View original document

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

/ K « s
H

J

tv
, Ñ

/

m

v.ti

U.S 7
R

issasiÌ W

esS,

1

L IB R A R Y

ROOM 5030

JU N
TREASURY

1 4 7972
DEPARTMENT

TABLE OF CONTENTS

Bill offering • « • • • • • • • • • • • • • • • • • • • •
January 2, 1948
S-582

1

Snyder New Year's statement • • • • • • « » » « • • » • •
January 1, 1948
S-583

2

Snyder bond buying to combat inflation
December 31, 1947
S-584

3

................. ..

Snyder denial Internal Revenue agents active in commodity markets
January 3, 1948
S-585

4

Snyder commends Joseph M* Dodge, ABA, anti »inflation program
January 5, 1948
S-586

5

Statistics of Income for 1945, Part 1
January 9, 1948
S-587
Bill tenders
January 6, 1948

•

• • • • • • • • • • , ,

# t # # #
S-588

Benjamin Franklin half dollar to be issued
January 7, 1948
S-589

15

• • • • • • • • «

19

Debt limitation
January 8, 1948

S-590

Bill offering • • • • • • • • • , * , * ,
January 9, 1948
S-591
Snyder statement on EBP,
January 14, 1948

S-593

Bill tenders
January 13, 1948

S-594

Market transactions
January 15, 1948

•

21

25

26

andIntercorporateDividends
S-595

tax study

. •

27

55
S-596

Customs * Philippine commodities
January 16, 1948
S-597
Customs: Wheat
January 16, 1948

20

Senate Foreign Relations Committee
S-592

Bill offering
January 13, 1948

Consolidated Returns
January 9, 1948

6

« • • • • • • • • • • • • • •

57
58

S-598

Italy, Bulgaria, Hungary, Rumania not "enemy nationals"
January 16, 1948
S-599

• • •

59

PS 2

Customs: Import commodities * * » • » • « • • • • • » • •
January 16, 1948
S-600

60

Customs: Cotton « • • • « # * • #
January 16, 1948
S-601

,,

61

• • .

63

* t * * . * » , * ,

Snyder statement, Ways-Me ans Committee, on HR 4790
January 16, 1948
S-602

Bill tenders
• • • • • • • • • • • • • • • • • • * . . ,
January 17, 1948
S-605

87

l-l/ 8j£ Certificate offering. Series B-1949
January 20, 1948
S-604

88

• • • • * • •

Snyder statement, ERF, House Committee on Foreign Affairs
January 21, 1948
S-605

91

Bill offering
January 23, 1948

95
S-606

Bill tenders • « • • • « • • , , • * * • * # « , , , , , ,
January 27, 1948
S-607

96

"Trial of Coins*, Philadelphia Mint
January 28, 1948
S-608

97

• • • • • • • • • • • «

Savings bonds used investments in private companies contrary
to their purpose, says Snyder * • • • • • • • • « • • • •
January 29, 1948
S-609

98

Bill offering • • • • • • • • • • • • • • . • • • • • • • • «
January 30, 1948
S-610

99

Subscription figures on l-l/ 8^ Certificates
January 29, 1948
S-611

100

• • • • • • • •

Snyder letter to Vandenberg on financial aspects of ERP
February 2, 1948

, t *

101

i05

Bill tenders • • • • • • • •
February 3, 1948
S-612
Schoeneman statement on subversive organizations
February 4, 1948
S-613

• • • • •

106

Federal Reserve Banks to make telegraphic transfer on bonds
February 4, 1948
S-614

107

Bill offering • • • • • • • * • • • • • • • • • • • • , • »
February 6 , 1948
S-615

108

Customs seizures of contraband narcotics
February 8 , 1948
S-616

109

• • • • • • • • • •

Counterfeit currency seizures, 12,100,000 in France
February 9, 1948
S-617
Seizures of firearms
Febnuary 10, 1948
Smuggling seizures
February 12, 1948

# . #
S-618

t • • • • • « .

• • • •

112

• , M

114

......... ..
S-619

Quotas on fish filled
February 6, 1948

117

119
S-620

Debt limitation « • • • • • • • • • , , • • • • • • • • • * .
February 10, 1948
S-621

120

Bill tenders
February 10, 1948 .

121
S-622

Security Loan Drive to start April 15 through June 30
February 12, 1948
S-62S

. • • •

122

Snyder address, Jeff arson-Jackson dinner, Newark • • • • • • •
February 19, 1948 (Democratice National Committee release)

124

Bill offering
February 13, 1948

131
S-624

Tax collections continue to set new records
February 15, 1948
S-625

• • • • • • • • •

Snyder address, Chicago World Trade Conference: "World Trade A Necessary Component of our Economy" • • • • • • » • • • •
February 16, 1948
S-626
Snyder remarks Poor Richard Club, citation of merit
February 17, 1948

• • • • •

132

134

141

Snyder address, Association of Stock Exchange Urns, Atlanta ••
February 13, 1948
S-627

143

Customs: Cotton • • • • • • • • • • • • • • • • • • « • • « ,
February 11, 1948
S-628

150

Customs: Philippine commodities
February 11, 1948
S-629

• • • • • • • • • • • • • «

152

#75,000 salary list; calendar *44, fiscal *45; calendar '45,
fiscal 1946 • • • • • • • • • • • • • • • • • • • • • •
February 20, 1948
S-630

153

Savings Bonds issued-Redeemed during January, 1948

155

.........

Customs * Wheat • • • • • • •
• • • • ♦ • • • • • • « • •
February 11, 1948
S-631

166

Customs * Quota conmodities • • • • • • • • • • • • • • «
February 11, 1948
S-632

167

Market transactions
February 16,
1948

168

Bill offering
February 17,

.............
S-633

• • • • • • « • • •
1948
S- 6S4

• • • • • • * • . * . ,

169

Bill tenders • • • • • • • • •
• • * . * * * * * , , . , .
February 17, 1948
S-635

170

l-l/8^ Certificate offering, Series C-1949
February 18, 1948
S-636

171

• • • • • •

••

Eight appointments to National Academy for Public Purchasing
February 22, 1948
S-637

176

Bill tenders
February 21,

177
1948

Bill offering
February 27,

• • • • • • • • • • • • • • • , • • • • ,
1948
S-639

S-638

Wiggins letter to Knutson on49 tax recommendations
lfebruary 26, 1948
Federal Excise Taxes on Tobacco tax study
February 27, 1948
S-640
Potatoquota 75# filled
February 26, 1948

• • •

179

• • • • » • • •

185

• • • • • • • • • • • • • • • • ,
S-641

229

Subscription figures on 1-1/8# Certificates
Bbbruary 27, 1948
S-642

• • • • • • *

Snyder statement, Senate Finance Committee, on HR 4790
March 1, 1948
S-643
Bill tenders
March 2, 1948

178

• «

230

251

259
S-644

Freezing controls removed from #5,000 blocked accounts
February 27, 1948
S-645

. .

260

Blocked foreign funds transferred to Department of Justice •
March 1, 1948
S-646

261

Dibt limitation
March 4, 1948

263
S-647

Bill offering
March 5, 1948

S-648

264

pg 5

Customs * Philippins commodities
March 10, 1948
8-649
national bank assets
March 3, 1948

• • • • • • • • • • • • « *

• • • • • • • « • • • • • • •
8-650

265

• • • • •

266

Hoggins, House Committee on Agricultures Oleomargarine Taxes •
March 8 , 1948
S-651
Bill tenders • • • • •
March 9, 1948

âsyder
March

• # • • • • • • • • • • * • • * . « . «
S-652

address Alpha Tan Anega banquet, Cleveland
1948
S-653

•

270

281

+

282

8,

Customs t Wheat • « • , , , , , , ,
March 10, 1948
8-654

#

Customs t Quota commodities • • • • •
March 10, 1948
S-655
Cueterns: Cotton
March 10, 1948

••

•••••••

••

••••

• • ##

291

292

293
8-656

Basks to transfer withheld taxes to war loan accounts
March 11, 1948
S-657

• • • •

295

Bill offering • • • • • • • • • • • • • • * # * * . * . . , ,
March 12, 1948
S-658

296

Market transactions
March 15, 1948

297

• • • • • • • • •
S-659

Bill tenders
March 16, 1948

#

# ,

298
S-660

Bonds issued-Redeemed During February, 1948
Snyder address Savings Bonds Conference, D * C «
March 18,
1948
8-661

• • • • • • • • •
• ••

Limitation on E Bonds raised from $5,000 to #10,000
March 18,
1948
S-662

299

•••••

300

• • • • •

304

1945, Part
8-663

309

Bill offering • • • • • • • • • • • • • • • • • • • • • , , ,
March 19 , 1948
S-664

518

Statistics of Income for
March 25,
1948

1

TREASURY DEPARTMENT
Washington

FOR' RELEASE, MORNING NEWSPAPERS,
Friday, January 2, 1948.

Press Service
No, S-582

The Secretary pf thé'Treasury,, by thi.s-public notice,, invites
tenders for '$1,3:00,,000-, 000, oh the re apouts, ,pf 91 -ddy Treasury bills,
for cash ana in. ,exphahge for Treasury bills maturing January 8 , 1948, to
be1,issued on' à discount-: basis' under competitive and ’non-competxuive
bidding 'as hereinafter provided* The bills of this séries m i l be dated
January 8, 1948, and will mature April 8,; 1948, when the face..amount will
be payable without interest. They will, pe issued iri bearer, form; only,
and- in denominations of $>1,000, '$5,000, flOjQOQ, $10 0^0 0$^ $-500,000, and"
$1,QQ0*,000 (maturity value),
. Tenders will. be', received at. Federal Reserve Banks' and Branches up
to the. closing hour, two °Jclock p.m,, Eastern standard time, Monday,
January .5, 1948• Tenders will not be received at the Treasury Department,
Washington, Each tender must be for an even multiple of $>1,000, and in
the case of competitive tenders the price offered must be expressed on
the basis of 10Ô, with not more than three decimals,- e, g,, 99,9.25, ’
Fractions may' not be used. It is urged that tenders be made on 1he print­
ed forms and forwarded in the 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 trust companies and from .responsible and recognized dealers in invest­
ment, .securities, Tenders from others must, be accompanied by payment of
2 percent of the face.amount of Treasury bills applied for, unless-the
tenders are accompanied, by. an express guaranty of payment by an in­
corporated bank or trust company,
«
Immediately after the closing hour, tenders will be opened at the
Federal Reserve Banks and Branches, following which public announcement
will be made by the Secretary of the Treasury of the amount and price
range of accepted bids. Those submitting tenders will be advised of the
acceptance or rejection thereof. The Secretary of the Treasury expressly
reserves the right to accept or reject any or all tenders, in whole or in
part, and his action in any such respect shall be final. Subject to these
reservations, non-competitive tenders for $200,000 or less without stated
price from any one bidder will be accepted in full at the average price
(in three decimals) of accepted competitive bids* Settlement for accepted
tenders in accordance with the bids must be made or completed at the
Federal Reserve Bank on January 8, 1948, in cash or other immediately avail­
able funds or in a like face amount of Treasury bills maturing January 8,
1948. Cash and exchange tenders will receive equal treatment. Cash,
adjustments will be made for differences between the par value of matur­
ing bills accepted in exchange and the issue price of the new bills*

2
TEEASUHÏ DEPARTMENT
Washington
FOR RELEASE H O M I N G NEWSPAPERS
Thursday, January 1, 19AS«

Press Service
No* S - 583

Secretary Snyder today issued the following New Year’s statementi
Nineteen hundred and forty-seven has been a year of
new records for our Nation, Most of them have been good©
Our task now is to try to make 19AS a year of good
records only. We can do this if Government, business,
labor, and agriculture will all pull together*
Large backlogs of demand for many types of goods
still exist; and there is no reason why 1943 should,
not be a year of new production records* Our main task
is to prevent it from becoming a year of new inflationary
records also*
As the New Year approaches, 1 would like to emphasize
strongly the value of national thrift* It is most
important at this particular time that we make every
effort to protect and conserve our national assets and our
natural resources#
Conservation and savings f o m a powerful reserve of
strength; offer incentives to greater fields of endeavor;
enable the full realization of opportunity; and provide
the necessary security for troublesome times*
Individual saving is our most potent weapon in
combating inflation* I want to take the occasion of this
New Year’s day to ask every American who can do so,
consistent with his responsibilities, to set a goal of
substantial savings for 1948* This is a good time to save
money, both from the point of view of the Nation and of
the individual saver*

-OoO-

3

TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Wednesday, December 31, 1947.

Press Service
No* S-584

Secretary of.the Treasury Snyder today reminded bond holders and
bond buyers generally of the fact that the Treasury is urging individuals
to buy more Savings Bonds as a means of combatting inflation.
The campaign to increase the sale of Savings Bonds is being stimu­
lated in various ways. In furtherance of this campaign, the Secretary
has decided to permit individual holders of the Series C-1938 Savings
Bonds, which start maturing January 1, 1948, to reinvest the proceeds,
as they mature, in the Series E Savings Bonds which are currently on
sale, without regard to the annual limitation. This can be accomplished
through the established payment and issue procedure, and the Series E
bonds so acquired will be exempt from the $5,000 (maturity value) annual
limitation on holdings of Series E bonds. Holders will be permitted to
reinvest any part of the proceeds of their maturing bonds up to such
denominational amount as the proceeds will fully cover, Since Series E
bonds may be purchased only in the names of individuals, only those
Series C-1938 Savings Bonds held by individuals will be eligible for
this privilege.
Any agent qualified to pay Savings Bonds, which is also an issuing
agent, can accomplish this exchange through the simple procedure of
redeeming matured bonds registered in the name of an individual owner
or coowner, and applying the proceeds to the purchase of newr Series E
bonds. The bonds may also be'exchanged, of course, at any Federal
Reserve Bank or Branch, or at the Treasury Department,
The new bonds will be dated as of the first day of the month in which
the matured Series C-1938 Savings Bonds are presented for payment. In
order to preserve the continuity of the investment, individual holders
of the maturing bonds should present them for exchange during the month
in which they mature.
The Secretary took occasion to express appreciation for the splendid
response of the people of the country to the Treasury’s Savings Bond
program. He also expressed his confidence that people will divert their
spending dollars to Savings Bonds to the fullest extent, in recognition
of the check which this action has against Inflationary pressures.
oOo

f

TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Saturday, January 3, 19 ^ 8 .

Press Service
No. S -585

Secretary Snyder tonight denied published reports that
Internal Revenue agents in charge, or others of equivalent
authority were active in the commodity markets in the period from
July l, 1946 through December 11, 1947.
The denial was prompted by an earlier disclosure attributed
to the Senate Appropriations Committee that six Treasury employees,
including agents in charge in New York City and Tulsa, Oklahoma,
have been speculating in commodity m a rkets.
Secretary Snyder said:
"None of these persons was serving in an executive
capacity, as stated in press reports.
Rather, they were field
employees, none in the Washington area,
The transactions of
two of these employees involved wheat, totaling 14.000 bushels.
One employee had five transactions in cotton in 1946, and the
remaining three employees had transactions in corn, totaling
15*000 bushels."
The six names were submitted by the Treasury Department
m response to a telegraphic request by the Chairman of the
Senate Appropriations Committee, received December 12, 1947,
and Which read as follows:
With respect to all executive, professional,
scientific, consultant, and CAF grades 1 1 -l6
personnel in your Department or any unit thereof,
you are hereby requested to obtain and furnish
forthwith to the Senate Appropriations Committee
the following information as to whether such person­
nel, in-any capacity, has purchased, sold or dealt
in any commodity Included in any Government purchase
program in futures or commodities themselves, directly
or indirectly, or as beneficiaries under any trust
or through any corporation or any other device, In
the period from July 1 , 1946 to and Including the
date hereof.
State the name of the purchaser, .address of
purchaser, date of purchase, name of commodity or
future, amount purchased, date of sale,, purchase
price and sale p r i c e .

oOo

5
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Monday, January 5, 19^8.

