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FEDERAL RESERVE BANK OF RICHMOND AUGUST 1965 SALES TAXES IN THE FIFTH DISTRICT State retail sales taxes, virtually unknown in the U nited States 35 years ago, have becom e m ajor sources of revenue in 37 of the 50 states. In 1964, this article, depends on a number o f assumptions. It seems reasonable, though, that som e shifting back should take place. T he tax norm ally raises the re the yield from sales taxes amounted to slightly over $6 billion, roughly one third of total state tax revenues in states em ploying this type of tax. tail prices of the good s and services to which it ap plies and might be expected to restrict consumption of some o f them. Insofar as consum ption is reduced, T he m ajority of A m erican sales taxes were in troduced during the early and middle 1930's, as states sought new sources o f revenue to compensate few er w orkers will be needed and dow nw ard wage for sharp drops in the yields of older taxes. litical pressure for property tax reduction P o also spurred adoption. In many instances, levies on sales came into being as tem porary measures but soon became permanent. T he Fifth District states o f W est V irgin ia and N orth Carolina were am ong the first in the nation to adopt the sales tax, each levying the tax in 1933. M aryland instituted a retail sales tax in 1935, but repealed it the next year. The retail levy cu r rently in effect in M aryland was passed in 1947. T he District of C olum bia’s sales tax dates from 1949; South Carolina’ s, from 1951. V irginia has no state sales tax at this time, although a few localities have im posed sales levies in recent years, and pressure for a state-wide tax appears to be grow ing. pressures could develop in som e lines o f activity. Sales Taxation vs. Income Taxation P ro p o n e n ts of the sales tax claim that it has a number o f ad vantages over a direct levy on income. Their principal arguments may be summarized as fo llo w s : ( 1 ) Since a sales tax falls only on that portion of incom e spent for consum ption, individuals are en couraged to save m ore than they w ould if an income tax designed to raise the same amount of revenue were im posed. Thus, additional funds are made available for grow th-produ cing private investment. ( 2 ) T he taxing o f consum ption expenditures avoids the negative effect on w ork incentives which may be present in a personal incom e tax. A n in dividual cannot reduce his tax liability by earning less and, therefore, will not be m otivated to w ork less. ( 3 ) T he sales tax is a feasible method o f col General Characteristics A retail sales ta x m ay be defined generally as a levy on consum ption e x penditures, applying at a uniform rate to all or a wide range of consum er purchases. In its usual form , the general sales tax provides an alternative to direct levies on current incom e and to the im position of a system of specific excise taxes falling on particular com m odities. State sales tax rates in lecting som e revenue from the low er incom e brackets. Individuals in these brackets norm ally pay relatively little in the form of direct incom e taxes, yet often benefit from num erous governm ent services. the United States range from 2 % to 4 % . N one of to ascertain and are subject to few er questions of the states single out any particular group of com interpretation than are earnings or incom e figures. modities or services for taxing. M ost, ( 4 ) T he tax is relatively easy to administer. It is collected from a small number of businesses rather than a large number of individuals, and it is collected on the basis of sales figures, which are much easier however, A ll things considered, the m ost telling argument exem pt certain com m odities and services, although in favor of sales taxation at the state level is simply the pattern o f exem ptions is by no means consistent. that it is a practical and acceptable source of addi It is frequently argued that the burden of a retail tional tax revenues. The Federal governm ent is sales tax is borne by the consumer, and most state dominant in the incom e tax field, and many states legislatures have enacted their taxes on this assump are reluctant to rely m ore heavily on direct income tion. Since, in the typical instance, the consum er sees the tax added to the bill for his purchase, wide acceptance of this idea is understandable. A number of well-know n tax theorists argue, however, that at taxation. T h e matter is reduced to the old adage of tax policy which charges the taxing authority to “ pluck the chicken where the feathers com e off most easily.” least part of the burden of the tax is shifted back to Sales Taxation vs. Excise Taxation A s co m p a red the producer and, ultimately, to his employees. This with excise or special sales taxes, the retail sales argument, which cannot be examined in detail in tax has several advantages, all o f which stem from 2 the general nature of the retail levy. These ad vantages may be summarized as fo llo w s : ( 1 ) Because the retail sales tax applies to a wider range of com m odities and services, the rate required to raise a given amount of revenue is lower. ( 2 ) T h e more general tax will be less likely to force changes in consumption