' 1,780
5,180
9,930
1918
1,670
2,630
3,720 11,030 21, 470
1919-20
1,230
1,990
2,880.
9,190 18, 630
1921
1,230
1,990
2,880. 9,190 18, 630
1922
1,060
1,7202,660
8,640 17,830
1923
796
1, 290
1,920
6,480 13,373
1924 •
615
976
1, 666
6,096 13,145
1925-27
311
619
1,159
4,879 10,109
1928, 1930-31
311
619
1,024.
4,589 • 9,819
1929 .
225.
495
862
4,190
9,170
1932-33
1,020
1,680
2,520
.8,600 17, 790
, 1934-35
924
1,689
2,489
8,869 18, 239
1936-39
924
1, 589 ' • 2,489
8,869 18,779
1940 1 '
. 1,258
2, 336
3,843 14,128 27, 768
1941 ;
2, 739
4,614
6,864 20. 439 35, 999
1942 2
4,052 • 6,452
9,220 •25,328 43,820
1943 2 8
4,533
7,100. 10, 035 • -27,075 46, 955
• 1944^46
. 4,695. 7,316 10, 295 27, 585 47, 595
; 1946-47
4,047
6.394
9,082 24, 795 43, 092
' 1948-49
2.829.
4, 247
6,877 17,201 31,015
1960
2,935
4; 402
6,087 17, 797 32,082
1951 .
•3,260
4,872. • 6,724 19,592 36,290

Footnotes at end of table VI.




$2, 610
3,920
16,180
36,030
31,190
31,190
30,140
22, 605
22, 675
16,069.
16, 769
14,870
30,100
30, 694
32,469
43,476
52, 704
64,060
68,684
69, 435
63,128
46,403
47,994
62,776.

$25,010 $60,010
$340, 010
42, 920 102, 920
687, 920
192, 680 475,180 3,140,180
323,030 703,030 3, 783,030
303,190 663,190 3, 583,190
303,190 663.190 3,583,190
260, 640 560; 640 2,870, 640
196,480 412, 980 2,152,980
199, 575 429, 576 2, 269, 575
116,059 241,059 1, 241, 069
115, 769 240, 769 1, 240, 769
110,870 230,870 1,190,870
263,600 571,100 3,091,100
263, 944 571,394 3,091, 369
304,144 679,044 3, 788, 994
330,156 717, 584 3, 916, 648
345, 084 732, 554 3, 922,624
414,000 854,000 4,374,000
440, 747 5-899,000 5 4, 499, C O
O
443,895 5900,000 8 4,500,000
407, 465 839, 715 8 4, 275,000
369, 662 8770; 000 8 3,850.000
370, 657 792, 442 8-4,000,000
403,548 868,548 8 4,350,000

..^•^

:.

r-

' . E X H I B I T S •*••'= • • ; . . • . - : • • • • . • : : a

•."•••

247^

T A B L E 111.—Individual income tax liabilities^^Married person with"tibb 'dependents
S e l e c t e d a m o u n t o f n e t income
Revenue
act

Income
year

-

•

$600

$800

$1,000 .$2,000^ ^$2,500

$3,000

$2
6
4

$12
36
24

1913
1916..
1917
1918.

3/1/13-12/31/15
1916
1917
1918 •
.'
1919-20
1921..
1921 .
1922
1923
1924
1924
1926 .
1925-27
1928
1928,1930-31
• 1929
1932
• 1932-33
1934
.• 1934-35
1936,1938. . 1936-39
19401940 !•
1941
194L .
1942 2
1942 . . . _
1943 2 3,
1944<....
1944-46 <
1946-47
1945
1948
1948-49
1950.
1950
1951

$5,000 ! $6,000
• .f

.)

,
.

—-.-

$7'
9

$1
.3

^14
15-

$13
58
45

•

12
99
L59
L60
95
17
17
20

58
191
267
276
• ]L90

;

LOO

. 1 04
L20-

m

20
64
]L56
]L04
68
68
51
26
8
8
3
68
48
48
75
271
592
r30
r55
589
132
t52
520

i
;

•
•

•
'

$8,000, $10,000

$20
$40'
40
. 80
114
219
: 226
'482
154 • 338
138 ' 306
128, •i 276
96 • • 207
41
81
19
42
19
42
6
14
108 • ; 236
84'
184
84 • 184
114
246
397:
717
810
1,322
1, 553
979
1,005
1, 585
798 ' 1, 292
5^8
974
626 • 1, 016
1,152
720

$60
120.
339
'782:
568:
'626'
456:
342
14i:
83
83
•40'
416.
3431
343
• 440.
1,117'
1,-914'
2,208'
2, 2451,862'>
1,361
1, 4171,'692'

Selected a m o u n t of n e t income "
Revenue
act

Income
year
$15,000 . $20,000' $25,000. $50,000 $76,000 $100, 000 $500,000 $1,000,000 h)^, 000, 000

1913.___. 3/1/13-12/31/15 .
1916
1916
1917
1917
1918
1918 .
. 1919-20
1921
1921
; 1922
1923
1924....
1924
1926
1926-27
1928
1928, 1930-31
1929
1932
1932-33
1934
1934-35
1936-39
1936,19381940
1940 I
1941
. 1941
1942
1942 2 . •
. 1943 2 3
1944*.-__
1944-45
.
1945..___
1946-47 . •
1948-:___
1948-49 •
1950-____
1950
1951

. $760
$260
$110
$160470
1,320
.220
320
1,764
6,164
714
1,164
3.672 , 10,982
1,622
2,582
9.158
1,958 : 2,848
1,1.98
9,126
1,166
1,886 ' 2.816
2,496 • 8.576
996
1,656
6,432
747
1, 242 , . 1,872
476
935 • 1,526 . 6,056
1,129
4,849
281
689
994
4, 559
281
689
201
471 . 838, . 4,166
8,536
956
1,616 • 2,456
8,621
831
1,469 , 2,327
831
1, 469 ,. 2,327 , 8,621
1,118 .•2,143 ; 3,671 13, 741
2,475
4, 287 •.• 6, 480 19, 967
3,758
6,088 • 8,814 24,845
9,574 26. 392
6, 693
4, 207
9,705 26,865
4.265
6. 785
8,522 24.111
3,639 ; 5, 890
2,512
3.888 •5,476 16, 578
2.607
4,030 • 5,672 17.152
6 268 •18 884
2,90
4,^164

Footnotes at end of table VI.




)

$1,610 $2,510
2.470
3,920
9,914 16,164
21, 422 34, 982
18, 598 31.158
18, 566 31,126
17, 766 30, 076
13,325 22, 557
13.105 22, 535
10, 079 , 16, 029
9,789 15,739
• 9,146 14, 846
. 17, 726 30, 036
•17,895 . 30,162
: 18, 403 3L997
27, 293 •42,948
35, 479 • 52,160
43,274 63, 479
46, 209 67.803
• 46. 785 68. 565
42.323 • 62. 301'
30. 329 45.643
• 31, 372- 47, 20834 510 . 61 912

$25,010
42,920
192, 664
322,982
303,158
303,126
260, 576
195, 432
199. 535
116,029
115,739
110,846
263,536
263,464
303,568
329,637
344, :476
413,384
439.931
442.985
406.600
358.677'
369. 645
402,456

$60,010
102, 920
475,164
702.982
663.158
663,126
550,576
412,932
429, 535
.241-, 029
240,739
230,846
571,036
570,898
678,436
717, 036
: 731,930
•853,384
8 898,800
8 900.000
838.850
769. 314
791; 430
.857; 456

: $340, 010
687, 920
3.140,164
3. 782,982'
3,583,158'
3, 583.126
2,870,5.76>
2,152,932
2, 269, 535'
1, 241,029
X, 240, 739
1,190,846.
3, 091,036:
3, 090,865
3, 788, 370
3,915,986'
3,921,884
4, 373, 384
« 4, 498,800
« 4,500, 000=
« 4,275,000
« 3,850. 000
« 4,000,000'
« 4,350, 000^

248

1 9 5 0 REPORT OF T H E

SECRETARY OF T H E

TREASURY

TABLE IV.—Effective rates of individual income tax—Single person with no
dependents
[In p e r c e n t
^•Selected a m o u n t of n e t income
Revenue
act

I n c o m e year
$525

1913
1916
1917
1918

1
1

1621
1924
1926
1928.-—
1932
1934
.1936,1938.
]940.
1941
1942
1944<....
1945
:
1948
1950

3/1/13-12/31/15
1916
1917
1918
1919-20
1921
1922
1923
1924
1926-27
1928, 1930-31
1929
1932-33
1934-35
1936-39
1940 1
1941
1942 2
1943 2 3
1944-45
1946-47
1948-49
1960
1951

""i."i'
.9

$600

$800

2.5
2.8
3.8
3.2

$900 $1,000 $2,000 $3,000 $5,000

$6,000

$8,000

$10,000

0.4
.8
2.4
4.8
3.2
3.2
3.2
2.4
1.2
.8
.8
.3
3.2
2.8
2.8
3.4
9.7
18.4
22. r
22:1
18.4
16.2
16.9
18.9

0.6
LO
2.8
6.2
4.2
4.2
4.0
3.0
L5
.9
.9
.4
4.0
3.6
3.6
4.3
10.8
19.6
23.4
23.3
19.5
17.3
18.0
20.1

0.6
1.3
3.4
8.1
5.6
5.6
6.3
3.9
L9
L3
L3
.7
5.3
4.7
4.7
6.6
12.9
21.8
25.7
25.4
2L5
19.3
20.0
22.3

0.7
1.4
4.0
9.5
6.7
6.7
6.0
4.5
2.3
1.5
1.5
.9
6.0
6.6
5.6
6.9
14.9
23.9
27.8
27.6
23.6
2L2
22.0
24.4

0.04
0.4 1.2
6.5 7.9
7.8 9.4
8.6 10.2
7.1 8.4
4.2 6.5
4.4 5.8
6.0 6.7

0.4
2.1
8.9
10.7
11.5
9.5
6.6
7.0
8.0

LO
3.0
2.0
2.0
2.0
1.5
.8
.3
.3
.1
2.0
L6
1.6
2.2
5.9
13.7
16.7
17.3
14.3
1L6
12.2
14.0

L3
4.0
2.7
2.7
2.7
2.0.
LO
.6
.6
.2
2.7
2.3
2.3
2.8
7.4
15.7
19.1
19.6
16.2
13.6
14.3
16.3

Selected a m o u n t of n e t income
Revenue
act

Income year
$15,000

3/1/13-12/31/15
1916
1917
1918
1919-20
1921
1921
1922
1923
1924
1924
1926-27
1926
1 9 2 8 — - 1928, 1930-31
1929
1932
1932-33
1934
1934-35
1936-39
1936,19381940 »
1940-.1941
1941
1942 2
1942
1943 2 8
1944-45
1944 < —
1946-47
1946
1948-49
1948
1950
1950
1951
1913
1916
1917
1918

$20,000

$25,000

$50,000

0.8
L6
5.1
11.9
8.7
8.7
7.6
5.7
3.9
2.6
2.6
L9
7.6
7.4
7i4
9.8
20.0
29.1
33.1
32.9
28.5
26.0
26.9
29.7

0.9
1.7
6.1
13.8
10.4
10.4
9.0
6.8
5.2
3.5
3.5
2.8
9.0
9.2
9.2
13.3
24.6
34.1
38.1
37.9
33.2
30.4
3L5
34.7

Ll
2.0
7.3
16.4
1L8
1L8
• 10.6
7.9
6.5
4.9
4.4
3.7
10.6
1L2
11.2
17.0
28.9
38.5
42.6
42.4
37.5
34.4
35.6
39.2

L6
2.7
10.4
22.3
18.5
18.6
17.4
13.1
12.3
9.9
9.3
8.5
17.4
18.7
18.7
29.4
4L8
51.6
56.1
65.9
50.3
46.4
48.0
62.8

Footnotes at end of table VI.




$75,000 $100,000 $500,000 $1,000,000 $5,000,000
2.0
3.3
13.3
28.8
24.9
24.9
23.9
17.9
17.6
13.6
13.2
12.3
23.9
25.2
26.0
38.0
48.6
59.2
64.0
64.0
58.0
63.6
55.4
60.9

2.5
3.9
16.2
36.2
31.3
3L3
30.2
22.7
22.7
16.1
15.8
14.9
30.2
3L4
33.4
44.3
53.2
64.6
69.7
69.9
63.6
58.8
, 60.8
66.8

5.0
8.6
38.6
64.6
60.7
60.7
52.1
39.1
39.9
23.2
23.2
22.2
52.7
53.0
6L0
66.2
69.1
82.9
88.4
88.9
8L6
8 77.0
79.2
85.9

6.0
10.0
47.6
70.3
66.3
66.3
55.1
4L3
43.0
24.1
24.1
23.1
67.1
67.2
68.0
7L8
73.3
85.6
8 90.0
8 90.0
84.0
8 77.0
8 80.0
8 87.0

.

6.8
13.8
62.8
75.7
7L7
7L7
57.4
43.1
45.4
24.8
24.8
23.8
61.8
6L9
75.8
78.3
78.5
87.5
5'90.0
5 90.0
5 85.5
8 77.0
8 80.0
8 87.0

249

EXHIBITS

T A B L E V.—Effective rates of individual income tax—Married person with no
dependents
[In percent]
Selected a m o u n t of n e t income
Revenue
act

I n c o m e year
$800

$1,000

$2,000

$2,500

$3,000

0.4
1.2
.8

$600

0.7
2.0

1913
1916
1917
1918

3/1/13-12/31/15
. 1916
1917
1918
1919-20
1921 . 1921
1922
1923
1924
1924
1925-27
1926
1928,1930-31
1928
1929
1932...
1932-33
1934-35
1934
1936-39
1936,1938
1940.---.
19401
1941
1941
1942--.
1942 2 .
1943 2 3 .
1944 <
1944-45
1946-47
1945
1948-49
1948- .
1950
1950
1961

$5,000

0.2
0.3
.4
•
. 7
L6
2.2
4.2
3.6
2.4
2.8
2.0
2.8
.2.0
2.7
1.5
2.0
.8
.9
.3
.5.
.3
.6
.1
.2
2.0
2.3
1.6
L91.6
L9
2.2
2.5
7.6 • 8.7
14.9
16.6
17.9
19.6
19.5
21.1
16.0
17.4
12.6 • 13.6
13.2
14.3
15.2
16.3

^:?
.7
.5
.3

0.2
.5

LO
1.1

1.5
1.6

2.1
7.0
9.4
12.3
9.5
6.6
7.0
8.0

.4
3.6
9.3
11.9
14.4
. 11.4
8.6
9.0
10.4

.

$6,000

.7
.3
.3
1.0
4.6
10.8
13.5
15.8
12.7
10.0
10.4
12.0

$8,000
0.5
LO
2.9
6.6
4.6
4.6
4.3
3.2
L3
.7
.7
.3
3.8
3.1
3.1
4.0
10.9
19.2
22.3
23.6
19.7
15.1
15.7
17.7

$10,000
0 6
1.2
3.6
8.3
5.9
*5 9
6.2
3.9
1.7
1.0
1.0
.5
4.8
4.2
4.2
5.3
13.1
21.5
.24.7
26.9
21.9
16.2
16.9
18.9

Selected a m o u n t of n e t income
Revenue
act

I n c o m e year
$15,000

1913
3/1/13-12/31/15
1916
1916
1917
1917..-.
1918
1918
1919-20
1921
1921
1922
1923
1924
1924
1925-27
1926
1928,1930-31
1928
1929
1932--..
1932-33
1934
1934-35
1936,19381936-39
1940 '
1940
1941
1941
, 1942 2
1942
1943 2 3
1944 < —
1944-46
1946-47
1945
1948-49
1948
1960
1950
1961

$20,000

0.7
1.5
4.9
ILl
8.2
8.2
7.1
5.3
3.4
2.1
2.1
1.6
6.8
6.2
6.2
8.4
18.3
27.0
30.2
31.3
27.0
18.9
19.6
21.7

0.8
L6
5.9
13.2
10.0
10.0
8.6
6.5
4.9
3.1
3.1
2.5
8.4
7.9
7.9
1L7
23.1
32.3
35.5
36.6
32.0
21.2
22.0
24.4

Footnotes at end of table VI




$25,000 $60,000
LO
L9
7.1
14.9
1L5
11.6
10.2
7.7
6.3
4.6
. 4.1
3.6
10.1
10.0
10.0
15.4
27.6
36.9
40.1
.4L2
36.3
23.5
24.3
26.9

1.5
2.6
10.4
22.1
18.4
18.4
17.3
13.0.
12.2
9.8
9.2
. 8.4
17.2
17.7
17.7
28.3
40.9
60.7
64.2
65.2
49.6
34.4
35.6
39.2

$75,000 $100,000 $500,000 $1,000,000 $5,000,000
2.0
3.3
13.2
28.6
24.8
24.8
23.8
17.8
17.5
13.5
13.1
12.2
23.7
24.3
25.0
37.0
48.0
68.4
62.6
63.5
•67.5
41.4
42.8
47.1

2.5
3.9
16.2
35.0
3L2
31.2
30.1
22.6
22.6
16.1
16.8
14.9
30.1
30.6
32.5
•43.5
62.7
64.1
68.6
69.4
63.1
46.4
48.0
52.8

5.0
8.6
38.5
64.6
60.6
60.6
62.1
39.1
39.9
23.2
23.2
22.2
52.7
52.8

eo.8
66.0
69.0
82.8
88.1
88.8
81.6
71.9
74.1
80.7

6.0
10.347.5
70.3
66.3
66.3
65.1
4L3
43.0
24.1
24.1
23.1
57.1
57.1
67.9
7L8
73.3
85.4
8 89.9
8 90.0
84.0
8 77.0
79.2
85.9

6.8
13.8
62.8
75.7
7L7
7L7
57.4
43.1
45.4
24.8
24.8
23.8
61.8
61.8
75.8
78.3
78.5
87.5
8 90.0
8 90.0
8 85. 6
8 77. 0
8 80.0
»87.0

250.:

195 0 REPORT OF THE SECRETARY OF THE TREASURY

TABIJ'E Yl.r:^Effectipe rates of iridividual income tax—Married person-with two
dependents
[In percent;
.., , • Selected a m o u n t of n e t income
Income
year

Revenue
act

• • '

$600^ $800
3/1/13-12/31/16
. ,' 1916:'
.. . 1917' .
1918:
. 1919-1920
;• 1921.
1921
: 1922- .
• . 1923,
"
. , 1924,' •
1924
• 1925-27
1926
1928, 1930-31
1928 ..
1929
1932-33
1932—
.1934-35'.
1934
1936-39 •
1936.1938
1940 1.
1940.
1941
1941
19422
1942
. 1943 2 3 ,
1944 * . . . .
1944-45 .'
1945.
1946-47 .
1948-49 .
1948
1950
1950
1951.
1913
1916
1917..
1918

$1,000, $2,000

$3, 000

01
.2.
.2

0.4
1.2
.8

.

0.2
.5

, 0.7
.' 1.4; . 2.9
1.1 ., L 6 ' .': 2.3

6.9

•

"

,;

5
1.9
40
6.4
8. 9.
R.-4.
R.4. " 9.2
.
^ 8
6.3
.73.3
.7
3.5
.8
4.0

$5,000: $6, 000

$8,000

0.3
0.5
•; 71.0
1.9
2.7
3.8
6.0
4.2
2.6
2.3
3.8
2 . L . 3.6
1.6
2. 6
.7
LO
.3
.5
. .3
.5
" .1
.2
L8'
•..3.0'
1.'4
.'2.3
.1.4
•2.3
1.9
3.1
6.6
9.0
13.5^
16.5
16.3 • 19.4
16.8
19.8
16.2
13.3
10.0 • 12.2
12. 7
10.'4
14. 4
12.0

0.2
.4*
1.3
3.1
2.1
1.4
1.4
LO
.6
.2
.2
.1
1.4
LO
LO
1.5
5.4
11.8
, 14.6
16.1
11.8
• 8.6
9.010.4

''

:

$10, 000
0.6
1:2
3.4
7:8
5.6
5.3
4.6
3.4
1.4
.8
.8
.4
4.2
3.4
3:4
4.4
11.'2
19.1
22.1
22.5
18:6
13.6
14.2
15.9

Selected a m o u n t of n e t income

Income
year

Revenue
- act

$2,600

.$15,00.0 $20,000 $25,000 $50, 000 $75. 000 $100, 000 $600, O O $1,000,000 $5,000,000
O
'
-

'

•

.

•

.

'

•

•

•

•

3/1/13-12/31/15
1913
1916—
. . . 1916
1917
•
1,917. , •
1918-—
• 1918 :
• 19.19-201 '
1921:._._
1921
1922 i
-. 1923 '
1924—
: • .1924 ; •
1926: — : 1925-27' •
1928
19?8, 1930-31
i ' 1929 '
1932
. ;1932-33 • 1934
. •; 1934-35 •
1936,1938- • 1936-39 ' '
'•
•
1940:
: • 1940 1
1941:„_• 1941 • • •'
1 9 4 ' 2 : — . . 1942 2
••
•
1943 2 3
1944''».... • • 1944-45 •
1945—...
"1946-47
1 9 4 8 — . • 1948,-49
1960-*-.;1950
• .1951

0.7
0..8
1.5 :•• L: 6
4.8 -. 5:8
10.^8
12.9
8.0 • 9.87.89:6
6.16
8.3
5.0'
6.23J2' • 4.7
1.9
2; 9
L9'
2.9
1:3
• 2! 4'
6.4
8.1
6. 5' " 7.36.5 '
7.3
7.5' , 10.7
16.5 " 21.4
25. V ' ' 30.4
28.0
33.5
28. 4
33.9
24.3 ,.' 29:5'
16.7 '• 19.4
17.4
20 2
22.3
19.3

1.0
1.5
L9
2.6' '
7.1
10.3 •
14. 7
22.0
• 1 L 4 • 18.3
; • 11.3 • 18; 3 •
;• 10.0
17:2 •
'
7. 6 • 12:9
6.1
12.1• 4.6 • 9.7
4. 0
9:1
3. 4
8. 3 '
17.1
'
9.8
'••: 9 : 3
• 17.2. •:
9.3' •• 17.2
14.3 • 27.5' "
• 25.9
39:9
35.3' • 49:7 ••
38.352:8
• " 3818 • 53.7
34:1 • 48.2 :
'21:9 ' 33.2
• 22.7
34.3
• 25.1
:
37:8
•

2.0
3,3'
13.2
28.6
24.8
24.8
23.7'
17.8
17. 5
13.4
13. V
12.2
23:6
23:9
24.5
36:4
47.3
67.7
6L6
62.4
56:4:
40. 4
4L8
46. 0

2i5
3.9
16.2
35.0
31. 2
31.1
30 1
22. 6
• 22.6
16. 0
15:7
• 14.8'
3O1O
30. 2
32.0
42.9
• 52:2
63.5
67.8'
68.6
•• 62.3.
• 45.6 •
'•'• 47.2
51.9
:

6.0
5.0
8.6
. ' 10. 3
-47.5
38.5
64. 6.
70 3
60 6
-66.3
60 6 • . ' 6 6 : 3
62.1
'-55.1
39.1
• 41.3
39.9
43. 0
23.1
• '24.1
23.1 •: 24:1
22.2
• .23. r :
57.1
52.7
62.7
57.1
60. 7 . '67; 8
65.9 . .71:7
68.9
73:2
82.7
85.3
. 8 89.9,
88.0
8 90.0
88.6
83; 9
81. 3
76.9
71.7
.79.1
73.9
• 85.7
80 5

6.8
13:8'
62;8-.
76.7:
71; 7'
71.7
57.4
43.1
45.4
.24.824. 8.
. 23.8:
61.8
•6L8
75.8:
78.3
78.4.
87:5
8 90.0
8 90.0
5-85. 5
8 77. 0.
8 80. 0
8 87. 0'

NOTE.—Maximum earned net income assumed, In the case of married persoris it is also assumed that
only one spouse has income.
*Less than 50 cents.
1 Includes defense tax.
2 Tax liabilities for the years 1942 and 1943 are uaadjusted for transition to currerit payment basis.
3 Includes net Victory tax. Computed by assuming that deductions are 10 percent of Victory tax net
income; i. e., that Victory tax net iiicome is ten-ninths of selected net income.
4 Individual Income Tax Act of 1944.
8 Taking into account the following maximum effective rate limitations: For 1943-45, 90 percent; 1946-47,
85.5 percent; 1948-49, 77 percent; 1950, 80 percent; 1951, 87 percent.




Exhibit 26.—Federal taxes of the United States, 1940 through 1950
RATES, E X E M P T I O N S , AND C R E D I T S
R e v e n u e A c t of—
T i t l e of t a x

-•

• • T a x e s in effect
D e c . 31,1940

.
1942

• 1941
INCOME

.

1943

1945

19441

.

-

1948 .

.

1950

TAX

On individuals: 2 3
Personal exemptions:
M a r r i e d o r h e a d of
family.*
Single
C r e d i t for d e p e n d e n t s
A d d i t i o n a l exernptions: If,
F o r persons 65 years of
age or over.
For the blind n
N o r m a l t a x rate—Applies to
n e t income in excess of cevr
tain credits.
Surtax:
M i n i m u m rate
Maximiim rate

"

$2,000-

-..- — ---,

800
400

Footnotes on pp. 271 to 275"^




• •

.

'

- - 760
Nochange

'

$ 1 , 2 0 . 0 - . - — — , — . N o change 5.. _ _ _ _ _$1,000 6
N o change 5
Nochange 5

— 500
350

500 6
600 6 9

$1,000 7 . . . . . ^ . . ^ $1,2008.
500 7
600 7

600.
600

N o chainge..

•

- -

\ N o change.
No change..

600

N o change.

600
N o change

N o change.
3%.i3

20%,

Tentative
rate—17%.
Tentative
rate—88%.i4
0-$2,000... — . N o c h a n g e

Nochange

17%. 13

9 1 % , 14

N o change i*.. 88%. 1314
Nochange

N o change.

O v e r $200,000.. N o c h a n g e

Nochange

N o change.

.
4%

12:

4%i2.
.•75%i2—:i —

M i n i m u m r a t e applies to $4,000-$6,000
p o r t i o n of s u r t a x n e t
income.
M a x i m u m r a t e applies to Over $6,000,000.:
p o r t i o n of s u r t a x n e t
income.
R e d u c t i o n s from c o m b i n e d
tentative normal tax and
surtax:
F i r s t .$400
N e x t $99 600
Over $ 1 0 0 , 0 0 0 . . . . . - . - - . Victory tax
" '

Dividends
.
E a r n e d - i n c o m e credit i^

'

•,$1,500...-----

4%-

6%,
— 1 .77%,' ' •• • • '

N o change 5 . .

6%

N o change 5

13%
82% .

3%

-

. - N o change 8.

-•:. .0^$2,00()--•---. N o c h a n g e .

. N o change 5.

Tentative
rate—3%.

a

C
O
N o change

Subject t o n o r m a l t a x . N o change
10%,o,f a m o u n t of earn- N o c h a n g e
. ed n e t income, b u t • n o f i i i excess of 10%
of a m o u n t of n e t
incorae to be credited.
against n e t income
for.normal tax, - - ' , - .

Over $200,000-J-.- N o change 8..

'5%'of V i c t b r y ' t a x
n e t income i n
excess of $624,
less c e r t a i n
^ ..-credits. 15
.
No change.
Nochange

3 ^ of V i c t o r y t a x
n e t income in
excessof $624,5
Nochange
Repealed.

Repealed.

. . . . Nochange

5%
5%
5%-.-:—

9.75%....:.-..

Nochange

Nochange

17%.--•--"--'!'.
12%

'

• •

(.13).
(13).
(»?)..-•

- •

>

N o change.

to

Exhibit 26.—Federal taxes of the United States, 1940 through 1950—Continued

to
bO

Revenue Act of—

Taxes in effect Dec. 31,
1940

Title of tax

''
1941

1942

1943

1945

1950

INCOME TAX—Con.

On corporations: i7
Normal tax

Normal tax net income, Normal tax net income, Normal tax net income,
in total amount:
in total amount: is
in total amount:
$25,000 or less:
$26,000 or less:
$25,000 or less:
First $5,000—14.85%.
First $6,000—16%. 1
Next $15,000—16.5%.
Next $15,000—17%. > No change.
Next $5,000—18.7%.
Next $5,000—19%.
Over $25,000 and not
Over $25,000 and not
Over $26,000 and not
over $31,964.30: IB
over $38,461.54: is
over $50,000: i"
First $25,000—
First $26,000—
First $25,000—
14.85%.
$4,250.
$4,250.
Next $6,964.30—
Next $13,461.54—
Next $25,000—
38.3%.
37%.
31%.
Over $31,964.30 and not
Over $38,461.54—
Over $50,000—
over $38,665.89:19
24% of entire nor24% of entire normal
First $5,000—15.4%.
mal tax net income.
tax net income.
Next $15,000—
16.9%.
Next $5,000—18.9%.
Next .$13,565.8936.9%.
Over $38,565.89—
24% of entire normal tax net income.
Dividend exemption
86% 21
No change
86% 2
2
(dividend received
credit).

No change

Base XV/i X±\JX I.M.A.CIX tax _
J-'Cl'OVy for nonnal l/CX'A

No change

No change

25% of entire normal tax
net income for taxable
years beginning after
June 30, 1950; 23%, for
calendar, year 1950.20

o
o

1




.

"Normal tax net income" consists of "net
income" (after deduction of the declaredvalue excess profits
tax), minus the credit
for interest received on
certain obligations of
the United States, less

"Normal tax net income" consists of "net
income" (after deduction of the declaredvalue excess profits
tax and the excess
profits tax), minus the
credit for interest received on certain obli-

"Normal tax net income" consists of "net
income" (after deduction of the declaredvalue excess profits
tax), minus the credit
for interest received on
certain obligations of
the United States, less

i
a

SI

>
o
No change

No change

85% (59% in the case of
dividends received on
certain preferred stock
of public utilities). 23
"Normal tax net in- "Normal . tax net income" consists of.
come" consists of "net
"net income," minus
income," minus the
the credit for intercredit for interest reest received on cerceived on certain oblitain obligations of
gations of the United
the United States,
States,
the
credit
less the "dividends
for dividends received
received credit."
from domestic corpora-

W
1-3

>
d
Hi

the "dividends received credit." No deduction allo"w^ed for
excess profits tax.

Surtax.

None.

First $25,000—6%-.
Over $25,000—7%-.

Same as for normal tax,
except that no credit
is allowed for interest
received on certain obligations of the United
States.

Base for surtax.

Loss carry-overs
and carry-backs.

gations of the United
States, less the "dividends received credit.''

Net operating losses sustained in a taxable
year beginning on or
after Jan. 1,1939, may
be, carried forward
against net income of
the following 2 taxable years.

No change-

income subject to excess profits tax (adjusted excess profits
net income), less the
"dividends received
credit."
Surtax net income, in
total amount:
Not over $50,000:
First $25,000—10%.
Next $25,000—22%.
Over $50,000—16%
of entire surtax net
income.
No change

Net. operating losses
may be (1) carried
back against net income of the 2 preceding taxable years (but
not to any taxable
year beginning before Jan. 1, 1941), and
(2) to the extent not
absorbed b y t h i s
carry-back, they may
be carried forward
against net income of
the following 2 taxable
years.

No change-

No change.

No change.

tions, the credit for
dividends paid by a
public utility on certain preferred stock,
and the credit provided
for Westem Hemisphere trade corporations. 2
4
20% of surtax net income
in excess of $25,000 for
taxable years beginning
after June 30,1950; 19%,
for calendar year 1950.

Surtax net income, in
total amount:
Not over $50,000:
First $25,000—6%
Next $25,000—22%
Over $50,000—14%
of entire surtax
net income.
No change
.-. "Surtax net income"
consists of "net income '' minus the credit
for dividends received
from domestic corporations, the'^credit for
dividends paid by a
public utility on certain preferred stock,
and the credit provided
for Westem Hemisphere trade corporations.24
Net operating losses susNo change• tained in a taxable
year beginning after
Dec. 31, 1949, may be
(1) carried back against
net income of the preceding • taxable year,
and (2) to the extent
not absorbed by this
carry-back, they may
be carriied forward
agairist net income of
the following 5 taxable
years.

.
ra
y^
^
^
g
(^
Ui

Footnotes on pp. 271 to 275.




Cl
CO

bO

Exhibit 26.—Federal taxes of the United States, 1940 through 1950—Continued
Revenue Act of—

Taxes in effect Dec. 31,
1940

Title of tax

1941

1942

1943

1945

1950

EXCESS PROFITS T A X
ON CORPORATIONS 25

t?3

Specific exemption

$5,000 per return

No change

NpiiChange. ^ •:. J: ..^.,. --^ - $10,000 per return

Credit (average income
credit or invested capital credit, whichever
is the higher).

Average income base:
95% of average base
period. (1936-39) net
income plus 8% of net
capital:, addition or
less 6% of net capital
reduction. 28
Invested capital base:
. 8% of invested capital.

No change

No 'chahge 27. _:_.". -.J'.. J -. No change

'•"••

•

'

'

-

'

-

'

-

- ' - • ^

•
Invested capital base:
First $5,000,000 of invested capital—8%.
Over $5,000,000—7%.

Treatment of income
tax for purposes of
determining excess
profits tax base.
Carry-overs and carrybacks of unused excess
profits credits.