Pross Senvic©
No. S -586

John ¥. Snyder, Secretary of the Treasury, today issued the
following.statement:
The anti-inflation program, announced today by
Joseph M. Dodge, President of the American Bankers
Association, is highly commendable.
It is an aggres­
sive voluntary step in the direction of controlling
inflationary and speculative loans by the banks.
The four objectives of the program, i.e.,
!. commodity and inventory loans designed
• to withhold essential goods from normal market
channels in anticipation of price rises should
not be made in the months, immediately ahead,

2 . mortgage loans for non-essential build­
ing, or construction which can be postponed until
supplies and labor are more available, should
be discouraged,
.3. banks Should give priority to borrowers
who can turn out supplies and services needed
here and abroad now,

b. there should be a greatly intensified
drive to sell Treasury savings bonds to the
public, and to promote other forms of savings,
as a means of absorbing surplus money which
otherwise would continue to compete for the
goods and services in short supply,
indicate the thorough.approach the bankers have given
to this serious problem.
It is certain, that with the cooperation of the
bankers of the country, the program will succeed in
obtaining positive beneficial results.

0C 0

TREASURY DEPARTMENT
Washington
FOR RELEASE,
Friday, January 9, 1948

Press Service
No. S-587

Secretary of the Treasury Snyder today made public data from the pre­
liminary report, Statistics of Income for 1945, Part 1, compiled from in­
dividual income tax returns for the income year 1945, under the direction
of Commissioner of Internal Revenue George J. Schoeneman.
Summary data
There were 49,965,474 individual income tax returns filed for the in­
come year 1945, an increase of 2,853,979 returns, or 6,1 percent, over the
number filed for 1944. The current year returns include 20,869,431 optional
returns, Form W-2, the withholding receipt for tax withheld on wages;
19,206,483 short-form returns, Form 1040; and 9,889,560 long-form returns
Form 1040.
*
Adjusted gross income is reported on 49,750,991 returns and adjusted
gross deficit is shown on 214,483 returns. The adjusted gross income is
$120,301,131,000, an increase of $3,586,395,000, or 3.1 percent; and the
adjusted gross deficit is $292,472,000, an increase of $42,701,000, or
17.1 percent, as compared with similar amounts reported last year.
The tax liability for 1945 is $17,050,378,000, an increase of
$833,977,000, or 5.1 percent, over the tax liability for 1944.
These preliminary data present a complete coverage of returns filed
for 1945; however, they are subject to such revisions as are found necessary
upon further processing of the returns for additional statistics for the
complete report.
Comparative data, individual returns, 1945 and 1944
(Money figures in thousands of dollars)
1945
1944
preliminary complete
report
report
Total individual returns:
Number of returns
49,965,474 47,111,495
Adjusted gross income
120,301,131 116,714,736
Adjusted gross deficit
292,472
249,771
Tax liability
17,050,378 16,216,401
Taxable individual returns:
Number of returns
42,650,502 42,354,468
Adjusted gross income
117,561,661 114,761,385
Tax liability
17,050,378 16,216,401
Nontaxable individual returns;
Number of returns with ad­
justed gross income
7,100,489
4,565,122
Adjusted gross income
2,739,470
1,953,351
Number of returns with no ad­
justed gross income
214,483
191,905
Adjusted gross deficit
292,472
249,771

Increase
Number or
Percent
amount
2,853,979
3,586,395
42,701
833,977

6.06
3.07
17.10
5.14

296,034
2,800,276
833,977

.70
2.44
5.14

2,535,367
786,119

55.54
40.24

22,578
42.701

11.77
17.10

2
Returns included
The individual income tax returns included in this release are
for the calendar year 1945, a fiscal year ending within the period
July 1945 through June 1946, and a part year with the greater part
of the accounting period in 1945, The returns include Forms W-2 and
1040 filed by citizens and resident aliens and Form 1040B filed by
nonresident aliens having a business within the United States,
Tentative returns are not included and amended returns are used only
if the original returns are excluded. Statistics are taken from
the returns as filed, prior to revisions that may be made as a re­
sult of audit.
Form W-2, the withholding receipt for income tax withheld on
wages, is the optional return which may be filed by persons whose
total income is less than $5,000 consisting of wages shown thereon
and not more than $100 of other wages, dividends, and interest. The
tax liability is determined by the collector of internal revenue on
the basis of the income reported, in accordance with a tax table
provided under supplement T of the Code, which allows for exemptions
claimed by the taxpayer and also allows for deductions and tax
credits approximating 10 percent of tjtie income. Husband and wife may
file a combined return on Form W-2 if their aggregate income meets
the requirements for use of this form. On such .combined returns, the
tax as determined by the collector is the lesser of two amounts: the
tax on the combined income or the aggregate tax on the separate in­
comes •
Form 1040, the regular income tax return, which may be either a
long-form return or a short-form return, is used by persons who, by
reason of the size or source of their income, are not permitted to
use Form W-2 as a return, and by persons who, although eligible to
use Form W-2, find it to their advantage to use Form 1040. Persons
with adjusted gross income of less than $5,000, regardless of the
source, may elect to file the short-form return on which deductions
and tax credits are not itemized, the tax being determined by the
taxpayer from the tax table provided under supplement T. Persons
with adjusted gross income of $5,000 or more, and persons with ad­
justed gross income of less than $5,000 who wish to claim deductions
in excess of the amount allowed through the use of the tax table
file the long-form return and compute the tax liability.
Data for the returns with adjusted gross income under $25,000,
except number of returns, and their distribution by adjusted gross
income classes are estimated on the basis of samples as explained on
pages 4 and 5.

7
- 3 Internal Revenue Code
Returns for the income year 1945 are filed under the same pro­
visions of the Internal Revenue Code as were the returns for the
previous year, so that statistical data for 1945 are comparable with
that for 1944.
Classification of returns
Three tables are presented in this release. For table 1, re­
turns are classified by adjusted gross income classes; for table 2,
returns are classified by taxable and nontaxable returns, by ad­
justed gross income classes, and by returns with standard deduction
or with itemized deductions; for table 3, returns are classified by
States and Territories.
Adjusted gross income, being common to all types of returns,
supplies the base for adjusted gross income classes regardless of
the amount of net income or net deficit when computed. Returns with
adjusted gross deficit are designated no adjusted gross income and
the size of the deficit is disregarded.
The classification of returns as taxable and nontaxable is
based on the existence or nonexistence of a tax liability.
Returns with standard deduction are optional returns, Form W-2;
short-form returns, Form 1040; and long-form returns, Form 1040,
with adjusted gross income of $5,000 or over on which the $500
standard deduction is used.
Returns with itemized deductions are long-form returns,
Form 1040, on which deductions are itemized in detail; long-form
returns, Form 1040, with no deductions, filed by spouses of tax­
payers who itemized deductions (such spouses are denied the standard
deduction); and returns, Form 1040, with no adjusted gross income
whether or not deductions are itemized.
The classification of returns by States and Territories is based
on the location of the collection district in which the return was
filed, except that for the District of Columbia, which comprises a
part of the collection district of Maryland, the classification is
determined by the address of the taxpayer. The Territory of Alaska
comprises a part of the collection district of Washington; however,
the sampling technique employed does not permit separate tabulation
of returns with an Alaskan address.

- 4 Description of the sample and limitations of data
Tables 1 and 2 in this release were derived from a basic strati­
fied random sample of individual income tax returns designed to com­
prise 1 percent of returns, Form V.T-2 and Form 1040,with adjusted
gross income under $7,000; 10 percent of returns, Form 1040, with
adjusted gross income from $7,000 to $10,000; 20 percent of returns,
Form 1040, with adjusted gross income from $10,000 to $25,000; and
100 percent of returns, Form 1040, with adjusted gross income of
$25,000 or more* The different administrative processes applied to
the various categories of returns in collectors * offices affected
somewhat their availability for sampling. These categories were
sufficiently heterogeneous with respect to data tabulated to warrant
independent controls* Accordingly, returns in each of the above in­
come ranges were further stratified to assure homogeneous groups
subject to uniform administrative processing for sample selection,
tabulation and weighting purposes. Precise 1 percent, 10 percent,
and 20 percent representation of returns with adjusted gross income
under $7,000, from $7,000 to $10,000, and from $10,00,0 to $25,000,
respectively, was not achieved. However, the over-all universes,
applicable to the separate sampling strata, were independently
determined and the data tabulated from the samples were extended to
such universes, so that no random sampling error attaches to the
total number of returns in each income range. A relatively
negligible error in the total number of returns does result, how­
ever, from the use of rounded extension factors.
For table 3 in this release, which shows the total number of re­
turns and the amounts of salaries and wages, dividends and interest,
adjusted gross income and tax liability for returns with adjusted
gross income by States, supplementary random samples were added to
the basic sample described above where the basic sample was not suffi­
ciently large to assure reliable State data* The degrees of
supplementation varied by States, and data for each State were
separately tabulated and extended to the proper universe. Returns
with no adjusted gross income are not distributed by States because
of the large sampling errors involved.
In view of the different samples used for the distributions on
a national basis and for the State distributions, the aggregate data
relative to returns with adjusted gross income by States in table 3
do not precisely agree with corresponding United States totals in
tables 1 and 2. Apart from the sampling error involved, the difference
between the number of returns with adjusted gross income for the
United States in tables 1 and 2 and the corresponding aggregate of
State frequencies is due in part to the use of rounded ratios in
extending the data from samples of returns with adjusted gross income
under $25,000 to the universes.

5
In computing the possible variation of a given frequency due
to random sampling, a range of two standard errors was used; chances
are 19 out of 20 that the frequency as estimated from the sample
tabulation differs from the actual frequency, if the entire universe
were tabulated, by less than twice the standard error. Variation
beyond the two-error limit would occur only 1 time in 20 and would
be sufficiently rare to justify a two-error range in defining
sampling variability. Accordingly, in cells associated with taxable
or nontaxable adjusted gross income classes under $7,000, frequencies
of the magnitude of 1 million or more are subject to variation of
less than 3 percent; frequencies of 100,000 or more are subject to
variation of less than 10 percent; and frequencies of 10,000 or more
are subject to variation of less than 30 percent.
In cells associated with adjusted gross income classes from
$7,000 to $25,000, frequencies of magnitude of 100,000 or more are
subject to less than 2.5 percent variation; frequencies of 10,000
or more are subject to less than 10 percent variation; and frequencies
of 1,000 or more are subject to less than 26 percent variation. The
degrees of variability noted above relate only to cell frequencies
and do not indicate the variability associated with money amounts of
income, deductions, or tax.

Table 1. - Individual returns for 1945, by adjusted gross income classes: Simple and cumulative distribution of number of returns, adjusted gross income,
and "tax liability, with corresponding percentage distribution

r

--------

1
'Adjusted gross income classes ¿/

;Individual returns (taxable and non| taxable) with adjusted gross income:
j Under 0* 5
i 0*5 under 0.75
0*75 under 1
I under 1.25
1.25 under 1*5 4/
; 1*5 under 1*75
! 1*75 under 2
! 2 under 2*25
! 2*25 under ¡¿.5
2*5 under 2*75
! 2*75 under 3
3 under 3*5
3*5 under 4
4 under 4*5
4*5 under 5
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
II under 12
12 under 13
13 under 14
14 under 15
15 under 20
20 under 25
25 under 30
30 under 40
40 under 50
50 under 60
60 under 70
70 under 80
80 under 90
90 under 100
100 under 150
150 under 200
200 under 250
250 under 300
300 under 400
400 under 500
500 under 750
750 under 1,000
1.000 under 1,500
, 1,500 under 2,000
2.000 under 3,000
3.000 under 4,000
4,Q00 under 5,000
5.000 and over
Total
Individual returns (nontaxable) with
no adjusted gross income 5/
________ Grand total_____ _
For footnotes, see p. 15,

--(Adjusted gross income classes and money figures in thousands of dollars)j
Number of returns
usted gross income 2.
(Cumulative distri- ¡Cumulative distriCumulative distri­
Cumulative distri­
Simple distribution bution from highest(bution from lowest
Simple distribution bution from highest bution from lowest
income class
1Percent1 --------- )Percent
(Percent
Percent
Number :of
Number !of
1 Number
Amount
of
of
Amount
of
Amount
i°f
jtotal
!
total
1total
total
total
5,452,051
3,088,490
3,124,651
3,583,559
3,735,565
3,602,265
3,573,466 ¡
3,3D8,650|
3,039,53I¡
2,767,9821
2,484,187!
4,024,307
2,713,135!
1,629,488
983,337
889,652
430,753
252,895
177,315
134,856
104,454
80,430
66,519
55,891
46,052
155,308
83,229
45,966
49,771
24,483
13,418
8,441
5,448
3,601
2,587
5, 530
1,726
738

49,750,991 100.00
5,452,051; 10.96
44,298,940 1 89.04
8,540,541
17.17
41,210,450
82.85 11,665,192 j 23.45
38,085,799
76.55 16,248,751 ¡ 30.65
34,502,240
69.35 18,984,316 j 38.16
30,766,675
61.34 22,586,581 I 45.40
27,164,410
54.60 26,160,047
52.58
23,590,944
47.42 29,468,697 1 59.23
20,282,294
40.77 j 32,508,228 i 65.34
34,66 1 35,276,210 ! 70.91
17,242,763
14,474,781
29.09 37,760,397
75,90
11,990,594
24.10 41,784,704
83.99
7,966,287
16.01 44,497,859
89.44
5,253,152 j 10.56 46,127,327
92.72 f
3,623,664;
7.28 47,110,664! 94,69
2,640,327 1 5.31 48,000,316 1 96.48
1,750,675
3.52 1 48,431,069
97.35
1,319,922
2.65 i 48,683,964
97.86
1,067,027
2.14 1 48,861,279
98,21
889,712
1.79 48,996,135
98.48
754,856
1.52! 49,100,589; 98.69
650,402
1.31 49,181,019
98.85
569,972
1.15 49,247,538
98.99
503,453
1.01 49,503,429
99.10
447,562
.90 49,349,481
99.19
401,510
.81 49,504,789
99.50
246,202
.50 49,588,018
99.67
162,975
99.76
»33¡ 49,633,984
117,007
.24 49,683,755
99.86
67,236
.14 49,708,238
99.91
42,753
.09 49,721,656
99.94
.06 49,730,097
29,335
99.96
20,894
.04 49,735,545
99.97
15,446
.03 49,739,146
99.98
11,845
.02 49,741,735
99.98
9,258
.02 49,747,263
99.99
3,728
.01 49,748,989
99.99
2,002
49,749,727
99.99
(6)
1,264
49,750,134
99.99
(6)
857
49,750,467
99.99
(6)
524
49,750,662
99.99
(6 )
329
49, 750,855
(6)
99.99
136
49,750,920
99.99
(6)
71
(6)
49,750,959
99.99
32
(6)
49,750,978
99.99
13
49,750,985
99.99
(6)
6j
49,750,987
99.99
(6)
4
(6)
49,750,990
99.99
i __ L6Jl_ 49.750.991 100.00

j 49,750,991
214,483

-

- - ... i[

(? )