patterns. This avoids It is contended by some students of tax policy that individuals simply are not conscious o f the amount of tax that they are paying when the indirect method is used. Presumably, the citizen in a free society should be aware of his tax burden and, at least in a general fashion, weigh the burden of the tax against the benefits of governm ent services, making the result penalizing sellers of the particular com m odities and of his assessment know n on election day. services selected for specific taxation. A lso, if in the absence of any type of consum ption tax, individuals have allocated their spending in a way that gives them maxim um satisfaction, undesirable distortion o f their chosen consum ption patterns is avoided. ( 3 ) Further, the m ore general tax avoids the discrim inatory effects of specific excise taxation. U nder a system of excises, individuals w ho desire to consum e a larger volum e o f taxed items rather than nontaxed items bear a more than proportionate share o f the tax load. W ith the m ore general tax, this does not happen. Objections to the T ax T he most often encountered District Experience W h a te v e r the m erits or disadvantages o f sales taxation, it has proved an effective method o f revenue collection in this District. Last year, the District o f Columbia and the four Fifth District states that em ploy sales taxes collected a total of $428 million through retail merchants. This sum was approxim ately one fifth o f their co m bined total tax revenues. A s shown in the table on this page, yields ranged from $37.5 million in the District of Columbia to $157 million in N orth C aro lina. T he tax was relatively most important in South Carolina where it provided m ore than 3 0 % of total state tax revenue. objection to the general sales tax is that it tends to Between 1952 and 1964, revenues trebled in M ary income land and N orth Carolina and m ore than doubled in brackets w ho spend a larger fraction of their income the District o f Columbia, South Carolina and W est for consum ption and accordingly devote a larger part Virginia. o f their incom e to payment of the tax. V irginia the tax became a relatively m ore important discriminate against those in the low er T he weight attached to this argument depends basically upon the value judgm ents of the individual observer. A second anti-sales tax argument is that it places an inordinate and unfair burden on the retailer who must act as tax collector for the government. The actual burden of this administrative requirement is, o f course, extremely difficult to measure in any meaningful way. Som e merchants operating in states which have adopted sales taxes claim, however, that they have been forced to hire extra personnel just to d o the record-keeping associated with the tax. A third argument against the use of sales taxation is less often voiced, but perhaps m ore significant. RETAIL SALES TAX YIELDS Fifth District States, Fiscal 1963-1964 Retail Sales Tax Yields ($1,000) District of Columbia 37,539 Retail Sales Tax Yields As % Of State Tax Collections 17.3 M oreover, in every state except W est source of funds, as sales tax revenues increased more rapidly than revenues from other taxes. T he grow th of retail sales tax revenues is shown in the charts at the top of page 4. In each of the Fifth District states em ploying the tax, the rate structures applying on small sales, gen erally those o f less than $1, allow the merchant to collect slightly m ore than the 3 % which he must remit to the state. This partially compensates him for the administrative burden of collecting the tax and also provides some allowance for “ breakage.” A s may be seen in the table at the end o f this article, there is considerable interstate variation in these rate structures. In W est V irginia, fo r e x ample, the consum er must pay 1^ in tax on any purchase of taxable items am ounting to 6^ or more, while in M aryland no tax is due unless the purchase is at least 25^. O n larger sales, generally those of $1 or m ore, the rate is uniform ly 3 % in the District of Columbia and each of the four states, except that in N orth Carolina a ceiling of $120 applies to purchases o f automobiles and airplanes, and an $80 ceiling applies to machinery purchases. Maryland 104,496 22.0 North Carolina 156,731 25.1 South Carolina 85,481 30.6 District states. West Virginia 45,863 19.8 gasoline, newspapers, and governm ent purchases are Source: U. S. Department of Commerce, Bureau of the Census. E xem ptions vary greatly am ong the several Fifth T he only consistent policy is that not taxed in any state. Other com m odities may 3 RETAIL SA LES T A X R E V E N U E S (M ILLIONS OF DOLLARS) Source: U. S. Department of Commerce, Bureau of the Census and West V irgin ia Blue Book. or may not be taxed, depending upon the provisions N ew s, Petersburg, Portsm outh, V irgin ia Beach and of the particular state law. Cigarettes, for example, are free of sales tax in the District o f Columbia, but are subject to tax in the four states. Sales of both W illiam sburg have introduced identical taxes in the prescription and nonprescription medicines are tax free in the District of Columbia and M aryland, while only prescription sales are exempt in N orth C aro lina, and