Normal tax deductible.- No deduction of normal tax or surtax.

"

.';.

Repealed
1946.26
Repealed
1946.28

Jan.

1,

Jan.

1,

Repealed
1946.26

Jan.

o
•

'

' , .

Np change.!-..^-.

'

.

•

•

^

o

V

Invested '.capital ,base:
:First |5,000;000 of-ini
• vested capital—8%.

Invested capital base:
First $5^000,000 of
invested capital—
8%.
Next $5,000,000^7%.
Next $5,000,000—6%.
Next
$190,000,000—
Over $10,000,000—
6%.
6%.
Over $200,000,000—5%.
No change
No change

1,

0

• ."V

The unused portion of
the excess profits
credit may be-(l) carried back against excess profits net income
of the 2 preceding taxable years (but not to
any taxable, year beginning before-Jan, 1,
1941),. and (2).to the
extent not absorbed
by this carry-back,
they may be carried
forward against excess
profits net income of
the following 2 taxable
years.

No change

-

••;

.

'.''"

...

.-

m
- .

.;.•••....

.

:•

<;.-".•.;-

a
.H3

Repealed
1946.26

Jan.

>

1,
'

The unused portion of
the excess profits
credit of-any taxable
year may be carried
forward against excess
profits net income of
the following 2 taxable years.

"

.-- The 2-year carry-back
of unused excess
profits credit was
continued, for 1 year
after the date of
repeal of the excess
profits tax..

.

•

•

'

'•

.

•

o.

Ul

d

Excess profits tax rates
(in terms of adjusted
excess profits- net income).
"Postwar refund bf excess
profits tax.
Tax credit for debt repayment.

Fu-st
Next
Next
Next
Next
Over

Limitation upon excess
profits tax.

$20,000—25%
$30,000—30%
$50,000—36%
-.
$150,000—40%
:
$250,000—45%
$500,000—50%—-

First
Next
Next
Next
Next
Over

$20,000—35%
90% flat rate$30,000-40%
$50,000—45%
i
$150,000—60%
$260,000—66%
$500,000—60%—-10%.of excess profits tax
p^d.
40% of the amount of
debt retired in taxable
year, but not more,
than the amount of
postwar credit • other• wise allowable (from
which this credit is deducted) and not more
than 40% of the excess
of (1) the amount of
debt outstanding on
Sept. 1,1942, or (2) the
smallest aniount of;
debt outstanding at
the end of a taxable
year beginning after
Sept. 1, 1942, whichever is the lesser, over
the amount of debt as
• of the close of the taxable year...'
The sum of hornial tax,
^
-surtax, and (gro3s) excess profits tax may
not exceed 80% of sur-'.
tax net income (before
deduction of income
subject to excess profits tax). The excess
profits tax will be reduced to the extent
necessary to conform
with this limitation.

95% flat rate-

Repealed
1946.28

Jan.

No change-

RepealedJan. 1,1946.26

No change other than
retroactive technical
a m e n d m e n t reflected in preceding
coluinn.
.

RepealedJan. 1,1946.26.

No change^..

RepealedJan. 1,1946.26

w
I—(

CO

Footnotes'on pp. 271 to 275.




bO
Cn
Cn

Exhibit 26.—Federal taxes ofthe United States, 1940 through 1950—Continued
Revenue Act of—

Taxes in effect Dec. 31,
1940

Title of tax

bO
Ol

1941

. 1942

1943

1945

1950

RECAPTURE OF EXCESS
PROFITS

•Recapture of excess
profits on certain Govemment contracts.29

CONSOLIDATED
RETURNS

All profits exceeding 8% No change .
of contract price for
vessels and aircraft for
Army or Navy 3 (sus0
pended by title IV of
the Second Revenue
Actof 1940).

No change

. .

No change

Suspension terminated by repeal of excess profits tax, effective as to taxable
years beginning after
Dec. 31, 1945.31

No change.

Nochange

No change. •

o
O

.

Consolidated returns. .- Allowed only for rail- Nochange
roads, etc., wholly
owned foreign railroad
operating subsidiaries"
organized to comply
with the laws of Canada or Mexico, and
Pan-American trade
corporations for income tax. Permitted
for substantially all
corporations with respect to excess profits
• tax. No additional
tax.

Allowed for income and
excess profits tax (both
or none) for substantially all corporations.
Additional 2% surtax
imposed for privilege.

No change-

o

O

CAPITAL STOCET T A X

Per $1,000 of adjusted
declared value.

$1.1018

.

No change

$1.25

-

Repealed July 1,1945.

-. No change

>
CQ

DECLARED-VALUE
EXCESS PROFITS
TAX

d

J
•

On net income in excess
of 10% and not in excess of 16% of adjusted
declared value.




6.6% 1
8

6.6%

-

No change

--_ No change

Repealed July 1,1946.

On net income in excess
of 16% of adjusted declared-value.

13.2%

Nochange

Nochange

Repealed July 1, 1946.

27\(i%^K.

27 H%-.

No change-

N o change-

N o change.

N o change.

38H%i8.

38^^%-.

No change-

N o change.

N o change.

N o change.

7U^%18.

711^%.,

76%..

N o change.

N o change.

N o change.

821/^% 18.

82^%-,

85%..

N o change.

N o change

N o change.

13.2% 1
8

-

SURTAX ON CORPORATIONS
IMPROPERLY
ACCUMULATING SURPLUS

First $100,000 of undistributed sec. 102 income.
Over $100,000 of undistributed sec. 102 income.
SURTAX ON PERSONAL
HOLDING COMPANIES

• First $2,000 of undistributed Subchapter A
net income.
Over $2,000 of undistributed Subchapter A
net income.

Footnotes on pp. 271 to 275.




W
W
CQ

bO
Or

Exhibit 26.—Federal taxes ofthe United States, 1940 through 1950—Continued

bO

at

00
Revenue Act of—

Taxes in effect Dec.
31,1940

Title of tax

1941

1943

1945

1948

1950

ESTATE T A X 3 33
2

. Specific exemption 3
4
Rate of tax: 3
6
Minimum rate
-.
Maximum rate
Minimum rate applies to portion of
net estate not exceeding.
Maximum rate applies to portion of
net estate.
Credit for State death taxes paid—credit
not to exceed.

$40,000

No change..

2 % 37.
70% 37

3%—77%
--. $5,000

$10,000.

$60,000 3 5 . -

No change

No change

No change

No change.

No changeNo change
No change.

No change
No change
No change

No change
No change
No change

No change
No change
No change

No change.
No change.
No change.

Over $60,000,000

Over $10,000,000... No change-

No change

No change.... No change

No change.

80% of Federal tax under Revenue
Act of 1926.

No change.

No change.

No change

No change

No change

$40,000
$4,000 3
9

No change
No change

$30,000.
$3,000 40.

No change.
No change-

No change...
No change...

No change.
No change.

- No change
No change
- No change

Noc
No change.
No change.

No
No
No
No
No

No change...
No change...
No change. ^.

No change.
No change.
No change.

No change...

No change

No change...

No change.




t ^

o

No change.

GIFT T A X 3
2

Speciflc exemption 38_
Annual exclusion
.Rate of tax:
. Minimum rate
Maximum rate.
Minimum rate applies to portion of
net gifts not exceeding.
Maximum rate applies to portion of
net gifts.

o

m
—-

--

1H%<»
62}.^% 41

$10,000
Over $50,000,000.

.

2M%
57M%.
$5,000

Over $10,000,000... No change

change
change
change
change
change—..

§
o

R e v e n u e A c t of—
T a x e s i n effect D e c . 31,
•• • 1940

T i t l e of t a x

Excise T a x A c t of
1947
1943

T O B A C C O T A X E S 42

Cigarettes:
W e i g h i n g n o t riiore t h a n 3 lbs. per M . .
' W e i g h i n g m o r e t h a n 3 lbs. per M , a n d
• • • n o t m o r e ' t h a n Q^^ inches in l e n g t h : '
"
•'Weighing m o r e t h a n 3 lbs.'per M , a n d
m o r e t h a n 6M inches in length.46
Cigarette papers:
• • P a b k a g e of '26-50'sheets
-"- • P e r a d d i t i o n a l 50 sheets or. fraction
• • thereof.
C i g a r e t t e t u b e s , p e r 50 or fraction thereof.Cigars:
W e i g h i n g n o t m o r e t h a n 3 lbs. per M . .
W e i g h i n g m o r e t h a n 3 lbs. per M ,
retailing a t : 47
N o t m o r e t h a n 2}4^ e a c h .
More than 2H^ and not more t h a n
M o r e t h a n 40 a n d n o t m o r e t h a n 50.
M o r e thari 60 a n d riot m o r e t h a n 60.
M o r e t h a n 60 a n d n o t m o r e t h a n 80.
M o r e t h a n 80 a n d n o t m o r e t h a n
.150;'
. M o r e t h a n 150 a n d n o t m o r e t h a n
200.'
- ...
• •
Mbi-e t h a n 200 e a c h .
:.._
Leaf tobacco, p e n a l t y tax on leaf tobacco
sold, r e m o v e d , or s h i p p e d b y dealers in
leaf tobacco in violation of l a w .
Tbbaicco a n d s n u f f . . . Floor stocks tax.on c i g a r e t t e s - .
T.-T--:T
Floor stocks tax on c i g a r s - . .

-

$3.25 per M 43.
$7.80 p e r M 43.

N o charige 44.
N o c h a n g e 44.

$3.60 per M
$8.40 per M

N o change 45.
N o change 45.

N o change.
N o change.

$3.25 per M'43.

N o change 44.

$3.50 per M '

N o change 4.5.

N o change.

M0-.
H0:.

No change.
N o changei

No change.
No change.

N o change.'.".
No change...

N o change.
N o change.

10—:—.

N o changei"

N o charige L

No change.i.

N o change.

750 per M . .

No change.

No change.

N o change 45.

N o change.

$2'per M :
$2 per M J

No changeNo change.

$2.50 per M
$3per M . - -

N o change 45.
N o change 45.

N o change.
N o change.

$2 per
$3per
$3 per
$5per

No
No
Nb
No

change:'
charige.
charige.
change-

$4 per M . _ $4 per M . $7 per M . - i
$10 per M . .

No
No
No
No

No
No
No
No

$10.50per M -

No change..

$16 per M . .

N o change 45.

N o change.

$13.50 per M."
180 per. lb

Nb change:
No change.

$20 per M . _
No change.

N o change 451
No change...

N o change.
N o change.

180 per l b .

N o ' c h a n g e . . . . - —.-

No change...._._
250.pei^..M sriiall; 600 per
' • M large.
R a t e s e q u a l to tax r a t e
increases.

No charige'«.

N o change.

M.
M.
Ml
M-

change
change
change
change

45.
45.
45.
45.

charige.
charige.
change.
change.

X

W

M
W
>-{

Ul

F o o t n o t e s on p p . 271 to 2 7 5 . '




bO
CD

bO

Exhibit 26.—Federal taxes of the United States, 1940 through 1950—Continued

O
Title of tax

Revenue Act o—
f

Taxes in effect Dec. 31,
1940

Excise Tax Act of
1947
1943

LIQUOR TAXES 48

Distilled spirits, except brandy 49.
Brandy 49
Nonbeverage distilled spirits, not denatured (after payment of drawback).
Fermented malt liquors containing M of 1%
or more of alcohol by volume.
Still wine containing following percentages
of absolute alcohol by volume:
Not more than 14%
More than 14 but not more than 21%..
More than 21 but not more than 24%..
More than 24%

$6 per proof gal. or wine $9 per proof gal. or wine
gal. if below proof.5" si
gal. if below proof.
$6 per proof g.al. or wine $9 per proof gal. or wine
gal. if below proof.50 5i
gal, if below proof.
$2.25 per proof gal.53....... $3 perproof gal.so 5i

$6 per bbl."

No change 4
4

$7 per bbl

$8per.bbl.50 5 i . . . . . .

No change-S? 3
4

80 per wine gal
.
300 per wine g a l . . .
650 per wine gal
$4 per proof gal. or wine
gal. if below prooL

100 per wine gal
400 per wine gal...
$1 per wine gal
$6 per proof gal. or wine
gal. if below prooL

150 per wine gal.5o 5i
600 per wine gal.so 5i_._.__
$2 per wine gal.so '-i
$9 per proof gal. or wine
gal. if below proof.5° si

No
No
No
No

60 per wine gal.43....
180 per wine gal.43....
300 per wine gal.43
$3 per proof gal. or wine
gal. if below proof, if
containing distilled spirits other than brandy;
or $2.76 per proof gal. or
wine gal. if below proof
if brandy only is contained therein.43
1H0 per half pint 43.,
Artificially carbonated wine
Liqueurs, cordials, or similar compounds. . 1H0 per half pint 43
Champagne or sparkling wine
.-. 30 per half pint 48.:.—
Rectification tax, distilled spirits and wines. 300 per proof gal. in addition to tax on distilled
spirits or wines..
Bay rum or any article containing alcohol $3 per proof gal. or wine
imported from Puerto Rico for consumpgal. if below proof.43
tion.
.
Perfume, imported, containing distilled $3 per wine gal.43
spirits.
Special (occupational) taxes:
Distilled spirits or wine:
$110 per year 43
......
Wholesale dealers
Retail dealers 55
$27.50 per year 43
_.
Fermented malt liquors:
Brewers according to production, $56-$110 per year 43
per brewery.




No change.52

$3 per proof gal. or wine $4 per proof gal. or wine
gal. if below proof.
gal. if below proof.43
$2.75 per proof gal. or wine $4 per proof gal. or wine
gal. if below proof.43
gal. if below proof.
$3 per proof gal.43
- _ . $4 per proof gal

No change.52

o

No change.52

change.52
change.52
change.52
change.52

O

S

i
o

>
3H0 per half pint
33^0 per half pint
70perhalf pint—.
Nochange

50 per half pint..
60 per half pint..
100 per half pint
Nochange

106 per half pint so si
100 per half pint so 51
150 per half pint so n
Nochange

No
No
No
No

$4 per proof gal. or wine
gal. if below proof.

$6 per proof gal. or wine
gal. if below proof.

$9 per proof gaL or wine
gal. if below proof.so si

No change.52

$4 per wine gal

$6 per wine gal

No change 4
4
No change 4
4
No change 4
4

No change
No change
No change

,

.. $9 per wine gal.so 51

.--.

No change
No change
No change.--

change.52
change.52
change.52
change.

No change.52
No change.
No change.
.

No change.

fel

fel

>
d

Wholesalers
Retailers "
Rectifiers, according to production
Manufacturers of stills
Stills or worms manufactured for distilling spirits.
Stamp taxes ori distilled spirits:
Container stamps, distilled spirits in
containers upon which all internal
revenue taxes have been paid.
Export stamps, distilled spirits intended for export.
Floor stocks taxes:
Distilled spirits, except brandy 4
9
Brandy 49
Fermented malt liquors
Still wine containing the following percentages of absolute alcohol by
volume:
Not more than 14%
.
More than 14 but not more than
21%.
More than 21 but not more than
24%.
Artificially carbonated wine
Liqueurs, cordials, or similar compounds.
Champagne or sparkling wine

$56 per year 43...
$22 per year 43
—.
$110-$220 per year 43
$55 per year 43
$22 per still or worm 43_.

No
No
No
No
No

change 44.
change 44.
change 44.
change 44.
change 44.

Per container of less than
K pint, M0; H pint or
more, 10,
100 per package

No change.

No change

No change

No change.

No change.

No change

No change.

No change.

$1 per proof gal
$l,25per proof gal.

$2 per proof gal...
$2per proof gal...
$1 per bbl

$3 per proof gal.
$3 per proof gal.
$1 per bbl.

20 per wine gal._
120 per wine gal.

20per winegal...
100 per wine,gal..

50 per wine gal.
200 per wine gal.

350per wine gal.

350 per wine gal..

$1 per wine gal.

20 per half pint..
20 per half pint..

1H0 per half pint.
1H0 per half pint.

50 per half pint.
50 per half pint.

40 per half pint..

30per half pint...

60 per half pint.

No change 4 ss..
4

No change.

No change

No change.

No change 4
4

No change.

No change

No change.

No change

No charige.

No change 4 se.
4

10 per dollar or fraction of
premium,
10 per dollar or fraction of
premium.
No change

No change 4 se
4

No change.

No change
No change
Nochange
No change
No change

.

No
No
No
No
No

change
change
change
change
change.

No
No
No
No
No

change.
change.
change.
change.
change.

STAMP TAXES

Documentary:
Conveyances (deed, instrument, or
writing conveying realty).
Foreign insurance policies: Insurance
policies other than life and indemnity, fidelity or surety bonds, etc.
Life, sickness, and accident policies,
annuity contracts.
Reinsurance policies..-.-Issues of bonds, debentures, certificates
of indebtedness, etc.
Issues of capital stock-.-^.....

Footnotes on pp, 271 to 275.




Value: $100.01-$600, 550;
each additional $500 or
fraction, 660.43
40 per dollar or fraction of
premium.43

110 per $100 face value or
fraction thereof,43
110 per $100 par or face
value or if without par
or face value; <a) if actual value is less than
$100, 30 on each $20 or
fraction; (b) if actual
value is over $100,110 on
each $100 or fraction.43

No change

No change.

No change

No change.

No change

No change.

bO

Exhibit 26.—Federal taxes of the United States, 1940 through 1950—Continued

bO
bO'

Taxes in effect Dec. 31,
1940

' Title of tax

Revenue Act of—
1941

1942

1943

Excise Tax Act of
1947

STAMP TAXES—Continued

fel

Documentary—Continued
Transfers of bonds
Transfers of capital stock

60 per $100 face value 43
60 per $100 par or face
value or fraction; or if
withp.ut par or face
value 50 pefshare. However, if selling price is
$20 or. .over, .whether
with or: without par or
• face value rate is 60.43

Other:
Passage tickets over $10 sold for pas- : Costing: $10.01-$30,$l.l0;
: $30.01-$60, $3.30; over
sage by vessel to a foreign.port. S
7
$60, $5.50.43
110 per package of not
Playing cards
more than 64.43
50% of amount by which
Silver bullion sales or trarisfers
selling price exceeds cost
plus allowed expenses.

No change 4 56
4
No change 4 se
4

Nochange
Nochange

. ....

Nochange . No change

No change.
No change..

o
fel.

No change 4
4

Nochange

130 per package of not
more than 54.
.
Nochange.' _
.

No change .

No change S
8

No change . - . i

Nochange

. No change

Repealed Apr. 1,1947.
• No change.

fei-

o
•=1

.•'

Admissions sold by pi-oprietor in excess
.of established price..
Leases of boxes or seats
.:.
Roof gardens, cabarets, etc

10 for every 100 or fraction
thereof if 210 or more.59.
50% of excess
11% of amount for which
similar accommodations
are sold,43
20 per each 100 or fraction
thereof of amount taxable.43 63

. Ticket broker sales at prices in excess
of regular or established price.
Adulterated arid process butter:
Adulterated butter: •;
Adulterated butter.-----l-;.




i:

No change.

MISCELLANEOUS TAXES

Admissions:
Admissions, general

o

11% of excess 43

10 for each 100 or fraction
thcreof.oo
No change
No change 4
4

No change 0
1

5% of amounts paid for
admission, refreshment,
service, and merchandise.
No change 44

Nochange

No change
No change

No change

.1

10 for each 50 or major No change,s2 02
fraction thereof, so
' No change.
Nb change
20% of amount for which No change.s2
similar accommodations
are sold.so
-- 30% of amounts paid for No change, s2
admission, refreshment,
service, and. merchandise.so64
20% of excess so
_ No change.»2
•

1C0 per pbiind-1

. . . . ' . . No change._'_.—'.

. : . . No chari^ge--

No change

•

No charike.

fel

>

CQ

d

Manufacturers..
Retailers
Wholesalers...-.
Process butter:
Process butter...
Manufacturers..
Alaskan railroads
Automobiles, etc.:
Automobile bodies..

No
No
No
No
140 per pound
No
$50 per year
1% of gross annual income. No

$600 per year.
$48 per year..
$480 per year..

3M%
sale
3M%
sale
2H%
sale
2H%
sale

. Automobile chassis..
Automobile truck bodies..
Automobile truck.chassis.
Automobiles, use of ^9..
Motorcycles, j _1
Parts and accessories.

—..

Tires and tubes:
. Inner tubes..
Rubber tires
• Floor stocks tax. on tires...
Floor stocks tax on tubes.
Tractors 7
o

of manufacturer's
price.43
of manufacturer's
price.43
of manufacturer's
price.43
of manufacturer's
price.43

3M%. of manufactm-er's
sale price.43
2H% of manufacturer's
sale price.43
4H0perlb.43_
2M0 per lb.43.
2M% of manufacturerls
sale price.43 . . .

Bank circulation, etc, taxes:
Circulation of Federal Reserve Bank H b f l % : - 1 — - : - ^ — - - - - , . .notes.
'
Circulation of pational bank notes:
Notes secured by 2% bonds—------ ^ofl%
., .
Other notes.
l%• Circulation other t h a n of national
banks: 71
.
On' average circulation outstand.ing:

'.

change.
change.
changechange..
change..
change-

No change..
No change..
No change..

No change..
No change..
No change..

No change.
No .change.
No change.

No change..
No change..
No change..

No change..
No charige..
No change..

No change.
No change.
No change.

No change..

No change oo.

No change-.

No change..

No change oo.

No change.

No change..

No change 08..

No change.

No change..

No change oo..

No change.

No change..
Np .change..

No change os.
No change 00..

No change.

No change.

No change..-

No change.

No change.
No change.

No change 06.
No .change 60.

No change.
No change.

7% of manufacturer's sale
price.os
7% of manufacturer's sale
price.os
5% of manufacturer's sale
price,65 0
7
5% of manufacturer's sale
price,65 6
7
$5 per year
1.
7% of rrianufacturer's sale
price.65
5% of manufacturer's sale
price.65
90perlb.65
60 perlb.65
.
21^0 per lb
:
4H0 per lb
,
5% of manufacturer's sale
price,65
No change-

No change.

No change 0

No change.

No change.

No change-

No change.

No change.'.
No change..

No change.
No change-

No changei
No change-

No change:'
No change.

No charige.
No 'changei

No charigeNo change.

No charigeNo chainge.

No change.
No change.

No change.
No change.

No change.
No change.

No changeNo change.

No change.
No change.

fel

X
W

H
3

QQ

. " . ' • • '

Entire: circulation:...:
Circulatiph exceeding 90% of
capital.
Circulation paid b u t . . .
Earnings of Federal intermediate cre.dit
'"banks.
.....<.

M2 of 1% each month
yi of 1% each month (additional tax).
10%
.
25% of net earnings fe- •
maining after provision
- for expenses,- losses,-and
. reserve requirements for
the fiscal year.

i:

Footnotes on pp. 271 to 275.




bO

Exhibit 26.—Federal taxes of the United States, 1940 through 1950—Continued

to
Gi-

Title of tax

Revenue Act of-

Taxes in effect Dec. 31,
1940 '

Excise Tax Act of
1947

MISCELLANEOUS TAXES—Continued

Boats, use of 69—over-all length:
16 feet but not over 28 feet
Over 28 feet but not over 50 feet
Over 50 feet but not over 100 feet-..
Over 100 feet but not over 160 feet..
Over 150 feet but not over 200 feetOver 200 feet.....
-Business and store machines
Bowling alleys, billiardfand pool tables.
Canal Zone.taxes..

Ad valorem taxes (not to
exceed 1% of value of
property), excise and
franchise taxes (not to
exceed 2% of gross eamings).

Coin-operated machines:
Amusement devices 74...
Gambling devices
Cotton futures, contracts of sale of cotton 20 per lb.
for future delivery, which do not conform with regulations of Secretary of
Agriculture.
11% of amount paid 43 77
Dues and initiation fees
Electrical energy for domestic or commer- 31^% of sale price 43
cial consumption.
Electric, gas, and oil appliances
:
Electric light bulbs and tubes..
Electric signs..
Filled cheese:
Domestic.
Imported.
Manufacturers, per factory.
Retail dealers..
Wholesale dealers
Firearms, shells, cartridges so...




10 per pound...
..*....
80 per pound in addition
to import duties.
$400 per year..
$12 per year
$250 per year
11% of manufacturer's sale
price.43

$5 per year
$10 per year
$40 per year
$100 per year.
$150 per year
$200 per year
10% of manufacturer's
sale price.
$10 per year per unit
No change

No change..
Nochange..
No change..
No change..
Nochange..
No change..
No change 72.

No change. 6
8
No change. 68.
No change, 0
8
No change, os
No change, os
Np change. 6
8
Nochange oo..

No change.

Nochange..
No change..

$20 per year per unit so 73..
No change

No change,52
No change.

O
S3

O

fel

fel

o
No change 75
$10 per year per machine
$50 per year per machine.. $100 per year per machine
No change.
No change

Nochange.
No change
No change

No change 4 78
4
No change 4 56_
4

20% of amount paid so..... No change.52
No change oe
No change.

No change.
. . . No change.70
No change.

o
No change
No change

10% of manufacturer's sale
price.
6% of manufacturer's sale
price.
10% of manufacturer's sale
price.
No
No
No
No
No
No

change
:
change
change.-...
change
change
change 4
4

.
1
:

No change.

1

No change

No change 0 7
0 9

No change.

20% of manufacturer's sale
price.so" o
o

No change.52
fel

Repealed Nov, 1,1942.

CQ

No
Np
No
No
No
No

change
change..
change
change
change
change

No change
No change.

No change.
No change.

No
No
No
No

No
No
.No
No

change.
change.
change.
change

change.
change,
change.
change.

d

Firearms (machine guns and shortbarrelled firearms) :Si
Dealers
Im porters or manu facturers
Pawnbrokers
Transfer of firearms
Fur articles''(of which fur is component of
chief value).
Gasoline and other motor fuels
Immigration head tax
Imports of:
Coal, coke, etc^s
Copper and copper concentrates:
Articles containing 4% or more of
copper by weight.
Articles in which copper is component material of chief value.
Copper-bearing ores and concentrates and articles specified in
Tariff Act of 1930.
Crude petroleum, fuel oil, gas oil, and
liquid derivatives (except gasoline
and lubricating oils).
Gasoline and other motor fuel
Hempseed
.
Lubricating oils..i
Lumber 9
0 -.
.
Oils: 9
2
Sunflower, rapeseed, sesame, kapok, hempseed and perilla oils,
etc.,«3
Whale oil (except sperm oil), fish
oil (except cod oil, cod liver oil,
and halibut liver oil), marine
animal oil or any combination of
the foregoing, etc. «
4
- Paraffin and other petroleum wax
products.
Perilla seed
Rapeseed, kapok seed
Sesame seed
Jewelry..
.--.
Leases of safe deposit boxes..
Lubricating oils, domestic...
Luggage

Footnotes on pp. 271 to 275.




No
No
No
No
No

No change..
No change..

No change.-No change
No change
No change 8
2
20 % of r e t a i 1 s a l
price.50 oe 8
3
No change 6
o
No change S
7

No change so.

No change..

No change

No change.

3% ad valorem or ^ 0 per No change so
pound, whichever is
lower,
30 per pound
-. No change 56

No change..

No change

No change.89

No change..

No c h a n g e . . . . . . .

No change,S9

$200 per
$500 per
$300 per
$200 per

year
year
year
firearm.

No change
No change
No change.
No change...
10% of retail sale price

No change..
No change..
No change..
No change..
Nochange..

11/^0 per gal 43
$8 per person, 16 years or
over.

No change 4 se
4
No change

100 per 100 pounds

_

^.

1.....

change.
change.
change.
change.
change.52«

No change.
No change.

No change.89

40 per pound of copper
therein,

No change so

No change..

No change

H0 per gal

No change,5o

No change..

No change..

2M0pergal
1.240 per lb.
40 per gal..
$3 per M feet "i..
4H0per lb-.

No
No
No
No
No

30 per lb..

No change

10 per lb

No change so

No change..

No change

No change.

1.380 per lb..
20per Ib---.1.180 per Ib.-

No change...
No change..
No change
10% of retail sale price 9
5

No change..
No change..
No change..
No change 9o.

No change.
No change.
No change,
Nochange.s2 8
5

11% of amount collected.4
4H0 per gal.43i....

20% of ampunt collected ... No change..
60 per gal....
No change 4 se
4
10% of manufacturer's sale No change..
price.

No change.
No change
No change
20% of r e t a i l s a l
price.so ee 9
7
No change..
No change o
o
20% of- r e t a i l , s a l
price.so oe g
g

No
No
No
. . . No

change so.
change
change so..
change so..
change
:'.

change.change..
change..
change..

No change..
^..

No change..

No
No
No
No
No

No change.

fel
No change.
No change.
No change.
No change.

change
change
change
change
change.

No change

CQ

No change.
^

No change.

No change.
No change. .
No change.52'8

to

Exhibit 26.—Federal taxes of the United States, 1940 through 1950—Continued

Title of tax

Revenue Act of—

Taxes in effect Dec. 31,
• .. 1940

bO'.

Excise Tax Act of
:
; 1947

1941
MISCELLANEOUS TAXES—Continued

Matches:
Matches, in general
White phosphorous
.......
-.
Wood,:fancy-ij-.
1
Floor stocks tax on matches (except
fancy wooderi matches) held and. intended for .sale together with other
articles.99
.. •
Mixed flour ioo....'.
Mixed flour, ihanufacturers, packers, or
repackers.
Musical instruments
Narcotics:
Marihuana:
Importers, m.anufacturers, and
compounders.,
Persons.-engaged in laboratory research.
Persons, other than practitioners,
who deal in, dispense, or give
away.
Practitioners
Producers...--Transfers of:
To any person, who has paid
the special tax as indicated
above.
To any person who has not
paid the special tax as indi?
cated above.
Opium:
Importers, manufacturers, and compounders.
• Opium, coca leaves, etc
..,
• Opium manufactured for smoking
purposes.




fel

20 per 100
5M0per M43..

20 per M . - NP change
No change 4
4
20 per M.

-.

No change
No change.
No change

i..

Nb change'oe.
No change...
No change oo.

No charige.
No change,.
No change.

^ .
o
o

No change
No change-..

Repealed Nov. 1,1942.
Repealed Nov. 1,1942,

10% of manufacturer's sale
price.

40 per bbl
$12 per year..

No change...

w
No change oo.

No change, loi

fel_

w

$24 per year.

No change

No' change...

No change..

No change.

$1 per year...

No change

No change

No change..

No change.

$3 per year..

No change

No change

No change..

No change.

$1 per year.
$1. per. year..

No change
No change..
No change

No change
No change
No change

No change..
No change..

No change.
No change.

m'
o

$1 per pz. or fraction thereof on each transfer.

•_...

No change..

No change.

$100 p.er. oz. or fraction
there'of on each transfer.

No change

No change

No change..

No change.,

No change.

No change..

No change.

10 per ounce..
$300 per Ib^-.

No change.
No'change......

No change..
No change

No change..
Np change..

No change.
No change.

o

No. change.

$24 per. year-

i-

fel
-fel

>

d

" P e r s o n s engaged in l a b o r a t o r y research.
P e r s o n s n o t otherwise taxed, dispensing p r e p a r a t i o n s of l i m i t e d
narcp tic c o n t e n t .
Practitioners
R e t a i l dealers
.
i.
Wholesale d e a l e r s . . . : . . ,
....
Oils, flrst d o m e s t i c processing:
C o c o n u t 102
Palm" 100
P a l m kernel
1
:
Oleomargarine:
Colored
..:
Uncolored
Imported..
.
Manufacturers
Retailers of colored oleomargarine
Retailers of uncolored oleomargarine^..
Wholesalers of colored o l e o m a r g a r i n e . - .
Wholesalers of uncolored oleomargarine.
Optical equipment

No change.

No change.

N o change.

N o change

No change.

No change.

N o change.

$1 per y e a r . $3 per y e a r . $12 per y e a r -

N o change
No change.
No change.

No change.
No change.
No change.

No change.
No change.
No change.

N o change.
N o change.
N o change.

30 per l b . 103..
30 per lb
30 per lb

' N o change io4
N o change
N o change

N o change los..
N o change i07..
No change....

N o change 102 los..
N o change
No change...

N o change. 105
N o change.
N o change.

100 per l b - _
340 per lb
150 per l b . in a d d i t i o n to
import duties.
$600 per year
$48 per year
$6 p e r y e a r . - i - •
:--.:.
$480 per y e a r . -----.
$200per yfear.---

N o charige
No change.
N o change

No change.
No change.
No change.

No change.
No change.
No change.

N o change,108
N o change, 108
N o change.

No
No
No
No
No

No
No
No.
No
No

No
No
No
No
No

No
No
No
No
No

$1 per y e a r .

N o change

$1 per y e a r .

P h o n o g r a p h s a n d p h o n o g r a p h records
Photographic apparatus
P h o t o g r a p h i c film a n d plates, unexposedPistols a n d revolvers

.-.--.-.-

R a d i o s a n d r a d i o accessories
Refrigerating e q u i p m e n t :
Refrigeratbrs, mechanical household
type.
Comriiercial refrigerating e q u i p m e n t - - .
Air coiiditioning u n i t s , self-contained--.
R u b b e r articles, w h e r e r u b b e r is chief compprierit b y •weight,ii3
.Sporting goods—..-,-...
....
....

1 1 % of m a n u f a c t u r e r ' s sale
• price,43 •
5>^% of m a n u f a c t u r e r ' s
saleprice,43
5>^% of m a n u f a c t u r e r ' s
sale price,43

i

.