'
-*

:

-

j

i

-

1,498,401¡
1.25
1,922,087 ! 1.59
2,738,89]
2.28
4,035,572
3.35
5,178,417 I 4.31
5,845,469 ) 4,86
6,692,418 ] 5.56
7,022,365
5.84
7, 213,675 ! 5.99
7,261,329 j 6.04
7,133,274 j 5.93
13,017,492 ( 10.82
10,125,025
8.42
6,892,942
5.73
3.86
4,649,038
4,826,976
4.01
2,779,434
2.31
1,838,235
1.57
1,501,205
1.25
1,277,388
1.06
1,094,124
.91
923,312
.77
829,486
.69
753,545
.63
666,679
.55
2,668,955
2.22
1,853,715
1.54
1,254,327
1.04
1,708,972
1.42
1,089,366
.91
731,521
.61
544,726
.45
406,852
.34
304,660
.25
245,041
.20
661,464
.55
295,289
.25
163,463
.14
110,845
.09
115,585
.09!
86,447
.07
114,603
.10
55,141
.05
46,214
.04
31,910
.02
16,806
.01
7,042
.01
13,795
.01
7.617
.01
120,301,131

100.00

8/ |292,472i (7)
9/120.008.659 If7)

120,301,131 100.00
118,802,730
98.75
116,880,643 I 97.16
114,141,752
94.88
110,106,180
91.53
87.22
104,927,763
99,082,294
82.36
92,389,876
76.80
85,367,513
70.96
78,153,838
64.97
70,892,509
58.93
63,759,235
53.00
50,741,743
42.18
40,616,718
33.76
33,723,776
28.03
29,074,738
24.17
24,247,762
20.16
21,468,328
17.85
19,580,093
16.28
18,078,890
15.03
13.97
16,801,502
15,707,378
13.06
14,784,066
12.29
13,954,580
11.60
13,201,035
10.97
12,534,356
10.42
9,865,401'
8.20
8,011,686
6.66
6,757,359
5.62
5,048,387
4.20
3,959,021
3.29
3,227,500
2.68
2,682,774
2.23
2,275,922
1.89
1,971,262
1.64
1,726,221
1.44
1,064,757
.89
769,468
.64
606,0051
.50
495,160
.41
• 579,575j
.32
295,128
.25
178,525 1
.15
123,384 !
.10
77,170;
.06
45, 260 1
.04
28,454 j
.03
21,412 !
.02
7,617
.01
-

-

1,498,401
1.25
3,420,488
2.84
6,159,379
5.12
8.47
10,194,951
15,373,368
12.78
21,218,857
17.64
27,911,255
23.20
34,933^618
29.04
42,147,293
49,408,622
41.07
56,541,896
47.00
69, 559,388
57.82
79,684,413
66.24
71.97
86,577,355
91,226,393
75.83
96,053,369
79.84
98,832,803
82.15
100,721,038
83^72
102,222,241
84.97
103,499,629
86.03
104,593,753
86.94
105,517,065
87.71
106,346,551
88.40
107,100,096
89.03
107,766,775
89.58
110,435,730
91,80
112,289,445
93.54
115,543,772
94.38
115,252,744
95.80
116,342,110
96.71
117,073,631
97.52
117,618,357
97.77
118,025,209
98.11
118,329,869
98.36
118,574,910
98.56
119,236,374
99.11
119, 53l'663
99.36
119,695,126
99.50
119,805,971
99.59
119,921,556
99.68
120,008] 003
99.75
120,122,606
99.85
120,177,747
99.90
120,223,961
99.94
120,255,871
99.96
120,272,677
99.97
120,279,719
99.98
120,293,514
99.99
120.301.131 100.00
_
-

Tax liability 3T
Cumulative distri­ Cumulative distri­
Simóle distribution bution from highest bution from lowest
income class
income class______
Percent
Percent
Amount
of
of
total
total

27,582
lio] 823
221]201
354^715
472]301
599^429
650] 934
686]008
707]912
716^950
1,391^ 200
l]178]294
’871] 803
635]796
727^208
473]245
351^156
298^ 374
269]586
242^ 705
214]678
201^619
190^740
175^651
775*181
619^ 816
466* 851
706*167
496^611
355,878
279*443
216*513
137*65Ç
96J>
180.398
101*678
68-OQ7
75^0^6
51 *552
72 jQOi>
37I06O
27,Q18
267
10, 053
4*584
10,277
4 *801
17,050,378

-

-

17,050,378 100.00
27,582
17,022,796
99.84
138,405
99.19
16,911,973
359,606
16^690,772
97.89
714,321
16,336,057
95.81 1,186,622
15,863,756
93.04 1,786,051
15,264,327
89.52 2,444,985
85.66 3,150,993
14,605,393
13,919,385. 81.64 3,838,905
13,211,473
77.48 4,555,855
12,494,523
73.28 5,947,055
11,103,323
65.12 7,125,349
9,925,029
58.21 7,997,152
9,053,226
53.10 8,632,948
8,417,430
49.37 9,360,156
7,690,222
45.^0 9,833,401
7,216,977 ,42.33 10,184,557
6,865,821
40.27 10,482,931
6,567,447
38.52 10,752,517
6,297,861
36.94 10,995,222
6,055,156
35.51 11,209,900
5,840,478
34.25 11,411,519
5,638,859
33.07 11,602,259
5,448,119
31.95 11,777,910
5,272,468
30.92 12,553,091
4, 497, 23 7
26.38 13,172,907
3,877,471
22.74 13,639,758
3,410,620
20.00 14,345,925
2,704,453
15.86 14,842,536
2,207,842
12.95 15,198,414
10.86 15,477,857
1,851,964
1,572,521
9.22 15,694,370
1,356,008
7.95 15,861,179
1,189,199
6.97 15,998,834
6.17 16,386,796
1,051,544
663,582
3.89 16,567,124
483,254
2.83 .16,668,802
381,576
2.24 116,736,899
313,479
1.84 !16,808,964
1.42 16,860,516
241,414
189,862
1.12 16,933,418
116,960
.69 16,970,478
.47 16,998,396
79,900
51,982
.30 17,020,665
.17 17,030,716
29,715
19,662
.11 17,055,300
.08 17,045,577
15,078
4.801
■02 17.050.378

.16
.81

2.11
4.19
6.96
10.48
14.34
18.56
22.52
26.72
34.88
41.79
46.90
50.63
54.90
57.67
59.73
61.48
63.06
64.49
65.75
66.93
68.05
69.08
73.62
77.26

80.00
84.14
87.05
89.14
90.78
92.05
93.03
93.83
96.11
97.17
97.76
98.16
98.58
98.88
99.31
99.53
99.70
99.83
99.89
99.92
99.98
100.00

tax exemption, tax liability, tax payments, and tax overpayment
PAHT I. - ALL RETURNS
(Adjusted gross Income classes and money figures in thousands of dollars)

Adjusted gross income classes 1/

1
2
3
4
S

6
7
8
9

10
11

12
13
14
15
16
17
18
19
20

21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
56
37
38
39
40
41
42
43
44

xable individual returnst
0.5 under 0,75
0,75 under 1
1 under 1.25
1.25 under 1.5
1.5 under 1.75
1.75 under 2
2 under 2.25
2.25 under 2.5
2.5 under 2.75
2.75 under 3
3 under 3.5
3.5 under 4
4 under 4.5
4.5 under 5
5 under 6
6 under 7
7 trader 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under 13
13 under 14
14 under 15
15 under 20
20 under 25
25 under 30
30 under 40
40 undèr 50
50 under 60
60 trader 70
70 trader 80
80 under 90
90 trader 100
100 under 150
150 under 200
200 under 250
250 under 300
500 under 400
100 under 500
500 under 750
750 under 1,000
1.000 under 1,500
1,500 under 2,000
2.000 trader 3,000
3.000 under 4,000
4.000 under 5,000
5.000 and over

Total
number
of
returns

89,462.015

ntaxable individual returns: 31/
No adjusted gross income 5/
Under 0.5
0.5 trader 0.75
0.75 under 1
1 under 1.25 .
1.25 and over

214,483
5,452,051
1,064,084
306,238
185,423

41,580.
1,345,897
444,920
169,495
131,143

18,625
18,105
20,585

8,816
6,548

6,350
7",118
15,746
14 j562
13,046
9,891
9,267
6^957
7,719
9,042
11,925
10,714
7,611
3,757
6,420
5,896
3,674
2,384
2,674
2,436
1,888
1,466
1,085
1,356
4,395
2,701
2,177
3,583
1,500
1,160
1,098
792
574
368
1,195
419
276
85
82
140
127
128
114

134,166
1,542
28,944
252,421
3,868
48,308
371,191
4,442
53,049
445,279
7,242
64,984
469,556
7,408
66,217
499,937
8,089
62,308
481,644
10,517
64,108
478,090
9,340
63,838
447,178
11,503
64,100
447,974
9,919
62,303
783,169
17,255
113,734
644,531
11,237
94,402
527,353
7,163
67,488
473,528
6,575
63,936
723,809
6,116
88,767
566,010
6,473
68,273
454,070
3,591
53,969
378,062
3,062
42,234
334,743
2,393
37,514
277,076
2,154
31,110
248,211
1,869
27,739
212,339
1,719
24,759
197,247
1,404
22,315
170,273
17,706
1,092
642,021
4,697
75,518
411,499
49,596
3,212
248,096
2,100
31,710
308,870
2,296
42,671
174,875
1,383
25,614
107,094
1,037
17,346
749 - 73,984
11,055
50,697
521
10,227
34,155
377
6,707
30,106
276
5,056
827
68,579
15,063
30,043
292
6,962
12,339
131
4,425
10,161
107
2,068
6,059
168
2,437
4,072
70
2,056
4,521
233
926
•1,806
20
331
3,004
52
304
1,681
63
1,867
15
12
3
21

183.962

1.644.048

1,122

13,321
37,485
31,797
17,869
11,388

2,269
3,310
1,731
1,254

4
124

5,634
12,263
11,620
17,007
14,158
14,413
14,022
12,089
10,442
9,611
15,470
13,162
7,535
4,918
11,138
4,900!
7,955
7,708
6,460
5,679
4,996
3,910
3,921
2,993
13,851
11,019
7,596
11,306
7,470
S,629
4,270
2,598
2,509

2,000
7,310
2,205
1,768
998
815
1,397

1,022
674
563
505
50
95
25

17,401
35,169
53,373
61,223
75,061
87,834
97,350
101,315
122,816
109.650
223,386
193,029
189,102
180,506
309,890
266,854
267,045
248,352
223,822
201,675
179,697
163,670
164,462
154.651
639,952
480,515
347,397
505,672
345,526
232,290
177,128
132,932
97,559
76,312
197,847
73,969
58,707
19,607
22,380
12,264
l16,408
7,605
2,108
865
2,155
3,020

Sales or ex­
changes of prop­ Income
from
erty other than
capital assets 17/ estates
and
Net gain Net loss Net gain Net loss trusts 18/

Sales or ex­
changes of capi­
tal assets 16/

Partnership 15/

Net profit Net loss Net profit Net loss Net profit Net loss

25,708
2,024,406 1,098,158
49,696
2,818,413 2,060,255
57,041
3,398,136 3,256,289
63,478
3,642,872 4,329,335
69,692
5,107,645
3,602,265
71,382
3,573,466 5,913,790
73,960
3,308,650 6,246,287
73,976
3,039,531 6,444,530
63,446
2,767,982 6,505,425
74,740
2,484,187 6,381,127
133,432
4,024,307 11,647,774
116,273
8,972,765
2,713,135
90,289
1,629,488 5,923,242
87,982
983,337 3,753,518
167,999
889,652 3,396,406
139,091
430,753 1,621,064
119,973
895,669
252,895
103,142
646,601
177,315
95,707
507,860
134,856
85,186
431,315
104,454
77,898
327,534
80,430
71,559
301,393
66,519
66,884
252,728
55,891
63,498
211,101
46,052
263,073
854,804
155,308
200,835
564,235
83,2.29
146,325
371,384
45,966
214,283
470,154
49,771
151,474
275,741
24,483
111,128
176,973
13,418
87,890
123,293
8,441
69,784
82,789
5,448
56,930
61,727
3,601
46,802
45,652
2,587
141,410
108,853
5,530
68,736
39,944
1,726
41,581
18,484
738
30,491
11,648
407
31,031
9,788
333
22,840
5,438
195
36,969
6,519
193
21,507
1,026
65
15,826
834
39
10,900
697
19
5,734
153
6
65
12,275
1
8,595

Total, taxable individual returns

Business and
profession 14/

Rents and
royalties 13/

Dividends Annuities
Salaries
and pen­
and in­
and
wages 10/ terest 13/ sions 12/

528
1,390
2,523
3,895
1,900
1,528
1,716
2,452
2,178
2,030
3,164
2,585
2,206
1,136
3,525
2,455
3,230
2,593
1,924

2,120
1.447
1,790
1,553
1,649
4,941
3,111
2,356
3,563
3,023
1,857
1.447
676
1,169
521
1,510
781
375
150
473
108
283
10
71

20
44

7,637
15,873
21,294
27,054
36,237
34.852
39,822
39,244
40,136
43.852
88,053
78,469
65,382
62,363
101,283
89,072
68,725
60,016
55,432
47,597
43,336
38,347
34,076
33,549
132,803
97,538
73,530
110,246
79,085
59,667
49,893
40,093
34,083
28,945
92,131
55,191
35,331
27,681
35,588
31,510
38,846
14,656
16,584
7,320
7,749
3,901
1,528

2,123
3,732
4,913
6,649
6,095
6,302
7,998
6,535
6,751
6,679
12,366
12,521
8,166
5,559
8,176
5,7ei
5,821
5,233
4,451
3,482
3,129
2,587
2,410
2,269
7,972
5,194
3,052
3,493
1,869
1,135
830
891
350
272
624

200
89
50
30
24
27
14
9

599
1,498
1,138
1,655
1,394
2,353
1,977
1,624
2,771
2,083
5,133
4,511
4,053
3,006
5,458
3,376
3,309
2,132
1,513
1,481
1,319

1,011
934
587
2,137
1,533
675
797
489
199
192
167
103

22
248

11
16

2
(32)
2

310
2,016
1,582
1,189
948
2,123
1,283
3,451
1,422
2,320
3,100
2,559
2,140
1,086
2,641
1,412
2,948
1,936
2,902
1,353
1,227
1,041
1,208
1,039
4,234
2,331
1,872
' 2,206
1,801
1,279
620
630
385
430
1,433
797
366
500
400
164
419
97
32