all sales of medicine are taxable in South Carolina and W est V irginia. A ll sales to churches are tax free in the District of Columbia, Maryland, and W est V irginia, but are subject to tax in the other past several months. Charlottesville will im pose the same tax beginning in September. W est Virginia’s Turnover T ax The ta x in g policy of the W est V irginia State Governm ent is unique am ong the states in this District in that the retail sales tax is only one stage in a com prehensive system of taxes covering all transfers of goods and services within the state. In addition to the retail states. These are only a few o f the interstate dif ferences in the laws and regulations governing sales levy, the state taxes sales of raw industrial materials taxation. A s is indicated by the list o f exem ptions in the table at the end of this article, numerous others timber, etc.— sales of semifinished products within could be noted. saler, and sales from wholesaler to retailer. Local Sales Taxes In 13 states in v a rio u s parts — coal, oil, natural gas, limestone, sand, gravel, the industrial sector, sales from producer to w hole C ol lectively, these taxes are know n as the Business and of the nation, certain local governments have enacted Occupation T a x . sales taxes. system o f taxation, the state imposes a privilege tax In 10 of the 13, these local taxes are im posed in addition to state levies. T o com plete the comprehensive N one of the on certain carrier corporations engaged in interstate Fifth District states with sales taxes have any local and intrastate com m erce. T he Business and O ccupa levies, how ever. tion T a x was enacted in 1921. O nly in Virginia, where there is T he Transportation no state tax, are there local taxes on expenditures. Privilege T a x came into being along with the retail A t present, nine V irginia comm unities have such tax in 1933. taxes. T he V irginia half o f the city o f Bristol has This unusually com prehensive system of taxation a 3% sales tax which was instituted in 1950 to has proved a very effective revenue producer for the balance the Tennessee state sales tax applying in the state. other half of the city. Since m id -1964, N orfolk has yielded almost $150 million last year. Thus, whereas im posed a 2 % tax, with a $4 m axim um on any one collections from the retail levy were slightly less than sale. 2 0 % of total state tax revenue in 1964, the entire T he cities of Chesapeake, Ham pton, N ew port 4 Together, all o f these taxes on transactions system of transactions taxes produced 45% of taxation. W hatever the balance o f these arguments, however, it is evident that the states have few al ternatives. T o many of them, the sales tax is the m ost feasible source of additional tax revenues. T he the total. Summary S ales taxes are clea rly g r o w in g in importance, both in the nation and the Fifth District. the direct taxation o f individual and corporate in fact that 10 states have adopted retail levies during the past 15 years, and adoption is currently being debated in a number of other states indicates in com es, states have been under pressure to adopt taxes creasing recognition of the usefulness o f the tax. A s the Federal governm ent has assumed prim acy in on sales. T here are, as outlined above, numerous arguments for and against this indirect method of In short, the retail sales tax appears to have becom e a permanent element in the nation’s tax structure. SALES TAX RATES A N D M A JO R EXEMPTIONS Fifth District States, 1964 State D. C. General Rate to Retailer 3% * General Rate to Consumer Amount of Sale $ .01 .15 .45 .75 1.15 Tax to .14 ....... ........... ......... None to .44 $ .01 to .74 ................................... 02 to 1.14 ....... ........................... 03 .04 to 1.44 ............................. Above $1.44, same progression continues. Md. 3% * $ .01 .25 .34 .67 to .24 ............................. None to .33 ....................... $ .01 to .66 ................................... 02 to 1.00 ................................... 03 Add ^ t for each 33<? or fraction thereof < in excess of $ 1 .00. N. C. 3%* $ .01 .11 .36 .71 to .09 ............................. None to .35 .................. ......... $ .01 ..................02 to .70 ...... to 1.16 ........................... .03 Add 1$ for each 33^ or fraction thereof in excess of $1.16. S. C. 3% $ .01 .11 .36 .66 to .10 to .35 to .65 to 1.00 ............................. None ... $ .01 ................................... 02 ................................... 03 Add 1$ for each 33^ or fraction thereof in excess of $ 1 .00. W. Va. 3%* $ .01 .06 .36 .71 to .05 .................... None to .35 .............................. $ .01 to .70 .................................... 02 to1.00 ..................... 