.

change
change
change..
change.
change

change.
change.
change.
change.
change.

10% of m a n u f a c t u r e r ' s sale R e p e a l e d N o v . 1,1942.
pric6.
10% of m a n u f a c t u r e r ' s sale N o change
price. .
10% pf m a n u f a c t u r e r ' s sale 25% of m a n u f a c t u r e r ' s sale
price, 109
price, •
...
10% of m a n u f a c t u r e r ' s sale .16% of m a n u f a c t u r e r ' s sale
price.
•
price,
' '
\r
'
N o change 44.
;.
. i . . N o change
10% of m a n u f a c t u r e r ' s sale
price.so no
10% of inanufacturer's sale
price.so
10% of riianufacturer's sale
price.
10% of m a n u f a c t u r e r ' s sale
price.
10% of m a n u f a c t u r e r ' s sale
price.
iO%.of m a n u f act.ur.er.'s..sale.
price.

N o change

..,

N o change

change.
change.
change.
change.
change.

change,108
change, 108
change, 108
change, 10s
change.108

fel
N p change.60..
'No change-60

....1.

N o change .00

N o change.

...:

N o c h a n g e 60

..
,

N o change.

N o change.

Xfl

N o change.

N o change .00.

N o change.Ill

N o change 60.

N o change. 112

N o change 60.

N o change.

N o change 60.

Nochange,- .

Repealed N o v . 1,1942.
N o change
R e p e a l e d N o v . 1,1942.
N o change

F o o t n o t e s on p p , 271 to 276.




bO
<5

Exhibit 26.—Federal taxes of the United States, 1940 through 1950—Continued

bO
(X)

Revenue Act of—

Taxes in effect Dec, 31,
1940

Title of tax

Excise Tax Act of
1947
1943

Ox

MISCELLANEOUS TAXES—Continued

Telephone, telegraph, radio
etc.: 1 4
1
Cable and radio messages:
Domestic.In ternational
Leased wires
-Local telephone serviceTelegraph messages: •
Domestic-.International
Telephone toll service...

o

messages,
: : . . . . 100 per message100 per message
6% of amount charged..

6% of amount charged
6% of amount charged
100 if charge is 500-990; 150
if charge is $1-$1.99; 200 if
charge is $2 or more.
5% of amount charged^
Wire and equipment service.
11% of manufacturer's sale
Toilet preparations
price.
Tonnage tax, entry of vessel from foreign 20 to $2 as provided by
law.
poft.iio
Transfers to avoid income tax "7.
'.. 27}'^% of the excess of (1)
the value ofthe stock or
securities transferred
over; (2) its adjusted
basis in the hands of the
transferor as determined
under sec, 113 of the
Revenue Act of 1932,43
Transportation:
Oil by pipe line i
43-^% of amount paid for
transportation.43
Persons by rail, motor vehicle, water,
or air.
Property by rail, motor vehicle, water,
or air.
Seating or sleeping accommodations....
Washing machines of commercial type
used in laundries.




10% of amount charged so.

15% of'amount charged

25% of amount charged so 00.. No change.s2

10% of amount charged so.
10% of amount charged so.
6% of amount charged

No change
15% of amount charged
10% of amount charged

No change 60
No change.
26% of amount charged so oe. No change.52
16% of amount charged so oe. No change.52

10% of amount charged so..
10% of amount charged so..
50 for each 600 or fraction
thereof if charge is more
than 240,56
No change so
10% of retail sale price

15% of amount charged
No change
20% if charge is more than
240.

25% of amount charged so oe..
No change ^6
25% if charge is more than
240.50 ee
8% of amount charged so ee.
20% of retail sale price « ee.
o

No change.52
No change.
No change.52

No change.

fel
O
S3

No change.

No change
No change 44.

No change...
No change us
No change
No change.

.
.

-

No change,52
No change.52 so

No change.-

No change.

^

O
• ^

W

fel

i
^.
fei

No change.

Kj

fel

No change 4 se....
4

No change n'

No change

5% of amount paid 120.

10% of amount paid 1 1
2

15% of amount paid so oe..

No change,s2122123

fel

No change oo

No change.

Ul

No change.52123

d.

3% of ambunt paid (coal
40 per short ton) .• 4
"2
5% of amount paid
1.. 10% of amount paid
10% of manufacturer's sale Repealed Nov. 1, 1942.
price.

.

15% of amount paid so oe .

Bituminous coal:
Excise tax on sale of bituminous coal 10 per ton of 2,000 lbs
_produced within the United States,
Additional excise tax on.sale of bitu- Applicable to producers
not members of Bituminous coal produced within the
minous Coal Code: (a)
United States.
19J^% of sale price at
mine, if sold at mine,
(b) 191/6% of fair niarket
value at time of sale, if
not sold at mine or
through an arm's length
transaction, 1 0
2
Sugar:'
Sugar taxes:
Excise tax on manufacture of sugar
in the United States:
Testing 92 sugar degrees and 0.4660 per lb., 0.008760 per
lb., additional, and fracfor each additional sugar
tions of a degree in prodegree.
portion,
Testing less than 92 sugar 0.51440 per lb, of total
sugars therein.
Import compensating tax:
All manufactured sugar testing 92 0,4650 per lb., 0.008750 per
lb. additional, and fracsugar degrees and for each additions of a degree in protional sugar degree.
portion.
All manufactured sugar testing less 0.51440 per lb. of total
sugars therein.
than 92 sugar degrees.
All articles composed in chief value 0.51440 per lb. of total
sugars therein.
of manufactured sugar.

Nochange.

No change.

(125)

Nochange.

No change.

(125)

No change

N o change.

N o change i27.

No change,128

No change,

N o change

N o change i 7
2.

No change,i2s

No change

N o change

N o change i27.

No change.128

No change

N o change

N o change 1 7
2.

No change.128

No change

N o change

N o change 1 7
2,

No change.128

fet

Q
O

Footnotes on pp. 271 to 276.




bO
CD

Exhibit 26.—Federal taxes of the United States 1940 through 1950—Continued

bO

o
R e v e n u e A c t ofT a x e s in effect
Dec, 31, 1940

T i t l e of tax

1942

1943

1944

1945

1946

1947-1948

o
SOCIAL S E C U R I T Y A C T O F
1935, AS A M E N D E D

T a x e s w i t h respect to employment b y others t h a n
carriers:
I n c o m e tax o n employees based on
wages received. 129 iso

Excise t a x ori e m - '
ploy e r s based on
wages paid-.izs iso

T a x ori e m p l o y e r s of £
or m o r e based on
wages paid.129 ise
T a x on self-'em'ploym e n t income.i37

CARRIERS TAXING

fel
O
C a l e n d a r years: C a l e n d a r y e a r s : '
1939-42, 1%;
1939-43, 1%;
1943-45, 2%;
1944-45, 2%;
1946-48, 2 H % ;
1946-48, 2 H % ;
1949 a n d there; 1949 a n d thereafter, 3 % .
after, 3 % .
C a l e n d a r years: C a l e n d a r years:
1939-42, 1%;
1939-43, 1%; '
1943-45, 2%;
1944-46, 2%;
•1946^48, 2 H % ;
1946-48, 2 H % ;
1949 a n d there- • 1949 a n d t h e r e after, 3 % ,
after, 3 % .
3 % . . . - . . . . . . . . . No change..'

C a l e n d a r years: C a l e n d a r years:
1939-46, 1%;
1939-44, 1%;
1946-48, 2 H % ;
1945, 2%;
1949 a n d there1946-48, 2 H % ;
after, 3%.i32
1949 a n d there. after, 3%.i3i
C a l e n d a r years: C a l e n d a r years:
1939-45, 1%;
• 1939-44,1%;
1946r48,.2M%;
1945, 2%;
1949 a n d there1946-48, 2 H % ;
after, 3%.i32 •
1949:and thereafter, 3%.i3i •
.No c h a n g e . . . . _ - N o change

Calendar years:
1939-47, 1%;
1948, 2 H % ;
1949 a n d thereafter, 3%.i33

C a l e n d a r years:
1939-49, 1%;
1960-51, 1M%;
thereafter,
2%.i34

C a l e n d a r years: C a l e n d a r y e a r s :
'1939-46, 1%;
1939-47,1%;
1947-48, 2 H % ; . 1948, 2 H % ; . - . .
1949 a n d there1949 a n d thereafter, 3 % . ISS
after, 3 % .

Calendar years:
1939-49, 1%;
1950-61, 1 H % ;
thereafter,
2%.i34

C a l e n d a r years:
1939-46, 1%;
" 1947-48, 214%;
1949 a n d thereafter, 3 % .

N o change

N o change

No change.

C a l e n d a r years:
1950-53, 1 H % ;
1954-59, 2%; 196064, 2 H % ; 1965-69, "
3 % ; thereafter,
3>i%.i35
C a l e n d a r years:
1960^53, 1 ^ % ;
1954-59, 2%; 1960' 64, 2 H % ; 1965-69,
3 % ; thereafter,
3K%.i35
N o change.
T a x a b l e years: 196163, 23^%; l'954-59,
3 % ; 1960-64, 3 ^ % ;
1965-69, 4 H % ;
thereafter,
474%.i3s

6

m
S3.

'W

o
fel

ACT,

1937
t ^

T a x e s w i t h respect to emp l o y m e n t b y carriers:
I n c o m e tax on employees based on
c o m p e n s a t i o n received.iss




C a l e n d a r years:
1937-39, 2 H % ;
1940-42, 3 % ;
1943-45, 3 J i % ;
1946-48, 3M%;
1949 a n d thereafter, 3 ^ % .

No change.

No change.

No change.

No change.

C a l e n d a r years:
1947-48, 5 ^ % ;
1949-51, 6%;
thereafter,
- 6M%.'39

No change.

N o change.

fel
t>
J/2

d
K4

Income tax on representatives of employees based on
compensation re. ceived.iss
Excise tax on employers based on
compensation
paid.138

Calendar years
1937-39, 5H%;
1940-42, 6%;
1943-45, 6H%;
1946-'48, 7%;
1949 and there^ after, 73^%.
Calendar years
1937-39, 2 ^ % ;
1940-42, 3%;
1943-45, 3 ^ % ;
1946-48, 31^%;
1949 and thereafter, 31^%.

No change..

No change

No change

No change

Calendar years
1947-48,11H%;
1949-51, 12%;
thereafter,

No change

No change.

No change.

121^%.1S9

No change..

No change

No change

No charige

Calendar years
1947-48, 5^%;
1949-61, 6%;
thereafter,
6M%.i3«

No change

No change..

No change

No change

No change.

Nb change.

Effective Jan. 1, No change.
1948: 0.5%3.0%, depending on the size
of the railroad unemployment insurance ac- ^ •
count.140

RAILROAD UNEMPLOYMENT INSURANCE ACT, 1938

Excise tax on employers
(carriers) based on compensation paid.iss

3%

«

fel

X

n

w

NOTE,—This exhibit does not include (1) customs duties. (2) miscellaneous fines and
fees, (3) the tax with respect to certain hydraulic mining (act of Mar. 1,1893, as amended
by the act of June 19, 1934), and (4) various taxes levied in the District of Columbia for
expenses of tbe District of Columbia,
For Federal taxes in the period 1913-39, see 1940 annual report, pp, 466-534, and for
1939-44, see 1944 annual report, pp. 468-486.
1 Individual Income Tax Act of 1944,
2 In addition to the Revenue Act of 1943, the Congress enacted the Current Tax Payment Act of 1943, which revised, the system of individual income tax payment but made
no change in the rates, exemptions, and credits. The act provided for current collection
of tax liability by collection at source, and by filing of-declarations of estimated tax and
the current payment of such tax by taxpayers not made substantially current in their
payments through withholding. To provide for transition to current payments, the act
in gerieral canceled 75% of either the 1942 or 1943 tax, whichever was the lesser,
3 For rates arid exeniptions with respect to nonresident alien individuals, see Supplement A, p, 276. For tax treatment of capita] gains and losses, see Supplement B, p. 277. •
.4 Subsequent to the act.of Oct. 22,1914; and prior to the Individual Income Tax Act.of
1944, the personal exemption allowed to married persons was also allowed to heads of
families.
: .• .
. •




s The cllanges in individual income tax exemptions and rates made by the Revenue
Act.of 1943, intended.to be applicable to the taxable year 1944, were superseded by the
provisions of the Individual Incomie Tax Act of 1944 before they became effective.
0 Surtax exemptions. For surtax, each taxpayer was allowed an exemption of $500,
plus $500 for his spouse and $500 for each dependent. The normal tax exemption was
$500, However, if husband and wife combined their income in a joint return, the normal
tax exemption was $600 plus the amount of the smaller of the two incomes, but not more
than $17000 for both,
7 For 1946 and subsequent years, the exemptions are allowed for both normal tax and
surtax.
8 Beginning with the taxable year 1948 married couples filing joint returns were allowed
to .divide their combined incomes equally in corriputing their income taxes.
9 The Individual Income Tax Act of 1944 eliminated the former requirement that a
"dependent" must be und^r 18 years old or incapable of self-support. Under the 1944
act the taxpayer may claim as a dependent any close relative whose income is less than
$500 and who received more than half of his support from the taxpayer, provided the
relative is a resident of the United States, Canada, or Mexico.
. 1 Allowed to taxpayers arid their spouses, but not allowed for dependents.
0
1 The additional exemption of $600 for the blind replaced the special $500 deduction for
1
the blind provided by the Revenue Act of 1943, applicable to taxable years 1944-47.

g
hH

bsS
-SI

FOOTNOTES FOR E X H I B I T 26—Continued
1 For taxable years beginnmg after Dec. 31, 1939, and before Jan. 1, 1941, the sum of
2
the normal tax and surtax computed under the above rates was increased by a defense
tax of 10% of the amount of the tax, limited, however, to 10% of the excess of the net income over the sum of the normal tax and surtax.
1 The percentage reductions from tentative tax "were eliminated for calendar year 1951
3
and other taxable years beginning after Sept, 30,1950, For calendar year 1950 the percentage reductions.from tentative tax were reduced to the following: 13% on the first $400 of
tentative tax; 9% on the next $99,600; and 7,3% on the amount in excess of $100,000.
1 The combined normal tax and surtax (before deduction of. credits for foreign ta;xes,
4
taxes withheld at source, and taxes withheld on wages) is subject to the following maximum effective rate limitations: Reveriue Act of 1944, 90%; Revenue Act of 1945, 85,5%;
Revenue Act of 1948, 77%; Revenue Act of 1950, for calendar year 1950, 80%, for calendar
year 1951 and other taxable years beginning after Sept. 30, 1950, 87%.
1 Applicable to taxable year 1943 only, f h e exemption of $624 applied to every indi5
vidual regardless of marital status. However, in the case of a husband and wife filing
a joint return, if the Victory tax net income of one spouse was less than $624, the total
exemption was limited to $624 plus the Victory tax net income of such spouse. The following credits were allowed against the tax: 25% of the tax if single or 40% if married, plus in
either case 2% for each dependent. The amount of the credits were limited, however, to
$500 if single, $1,000 if married^ plus $100 for each dependent. The credits as provided bythe Revenue Act of 1942 were to be postwar credits, allowable currently only under specified conditions, but they were converted into automatic current credits by Public Law
178,78th Congress, approved Oct. 28,1943. The amount of Victory tax (before tax credits)
was limited to the excess of 90% of net income over the regular income tax liability.
1 The amount of net income accounted as earned for purposes of the earned-income
0
credit was all net income up to $3,000, whether earned or not, and up to $14,000 if earned.
In the case of a taxpayer engaged in a trade or business in which both personal services and
capital were material income-producing factors, a maximum of 20% of his share of the net
profits of such trade or business was includible within the earned-income category.
1 For tax treatment of capital gains and losses, see Supplement B, p. 277. For taxeson
7
special classes of corporations, see Supplenient C, p. 279.
IS Including defense tax.
1 Notch provision,
9
20 For taxable years beginning before Julyl, 1950, and ending after June 30,1950 (except
calendar year 1950 returns), the tax is computed under prior law rates on income allocated
to the period prior to July 1,1950, and under the rates applicable to taxable years beginning
after June30,1950, on income allocated to the period after June 30,1950, Provision is also
made for an earlier schedule of installment payments of the corporation income tax which
will ultimately achieve payment of the full tax liability in the first two quarters following
the end of the taxable year, A 5-year transition period, begirming with taxable years
ending on or after Dec. 31,1950, is provided, during which the tax payable in the third and
fourth quarters is gradually reduced and the tax payable in the first and second quarters
is correspondingly increased.
21 But not in excess of 85% of adjusted net income.
22 But not in excess of 85% of adjusted net income after deduction of income subject to
excess profits tax,
23 The total credit allowed for dividends received is limited to an amount equal to 85%
of net income, minus the credit for interest received on certain obligations of the United
States, computed without regard to the net operating loss deduction. In the case of
dividends received in property other than money, the credit is limited to an amount not




greater t h a n 85% of the adjusted basis of the property in the hands of the distributing
corporation. For the calendar year 1950, the credit in the case of dividends received on
certain preferred stock of public utilities is 57%. '
24 The credit for dividends paid by a public utility on certain preferred stock, in the case
of a taxable year beginning after June 30,1950, is ari amount equal to 31% of such dividends,
but not in excess of 31% of the net income, minus the credit for interest received on certain
obligations of the United States and the credit for dividends received. For the calendar
year 1960, the applicable credit is 33% of such amounts. The credit for Western Hemisphere trade corporations is shown in Supplement C.
25 See "Recapture of excess profits on certain Government contracts," below.
2 The Tax Adjustment Act of 1945, approved July 31,1945, increased the specific exemp0
tion from $10,000 to $25,000, effective Jan, 1, 1946, allowed the 10% excess profits postwar
refund credit to be taken currently with respect to tax liabilities of 1944 and subsequent
years, and advanced the maturity date of outstanding refund bonds to Feb, 1, 1946.
Owing to the repeal of the excess profits tax by the Revenue Act of 1945, the increased
specific exemption of $25,000 was riot applicable. For taxable years beginning in 1945 and
ending in 1946, the excess profits tax was retained for the 1945 portion of the year.
27 The deficit rule was repealed and it was provided that the base period net income in
the lowest year of the base period shall not be less than 75% of the average base period net
income of the other three base period years.
28 The Secorid Reveriue Act of 1940 established the rule.that the largest deficit of any base
period year shall be disregarded in computing average base period net income. Excess
Profits Tax Amendments of 1941, applicable to taxable years beginning after Dec. 31,1939,
permitted taxpayers with higher average income in the second half of the base period than
in the first half to use the so-called "growth formula."
29 This tax was imposed by sec. 3 of the act of Mar. 27, 1934 (Vinson Act) (48 Stat. 503,
505), as amended by the act of June 25,1936 (49 Stat. 1926), the act of April 3,1939 (63 Stat.
655, 550), and the act of June 28, 1940 (Public Law 671, 76th Congress).
so Any profits in excess of 8.7% of the cost of performing such contracts except prime
contracts made on a cost-plus-a-fixed-fee basis completed within the income taxable year
shall be considered profits in excess of 8% of the contract price. In a contract entered into
on a cost-plus-a-fixed-fee basis, the fee shall not exceed 7% of the estiniated cost of the
contract (exclusive of the fee as determined by the Secretary of the Navy or the Secretary
of War, as the case may be).
31 Sec. 622 (b) of the National Military Establishment Appropriation Act, 1950 (63 Stat.
987, 1021), approved Oct. 29, 1949, provides that "the profit limitation provisions of the
act of Mar. 27, 1934 (48 Stat. 503, 605), as amended and supplemented, shall not apply
to any contract or subcontract which is subject to the Renegotiation Act of 1948."
32 In community-property States prior to 1942. at the death of a spouse, only one-half
of the community property was subject to estate tax irrespective of whether such property
was accumulated by that spouse. In the case of gifts of community property, one-half
of the gift was taxable to the husband and the other half was taxable to the wife. In noncommunity-property States, the entire amount of property accumulated by the spouse
was taxable under the estate and gift tax. The Revenue Act of 1942 provided that, even
in the case of community property, transfers were fully taxable to the decedent or donor
to the extent that the property was attributable to his personal services. The Revenue
Act of 1948 repealed the 1942 provision with the result that transfers of community property are now generally taxable under the pre-1942 law. In addition, the 1948 act provides
that transfers of noncommunity property may be split for purposes of the estate and gift
taxes.

bO
bO

CO
Ot

o
fel
O
O
fel
fel

o
fel

Sl
fel

>.
Ul
d
Sl

liquor is not otherwise engaged in business as a dealer in wine or malt liquors. Under
33 Estates of decedents dying after June 6, 1932, are subject to two estate taxes—the
the Revenue Act of 1940, the rate was increased to $2.20 per month.
basic tax under the provisions of the Revenue Act of 1926 plus an additional tax under
- 56 Tax made permanent by eliminating expiration date of July 1, 1945,
the Revenue Act of 1932 or 1932 as amended. The rates and exemptions shown in this
57 Except for passage to Canada, Mexico, Cuba, or Puerto Rico.
table are for determining the additional estate tax. The total tax is the araount deter58 Effective Jan. 1,1942, and until the termination of hostilities (Dec, 31,1946) exports to
mined under the basic rate plus the difference between the basic and the additional tax.
a possession of the United States, or to a Territory of the United States if for use of members
34 This exemption and the exemption of $100,000 under the basic tax are allowed only
of the armed forces, exempt,
to resident decedents and citizens. The Revenue Act of 1942 provided for an exemption
59 Persoris admitted free or at reduced rates (except employees, municipal officers on
of $2,000 in the case of estates of nonresidents not citizens under the additional tax.
36 The $60,000 exemption replaces the former $40,000 exemption and $40,000 life insurance official business, and children under 12 years of age) subject to tax based on the admission
charge made to other persons for similar accommodations. The tax on tickets to any
exclusion. Under the 1942 act, the exclusion for life insurance was eliminated.
30 Rates shown are those for determining the additional tax; the minimum and maxi- spoken play sold at the ticket olfice of theaters at reduced rates is based upon the price
for which sold,
mum rates for determining the basic tax are 1% and 20%, respectively,
00 Admissions to affairs for the benefit of religious, educational, and charitable organ37 In the case of a decedent dying after the enactment of the Revenue Act of 1940 (June
. izations and all other nonprofit organizations made taxable. Members of the armed
25, 1940) and prior to the effective date of the Revenue Act of 1941 (Sept, 21, 1941), there
forces of the United States or Civilian Conservation Corps when in uniform subject to
was added to the net tax (after deductions of the credits for gift taxes and State death
tax based on actual admission charge if admitted at reduced rate (see footnote 59). No
taxes) computed at the aboye rates, 10% of the amount of such net tax, as a defense tax.
tax.payable on admission charges for children under 12 years of age if the amount paid
38 Allowed but once and may be taken all in 1 year or over a period of years at the option
is less than 10c. Provision for exemption of admissions of $3 or less, to have been effective
of the donor.
July 1, 1945, repealed.
39 Except gifts of future interests and gifts in trust,
01 Admission charges to activities operated on military areas by the Departments of
40 Except gifts of future interests. Applicable to gifts made after the end of the calendar
the Army and Navy, exempt effective Oct. 1, 1941, by Public Law 676, 77th Congress,
year 1942.
approved July 23, 1942. The same law also provided that members of the armed forces
41 A defense tax of 10% of the gift tax computed at the above rates was applicable to
of the United Nations when in uniform should be subject to tax on the basis of the actual
gifts made in the calendar year 1940 (determined by proration), and to gifts made in the
admission charge if admitted at reduced rate (see footnotes 69 and 60).
calendar year 1941.
02 Effective after Dec. 31, 1947, Public Law 384, 80th Congress, approved Aug: 8, 1947,
42 With the exception of the penalty tax on leaf tobacco, and the taxes on dealers and
required that free or reduced rates of admission of members of the armed forces of the
manufacturers, the tobacco taxes apply to products manufactured or imported into the
United States, the United Nations, or the Civilian Conservation Corps be taxed on the
United States and sold or removed for consumption or sale.
basis of the regular charges for comparable admissions. Effective Aug, 1, 1948, Public
43 Defense tax for 5 years, effective July 1,1940, through June 30,1945, in lieu of tax under
Law 706, 80th Congress, approved June 19, 1948, exempted from tax free admissions of a
prior law.
hospitalized member of the arnied forces of the United States or of a person hospitalized
44 Defense tax rate made permanent.
as a veteran by the Federal Government in a Federal, State, municipal, or private hos45 Exports to Territories of the United States for use of members of the armed forces
exempted until the termination of hostilities (Dec. 31,1946)'by Public Law 14, 78th Con- • pital or institution.
03 Amount taxable is the amount of admission charge, which is deemed to be 20% of Ul
' gress, approved Mar. 23, 1943.
the total paid- for refreshments, services and merchandise. Where amount paid for
4 (Counting each 2% inches (or fraction thereof) of the length of each as one cigarette.
0
admission is 50^ or less no tax shall be paid.
47 The retail price classes were changed by the Revenue Act of 1942.
04 Effective July 1, 1944, rate was lowered to 20% by Public Law 333, 78th Congress,
48 With the exception of the taxes on rectification of distilled spirits and wines, and
approved June 9, 1944.
fermented malt liquors prior to Aug. 1, 1948, the liquor excise taxes apply to products
05 Tax on automobiles and trucks, parts and accessories, tires and inner tubes made
imported into the United States as well as to domestic products.
permanent by eliminating expiration date of July 31, 1946.
49 Brandy taxed at samjd rate as other distilled spirits by the Revenue Act of 1941 and
0 Exemption of sales to the Fede.ral Government repealed as of June 1, 1944, with re0
subsequent revenue acts.
^
spect to the manufacturers' (Chapter 29, Internal Revenue Code) and retailers' excises
50 War tax rate^in lieu of tax urider prior law, applicable until the first day of the first
(Chapter 19, Internal Revenue Code), and the excises on pistols and revolviers, firearms,
month whicji begins 6 months or more after the termination of hostilities.
51 The Revenue Act of 1945 provided refunds in coimection with reductions in taxes on shells and cartridges, electrical energy, communications services, and transportation of
persons and property. In the case of sales of pistols and revolvers, firearms, shells and caralcoholic beverages and electric light bulbs which under the Revenue Act of 1943 were
tridges, and radios, phonographs, phonograph records and musical instruments, the exempto have taken place 6 months after the termination of hostilities.
tion is repealed, effective July 1,1947, six months after the termination of hostilities. The
52 Increases in excise tax rates imposed under the 1943 Revenue Act made permanent.
Secretary of the Treasury may authorize exemption of sale to the Federal Government
53 Nonbeverage distilled spirits taxed when withdra'vvn at same rate as distilled spirits.
from any of the above-mentioned taxes if he determines that the imposition will cause
Drawback of part of tax permitted beginning Nov. 1, 1942, if spirits used for certain pursubstantial burden or expense which can be avoided by granting tax exemption and that
poses and manufacturer pays an armual tax of $25 for withdrawals of not more than 25
the full benefit of such exemption will accrue to the United States. The discretionary
proof gallons, $50 for withdrawals of not more than 50 proof gallons, $100 for withdrawals
power of the Secretary shall not be applicable to any contract entered into on or after July
of more than 50 proof gallons.
1. 1947, six months or more after the termination of hostilities. The Revenue Act of 1946
8 Effective Aug. 1, 1948, tax extended to imported fermented liquors by Public Law
4
repealed the time limitation on the discretionary powers of the Secretary.
857, 80th Congress, approved June 30, 1948.
07 Automobile busses taxed at same rate as trucks. Previously taxed at the higher bO
5 Retailers of wines or malt liquors, to members, guests,.or patrons at fairs, dances,
5
picnics, etc., shall pay a tax for each calendar month in which such sales are made in lieu . rate applicable to passenger automobiles.
00
08 Repealed, effective after June 30, 1946, by the Revenue Act of 1945.
of the regular tax, provided that the person or organization retailing the wine or mialt




FOOTNOTES FOR E X H I B I T 26—Contmued
09.lf in any year the first use of the motor vehicle or boat is after July^31, the tax is
reckBried prbporticiiately from the first day of the month in which such use occurs to and
including the 30th day of June following.
70-'Tax applies only to tractors of the kind used chiefly for highway transportation in
•combination with a trailer or semi-trailer. "
- '71'Outstanding circulation exempt from taxation (1) whenever such circulation of any
barik,-association, corporation, company or person is reduced to not over 5% of the
chartei-ed or declared capital existing at the time the same was issued; (2) whenever any
bank which has ceased to issue notes for circulation deposits in the Treasury of the United
•States in lawful money the amount of its outstanding circulation to be redeemed at par
and (3)"whenever any bank is insolvent or bankrupt.
7 Cash registers of the type used in over-the-counter retail sales exempt.
2
• 78'Billiard tables or pool tables in a hospital, if no charge is made for use of such table,
exempt'-from tax beginning July 1, 1944.
• - 7 Includes "pin ball" and similar amusement devices.
4
7s Includes any coin-operated amusement or riiusic machine and vending machines
operated by a 1^'.coin with provision for merchandise prizes of not more than 5{i retail
•valueV70 Effective Nov. 1,1950, rate increased to $150 permachine by the Revenue Act of 1950.
77 In the case of (1) dues, if the dues of active resident annual members exceed $25 per
year,- (2) initiation fees, if such fees exceed $10 per year, or if the dues of active resident
annual rnembers exceed $25 per year, not including initiation fees.
78 In the case of (1) dues, if the dues of active resident annual members exceed $10 per
year, (2) initiation fees, if such fees exceed $10, or if the dues of active resident aimual
. members exceed $10 per year, not including initiation fee's.
79 Household type electric vacuum cleaners exempt.
so Excludes pistols and revolvers and certain firearms on which a tax has.been paid
under sec. 2720 of the Internal Revenue Code (see footnote 81).
81 Firearms are defined to include shotguns and rifles with barrels of less than 18 inches
in length, other guns capable of being concealed (except pistols and revolvers), machine
guns, and muflaers and sflencers. The law provides that: In the case of manufacturers
and dealers in guns with two attached barrels from which only a single discharge can be
made from either barrel without manual reloading, the tax shall be $25 per year for manufacturers .and $1 per year for dealers; and the transfer tax on such guns, the barrels ofwhich
are 12 inches.or more in length, shall be at the rate of $1.
82 Effective July 1, 1945, nonautomatic single barreled guns, 12 inches or more in length,
designed to- be held in one hand when fired were placed in the $1 transfer tax class by
Public Law 177, 79th Congress, approved Aug. 11, 1945.
• ' 8 Pur articles made from pelts furnished by a customer, when the article is for use of and
3
not for resale by such a customer, taxable upon the fah' retail market value as determined
by the Commissioner.
84 Articles made of fur on the hide or pelt taxable only if the value of the fur is more
than three times the value of the next most valuable component-material.
85 Retail auction sales of jewelry and furs on behalf of persons not engaged in the business
of selling like articles, made taxable as retail sales under Revenue Act of 1950, except
that the first $100. of sales exempted where the auction sale takes place at the home of
the person whose "articles are being sold.
- so Articles sold at retail by any agency or instrumentality of the United States made
taxable under Revenue Act of 1950, unless specifically exempted by statute.




bO

8 Natural born residents of North, South, and Central America, and adjacent islands
7
were exempted from tax from Apr.' 29, 1943, to -Dec; "31, 1947, by Public Law 45, 78th
Congress, approved .Apr. 29, 1943, Public Law 229, 78th Congress, approved Feb. 14,
1944, and Public Laiw 40, 80th Congress, approved Apr. 28, 1947. •
-s Applies only on imports if imports from a country during the preceding calendar year CO
exceeded exports to it.
Or
3 Suspended, except for copper sulphate and other specified types of copper, from Apr. O
9
30, 1947, to June 30, 1950, by Public Law 42, 80th Congress, approved Apr. 29, 1947, and
Pubhc Law 33, 81st Congress, approved Mar. 31, 1949. Public Law 869, 81st Congress, pi
approved Sept. 30,1950, extended the suspension with regardto scrapuntil June 30,1951, fel
90 Flooring of maple, birch, and beech, and Northern white pine, Norway pine, and
Western white spruce is exempt,
O
91 The rate was reduced by various trade agreements.
S3
• 9 Tax does not apply to any article, merchandise, or combination if any coconut oil
2
or derivative thereof produced in Guam or American Samoa is contained therein.
O
8 Tax does not apply to rapeseed' oil imported for use in the manufacture of rubber
3
fel
substitutes or lubricating oil,
« No whale oil (except sperm oil), fish oil, or marine animal oil of any kind may enter
4
tax-free unless such oil was produced on vessels of the United States or in the United
States or its possessions, from whale, fish, or marine animals or parts thereof taken and
fel.
captured by vessels of the United States,
8 Tax does not apply to any article used for religious purposes, to surgical instruments,
5
or to frames or mountings for spectacles or eyeglasses, or to a fountain pen if the only
parts of the pen which consist of precious metals are essential parts not used for ornamental
o
purposes,
8 Additional exemptions: Watches designed especially for use by the blind, smokers'
0
pipes if the only parts which consist of precious metals are essential parts not used for S3
ornamental purposes, and buttons, insignia, cap devices, chinstraps, and other-devices >
prescribed for use in connection with the uniforms of the arriied forces of the UnitedStates.
8 Silver-plated flatware exempt. Watches retailing for not more than $65 and alarm
7
clocks retailing for not more than $5 taxed at 10%, eflective Sept. 1, 1945, mechanical
pencils having precious metals as essential parts exempted from tax by Public Law 180, o
79th Congress, approved Aug. 11, 1945.
8s Tax extended to cover purses, handbags, wallets, billfolds, and similar articles; fel
8 Tax does not apply to retail stocks held at the place where intended to be sold, nor
9
to matches held for sale by the manufacturer or importer thereof.
100 A barrel contains more than 98 pounds but not more than 196 pounds. The tax on fel
smaller amounts of mixed flour is as follows: 20 per half barrel containing more than 49
pounds but not more than 98 pounds; 10 per quarter barrel containing more than 24)^
pounds but not more than 49 pounds; H^ per one-eighth barrel containing 24>^ pounds
fel
or less.
1 1 Effective July 4, 1948, musical instruments sold for the.use of religious or nonprofit >
0
educational institutions exclusively for religious or educational purposes exempted from Ul
c\
tax by Public Law 899, 80th Congress, approved July 3, 1948.
102 Effective July 4; 1946, Pubhc Law 371, 79th Congress, approved Apr. 30, 1946, re- SJ
pealed the provision requiring that tax collected on processing of coconut oil from the
Philippines be paid into the Philippine treasury.
103 Additional tax of 20 per pound if coconut oil is not from the Philippines or other
possession of the United States,
" .