Miscel­
laneous
in­
come 19/

Adjusted
gross
income 2/

10,269
19,006
22,992
25,392
31,129
29,836
32,398
26,489
31,319
23,387
42,642
34,698
20,654
24,438
27,179
13,347
16,061
13,168
12,873
10,143
8.500
7,814
6,970
6.500
20,396
15,241
6,282
8,166
4,303
3,266
2,574
1,617
609
1,158
2,519
1,270
569
264
155
95
60
126
78
1
1
1,101
1
144
(32)

3,804
5,356
7,154
8,391
6,021
12,710
11,087
11,478
8,716
9,670
19,597
17,697
24,975
15,280
31,363
27,472
29,287
25,646
23,383
20,892
19,859
18,194
17,339
16,501
69,552
54,890
43,727
67,397
46,305
33,335
25,534
23,072
17,003
14,119
45,324
23,019
14,463
10,643
9,951
9,793
12,213
8,770
8,088
9,106

13,745
5,430
2,024
1,460
921

11,462
104,131
88,641
62,708
45,232

290,074
21,915
5,668
5,918
2,659

12,862
9,765
8,935
6,228
4,445

62,445
4,299
898
181
564

32,332
9,836
5,468
4,375
3,036
7.408

11,856
8,125
3,671
1,563
1,113
1,738

3,903
558
202
709
253
692

57,169
2,116
565
656
1,249
1.287

2,737
1,326
1,480
990
253
2,124

4,872
10,914
6,673
4,322
4,334
3.387

62:453

28.066

6,317

63,042

,910

34,502

948,331

67,825
Grand total
47,325,147 79,877,924 1,137,288
2,640,327 11,821,875 2,787,362

145,549
50,258

1,045,123
726,329

aa •
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48

117.561,661

49

8/292,472
1,498,401
599,184
267,458
201,383
173.044

50
51
52
53
54
55

154,724 12.241.514

Total, nontaxable individual returns

tdividual returns with adjusted gross in;ome (or deficit) under-.$5,000
individual returns with adjusted gross in-

1,322,905
2.471.433
3,834,189
5,005,375
5,845,469
6,692,418
7,022,363
7,213,675
7,261,529
7,133,274
13,017,492
10,125,025
6,892,942
4,649,038
4,826,976
2.779.434
1,888,235
1,501,203
1,277,388
1,094,124
923,312
829,486
753,545
666,679
2,668,955
1,853,715
1,254,327
1,708,973
1,089,366
731,520
544,726
406,852
304,660
245,041
661,464
295,289
163,463
110,845
115,585
86,447
114,603
55,141
46,214
31,910
16,806
7,042
13,795
7,617

141,113
48,624

6,797,967
5,785,

494,857
145,335

1,596,410
5,612,336

9/2.446,998

56

9/120.008,659

57

662,701

124,455

40,112

88,571

170,846

409,151

9/90,933,921

58

48,775 1,645,332

69,4S9

27,713

38,561

777,485

191,306

29,074,738

59

100,173

Table 2. - Individual returns for 1945, by taxable and nontaxable returns and by adjusted gross income classes - Part I, all returns;
Part II, returns with standard deduction; Part III, returns with itemized deductions; Number of returns, sources of income, ad­
justed gross income, deductions, surtax exemption, tax liability, tax payments, and tax overpayment - Continued
PART I. - ALL RETURNS - Continued

1

z
3
4
5
6
7
8
9
10

11
12
13
14
15
16
17
18
19

20
21
22
23
24
25
26
27
28
29
30
31
52
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49

50
51
52
53
54

(Adjusted gross income classes and money figures in thousands of dollars)
Amount of
Payments
surtax
Tax
Tax
on 1945
Adjusted gross income classes 1/
exemption 20/
liability 3/
withheld
declara­
tion 21/
Taxable individual returns:
0,5 under 0.76
1,654,328
27,582
85,400
4,611
0.75 under 1
2,558,618
110,823
161,045
12,469
1 under 1.25
3,307,328
221,201
272,565
20,814
1.25 under 1.5
3,770,756
354,715
395,363
27,021
1.5 under 1.75
3,854,392
472,301
497,426
32,951
1.75 under 2
3,982,110
599,429
608,062
43,148
2 under 2.25
3,932,290
658,934
659,342
45,815
2.25 under 2.5
3,948,177
686,008
673,657
49,252
2.5 under 2.75
3,789,068
707,912
686,724
55,021
2.75 under 3
3,567,283
56,222
716,950
685,431
3 under 3.5
6,011,746
1,391,200
1,304,891
113,137
3.5 under 4
4,243,380
1,178,294
1,074,191
100,647
4 under 4.5
2,528,535
871,803
752,547
93,675
4,5 under 5
1,489,851
635,796
507,900
92,830
5 under 6
1,292,610
727,208
491,517
164,915
6 under 7
589,308
473,245
248,269
152,170
7 under 8
351,156
332,190
140,931
153,796
8 under 9
231,638
298,374
104,050
142,083
9 under 10
269,586
171,605
83,849
137,273
10 under 11
134,464
242,705
72,365
128,324
11 under 12
102,424
214,678
55,069
118,851
12 under 13
84,236
201,619
52,240
114,193
13 under 14
70,226
190,74044,118
111,383
14 under 15
57,147
175,651
37,440
104,740
15 under 20
192,702
775,181
483,496
155,764
20 under 25
619,816
103,070
106,176
407,295
25 under 30
55,640
466,851
71,437
319,445
30 under 40
58,785
706,167
92,096
502,137
40 under 50
28,051
496,611
54,801
368,284
50 under 60
15,125
355,878
35,500
268,905
60 under 70
9,232
279,443
25,455
213,897
70 under 80
5,835
216,513
17,000
169,848
80 under 90
3,789
166,809
12,756
131,877
90 under 100
2,652
137,655
9,422
110,219
100 under 150
387,962
5,488
23,209
315,407
150 under 200
1,629
180,328
8,605
150,151
200 under 250
699
101,678
3,884
86,041
250 under 300
68,097
364
2,364
58,271
300 under 400
308
72,065
1,896
63,128
400 under 500
184
51,552
1,154
44,833
500 under 750
182
72,902
1,222
64,804
750 under 1,000
56
206
37,060
34,208
1,000 under 1,500
34
27,918
165
25,921
1,500 under 2,000
16
22,267
124
21,050
2,000 under 3,000
10,053
10
28
9,798
3,000 under 4,000
4
4,584
14
4,306
4,000 under 5,000
6
10,277
8,700
5,000 and over
1 _______ 4,801
4.825
Total, taxable individual returns
jontaxable individual returns; 31/
No adjusted gross income 5/
Under 0.5
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 and over '
Total, nontaxable individual returns
Qrand total
Individual returns with adjusted gross income (or deficit) under $5,000
Individual returns with adjusted gross income of $5,000 and over
footnotes, see p. 15

52.187.572

17.050.378

10.317.670

5.942.187

246,537
3,779,778
1,047,158
407,651
267,918
123.680

-

4,839
119,613
31,441
9,483
6,944
6.916

18,998
4,445
2,396
1,362
919
5.055

5,872,722

«

179.236

31.175

10.496.906

5.973.362

58.060.294

17.050.378

Balance of
tax due
at time
of filing
5,038
16,847
26,003
34,890
43,891
49,835
52,862
56,123
58,161
59,948
113,784
100,879
83,389
72,294
110,746
94,066
79,833
71,294
65,047
56,350
52,201
46,524
45,076
42,346
175,663
135,561
94,100
137,500
90,816
63,280
48,682
35,888
27,376
21,903
60,870
26,565
14,315
9,141
8,465
6,998
7,912
3,066
1,994
1,335
280
264
1,577

Overpayment
(refund, or
credit on
1946 tax)
67,467
79,538
98,178
102,558
101,969
101,617
99,088
93,022
91,995
84,654
140,611
97,421
57,807
37,227
39,969
21,262
23,403
19,052
16,581
* 14,334
11,444
11,337
9,837
8,876
39,743
29,216
18,131
25,566
17,289
11,807
8,592
6,223
5,199
3,889
11,523
4,994
2,562
1,679
1,423
1,432
1,035
420
162
242
52

1
2
3
4
5

6
7
8
9
10

11
12
13
14
15
16
17
18
19

20
21
22

24

23
24
25
26
27
28
29
SO
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48

2.410.978

1.620.450

49

-

23,836
124,059
33,836
10,846
7,861
9.973

50
51
52
53
54
55

210,411

56

2.410.978

1.830.861

57

_

54,510,584

8,632,948

8,543,780

778,788

773,944

1,463,563

58

3,549,710

8,417,430

1,953,126

5,194,574

1,657,034

367,298

59

Table 2. - Individual returns for 1945, by taxable and nontaxable returns and by adjusted gross Income classes - Part I, all returns; Part II, returns
with standard deduction; Part III, returns with itemized deductions: Number of returns, sources of income, adjusted gross income, deductions, sur­
tax exemption, tax liability, tax payments, and tax overpayment - Continued
PART II. - RETURNS WITH STANDARD DEDUCTION 22/
(Adjusted gross income classes and money figures in thousands of dollars)

Adjusted gross income classes l/

1
2
3
4
S
6
7

8
9
10
11

12
13
14
15
16
17
18
19

20
21

22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48

Taxable individual returns:
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 under 1.5
1.5 under 1.75
1.75 under 2
2 under 2.25
2.25 under 2.5
2.5 under 2.75
2.75 under 3
3 under 3.5
3.5 under 4
4 under 4.5
4.5 under 5
5 under 6
6 under 7
7 tinder 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under 13
13 under 14
14 under 15
15 under 20
20 under 25
25 under 30
30 under 40
40 under 50
50 under 60
60 under 70
70 under 80
80 under 90
90 under 100
100 under 150
150 under 200
200 under 250
250 under 300
300 under 400
400 under 500
500 under 750
750 under 1,000
1.000 under 1,500
1,500 under 2,000
2.000 under 5,000
3.000 under 4,000
4.000 under 5,000
5.000 and over

Nontaxable individual returns: 31/
No adjusted gross income 5/
Under 0.5
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 and over

56

Total, nontaxable individual returns

57

Grand total

58
59

1,915,280
2,546,756
3,023,202
3,195,775
3,099,778
3,038,760
2,781,447
2,503,500
2,241,000
1,986,556
3,129,343
2,071,953
1,215,385
722,938
579,381
262,819
145,461
95,401
67,307
48,147
34,686
26,967
21,303
16,207
44,887
17,661
7,522
6,090
2,258
924
487
278
164
114
152
43
8
6
3

1
1
1

Salaries
and
wages 10/

1,063,700;
1,921,257
2,972,832
3,902,744
4,492,627
5,130,502
5,341,851
5,383,954
5,333,956
5,161,138
9,145,740
6,900,816
4,446,171
2,765,078
2,118,127

888,202
435,698
275,331
189,485
144,188
96,604
83,266
58,303
43,360
140,753
57,529
28,964
24,350
9,956
4,667
2,296
1,004
807
792
540
284
40

11
( 52 )
.64'
(32)

Dividends Annuities
and pen­
and in­
terest u/ sions 12/

18,816
27,486
33,474
33,432
37.397
39,661
40,679
38.398
36,223
42,538
72,409
64,947
50,870
47,853
80,979
65,886
48,951
37,607
30,301
24,121
19,543
16,076
14,159
11,337
34,872
15,866
9,087
7,881
3,875
2,158
1,277
1,062
458

5,431
4,230
9,099
7,768
5,790
5,275
4,614
4,286
3,725
6,306
5,436
7,175
5,281
3,000
4,053
4,310
1,162
717
931
676
550
302
232
256
471
122
154

121
35
17
5
22

IBS

1

919

3

201
11

(32)

182
4
10
457
(32)

Individual returns with adjusted gross in­
come (or deficit) under $5,000
Individual returns with adjusted gross income of $5,000 and over
For

footnotes,

s e e p.

15.

5,388,753
902,563
195,046
117,879

1,336,489
398,079
123,545
95,389

14,236
8,016
2,099
876

6.604.241

1.953.502

25.227

Sales or ex—
changes of prop­ Income
erty other than
from
capital assets 17/ estates
and
Net profit Net loss Net profit Net loss Net profit Net loss Net gain Net loss Net gain Net loss
trusts 18/
Rents and
royalties 13/

21,643
30,938
32,362
38,234
39,148
36,153
37,123
37,996
36,353
38,778
67,890
56,834
40,231
41,195
51,025
38,776
27,334
20,374
17,424
13,766
10,850
8,413
7,582
5,796
19,507
9,869
5,243
4,805
2,139
1,318
425
549
188
303
323
148
28
13

Business and
profession 14/

1,195
2,536
2,560
4,527
4,161
4,720
6,292
5,278
5,309
6,185
10,421
6,477
4,485
3,956
3,181
4,569
1,653
1,188
1,127
849
823
525
631
395
1,081
596
280

211
120
42
45
21

1
2
6
1

115,622
204,181
296,290
340,939
358,145
375,254
361,491
359,345
334,607
335,298
591,391
488,587
394,304
364,707
553,520
421,079
328,832
260,998
219,542
171,042
144,035
119,148
106,334
82,695
275,169
138,253
66,308
65,066
31,943
14,811
9,485
5,619
3,537
3,571
5,842
2,241
236
256
297

Sales or ex­
changes of capi­
tal assets 16/

Partnership 15/

5,085
9,430
7,963
12,737
8,827
10,581
10,191
7,770
6,978
6,332
8,527
8,395
5,562
3,643
5.390
3,811
3.390
2,845
2,532
1,789
1,560
1,449
732
831
2,821
1,513
792
1,097
422
257
198
72

66
35
24

11

14,875
28,955
43,125
48,603
61,269
65,196
78,382
80,608
93,659
85,580
162,548
148,313
144,334
137,832
234,465
208,794
190,128
168,194
141,650
120,324
101,011

87,372
83,389
74,163
245.437
140.438
78,088
87,022
43,225
21,746
14,278
9,709
6,827
3,767
6,573
1,982

6

457
748
1,583
3,243
1,052
1,161
1,152
1,957
1,312
1,274
1,695
1,549
1,386
404
2,143
1,118
1,865
1,366
684
761
508¡
552
430
537
941
424
349 ;
350
105
129
108:
22"I

8

18
16

1
5

6.304
11,607
15,197
19,574
24.742
24,457
27,645
27,795
27,478
30,125
57,875
51.804
44,883
42,368
68.804
53,373
38.742
32,606
27,626
21.514
17,266
15,783
11,430
11.514
37,294
19,509
12,189
13,281
6,646
4,228
3,253
1,962
1.304
1,809
2,917
1,454
1,207
857

1.835
2,245
3,316
4,088
2,699
2.836
4,939
2,932
3,049
3,389
5,897
7,676
4,173
3,184
3,429

2,020
2,051
1,893
1,366
1,009
882
637
696
410
1,474
510
246
229
78
28

11
13
'3

471
1,297
941
1,360
945
1,981
1,400
576
i,46o:

1,221
2,432
3,366
2,164
1,891
2,277
1,615
1,931
1,321
799
628
665
578
329
222
845
472
149
166
81
9
10
4
3

2
6
(5?)