03 Same progression continues up to $5.00. Above $5.00, add 1$ for each 35^ or fraction thereof. Major Exemptions (1) Sales to U. S. or the District or any instrumentality thereof except national banks and Federal savings and loan associations, (2) Sales to semipublic institutions, (3) Sales of motor vehicle fuels, (4) Sales of medicines, pharmaceuticals, and drugs, (5) Sales of cigarettes, (6) Casual and isolated sales by vendor not regularly engaged in retail trade, (7) Sales of newspapers and publications of semipublic institutions. (1) Sales of food for human consumption by churches, religious organizations, schools, colleges, and hospitals, (2) Sales of motor vehicles or motor vehicle fuel and liquid fuel, (3) Farm products, seeds, feeds, fertilizers, etc., (4) Professional, insurance, or personal services, (5) Drugs, medicines, etc., and physical aids, (6) Sales to state, local, and Federal governments, (7) S a | of newspapers, es (1) Farm products, seeds, feeds, fertilizers, etc., (2) Sales of boats, fuel and lubricating oils, machinery and equipment for use by commercial fishermen, (3) Gasoline and other motor fuel, (4) Medicines sold on prescription and physical aids, (5) Sales of manufactured products produced and sold by manufacturers or producers to other manufacturers or producers for resale, (6) Sales of newspapers, (7) Sales to state, local, and Federal governments. (1) Sales of textbooks used in elementary and high schools and institu tions of higher learning, (2) Farm products, feeds, seeds, fertilizers, etc., (3) Gross proceeds from sales of fuel, lubricants, and supplies for use aboard ships plying the high seas, (4) Sales of railroad cars and loco motives and parts thereof and vessels and barges of more than 50 tons burden, (5) Sales of all supplies and machinery used by laundries, launderettes, cleaning, dyeing, and pressing establishments, (6) Sales of gasoline and other motor vehicle fuels, (7) Sales of newsprint paper, newspapers and religious publications, (8) Sales to state, local, and Fed eral governments. (1) Sales of motor vehicles and gasoline, (2) Sales of gas, steam and water delivered to consumers through mains or pipes and sales of elec tricity, (3) Sales of textbooks to be used in public schools of the state, (4) Sales to churches and charitable organizations, (5) Sales of tangible personal property for purpose of resale in form of tangible personal property, (6) Sales of newspapers when delivered to consumers by route carriers, (7) Sales to the state and the United States governments. *There are several variations in the general 3% tax rate. The District of Columbia imposes a 4 % tax on transient lodging and a 1% tax on the sale of food for off-premises consumption; M aryland levies a 2% tax on the sale of farm equipment; and North Carolina levies a 1% tax ($80 maximum) on the sale of fuel to farmers and manufacturers, machinery and equipment to farmers, dairymen, commercial laundries and dry cleaning establishments. Also, there are a number of exceptions as to the manner in which motor vehicles are taxed. Under North Carolina's sales and use tax laws the amount of tax on the sale of a motor vehicle cannot exceed 1V2% of the sale price of the automobile or $120. The following states exempt motor vehicles from general sales and use taxes but impose special sales or gross receipts taxes on them under motor vehicle tax laws: Maryland 3% titling tax; West Virginia 3 % titling tax; District of Columbia 2% titling tax. Sources: Codes of the several states involved. 5 Last year a record 2.2 million United States residents traveled abroad, 11.6% more than in 1963. United States expenditures for foreign travel, excluding C anad a and Mexico, totaled about $3.4 billion, a 5.8% increase over 1963. O f this amount transoceanic fares accounted for $1.2 billion, one third of the total, with Ameri can carriers receiving $530 million and foreign carriers about $635 million. Expenditures in foreign countries accounted for the re m aining $2.2 billion. U. S. TRAVELERS T FOREIGN COUNTRIES Thousands of Travelers ____________ 2,200p Note: FOREIGN VISITORS TO THE U. S Thousands of Travelers Excludes Canada and Mieo. Note: Excludes Canada and Mexico. In contrast to total spending by Americans, which increased, the average annual expenditure per traveler trended downward. In the European and Mediterranean Area, for example, average expenditures fell by 4.8% despite a 13.4% increase in the number of travelers. The number of foreigners visiting the United States, excluding Canadians and Mexicans, rose a substantial 29.6% from 1963, to 1.1 million. About one half of this total came from Europe and the Mediterranean Area, and their spending totaled almost $160 million. West Indies, Central ane South America Europe and Mediterranean Total United States receipts from foreign visitors increased 18.6% to $1.2 billion, which included $150 million in fares paid to U. S. carriers. Tourists from C an ad a and Mexico provided the bulk of total receipts, with $698 million. Expenditures by visitors from overseas reached $397 million, up 20.3% from 1963, although average annual expenditure per traveler decreased by 7.3%. EXPENDITURES FOR FOREIGN TRAVEL $ Millions 1,000 L cm Canada and Mexico a West Indies, Central and South America n Europe and Mediterranean ■1 Europe and Miterranean West Indies, Central and South America Dollars U. S. Residents in Foreign Countries Other Othei A VERA G E A N N U A L E)ENDITURE PER TRAVELER FOREIGN TRAVEL: " U. S. EXPENDITURES A N D RECEIPTS $ M illions Total U. S. Travelers Other 800 Expenditures for Foreign Travel by U. S. Residents Foreign Residents in U. S. 600 Foreign Residents in U. S. S. Travelers in European ind Mediterranean Area U. S. Residents in Foreign Countries 400 Foreign Travelers the U. S Expenditures of Foreign Travelers in U. S. 200 1954 1954 Source: Survey of Current Business. 