a

to uniformed members of the arraed forces of the United States or the United Nations
104 Taxes collected with respect to coconut oil wholly of the production of Guam or
^ American Samoa or produced from materials wholly of the growth or production of Guam was terminated effective Dec. 31, 1947, by Public Law 384, 80th Congress, approved
Aug. 8, 1947.
or American Samoa, held as separate funds and paid to the treasury of Guam or American
123 Effective Nov. 1, 1950, the Revenue Act of 1950 requires the collection of tax where
Samoa, respectively.
.
'
payment is made without the United States for travel which begins or ends in the United
105 Additional tax of 20 per pound suspended for the period Sept, 17, 1942, to Aug. 26,
States, or for the transportation of property from one point in the United States to another.
1949, b y Pubhc Law 711, 77th Congress, approved Sept. 16, 1942; Pubhc Law 390, 78th
124 The tax on transportation of property does not apply to the transportation of coal
Congress, approved June 30, 1944; and Presidential proclamation of June 27, 1946, Suswith respect to which there has been a previous taxable transportation,
pension terminated, effective Aug, 27, 1949, by Presidential proclamation of July 27,
1949. (See footnote 103.)
125 Expired Aug. 23, 1943.
1 0 The Commissioner of Internal Revenue shall determine the fair market value thereof.
2
1 0 Tax does not apply to palm oil used in the manufacture of tin plate, terne plate, or
0
Such fair market value shall equal the current market price at the mine of coal of a coraany subsequent use of palm oil residue resulting from the manufacture of tin plate or
parable kind, quality, and size produced for market in the locality where the coal so
terne plate.
disposed of is produced,
107 Palm oil used in the manufacture of iron or steel products exempt.
127 Effective date extended from June 30,1945, to June 30,1947, by Pubhc Law 345, 78th
108 Repealed effective July 1, 1950, by Pubhc Law 459, 81st Congress, approved Mar.
Congress, approved June 20, 1944, and from .June 30, 1947, to June 30, 1948, by Public
16, 1950.
Law 558, 79th Congress, approved July 27,. 1946,
109 Cameras weighing more than 4 pounds exclusive of lens and accessories exempt.
'110 Basis of tax changed from value of specified component parts of radios to value of
128 Effective date exiended from June 30,1948, to June 30,1963, by Public Law 388, 80th
Congi-ess, approved Aug. 8, 1947,
.
complete rMio.
Ill Eflective Nov. 1, 1950, tax extended to television sets by Revenue Act of 1950.
129 For the period through 1950, "wages" do not include remuneration to an individual
• 1 Effective Nov, 1, 1950, tax extended to household units for the quick freezing or
12
in excess of $3,000 in a calendar year; thereafter remuneration in excess of $3,600 in a calfrozen storage of foods by Revenue Act of 1950.
endar year is excluded.
J30 The tax is imposed by the Federal Insurance Contributions Act (embodied in
'• 1 3 Tax not applicable to footwear, articles designed especially for hospital or surgical
1
Social Security Act Araendraents of 1939) which superseded title VIII of the Social
use, or articles taxable under other provisions of Chapter 29 of the Internal Revenue Code,
Security Act of 1935.
fel.
14 No- tax is imposed upon any payment received from any person for services utilized
1
in collection of news for public press or radio broadcasting, or in the dissemination of
• 1 1 Changes were enacted in Public Law. 211, 78th Congress, Dec. 22,1943, and in Reve3
news through the public press or by means of radio broadcasting if the charge for such
nue Act of 1943.
services is billed to such person.
132 Changes were enacted in Public Law 495, 78th Congress, Dec. 16,1944.
133 Changes were enacted in Public.Law 719,"79th Congress, Aug. 10,1946 (Social Security
. lis Sales to beauty and barber shops of preparations for resale not considered a sale at
Act Araendraents of 1946).
retail.
134 Changes were enacted in Public Law 379, 80th Congress, Aug. 6, 1947 (Social Se- Ul
1 , Certain vessels are specifically exempt from the tax, (See 46 U. S, C , sees. 122-126,
1
0
curity Act Araendraents of 1947).
130.)
135 Changes were enacted in Pubhc Law 734, 81st Congress, Aug. 28, 1950 (Social Se1 7 The tax is imposed upon the transfer of-stock or securities by a citizen or resident of
1
curity Act Amendments of 1950).
the United States, or by a domestic corporation, partnership, or trust to a foreign corporation as paid-in surplus or as a contribution to capital, or to a foreign partnership or trust.
I O The tax is iraposed by the Federal Uneraployraent Tax Act (embodied in Social
S
1 8 If no charge is made, or charge is less than "fair charge," the tax is on the fair charge Security Act Amendments of 1939) which superseded title IX of the Social Security
1
Act of 1935. A credit up to 90% of the tax is allowed for contributions paid into an
for transportation.
1 9 Transportation of oil through lines of pipe within a refinery, bulk plant, terminal, or unemoloyraent fund under a State law.
1
a gasoline plant, if not a continuation of taxable transportatiori, is not included within the
137 Tax does not apply to net eamings from self-employment when such earnings fpr
term transportation.
the taxable year are less than $400, nor does it apply to that part of self-employment
income which exceeds (a) $3,600 minus (b) the amount of wages subject to social security
120 No tax is imposed on amounts paid for: transportation for which the charge does not
tax.
. . .
exceed 350, commutation or season ticket for single trips of less than 30 miles, commutation
tickets for one month or less. Payraents for round-trip tickets at tariffs of not more than
138 "Corapensation" does not include remuneration to an individual in excess of $300
1)40 per mile by members of the armed forces of the United States in uniform and traveling
in a calendar month. Prior to 1947, the incorae tax on eraployees and employee representat their own expense when on official leave are exempt.
atives was based on compensation earned, and the excise tax on employers (under the
1 1 jjjxemption for special rate furlough tickets extended to merabers of the armed forces . Railroad Uneraployment Insurance Aet) was based on compensation payable.
2
• 1 9 (Changes were enacted in Public Law 5';^, 79th Congress, July 31,1946.
3
of any of the United Nations. (See footnote 120.)
1 0 If the balance to the credit of the account on Sept. 30 of any year is less than .$250
4
122 The Excise Tax Act of 1947 exempted from tax transportation, any part of which is
million, the tfix rate for the following year is 3%; if the balance is between $250 arid"$300
outside the northern portion of the Westem Hemisphere, except with respect to any part
million, the rate is 2H%;.if the balance is between $300 and $360 million, the rate is 2%;
of such transportation which is from any port or station within the United States, Canada
or Mexico to any other port or.station within the United States, Canada'.or Mexico.. if the balance is between $350 and.$400 million, the rate is 13^%; ifi the balance is between
$400 and $450 million, the rate is 1%; if the balance is $450 million br over, the rate is 3^%. bO
For purposes of this exemption. Public Law 35,'81st Congress, approved Marl 31, 1949,
Public Law 744, 80th Congress, June 23,1948,
provided that effective Apr. 1, 1949, a port or station within Newfoundland shall not be
considered as being within Canada. The exeniption from tax on tfarisjportatiori grainted .
Or




S

Exhibit 26.—Federal taxes of the United States, 1940 through 1950—Continued

bO

S U P P L E M E N T A,—PERSONAL E X E M P T I O N S , TAX BASE, AND RATES APPLICABLE TO N O N R E S I D E N T ALIEN INDIVIDUALS

Federal tax law

Intemal Revenue Code as amended by Revenue Act of:
1940

Income Personal
year exemption 1

1940

1941
1941
..
1942,1943, Individual Income Tax Act of 1944 and Revenue Act of 1945. 1942-47
19481948 and 1950
.
.
. .
NOTE.—Nonresident aliens engaged in trade or business within the United States are
taxed at the same rates as residents of the United States. Nonresident aliens not engaged
in trade or business within the United States, who derive not more than $21,600 in 1939,
$24,000 in 1940,'$23,000 in 1941, and $15,400 in 1942 and subsequent years from fixed and
determinable annual or periodical gains, profits, and income frora sources within the
United States are subject to the rates shown in the table, withheld at source on the gross
amount of such income without personal exemption or credit for dependents. By treaty
agreement with a contiguous country (Canada or' Mexico) for 1939 through 1940, and
with any country in North, Central, or South Araerica, the West Indies, or Newfoundland for 1941 and subsequent years, these rates may be reduced to not less than 5%. Under
treaty agreements the rates applicable to residents of Canada are 5% for 1940, and 15% for
1941 and subsequent years. Salary or other corapensation for personal services of a resident
of Canada or Mexico who enters and leaves the United States at frequent intervals is not
subject to the withholding rates shown in the table, but for 1943 such incorae was subject
to Victory tax withholding and thereafter to withholding at rates applicable to residents
of the United States. Nonresident aliens with no United States business (other than
those affected by a treaty) who report raore than the above specified araounts of gross
income are liable to normal tax aind surtax on such incorae after deductions applicable
thereto and the personal exemption shown in the table. The total tax, however, shall in
no case be less than the withholding rate shown in the table. In addition, such nonresident aliens were subject to the 10% defen.se tax applicable to the taxable year 1940, and




$800

Tax basei

Fixed or determinable annual or periodical gains, profits, and income
from sources within the United States,
do
750
.
. .
500 . . . . do
600
do

Withholding rate
(percent)

2 16^^
27^
3 30
4 30

the Victory tax applicable to the taxable year 1943. For tax treatment of capital gains of
nonresident aliens not engaged in trade or business in the United States, see Supplement B, page 278 (footnote 1),
1 Whether nonresident alien is single, married or head of a family, except that for 1942
and subsequent years residents of Canada or Mexico are allowed the sarae exeraption as
a citizen of the United States. Credit for dependents allowed only to residents of Canada
or Mexico,
2 Includes 10% defense tax.
3 As provided by the Revenue Act of 1943, on or after Mar, 6,1944, the rate of withholding on the compensation for services performed by a nonresident alien individual, or by
a citizen of a possession of the United States not otherwise a citizen of the United States,
brought into the United States under authority of the War Manpower Comraission for
teraporary employraent essential to the war effort shall be at the reduced rate of 10% on
the gross amount of compensation derived from labor or personal services by such an
individual,
4 For taxable years beginning after Dec, 31, 1950, citizens of Puerto Rico deriving income from sources within the United States will be taxable on such income to the sarae
extent and in the sarae raaimer as United States citizens, and the 30 per cent withholding
tax will be inapplicable to them.

o
S3
1^

o
fel

^
fel

s
o
SI

fei

>

o
fej

SJ

>
Ul

SI
-1

S U P P L E M E N T B.—TAX T R E A T M E N T OF GAINS AND LOSSES FROM SALE OR E X C H A N G E OF CAPITAL ASSETS
PART I. UNDER INDIVIDUAL INCOME T A X i

o

Provisions with respect to—

Federal tax law

Income year
Assets by period held

Revenue Act of 1938 and Internal Revenue Code.

1938 through 1941.. Short-term: Not
than 18 months.

more

Long-term:
More than 18 months
but not more than
24 months.
More than 24 months.:
Internal Revenue Code'as
amended by Revenue Act
of 1942.
.

1942—

Short-term: Not
than 6 months.

more

Long-term: 2 More than 6
months.

Percent of
gainorloss
taken into
account in
computing
net income
1.00

Tax on net gain taken into account

Loss offsets, hraitations, and carry-overs

Net short-term gain fully taxable at
normal and smtax rates. In 1940
defense tax also apphed,

Short-term loss allowed only to the extent of
short-terra gain. Loss disallowed in one year
(to an araount not in excess of net income)
carried forward and applied against net
short-term gain of the succeeding year.

6624 ] Net long-term gain either included Long-term loss allowed against long-term gain.
Net long-term loss either deducted from other
wath other income subject to normal
income (including net short-term gain) or 30%
1 and surtax rates or segregated and
of net loss credited against tax on other in60 f taxed at 30%, whichever method
come, whichever method results in the
results in the lesser tax. In 1940
greater tax. No long-term loss carry-over.
J defense tax also applied.
Net short-term gain (reduced by net\ Short-term loss combined with long-term loss
100
taken into account alio wed.to the extent of
long-term loss taken into account)
(1) short-term gain, (2) long-term gain taken
fully taxable at norraal and surtax
into account, and (3) other income up to
rates.
$1,000. Balance of combined short-, and longNet long-terra gain (reduced by netl
50
term net loss carried forward for 5 years as
short-term loss) either included with /
short-term loss. The amount of the net capother income subject to normal and
ital loss carry-over may not be included in
surtax rates or segregated and taxed
computing a new capital loss of a taxable year
at 50%, whichever method results in
which can be carried forward to the next 6
the lesser tax.
/
succeeding taxable years.

fel

X

i
w
I—l

Ul

Footnotes on p, 278.




bO

Exhibit 26.—Federal taxes o the United States, 1940 through 1950—Continued

bO

S U P P L E M E N T B.—TAX T R E A T M E N T OF GAINS AND LOSSES FROM SALE OR EXCHANGE OF CAPITAL ASSETS—Continued

(X)

PART II, UNDER CORPORATION INCOME AND EXCESS PROFITS TAXES S

Provisions with respect to—

Federal tax law

Income year
Assets by period held

0

Percent of
gain or loss
taken into
account in
computing
net income

S3
fel

Tax on net gain taken into account

Loss offsets, limitations, and carry-overs

O
SI

o
Intemal Revenue Code as
amended by Revenue Acts
of:
1939 and 1940

fel

1940 and 1941

Short-term: Not
than 18 months.

more

Long-term: More than 18
months.

1942

1942—

Short-term: Not
than 6 months.

more

Long-term:2 More than 6
months.

100

100

100

100

1 For taxable years beginning after Dec. 31, 1949, capital gains of nonresident aliens,
not engaged in trade or business in the United States but temporarily present here, are
subject to tax. In the case of those present iri the United States for less than 90 days,
the tax applies only to gains realized from transactions effected during their presence.
In the case of those present in the United States for 90 days or more, the tax applies to
all their gains from transactions in this country during the taxable year whether or not
they were present when the gain was realized.
2 For treatment of property used in trade or business and certain involuntary conver sees. 117 (j) and 117 (k) of Internal Revenue Code, as amended.by Revenue
sions, see
Acts of 1942 and 1943.
http://fraser.stlouisfed.org/

Federal Reserve Bank of St. Louis

Net short-term gain included with
other income and fully subject to
both income and excess profits tax.

Net long-term gain included with
other income subject to income tax
only .4
Net short-term gain (reduced by net
long-term loss) subject to income
tax. Net short-terra gain (without
such reduction) subject to excess
profits tax.3
Net long-term gain (reduced by net
short-term loss) taxable at maximum
rate of 25% under income tax. Net
long-term gain not subject to excess
profits tax,3

Short-term loss allowed only to the extent of
short-term gain, under both income and
excess profits tax,- Loss disallowed in one
year (to an amount not in excess of net
income) carried forward and applied against
net short-term' gain of the succeeding year.
Long-term loss allowed against long-term gain
and all other income (including net shortterm gain) under income tax. Not aUowed
under excess p'rofits tax. No long-term loss
carry-over.
For income tax, short-term loss combined with
long-term loss allowed only to the extent of
short-term gain. Net capital loss may be
carried over as a short-term capital loss for
5 years. The amount of the net capital loss
carry-over may not be included in computing
a new capital loss of a taxable year which can
be carried forward to the next 6 succeeding
taxable years. For excess profits tax,3 shortterm loss allowed only to the extent of shortterm gain and long-term loss not allowed.

fel

i
Sl
fel

>

o
fel
fel
fel

>
Ul

3 The excess profits tax is not applicable to taxable years beginning after Dec, 31,1946.
4 Net gain from sale or exchange of depreciable property held more than 18 months, as
well as net long-term capital gain, was excluded in 1940 and 1941 from excess profits tax
net income by a special provision which was discontinued with the enactment in 1942 of
sec. 117 (j) which had in general the same effect on long-term holdings. Under the Revenue Act of 1942 (sec. 208) involuntary conversions of such property were also excluded
retroactively from excess profits net income for 1940 and 1941.

d

S U P P L E M E N T C — F E D E R A L TAX RATES ON SPECIAL CLASSES OF CORPORATIONS U N D E R T H E R E V E N U E ACTS OF 1940 THROUGH 1950
Revenue Act of—

Regulated investment companies: 1
On Supplement Q net income.

24% 2

24%,

On Supplement Q surtax net
income.

- -

Surtax
Exempt 3
Excess profits tax
Resident foreign corporations: 4
24%2
Norraal tax
. .
Surtax
.
_

.

Sarae as other corporations.

1945

1943

- No change

- ---

First $25,000, 6%,; balance, 7%,

On undistributed capital
gains (excess of net longterra capital gain over the
sura of net short-term capital loss and capital gaiins
dividends paid).
Status under the excess Exempt . . . .
profits tax.
Western Hemisphere trade corporations:
Normal tax
...
Same as other corporations.

Excess profits tax

1942

1941

1940 (second)

No change

No change
14%

16%
No change..,

25%.

Nochange

No change

1950

.

^

25% for taxable years beginning
after June 30, 1950; 23% for taxable years beginning after Dec.
31, 1949, and before July 1, 1950
20% of surtax net income in excess
of $25,000 for taxable years begiiming after June 30, 1950; 19%
for taxable years begiiming after
Dec. 31, 1949, and before July 1,
1950.
No change.
fel

No change

No change

No change

I

No change.

Ul

No change. . . .

.

Nochange.

Nochange

No change

No change

' Sarae as other corporations.
No change

Exempt .
No change

No change

Nochange
No change
No change

Nochange
No change
No change

Nochange
No change
Repealed. 7

\ Same as other corporations except
that for taxable years beginning
after June 30,1950, a credit of 31%
1 of normal tax net income, com\ puted without regard to this
1 credit, is allowed in coraputing
normal tax and surtax net income. For calendar year 1950
j the credit is 33%,s

Repealed. 7

24% . . .
. . . .
Sarae as other corporations.
No change

.

.

No change

Same as other corporations.o
No change.
y

Footnotes on p, 280.




bO
CO

Exhibit 26.r-Federal taxes of the United States, 1940 through 1950—Continued

bO
(X)

S U P P L E M E N T C — F E D E R A L TAX RATES ON SPECIAL CLASSES OF CORPORATIONS UNDER T H E R E V E N U E ACTS OF 1940 THROUG.H 1950—Con.

o

Revenue Action
1940 (second)
Nonresident foreign
tions: 4
Norraal tax
Surtax
Excess profits tax

1941

1942

1943

1950

1945

SJ
fel
hi

corpora16)^% 2
E xempt

27^^%,
Exempt
No change

- 30%
No change.'
Nochange

1 The provisions of Supplement Q prior to the enactment of the Revenue Act of 1942
were applicable to mutual investment companies.
2 Including defense tax.
3 Under the general provisions of sec. 727 (g), Internal Revenue Code.
4 Taxation of foreign corporations may be subject to treaty provisions.
6 For taxable years beginning before July 1,1950, and ending after June 30,1950 (except
. calendar year 1950 returns), the exemption frora surtax is continued and the normal tax
is computed under prior law rates on income allocated to the period prior to July 1,1950,




No change..
Nochange
Nochange

No charige
No change
Repealed, 7

No change.
No change.

o

I

.o

and under the rate applicable to taxable years beginning after June 30, 1950, for income
allocated to the period after June 30, 1950, For taxable years begiiming after June 30, fel
1950, the net effective rates after the credit are 17.25%'imder the normal tax and 13.80%
under the surtax applicable to surtax net income in excess of $25,000. For calendar year •fel
1950 effective rates after the credit are 15.41% on normal tax net income and 12,73% on
surtax net income in excess of $26,000,
6 Effective for taxable years beginning after June 30, 1950 and for calendar year 1950,
o
7 Not apphcable to taxable years beginning after Dec. 31, 1945.

i.

Sl

>
Sl

•o
fe}

fel
S)
fel
Ul

d

Sl

'

EXHIBITS

281

INTERNATIONAL FINANCIAL AND MONETARY DEVELOPMENTS
Exhibit 27.—Report of activities of the National Advisory Council on International
Monetary and Financial Problems, April 1 to September 30, 1949
[House Document No. 450, 81st Congress, 2d session]

LETTER OF TRANSMITTAL
To the Congress oj ihe United States:
Attached hereto is a report of the National Advisory Council on
International Monetary and Financial Problems covering its operations from April 1, 1949, to September 30, 1949, and describing, in
accordance with section 4 (b) (5) of the Bretton Woods Agreements
Act, the participation of the United States in the International
Monetary Fund and the International Bank for Reconstruction and
Development for the above, period.
Previous reports of the National Advisory Council were transmitted
to the Congress on March 1, 1946, March 8, 1946, January 13, 1947,
June 26, 1947, January 19, 1948, May 17, 1948, August 3, 1948,
March 14, 1949, and July 5, 1949, respectively. In.addition to the
First Special Report on the Operations and Policies of the International Monetary Fund and the International Bank for Reconstruction
and Development, submitted on May 17, 1948, previous reports on
the participation of the United States in the Interriational Monetary
Fund and the International Bank were included in the reports of
January 13, 1947, June 26, 1947, January 19, 1948, August 3, 1948,
March 14, 1949, and July 5, 1949, respectively.
HARRY S. TRUMAN.
T H E W H I T E HOJJS-E^,

January 20,. 1950.

REPORT OF ACTIVITIES OF THE NATIONAL ADVISORY
COUNCIL ON INTERNATIONAL MONETARY AND FINANCIAL
PROBLEMS, APRIL 1, 1949, TO SEPTEMBER 30, 1949
I. ORGANIZATION OF THE COUNCIL
STATUTORY BASIS

The National Advisory Council on Interriational Monetary and
Financial Problems was established by the Congress in the Bretton
Woods Agreements Act (59 Stat. 512, 22 U. S. C. 286b), approved
July 31, 1945. The statute directed the Council to coordinate the
policies and operations of the representatives of the United States on
the International Monetary Fund and the International Bank for
Reconstruction and Development, the Export-Import Bank of Washington, and all other agencies of the Government ''to the extent that
. they make or participate in the making of foreign loans or engage in
foreign financial, exchange, or monetary transactions.'' The Council
was also directed to advise and consult with the President and' the
United States representatives on the Fund and the Bank on riiajor




282

195 0 REPORT OF THE SECRETARY OF THE TREASURY

problems arising in the administration of the Fund and the Bank;
and to recommend to the President general policy directives for the
guidance of. the representatives of the United States on the Fund and
Bank. The Bretton Woods Agreements Act was amended by section
106 of the Foreign Assistance Act of 1948.(62 Stat. Ch. 169, 22 U. S. C.
286b (a)), approved April 3, 1948, to include the Administrator for
Economic Cooperation as a member of the Council for the duration of
this office. The Council was also given certain additionaLduties,^with
regard to the econoiriic assistance program.
In June 1949, the Bretton Woods Agreements Act and the Natipnal
Bank Act were amended (Public Law 142, Ch. 276, 81st Cong.,
ist.sess.), to permit wider dealing in and underwriting of International
Bank securities and to exempt such securities from the Securities Acts.
The legislation also authorized the Securities and Exchange Commission, acting in consultation with the Council, to suspend the exemption of International Bank securities from the Securities Acts.
The relevant portions of the Bretton Woods Agreements Act, the
Foreign Assistance Act of 1948*, and amendments to the National
Bank Act and the Bretton Woods Agreements Act are presented in
appendix A.
REPORTS

Since its first meeting on August 21, 1945, the Council has submitted
nine formal reports.^ The present report covers the activities of the
Council from April 1 to September 30, 1949.
MEMBERSHIP

The members of the Council, according to law, during the period
under review, were the following:
The Secretary of the Treasury, John W. Snyder, Chairman.
The Secretary of State, Dean Acheson.
The Secretary of Commerce, Charles Sawyer.
The Chairman of the Board of Governors of the Federal Reserve
System, Thomas B. McCabe.
The Chairman of the Board of Directors of the Export-Import
Bank, Herbert E. Gaston.
The Administrator for Economic Cooperation, Paul G. Hoffman.
By agreement, the following served as alternates:
William McChesney Martin, Jr., Assistant Secretary of the
Treasury.
Willard L. Thorp, Assistant Secretary of State for Economic
Affairs.
Thomas C. Blaisdell, Jr., Assistant Secretary of Commerce.
M. S. Szymczak, Member of the Board of Governors of the
Federal Reserve System.
*Omitted in this exhibit; see note at end of exhibit.
1 These reports were transmitted by the President to the Congress on March 1,1946 (H. Doc. No, 489, 79th
Cong., 2d sess,, subsequently included as appendix B to H, Doc. No. 497, 79th Cong., 2d sess.); March 8,
1946 (H. Doc. No. 497, 79th Cong., 2d sess.); January 13,1947 (H, Doc. No. 53, 80th Cong., 1st sess.^; June 26,
1947 (H, Doc. No. 365, 80th Cong,, 1st sess.); Janiiary 19,1948 (H. Doc. No. 501, 80th Cong,, 2d sess.); May 17,
1948 (H. Doc, No. 656, 80th Cong., 2d sess.); August 3,1948 (H. Doc, No, 737, 80th Cong,, 2d sess,); March 14,
1949 (H. Doc, No, 120. 81st Cong., 1st sess,); and July 5, 1949 (H. Doc. No. 260, 81st Cong,, 1st sess.).




EXHIIBITS

'

283

Hawthorne Arey, Vice Chairman of the Board of Directors of the
Export-Import Bank.
Wayne C. Taylor, Assistant to the Administrator, Economic
Cooperation Administration.
C. Dillon Glendinning is the Secretary of the Council.
The United States Executive Directors of the International Monetary Fund, Frank A. Southard, Jr., and of. the International Bank for
Reconstruction and Development, Eugene R. Black, or their alternates, Henry J. Tasca and John S. Hooker, respectively, regularly
attended the meetings of the Council. On M a y 18, 1949, Mr. Black
was elected President of the International Bank, and assumed his
new duties on July 1, 1949.
II.

U N I T E D STATES POSTWAR F O R E I G N ASSISTANCE ^

As in previous reports of the Council, this chapter outlines the
magnitude and scope of assistance extended by the United States to
nations throughout the world. I n its consideration of the foreign
financial policies of this country, the Council has taken into account,
in addition to the objectives of the programs, the interrelationship of
the various factors affecting the extent and direction of foreign aid.
THE MAGNITUDE AND GEOGRAPHICAL DISTRIBUTION OF POSTWAR
FOREIGN AID

In the four-year period, July 1945 through June 1949, the United
States exported approxim.ately 67 billion dollars in goods and services
to foreign countries and imported 35 billion dollars worth. During
this period. United States Government foreign assistance utilized
amounted to 23 billion dollars, or over one-third of the value of all
imports of foreign countries from the United States. Foreign
countries liquidated gold and dollar assets of about 6.6 billion dollars,^
and additional dollars were made available from disbursements by the
International Monetary Fund and the International Bank, United
States private financing, and other capital movements.
During the postwar period, through June 30, 1949, a somewhat
larger share of United States Government foreign aid was rendered
in the form of grants, including (for statistical purposes) assistance for
which terms of repayment are subject to future determination, as
compared with loans and other credits which call for the repayment of
principal and interest to the United States. As of June 30, 1949, the
outstanding indebtedness of foreign countries to the United States
Government, excluding that arising from World War I debts, amounted
to 9.8 billion dollars. During the postwar period, repayments on
principal were in excess of 1 billion dollars. Annual foreign debt
service to the United States Government, including interest and
amortization of principal, will increase between 1949 and 1952, reaching a peak of about one-half billion dollars in the latter year.
2 A detailed break-down of tlie statistical information referred to ih this section appears in appendixes
B and C. [Omitted in this exhibit: see note at end of exhibit.]
3 The net difference between the'6.6 billion dollars mentioned above and the 6,0-binion-dollar reduction
in foreign gold and dollar balances shown in table III is largely accounted for by sales of gold to the United
States out of currisnt foreign gold production.




284

1 9 5 0 REPORT

OF T H E

SiECRETARY

OF T H E

TREASURY

CHART A

UfltEDSmriiSlOTEiNlVIENT^^ro
Total utilized, July 1.1945 to June 30,1949

July-Dec, • Jan.-June

1945
Credits—0.6
Grants—2,0




I

July-Dec.

1946
-J I
1.3
2.0
1,3
1,0

Jon.-June

July-Dec.

1947
2,4
1,2

Grants and Credits
BY RECIPIENT
(In Billions of Dollars)

Jan.-June

»'
1,8
0.9

July-Dec.

I948--—J
1,0
0.6
1,7
2.3

Jan.-June

1949
0.5
2.8

285

EXHIBITS

TABLE I.^-U". S . Government foreign grants and credits, utilized July 1, 1945, to
June 30, 1949, and unutilized as of June 30, 1949, by major geogra.phic area
[In millions of dollars]
Utilized

Unuiilized

Area
Total

.

Asia...
L a t i n AmericaMiscellaneous . U n c o m m i t t e d lending a u t h o r i t y

$13,230

$10,080

8,089
1,116

8,345
462

4,156
359

E R P Participants
Other E u r o p e

Credits

$23,310

T o t a l , All Areas

Grants

3, 406
31

750
329

784

689

195

16,434 L
1,677

Total

1

Grants

. Credits

$2,163'

2,014

1

$S,855

1,766

248
13

513
138

371
2

142
137

. 1 0 3
' 1,074

25

78
1,074

13

$1, 692

NOTE,—(a) Components will not necessarily add to totals because of rounding, (b) U. S. Government

the
Monetary Fund
f )ayments toAthe International Bankofand data International this table, as wellare anot includedofin this tabuation, (c)
detailed break-down all
appearing in
as definition terms, may
be found in appendix C. [Omitted in this exhibit, see note at end of exhibit.]
Source: Clearing Office for Foreign Transactions, Office of Business Economics, Department of Commerce.

Of the 23.3 billion dollars of United States Government assistance
utilized by countries throughout the world in the postwar period,
approximately 16.4 billion dollars, or 70 percent, went to nations
presently participating in the European Recovery Program. Although aid received by the European Recovery Program participants,
as a group, was almost equally divided between grants and credits,
the £dlocation to individual countries varied considerably. Grant
assistance has been the more widely dispersed, with 70 percent of the
total, utilized going to four countries^the United Kingdom, Western
Germany, France, and Italy—as contrasted with 80 percent of total
credit assistance going to two countries, the United Kingdom and
France.
Asiatic nations (primarily Japan and China) were the recipients of
over 4 billion dollars in postwar United States Government aid, almost
five-sixths in the form of grants. On the other hand, postwar assistance to Latin America—which amounted to over $350,000,000—was
largely in the form of loans and credits. .
Of the 3.9 billion dollars available for foreign aid but unutilized on
June 30, 1949, approximately one-half consisted of ECA funds allocated and obligated by country but not disbursed as of that date.
A G E N C I E S A N D P R O G R A M S OF F O R E I G N A I D

The first year after the end of the war witnessed a larger proportion
of aid in the form of grants than in loans, due primarily to relief
assistance extended through U N R R A and post-VJ-day lend-lease
grants. For the fiscal year 1947, large drawings from the 3.75 billion
dollar line of credit extended to the United Kingdom swung the
balance toward a preponderance of credit assistance. In the fiscal
year 1948, grants increased and credits declined, resulting in an equal
division of aid between grants and credits. Since mid-1948, after the
advent of the European Recovery Program, the major part of United
States foreign assistance has been in the form of grants. During this
four-year period, the average rate of aid rendered has amounted to
5.8 billion dollars per year.




286

1 9 5 0 REPORT OF T H E SiECRETARY

OF T H E TREASURY

CHART B

liiiiiliM&i^l^iiili
UTILIZED. BY PROGRAM
Fiscal Years 1946-47
0

1

2

Fiscal Years 1948-49
BILLIONS OF DOLLARS
3 0
I

2

3

PROGRAM
UNRRAl.

Lend Lease.

United Kingdom Loan.

Export-Inriport Bank-

J'1948

/'I949

Civilian Supplies
(GARIOAjetc.)

Surplus Property
Credits

Miscellaneous

iCHTi
European Recovery
Program.