310
1,539
789
585
355
1,729
720
909
557
619
820
1,764
1,493
722
916
376
1,482
579
418
396
310
268
155

221
471
244
249
110
60
26
'

11

1
7

11
7

1

14
93
16
6

2,756
3,911
5,006
4,454
3,461
8,079
7,629
6,898
5,794
4,356
11,515
10,247
15,336
9,436
20,170
16,025
14,222
11,612
9,665
8,120
7,457
5,469
4,866
4,699
12,618
8,283
4,936
5,310
2,716
1,483
449
644
683
241
636
936
24
250

Miscel­
laneous
in­
come 19/

8,582
14,446
18,337
19,672
22,460
23,177
25,396
19,002
21,863
16,198
31,115
23,366
14,201
16,768
18,272
8,600
8,569
6,770
6,253
'4,539
4,183
3,244
2,989
2,944
5,529
4,177
1,249
1,408
153
204
166
299
83
208
124

1

237

791
411

1

2
791

Total, taxable individual returns

49

50
SI
52
53
54
55

Total
number
of
returns

2,054
1,258
434
243

801.076

85.449

7.949.920

143,658

3,263.451

32,285
12,940
4,557
1,631

4,911
715
309
155

95,185
68,556
36,488
23,813

17,106
3,504
3,212
665

9,351
6,267
2,705
2,576

224,042

24.487

852,489

91,559

8.173.962

51,413

Adjusted
gross
income 2/

1,249,521
2,231,811
3,410,454
4,391,501
5,028,890
5,688,708
5,902,915
5,940,014
5,877,912
5,703,741
10,120,992
7,729,596
5,140,677
3,418,218
3,136,631
1,694,764
1,085,127
807,659
637,549
504,114
398,083
336,221
286,970
234,591
765,706
391,230
204,451
207,412
99,983
50,159
31,272
20,723
13,828
10,809
17,818
7,143
1,762
1,579
1,092
421
522
791

1
2
3
4
5

6
7
8
9
10
11

12
13
14
15
16
17
18
19

20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49

3,275
427
72
405

8,993
3,237
1,770
768

6,121
1,456
222
225

254
63
555
19

1,385
471
109

865
695
252
12

14.768
3.284.350

21,316

77.276

10,252
4,356
2,495
2,066

1,477,166
496,893
170,975
125,945

50
51
52
53
54
55

19.169

2.270.979

56

375.953

85.054.139

57

40,075,914 65,915,868

609,410

81,405

606,291

74,192

5,144,103

136,508

1,214,178

23,152

426,622

60,282

22,396

14,876

100,702

293,752

74,105,729

58

4,604,621

427,465

14,148

246,198

17,347

3,029,859

31,637

2,070,172

12,440

406,568

16,994

12,112

6,440

141,926

80,201

10,948,410

59

1,578,279

Tabl* 2. - Individual returns for 1945, by taxable and nontaxable returns and by adjusted gross income classes - Part I, all returns;
Part II, returns with standard deduction; Part III, returns with itemized deductions: Number of returns, sources of income, ad­
justed gross income, deductions, surtax exemption, tax liability, tax payments, and tax overpayment - Continued
PART II. - RETURNS WITH STANDARD DEDUCTION 22/ - Continued

Adjusted gross income classes l/

1
z
3
4

5

6
7
8
9
10

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
52
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49

50
51
52
53
54
55
56
57
58
59

axable individual returns:
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 under 1.5
1.5 under 1.75
1.75 under 2
2 under 2.25
2.25 under 2.5
2.5 under 2.75
2.75 under 3
3 under 3.5
3.5 under 4
4 under 4.5
4.5 under 5
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under 13
13 under 14
14 under 15
15 under 20
20 under 25
25 under 30
30 under 40
40 under 50
50 under 60
60 under 70
70 under 80
80 under 90
90 under 100
100 under 150
150 under 200
200 under 250
250 under 300
300 under 400
400 under 500
500 under 750
750 under 1,000
1.000 under 1,500
1,500 under 2,000
2.000 under 3,000
3.000 under 4,000
4.000 under 5,000
5.000 and over
Total, taxable individual returns
Nontaxable individual returns: 31/
No adjusted gross income 5/
Under 0.5
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 and over
Total, nontaxable individual returns
Grand total
Individual returns with adjusted gross in­
come (or deficit) under $5,000
Individual returns with adjusted gross income o£ $5.000 and over__________________
For footnotes, see p. 15.

Amount of
surtax
exemption 20/

1,572,566
2^333^083
2^975^150
3,333,424
5,534,030
3^404,371
3,327,794
3,285,755
3^088j741
2,871,868
4,702,898
3^256^835
1,882,222
1^095^554
821^ 575
, 342,647
183,117
118,228
80,717
58,263
41,082
31,617
24^825
18,381
50,610
19,830
8,270
6,621
2,423
962
515
283
167
127
148
48
10
5
3
1
1
3

Payments
on 1945
declara­
tion El/

Tax
withheld

liability

25,958
102,084
201,101
321,297
420,349
527,299
572,588
582,301
592,968
593,238
1,121,185
932,414
675,061
484,466
499,945
307,839
215,233
172,002
144,654
120,446
100,211
88,592
78,908
67,489
243,417
144,480
84,419
95,130
51,020
27,504
18,154
12,582
8,716
6,870
11,995
5,062
1,029
982
948
369
465
711

82,777
, 150,343
248,777
357,745
439,919
530,717
567,663
565,144
566,270
558,247
1,031,748
832,622
570,559
378,467
311,981
139,212
69,817
44,495
31,098
24,066
15,875
14,119
9,975
7,433
24,405
10,194
5,216
4,519
1,946
879
497
229
120
157
115
52
9
2
(52)
14

3,873
9,332
15,640
19,150
23,507
31,693
33,601
35,179
39,697
40,236
81,299
72,989
67,515
68,068
117,554
104,974
98,036
85,203
75,990
66,397
56,663
52,154
47,814
41,297
152,686
93,477
56,691
66,018
35,539
19,296
12,960
9,212
6,478
5,021
8,563
3,855
824
•
622
837
457
451
711

9.661.481

7.597.403

1.761.559

1.275.632

118,592
28,514
6,600
4,853

3,614
1,659
462
228

-

-

-

5.103.000

65,015
71,621
84,946
84,492
79,260
75,607
71,417
63^459
59,981
54,412
82,225
53,281
28,172
18,051
14,410
7,931
9,631
7,014
5,414
4,967
3,293
5,827
2,763
2,321
8,555
4,195
1,919
2,331
1,087
523
374
147
158
108
57
74
10
10
87
.-

158.559

5.963

973.105

-

3,715,014
'912j191
290,858
184,937

4,323
14,050
21,632
28,894
36,182
40,496
42,739
45,438
46,982
49,165
90,364
80,086
65,180
55,963
84,820
71,582
57,012
49,319
42,981
34,950
30,966
26,146
23,882
21,080
74,861
45,004
24,431
26,924
14,623
7,852
5,071
3,288
2,277
1,800
3,375
1,229
206
368
111
(32)

-

"

42.274.768

Overpayment
(refund, or
credit on
1946 tax)

Balance of
tax due
at time
of filine

122,206
30,173
7,063
5,081

_
-

164,523

47,377,768

9,661,481

7,755,962

1,767,522

1,275,632

1,137,628

45,567,289

7,152,309

7,039,537

547,742

621,474

1,056,442

* 1,810,479

2,509,172

716,425

1,219,780

654,158

81,186

Table 2, - Individual returns for 1945, by taxable and nontaxable returns and by adjusted gross income classes- - Part I, all returns; Part II, returns
with standard deduction; Part III, returns with itemized deductions! Number of returns, sources of income, adjusted gross income, deductions, sur­
tax exemption, tax liability, tax payments, and tax overpayment - Continued
PART III. - RETURNS WITH ITEMIZED DEDUCTIONS 23/
(Adjusted gross income classes and money figures in thousands of dollars)

Adjusted gross income classes 1/

1

2
3
4
5

6
7

8
9
10
11
12
13
14
15
16
17
18
19
20
21

22
25
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46!
47
48
49

50
51
52
53
54
55
56
57

taxable individual returns!
0.5 wider 0.75
0.75 under 1
1 under 1.25
1.25 under 1.5
1.5 under 1.75
1.75 under 2
2 under 2.25
2.25 under 2.5
2.5 under 2.75
2.75 under 3
3 under 3.5
3.5 under 4
4 under 4.5
4.5 under 5
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under 13
13 under 14
14 under 15
15 under 20
20 under 25
25 under 30
30 under 40
40 under 50
50 under 60
60 under 70
70 under 80
80 under 90
90 under 100
100 under 150
ISO under 200
200 under 250
250 under 300
300 under 400
400 under 500
500 under 750
750 under 1,000
1.000 under 1,500
1,500 under 2,000
2.000 under 3,000
3.000 under 4,000
4.000 under 5,000
5.000 and over
Total, taxable individual returns
Nontaxable individual returns: 31/
No adjusted gross income 5/
Under 0.5
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 and over
Total, nontaxable individual retisms
Grand total
Individual returns with adjusted gross in­
come (or deficit) under $5,000
Individual returns with adjusted gross ini come of $5.000 and over_________ _________
For foo"tnot.es, see p* 15.

Salaries
and
wages 10/

Total
number
of
returns

Dividends Annuities
and pen­
and in­
terest 31/ sions 12/

6,892
22,210
23,567
30,046
32,295
3l)721
33,281
35)578
27,223
32,202
6l)023
51)326
39,419
40,129
87,020
73)205
71,022
65,535
65)406
61,065
58,355
55,483
52)725
52)161
228,201
184)969
137)238
206)402
147)599
108)970
86,613
68)722
56,472
46)617
140)491
68)535
4l)570
30,309
3l)027
22)830
36)512
2l)507
15)826
10,900
5,734
6
12,275
q \595

919
2,888
6,647
6,794
7,256
4,616
4,653
2,671
3,994
2,736
6,489
3,539
2,330
757
2,567
1,586
2,512
1,667
1,745
1,760
1,338
1,164
853
1,100
3,924
2)579
2)023
3,462
1,465
1,143
1,093
*792
552
367
1,192
419
276
77
82
140
127
128
114
64
1

7.800,550 20.895.028 2.826.809

92.399

109,126
27l) 657
374)934
447,097
502,487
554)706
527)203
536)031
526)982
497)651
894^964
641^182
414)103
260)399
310)271
167*934
107j434
8l)-914
67)549
56)3Q7
45)744
39)552
34^ 588
29)845
110)421
6s)568
38)444
43)681
22)225
12)494
7)954
5)170
3)437
2,473
5,378
l)683
*730
401
330
194
192
64
39
19
7

34,458
138,998
283)457
426)591
615,018
783,288
904)436
1,060,576
l)l7l)469
l)219)989
2)502)034
2)07l)949
l)477)071
*988)440
1,278)279
*732)862
459)971
37l)270
318)375
287)127
230)930
218)127
194)425
167)741
714,051
506)706
342,420
445)804
265)785
172)306
120)997
8l)785
60^920
44)860
108,313
39)660
18,444
ll)637
9)788
5,438
6,455
l)026
834
697
153
65
1
3
2

z
l

Sales or exchanges Sales or ex­
of capital as­
changes of prop­ Income
Miscel­
erty other than
from
sets 16/
laneous adjusted
capital assets 17/ estates
in­
gross
and
come 19/ income 2/
Net
gain
Net
loss
Net profit Net loss Net profit Net loss Net profit Net loss Net gain Net loss
trusts 18/
Business and
profession 14/

Rents and
royalties 15/

7,301
17,370
20,687
26,750
27,069
26,155
26,985
25,842
27,747
23,525
45,844
37,568
27,257
22,741
37,742
29,497
26,635
21,860
20,090
17,344
16,889
16,326
14,733
ll)910
56,011
39,727
26,467
37,866
23,475
16,028
10,630
9,678
6,519
4,753
14,740
6,814
4,397
2,055
2,437
2,056
926
331
304
1,86,7
3

_

347
1,332
1,882
2,715
3,247
3,369
4,225
4,062
6,194
3,734
6,834
4,760
2,678
2,619
2,935
1,904
1,938
1,874
1,266
1,305
1,046
1,194
773
697
3,616
2,616
1,820
2,085
1,263
995
704
500
376
274
821
291
131
107
168
70
233
20
52
63
12

18,544
48,240
74,901
104,440
111,391
124,683
120,153
118,745
112,571
112,676
191,778
155,944
133,049
108,821
170,289
144,931
125,238
117,064
115,201
106,034
104,176
95,191
90,913
87,578
366,852
273,246
181,788
243,804
142,932
92,283
64,499
45,078
30,618
26,535
62,737
. 27,802
12,103
9,905
5,762
4,072
4,521
1,806
3,004
1,681
15

549
2,833
3,657
4,270
5,331
3,832
3,831
4,319
3,464
3,279
6,943
4,767
1,973
1,275
5,748
1,089
4,565
4,863
3,928
3,890
3,436
2,461
3,189
2,162
11,030
9,506
6,804
10,209
7,048
5,372
4,072
2,526
2,443
1,965
7,286
2,194
1,768
998
815
1,397
1,022
674
563
505
50
95
25

Partnership 15/

2,526
6,214
10,248
12,620
13,792
22,638
18,968
20,707
29,157
24,070
60,838
44,716
44,768
42,674
75,425
58,060
76,917
80,158
82,172
81,351
78,686
76,298
81,073
80,488
394,515
340,077
269,309
418,650
302,301
210,544
162,850
123,223
90,732
72,545
191,274
71,987
38,707
19,601
21,589
12,264
16,406
6,814
2,108
865
2,155
3,020

71
642
940
652
848
367
564
495
866
756
1,469
1,036
820
732
1,382
1,337
1,365
1,227
1,240
1,359
939
1,238
1,123
1,112
4,000
2,687
2,007
3,213
2,918
1,728
1,339
654
1,161
503
1,494
780
370
150
473
108
283
10
71
20
44

-

-

4
124

«

842.972

79.275

4.291.594

164.021

3.896.100

13,321
5,200
18,857
13,312
9,757
15.544

13,745
519
1,309
1,151
766
1.433

11,462
8,946
20,085
26,220
21,419
29.796

290,074
4,809
2,164
2,706
1,994
6.279

12,862
414
2,666
3,523
1,869
6.962

21

214,483
63)296
16l)521
111^192
67)544
92)693

41,580
9,408
46,841
45)950
35)754
104)749

18,625
3)869
12)569
6,717
5,672
13.514

1,122
215
2,052
1,297
1,011
2.158

710.731

284.282

60.966

7.855

75.991

18.923

117.928

308.026

28.296

98.198

4.409.522

472.047

3.924.396
382,232

100.254

918.963

527,878

64,144

438,832

66,921

1,653,864

358,349

7,217,254 |2,359,897

36,110

480,131

31,277

2,755,658

113,698

8.511.281 21.179.310 2.887.775
7,249,233 13,962,056
1,262,048

1,333
4,266
6,097
7,480
11,495
10,375
12,177
11,449
12,658
13,727
30,178
26,665
20,499
19,995
32,479
35,699
29,983
27,410
27,806
26,083
26,070
22,564
22,646
22,035
95,509
78,029
61,341
96,965
72,439
55,439
46,640
38,131
32,779
27,136
89,214
53,737
34,124
26,824
35,588
31,510
38,846
14,656
16,584
7,320
7,749
3,901
1,528