1964 1964 Som e 67 years ago a small group o f bank clerks living in M inneapolis decided they wanted to know m ore about their field and began to meet after office hours to study subjects related to banking. These inform al classes were the forerunners o f today’s in numerable banker education program s which range in type from seminars o f a few hours duration to several years of study at the graduate level. T h e A m erican Institute o f Banking offers chapter classes in banking and related subjects in some 345 large cities and sponsors numerous study groups in smaller cities. T h e m ajority o f Institute subjects are also available by correspondence. Annual en rollment in A .I.B . courses totals about 100,000. Other form al education for bankers is available at state, regional, and national full-time banking schools sponsored, in m ost cases, by national and state bankers associations. These schools are found in 28 states, principally in the south and east. F ive are located in the Fifth District. T he South Carolina Bankers A ssociation operates a banking school at the U niversity o f South Carolina and, with the N orth Carolina Bankers A ssociation, the N orth Carolina to develop a com prehensive view o f the role of the com m ercial banking system in the econom y. They are “ state.” in that they are sponsored by either one or tw o state bankers associations. Curricula T h e r e is co n s id e ra b le v a ria tio n a m o n g general state banking school program s in level and type o f education offered. T he General Banking D ivision of the Carolinas S chool of Banking and the Commercial Bankers Seminar of the V irgin ia -M a ryland Bankers Schools, for example, are geared principally to the educational requirements of non officer bank personnel. Com prised of basic subjects, these program s are designed fo r individuals with relatively limited experience in the banking field. M ore experienced banking personnel w ho are unable to com m it themselves to longer program s also find these one-week sessions useful as refresher courses. Other general state banking school program s are planned for ju n ior officers and supervisory personnel interested in management training or intermediate banking education. Senior bank officers, also, often find these program s consonant with their w ork and derive benefit from participating in them as well as State Banking Department, and the U niversity of in the still relatively few which are adapted to their N orth Carolina, co-sponsors the Carolinas School of special educational needs. Comprehensive education for management is of fered by both the Carolinas School o f Banking in its Banking at Chapel Hill. T he W est V irgin ia School of Banking, run by the state’ s banking association and W est V irgin ia U niversity’ s College of C om M id-M anagem ent D ivision and the V irgin ia-M ary- merce, is located at Jackson’s M ill. land T h e V irginia- Bankers Schools in their School of Bank M aryland Bankers Schools at Charlottesville are a Management. cooperative venture o f the bankers associations of grow th, human relations, loan administration, busi the tw o states and the M cln tire School o f C om ness finance, com m unications, and in other subjects m erce of the U niversity of V irginia. T he fifth, also located at Charlottesville, is a special school on con Curricula include courses in econom ic related to management functions. Program s offered by the South Carolina Bankers School and the W est V irginia School of Banking are also suitable fo r ad sumer credit. vanced personnel and include management training. GENERAL STATE SCHOOLS Such courses, how ever, are fitted into a fram ew ork of T he first four of these are classified in banking circles as “ general state banking schools.” T hey are m ore general banking education. program s is a three-year Each of these four course of study, with “ general” because their purpose is to expose students students attending a 4- to 5-day session each year. to all phases of the com m ercial banking function and In addition, students enrolled in the School o f Bank 8 Management of the V irginia-M aryland Bankers Schools are assigned intersession problem s which must be completed before the follow ing resident session. Admissions Policies T h e fo u r F ifth D is tric t g e n eral state banking schools are operated prim arily for the benefit of com m ercial bankers. H ow ever, ad mission is usually open to persons connected with bank exam ining agencies, state banking departments, and, in some instances, other financial institutions. Preference in admissions is given applicants from the state whose bankers association sponsors the school, of the instructors are com m ercial bankers. Others are recruited from colleges and universities and from the professions. It is custom ary for several Federal R eserve Bank officers and economists to instruct in the schools. T he lecture method o f instruction is most often used, supplemented by such visual aids as flannel board exhibits, charts, and “ hand-outs.” T he case study method is not uncom m on, particularly in ad vanced