3 0
I
BILLIONS OF DOLLARS
* United Nations Relief and Re/tatilitation Adniinistration.
^ Government and Relief in Occupied Areas.

287

EXHIBITS

TABLE II.— U. S. Government foreign assistance utilized, total of grants and credits,
by program, fiscal years 1946 through 1949
[In millions of dollarsj
Postwar j
Total

Programs

All Programs

$23,310

European Recovery
United Kingdom loan
___..._
Civilian supplies (GARIOA, etc)...
UNRRA
Lend-lease
..
Export-Import Bank

. .

Surplus-property credits
Miscellaneous
...

. _._
._

Fiscal years
1946

1947

$5,462

$6,184

1948

.

1949

$5,387

$6,277

204
1, 700
1,181

•4,062

4,2fiG
3,750
3,660
...J

744

2,050
667

2,577
2,552
2,455

1,184
2, 312
558

1,377
191
1,085

16
46
598

4
214

1,341
2,708

474
191

530
284

290
1. 352

47
882

.

1,068

NOTE.—(a) Coraponents will not necessarily add to totals because of rounding, (b) U, S. Government
payments to the International Bank and the International Monetary Fund are not included.in this tabulation, (c) A more detailed analysis of foreign assistance prograras of the United States Governmerit in the
postwar period will be found in table 11 of appendix C. [Omitted in this exhibit; see note at end
of exhibit.]
Source: Clearing Office for Foreign Transactions, Office of Business Economics, Department of Commerce.

The chief agencies through which foreign financial and economic
assistance was extended by. the United States immediately after the
war were the Export-Import Bank, the lend-lease organization, and
UNRRA (see table I I and chart B). In addition, surplus property
was available for sale in various foreign countries, a large part of which
could be used for peacetime as well as military purposes. The Congress had, furthermore, provided funds to be administered by the
Department of the Army for government and relief in occupied areas,
principally Germany and Japan.
By the end of the fiscal year 1947, practically all of the aid rendered
through post-VJ-day lend-lease and .through UNRRA had been
utilized. In addition, all of the loan to Britain had been utilized by
the end of the fiscal year 1948. Finally, the bulk of surplus property
located overseas had also been sold by mid-1948.
Completion of several early postwar programs left the United
States, at the end of 1947, with three major avenues of foreign assistance: (1) the Export-Import Bank, whose lending authority had been
increased in 1945 from $700,000,000 to 3.5 billion dollars; (2) the
initiation of the Interim Aid Program, which anticipated the longrange European Recovery Program; and (3) government and relief in
occupied areas (GARIOA), as a responsibility of the Department of
the Army.
The European Recovery Program got under way in the spring of
1948. Introduction of this program resulted in a realignment.of the
agencies designated to carry out programs of foreign assistance. The
Congress also integrated into the Foreign Assistance Act of 1948
provision for assistance covering other major aid programs.
"
In the two fiscal years of 1948 and 1949, the total amount of foreign
assistance utilized amounted to 11,664 million dollars, almost identical
with the 11,646 million dollars extended during the first two postwar
years. A principal source of United States assistance in. this second
907795—51

20




288

1 9 5 0 REPORT OF T H E SiECRETARY OF T H E

TREASURY

2-year period has been the European Recovery Program, which accounted for about 65 percent of all aid during the fiscal year 1949.
The Mutual Defense Assistance-Program, for which the Congress
authorized 1.3 billion dollars in October 1949, was developed with
attention to the primary need for economic recovery in Europe. This
program embodied parts of several earlier programs for which the
Congress provided funds.
'
In addition to military assistance, proposed legislation bearing upon
foreign aid considered during 1949 was that resulting from promulgation of the Point IV Program. As indicated in chapter I I I of
this report, no authorization was made by the Congress for that program during 1949.
F O R E I G N GOLD A N D DOLLAR R E S E R V E S

The gold and short-term dollar reserves which foreign nations had
on hand at the end of the war were available for two main purposes:
for currency reserves, and as working balances for international transactions. As shown in table I I I , these reserves declined by over 5
billion dollars during the postwar period from June 30, 1945, to June
30, 1949. The decline would have been greater were it not for the
fact that during this period foreign gold production, exclusive of the
U. S. S. R., amounted to about $700,000,000 per year.
TABLE 111.—Estimated foreign gold and official and private short-term dollar
balances, as of June 30, 1945, 1948, and 1949 ^
. [In millions of dollars]
J u n e 30—
Geographic area
1949
Total, All Areas

.

Asia a n d Oceania
L a t i n America
All o t h e r -

. . . .

1945

$14, 647

:

E R P countries a n d dependencies
Other E u r o p e 2-.
.

1948

.

_ .
^..

$14,631

$19, 684

7,496
737

7, 322
988

10, 473
1,029

2,121
2,801
1,492

2,004
2, 876
1,441

1,980
3,625
2,577

J Exclusive of international organizations and the gold holdings of the U. S. S. R.
»Includes gold held by Tripartite Commission for the Restitution of Monetary Gold.

Prior to the start of the Recovery Program, E R P countries had lost,
in the aggregate, slightly over 3 billion dollars, or 30 percent of their
monetary reserves. The decline continued for the first few months
after the Recovery Program started in April, but from June 30, 1948,
to June 30, 1949, there was a small increase from 7.3 billion dollars to
7.5 billion dollars in the gold and dollar reserves of the participating
countries. Among the major countries, Italy and Belgium were able
to increase their reserves, while those of the United Kingdom showed
a considerable decline.




289

EKHIBITS
CHART C

GOLD TRANSACTIONS OlTHEtJNITED STATES GOVERNMENT
SEMIANNUALLY, 1945-1949

1 1947 1 1948 | 1949

1946

1 1945

TOTAL NET PURCHASES OF GOLD BY THE U.S. GOVERNMENT
(Jan. 1,1945 through Sept. 30,1949, in Millions of Dollars)

EUROPE

OTHER AREAS^
South
Africa $1,024

United
Kingdom $1,587-

'Canada $689

France $559

Latin
America $518

Sweden $ 3 2 /
Belgium $ 2 9 4

J

M o t h e r Europe $133''

'^"Other Area" countries not shown, had net sales o f $143 million.
^'Includes countries with net sales, and represents purchases of $ 5 9 0 million and sales of $ 4 5 7 million.




290

195 0 REPORT OF THE SECRETARY OF THE TREASURY

Outside of Europe, net declines over the postwar period have more
than offset isolated increases. The Latin American countries lost
over $800,000,000 in reserves, or more than one-fifth of the amount
they had on hand at the end of the war. Other nations which have
experienced heavy gold and dollar losses include Canada and the
Union of South Africa, despite the fact that both of these countries
are leading gold producers.
With respect to gold movements alone, chart C shows that in the
early postwar period, there was a heavy net flow of gold from foreign
countries to the United States, reaching a peak of 2.9 billion dollars in
1947. The inception and continuation of the European Recovery
Program enabled the participating .countries as a whole to avoid
further large liquidation of remaining reserves during 1949, though
the United Kingdom experienced a critical drain during part of the
year.
C H A N G I N G P A T T E R N S OF U N I T E D STATES F O R E I G N T R A D E

The repercussions of war greatly shifted the prewar pattern of world
trade. Germany and Japan witnessed reductions in their external
trade to the point where exports became negligible and imports consisted chiefly of aid from the United States. Other countries, both
belligerent and nonbelligerent, affected in varying degrees by the
war, also experienced wide changes in their trade. Postwar exports
of the United States, expressed both in quantitative units and in
terms of value, have been considerably greater-than imports. The
United States, which had supplied 14 percent of world exports in
1938, had become the source of supply of 33 percent of all exported
goods in 1947, 23 percent in 1948, and approximately 20 percent in
the first nine months of 1949.
As indicated in table IV, there has been a considerable shift in the
geographical pattern of United States foreign trade. The share of
Asia and Oceania in both the imports and exports of the United States
has declined, and the prewar export surplus of this area with the United
States has shifted to an import surplus. United States postwar imports from both Latin America and Canada substantially increased,
whereas the dollar value of imports from Europe has only slightly
increased above the prewar level. The dollar value of exports to
Latin America and Canada showed a fivefold increase in the postwar
period as compared with prewar, while exports to Europe, including those financed through the European Recovery Program, showed
less than a fourfold increase.
During the first 9 months of 1949, the dollar value of United States
imports showed a moderate increase over the 1946-48 level, while
exports registered a slight decline. Compared with the year 1948,
however, both imports and exports decreased to a small extent. In
the first 9 months of 1949, countries participating in the European
Recovery Program imported approximately $5 of goods and services
from the United States for every $1 of exports to this country. This
represented some improvement, as compared with the period 1946-48,
in the trade deficit of these countries with the United States.




291

EXHIBITS

T A B L E TV .^—Foreign trade of the Uhited States, by geographic' area, prewar and
postwar
VALUE
[In millions of dollars]

' '

Postwar
(1946-48 average)

U n i t e d States t r a d e w i t h

Imports

Prewar
(1936-38 average)

Exports

Imports.

Exports

$5.904

E R P countries
Other E u r o p e
Asia a n d O c e a n i a

. . .

Africa a n d N e a r E a s t

1,810
3,040
208

345
.542
38

454
485
68

4,764

725

1,254

4,253
511

606
119

1.129
125

• 1,854

757

442

Europe

1,007

1.177
2,080
141

1,102

,

$2, 967

925

776
187

Canada
_ .
L a t i n Araerica
Other Western Hemisphere

$2,489

5,058

963

__

Western Hemisphere . .

$12, .564

3, 398

All Areas

890

81

557
'

149

PERCENTAGE DISTRIBUTION
Postwar
(1946-48 average)

U n i t e d States t r a d e w i t h

Imports
100. 0%

All A r e a s . . . . .

100. 0%

100. 0%

Exports
100.0%

E R P countries
Other E u r o p e

.
.

.

Africa a n d N e a r E a s t

. . .

33. 9

19.7
35.4
2.3

•14.5
23.9
. L6

13. 9
21.8
1.5

15.3
16:3
2.3

38.3

29,1

42: 3

13.1
3.3

33.8
4.5

24.3
4.8

• 38. i;
- 4.2

14,7

30,4

18.8

7,6

...1

. .

37.2

18.6

. . .

40.0

16,4

Canada
L a t i n America . . Other W e s t e r n H e m i s p h e r e

Asia a n d Oceania

Imports

57,4

Western Hemisphere .

Europe

Exports

P r e war
(1936-38 average)

7.0

3.3

5,0*

NOTE,—Components will not necessarily add to totals because of rounding.
Source: Department of Commerce.
OTHER

ASPECTS

OF F O R E I G N

ASSISTANCE

, United States Government foreign aid during the postwar period
amounted to 2.5 percent of the gross national product. Although the
dollar.value of such assistance in the fiscal years 1948 and 1949 was
approximately equal to that in the two immediate postwar fiscal
years 1946 and 1947, the gross national product of the United States.
showed almost a 20 percent increase. As a consequence, foreign aid
declined from 2.7 percent of the Nation's gross national product in
the first two fiscal postwar years to less than 2.3 percent in the fiscal
years 1948 and 1949.
With the exception of the fiscal year 1946, which included extraordinary wartime! expenditures, total expenditures of the United States




292

1 9 5 0 REPORT OF THE SECRETARY OF T H E TREASURY

Government showed slight variation during the postwar period. Thus
foreign aid as a percentage of total federal expenditures remained
relatively constant, ranging between 14.7 and 17.0 percent in the three
most recent postwar years.
T A B L E Y . — United States gross national product. Government postwar foreign aid,
• '
and fiscal operations
[In billions of dollarsj
U. S. Government
Fiscal year

Total Postwar

Gross
national
product

Total
expenditures

Foreign
aid

Foreign aid as a percentage of
Gross
"national
product

Total
'expenditures

$944,9

$172.3

$23,3

2.5%

13,5%

1949.
1948

265.0
248, 5

137,1
136.8

6,3
5.4

2,4
2.2

17,0
14,7

1947
1946

226,7
204,7

2 37,9
2 60,5

6,2
5,5

2,7
2,7

16,4
9,1

•

» Figuresfor the fiscal year 1948 include a 3-billion-dollar transfer in June to Foreign Economic Cooperation
trust fund; figures for fiscal year 1949 exclude expenditures from this fund.
2 Data exclude payments to the International Bank and the International Monetary Fund.
Sources: Department of Commerce for data on gross national product and foreign aid. Treasury Department for total expenditures of the U. S. Government.

In addition to United States Government aid, a significant amount
of Uriited States private capital and gifts has gone abroad in the postwar period. The net amount of these funds totaled 4.9 billion dollars
in the four years from July 1945 to June 1949. Private postwar investments were largely concentrated in petroleum development in a
relatively few countries.
Total funds authorized and appropriated by the 81st Congress, 1st
session, for foreign assistance, amounted to 6.6 billion dollars. European Recovery Program funds of 3.9 billion dollars account for threefifths of this total. Under the Mutual Defense Assistance Program,
$1,211,370,000 was authorized for the North Atlantic Treaty countries
and for Greece and Turkey, as well as $102,640,000 for Middle Eastern
and Asiatic countries. An additional amount of $45,000,000 for
assistance to Greece and Turkey under the act of May 22, 1947 (61
Stat. 103), was appropriated under the Foreign Aid Appropriations
Act of 1949 (Public Law 327, 81st Cong., 1st sess.).
Appropriations under GARIOA of $912,500,000 for the fiscal year
1950 compared with $1,300,000,000 appropriated for the fiscal year
1949. This decline reflects, in part, transfer of the administration of
funds for certain countries—such as Korea—from the Department of
the Army to the Economic Cooperation Administration and the Mutual Defense Assistance Program.
The Korean aid program was presented by the Administration as a
three-year program with an appropriation request for $150,000,000
during the first year, fiscal 1950. Appropriations amounting to
$60,000,000 were effective through February 15, 1950.




293

EiXHIBITS
FOREIGN AID FUNDS FOR FISCAL 1950

The following table shows foreign aid funds made available by the
Congress during 1949:
T A B L E VI.—Foreign aid appropriations and authorizations {81st Cong., 1st sess.) ^
P r o g r a m and country

TotaL

Amount

__^____

$6, 575, 168, 092

E u r o p e a n Recovery P r o g r a m

3, 900, 680, 000

Period Apr. 3 t o J u n e 30, 1949 __
Fiscal year, 1949-50
E C A loan authorizations
_
_
E C A guaranties _ _
Department of the A r m y :
GARIOA (Government. and
Areas)
_

_

_

_ _
_

Relief
_

_^__

in. Occupied
_ _

M u t u a l Defense Assistance Program.__
N o r t h Atlantic T r e a t y c o u n t r i e s .
Greece and T u r k e y
I r a n , Korea, and Philippines
China
.
Assistance to:
Greece a n d T u r k e y _
Korea.. _
__
China
Philippines.
i n t e r n a t i o n a l Refugee Organization
Loan t o t h e United N a t i o n s
_
_
Relief of Palestine refugees
__
I n s t i t u t e of I n t e r - A m e r i c a n Affairs _ _
Liquidation of lend-lease

. _ 2(1, 074,
_
3, 628,
150,
3 122,

000,
380,
000,
300,

000)
000
000
000

912, 500, 000
4 1,314,010,000

. .

.

_

_

000,
370,
640,
000,

000
000
000
000

45, 000,
5 60, 000,
8 4, 000,
202, 092,

_ _.

1, 000,
211,
27,
75,

000
000
000
398

70 500, 029
7 53, 534, 065
8 8, 000, 000
0 4,751,600
100, 000

1 Under specific appropriations and authorizations, funds were made available beyond the fiscal year, 1950,
for such items as ECA guaranties, certain phases of the Mutual Defense Assistance Program, Philippi le
rehabilitation, and construction of the United Nations building,
2 This amount is not included in the total since these funds technically were considered to have been
available for allotments or other use prior to June 30,1949,
3 Public Law 47, 81st Cong,, 1st sess., authorized ECA to borrow $150,000,000 from the Treasury for the
purpose of extending guaranties, less any amount allocated for that purpose prior to April 3,1949. $27,700,000
had been so allocated prior to April 3,1949, but only approximately $3,600,000 of guaranties had actually been
made. Therefore ECA was authorized to make up to approximately $146,400,000 in new guaranties after
April 3, 1949, This amount is not limited for use within the fiscal year,
* For expenditures necessary to enable the President to carry out the Mutual Defense Assistance Act of
1949 (Public Law 329, 81st Cong., 1st sess,) for the period through June 30, 1950; $814,010,000. In addition,
the President is authorized to enter into contracts for carrying out the provisions of title I (North Atlantic
Treaty countries), of this act not in excess of $500,000,000 during the period ending June 30,, 1950,
« From July 1 to October 15, 1949, $30,000,000 of assistance to Korea was provided at the same rate of expenditure as in the fiscal year 1949, pending the enactment of legislation by the Congress outlining the terms
and conditions under which further assistance3'is to be rendered in 1950. From October 15, 1949,
to February 15,1950, $30,000,000 of assistance may|be expended at the same rate and under the same terms
and conditions as in the fiscal year 1949, Appropriations were made for the period through February 15,
1950, pending enactment of legislation authorizing aid to Korea,
6 Out of the unexpended balances from the 1948 appropriations to China (Public Law 793, 80th Cong.),
the Congress made available $4,000,000 under Public Law 327, 81st Cong., 1st sess., out of any unobligated
balanceof the amount made available under Public Law 47, 81st Cong,, to be used for educa.tional purposes
for CliiTiPSP oitizf^ns

7 Authorized under Public Law 903, 80th Cong,, 2d sess., approved August 11,1948. Of the $65,000,000
authorized, $11,465,935 had been disbursed by June 30,1949.
8 Of a total appropriation of $16,000,000, $8,000,000 had been expended by June 30, 1949, The legislation
provided for a sum of $16,000,000 to be available until June 30,1950, of which $8,000,000 was to be used to repay
without interest the RFC for advances made pursuant to section 1 of Public Law 25, 81st Cong,, 1st sess,'
9 Public Law 283, 81st Cong., 1st sess., extends the life of the Institute of Inter-American Aflairs to June
30, 1955, and authorizes total appropriations of $35,000,000.




294

195 0 REPORT OF THE SECRETARY OF THE TREASURY

I I I . ACTIVITIES OF THE COUNCIL FROM APRIL 1, 1949, TO SEPTEMBER
30, 1949 (OTHER T H A N T H O S E RELATING TO THE INTERNATIONAL
MONETARY F U N D AND THE INTERNATIONAL BANK)
EUROPEAN RECOVERY IPROGRAM

ECA appropriations and authorizations, 19^9-50
The European Recovery Program was predicated from its inception
on the assumption that progress in recovery would be accompanied
by a reduction in the amoimt of aid extended. I t was contemplated
that the United States would provide dollar assistance to stimulate
recovery and that the European countries would complement American aid with their own efforts of mutual assistance and self-help. In
accordance with these principles, the Administration requested
appropriations for the second year of the European Recovery Program
which were approximately 20 percent below those which had been
provided for the first year.
On April 19, 1949, the Congress authorized a total of $5,580,000,000
for European recovery (Public Law 47, Ch. 77, 81st Cong., 1st sess.),
to provide funds for the April-June quarter of 1949, and for the fiscal
year 1949-50. The appropriation bill for foreign aid, however,
passed on October 6, 1949 (Public Law 327, Ch. 621, 81st Cong., 1st
sess.), provided a smaller amount, as indicated in table VI of chapter
I I . , Operations for a portion of the interim period were covered by
the authorization in section 114 (g) of the ECA Act of 1948, as
amended by Public Law 47, which made available 1.0 billion dollars
through the Reconstruction Finance Corporation. In order to
finance, interim ECA expenditures after these funds had been exhausted, the Congress made temporary appropriations for the fiscal
year 1950.* Appropriations for the European Recovery Program,
as well as for other foreign aid purposes, have been summarized in
table VI of chapter I I of this report.
Nature of aid to, participating countries
The Economic Cooperation Act of 1948 provided for consultation
by the Administrator for Economic Cooperation with the National
Advisory Council on the types of assistance to be extended and the
terms applicable thereto. Under that act 1 billion dollars was specifically authorized to finance loans and guaranties. Of this amount
$972,300,000 was allocated to participating countries in the form of
loans, and the remainder was allocated for guaranties. Other assistance took the form of direct grants, and, to a lesser extent, conditional
aid, i. e., funds made available to participating countries to the extent
that they granted equivalent ^amounts in their own currencies (called
drawing rights) to other participating countries.
In testifying on the second-year program, Secretary Snyder, as
Chairman of the Council, recommended to the Congress that the
Administrator be authorized, with the advice of the Council, to determine, as to the total amount of aid made available, whether aid
should be on a loan basis and in what amount. I t was pointed out
that, to the extent that participating countries emerged from the
< Public Law 154, Ch. 290, 81st Cong.. 1st sess.; Public Law 196, Ch. 378. 81st Cong., 1st sess.; Public Law
246, Ch. 473, 81st Cong., 1st sess.; Public Law 305, Ch. 576, 81st Cong.. 1st sess.




295

ErXHIBITS

Recovery Program with a burden of fixed charges on existing dollar
indebtedness, their ability to attract private capital would be reduced,
and that many of these countries had already contracted substantial
dollar debts in connection with earlier reconstruction expenditures.
If these countries had to obligate themselves for too large amounts of
additional loans under the program, the longer-term objectives of that
program would be endangered. I t was recognized, however, that
some of the countries would be in a better position to repay than
others. A prudent use of the discretionary power requested by the
Administrator and the Council would keep the field open for longrange investment projects to be financed by the private capital market,
the Export-Import Bank, and the International Bank.
Accordingly, in the authorizing legislation, Congress did not set
aside, as it had done in 1948, any specific amounts available only for
loans, but an ainount was set aside in the Appropriation Act for that
purpose. Under Public Law 327, Eighty-first Congress, the Administrator was authorized to issue notes during the fiscal year 1950 for
purchase by the Secretary of the Treasury in an amount not exceeding in
the aggregate $150,000,000 for the purpose of extending assistance on
credit terms to E R P countries. The form in which assistance provided from appropriated funds would be extended was left to the
determination of the Administrator in consultation with the Council.
The following table summarizes ECA allotments by country and
type of aid extended for the period April 1948 through September 1949:
T A B L E V I I . — E C A allotments to participating countries, April 1948-September 1949,
by type of aid
[In millions of dollars]
J u l y 1, 1949Total
Sept. 30, 1949,
allottotal allotments,
m e n t s 1—
April
loans, grants,
1948a n d condiSept. 1949
tional a i d

Country

7,085.7 1

United Kingdom
France.
Italy
Germany:
Bizone 2
F r e n c h Zone
Netherlands
Belgium-Luxembourg
Austria
Greece - .
D e n m a r k...'.__.

J... .
•. .
__

721.7
653.1
360, 7

/
108. 2 1
82.0
99.3

Loans

_

...

Grants ^

Conditional
aid

5,953.0 1

972.3

4, 209.3

771.4

1,619.7
1, 313. 4
668.0

322. 7
172.0
67.0

963. 0
1,131.7
653. 7

334.0
9.7
47.3

496.9
116.6
571.1
261.4

146. 7
50.9

414.3
101.8
413.1
3.0

• 82,6
14,8
11.3
207.5

276.9
191.7
90.1

3.1

49,6

16,5

52. 9
49.7
27.6

280.0
191.7
126. 2

1 31.0

129.7
100.5
67,7 1

._

Sweden _
Trieste
Iceland

.. 292. 2
213.9
- 123.6

Total

332.9
241.4
153.8

_
._

Norway
Ireland
Turkey

}

1,132. 7

1,911.9
1, 527.3
79L6

All E R P C o u n t r i e s . .

April 1948-June 1949, b y t y p e of a i d

28. 6
14.2
18- 7

lOLl
86.3
49.0

35.0
86.3
38.0

60.7 1
22.2
10.5

15.3
4.3
2.2

45.4
17.9
8.3 1

11.0

20.4
.2-3

5.1

25.0
17,9
2.5

3.5

1 This is the first allotment out of fiscal year 1949-50 appropriated funds.
2 ECA allotments.exclude GARIOA funds.
NOTE.—See appendix C, table 12, for data on intra-European aid and net aid received by or provided to
participating counteies, [Omitted in this exhibit; see note at end of exhibit.]
Source: Economic Cooperation Administration.




296

1950 REPORT OF THE SECRETARY OF THE TREASURY

E C A guaranty program
The Foreign Assistance Act of 1948 (Pubhc Law 472, 80th Cong.,
2d sess.) had authorized ECA to extend assistance on credit terms and
make guaranties out of public debt funds, not exceeding an aggregate
(jf 1 billion dollars. The guaranties were to cover private Uriited
States investments in industries and distribution of informational
media in the participating countries, made in connection with projects
approved by the Administrator and the foreign government concerned.
The total amount of guaranties made under this act was not to exceed
$300,000,000.
During the first year of ECA operations, $27,700,000 was set aside
for guaranties, although actual guaranties authorized amounted only
to approximately $3,600,000. These guaranties assured United States
companies investing abroad that they would be able to convert local
currency receipts from their investments into dollars up to 100 percent
of their original investment, if such conversion were not possible
through normal channels.
Public Law 47, signed by the President on April 19, 1949, authorized
ECA to make guaranties not exceeding $150,000,000, of which not to
exceed $10,000,000 in any fiscal year may be made for enterprises
producing and distributing informational media, funds therefor to be
obtained by issuing notes to the Treasury to the amount of $150,000,000, less the $27,700,000 allocated to guaranties under the Foreign
Assistance Act of 1948. Since $3,600,000 of guaranties were made
prior to April 2, 1949, ECA was in effect authorized to make up to
$146,400,000 in new guaranties.
The act was also amended to broaden the definition of ''investment''
to include ''the furnishing of capital goods items and related services,
for use in connection with projects approved by the Administrator,
pursuant to a contract providing for payment in whole or in part
after June 30, 1 9 5 0 . . . . ' '
Public Law 47, Eighty-first Congress, further amended the provisions of the 1948 Act (Public Law 472, 80th Cong., 2d sess.), relating
to guaranties, to read in part that " T h e guaranty to any person shall.
not exceed the amount of dollars invested in the project by such
person with the approval of the Administrator plus actual earnings or
profits on said project to the extent provided by such guaranty.''
Under this authorization, and after consultation with the Council,
ECA announced that the aggregate amount to be covered under
guaranties would not exceed 175 percent of the priricipal sum actually
invested. Investors would be limited as to the amount of receipts
they could convert in the first five years. Beginning in the sixth year,
however, investors would be permitted to convert up to an aggregate
of 175 percent of the principal sum invested. Within these limits,
conversion may be made at any time during the period of the guaranty,
regardless of whether the foreign currency was received as principal,
capital gains, or income. The 175 percent limitation does not apply
to the guaranties issued to cover the furnishing of capital goods items
and related services under section 111 (b) (3) (iv) of the Foreign
Assistance Act of 1948, as amended, nor to guaranties as to informational media. Guaranties may be written so as to be effective until
A p r i l s , 1962.




EIXHIBITS

297

As of September 30, 1949, total guaranties thus far issued by ECA
amounted to approximately $4,700,000. Although the amount of
interest in the guaranty provision, evidenced by the number of applications and inquiries received, has shown a steady increase during
recent months, the number of guaranty contracts signed to date in
relation to such applications and inquiries has not reached the volume
anticipated. Experience has shown that this is partly due to the
length of time which it takes investors to complete the necessary contractual and business arrangements preliminary actually to making
an investment.
All guaranties issued and ^applications for guaranties filed with
regard to industrial projects related to investments in the metropolitan areas of European countries—primarily in the United Kingdom, France, and Italy. Such guaranties issued and the majority of
the applications on file cover investments for the purpose of the
establishment of industrial enterprises in these countries or the expansion, modernization, or development of existing enterprises. The
bulk of the guaranties issued for informational media relate to western
Germany.
Intra-European trade and payments
During the 6 months under review, the first year's Intra-European
Payments Agreement was revised and a new agreement was signed by
the participating countries on September 7, 1949. The effective date
of the new agreement was made retroactive to July 1, 1949. The
new agreement continued most of the basic features of the previous
one. Intra-European balances were estimated bilaterally for the
fiscal year and drawing rights made available by the creditors in their
own currencies to finance uncovered deficits. These drawing rights
in turn would be matched by conditional dollar aid granted to the
creditors as part of their total ECA dollar allotment.
Two significant new features were included in the agreement. The
debtor countries were to be allowed to use freely in any of the participating countries ^ 25 percent of their total estimated drawing
rights for the fiscal year 1950. To insure the necessary incentives
under the plan, conditional dollar aid matching these so-called multilateral drawing rights would likewise be flexible and would be allotted
to the country in which multilateral drawing rights were actually
used.
The second significant modification was designed to take account
of the special position of Belgium in intra-European payments.
Since Belgium was expected to be a heavy creditor in European trade
and her estimated surplus with European countries exceeded her
Western Hemisphere deficit, the new agreemerit limited the total
amount of multilateral drawing rights and conditional aid which
could be transferred to Belgium. Furthermore, Belgium agreed to
finance part of the difference between her estimated deficit with the
Western Hemisphere and her surplus with the participating countries
by extending long-term credits to her main debtors; namely, the
United Kingdom, France, and the Netherlands.
The revaluation of European currencies which took place in September 1949 was expected to have a significant effect on the pattern
. « Subject to the qualification with respect to Belgium indicated in the next paragraph.




298

195 0 REPORT OF THE SECRETARY OF THE TREASURY

and volume of intra-European trade. However, until a clearer picture
of the impact of devaluation upon the payments pattern could be
obtained, it was not possible to judge the direction or amount of
change in drawing rights which might be desirable.
Local currency accounts
Assistance extended ori a grant basis by the United States under the
European Recovery Program has been accompanied by deposits of
commensurate amounts of local currency in special accounts by
participating countries. In accordance with the Economic Cooperation Act of 1948, these local currency funds, except for the 5 percent
set aside for use by the United States, are, to the extent consistent
with internal financial stability, available for the stiriiulation of productive activity and the exploration for and development of new
sources of wealth, and for other purposes conducive to attaining the
purposes of the act. The policies involved in the use of these funds
have been formulated by the ECA in consultation with the Council.
The status of (counterpart funds under the Foreign Assistance Act
of 1948 as of September 30, 1949, is shown in the following table:
T A B L E VIII.—Status of European local currency counterpart accounts under the
Foreign Assistance Act of 1948, as of Sept. 30, 1949
[Dollar equivalents of the local currency, in millions of dollars]
F o r use b y recipient c o u n t r y (95
percent)
Total
currency
deposited

C o u n t r i e s receiving grants

Approved
for w i t h drawal

Withdrawals

Balances
on deposit

F o r use b y
United
states •
(5 percent)
(cumulative)

3, 892. 8

.

France *
.
United Kingdom
Western Germany ^
Italy
Austria
Netherlands
Greece.-—.
Denmark
Norway
'

.-..-

2, 447. 0

1, 251. 3

194.5

1,132. 6
742.3
152. 0

1,132. 6
• 739.6
152.0

19.9
65.9
305.3

60.6
42.4
24.0

186. 4
109.4
90.5

24.0
106.8
90.5

345.0
169.4
167.9

19. 4
14.5
13.6

83.4
'81.0
7.1

10.6
4.3
'4.2

3.6
2.8

,7
,2

212.2
85.3
84.8

.._

Trieste.:
Belgium

2, 639. 2

1, 213.1
847.9
48L3
388.4
290.7
272.0

All C o u n t r i e s

-.._

14.1
3.0

139.6
(2)

118.2
(2)

73.5
12.9

73.5
9.8-

•
•

1 Data for France and western Germany revised from those published earlier in the ECA Local Currency
. Counterpart Funds Report for September 30,1949.
2 Less than $50,000 equivalent.
•
,
.
NOTE,—" Dollar equivalents" are computed at the actual rates which were used by the respective governments in agreement with the Administrator in making commensurate deposits of local currency. At
September 30,1949, these were all predevaluation rates,
Som-ce: Economic Cooperation Administration.

Pursuant to section 115 (b) (6) of the Economic Cooperation Act of
1948, the Council, during the 6 months ending September 30, 1949,
was consulted by the Economic Cooperation Administration on proposed programs of counterpart releases for Austria, France, Italy, the
Netherlands, and the French Zone of Germany.^
6 In October 1949 the Council also approved a broad program for the use of counterpart funds in the United
States-United Kingdom Zone of occupation of western Germany.