288
1,487
1,597
2,561
3,396
3,466
3,059
3,603
3,702
3,290
6,469
4,845
3,993
2,375
4,747
5,761
3,770
3,340
3,085
2,473
2,247
1,950
1,714
1,859
6,498
4,684
2,806
3,264
1,791
1,107
819
878
347
. 270
618
200
89
50
30
24
26
14
9
4

_

-

477
793
604
595
394
563
2,542
865
1,701
2,280
795
647
364
1,725
1,036
1,466
1,357
2,484
957
917
773
1,053
818
3,763
2,087
1,623
2,096
1,741
1,253
609
629
378
419
1,419
704
350
494
400
164
419
97
32

-

-

«

-

1,048
1,445
2,148
3,937
2,560
4,631
3,458
4,580
2,922
5,314
8,082
7,450
9,639
5,844
11,193
11,447
15,065
14,034
13,718
12,772
12,402
12,725
12,473
11,802
56,934
46,607
38,791
62,087
43,589
31,852
25,085
22,428
16,320
13,878
44,688
22,083
14,439
10,393
9,951
9,382
12,212
8,770
8,088
9,106
1,101
144

1,687
4,560
4,655
5,720
8,669
6,659
7,002
7,487
9,456
7,189
11,527
11,332
6,453
7,670
8,907
4,747
7,492
6,398
6,620
5,604
4,317
4,570
3,981
3,556
14,867
11,064
5,033
6,758
4,150
3,062
2,408
1,318
526
950
2,395
1,269
332
264
155
95
60
126
78
1
1
1
(32)

-

-

-

-

2
856

-

1

-

-

-

46.593 1.427.158

96.606

27.891

44.739

698.617

211.171

62,445
1,024
471
109
159
2.555

32,332
843
2,231
2,603
2,268
7.408

11,856
2,004
2,215
1,341
888
1.738

3,903
304
139
154
234
692

57,169
731
94
547
1,249
1.287

2,737
461
785
738
241
2.124

4,872
662
2,317
1,827
2,268
5.387

66.763

-

-

128
201
197
295
449
372
577
1,048
1,311
862
2,701
1,145
1,889
1,115
3,181
1,761
1,378
811
714
853
654
433
605
365
1,292
1,061
526
631
408
190
182
163
100
22
241
10
16
2
(32)
2

■

1
2
3
4
5
6
7
8
9
LO
LI
L2
L3
L4
L5
L6
L7
18
19

20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48

34.778.501 49

8/292,472
21,235
102,291
96,483
75,438
173.044

50
51
52
53
54
55

9/176.019 56

47.685

20.042

5.426

61.077

7,086

113.356 1.474.843

116.648

33.317

105.816

705.703

226.504 9/34.954.520 57

236,079

64,173

17,716

73,695

70,144

115,399 9/16,828,192 58

3,542,164 1 36,335 1,238,764

52,475
-

15,601

32,121

635,559

77,021

15.333

73,582
239,622
423,735
613,872
816,579
1,003,710
1,119,448
1,275,661
1,383,417
1,429,533
2,896,500
2,395,429
1,752,265
1,230,820
1,690,345
1,084,670
803,108
693,544
639,839
590,010
525,229
493,265
466,575
432,088
1,903,249
1,462,485
1,049,876
1,501,561
989,383
681,361
513,454
386,129
290,832
234,232
643,646
288,146
161,701
109,266
114,493
86,026
114,081
54,350
46,214
31,910
16,806
7,042
13,795
7.617

111,105

18,126,328 ¡59

- Part I, all returns; Part II, returns
Table 2. - Individual returns for 1945, by taxable and nontaxable returns and by adjusted gross income classes adjusted gross income, deductions , surwith standard deductions Part III, returns with itemized deductions! Number of returns, sources of income,
tax exemption, tax liability, tax payments, and tax overpayment - Continued
PART III. - RETURNS WITH ITEMIZED DEDUCTIONS 23/ - Continued
------- r

Adjusted gross income classes l/

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49

50
51
52
53
54
55

axable individual returns!
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 under 1.5
1.5 under 1.75
1.75 under 2
2 under 2.25
2.25 under 2.5
2.5 under 2.75
2.75 under 3
3 under 3,5
3.5 under 4
4 under 4.5
4.5 under 5
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under 13
13 under 14
14 under 15
15 under 20
20 under 25
25 under 30
30 under 40
40 under 50
50 under 60
60 under 70
70 under 80
80 under 90
90 under 100
100 under 150
150 under 200
200 under 250
250 under 300
300 under 400
400 under 500
500 under 750
750 under 1,000
1.000 under 1,500
1,500 under 2,000
2.000 under 3,000
3.000 under 4,000
4.000 under 5,000
5.000 and over

Nontaxable individual returns! 31/
No adjusted gross income 5/
Under 0.5
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 and over
Total, nontaxable individual returns

57

Grand total

59

4,000
14,245
24,469
33,932
42,919
50.897
54,863
59,921
61,076
63,267
126,796
100,928
73,105
47,698
69,882
42,452
31,350
25.897
23,318
21,129
18,288
16,674
15,434
14,103
60,573
44,478
31,980
46,124
30,833
22,660
18,025
14,414
12,469
9,960
30,865
15,078
9,103
6,512
6,409
4,750
7,619
4,009
4,250
2,482
1,518
121
1,568
1.143

interest 25/

352
2,564
6,079
10,059
14,792
20,443
24,296
28,805
33.752
34,897
74,257
62,093
45,464
31,306
45,290
26,071
18.753
14,824
12,433
10,696
9,043
7,925
7,327
6,346
25,469
17,976
12,042
16,151
10,402
7,663
5,915
4,125
3,102
2,879
7,439
3,438
2,271
2,030
1,562
1,357
1,178
703
530
204
52
10

2,*169
10,549
15,898
22,879
30,420
36,936
41,811
47,132
49,146
54,015
104,798
85,605
61,486
42,595
63,003
40,779
29,444
25,062
22,484
20,461
17,735
16,543
15,265
13,847
60,655
45,077
32,396
45,155
30,660
20,634
15,820
11,826
9,131
7,288
21,288
10,296
5,431
3,699
3,919
'3,078
3,556
1,535
1,605
871
489
47
172

Individual returns with adjusted gross in­
come (or deficit) under $5,000
Individual returns with adjusted gross in­
come of 45.000 and over
For footnotes, see p. 15,

129
870
1,607
2,627
4,481
4.529
5,026
6,904
7.687
7,633
15,760
11,256
9,138
5,845
9,840
3,939
3,262
, 2,274
1,708
1,875
1,691
1,415
1,153
929
3,943
2.688
1.530
2,272
1,306
1,002
649
567
278
347
719
184
491
22
111
38
82
43
23
7
1

2,597
15,514
30,503
40,751
52,057
58,333
59,442
59,118
62,798
57,044
103,055
77,261
48,330
32,064
39,616
20,543
14,292
10,342
8,101
6,240
5,230
3,737
3,568
2,781
9,304
5,340
2,621
2,624
1,215
562
411
197
155
103
131
57
63
10
14

1279881

Total, taxable individual returns

56

58

Contribu­
tions 24/

Deduction for
fedical,
1/iscellajosses
'otal
axes 26/ :rom fire, lental,etc., eous
eductions
sxpenses 28/ eductorm,
ions 29/
tc, 27/

1,803
1,692
IS 6,389
5,076
4,006

2,098
1,097
2,618
4,187
3,529

784,541
665,47C

411,654
285,226

649,559
599,823

62,802
192,438
336,009
489,564
650,404
805,760
903,252
1,031,889
1,127,678
1,165,850
2,374,102
1,967,961
1,445,431
1,012,439
1,396,714
907,847
680,521
594,809
552,628
514,116
460,166
435,090
412,933
383,483
1,703,259
1,319,899
952,286
1,363,807
898,271
'616,041
464,014
347,312
261,168
208,920
569,964
252,238
140,818
93,577
99,894
73,588
99,365
47,292
38,474
28,016
14,605
6,855
11,899
5.335

81,762
225,535
332,178
437,332
520,362
577,739
604,496
662,424
700,327
695,415
1,308,848
986,545
646,313
394,297
471,035
246,661
149,073
113,410
90,888
76,201
61,342
52,619
45,401
38,766
142,092
83,240
47,370
52,164
25,628
14,163
8,717
5,552
3,622
2,525
5,340
1,581
689
359
305
183
181
53
34
16
10
4
6
1

990.479

5.257.717 29.520.783

9.912.804

16,4a
99.771

. 62.631

280.81S

25.383

1,249,38C

10,780
47,184
87,72S
124,308
166,175
197,950
216,196
241,772
255,739
263,683
522,397
427,469
306,834
218,382
293,632
176,822
122,587
98,735
87,211
75,894
65,063
58,11(5
53,642
48,606
199,990
142,586
97,590
137,753
91,112
65,320
49,441
38,817
29,664
25,312
73,682
35,907
20,883
15,689
14,599
12,439
14,716
7,057
7,739
3,894
2,201
186
1,896
2.283

13,044
: 9,997
39,81!
49,283
36,996

2,820
2,677
16,908
23,167

44,120

:1,533
3,443
9,171
14,061
21,507
26,807
30,759
39,893
41,277
46,826
97,732
90,325
69,313
58,875
66,000
43,039
25,486
20,336
19,167
15,493
13,075
11,881
10,895
10,600
40,047
27,027
17,022
25,428
16,696
12,799
8,621
7,689
4,530
4,735
13,240
6,855
3,524
3,416
2,591
3,200
2,281
767
1,330
331
142
9
156
549

1,748
1,547
4,69S
6,277
5,264

797
3,777 Ì . h
212
2¿773 *
, 975
8,227
3,416
7,161
1,516
6,278
IR.aéî

Net
income

Onount of
1ax
surtax
' ax lialet
sility 3/ »rithheld
leficit 30/ exemp­
tion 20/

14,705
63,853
50,636
40,373

333.98

153.26Ï
108,87!
44,38

305,516
3,46'
1,37'
3,43!
1,926
18.25<

798,636
137,266

614,15!
438,95

5,367,41
2,171,12

13,794,76(
15,955,20«

1,624
8,739
20,100
33,418
51,952
72,130
86,346
103,707
114,944
123,712
270,015
245,880
196,742
151,330
227,263
165,406
135,923
126,372
124,932
122,259
114,467
113,027
111,832
108,162
531,764
475,338
382,432
611,037
445,591
328,374
261,289
203,931
158,093
130,785
375,967
175,266
100,649
67,115
71,117
51,183
72,437
36,349
27,918
22,267
10,053
4,584
10,277
4.801

2,623
10,702
23,788
37,613
57,507
77,345
91,679
108,513
120,45-4
127,184
273,143
241,569
182,008
129,433
179,536
109,057
71,114
59,555
52,751
48,299
39,194
38,121
34,143
30,007
131,359
95,982
66,221
87,577
52,855
34,621
24,958
16,771
12,636
9,265
23,094
8,553
3,875
2,362
1,896

i,iS4r
1,208
2C»6
165
124
28
14

ayments
n 1945
eclaraion 21/
738
3,137
5,174
7,871
9,444
11,455
12,214
14,073
15,324
15,986
31,838
27,658
26,160
24,762
47,361
47,196
55,760
56,880
61,283
61,927
62,188
62,039
63,569
63,443
330,810
313,818
262,754
436,119
332,745
249,609
200,937
160,636
125,399
105,198
306,844
146,296
85,217
57,649
62,291
44,376
64,353
33,497
25,921
21,050
9,798
4,306
8,700
4.825

of tax
due at
time of
filing

Iverpay- I
rœnt (re-1
:und or
redit on
946 tax)

2,452
715
' 7,917
2,817
13,232
4,371
18,066
5,996
22,709
7,709
26,010
9,339
27,671
10,123
29,563
10,685
32,014
11,179
30,242
10,783
58,386
23,420
44,140
20,793
29,635
18,209
19,196
16,331
25,559
25,926
13,331
22,484
13,772
22,821
12,038
21,975
11,167
22,066
9,367
21,400
8,151
21,235
7,510
20,378
7,074
21,194
6,555
21,266
31,208
100,802
25,021
90,557
16,212
69,669
23,235
110,576
„
16,202
76,193
11,284
55,428
8,218
43,611
6,076
32,600
5,041
25,099
3,781
20,103
11,466
57,495
4,920
25,336
2,552
14,109
1,669
8,773
1,423
8,354
1,345
6,998
1,035
7,912
420
3,066
162
1,994
242
1,335
52
280
264
1,577
24

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48

647.345

49

23,836
1,853
3,663
3,783
2,780
9.973

50
51
52
53
54
55

7.388.897 2.720.267 4.180.628 1.135.346

246,53'
64,764
134,96'
116,792
82,983
123.68C)

4,839
1,021
2,927
2,883
2,091
6.916

18,998
831
737
■ 900
691
3.056

769.72Î

20.67'

25.212

-

45.888

56

7.388.89' 2.740.944 4.205.84C 1.135.346

695.253

57

231,046

152,476

407,123

58

- 1,739,23 1 S,908,25i 1,236,70] 3,974,794

982,876

286,Ili

59

10.682.52

333,98 0 8,943,29

1,480,635 1,504,24!

f.__A

ro

Table 5. - Individual returns with adjusted gross income for 1945,
by States aid Territories! Number of returns, salaries ahd wages,
dividends and interest, adjusted gross income, and tax liability

States and
Territories
Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington 33/
West Virginia
Wisconsin
Wyoming

134,976
55,000
68,215
1,764,266
131,725
341,245
62,637
158,284
256,002
186,806
84,330
41,488
1,559,845
404,739
209,777
165,636
145,151
171,090
72,621
301,693
665,426
804,959
273,639
63,495
378,768
48,520
123,919
30, 566
47,395
737,972
54,844
2,743,072
181,175
36,705
1,015,220
' 137,486
195,654
1,275,957
108,643
78,998
34,801
173,584
609,657
51,680
24,229
226,178
528,913
113,312
337,027
25,603

120,241,365

17,020,899

49,773,085

Total

For footnotes, see p.