w ork. Seminars and forum s are often used to supplement classroom instruction, and intersession problem s may be required. but applicants from other states may be accepted if Fees and Expenses space permits. T he student body of the M idManagement D ivision of the Carolinas School of the schools are relatively low , making it possible for Banking, for example, is made up predominantly o f C o sts in v o lv e d in o p e ra tin g the schools to keep fees reasonable and still be selfsupporting. In V irginia, N orth Carolina, and South include Carolina, the banking schools make use of classroom bankers from V irginia and Georgia. A ll o f the general banking schools in the Fifth and other types of facilities on the campuses o f state universities. T he W est V irginia school uses accom modations on the grounds o f the state’s 4 -H camp N orth and South Carolinians, but may District admit both men and wom en. W h ile the number of wom en attending these schools is still relatively small, it is gradually increasing as the em at Jackson’s M ill. ploym ent of wom en in managerial type job s in bank ing becom es a m ore general practice. schools is another factor which helps to keep costs down. Fees covering tuition, room , board, and se Enrollm ent ranges from about 75 at the South lected study aids currently run from $60 to $120, while those which do not include the cost o f a room amount to $55 to $60. Fees are ordinarily paid, at Carolina Bankers School to around 250 at the V irginia-M aryland Bankers Schools. Total enrollment at the fou r schools runs between 650 and 700 a year. Instructional Staffs structors remuneration from the A D V A N C E D GENERAL SCHOOLS E xpert knowledge and teach M any T he fact that many of the in without least in part, by the student’s em ploying bank. ing ability are tw o of the main qualities sought in selecting instructors for the banking schools. serve F or many bankers, state banking school program s provide all o f the specialized education that is feasible. FIFTH DISTRICT B A N K IN G SCHOOLS Month Held Days Per Session Years to Complete Approximate Enrollment Number Name and Location Number Number C A R O L IN A S SCHOOL OF B A N K IN G University of North Carolina, Chapel Hill, North Carolina Mid-Managem ent Division ...................................................... July 115 General Banking Conference ................................................. July 75 March 75 School of Bank Management ............................................ August 165 Commercial Bankers Seminar ................................................. August 75 SOUTH C A R O L IN A BANKERS SCHOOL University of South Carolina, Columbia, South Carolina .............. V IR G IN IA -M A R Y L A N D BANKERS SCHOOLS University of Virginia, Charlottesville, Virginia WEST V IR G IN IA SCHOO L OF B A N K IN G West Virginia State 4-H Camp, Jackson's Mill, West Virginia SCH O O L OF CON SUM ER 140 B A N K IN G University of Virginia, Charlottesville, Virginia ............................. Source: October August 12 300 Banking Education Committee of The American Bankers Association. 9 F or others, such program s represent an intermediate step in their progress toward advanced study at one of the regional or national banking schools where to com plete a course of study may be one year, two years, or three; and program s may be appropriate for a special group— nonofficers, ju n ior officers, curricula are geared to ju n ior officer level and above. Regional schools are sponsored by three or m ore supervisory personnel, senior executives, or any com bination o f these— or fo r bank employees regardless state bankers associations to afford opportunities for higher education to officers and experienced bank per of sonnel. Southernm ost o f these, and the one serving the area in which most of the Fifth District lies, is their position. Specialized national banking schools are usually sponsored by a national banking association, a college or university, or by the two jointly. O n the state level, specialized schools are T he School of Banking of the South held at L ouisi sponsored ana State U niversity, Baton R ouge, Louisiana. singly or in cooperation with an institution of higher Its by a state banking association either dents understanding of the most significant banking, education. T he School monetary and econom ic problem s that affect com specialized mercial banking.” T he program covers a three-year Sponsored by the Consumer Bankers A ssociation in period, with students in residence for tw o weeks cooperation with the M cln tire School o f Commerce, U niversity of V irginia, it is held annually at the U n i program of study “ is designed to broaden the stu each year. A m on g the 14 state bankers associations sponsoring T h e School of Banking o f the South are those in N orth Carolina, South Carolina, V irginia, and W est V irginia. Bankers from these four states com prised some 15 per cent of the student body registered for the 1965 session and 16 per cent of this year’s graduating class. T h e oldest and perhaps best known of the advanced schools is T he Stonier Graduate School o f Banking at Rutgers U niversity, N ew Brunswick, N ew Jersey. Established in 1935 by the Am erican Bankers A s Stonier