EiXHIBITS

299

FINANCIAL DEVELOPMENTS RELATING TO THE UNITED KINGDOM

Earlier reports of the Council have reviewed postwar developments
as they affected the financial position of the United Kingdom. The
changes which took place' in the postwar foreign trade of Britain with
the dollar area and in gold and dollar reserves are reflected in chart D.
Here it may be observed that while total dollar imports and exports
increased in 1947 over 1946, the disparity in British trade remained.
In 1948, British exports continued to increase while her imports
decreased substantially, thus somewhat narrowing the gap. Nevertheless, the adverse trade situation with the dollar area continued i n t o '
1949. The difference between British exports and imports was financed largely by the use of gold and dollar reserves and by the extension of direct assistance from the United States in the form of
loans and grants. Gold and dollar reserves, for example, were reduced from a high of 2.6 billion dollars on December 31, 1946, to 1.6
billion dollars on June 30, 1949. The financing of the dollar deficits
of other parts of the sterling area contributed substantially to this
reduction in reserves.
As a result of the deterioration in the British dollar position, the
United Kingdom on July 14, 1949, announced a new austerity program
which would reduce plans for spending.in the United States and
Canada by $400,000,000 during the current fiscal year. This decision
to slash dollar imports by 25 percent was stated to be necessary to
safeguard the sterling area's gold and dollar reserves. At the same
time. Commonwealth Governments indicated that they would take
steps to make similar cuts in their dollar imports.
During the course of a trip to Europe in the summer of 1949, the
Chairman of the Council, at the request of the British Government,
participated with the Canadiari Minister of Finance in conversations
with the British Chancellor of the Exchequer. At this meeting, the
United States and Canadian representatives were advised of the
general character of the import cuts which would have to be.made by
the United Kingdom and the sterling area countries. I t was agreed
at the meeting to hold further conversations early in September 1949.
The ensuing discussions with the United Kingdom and Canada
were held in Washington under the chairmanship of Secretary Snyder.
These talks reviewed the steps that both debtor and creditor nations
should take to progress toward a self-balancing relationship between
the dollar area and the sterling area. The results of the meeting were
summarized in a joint communique which was released at the close of
the meetings on September 12, 1949, and which is reproduced as
appendix D to this report.
On September 18, 1949, after consultation with the International
Monetary Fund, the British Government announced a decision to
devalue the pound sterling from $4.03 to $2.80, or by 30.5 percent.
Gold and dollar reserves, which had reached a low of 1,330 million
dollars on the date of devaluation, increased to 1,415 miUion dollars
by September 30, 1949. The devaluation of sterling was followed by
adjustments in most of the other principal currencies of the world.
The subject of changes in par values is discussed in detail in chapter IV.




300

195 0 REPORT OF THE SECRETARY OF THE TREASURY
CHART D

KINGDOM TRADE WITH tHjEUNITJEDS-fiail-ES
B A N K " ^ t D AI^D DOLtiR^^^

UNI1"ED

UNITED KINGDOM TRADE WITH THE UNITED STATES

1946

iiili

1947

llllilM^

1949

GOLD AND DOLLAR RESERVES"
(Annually. As of June 30)
$Bil.^-

2.382

2.0 •

y f Level af
^"i^o <Oeva/uaf/on
\jSepf. 18.1949)

lllliBiIiiiiiiiiiiii

Iiiiiiii nil iiiiiiii^iiiiiiiiiii

illt,^

^'As reported by the Government o f the U.K. Data exclude private holdings.
"^Includes Canadian dollars.




EKHUBITS

301

POINT IV PROGRAM

Since first introduced in his inaugural address, January 20, 1949, the
Council has given continuing attention to the financial aspects of
the President's Point IV Program, which is designed to facilitate
economic development, particularly in underdeveloped areas. In the
original, statement, the methods whereby this objective could be
achieved were outlined in broad terms rather than in specific measures.
The Council gave particular attention to suggested methods of
implementing the program, including proposals for guaranties of
private investments, the content of investment treaties, and specific
measures relative to tax deterrents to international investment.
In connection with the program, emphasis was placed upon the
concept that private capital should contribute a major part of the
funds required. The history of United States private investments
abroad indicates there was a comparatively low level of financing
during the 1930's following defaults on foreign government obligations
which had resulted from the depression. During World War II,
withdrawals of capital from such investments exceeded new capital
put in and it was not until 1945 that new direct investments again
became important. Since the end of the war, foreign investments
have increased rapidly, reaching an annual level of about $800,000,000
in 1948, but these new investments have been concentrated in a very
limited number of fields and in a few countries. In order to achieve
an expansion in the amount and fields of investment, it was realized
that new incentives were required.
A prerequisite for stimulating foreign investment is the creation of a
more favorable climate for investment abroad, including a cooperative
attitude on the part of the foreign countries concerned. One step
toward the improvement of such a climate would be the negotiation of
treaties of friendship, commerce, and economic development between
foreign countries and the United States.^ The principal purpose of
such treaties would be to provide an understanding between the governments on the basis of which potential investors would be assured
of the security of their property and, in the case of expropriation, of
prompt, adequate, and effective compensation. The investor also
would be given reasonable opportunity to remit earnings and to withdraw his capital, and would enjoy security in the protection of his
person, and nondiscriminatory treatment in the conduct of his business affairs.
.
,
In addition it was considered that the United States might encourage
private investment abroad by providing guaranties against risks
peculiar to foreign investment. The Council therefore recommended,
as a coordinated part of the Point IV Program, that the ExportImport Bank seek authority from the Congress to offer guaranties, in
consultation with the Council, to United States private capital newly
invested in enterprises contributing to economic development in
foreign countries. The Export-Import Bank was considered the best
medium for carrying out the guaranty program since it had previous
experience in the extension of developnient loans to foreign countries,
both for productive purposes and to increase international trade. I t
was believed that the program should be experimental in nature since




302

195 0 REPORT OF THE SECRETARY OF THE TREASURY

it was difficult to anticipate the types of risks which should be covered
or the effectiveness of guaranties to stimulate investments.
The Council also recommended that the Secretary of the Treasury
propose legislation to remove tax deterrents to private foreign investment. Such legislation would liberalize present limitations dn the
foreign tax credits allowed to American business so that increased tax
relief would be accorded where foreign operations result in profits in
some countries and losses in others. The present laws pertaining to
taxation of corporations having foreign subsidiaries would be liberalized so that a majority stock ownership would no longer be required
to be eligible for the tax credit for foreign taxes paid by the foreign
subsidiaries. Furthermore, it was proposed that the law be liberalized so that an American citizen abroad may receive the exemption
from the United States tax on his foreign-earned income retroactively,
to the time he first becomes a bona fide resident of a foreign country.
I t was recommended that estate taxes imposed by foreign governments be allowed as a credit against United States estate taxes similar
to the credit under the income tax. Finally, it was proposed that, if
practicable, taxes on the profits of foreign branches of domestic corporations should be postponed until the profits are remitted to the
United States, similar to the present treatment of foreign subsidiaries.
In July 1949, the guaranty program was presented to the Congress
as an experimental program which would give the Export-Import
Bank broad and flexible authority to issue guaranties against risks
peculiar to foreign investment. In testifying before the Senate
Banking Committee, Secretary of the Treasury Snyder, as Chairman
of the Council, pointed out that outside capital could help speed the
development of underdeveloped areas but that sound and lasting
development could be attained only if these areas used their own
resources to the fullest extent. He stressed that foreign investment
should be undertaken through private channels insofar as possible,
particularly because investment by private enterprise is characteristically accompanied by technical assistance in the form of industrial
know-how.
Secretary Snyder also pointed out that the obstacles to investment
of private capital abroad spring from several sources, such as exchange
restrictions, state control and ownership of industry in foreign countries, and political instability. The United States Government could
contribute to the removal of these obstacles through the negotiation of
treaties of the type previously discussed, and could supplement the
assurances to investors through guaranties of private United States
investments abroad.
The Banking and Currency Committees of both Houses of Congress
reported favorably on the bills permitting the extension of foreign
investment guaranties, but no further action was taken on them during
the first session of the Eighty-first Congress.
In addition to the introduction of bills advocating foreign investment guaranties by the Export-Import Bank, a companion bill relating
to the Point IV Program dealt with international technical cooperation. It was the objective of the proposed legislation to enable the
United States to participate in programs, in cooperation with other
interested governments, for the interchange of technical knowledge
and skills which would, contribute to the balanced and integrated




EpCHIBlTS

. 303

development of the economic resources and productive capacities of
economically underdeveloped areas. The House Committee on Foreign Affairs conducted hearings on this bill but postponed action until
the second session of the Eighty-first Congress.
EXPORT-IMPORT BANK CREDITS

During the period under review, the Council continued to work
closely with the Export-Import Bank to facilitate coordination of the
Bank's operations with those of other agencies concerned with foreign
financial and monetary matters. New credits authorized by the Bank
during this period totaled $49,758,058.
Chile
During the 6-month period, the Council approved consideration
by the Export-Import Bank of a credit to Chile not to exceed
$25,000,000, with a maturity of not more than nine years, to assist
in the financing of its import program for the remainder of 1949.^
The Bank also approved an increase of $1,350,000 in an existing line
ol credit of $5,350,000 which was extended by the Bank in favor of the
Corporacion de Fomento de la Produccion, Chile, in February 1947.
This increase was granted to finance expenditures in the United States
for hydroelectric power facilities. The additional credit is guaranteed
by the Republic of Chile.
Yugoslavia
Before the war, Yugoslavia was a leading producer of nonferrous
metals such as bauxite, mercury, copper, lead, and zinc. Damage to
the mines and their equipment occurred during the war. There was
also a considerable amount of depreciation and obsolescence. In
order to assist in rehabilitation, chiefly of the Yugoslav mining industry, application was made to the Export-Import Bank for credits for
the purchase in the United States of essential materials and equipment.
The Council approved consideration by the Export-Import Bank of
the extension to Yugoslavia of credits up to $20,000,000 for purchases
in the United States of the necessary materials, equipment, and services. On September 9, 1949, the Bank announced an authorization
to Yugoslavia of $20,000,000 in credits, which would be available
until December 31, 1950.
O t h e r credits
In August 1949, the Bank announced authorization of credits in the
total amount of $17,900,000 (representing specific allocation of funds
from an original commitment of $50,000,000 made in April 1947), for
the rehabilitation and development of Mexican railroads. These
funds are designed to further a general program of transportatiori
development for which the Bank had previously lent $62,000,000,
under this and other credits, of which $22,000,000 had been repaid.
The Bank authorized a credit of $4,000,000 to the Liberia Mining
Co. to assist in financing the development of high-grade iron-ore
deposits and the construction of a railroad and ore-handling and
7 The authorization of a credit of $25,000,000 was announced by the Board of Directors of the Export-Import
Bank on Oct, 7, 1949, with $15,000,000 to be made available immediately and additional advances of up to
$10,000,000 to be made on demonstration that they are necessary to pay for 1949 imports agreed to be essential.
JFunds advanced under the credit wiU be repayable in semiannual installments beginning Apr, 30,1952, and
ending Oct. 31,1959, and will bear interest at the rate of 3H percent per annum.
907795—51

21




304

195 0 REOPORT OF THE SECRETARY OF THE TREASURY

storage facilities. This loan represented about one-half of the projected financing costs of the project.
As previously reported by the Council, as of April 1, 1949, credits
of $51,000,000 had been authorized out of the Bank's earmark of
$100,000,000 in favor of the State of Israel. On September 8, 1949,
the Bank announced an allocation from the $49,000,000 still available
of $2,350,000 for United States goods and services to be used in connection with the improvement and expansion of the existing ports of
Israel.
The Export-Import Bank also acted as administering agency for
the supplementary loan agreements with participating E R P countries
signed during'the period under review. The terms and conditions of
these loans, agreed upon by ECA after consultation with the Council,
include an interest rate of 2K percent per annum payable semiannually
from 1952, and principal payments beginning in 1956. The loans
mature in 1983.
As of September 30, 1949, the resources of the Export-Import Bank
were distributed as follows:
' [In millions of dollars]

Total Lending Authority..

$3,500. 0

Loans outstanding
Undisbursed commitments
Uncommitted lending authority

.

.

..^
^

2,160, 7
383, 2
956. 1

The following table shows the distribution of net credits authorized
by country and object of financing. Data on actual utilization of
Export-Import Bank credits by country, through June 30, 1949, may
be found in table 8, appendix C *
TABLE IX,—Net credits authorized bythe Export-Import Bank^ July 1, 1945, to
September 30, 1949
[In millions of dollars]

Total

Area a n d c o u n t r y

Reconstruction

Lend-lease
requisitions

Cotton 2
purchases

Other

2, 641. 8

France
Netherlands
iBelgium

767.1

655. 0

183.8

27.3

971.9

280.9

655.0

105.0

17,6

1, 200. 0
205.3
132.0

Total, Europe •

1, 008.6

2, 030. 4

Total, All A r e a s . .

650.0
3 152. 2
45.0

3.1
3 32.0

550.0
50.0
55.0

101.9
73.2

131.8
100.2
50.2

Italy
Finland
Norwav

40.0
35.5
22.0

Poland
Tm-key
Czechoslovakia .
Denmark
Germany
Greece

.

Austria
Sweden
Yugoslavia .

.

U n a l l o t t e d cotton credits

20.0
4.6
14.7

25.0
17,0,

449
'UO.O
0 2

20.0

*2.0

50.0
'

40.0
35,5
20. 0
64.6
14.7

13.5
2.2
20.0
38.4

See footnotes at end of table.
* Omitted in this exhibit; see note at end of exhibit.




Development

•

13.0
2.2
20.0

.5

38.4

305

EKHKBITS

TABLE IX.—A^e^ credits authorized by the Export-Import Bank,^ July 1, 1945, to
September SO, 1949—Continued
[In millions of dollars]

Total, Latin America
Brazil
Mexico
Chile

224.1

. _..

.

Reconstruction

Total

Area and country

_ .

Development

Lend-lease Cotton^
requisipurchases
tions

Other

224.1

65. 2.
57.0
64.7

65.2
57.0
64,7

20.1
4.0
3.8]

20.1
4.0
3.8

_ .

3.3
3.0
2.0

3.3
3.0
2.0

Argentina
Uruguay
Other Latin America.....

•2

,2
,1
,7

Colombia
Haiti
Ecuador..
Bolivia
...:
Venezuela...
Panama

._

Total, Asia and Africa

232. 6

Israel
China
Japan

100.0
66.7
45.8

33.7

10.0 1

Saudi Arabia.
Egypt
Ethiopia
Canada

36.7

7.1
3.0

.
. .

145.0

Other

3.6

117.1
100.0

78.8
33.0
3 6 45.8 •

10.0
7.1
145.0

• 9.7

9.7

1 Cancellations and expirations deducted. Numerous small exporter-importer loans extended by the
Bank, July 1, 1945, through Sept, 30, 1949, are excluded. Also excluded are Mexican authorizations of
$30,000,000 and a Peruvian authorization of $400,000 approved prior to Juhe 30, 1945, recorded on ExportImport Bahk books subsequent to June 30, 1945,
» Credits extended by Export-Import Bank under general approval of the Council.' Hungarian credit
of $7,000,000 canceled Apr. 2, 1947.
3 Excludes participation by private banks.
* For financing tobacco purchases.
« For financing food purchases.
* Revolving credits.

OTHER FINANCIAL PROBLEMS

Financial terms qf military assistance to Iran and the Philippines
When the financial aspects of the Mutual Defense Assistance Program were originally referred to the Council, the Council was of the
view that such assistance should be provided on a grant basis to countries receiving ECA assistance and that separate determinations should
be made for countries outside of the ECA program. Iran and the
Philippines were not included in the original program under which
the Atlantic Pact countries were to receive military aid. When it
was later determined that these two countries would participate iri
the Mutual Defense Assistance Program, the Council expressed the
opinion that military assistance to them should be provided on a grant
basis.
;
Additional stabilization assistance to Mexico
On June 17, 1949, Secretary of the Treasury Snyder, after consultation with the Council, announced the signing of an agreement supplementing the United States-Mexican Stabilization Agreement entered




306

1 9 5 0 REPORT OF THE SEiCRETARY OF T H E TREASURY

into in May 1947. Mexico had previously utilized $37,000,000 of the
$50,000,000 available under the existing Stabilization Agreement.
The new agreement increased to $25,000,000 the balance available from
the United States Stabilization Fund for the purchase of Mexican
pesos to stabilize the United States dollar-Mexican peso rate of exchange. The agreement was signed following acceptance by the International Monetary Fund of a new par value of 8.65 Mexican pesos
per dollar. (See ch. IV.) Secretary Snyder stated that any operations under the agreement with Mexico would be closely coordinated
with the activities of the International Monetary Fund in order to
contribute to the efforts of the Fund to stabilize the exchange rate
structure of its members.
Withdrawal of Commodity Credit Corporation agreement unth the
Netherlands Indies Government
In June 1948, the Council reviewed the proposed extension of a
$20,000,000 credit by the Commodity Credit Corporation to Indonesia
for the purchase of incentive goods (textiles, food, household articles,
etc.), to be used to stimulate the production and procurement of copra
and palm oil for export. A year later the Secretary of Agriculture
advised the Council that no funds had been advanced under the proposal and that the Board of Directors of the Commodity Credit Corporation had resolved to withdraw the offer to enter into the agreement.
During the period, changes in the world fats and oils supply situation
obviated the n e e d i e r the proposed agreement.
United States-Brazil economic discussions
• Following submission of the report of the Joint Brazil-United States
Technical Commission, the Governments of each country considered
plans to foster the economic development of Brazil. During the
spring of 1949, President Dutra returned the visit made by President
Truman to Brazil in August 1947. The two Presidents discussed at
length the desirability of fostering economic development and social
progress through the mutually beneficial interchange of technological
data and trained specialists of all types, as well as through financial
and economic cooperation. President Dutra mentioned the need of
foreign private investment in Brazil. The two Presidents recognized
the important role of private investment in economic development and
social progress and accordingly instructed technical experts of their
respective Governments to commence immediately the negotiation
of an appropriate treaty that would stimulate the mutually beneficial
flow of private investirient. I t was also fully agreed that a comprehensive joint study of the tax relations between the two countries
would be helpful. The two Presidents recognized the possibility of
financing through public lending agencies appropriate development
projects not suited to private financing, of the types which have been
accepted for financing by the International Bank for Reconstruction
and Development and the Export-Import Bank.




EIXHIBITS

307

IV. ACTIVITIES OJ' THE COUNCIL FROM APRIL 1, 1949, TO SEPTEMBER
30, 1949, RELATING TO THE INTERNATIONAL MONETARY F U N D AND
THE I N T E R N A T I O N A L B A N K F O R R E C O N S T R U C T I O N AND D E V E L O P MENT

The National Advisory Council, in accordance with statutory
authority, continued to coordinate the activities of the United States
representatives of the Fund and the Bank with those of other agencies
of the Government, by consulting and advising with them on major
problenis arising in administration of the Fund and the Bank. The
United States Executive Directors of these institutions, or their
Alternates, have attended the Council's raeetings regularly, and have
participated continuously in the work of its Staff Committee.
FOURTH A N N U A L MEETINGS OF THE FUND AND THE BANK

The Boards of Governors of the Fund and the Bank held their
fourth annual meetings in Washington, D . C , September 12 to 16,
1949. The Secretary of the Treasury, John W. Snyder, as United
States Governor of both institutions, attended. Willard L. Thorp,
William McChesney Martin, Jr., and Frank A. Southard, Jr., were
appointed temporary United States Alternate Governors for the purpose of these meetings. The United States Alternate Executive.
Directors also participated in these meetings, as did representatives
of the constituent agencies of the Council.
The principal matters considered by the Boards of Governors were
as follows:
(1) The Boards of Governors discussed and accepted the annual
reports, the financial statements and reports on audit, and the 1949
administrative budgets, and elected officers and a joint procedures
committee for 1949-1950.
(2) The application of the Republic of Haiti for membership in the
two institutions was approved, providing for a quota in the Fund of
$2,000,000, with a like amount as a subscription to the Bank. Membership is open to Haiti until March 31, 1950, with the Executive
Directors empowered to extend this period until September 30, 1950,
if they deem such action warranted.
(3) The Boards of Governors also extended until March 31, 1950,
the period in which the Republic of Liberia may accept membership,
and empowered the Executive Directors further to extend the period,
but not beyond October 1, 1950.
(4) At the Fund meetings, the Governors adopted a resolution referring to the Executive Directors for further study the proposal by
South Africa concerning gold sales at premium prices. They also
discussed questions of exchange and monetary policy, exchange restrictions, and monetary reserves.
,
(5) A report on relations with the International Trade Organization and the Contracting Parties to the General Agreement on Tariffs
and Trade was submitted to the Board of Governors of the Fund for
information.
(6) The Governors of the Bank reviewed the report of the Ad Hoc
Committee (appointed at the third annual meeting to consider pro^
visions relating to duties and remuneration of the Executive Directors),
and referred the matter back to the Committee for further study. ^




308

195 0 REPORT OF THE SECRETARY OF THE TREASURY

(7) The Governors of the Bank approved the report of the Executive Directors postponing the election of a new Advisory Council.
(8) The Governors of the Ba^nk also approved the report of the
Executive Directors on the allocation of the Bank's net income for the
fiscal year ending June 30, 1949.
At the closing session, the Governor of India was elected Chairman
for the coming year, and the Governors of China, France, United
Kingdom, and the United States were elected Vice Chairmen. I t was
decided to hold the fifth annual meetings in Paris in the month of
September 1950.
MEMBERSHIP CHANGES IN THE FUND AND THE BANK

During the period under review, one new country, Thailand, was
admitted to membership in the Fund and the Bank. At the third
annual meetings in Washington in September 1948, the Boards of
Governors accepted the request of Thailand for membership, providing
for a quota in the Fund of $12,500,000, with a like amount as a subscription to the Bank. Thailand formally became a member of the
two organizations on May 3, 1949.
Favorable action by the United States representatives with respect
to this application was taken with the approval of the Council.
On September 30, 1949, 48 countries were members of the Fund and
the Bank. The members, with their quotas and capital subscriptions
as of September 30, 1949, are listed in appendix E.*
ORGANIZATIONAL CHANGES

On May 18, 1949, Mr. Eugene R. Black, then United States Ex.ecutive Director, was elected President of the Bank, succeeding Mr. John
J. McCloy, who resigned to accept the post of United States High
Commissioner for Germany. Mr. Black assumed his new duties on
July 1, 1949.
THE FUND

During the period under review, the Fund continued to provide
a number of its member countries with technical assistance, as well
as, in appropriate instances, necessary foreign currency to meet balanceof-payments deficits on current account. As will be noted in the
following section dealing with ^'par values," the Fund participated
actively in the extensive realignment of currencies that occurred in
the latter half of September 1949.
P a r values
On May 24, 1949, the Fund announced the establishment of an
initial par value for the Yugoslav dinar at 50 dinars per United States
dollar, the rate proposed by the Government of Yugoslavia. On
June 17, 1949, the Fund also announced that it had concurred in the
request of the Government of Mexico for the establishment of a new
par value for the peso. The new par value of 8.65 pesos per United
States dollar replaced the initial par value of 4.855 pesos per United
States dollar, established on December 18, 1946, by agreement
between Mexico and the Fund.. Transactions at this initial parity
*bmitted in this exhibit; see note at end of exhibit.




EIXHIBITS

309

had been suspended by the Bank of Mexico on July 22, 1948. The
United States Executive Director, acting with the approval of thfe
Council, concurred in the Fund action on the proposals of both
Yugoslavia and Mexico.
Currency readjustments: Septemher 1949
In December 1946, the International Monetary Fund and member
governments agreed on the establishment of initial par values for
their currencies based on existing exchange rates, even though, as the
Executive Directors of the Fund recognized in their first Annual
Report ^^ . . iri some cases the taitial par values that are established may later be found incompatible with the maintenance of a
balanced international payments position at a high level of domestic
economic activity." There were cogent reasons for this decision.
I t would have been premature to attempt a general revisipn of exchange rates at that time, in view of the drastic changes in the structure of world trade and the disruption of the internal economies of
many member countries wrought by the war.
As economic advances were made as a result of the internal efforts
of the countries concerned as well as of the United States foreignassistance program,- the desirability of an eventual revaluation of
currencies gradually became more apparent. In its Semiannual
Report for the period October 1, 1948-March 31, 1949, the National
Advisory Council stated that '^. . . in 1948 a general revaluation
of the European exchange rates was inadvisable in view of the possible
internal repercussions of devaluation on the participating countries in
a period when their economies still exhibited serious infiationary
tendencies, while their levels of production were not adequate to
maintain an expanded volume of international trade. I n many of the
participating countries these conditions no longer obtain, since substantial progress has been made toward recovery in their levels of
production . . . . I t is the Council's opinion that in some cases
the revaluation of currencies may constitute an important means of
bringing about the desired expansion of exports to the dollar area
which, -along with other appropriate measures, will contribute to more
normal methods of financing after 1952." Sittiilarly, in their Annual
Report for the year ending April 30, 1949, the Executive Directors of
the International Monetary Fund declared that ^^Where a price
reduction . . . is necessary to expand exports, it would in many
cases seem possible only through an adjustment in the exchange
rate." «
In the period under review, it was becoming widely accepted that
a general revision of European exchange rates was an essential step
in the direction of creating freer intra-European and world trade and
restoring equilibrium in European balances of payments at a reasonable level. European export prices in terms of dollars had become
less competitive than United States prices for the same types of goods,
and in the absence of depreciation it was becoming increasingly difficult for European countries to maintain, much less expand, their
exports to the dollar area and to compete with dollar-area goods in
their domestic and third markets. There was serious danger that
8 Similar views had been expressed by other international bodies such as the Organization for European
EtgoAOmic Cooperation, and the Economic Commission for Europe.




310

1 9 5 0 REPORT OF T H E

SE.CRETARY OF T H E

TREASURY

unless such action was taken, the marked disparities in cost-price
structures existing between the soft-currency-area countries and the
dollar-area couritries on the one hand, and among the soft-currencyarea countries themselves on the other, would tend to become set,
the strains of altered creditor-debtor relationships increasingly burdensome, and the distortions of international trade and the disequilibria
in European balances of payments increasingly intractable.
The decline in the exports of European countries to the dollar area
and the depletion of the United Kingdom's gold and dollar reserves
during 1949 underlined the need to adopt remedial action. In less
than six months, from March 31 to September 18, 1949, the United
Kingdom's gold and dollar reserves fell by more than $500,000,000.
On September 18, the International Monetary Fund announced that
the United Kingdom had proposed and the Fund had concurred in a
change in the par value of the pound sterling from the previous rate
of one pound sterling to $4.03, to one pound sterling to $2.80.
Twenty-five other countries had announced adjustments in their exchange rates by September 30, with the extent of devaluation varying from 9.1 percent in the case of Canada, to 30,5 percent by most
countries within the sterling area (see table X ) . The Fund was consulted on, and approved, the adjustments proposed by member countries, and the United States Executive Director, acting in accordance
with policy directives previously formulated by the Council, concurred
in the action of the Fund.
The Council recognizes that this readjustment of exchange rates
does not constitute a cure-all for the difficult and complex problems
currently faced in international payments. But it helps to clear the
way by removing some of the obstacles to the effective functioning
of a world price system. I t may contribute to a reduction in the
European dollar deficit by an expansion of exports from the European
countries to the Western Hemisphere and facilitate the relaxation of
barriers to multilateral trade.
TABLE

X . --Changes

Country

in currency values, as of Sept. 30, 1949

Currency value: United
states cents per unit
of currency

Monetary unit

Old
Sterling Area:
United Kingdom » .
Iceland
_
Ireland

Iraq,-Australia
New Zealand.

280.000
10. 705
280.000 .

30.5
30.5
30.5

30. 225
30, 225
30. 225

21,000
21.000
21.000

30.5
30.5
30,5

Dinar
Pound
Pound

403.000
322. 400
403. 000

280. 000
224. 000
280.000

30.5
30.5
30 5

Pound

403.000

280. 000

30 5

Dollar
Pound

100. 000
413.300

90. 909
287,156

9,1
30,5

Rupee
_ Rupee
Rupee
'.

._

South Africa ._
Canada
Egypt

^..:

New

Reduction in
value
(percent)

403.000
15.411
403. 000

Pound
. Krona
Pound

Burma.
Ceylon
India

-

.__
_

1 All ofthe British territorial currencies (except that of British Honduras) were likewise devalued by 30.5
percent.




EKHIBITS

311

TABLE X.—Changes in currency values, as of Sepi. 30, 1949—Continued

Country

Currency value: United
States cents per unit
of currency

Monetary unit

Old
Israel:
Imports'
Exports

_ _ _ _ _ _

Jordan
Thailand_-_ .

_

_

Europe:
Belgium-Luxembourg'
Denmark
__ _
Finland*
__^
France ^
Germany (western).
Greece'
Italy 7
Netherlands 8
Norway .___.

__

'

Portugal *
Sweden i"..

Pound
Pound

Pound
. _._ Baht

} 280.000 \f

7,3
30.5

.280,000
8,000

30.5
20,6

2, 282
20. 838
0,625

...

2,000
14.478
0,4348

12,3
30,6
30.4

0,3669
30.000
0.01

Franc_
__ ____ _ . Krone
Markka

Escudo
Kjona——.-

302.000
403.000
403.000
10.075

_-i___

Franc
._
Deutsche Mark
Drachma
Lira
Guilder
Krone___ _

New

Reduction in
value
(percent)

0.2857
23,810
0,0067

22,1
20,6
33.3

0,1739
37:695
20,150

0.1572
26.316
14.000

9,6
30.2
30.5

4.000
27.816

3,478
19,33

13,0
30:5

2-Free market rate for imports,
3 The Belgian Congo franc remains at par with the Belgian franc,
< The Finnish change shown here followed closely an earlier devaluation (from 0.735 to 0,625 cents per
markka), on July 4, 1949, and thus represents a total devaluation of 41 percent during recent months,
8 Rates shown are those for trade transactions. • Under the official free market system used in France,
the rates referred to here are technically flexible, though they may be held steady for relatively long periods.
All local currencies of French dependencies are pegged to the French franc, except (1) the rupee of French
possessions in India, which is maintained at par with the Indian rupee; and (2) the Djibouti franc, which
retains its old dollar parity of 0,47 cents.
8 Under the exchange certificate system used in Greece, the rates referred to here are technically flexible,
but for over a year prior to the current devaluation, fluctuations in the old rate had been held to less than
1 percent in either direction.
7 Under the official free market system used in Italy, the rates referred to here are technically flexible,
though they may be held steady for relatively long periods.
8 The Indonesian guilder remains at par with the Netherlands guilder, but the Surinam guilder retains
the old dollar parity of 63 cents,
9 The change shown here followed closely a minor adjustment (from 4.0124 to 4.0 cents per escudo), on
August 8, 1949, Portugal is not a member of the International Mpnetary Fund and has no par value.
Rates shown are mid rates between the official buying and selling rates,
1 Sweden is not a member of the Fund and has no par value. Rates shown are average rates between the
0
ofl[icial buying and selling rates.

Exchange, restrictions
On May 27, 1949, the Fund reported results of consultations with
the Government of Ecuador on Ecuador's exchange system, and
related subjects of credit and monetary policy. As a result of similar
consultations with the Fund in June 1947, Ecuador had made certain
modifications in her exchange control system. In the May consultations it was understood that Ecuador would continue to maintain ior
another year her present exchange controls but that during this
period Ecuador would consult with the Fund regarding modifications
which might properly be made at the end of that time.
Price of gold
The Secretary of the Treasury, at the fourth annual meeting of the
International Monetary Fund, in connection with consideration of the
resolution proposed by South Africa concerning gold sales at premium
prices, reiterated the established position of the United States Government with respect to the maintenance of the dollar price of gold. In
his capacity as United States Governor, the Secretary stated, during




312

1 9 5 0 REPORT OF THE SiECRETARY OF T H E TREASURY

the course of the discussion ^^I have said on many occasions and I must
say again that I do not perceive any considerations of monetary policy
which would justify me in proposing to my Government a change in
the dollar price of gold." ®
Repurchase of Fund drawings
Article V, section 7 of the Fund's Articiles of Agreement provides fdr
the compulsory repurchase, of Fund holdings of a member's currency
under specified conditions.
During May 1949, Costa Rica became the first country to repurchase
some of its own currency from the Fund. This transaction involved
Costa Rican colones equivalent to 874,000 dollars, and was effected
through a Costa Rican payment to the Fund of 855,000 dollars, and
gold to the value of 19,000 dollars. In August 1949, Belgium repurchased from the Fund Belgian francs equivalent to 946,500 dollars,
with a payment of 35,000 dollars, and gold to the value of 911,500
dollars. During September 1949, Nicaragua repurchased for 500,000
dollars the total amount of cordobas which it had sold to the Fund in
1948. As a result of this transaction, the Furid's holdings of cordobas
reverted to the level in existence prior to the original Nicaraguan
drawing.
Exchange transactions
During the 6 months, April 1, 1949, through September 30, 1949,
the Fund sold $21,000,000 to three of its member countries. These
transactions increased total currency sales of the Fund to date to the
equivalent of $734,600,000. ,Fund sales of United States dollars for
member currencies have been almost entirely to non-ERP countries
since the start of the European Recovery Program in April 1948.
The following table presents a detailed break^down of currency
sales through September 30, 1949:
T'ABLE XI.—Currency sales ofthe Tnternational Monetary F u n d from Apr. 1, 1947,
< ,
to S e p t : 30, 1949
[In millions of United States dollars]

Total to
Sept. 30,
1949

Country

Total, All Countries _. _

734. 6

Total, E R P Participants .

Six-Month Periods e n d i n g Sept, 30,
;i949.

564.2

United Kingdom
France __
Netherlands
Belgium
Norway.Denmark
Turkey

._

_.