{Money figures in thousands of dollars)
Adjusted
Dividends I
Salaries
Number
gross
and
|
and
of
income g/
interest 11/
wages 10/
returns
— |
18,216
1,210,859
1,005,172
605,871
426,052
306,597
10,698
184,246
592,339
450,727
10,670
310,517
379,199
10,989,863
7,627,973
4,083,251
949,265
648,317
34,615
403,785
2,178,897
113,628
1,772,426
837,399
299,012
30,519
213,520
107,709
993,047
37,053
386,412
798,563
72,405
1,669,373
1,130,429
690,505
1,546,107
41,200
1,219,880
751,585
522,070
12,670
391,715
190,431
376,559
242,236
6,019
180,678
9,026,694
261,182
6,871,964
3,471,774
3,160,005
65,464
1,358,572
2,422,705
1,775,146
44,513
959,856
837,040
1,348,436
22,570
658,076
850,988
27,687
1,294,558
636,487
1,031,595
1,360,598
1,013,947
34,759
635,463
618,253
28,445
311,807
480,335
2,148,457
77,996
1,729,895
873,857
4,594,761
205,437
1,858,647
3,793,012
5,748,698
142, 549
2,273,787
4,652,483
2,146,778
59,928
1,496,765
992,060
11,261
570,868
430,145
298,510
2,820,759
2,138,336
99,752
1,308,035
409,214
7,960
185,907
269,575
980,087
19,259
460,076
568,442
177,485
7,915
124,201
65,174
392,882
20,400
312,929
194,999
5,225,042
171,419
1,981,047
4,300,718
294,776
5,734
196,942
140,033
16,816,795
779,549
12,864,324
6,063,750
1,623,637
46,813
1,237,817
842,835
350,589
5,061
160,235
175,955
5,929,656
208,827
7,287,285
2,955,543
1,211,284
22,055
571,796
879,812
1,314,582
22,817
956,926
518,109
9,187,829
524,297
7,484,445
3,872,854
742,636
35,027
595,291
315,963
765,464
619,616
13*238
400,838
347,498
5,634
192,316
176,872
1,413,075
1,150,957
29,713
695,825
4,492,619
97,171
3,207,261
1,988,628
474,067
7,515
387,454
214,841
214,858
11,072
113,448
159,098
1,767,397
57,499
821,029
1,593,554
2,329,276
42,545
959,667
1,827,428
1,143,302
19,204
545,803
1,028,552
75,546
2,715,484
2,057,926
1,209,941
198,750
145,777
4,489
82,206

15

91,713,369

3,886,794

Tax
liabil­
ity 3_/

!»

Footnotes
l/ Adjusted gross income classes are based on the amount of adjusted
gross'income (see note 2), regardless of the amount of net income or net
deficit when computed} returns with adjusted gross deficit are designated no
adjusted gross income and the sise of the deficit is disregarded.
2/ Adjusted gross income means gross income minus allowable trade and busi­
ness deductions, expenses of travel and lodging in oonnection with employment,
reimbursed expenses in connection with employment, deductions attributable to
rents and royalties, certain deductions of life tenants and income beneficiaries
of property held in trust, and allowable losses from sales or exchanges of
property. Should these allowable deductions exceed the gross income, there is
an adjusted gross deficit.
•
3/ Tax liability after deducting tax credits relating to income tax paid
at source on tax-free covenant bonds and to income tax paid to a foreign
country or United States possession, allowed only on returns with itemized
deductions.
4/ This class includes the nontaxable returns over $1,500.
5/ The no adjusted gross income classification is for returns showing
allowable deductions for the computation of adjusted gross income equal to
or in excess of gross income (see note 2); that is, other loss on line 4,
page 1, Form 1040, is equal to or in excess of salaries, wages, dividends,
and interest.

18/ Income from estates and trusts excludes partially tax-exempt inter­
est onGovemment obligations and dividends on share accounts in Federal
savings arri loan associations issued prior to March 28, 1942} such income
is reported in interest and dividend income.
19/ Miscellaneous income includes alimony received, prizes, rewards,
sweepstake winnings, gambling profits, recoveries of bad debts for which
a deduction was taken in a prior year, and health and accident insurance
received as reimbursement for medical expenses for which deduction was
taken in a prior year. Also tabulated in miscellaneous incase is
$51,194,155 of wages not subject to withholding, dividends, and interest,
not exceeding in total $100 per return, reported as other income on
901,973 returns, Form W-2.
20/ Surtax exemption is $500 for the taxpayer, $500 for the taxpayer's
spouse if not dependent upon another person, and $500 for each dependent
with respect to whom a surtax exemption may be claimed. Such dependents
must have received from the taxpayer more than half their support for the
year and must have had less than $500 gross income during the year.
Dependents include only close relatives which are specified by law.
21/ Payments on 1945 declaration of estimated tax include the credit
for prior year overpayment of tax as well as the aggregate payments made
on Form 1040-ES.

6/ Less than 0.005 percent.
7/ Not computed.
8/ Adjusted gross deficit.
9/ Adjusted gross income less adjusted gross deficit.
10/ Salaries and wages include annuities, pensions, and retirement pay
not reported in the schedule for annuities and pensions, but exclude wages
of less than $100 per return from which no tax was withheld, reported on
Form W-2. Such wages are tabulated with miscellaneous income. (See note 19.)
ll/ Dividends, domestic and foreign, and interest before amortization of
bond premium. This item includes both taxable and partially tax-exempt inter­
est on Government obligations and dividends on share accounts in Federal
savings and loan associations, but excludes dividends and interest not ex­
ceeding $100 per return reported on Form W-2. Such dividends and interest
are tabulated with miscellaneous income. (See note 19.)
12/ Income from annuities and pensions is only the taxable portion of
amounts received during the year. Amounts received to the extent of 3 percent
of the total cost of the annuity are reported as income for each taxable year,
until the aggregate of amounts received and excluded from gross income in this
and prior years equals the total cost. Thereafter, entire amounts received
are taxable and must be included in adjusted gross income. Annuities, pensions,
and retirement pay upon which tax is withheld may be reported in salaries and
wages.
15/ Net profit from rents and royalties is the excess of gross rents
received over deductions for depreciation, repairs, interest, taxes, and
other expenses attributable to rent income} and the excess of gross royalties
over depletion and other royalty expenses. Conversely, net loss from these
sources is the excess of the respective expenses over gross income received.
14/ Net profit from business is the excess of gross receipts over deduc­
tions for business expenses and net operating loss deduction due to a net
operating loss from business, partnership, and common trust funds for the
preceding year or years. Conversely, net loss from business is the excess
of business expenses and net operating loss deductions over the gross re­
ceipts from business.
15/ Partnership net profit or loss excludes partially tax-exempt inter­
est on Government obligations, dividends on share accounts in Federal savings
and loan associations issued prior to March 28, 1942, and net gain or loss
from sales of capital assets} each of which is reported in its respective
source. In computing partnership profit or loss, charitable contributions
are not deductible nor is the net operating loss deduction allowed.
16/ Net gain from sales or exchanges of capital assets is the amount
taken into account in computing adjusted gross income whether or not the
alternative tax is imposed. Net loss from such sales is the amount re­
ported as a deduction in computing adjusted gross income. Each is the
result of combining net short- and long-term capital gain and loss and the
net capital loss carried over from 1942, 1943, and 1944. Deduction for
the loss, however, is limited to the amount of such loss, or to the net
income (adjusted gross income if taxed under supplement T) computed with­
out regard to gains and losses from sales of capital assets, or to $1,000,
whichever is smallest. Sales of capital assets include worthless stocks,
worthless bonds if they are capital assets, nonbusiness bad debts, certain
distributions from employees' trust plans, and each participant's share
of net short— and long-term capital gain and loss to be taken into account
from partnerships and coranon trust funds.
17/ Net gain or loss from sales or exchanges of property other than
capital assets is that from the sales of (1) property used in trade or
business of a character which is subject to the allowance for depreciation,
(2) obligations of the United States or any of its possessions, a State or
Territory or any political subdivision thereof, or the District of Columbia,
issued on or after March 1, 1941, on a discount basis and payable without
interest at a fixed maturity date not exceeding one year from date of issue,
and (3) real property used in trade or business.

22/ Returns with standard deduction are optional returns, Form W-2}
short-form returns, Form 1040} and long-form returns, Form 1040, with ad­
justed gross income of $5,000 or over on which the $500 standard deduction
is used.
23/ Returns with itemized deductions are long-form returns, Form 1040,
on which deductions are itemized; long-form returns, Form 1040, with no
deductions filed by spouses of taxpayers who itemized deductions; and re­
turns, Form 1040, with no adjusted gross income whether or not deductions
are itemized.
24/ Contributions, reported only on returns with itemized deductions,
include each partner's share of charitable contributions of partnerships,
but cannot exceed 15 percent of the adjusted gross income.
25/ Interest, reported only on returns with itemized deductions, is
that paid on personal debts, bank loans, or home mortgages but excludes
interest on business debts reported in schedules for rents and business,
and interest on loans to buy tax-exempt securities, single-premium life in­
surance, or endowment contracts.
26/ Taxes paid, reported only on returns with itemized deductions,
include personal property taxes, State income taxes, real estate taxes ex­
cept those levied for improvements which tend to increase the value of
property, and certain retail taxes. This deduction for taxes does not in­
clude Federal income taxes; estate, inheritance, legacy, succession, or
gift taxes; taxes on shares in a corporation which are paid by the corpora­
tion without reimbursement from the taxpayer; taxes deducted in the schedule
for rents and business; income taxes paid to a foreign country or possession
of the United States if any portion thereof is claimed as tax credit; or
Federal social security and employment taxes paid by or for the employee.
27/ Losses resulting from war, fire, storm, shipwreck, or other
casualty, or theft, reported in itemized deductions, are the actual non­
business losses sustained, that is the value of such property less
salvage value and insurance or other reimbursement received.
28/ Medical and dental expenses, reported only on returns with
itemized deductions, paid for the care of the taxpayer, his spouse, or
dependents, not compensated by insurance or otherwise, which exceed
5 percent of the adjusted gross income. The deduction is limited to
$1,250 if one exemption is claimed, or to $2,500 if two or more exemp­
tions are claimed.
29/ Miscellaneous deductions, reported only on returns with itemized
deductions, include alimony payments, expenses incurred in the production
or collection of taxable income or in the management of property held
for the production of taxable income, amortizable bond premium, special
deduction for the blind, the taxpayer's share of interest and real
estate taxes paid by a cooperative apartment corporation, and gambling
losses not exceeding gambling gains reported in income.
30/ Net deficit reported on nontaxable returns, Form 1040, with
itemized deductions. The total number of returns showing net deficit
Is 249,436, of which 214,483 show no adjusted gross income, and 34,953
show adjusted gross income of various amounts and itemized deductions
of larger amounts.
31/ Nontaxable returns are those with no adjusted gross income
and returns with adjusted gross income which when reduced by deductions,
standard or itemized, and exemptions result in no tax liability. The
496,248 nontaxable returns with adjusted gross income and with itemized
deductions include 34,953 returns with net deficit.
32/ Less than $500.
53/ Includes Alaska.

TREASURY DEPARTMENT
Washington
Press Service
No. S -588

FOR RELEASE,MORNING NEWSPAPERS
Tuesday, January 6 , 19*1-8.

The Secretary of the Treasury announced last evening that
the tenders for $ 1 ,300,000,000, or thereabouts, of 91-day
Treasury bills to be dated January 8 and to mature April 8 , 19^8,
■which were offered January 2, 1948, were opened at the Federal
Reserve Banks on January $.
The details of this issue are as follows:
Total applied for - $1,914,793,000
Total accepted
- 1,305,222,000 (included $40,111,000 entered
on a non-competitive basis and accepted
in full at the average price shown below)
Average price - 99 .760 Equivalent rate of discount approx. 0.950$
per annum
Range of accepted competitive bids:
High - 99.770 Equiv. rate of discount approx. 0.910$ per annum
Low - 99.759
M
M
"
"
*"
0.953$
"

(79 percent of the amount bid for at the low price was accepted)
Federal Reserve
District_______
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco

Total
Total
Applied for_______Accepted
$

TOTAL

7 ,961,000
1,540,832,000
1 ,280,000
2 6 ,5 5 0 ,0 0 0
2 ,310,000
5 ,8 3 5 ,0 0 0
2 3 5 ,2 1 5 ,0 0 0
7.175.000
4.260.000
1 9 ,800,000
8 .655.000
54,920,000

$1,914,793,000

0 O 0

$

7 ,961,000
952.253.000
1 ,255,000
26 ,550,000
2 ,310,000
3.735.000

.

222 015.000
7.175.000
4.260.000

15,700,000
8 . 6 0 3 . 0 0 0

53,405,000
$1,305,222,000

TRfcASURY DEPARTMENT

15

Washington

FOR RELEASE, MORNING NEWSPAPERS
Wednesday, January 7, 1948,____

Press Service
No. S -589

One of this country's beloved immortals, Benjamin Franklin,
is being brought out of honored retirement to play a prominent
new role in the drama of every-day American life.
Franklin's likeness will soon appear on a brand new half
dollar of regular issue, it was announced today by Secretary
of the Treasury S n yder, A design for the new coin, recommended
by Nellie Tayloe Ros§, Director of the Mint, has received the
Secretary’s enthusiastic approval.
Lending it distinction will
be not only Franklin's wise and kindly features but also an
impressive representation of another ’’great" of American history,
the Liberty B e l l .
The coin is expected to be ready for distribution from
the Philadelphia, Denver and San Francisco mints in about two
or three months.
Only two specimens have been struck so far.
Secretary Snyder said he had shown the coin to President Truman,
and reported that the President was much pleased with It,
Ben Franklin was many things to many men, but he never lost
an opportunity to preach the virtues of thrift. His face on
the new half dollar will serve as a potent reminder, so the
Secretary hopes, that thrifty financial management is as
important to individuals and to society today as -it was in
Franklin's time.
Specifically, the Secretary thinks it will
remind everyone that an excellent thing to do with spare half
dollars and other spare coins these days is to buy savings
bonds and stamps.
Mrs. Ross, the Mint Director, said that coinage of half
dollars of the old design, introduced in 1916 , had been stopped
at all mints, in anticipation of the introduction of the new
Franklin-Liberty Bell coin.
M r s , Ross envisaged several years ago a new half dollar
honoring Franklin and the Liberty Bell.
The 1916 design became
eligible for replacement in 19^1, under the law authorizing
changes in the design of a coin of regular issue not oftenar
than every 25 years.
The late John R. Sinnock, Engraver of the
Mint, was the artist who gave the idea sculptural form.
For the obverse of the design Mr. Sinnock used a composite
study of Franklin's face in full profile.
The study was
prepared from a variety of portraits of Franklin.
It is a slight
modification of a Franklin profile used for a medal Issued by
the Mint in 1933.

2

A

1 b

The Liberty Bell representation on the reverse of the
c#in was adapted by Mr. Sinnock from one which he modeled
f^r a commemorative half dollar issued for the Sesquicentennial
of American Independence in 1926. The bell is suspended
from its familiar wooden beam, with the time-honored crack
in the bell discernible.
The lettering 33 Pluribus Unum is
inscribed at one side of the bell, and the American eagle
appears at the ot h e r .
The initials on the obverse are those with which
Mr. Sinnock signed his coin and medal designs.
Franklin will join a very select company when the coin
goes into circulation.
Only four persons before him have
had their portraits chosen for use on coins of regular issue
of the Federal Government.
Lincoln's head appears on the
one cent piece of 1909, Jefferson's on the nickel of 1938,
Washington’s on the quarter of 1932, and Franklin D. Roosevelt's
on the dime of 1946. Faces used on all other regular issue
coi^s have been either portraits of Liberty or of the American
Indian.
Mrs , Ross said none of the Franklin-Liberty Bell half
dollars would be released until a sufficient supply has
been minted for simultaneous distribution all over the
country. This will require several weeks.