w h o founded, and was for many years di each year. Consumer located in Banking the is the one Fifth District. versity in Charlottesville. T he program covers a three-year span and students must attend a tw o-week session each year. T hey also must com plete e x tension w ork between resident sessions and submit an acceptable thesis in order to fulfill diplom a re quirements. Instruction is geared to the officer level. F or the 300-odd students w h o attend the school each year, the program is designed to furnish a broad general background in bank management in addition to specialized study in consum er banking. sociation as T he Graduate School of Banking, its name was changed in 1959 to honor Dr. H arold rector of, the school. Its purpose is to provide an opportunity for advanced education to the many bank officers w ho are qualified by experience or form al schooling, or a combination o f the two, for graduate study in their field of interest. Today, annual en rollment in its three-year program numbers from 1,100 to 1,200 bank officers. Between 300 and 400 students successfully complete diploma requirements of school OTHER BANKER EDUCATION P R O G R A M S There are other banker education program s which may be m ore appropriately classified as conferences, forum s, clinics, workshops, or seminars than as “ schools.” Som e are general in scope, others are limited to a specific area such as agricultural credit or management operations. In general they are brief, lasting only a day or two. O f the fou r cu r rently held by the V irgin ia Bankers A ssociation, for example, the shortest lasts only one d a y ; the longest, tw o and one-half days. T he city in which such p ro grams are held may or may not be the same each SPECIALIZED SCHOOLS F or men and wom en interested in studying a single year. In M aryland, fo r instance, the Management Operations and Consumer Credit Conferences are phase of banking— investments or consum er lending, always scheduled fo r for exam ple— there are state and national specialized Bankers Conference may meet in Baltim ore but more schools. often is held elsewhere. W h ile study in one o f these schools is not Baltim ore while the Y ou n g necessarily limited to the core subject since many W hatever their type, their duration, or their lo specialized schools also offer one or m ore courses in cation, these brief program s are valuable adjuncts to econom ics or other general subjects, the curriculum form al schooling. is much m ore circum scribed than that in a general contacts outside their immediate sphere o f activity. school, allowing attention to be focused sharply on T hey stimulate interest in the topic or topics being a single aspect o f banking. presented. A s in general schools, length of sessions varies from a few days to tw o w e e k s ; the time required 10 T hey expand participant bankers’ A n d they direct attention to the value of outside education jo b training. as a supplement to on-the- THE FIFTH DISTRICT Business activity in the Fifth Federal Reserve District has continued at a high level in recent weeks. T he D istrict’s econom ic vitality is also reflected Bank debits in June recovered from a M ay decline, rising to a record level one-sixth higher than a year in less com prehensive indicators. N ew car sales in the first half of the year topped last year’s first-half figure by one eighth. Few er businesses have failed ago. Total debits in the first half of the year sur passed 1964’s first-half figure by one eighth, slightly so far this year than at any time since 1956 and, except for an unusually high figure in February, m ore than the comparable rise in bank debits na tionally. Nonagricultural employm ent increased m ore than seasonally in June, as it has with few exceptions the dollar volum e o f liabilities associated with these for many months, and closed the first half 3 % above a year ago. A lthough m an-hour gains were quite failures has remained at its lowest level in nearly a decade. Strength in Construction E a rlier in d ica tion s that the District construction industry’s strong three- prevalent in June am ong the D istrict’s principal manufacturing industries, most fell slightly short of year uptrend might be starting to wane have largely the usual seasonal magnitudes. Nevertheless, total factory man-hours finished the first six months 4 % which rose less than seasonally in M arch and A pril, higher than in the previous year. District insured unem ployment has continued to decrease considerably faster than usual and averaged more than one-fifth disappeared. Contract construction employment, resumed greater-than-seasonal gains in M ay and June and recently has maintained a margin of m ore than 4 % over year-earlier levels. Contract award values below comparable 1964 levels during June and the rose sharply in M arch and A pril, and although they first half of July. declined in M ay, the total was still the second highest SALES OF RETAIL ESTABLISHMENTS FIFTH DISTRICT TYPE OF TRADE GEO GRAPH ICAL Food Stores M aryland Automotive Dealers District of Columbia General Merchandise Service Stations Virginia Restaurants, Cafes, etc. Apparel and Accessories West Virginia g p Building Materials, Hardware, etc. | 1963 Furniture, Appliances, etc. North Carolina j 1958 J 1954 Drug and Proprietary South Carolina = p -3 ----------J .. - .. L i 2 -------------Other i 3 $ Bit. Source: 1 4 J 5 0 1 2 3 $ Bil. U. S. Department of Commerce, Bureau of the Census. 