21,0

Mar, 31,
1949

Mar. 31, , • Sept. 30, .
1948
' ' 1947

73.8

39.7

391,1

209 0

6.1

17,3

356.8

184 0

16.8

240.0
25.0
44.5
33.0

60,0
100 0
2 24,0

300.0
125.0
75.3
33,0
15,7
10,2
5.0

Sept, 30,
1948

3 6.1

< 7.1
3,4

2,5
6,8
5.0

^1 Sale of Belgian francs,
2 Includes $6,000,000 of pounds sterling,
J United States dollars sold for an equivalent in gold. -.
< Includes $4,600,000 of Belgian francs.
9 The position of the United States on this matter was further explained in a memorandum to the press of
October 6, 1949 (see appendix F), and reaffirmed by President Truman on November 10, 1949,




313

EiXHIBITS

TABLE XI.—Currency sales of the International 'Monetary Fund from Apr. 1, 1947^
to Sept. 30, 1949—Contmued
.
[In millions of United States dollars]
';.
Total t o
Sept.30,
1949

Country ' '

Total, o t h e r Countries

Sept. 30,
1949

8.8
6.0
3.0
3.0
.

21.0

100.0
22.5
15.0
10.0

Chile
Czechoslovakia
Egypt
Yugoslavia..
••

.

•

1 . 3

M a r . 31,'
.1949

Sept. 30,
1948.

M a r . 31,
1948

67,7

22.4
16,1

Sept. 30,
1947 .

34,3

55.9

170,4

India
Mexico
Brazil.
U n i o n of S o u t h Africa

CostaRica
Nicaragua
Ethiopia

Six-Month Periods e n d i n g -

28.0

25,0
•

22,5

i5;0
10.0
•

6.3

2, 6

6.0
.'

3,0
• 3.0
•

••

•.5
.3

1.3
.5
.3

NOTE.—Except where otherwise indicated, all sales were of United States dollars in exchange for the currency of the purchasing country.
•
.
Source: International Monetary Fund.
,

THE BANK

During the 6 months under review, the International Bank made.
$76,500,000 in new loan commitments to four of its member countries.
The United States Executive Director or his Alternate consulted with
the Council with respect to each of these loan applications.
As a further .aid to member countries, the International Bank
announced an expanded program of technical assistance for economic
development. The Bank indicated that it would be prepared tp help
member countries in making comprehensive surveys of their resources
and in working out appropriate long-term investment programs; to,
work closely with potential borrowers in the analysis and planning of
specific projects for Bank financing; and to assist in formulating and
putting into effect practical measures to strengthen the financial
institutions and practices of its member countries and to encourage
productive investment from other sources. The Bank, however,
emphasized the importance of action on the part of the less-developed
countries to create a sdund foundation for economic development.
Loans and disbursements
;,
On July 29, 1949, the Bank granted a loan of $15,000,000 to the
Finance Corporation for National Recionstructiori (Herstelb.ank),. of.
the Netherlands. This loan was specifically riiade to finance iriiports;;
of equipment for the reconstruction or modernization, of plants iri;
various industries. The loan, guaranteed by the Kingdom of the
Netherlands, extends for a period of 15 years, and carries an interest
rate of 3 percent, plus the usual 1 percent commission for the Bank's
special reserve. Amortization payments, calculated to retire the loan
by maturity, will start in the fourth year. The Bank announced that




314

1950 REPORT OF THE SECRETARY OF THE TREASURY

this loan was made in accordance with one of its main purposes—to
aid in the reconstruction of economies of member nations and to
encourage the development of their productive facilities and resources.
The Bank also stated that by assisting in financing projects which
involve permanent additions to Europe's productive capacity, the
loan followed the Bank's policy of supplementing the European
Recovery Program.
On August 1, 1949, the Bank announced a loan of $12,500,000 to the
Bank of Finland to finance imports of equipment and materials
required for the reconstruction and modernization of Finland's woodworking industries, for an electric power development program, and
for expanding production of limestone powder for agriculture. The
terms of this loan, which was guaranteed by the Government of
Finland, were similar to those applicable to the Herstelbank.
On August 18, 1949, the Bank granted a loan of $34,000,000 to
India for the reconstruction and development of the railways owned
and operated by the State. Proceeds of this loan will be used to
finance part, of the purchase price of locomotives, boilers, and spare
parts. This loan—^^the first to be granted by the Bank to a member
country in Asia—carried terms similar to those in the two preceding
instances, except that amortization payments will start on August 15,
1950. On September 29, 1949, the Bank announced an additional
loan of $10,000,000 to India, to finance part of the cost of agricultural
machinery needed for land clearance and reclamation and thereby to
increase the production of grain in India. This loan was for a term of
seven years and carried an interest rate of 2K percent, plus the usual
1 percent commission. ' Amortization payments, calculated to retire
the loan by maturity, will start on June 1, 1952.
On August 19, 1949, the Bank granted a loan of $5,000,000 to the
Caja de Credito Agrario, Industrial y Minero of Colombia to finance
the purchase of agricultural machinery. This loan, guaranteed by the
Republic of Colombia, is for a term of seven years, and carries an
interest rate of 2K percent, plus the customary 1 percent commission.
Semiannual amortization payments, beginning M a y 15, 1952, are
designed to retire the loan by maturity on November 15, 1956. The
agricultural equipment to be purchased with the proceeds of this loan
should enable Colombia to increase farm production and thus meet an
expanding domestic consumption, while reducing imports of foodstuffs
and staples with a consequent saving of hard currency.
From M a y 9, 1947, when the Bank announced its first loan, through
September 30, 1949, total loan commitments of the International
Bank aggregated somewhat more than $726,000,000, of which
$678,000,000 had become effective. As shown in the following
tabulation, four-fifths of this latter amount had been disbursed by
September 30, 1949:




EXHIBITS

315

TABLE XII.—Status of International Bank loans as of Sept. 30^ 1949
Loan Commitment

Borrower
Total, All Lcfans

_

_.

_

Credit National (France) _ _
_
Kingdom of the Netherlands
Brazilian Traction, Light & Power Co,, Ltd. i
Dominion of India 2
__.
Kingdom of Denmark__.___i
Financiera and Comjsion (Mexico) 3

^ . ^,,

Kingdom of Belgium. . . .
_ ..
Corporacion de Fomento (Republic of Chile)
Herstelbank (Netherlands) *
Bank of Finland»__
Grand Duchy of Luxembourg
_
__ _ _
Netherlands shipping companies *
Caja de Credito (Colombia) 2

$726, 600,000
250,000,000 1
195,000,000
76,000,000
44,000,000
40,000,000
34,100,000 1

Disbursement Unused balance
of commitment
$541,440,917
250,000,000
195,000,000
21,948,244
40,000,600
5,296,139

16,000,000
16,000,000
15,000,000

4,029,608
2,946,100

12, 500,000
12,000,000
12,000,000
5,000,000

10,221,826
12,000,000

$185,159,083
63,051,756
44,000,000
28,803,861
11,970,392
13,054,900
15,000,000
12, 500,000
1,778,174
6,000,000

1 Loan guaranteed by the United States of Brazil.
2 Agreements become effective after the Bank has received certain certificates and documents, and has
notified the borrower and guarantor of its acceptance of such evidence,
3 Loans guaranteed by the Government of Mexico. Nacional Financiera and Comision Federal de
Electricidad are joint borrowers.
< Loans guaranteed by the Kingdom of the Netherlands,
fi Loan guaranteed by the Government of Finland.
Source: International Bank for Reconstruction and Development.

Legislation
In June 1949, the United States Congress enacted, and on the 29th
day of that month the President approved, legislation amending provisions of the National Bank Act and the Bretton Woods Agreements
Act applicable to securities of the International Bank (Public Law
142, Ch. 276, 81st Cong., 1st sess.). This legislation was designed to
remove certain requirements which might interfere with the Bank's
financing operations and thereby limit its effectiveness in carrying
out the purposes for which itowas established. The National Bank
Act was amended to permit national banks and State member banks
of the Federal Reserve System to deal in and underwrite International
Bank securities subject to certain prescribed limitations as to amount.
The Bretton Woods Agreements Act was amended to provide that any
securities issued by the International Bank arid any securities guaranteed by the Bank as to both principal and interest shall be deemed
exempted securities under the Securities Act of 1933 and the Securities
Exchange Act of 1934. Public Law 142 also authorized the Securities
and Exchange Commission to require the Bank to file annual and other
reports with it and, in consultation with the Council, to suspend these
exemptions.
Fiscal operations
For the fiscal year ending June 30, 1949, the International Bank
had a net income of about $10,600,000, exclusive of special reserve
commissions of $5,000,000. For the three months ending September
30, 1949, the Bank had an income of nearly $3,200,000, exclusive of
over $1,300,000 paid into its special reserve. As of September 30,
1949, the Bank had an earned surplus of over $16,800,000, plus about
$9,400,000 in its special reserve.




316

1 9 5 0 REPORT OF T H E SEiORETARY OF ;THE TREASURY

Future lending
On September 30, 1949, the Bank had uncommitted loanable dollar
fiiricis amounting to approximately $320,000,000, and was engaged in
the investigation of nuriierous requests for loans throughout the world.
After having completed the immediate postwar phase of its activities,
the Bank has entered upon a program of developmental loans to assist
nations to obtain the fullest utilization of their own resources.
JOHN W .

SNYDER,

; Secretary of the Treasury^ Chairman of the National Advisory
Council on International Monetary and Financial Problems.
D E A N ACHESON,

'

'

Secretary of State.
CHARLES SAWYER,

'
"

Secretary of Commerce,
!

THOMAS B .

MCCABE,

Chairman of the Board of Governors of the Federal Reserve
System.
H E R B E R T E.

GASTON,

Chairman ofthe Board of Directors of the Export-Import Bank
of Washington.
PAUL G . HOFFMAN,

Administrator for Economic Cooperation.
APPENDIX

A

A M E N D M E N T S OF THE NATIONAL B A N K A C T AND THE BKETTON W O O D S A G R E E M E N T S
ACT

(Public Law 142, Ch. 276, 81st Cong., 1st sess.)
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled. T h a t paragraph seventh of section 8 of t h e National Bank Act, as amended (U. S. C , title 12, sec. 24), is amended by adding to
t h e end thereof t h e following new sentence: " T h e limitations and restrictions
herein contained as to dealing in and underwriting investment securities shall not
apply t o obligations issued by t h e International B a n k for Reconstruction and
Development which are a t t h e time eligible for purchase by a national bank for
its ow:n SiCGOMni: Provided, T h a t nd association shall hold obligatipns issued by
said b a n k as a result of underwriting, dealing, or purchasing for its own account
(and for this purpose obligations as to which it is urider .commitment shall be
deemed t o be held by it) in a total a m o u n t exceeding a t any one time 10 per
centum of its capital stock actually paid in and unimpaired and 10 per centum of
its unimpaired surplus fund."
S E C . 2. T h e Bretton Woods Agreements Act, as amended (U. S. C , title 22,
sees. 286-286k), is amended by adding a t t h e end thereof a new section to be
numbered section 15 and to read as follows:
' ' S E C . 15. (a) Any securities issued b y International B a n k for Reconstruction
and Development (including any g u a r a n t y by t h e bank, whether or not limited in
scope), and any securities guaranteed by t h e bank as to both principal and interest,
shall be deemed t o be exempted securities within t h e meaning of paragraph, (a) (2)
of section 3 of t h e Act of M a y 27, 1933, as amended (U. S . C , title 15, sec. 77c),'
and p a r a g r a p h (a) (12) of section 3 of t h e Act of J u n e 6, 1934, as amended (U. S. ,C..,
title 15, sec. 78c). T h e bank shall file with t h e Securities and Exchange Commission such annual and other reports with regard to such securities as t h e Commission
shall determine to be appropriate in view of t h e special character of t h e bank and
its operations and necessary in t h e public interest or fbr t h e protection of investors.
"(b) T h e reports of t h e National Advisory Council provided for in section 4
(a) (6) of t h e Bretton Woods Agreements Act shall also cover and include the.




EKHATBITS

317

effectiveness of t h e provisions of section 15 (a) of this Act and t h e exemption for
securities issued by t h e bank provided by section 8 of t h e National Bank Act in
facilitating t h e operations of t h e b a n k a;nd t h e extent to which t h e operations of
t h e | b a n k m a y assist in financing European recovery and t h e reconstruction and
development of t h e economic resources of member countries of t h e b a n k and t h e
recommendations of t h e Council as to any modifications it m a y deem desirable in
the provisions of this Act. •'
S E C . 3. T h e Securities.and Exchange Commission acting in consultation with
the National Advisory Council on International M o n e t a r y and Finaricial P r o b lems is authorized to suspend, t h e provisions of section 15 (a) of t h e Bretton Woods
Agreements' Act at any time as to any or all securities issued or guaranteed b y t h e
bank during t h e period of such suspension. T h e Commission shall include in i t s
annual reports to Corigress such information as it shall deem advisable with regard
to t h e operations and effect of this Act and in.corinection therewith shall include
any views submitted for such purpose by any association of dealers registered
with t h e Commission.
Approved J u n e 29, 1949.

APPENDIX D
JOINT

COMMUNIQUE

OF

.

U N I T E D STATES, U N I T E D
S E P T E M B E R 12,
1949

KINGDOM,

AND

CANADA—

1. Representatives of t h e United States, t h e United Kingdom, and Canada
have met during t h e past week to .examine t h e t r a d e and financial relationships
between t h e sterling area and t h e dollar area. T h e pound and the dollar are t h e
two principal world trading currencies. While t h e development of a satisfactory
balance of p a y m e n t s between t h e two areas is a m a t t e r of fundamental concern
to t h e democratic world; it involves m a n y problems which concern in t h e first
instance the: governments which" are t h e centers of these two currency systems.
T h e present discussions were held to examine these problems. I t was recognized
t h a t t h e task of working out conditions under which world t r a d e can develop
steadily and in increasing freedom will require a strenuous and sustained effort,
not only on t h e p a r t of t h e United States, t h e United Kingdom, and Canada, b u t
also by all other countries desiring t h e same objectives.
2. I t was agreed t h a t t h e conimon aim is to work toward an ultimate solution
which will maintain employment and establish equilibrium of international, t r a d e
on a mutually profitable basis a t high levels. These objectives and general course
of action have already been set forth in t h e United Nations Charter, t h e Bretton
Woods Agreements, and t h e H a v a n a Charter for an International Trade Organization. I t was t h e broad purpose of t h e present meetings to explore, within this
general framework, various specific measures which t h e three Governments might
take to prevent a serious break-down in t h e dollar-sterling relationships • which
would have led to a crippling limitation of dollar imports into t h e sterling area and
to hasten t h e achievemient of those objectives.
" .
3. These conversations have carried forward t h e consultations iriitiated in
London during. July 8-10. T h e y have resulted in a clear understanding of t h e
character of t h e difficulties to be faced and an. increasing realization t h a t a fully
satisfactory solution will necessitate continuing efforts in m a n y directions. I n
t h e course of these conversations it has become possible to discuss with complete
frankness specific problems and t h e types of measures which will have to b e t a k e n .
if t h e three countries are to achieve their .common purpose.
4. I n t h e early stages of t h e discussion, attention was given to t h e immediate
problem confronting t h e United Kingdom and t h e rest of t h e sterling area as a
result of t h e rapid decline of gold and dollar reserves. Note was t a k e n by t h e
three Governments of t h e emergency action w:hich sterling countries have decided
t o t a k e to meet t h i s situation. These measures are not pleasant ones; they will
cause difficulties and sacrifices for everyone concerned. Nevertheless, t h e y are a
temporary necessity, and are recognized as such by all three Governments.
5. T h e Ministers were in complete agreement t h a t no p e r m a n e n t solution t o :
t h e problem could be found in tlie ernergency steps cojntemplated. A^ more.frinda,71




318

1950 REPORT OF THE SECRETARY OF THE TREASURY

miental attempt would have to be made by all concerned to expand the dollar
earnings of the sterling area and to increase the flow of investment from the North
American Continent to the rest of the world, including the sterling area.
6. This more fundamental attempt would involve both separate actions of the
three countries operating individually, and joint action by the three acting in
copperation with each other. In approaching these possibilities of individual and
joint action on the sterling-dollar problem, there was common agreement that this
action should be based on the assumption that extraordinary aid from the North
American Continent would have come to an end by the middle of 1952. This
would require that the sterling area increase its dollar earnings so as to pay its
way by 1952. This would require in the sterling area the creation of appropriate
incentives to exporters to the dollar area and a vigorous attack upon costs of
production to enhance the competitive position of sterling-area products. Maximum efforts would be made to direct exports to the dollar area and build up
earnings from tourism and other services. As a part of this export campaign by
the sterling-area countries, it was recognized that an essential element was the
creation of a feeling of confidence on the part of sterling-area exporters. They
must feel that they will be afforded the opportunity to remain in the markets of
the United States and Canada in which they will have gained a place, and that the
minirdum of difficulties will be placed in'their way in entering those markets.
On their part the creditor countries undertook to facilitate, to the greatest
extent feasible, an expansion of dollar earnings by debtor countries, including the
sterling area. It was agreed that the United States and Canada should reduce
obstacles to the entry of goods and services from debtor countries, in order to
provide as wide an opportunity as possible for those countries to earn dollars
through the export of goods and the provision of services, including tourism. It
was recognized that such a policy would be in the interest of producers in the
United States and Canada, for only in this way can the future level of trade
provide adequately for those sectors of the American and Canadian economies
which depend in considerable part upon foreign markets.
7. The discussion of possible individual and joint actions, both long-run and
short-run, ranged over a wide field. In addition to the question of dollar earnings
of the United Kingdom and the rest of the sterling area, mentioned above, the
Ministers gave special attention to,the following subjects:
1. Overseas investment.
2.. Commodity arrangements and stock-piling.
3. Limitations on items which may be financed under present ECA procedures.
4. Customs procedures.
5. Tariff policy.
6. Liberalization of intra-European trade and payments.
7. Sterling balances.
8. Petroleum.
9. Shipping.
10. Provisions for continuing consultation.
8. A working group on overseas investment reviewed both recent experience
and future prospects for the flow of productive investment, both private and
public, from North America to overseas areas, especially underdeveloped countries.
It was agreed that a high level of such investment could make an important contribution toward reducing the sterling-dollar disequilibrium"^and that every aspect
of this problem should be explored on a continuing basis. . In order to initiate this
work, the President's Committee for Financing Foreign Trade will be asked
immediately to explore possible lines of action in cooperatiori with corresponding
groups of British and Canadian financial and business representatives. While
dealing with all aspects of private and public investment, the Committee will be
expected to address itself especially to the problem of incentives and of providing
a suitable environment for a high level of private investment.
9. A working group on commodity arrangements and stock-piling gave special
attention to rubber and tin. The Canadian representatives, stated that the Canadian Government was prepared to take steps to increase reserve stocks of tin and
rubber in Canada. The United States representatives reported that the United
States Government was prepared to open to natural rubber a substantial additional ^rea of competition, including a modification of the Government order




EXHIBITS

319

relating to the consumption of synthetic rubber. The United States would
review its stock-piling program, with particular reference to rubber and tin.
10. Special attention was given by another group to the practical difficulty being
experienced by the United Kingdom in making fully effective use of its ECA aid
to cover its dollar deficit. This difficulty arises out of the fact that, although the
United Kingdom needs dollars to pay for goods in the United States, to make
settlements with other countries, to pay for services, and for other purposes, the
types of transactions which may be financed by EGA dollars have been definitely
limited. It has been agreed that, in order to carry out the basic purposes of the
Economic Cooperation Act, it will be necessary for tlie United Kingdom to
finance with its share of EGA funds a wider range of dollar expenditures than has
hitherto been eligible, both within and outside of the United States. After careful
examination of the dollar expenditures proposed tp be made or authorized by the
United Kingdom, it appears that eligibility requirements can be broadened to the
extent required within the limits set by the Economic Cooperation Act. 'T?his
would broaden the use but not increase the amount of EGA funds allocated to the
United Kingdom.
11. In the consideration of measures which creditor countries might take to reduce barriers to trade, it was recognized that customs procedures may create
obstacles, psychological as well as actual. Technical discussions of this subject
disclosed that the United States, through administrative action and proposed
legislation, was already contemplating constructive steps in this field. Canadian
representatives stated that the Canadian Government would undertake a further
review of the administrative operation of its Customs Act in the light of these
discussions. As to tariff rates, it was noted that high tariffs were clearly inconsistent with the position of creditor countries. There had already been significant
and substantial reductions in U. S. tariffs during the last fifteen years. The policy
of the United States Government was to seek further negotiation of trade agreements through which additional reductions might be made, witliin the framework
of the Reciprocal Trade Agreements Act.
12. There was agreement that one of the ways in which the competitive position
of United Kingdom products might be improved was by a widening of the area in
which such products competed freely with those of other countries. In this connection as an initial step toward a more general liberalization the United Kingdom
delegation outlined its proposals fpr liberalizing trade with countries with which
it did not have balance-of-payments difficulties, and raised the question whether
the provisions of section 9 of the Anglo-American Financial Agreement, and
article 5 of the Anglo-Canadian Finaricial Agreement presented an obstacle to
such a plan. It was the view of the United States and Canadian delegations that
such liberalization of United Kingdom import regulations should be considered
since the United Kingdom shortage of dollars should not in itself force the United
Kingdom to reduce its purchases from areas with which it does not have a shortage
of means of payment. It was agreed that any United Kingdom import regulations
as they affect United States and Canadian products would be the subject of
continuing review by representatives of the three Governments through continuing
facilities for consultation.
13. (a) A further subject which was discussed was the United Kingdom
liability represented by the sterling balances of other countries. A large number
of countries have been accustomed to hold either all or a part of their foreign-exchange reserves in the form of sterling. The existence and availability of such
holdings are an integral feature of the widespread multilateral use of sterling for
the purpose of financing international trade. One of the problems of the postwar >
period has been the existence of exceptionally large accumulations of sterling which
were built up, mainly during .the war, as the result of payments by the United
Kingdom for goods and services purchased overseas in furtherance of the common
war effort. In June 1945 these balances amounted to $13V^ billion. Since then
there have been considerable fluctuations both in the total and in the holdings of
individual countries, though the amount outstanding at the end of 1948 was
approximately the same as at June 1945.
(b) In principle the whole of these balances represents a charge on United
Kingdom production of goods and services. In practice, however, a substantial
proportion will continue to be held as reserves by the countries concerned. To
the extent that the balances are liquidated, some proportion of United Kingdom
907795—51

22




320

1 9 5 0 REPORT OF T H E 'SiECRETARY OF T H E TREASURY

production of goods and services is used to discharge this liability instead of to
pay for current imports bf goods and services.
(c) This whole problem in its various aspects, including t h e necessity to provide capital goods for development, was discussed in a preliminary way on t h e
basis of prior technical examination by t h e experts of t h e three Governments.
I t was agreed t h a t this was one of t h e subjects which concerned other countries
and would require further study.
14, Investigation of t h e ways in which t h e sterling area could move toward a
position in which it could earn its own way led to t h e discussion of other special
problems, including petroleum and shippings—two i m p o r t a n t elements in t h e sterling area balance-of-payments picture. T h e United Kingdom representatives set
forth the facts of t h e very large dollar deficit which t h e sterling area presently
incurs because of oil transactions, and their desire to reduce this deficit to t h e
minimum possible level. I t was mutually recognized t h a t t h e question, of oil
production and refining, and geographical distribution raised problems of extreme
complexity involving t h e protection of legitimate interests of t h e rriajor producing
countries and companies. T h e Ministers recognized t h a t these two questions of
petroleum and shipping could not be resolved in t h e short time available to t h e m ,
and t h a t further s t u d y would be required. I n t h e case of petroleum they agreed'
to appoint representatives to analyze t h e facts and to provide t h e basis for s u b sequent discussions.
' 15. There has been agreement on t h e objective t o w a r d which policies should b e .
directed and agreement on certain immediate steps which wiir be t a k e n to bring
t h a t objective nearer. There are, however, as has been emphasized, a number of
questions requiring closer examination t h a n this short conference has allowed. I t
is proposed, therefore, to continue t h e examinations, initiated during t h e conference, of questions on which it is hoped t h a t useful understanding can be reached
" under t h e direction of t h e present Ministerial group. These arrangements for
continuing consultation—supplementing t h e usual channels of communication
between governments—will be used to keep under review t h e effectiveness of
actions already agreed upon and t o prepare, for governmental consideration,
measures which could carry further those adjustments which are considered to be
necessary. I n establishing these arrangements for continuing consultation, t h e
three Governments wish t o emphasize t h a t these arrangements underline rather
than diminish their interest in t h e development of economic cooperation within
the eritire community of western nations. T h e tripartite arrangements will not
in any way encroach upon, or detract from, t h e area of competence of t h e O E E C
and other existing organs of international economic collaboration. On t h e contrary, those arrangements for continuing consultation, by contributing materially
to the solution of problems which t o d a y adversely affect t h e working^of t h e entire
O E E C group and yet are not susceptible of solution within t h a t group, will facilit a t e t h e progress of economic collaboration in t h e wider field.
16, I n s u m m a r y t h e Ministers of t h e three countries concerned are satisfied
t h a t a real contribution to t h e solution of t h e sterling-dollar difficulties has been"
made by t h e conclusions recorded above. T h e y are confident t h a t , with sustained
efforts on all sides and with t h e seizure of every opportunity by sterling-area
exporters to enter into and remain in dollar markets which are open to them, there
is t h e prospect of reaching a satisfactory equilibrium between t h e sterling and
dollar areas by the time exceptional dollar aid comes to an end.




lEt^oaiBiTs
'APPENDIX
THE

321

F

GOLD C O N T E N T OF THE DOLLAR AND THE P R I C E OF GOLD
MEMORANDUM FOR THE P R E S S

T h e following sta,tement was issued in response t o inquiries a t Secretary
Snyder's press coriference of Wednesday, October 5, 1949, concerning t h e legal
a u t h o r i t y to change t h e gold content of t h e dollar arid t h e Treasury's price for
gold.. T h e Secretary again stated t h a t he had no intention of proposing a change
in t h e dollar price of gold. H e reiterated w h a t he had said on m a n y occasions
t h a t he does not perceive any considerations which would justify such an action.
(a) The gold content [of the dollar
Only an act of Congress can now alter t h e s t a t u t o r y gold content of t h e dollar.
T h e gold content of t h e dollar, and hence t h e s t a t u t o r y monetary value of gold
in terms of t h e United States dollar, was defined by t h e Presidential Proclamation
of J a n u a r y 3 1 , 1934, issued under a u t h o r i t y of title I I I , section 43, of the" act
approved M a y 12, 1933, as amended. T h e weight of t h e gold dollar was fixed by
this Proclamation a t 15^^i grains of gold 9/lOths fine, t h a t is, 1/35 of a t r o y ounce
of pure gold (technically referred to as gold 1,000 p a r t s fine). The m o n e t a r y or
s t a t u t o r y value of gold in t h e United States is therefore $35 per fine t r o y ounce.
After several extensions t h e a u t h o r i t y of the" President by proclamation further
to change t h e gold content of t h e dollar expired on J u n e 30, 1943.
(6) The price of gold
T h e Secretary of t h e Treasury has a u t h o r i t y under sections 8 and 9 of t h e Gold
Reserve Act of 1934, as amended, with t h e approval of t h e President, to purchase
and sell gold a t such rates and upon such terms and conditions as he m a y deem
most advantageous to t h e public interest.
T h e a u t h o r i t y of t h e Secretary of t h e Treasury in this respect, however, is
limited by a number of factors. First is t h e obligation undertaken by t h e United
States as a member of t h e I n t e r n a t i o n a l M o n e t a r y F u n d . Article IV, section 2
of t h e Articles of Agreement of t h e International Monetary F u n d provides:
' ' T h e ' F u n d shall prescribe a margin above and below par value for t r a n s actions in gold by members, and no member shall buy gold a t a price above
par value plus t h e prescribed margin or sell gold a t a price below par value
minus t h e prescribed margin."
T h e F u n d has prescribed a margin of }^ of 1 % above and below t h e p a r value
for purchases and sales of gold. Accordingly, t h e United States has an obligation
to t h e International Monetary F u n d not to purchase gold at more or sell gold a t
less t k a n $35 plus or minus t h e prescribed margin so long as t h e par value of the
dollar declared to the F u n d remains unchanged. T h e par value of t h e dollar can
be changed only p u r s u a n t to t h e provisions of t h e Articles of Agreement and the
Bretton Woods Agreements Act, which requires the approval of Congress for any
such change. Section 5 of t h a t act provides t h a t neither t h e President nor any
person or agency shall propose to t h e International Monetary F u n d any change
in t h e par value of t h e United States dollar or approve any general change in par
values unless Congress by law authorizes such action.
E v e n without t h e legal obligation to t h e International M o n e t a r y F u n d there are
i m p o r t a n t considerations of policy which, in effect, circumscribe t h e discretion
of t h e Secretary of t h e Treasury to change the price of gold. T h e gold policy
of the United States has been directed primarily to maintaining a stable relation
between gold and t h e dollar.




.322

1950 REPORT OF THE SECRETARY OF THE TREASURY

Since 1934 the United States has firmly adhered to the requirements of an
international gold bullion standard. We have done so by buying and selling gold
freely at a fixed price, $35 an ounce, in transactions with foreign governments and
central banks for all legitimate monetary purposes.
The importance which the United States attributes to the maintenance of a
stable dollar price for gold is demonstrated by other legislative provisions. The
gold parity statutes contained in the Gold Standard Act of 1900 and the act of
May 12, 1933, provide that the gold dollar ''shall be the standard unit of value
and all forms of money issued or coined by the United States shall be maintained
at a parity with this standard and it shall be the duty of the Secretary of the
Treasury to maintain such parity."
[Omitted from this exhibit is part of appendix A, which includes sections of the
Bretton Woods Agreements Act and of the Foreign Assistance Act of 1948
relating to the National Advisory Council, which sections were printed in the
Annual Reports of the Secretary ofthe Treasury for 1945 and 1948, respectively.
Omitted also are appendixes B, C, and E, which include tables on estimated gold
and short-term dollar resources of foreign countries as of June 30, 1949, gold
transactions between the United States and foreign countries, January 1, 1945,
through September 30, 1949, United States Government assistance to foreign
countries, July 1, 1945, through June 30, 1949, and membership and quotas in the
International Monetary Fund and membership and subscriptions in the International Bank for Reconstruction and Development, September 30, 1949. Corresponding tables containing data through December 31, 1949, and membership
information as of March 31, 1950, are published in the appendixes, of the National
Advisory Council report covering operations from October 1, 1949, through
March 31, 1950, which is printed as exhibit 29. The appendixes in exhibit 29 are
published in full except the sections of the legislation referred to above.]




EIXHIBITS

.

323

Exhibit 28.—Second Special Report of the National Advisory Council on the
operations and policies ofthe International Monetary Fund and the International
Bank for Reconstruction and Development covering the two-year period ended
March 31, 1950
[House Document No. 611, 81st Congress, 2d session]

LETTER OF TRANSMITTAL
To the Congress of the United States:
In accordance with section 4 (b) (6) of the Bretton Woods Agreements Act, there is transmitted herewith the Second Special Report on
the operations and pohcies of the International Monetary Fund and
the International Bank for Reconstruction and Development.
HARRY S . TRUMAN.
T H E W H I T E H O U S E , May

31,

1950.

LETTER OF SUBMITTAL
T H E SECRETARY OF THE TREASURY,

Washington, May 12,1950,
The

PRESIDENT,

The White House,
Section 4 (b) (6) of the Bretton Woods
Agreements Act directs the National Advisory Council to submit
every 2 years a special report on the operations and policies of the
International Monetary Fund and the International Bank for Reconstruction and Development. The first such report was submitted in
May 1948. As in the case of the First Special Report, the present report discusses the specific'questions raised by this provision of the law,
particularly the extent to which the Fund and Bank have achieved
the purposes for which they were established and the degree to which
these institutions have served the interests of the United States and
the world in promoting sound international economic cooperation and '
furthering world security.
In accordance with section 4 (b) (5) of the Bretton Woods Agreements Act, the Council will submit a separate report, along the lines
of previous 6 months' reports, on the activities of the Fund and Bank
during the period October 1, 1949, to March 31, 1950.
Faithfully yours,
M Y D E A R M R . PRESIDENT:




JOHN W .

SNYDER,

Chairman, National Advisory Council on
International Monetary and Financial Problems.

324

195 0 REPORT OF THE SiECRETARY OF THE TREASURY

SECOND SPECIAL REPORT OF THE NATIONAL ADVISORY
COUNCIL ON THE OPERATIONS AND POLICIES OF THE
INTERNATIONAL MONETARY FUND AND THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT COVERING THE TWO-YEAR PERIOD ENDED
MARCH 31, 1950
CHAPTER I.

INTRODUCTION

The National Advisory Council is directed by section 4 (b) (6) of
the Bretton Woods Agreements Act biennially to submit a special
report to the President and the Congress on the operations and policies
of the International Monetary Fund and the International Bank for
Reconstruction and Development. These reports are to cover ^Hhe
exigent to which the Fund and the Bank have achieved the purposes
for which they were established; the extent to which the operations
and policies of the Fund and the Bank have adhered to, or departed
from, the general policy directives formulated by the Council, and
the Councirs recommendations in connection therewith; the extent
to which the operations and policies of the Fund and the Bank have
been coordinated, and the Councirs recommendations in connection
therewith; recommendations on whether the resources of the Fund
and the Bank should be increased or decreased; recommendations
as to how the Fund and the Bank may be made more effective;
recommendations on any other necessary or desirable changes in the
Articles of Agreement of the Fund and of the Bank or in this act;
and an over-all appraisal of the extent to which the operations and
policies of the Fund and the Bank have served, and in the future
may be expected to serve, the interests of the United States and the
world. in promoting sound international economic cooperation and
furthering world security.'[^
In the period intervening since the submission of its First Special
Report, the Council has submitted to the President and to the Congress, in accordance with section 4 (b) (5) of the act, four semiannual
reports on its activities. In each of these reports there has been*
included a discussion of the principal matters of interest in relation
to the Fund and the Bank. These matters will not be covered again,
except insofar as they are directly related to the broader questions of
policy discussed in the present report.^
In its First Special Report the Council noted the extensive economic
difficulties of the world consequent upon the war. At that time the
economies of many countries, particularly in Europe, were suffering
from shortages of raw materials and fuels, attrition of capital equipment,, and disorganization of production and of trade both within
countries and among countries. The report noted various ways in
which the world had been attempting to cope with the problems of
production, trade, and employment, and also summarized very briefly
the United States contributions to the process of reconstruction. The
First Special Report was presented after the Congress had passed the
1 Public Law 142, 81st Cong., which amended portions of the National Bank Act and the Bretton Woods
Agreements Act, as amended, requires this report to include additional matters regarding the International .
Bank. These questions are treated on page 329.
» This report covers the 2-year period ending March 31,1950.