11 so far this year and was surpassed in only four months of 1964. A w ards have been particularly strong in the residential category and in public works and utilities. Retail Trade D istrict d ep a rtm en t store sales rose again in July follow ing a mild decline. Present indi cations are that the July figure may be the second highest on record. T otal retail sales in the District, which take m ore time to com pile, have been estimated for M ay at $2.03 billion. This was the first time that any month other than Decem ber had passed the tw obillion-dollar mark. A lthough the increase over the A pril figure was smaller than in either of the previous tw o years, M ay sales exceeded their year-earlier level by m ore than 6 % . T he largest com ponent of the M ay figure was, of course, automobiles, which totaled $508 million in the District, almost exactly one fourth o f the total. M ay automobile sales were up 9 % from the previous year and wrere 2 3 % greater than in 1963. Trends in Trade L o n g e r term ch a n g e s in the volum e and com position of retail trade are revealed in recently published results of the 1963 Census of Business. T he chart on page 11, based on census data, classifies Fifth D istrict retail sales by g e o graphical areas and by types of stores for the census years 1954, 1958, and 1963. T he grow th of retail trade in a particular geo graphical area prim arily reflects tw o elements, the change in population and the rise in living standards. A third factor may be p resen t: the extent to which shopping centers in one geographical area draw customers from other a re a s; as W ashington stores, for instance, attract business from suburban M a ry land and V irginia. Naturally, the strongest gains in sales have occurred where both population and per capita consum ption have trended upwrard. The follow in g table summarizes these changes in the D is trict and com pares them with national trends. Columbia and Wrest V irgin ia experienced significant declines. D uring this first period, sales grew7 most rapidly in M aryland with N orth Carolina in second place, barely ahead of V irginia. Population was the strong factor in each of the tw o northern states, while increased sales per capita dominated the picture in N orth Carolina. W est V irgin ia and the District of Columbia, where population declined and per capita personal incom e remained high, showed the strongest rise in per capita sales, and N orth Caro lina came next. D uring the second period of most rapid grow th (1 9 5 8 -1 9 6 3 ), centers shifted southward. South Carolina made the strongest gain, and most of it resulted from gains in sales per capita, in which the Palmetto State led the rest of the D istrict by a sizable margin. H igher per capita sales likewise accounted for most of the increase in N orth Carolina and V ir ginia. but gains in population were also strong. As in the first period, the grow th o f sales in Maryland strongly reflected both increased population and higher consum ption per capita. Retailers Broaden Lines T r e n d s in the c o m p o s i tion o f retail sales by type o f store also reflect tw o principal influences. A s incom es rise, consumers shift larger fractions of expenditures from “ neces sities” to “ extras,” and retailers tend to widen their lines accordingly. Thus, store classifications indicate less and less accurately the type of merchandise sold. A utom obile dealers are exceptions, as are gasoline service stations to a considerable extent. M ost of the increase since 1954 in automobile sales and much of the rise in sales of service stations o c curred after 1958. F or other types of retailers, gains were about evenly distributed over the entire period and wrere strongest where diversification was most apparent. Com pared to a rise of 4 8 % in total District sales between 1954 and 1963, drug store sales rose m ore than tw o thirds, and the volum e of food store and general merchandise store sales in % change 1954-1958 Popula tion 7.6 u . s. 5th Dist. 6.1 11.1 Md. 4.3 D. C. 10.1 Va. 3.2 W . Va. N. C. 5.9 S. c . 5.9 Sales per capita creased more than one half. 1958-1963 Sales per capita 9.2 11.6 11.9 14.2 8.2 18.3 13.4 8.6 Total sales 17.5 18.5 24.3 9.2 19.3 14.7 19.5 15.0 Popula tion 8.3 8.4 12.4 5.4 9.4 1.7 9.4 8.7 12.5 15.5 13.4 3.1 17.8 12.6 17.9 19.8 Retail sales represent a declining fraction of per Total sales 21.9 25.3 27.4 8.7 28.7 10.7 29.7 30.1 Grow th rates in the District as a whole exceeded sonal income. T his fraction was three fifths in 1954 in both the nation and the Fifth District. Between 1954 and 1963, however, the ratio o f sales to per sonal incom e declined m ore slow ly in the District than in the nation as a w7 hole. In 1963, the portion of personal incom e spent for retail purchases ranged from 4 6 % in M aryland to 5 8 % in the Carolinas, with an average of a bit over 5 3 % fo r the entire national rates, except fo r the change in population District com pared with slightly less than 5 3 % for between 1954 and 1958 when both the District of the nation as a whole. 12