EXHIBITS

325

enabling legislation for the European Recovery Program, but before
appropriations for the Program had been made.
Partly as the result of reconstruction programs sponsored by the
United States, the economic situation of the world at the present time
appears far more satisfactory than when the previous report was submitted. In Europe particularly great strides have been made in the
recovery of production. With the recovery of production there has
also been a recovery in world trade, though the recovery of trade has
probably not. reached the point of expansion that had been expected
by the Bretton Woods Conference.
The Articles of Agreement of the International Monetary Fund were
predicated on the expectation that within a period of a few years following the end of hostilities, world trade would be restored to a multilateral basis, with the ehmination by the member countries of restrictions on international payments for current account. It was expected
that the currencies of the world would again become convertible fpr
mternational transactions on current account. These expectations
have not been realized. On the contrary, a large and persistent disequihbrium in the dollar accounts of most countries in the world
required them to draw heavily on their gold and dollar'reserves. This
not only gave rise to the need for special aid, such as the E R P , but
greatly retarded the rate of progress which countries found it possible
to make in eliminating exchange and trade restrictions and restoring
effective currency convertibihty. Consequisntly, the Fund and the
Bank have continued to operate in a world of restrictions and thus
have been unable fully to realize their objectives and to carry out their
activities in the way that was contemplated. In brief, the transitional period contemplated by the Articles of Agreement has continued
to the present time and may be prolonged until a substantial part of
the members of the Fund can undertake the obligations of article V I I I
of the Fund Agreement. This situation has been reflected in the pohcies and activities of these institutions..
It was recognized by the Bretton Woods Conference that the elimination of exchange restrictions of itself would prove inadequate tb
the attainment of the Fund's purposes of expanding world traide and
nondiscriminatory currency practices unless barriers to trade in the
form of quantitative restrictions, import and export controls, and
similar devices, which easily could negate freedom of exchange transactions, also were drastically reduced. The Conference in its Resolution VII inter alia called upon the nations to deal internationally with
the problem of reducing trade regulations and restrictions and other
nonfinancial barriers to world trade, and section 14 of the.Bretton
Woods Agreements Act declared that it was the policy of the United
States to bring about further international economic cooperation to
attain these ends.
After a succession of conferences a Charter for the International
Trade Organization has been formulated and submitted to the Congress and the legislatures of other nations. The code of international
trade practices embodied in the ITO Charter will form a valuable
adjunct to the provisions of the Fund Articles regarding international
currency and exchange practices. Under the proposed ITO Charter
the Fund is given certain responsibilities with regard to balance-pfpayments questions arising under the Charter. Special exchange




326

1950 REPORT OF THE SECRETARY"^ OF THE TREASURY

agreements with the ITO are to be required in the case of countries
not members of the Fund so that they assume obligations in exchange
matters comparable to those of Fund members. The ITO Charter
provides for consultation and cooperation between the ITO and the
Fund in other matters of common interest. The combined activities
of these organizations should eventually bring closer to reahzation
their common ideal of expanding multilateral trade intended to raise
levels of production and real income throughout the world and should
contribute to the stability of the flow of income among the nations.
Pending the entry into effect of the ITO Charter, 26 countries have
entered into a General Agreement on Tariffs and Trade, and additional
countries are in process of adhering to this Agreement. The countries
making this General Agreement have agreed to certain international
trade practices as immediate steps looking forward to the entry into
force of the more permanent provisions of the ITO Charter and have
agreed upon mutual reductions in tariffs and elimination of certain
quantitative restrictions on the movement of international trade.
There are also provisions for consultation with the Fund in trade
matters related to the balance of payments of the signatories and for
special exchang.e agreements with countries not in the Fund.
TABLE I.—Member countries of the International Monetary Fund and the International Bank for Reconstruction and Development, as of Mar. 31, 1950
Australia
Austria
Belgium
Bolivia
Brazil
Canada
Chile
China
Colombia
Costa Rica
Cuba
Czechoslovakia
Denmark
Dominican Republic
Ecuador
Egypt

El Salvador
Ethiopia
Finland
France
Greece
Guatemala
Honduras
Iceland
India
Iran
Iraq
Italy
Lebanon
Luxembourg
Mexico
Netherlands

Nicaragua
Norway
Panama
Paraguay
Peru
Philippines
Syria
Thailand
Turkey
Union of South Africa
United Kingdom
United States
Uruguay
Venezuela
Yugoslavia

In the last 2 years two additional members have joined the International Bank and the International Monetary Fund, and one,
Poland, has withdrawn, so that tbey have a present membership of
47 countries. Of the original signatories only Haiti, Liberia, New
Zealand, and the Soviet Union have not become members, while
Austria, Finland, Italy, Pakistan, Thailand, and Turkey, which did
not participate in the Bretton Woods Conference, have been admitted
to membership.^ .
CHAPTER

II.

T H E INTERNATIONAL BANK FOR RECONSTRUCTION
DEVELOPMENT

AND

The International Bank was established to make and guarantee
loans for postwiar economic reconstruction and the economic development of its member nations as a means of realizing the liiore general
3 Haiti, Liberia, and Pakistan have been admitted to membership but have not as yet assumed the obligations of members by signing the Articles of Agreement and paying their subscriptions.




EXHIBITS

327

objectives of international economic cooperation, the growth of international trade, the maintenance of equilibrium in the balances of
payments of members, and raising the standards of living of the
member countries.
1, CAPITALIZATION AND FINANCING OF THE B A N K ' S

OPERATIONS

The Articles of Agreement of the Bank authorize a c&pital of 10
billion dollars. The original signatories were to subscribe 9.1 billion
dollars of this amount, with the balance available for such new members as might eventually be admitted. The present subscribed
capital of the Bank is $8,348,500,000. The capital of the Bank
consists of three portions: (1) 2 percent of each member's subscription paid in gold or dollars, except that those countries formerly
occupied by the enemy may defer part of their payment; (2) 18 percent of the capital paid iri the member's own currency; and (3) 80
percent of the capital subject to call only to meet obligations of the
Bank and payable in the currency required by the Bank to meet its
obligations. On the 2 percent payment, the total received has been
$162,055,000 and $4,915,000 has been deferred. Of the total paid in
capital, equivalent to $1,664,785,000, the United States has paid in
$635,000,000. Gold and dollar payments by other countries have
provided the Bank with $98,555,000 which can be used without
restriction for lending operations. The 18 percent payment may be
used only with the consent of the member country.
The United States Government, acting through the National Advisory Council, has given its consent to the use of the subscription of
the United States. The Governments of Belgium, Canada, Denmark, arid the United Kingdom have also authorized the use of part of
their capital subscription for lending purposes in amounts aggregating
the equivalent of about $13,300,000.* While the Bank has been
anxious to secure permission from the member governments to use
their capital subscriptions for lending purposes, governments other
than those specified have not as yet seen fit to grant such permission.
In accordance with section 7 (c) of the Bretton Woods Agreements
Act and article V, section 12, of the Bank Agreement, the United
States substituted noninterest-bearing notes for that part of the
United States subscription not currently needed in the Bank's operations. In consequence of the Bank's use of the United States subscription for making loans, the entire amount of the United States
subscription has now been converted into cash so that no notes of this
issue are outstanding at this time.
The Bank may make direct loans from the portion of the capital
subscribed and paid in by the members, or from borrowed funds.
The Bank has issued securities on the market in the United States and
in Switzerland, a nonmember country. As noted in previous reports
of the Council, the United States has given the Bank permission, in
accordance with the Articles, to float securities in the United States
market. On July 15, 1947, the Bank issued $100,000,000 par value
of 10-year 2% percent bonds due July 15, 1957, and $150,000,000 of
25-year 3 percent bonds due July 15, 1972. On January 25, 1950, the
Bank, after permission had been granted by the Council, sold an issue
* In addition to this amount the United Kingdom has'agreed, in principle, to the release of an equivalent
ofi$2,800,000, subject to speciflc approval in individual cases as they arise.




328

195 0 REPORT OF THE SECRETARY OF THE TREASURY

of $100,000,000 of 2 percent serial bonds which will mature at an
annual rate of $10,000,000 between 1953 and 1962. These bonds
were issued to retire the outstanding 10-year 2!^ percent bonds. While
the first issues of the Bank's securities were sold directly to investors,
the ,1950 issue was sold by competitive bidding to a syndicate of banking houses, including commercial banks. Since the coupon rate was
reduced by V percent and the new bonds were sold to the syndicate
i
at a premium of $559,000, the cost of money to the Bank has been
reduced more than $1,250,000 annually. At the same time the
maturities of the bond issues will correspond more closely to the serial
repayments of loans to the Bank.
The Bank has also issued two series of bonds denoihinated in
Swiss francs. In 1948 the Bank sold an issue of 2]^, percent bonds in
the amount bf 17,000,000 Swiss francs (equivalent to approximately
$4,000,000) to the Bank for International Settlements, and in 1950
an issue of bonds with the same coupon rate in the aggregate amount
of 28,500,000 Swiss francs (approximately $6,600,000), was sold to a
group of Swiss banks. Both of these issues were purchased by the
banking institutions for investment purposes and were not offered to
the public. The bond issues were floated to obtain Swiss francs to
enable the Bank to provide funds for certain purchases of Swiss
materials and equipment and to extend the market for the Bank's
securities.
:
'
:
The loans made by the Bank up to the present time have been
derived from the capital subscription of the United States and, to a
very small extent, from the capital funds provided by other countries.
The total loans made by the Bank to March 31, 1950, less cancellations,
have amourited to $737,700,000, of which $595,000,000 has been disbursed, while the amount available from members' subscriptions for
loan purposes has aggregated $746,900,000. The bulk of the funds
obtained by the sale of securities has not as yet been loaned, and the
Bank has invested the proceeds along with other surplus cash in
United States Government obligations to a total amount of
$433,600,000, as of March 31, 1950. These investment securities
have earned over $4,000,000 per annum for the Bank. The accumulated interest from these investments and other earnings of the Bank
are available for additional loans by the Bank, since the Board of
Governors at the annual meetings has voted not to distribute the
Bank's current earnings, thus providing additional security for Bank
obligations.
The Articles of Agreement of the Bank also authorize the Bank to
guarantee loans made through private investment channels, as well as
to guarantee securities in which it has invested, in order to facilitate
resale to private investors. The original expectation that a considerable part of the Bank's business would take the form of guaranties of
privately floated loans has not been realized in practice, under the
conditions prevailing iri the world. In two instances, however, the
Bank has resold to private investors with its guaranty, securi ties received under its loan agreements. In 1948 the Bank made a series of
loans to four Netherlands steamship companies in an aggregate
amount of $12,000,000. The securities arising from these loans were
subsequently sold to a group of American commercial and savings
banks. Similarly, the bgnds arising from a iQan of $16^Q0O,,OQQ madQ.




EXHIBITS

329

directly.to the Kingdom of Belgium were resold at private sale to a
group ojE New York savings banks and a life insurance company. The
National Advisory Council, on behalf of the United States Government, approved of these sales of securities in the markets of the
United States.
Section 15 (b) of the Bretton Woods Agreements Act, as amended
by Pubhc Law 142, Eighty-first Congress, requires that the biennial
special reports of the Council shall cover the effectiveness of the provisions of section 15 (a) of the act and the exemption for securities
issued by the Bank, provided for by section 8 of the National Bank
Act, in facilitating the operations of the Bank, and the recommenda-,
tions of the Council as to any modifications it may deem desirable in
the. provisions of the act.
Section 15 (a) of the amended act exempted the securities of the
Bank from certain provisions of the Securities Act of 1933 and the
Securities Exchange Act of 1934 on condition of .filing reports with
the Securities and Exchange Commission. This amendment was
supported by the Council in order to facilitate the wider distribution
in the United States of securities issued or guaranteed by the International Bank. Since enactment of the amendment in June 1949,
the Bank has distributed only one issue of its securities, the $100,000,000 of bonds maturing serially from 1953 to 1962 mentioned above,
which was sold in January 1950 at competitive bidding to a syndicate
consisting of 99 investment bankers and 37 commercial banks. The
participation of the commercial banks was made possible by the
amendment to the National Bank Act.
In view of the short time that has elapsed and the fact that there
has been only one issue of the Bank's bonds since the adoption of the
amendment, the Council does not believe it possible as yet to judge
the effectiveness of section 15 (a) in securing a wider distribution of
the Bank's securities and, accordingly, does not at this time recommend any change.
2. THE

B A N K ' S LOANS

As of March 31, 1950, the Bank had made loan commitments (less
cancellations) of $737,700,000 including a loan of $12,500,000 which,
however, has not as yet become effective. The Bank retained in its
portfolio $697,100,000 in securities arising from these loan transactions.
During the first 2 years of its operations the Bank's loans were
predominantly reconstruction loans made to the governments of
European countries, or their agencies, i. e., France, the Netherlands,
Denmark, and Luxembourg. In the case of France, the Netherlands, and Denmark, the loans made in 1947 were general purpose
reconstruction loans which assisted these countries in carrying on
their reconstruction programs, and enabled them to secure needed
supplies of materials and equipment in the United States. The loan
to Luxembourg (1947) was to finance construction work for a steel
mill and to provide rolling stock for railways. The Council, through
the United States Executive Director, favored these loans, which
made a valuable contribution to European recovery. I t became
clear, however, that the magnitude of the European recovery problem
was far greater than had originally been anticipated and that the
needed program could not be financed entirely or predominantly on a




330

1950 REPORT OF THE SEORETARY OF THE TREASURY

loan basis under the conditions set in the Bank's Articles of Agreement.
For this reason, among others, the Council favored the European
recovery proposals which were submitted to the Congress and enacted
into law in 1948. The International Bahk loans proved of great value
in that they financed some of the most pressing reconstruction needs
in the earlier period.
Since the beginning of the operations of the Economic Cooperation
Administration program of grants and loans, the International Bank
has made only a few special purpose loans to European countries.
These were loans to the Netherlands steamship companies for the
purchase of ships, and to Belgium for steel mills and power plants.
/^The Bank has also made loans to the Repubhc of Finland and the
Bank of Finland (guaranteed by the Republic) for timber equipment,
the modernization of the woodworking industry, electric power, and
limestone production. J n 1949 it also made a loan to Yugoslavia
for timber equipment. The loans to Finland and Yugoslavia are part
of a project for relatively short-period financing of the purchase
of timber equipment which would enable these, countries to produce
and export to western Europe timber needed in the process of European
economic reconstruction. These loans should be of benefit to both
the borrowing countries and the countries cooperating in the European
Recovery Program.
In the last 2 years the Bank has directed its major attention to
development loans, particularly in Latin America. Thus, loans were
made to Chile for hydroelectric and irrigation installations and the
procurement of agricultural machinery. The loan to the Brazilian
Traction, Light & Power Co., Ltd., guaranteed by Brazil, was for power
and telephone installations, and the loan to Mexico was for power
plants and power distribution. The Bank has also approved a loan
to El Salvador for a hydroelectric plant and power-distribution
equipment, thou^'h this loan has not as yet become effective. The
loan to Colombia was for agricultural machinery. The Bank has also
made a loan to India for railway rehabilitation and land-reclamation
machinery, which will contribute to the badly needed agricultural
development of the country. These loans mark an important step
in the development of the Bank's lending policy. They were made
tq underdeveloped countries for carefully planned projects intended
to increase their economic productivity over a period of time. The
Council, in concurring in the granting of these loans, has looked with
favor on the extension of the Bank's activities to the underdeveloped
countries in the behef that the raising of the productivity of their
economies will contribute to world economic prosperity and stability.
In addition to the loans which have been made, the Bank has a variety of applications before it from other countries for various projects. As a general practice, the Bank considers that it is desirable
in the interest both of the borrower and of the Bank to have proposed
projects carefuhy examined on the spot by groups of te°chnicians
designated by the Bank. These studies have frequently resulted in
a reformulation of the project so that some of the projects have been
improved or their cost reduced. Many members without specific
loan projects in view have asked the Bank for technical assistance in
the survey and study of their economies and their prospects for
development.




EXHIBITS

331

TABLE II.—Status of International Bank loans, as of Mar. 31, 1950
Loan commitments

Borrower
Totai, All L o a n s . . . . . .

_

Credit National (France)......
Kmgdom of The Netherlands...
.'
Brazilian Traction, Light & Power Co., Ltd..
Republic of India...
Kingdom of Denmark...
^
Financiera and Comision (Mexico)»...
Kingdom of Belgium._.__._..
Corporacion de Fomento (Republic of Chile)
Herstelbank (Netherlands)
.
Rio Lempa Hydroelectric Commission (El Salvador)
Bank of Finland
.-...J..
Netherlands shipping companies.._
Grand Duchy of Luxembourg....
Cajade Credito (Colombia)._._..
Yugoslavia__
1.^
Republic of Finland

Disbursements

$737,706,983

$594,986,266

250, 000,000
195, 000, 000
75, 000, 000
44, 000,000
"40,000,000
34, 100, 000
16, 000, 000
16, 000, 000
800, 000
2 8,
12, 545,000
12, 500,000
12, 000, 000
< 11.761,983
5,000, 000
2, 700,000
2,300,000

250, 000,000
195,000,000
31,338,474
26, 710,118
40, 000, 000
10,185, 330
8, 739, 524
4, 891. 304
565, 616
1, 327, 599
12,000,000
11. 761, 983
866, 909
1. 584, 548
14. 861

Unused balance of commitments
$142,720,717

43, 661. 526
17, 289, 882
23, 914. 670

7. 260,476
11,108.696
8, 2.34, 384
12,545,000
11,172, 401
4,133, 091 '
1.115,452
2. 285,139

' Nacional Financiera and Comision Federal de Electricidad are joint borrowers.
2 After cancellation of $6, 200,000, effective Mar. 17, 1950.
* Agreement becomes effective after the Bank has received certain certificates and documents, and has
notified the borrower and guarantor of its acceptance of such evidence.
< After cancellation of $238,017, effective Dec. 19, 1949.
NOTE.—in all instances, loans have been made to or guaranteed by the respective governments.
Source: Intemational Bank for Reconstruction and Development.

The National Advisory Council is of the opinion that the Bank;
has contributed to the economic development of underdeveloped
countries both through its loans and through its technical advice
and assistance. The Council believes that the Bank should play an
increasingly important role in this pattern of development and that
it can be especially valuable in assisting the member countries to
direct their economic development in ways which will effectively
contribute to raising standards of hving and improving levels of
production. Properly conceived development projects will also, by
increasing productivity, help these countries in financing their foreign
exchange needs.
The President of the United States has emphasized the importance
of technical assistance to the underdeveloped countries in the Point
IV Program, which is under consideration by the Congress. The
Bank's activities in this field are a valuable contribution to economic
development, fully consonant with the United States international
program. The Bank, by using technicians from various countries,
can give programs of technical assistance the benefit of wider experience than would be available from the United States alone." In this
connection it is significant that the Bank has entered into cooperative
arrangements with the International Monetary Fund and with the
United Nations for the provision of technical advice to member
countries and for undertaking technical studies directed toward
economic development. I t is expected that the Technical Assistance
Program will help to overcome'some of the barriers to sound development loans to underdeveloped countries, and will provide considerable
assistance to countries in the presentation of projects which will rneet
the loan criteria of the Bank. In this way it is hoped that the Point
IV Program will niake possible a more, rapid rate of expansion of loans
by the Intemational Bank.




332

1 9 5 0 REPORT OF T H E SECRETARY OF T H E TREASURY
3. BANK ADMINISTRATIVE MATTERS

The organization of the Bank was provided for in the Articles of
Agreement. Its Board of Governors meets annually and the conduct
of affairs between meetings of the Governors is in the hands of the
Executive Directors, to whom the Governors have delegated all of their
powers except those which have been reserved exclusively to the
Governors by the Articles of Agreement. The five countries with the
largest subscriptions have the privilege of naming Executive Directors
to represent them, while the remainder of the Board is elected by the
countries with smaller subscriptions. Thus, the elected Directors
represent several countries, with the number varying from 2 to 10.
Each Director in turn appoints an Alternate Executive Director who
nfeed not be a national of the same country as the Executive-Director.
In some instances the Executive Director and his Alternate have been
nationals of different countries thus giving greater representation to
the group of members electing the Director.
The Bank's Articles provide that the Executive Directors shall '^function in continuous session at the principal office of the Bank and shall
meet as often as the business of the Banlc may recjuire" (art. V, sec.
4 (e)). The experience of the 4-year period has indicated that the
business of the Bank is not such as to require frequent sessions of the
Executive Directors. The active negotiation of loans or the study of
loan projects is carried out by the staff of the Bank, under the President's direction, so that the main function of the Executive Board is
to give general guidance to the President and to determine the terms
of loans after a considerable period of study and negotiation. This
business can be transacted by a Board meeting at less frequent intervals than the Fund Board whose problems and methods of operation
are rather different. Some of the member countries accordingly have
felt that it was undesirable to keep both an Executive Director and an
Alternate on a full-time basis in Washington. Other countries have
believed, however, that their interests in the Bank could be best served
by the retention of full-time Executive Directors and Alternates.
At the annual meeting of the Board of Governors in 1948, a Committee of Governors was established to study this question and to submit its findings to the 1949 meeting. After discussion at the 1949
meeting, the Committee was enlarged in membership and directed
to submit a second report to the Governors. This Ad Hoc Committee
in the early part of 1950 reported a plan whereby either the Executive
Director, or the Alternate, but ordinarily not both, representing a
country or group of countries, would be continuously available at the.
seat of the Bank. They would ordinarily be paid on the basis of the
portion of their time actually devoted to the Bank, and might perform
other functions for their countries. Where, however, special circumstances existed, an Executive Director might arrange with the
Bank's president for simultaneous full or part-time service of both
himself and his Alternate. In this way there would be the maximum
of flexibility in the arrangements of the various members. Under the
revision of the bylaws of the Bank, approved by the vote of the
Governors on March 30, 1950, this system will go into effect at the
meieting of the Governors in September 1950.
In line with the objective of the new bylaws, the United States




EXHIBITS

333

Government has appointed as its Executive Director of the Bank an
Assistant' Secretary of the Treasury, who receives no compensation
from the Bank, but carries on the duties of Executive Director in addition to his normal duties in the United States Government. He is
assisted by an Alternate Executive Director who divides his time
between the Fund and the Bank. Somewhat similar arrangements
have been made by a number of other countries, which have designated part-time Directors or Alternates.
The Bank's Articles provide for an Advisory Council of seven or
more persons elected for a 2-year term by the Board of Governors.
This Advisory Council has included representatives of banking, commercial, industrial, labor, and agricultural interests, as distinct from
ordinary national interests as represented in the Board of Executive
Directors. The members have been designated after consultation with
the international organizations in these fields. The Advisory Council
selected in 1948 held sessions in 1948 and 1949, at which it discussed
various problems in connection with the Bank's operations but found
that it was unable to agree upon any recommendations and, in fact, at"
its last session made no formal report to the Bank. It was the opinion of the Chairman of the Bank's Advisory Council, as well as a
majority of the meinbers that, as presently constituted, the Bank's
Advisory Council served little useful purpose. Accordingly', at the
1949 meeting of the Board of Governors, a new set of councilors was
not elected, and the Executive Directors have been instructed to study
methods whereby the intention of the Articles could be more satisfactorily accomplished by a reconstitution of the Council through a
different selection of members, or otherwise. The National Advisory
Council concurs substantially in the conclusion that the Bank's
Advisory Council in its present organization and with its present terms
of reference has not made a valuable contribution to the work of the
Bank,
4. FISCAL RESULTS

The International Bank was established as a cooperative venture
in financing reconstruction and development. As such, it was not a
primary objective that the Bank should earn a large profit but merely
that its operations should be conducted with a prudent regard to the
interests of all of the member nations, the soundness of its loans, and
the safety of the securities sold by it to the public. During the first
period of its operations, before interest on loans accrued to the Bank
in large amount, the Bank operated at a loss, amounting in the fiscal
year ending June 30, 1947, to $938,600. Since that period, however,
the Bank's income has increased, so that in the fiscal year ending
June 30, 1948, there was an excess of income over expenses of
$4,100,000; in thefiscal year 1949 of $10,600,000; and in°the 9-month
period ending March 31, 1950, $9,900,000. Thus, though it was not
intended as a profit-making institution, the Bank has been able to
add to its surplus which, on March'31, 1950, stood at $23,500,000.
In addition, the special reserve held against the Bank's habilities
amounted to $12,200,000. For the 9 months ending March 31, 1950,
the lending operations of the Bank (interest, commissions, commitment, and other incidental charges) produced gross revenue of
$19,200,000. Of this amount $4,200,000, equal to the commissions,




334

. 1 9 5 0 EEPORT OF THE^ SECRETARY OF THE TREASURY

was added, in accordance with the Articles, to the special reserve
a2:ainst the Bank's liabilities. The funds derived from the sale of its
securities and other funds not immediately needed in the Bank's
operations, as well as the special reserve fund, have been invested in
United States securities which, in the 9-month period, yielded an
income to the Bank of $3,800,000. Expenses for this period aggre-^
gated $8,900,000.
At their annual meetings, the Board of Governors has voted not
to distribute the net income of the Bank but to add this income to
the Bank's operating funds. If a dividend were to be declared, the
Bank's Articles of Agreement provide for a preferred dividend of up
to 2 percent of the amount of a member's subscription used in loans.
Since the bulk of the loans has been made in United States dollars,
the bulk of any dividend would thus accrue to the United States
Government. In the opinion of the National Advisory Council it
has been preferable to keep the Bank's earnings available to the Bank
to add to its available capital and surplus as an additional guaranty
. of. the Bank's obligations which have been issued on the market, and
to provide additional funds against the contingency of possible default,
5. C O N C L U S I O N S A N D

RECOMMENDATIONS

The National Advisory Council believes that the Bank has made
considerable progress in carrying out the functions entrusted to it
by the Articles of Agreement. The loans made by the Bank in the
initial period of postwar reconstruction have been of value in assisting
the recovery of the European countries. From the vantage of the
present time, it is apparent that the total requirements of the European countries for goods needed to restore their economies to approximately prewar levels have involved funds far in excess of the amount
which could be supplied by the Bank under the terms of its Articles
and the conditions of financial markets. The foreign economic
assistance programs of the United States since 1945 have amounted
to several times the total authorized capital of the International Bank.
Moreover, it is also clear that it would have been practically impossible to finance the European Recovery Program on a loan basis without greatly impairing the future balance-of-payments position of the
participating countries and creating international financial difficulties
in future years, in view of the problem of prospective world balances
of payments. The Bank, however, may be expected in the future
to make loans to European governments or to enterprises whose •
loans win be guaranteed by governments.
,The Bank is niaking an increasing contribution to the economic
development of underdeveloped member countries. It has made
loans for hydroelectric and other power projects which should increase
the productive capacity of the borrowing countries. It has made
loans for agricultural development programs which should add to the
ability of the borrowing countries to feed their populations and to
provide commodities for export. The Bank has also, through its
missions and technical advice, rendered an important, though perhaps less tangible, service to the member countries. The Council
heartily supports these activities of the Bank.
The Articles of Agreement predicate that the Bank would be able




EXHIBITS

335

to finance loan programs principally by the sale of its securities in the
financial markets of the member countries. Under the conditions of
currency inconvertibility and the maintenance of exchange and other
controls, particularly on capital transactions, which have prevailed
up to the present, the Bank could, in practice, raise capital funds in
large amount only in the American financial market. The Bank has
obtained a small amount of Swiss franc funds and it has been authorized to use a very small percentage of the capital subscription of
countries other than the United States. It does not appear that for
the immediate future the Bank will be able to obtain nondollar funds
in an amount large enough to add greatly to its lending capacity.
The Council believes that the methods of consultation with the
United States representatives on the Bank and other agencies engaged
in international financial transactions have provided satisfactory
coordination in the light of the broad objectives of United States international policy. In its opinion the operations of the Bank have contributed to promoting international economic cooperation and furthering world security. The Council does not believe that the United
States subscription to the capital stock of the Bank should be changed
at this time, nor does it wish to propose amendments to the Bank's
Articles of Agreement. The improvement of world . conditions will,
it is hoped, give the Bank a more important role in furthering international investment as an aid to world security and to improvement
in the standards of living of the member nations.
CHAPTER I I I .

T H E INTERNATIONAL MONETARY F U N D

The International Monetary Fund is an organization intended to
promote international monetary cooperation and to assist in the
expansion of productive world trade by promoting exchange stability
and maintaining orderly exchange arrangements. In carrying out its
functions it may aid members by selling foreign exchange to them,,
under adequate safeguards, to assist them in correcting temporary
maladjustments in their balances of payments without resorting to
measures destructive of national or international prosperity.
The Articles of Agreement of the International Monetary Fund were
predicated on the expectation that after a relatively brief period of
transition extending over a few years after the war, the world would
make rapid strides toward multilateralism in exchange and trade.
Recognizing that changes would come about in stages and that various
types of adjustment would be needed in the light of the diversity of
conditions among the member nations, the Fund was estaiblished as
an international arbiter of exchange practices and as an instrument
for discussion and mutual cooperation among the members. The
actual postwar conditions have been far removed from the ideal situation for the Funcl, and, as a consequence, its policies and operations
have necessarily reflected the unstable and restrictive conditions of
the postwar world. Some countries have found it possible to remove
some or even most of the exchange restrictions imposed during the
war. But all except five countries have availed themselves of the
right to retain exchange restrictions, and a number of countries have
intensified restrictions. I t cannot so far be said that the total
907795—51

23




336

195 0 REPORT OF THE SECRETARY OF THE TREASURY

movement has been large in the general^ direction of unrestricted
convertibility of currencies.
Under these conditions most of the world currencies have, been
inconvertible. The Fund, as a pool of currencies and gold, has thus
included a predominance of inconvertible currencies which have not
been in great demand by the member countries. The Fund's transactions, therefore, have been very largely in United States dollars.
Moreover, so far the amount repurchased from the Fund has been
relatively small. I t must be kept in mind that the type of currency
transaction originally envisaged by the Fund's Articles would result
from temporary deficits in balances of payments under conditions in
which exchange markets are dominated by private exchange transactions. In practice, with the extensive systems of exchange control,
import licensing, governmental purchasing programs, and other
forms of direct governmental intervention in international trade,
situations arise in which balance-of-payments deficits result from
governmental planning.
The Fund was not intended to provide long-term loans, nor to
provide funds for reconstruction. I t was intended to aid in the
stabilization of exchange rates by providing temporary assistance to
the members. Under conditions of inconvertibility the drawing of
currency, with little prospect of repurchase within a relatively short
time, is practically equivalent to an unsecured loan with no very
precise conditions for repayment. Under these conditions, the Fund
has found it peculiarly diflicult both to formulate and to administer a
proper and reasonable policy to govern the use of its resources.
I t is understandable that, in any description or evaluation of the
activities of the Fund, emphasis should be placed on the maimer and
extent of the use of its resources. But the Fund also has the task
of interpreting to members the ''code of fair practice" in the field of
foreign exchange policy which is set forth in its Articles of Agreement,
and of serving as impartial and expert adviser to members who are
striving to take the measures most likely to contribute to stability
and equilibrium.
The National Advisory Council has had these problems and changing circumstances in mind in the formulation of United States policy
with respect to the Fund. It has tried to avoid the extreme, on the
one hand, of acquiescing in the virtually automatic use of the Fund's
resources to meet any type of current deficit, while also, on the other
hand, avoiding the extreme of insisting upon such rigid standards as
would practically have suspended the Fund's currency operations
until greater progress had been made toward general convertibility,
particularly of sterling, and toward elimination of exchange restrictions. Thus, in the first period of the Fund's operations the Council
concurred in some Fund drawings, principally by European countries,
in the hope that financial stability might be more rapidly attained
thereby.. As it became apparent that Fund drawings would merely
be one additional source of dollars in a situation of fundamental
disequilibrium which would not be remedied within a few years, the
Council has favored a policy of conservation of the Fund's resources
to the future date at which their use might be more efficacious in
bringing about the realization of the Fund's basic objectives as stated
in the Articles of Agreement.




EXHIIBITS

.

337

As an element-ill this policy, the. Council has urged measures which
would result in the repurchase of their currencies by members drawing
on the Fund so as more effectively to maintain the revolving character of the Fund's pool of currencies. The Council has also emphasized the importance of appropriate levels of exchange rates and
exchange policies as an important means eventually of achieving the
Fund's objectives through the reduction of fundamental disequilibrium
in the international accounts of the mem