/

DESCRIPTION OF THE FRANKLIN HALF DOLLAR

17

On the obverse of the coin, in the center field, appears
the portrait of Benjamin Franklin, facing to the viewer's
right. Above the portrait, around the border, is the word
"Liberty." Below, around the border, are the words "In God
We Trust."
In the lower right field is the date 19^8, and
directly under the portrait are the initials of the c o i n ’s
designer, the late John R. Sinnock.
On the reverse of the coin, in the center field, is the
Liberty Bell suspended from a beam.
In the left field is
the inscription "E Pluribus Unum" and In the right field is
the eagle, the national emblem. Above, around the border,
care the words "United States of America" and below, around
the border, "Ha.If Do l l a r .■"
On the Liberty Bell may be read partially the inscription
"Proclaim Liberty Throughout All the Land Unto the Inhabitants
Thereof." Faintly readable also is the name of the concern,
"Pass and Stow, Philada.", which recast the bell after it was
damaged while being tested.

♦

18
BENJAMIN FRANKLIN ON THRIFT
Secretary of the Treasury Snyder feels pretty sure that
If Ben Franklin were alive today, he would he an energetic
advocate of the purchase of United States savings bonds and
stamps. For Franklin the printer, the author, the inventor,
the scientist, the diplomat and the patriot was throughout
his eminent life the proponent of thrift.
"If you would be wealthy, think of saving as well as
getting," he advised readers of Poor Richard's Almanac.
In rhyme, he put it this way:
"For age and want save while you may;
Ho morning sun lasts a whole day."
And more forcefully:
man may, if he knows pot how
to save as he gets, k#$p his nose all his life to the grind
stone and die not worth & groat at l a s t ."
*

*

*

Franklin was a student of the technical-aspects of money
matters, too. He wrote a treatise on money -- or a "tract",
as it was called then -- when he was 23 .

He had much to do with Government' finances, also.
Franklin headed a commission which raised 26 million livres
in France to help win the Revolutionary War. And he wrote
extensively about the public debt and taxes ,
*

*

*

Franklin doubtless would be much interested in the wide
circulation which his portrait on the new half dollar will
gain. He wrote to his daughter, Mrs. Sarah Bache, from
France in 1779 that "incredible" numbers of likenesses of
him were appearing in France on medallions, on lids of snuff
boxes, on finger rings and such. He added:
"These, with pictures, busts and prints (of which copies
upon copies are spread everywhere) have made your father's
face as well known as that of the moon, so that he durst not
do anything that would oblige him to run away, as his phiz
would discover him wherever he Bhould venture to 'show it."

statutory debt limitation
" as o f DECEMBER 31, 1947

January 8- ¿943

Section 21 of the Second Liberty Bond Act, as amended, provides that the face
-motet of obligations issued under authority of that Act, and the face amount of
tell ations ® £ a n t e e d as to principal and interest by the United States except sue!
?naranteed obligations as may be held by the Secretary of the lreasury), 'shall not {
oped in the segregate 1275,000,000,000 outstanding at any one time. For purposes
t w s
section lhe current redemption value of any obligation issued on a discount
basis which is redeemable prior to maturity at the option of the holder shall be

of

considered as its face amount**'
The following table shows the face amount of obligations outstanding and the
face amount which can still be issued under this limitation:
Total face amount that may be outstanding at any one time
|275,000,000, UU
r,v tsten dine December 31* 1947

Obligations issued under Second Liberty Bond Act, as amended
Interest-bearing
„
Treasury bills..... $ 15)13^33V>00
Certificates of indebtedness
21,219,710,000
Treasury notes........... .♦
16*758*491,800 t 53*114,538,800

^Treasury............................ . . . *

117,662,639*750

Savings (current redernp. value) $2,052,703,701
Depositary. *....... *.....
318,620,000
Armed Forces Leave.......
966, 5y0,400
Investment Series*.......
^ ^ 9 ^ 6 0 ^ 0 0

171,970,628,8$1 .

Special Funds
__ __
Certificates of indebtedness
14 ,7o4* 500,000
Treasury notes.... ......... J ^ 0 jl3 ^ 0 0 0
Total interest-bearing..................
25^ 2 q a / / V m 2
Matured, interest-ceased................. .
*44 *
Bearing no interest
n
War savings stamps...........
±yy
Excess profits tax refund bonds
12 ,1^-4* >
Special notes of the United States:
Internat'1 Bank for Reconst»
and Development series....
215,785,000
I n t e n t - 1. Monetary Ibnd series- 1,318,-OOfefigO
|_
Total. ..*•..•..••..»•♦•***********************
— — *--- z--- . ~
Guaranteed obligations (not held by Treasury)
Interest-bearing
,

D ebentures: ........................................................
32*955*3
Demand obligations: C.C.C. . . . -- 42*97^,441
^478*975
Matured, interest-ceased.............. ............... 8 1 4 ^ 6 5 2

v /

..

. * ..T 7 7 r r r ^ T r i T 7 :

Balance lace amount of obligations issuable under above authority...
heconeilement with Statement of the Public Debt - December 31,. 947
(Daily Statement of the United States Treasury, .January 2, 194 J
Outstanding - December 31, 1947
Total gross public debt.............. ....................******
Guaranteed obligations not o w ie d by the Treasury...... ...........
Total gross public debt and guaranteed obligations.»...........***
Deduct - other outstanding public debt obligations
not subject to debt limitation..... ..................* *V

S-590

256 ,899,844,85.
cn /no,6 $
981 ?*4,50
280 4Q

TREASURY DEPARTMENT
Washington

FOR

RELEASE 'MORNING NEWSPAPERS,
Friday, January. 9» 1948._______ _

.

. Press Service
* s~591

The Secretary of the Treasury, by this public notice, invites
tenders for $1,000,000,000,.or thereabouts, of 91-day Treasury
bills
for cash and in exchange for Treasury bills maturing
January 15, 1948, to be issued on a discount basis under Compe­
titive and non-competitive bidding as hereinafter provided. The
bills of this series Will be dated January 15, 1948, and will
mature April 1 5 1 9 4 8 , when the face amount will be- payable
without interest.
They 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 (maturity value)...
Tenders will be received at Federal Reserve Banks and •Branches
up to the closing hour, two o'clock p.m., Eastern Standard time,
Monday, January 12, 1948.
Tenders will not be received at the
Treasury Department, Washington. Each tender must be for an even
multiple of $ 1 ,000, and.in the case of competitive tenders the
price offered must be expressed on the basis of 100 , with not
more than three decimals, e. g., 99 -925 - Fractions may not be
used.
It .is urged that tenders be made on the printed forms and
forwarded in the 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 trust companies and from responsible and recognized
dealers in investment securities.
Tenders from others must be
accompanied by payment of 2 percent of the .face amount .of Treasury
bills applied for, unless the tenders are accompanied by an
express guaranty of payment by an incorporated bank or ■trust*'
company.
Immediately after the closing hour, tenders will be opened^
at the F e d e r a l .Reserve Banks and Branches, following .which public
announcement will be made by t h e 'Secretary of the Treasury of
the amount and price.range of accepted bids.
Those submitting
tenders will be advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to^ac­
cept or reject any or all tenders, in whole or in part, and his
action in any such respect shall be final.
Subject to these
reservations, non-competitive tenders for $ 200,000 or less with­
out stated price from any one bidder will be accepted in full at
the average price (in three decimals) of accepted competitive
bids.
Settlement for accepted tenders in accordance with the bids
must be made or completed at the Federal Reserve Bank on January 15,
1948, in cash or other immediately available funds or in a like
face amount of Treasury bills maturing January 15., 1948.
Cash
and exchange tenders will receive equal treatment.
Cash adjustments
will be made for differences between the par value of maturing

2
bills-accepted in exchange and the issue .prIce;;bf- the'hew
bills.
.... :a;.
19
The income derived from -Treasury.pills * whether interest or
gain from the sale or other disposition ,of the bills/1shall
not have any exemption, as such, and.loss from the sale or other
disposition- of Treasury bills shall not. have any special treat­
ment, as such, under,-the Internal Revenue Code, or lavs amendatory
-or supplementary thereto;/. The bills ,-shall be subject to estate,
inheritance, gift or?-other-excise taxes, whether Federal or
State, but shall be exempt from all.taxation now or hereafter
imposed on the principal or interest thereof by any State, or any
of the possessions of the United States, or by any local taxing
authority. For purposes of taxation the amount of discount at
which Treasury bills a r e .originally, sold by the United States
shall be considered to be i n t e r e s t U n d e r Sectibns 42 and 117 (a)
(1) of the Internal Revenue Code/ as amended by Section 115 of
the Revenue Act of 1941, the amount of discount at 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, the-owner of Treasury bills (other than life insurance
companies)- issued hereunder need include; in his income tax return
only the difference between, the price paid for.such bills, whether
on original issue or on subsequent .purchase, and the amount
actually received either upon sale or redemption at maturity
during the taxable year for which the return is made, as ordinary
gain or loss.

Treasury Department C ir c u la r Uo,...41.8, as amended, a n d -th is
n o t ic e , p rescrib e -.th e terms- o f the T r e a s u r y 'b ills and' govern the
co n d itio n s o f t h e ir is s u e . Copies o f the c ir c u la r may be obtained
from any F ed eral Reserve Bank or B ranch.
oOd

TREASURY DEPARTSNT
Washington

.........

. :

(Statement by- Secretary --Snyder, , on
'European •' - •
Recovery Program, before: the Foreign Relations- c
¡Committee; of the United States Senate.)
S' r

• • . •• ;

;

January-14», 194-8

.

. . . The President,., in his message, has laid before you the Adminis. tration^s, proposal for a European Recovery Program and in greater '
detail the Secretary of; State has described the need for assistance
to Europe-, and the manner in which,-.and extent to which, - it 'is recom­
mended that .American assistance be gi'-en. The financial aspects, of the
..Program have been carefully considered by the National Advisory Council
on International Monetary and Financial Problems. This is«a.program
for the economic recovery of Europet i t is not merely a re lie f program.
The Council throughout has approached the foreign financial policy 4
issues involved to determine what specific lines of action would most
effectively.-contribute -to .this basic- objective of economic' recovery.
As Chairman of the Council,. I welcome this opportunity to set forth the
conclusions reached by the Council and then to comment on the -financing
of the Program. s
•
First, I shall review the-principal financial--aspects of'the ■
Program, ,tben :say something about, the measures which we shall-expect ■
the European countries, themselves to take., and fin a lly comment-.briefly
on the financing of the Aid. program,.'
’ .
.
.
TRe fir s t matter which I wish to take up, is the question of the
form in which aid should be extended to Europe. This assistance should
be provided as a combination of grants-in-aid and loans.. The, criterion
for selecting one"or the other form should be the capacity of the par­
ticipating countries to earn, in the years to come, the dollars which
would be needed to pay interest and principal. We must keep in mind
that these countries have already incurred an obligation for large annual
payments of -interest' and amortization arising from the dollar loans . •
extended to them over a period of years by the U. S. Government or the
United States privale' capital market. We should take care not to insist
that these countries contract additional dollar debts which w ill absprb
so much of their dollar earnings as to operate to the disadvantage of
future trade and private investment. I f the entire aid for European
countries were to be on a lean basis, i t would be practically impossible
for them to meet the additional anneal charges from their earnings of
dollars, eveft after trade and investment return to normal. The -propor­
tion of total aid which can prudently-be provided on a loan basis must
depend on the estimate, of the borrowing country's capacity tò repay in
dollars and also on.the degree, of fle x ib ility which can be introduced
info the-terms of .'repayment.
S-592

-

2

-

The International Bank may be expected to finance part of the
capital requirements of the European countries* particularly to ere
they require the financing of permanent additions to their equipment*
I t does not seem-likely* however* that the Bank 1(7111 be able to
carry the whole^ or even .the major, part of the Program which, proper­
ly ought to be put on a loan basis. We propose* therefore* that when
the Administrator fo r Economic Cooperation decides, after consulting
the National Advisory Council* that i t is desirable to extend aid on
a credit basis, he w ill allocate the funds to the Export-Import Bank
of Washington* which w ill then make the loan as directed and on -terms
specified by the Administrator in consultation with the National Advisory
Council. This procedure w ill enable the Administrator to draw upon the
broad experience of the Export-Import Bank in the making of foreign
loans » Incidentally, this is .one example of the manner in which the
National Advisory Council would perform' it s customary role of coordina­
tion of -ti.S. foreign financial policy. I shall be glad to describe
this role in greater detail i f the- members of the Committee wish me to
do so*
I t is also important that the America! business enterprises be
given opportunity to participate in the Recovery Program by making new
investments abroad* or by expanding existing fa c ilitie s where the Program
calls for additional capital equipment. In this way they w ill con­
tribute to the restoration of Europe* while, at the same time they w ill
be carrying out their own programs for expansion abroad. But we must
recognize that new investments would be made at a time of great uncertain­
ty and that investors may anticipate encountering d iffic u lty in converting;
their earnings or their original principal into dollars. To fa cilita te
private investment* therefore* i t w ill probably be necessary for the
Government to guarantee the convertibility into dollars of local cur­
rency earned By the investment or available for the repatriation of
the original investment. While we may expect that the participating
countries w ill try to make dollars available* i t is possible that they
w ill not have adequate dollar's "to permit conversion« The Economic
Cooperation Administration should not be expected to guarantee American
companies making these investments against normal risks* but merely, to
give them-a transfer guaranty. We propose that not more than 5 percent,
of the funds appropriated by Congress for the Program should be obligated
for the se: guaranties* and that the guaranties themselves, should not
exceed the amount of the original investment and should not be extended
more than 10 years from the termination of the four-year program*
Some- people have argued that the participating countries should
pay for part of the Program by using up their gold and dollar assets
in the United States* and by liquidating the American investments if
their own citizens* I need not labor the point that the European coun­
tries must have some gold and dollar reserves.to finance their inter­
national trade i f they are to return to normal operations after 1952»
I t should be kept in mind that the Economic Recovery Program is not

- 3 -

22

intended to cover the entire import requirements of these oountries.
It would be fo lly on our part to force the European countries to use
up their gold and. dollar balances to a point,-where .they .would not
have adequate funds to.operate smoothly through ordinary commercial
and financial channels * By insisting that the participating countries
exhaust their gold and dollar- balances, we would merely add-further,
in stab ility to their monetary systems,,. As a matter of ..fact, a ll of.
the participating countries except Switzerland, Turkey, and Portugal
have already reduped their dollar balances to or below the- amount
which would normally.be regarded as safe©
- -.
•
’ When we turn to the possibility of liquidating European invest­
ments ;in the United States, we must also look at the problem in terms
of its long-run consequences. These investments annually earn a
dollar income, which w ill be used to cover part of the cost of the
Program, and which w ill be used in the future to meet.part of the cost
of imports after the Program ends. Without these investments, the
balance-of—payments situation of the participating countries w ill be
worse in the future. I doubt very much that i t would be wise policy
for the United States to require European countries as a general rule
to liquidate the property owned in the United States by their nationals
as a condition for receiving aid from this Government.

•

• Even if these countries could liquidate all of the property owned
by their citizens in the United States, they could not pay for more
than a small part of the Program. We estimate that as of last June 3®
thé dollar assets held by persons in the recipient countries amounted
to about
billion. Of this amount $1*5 billion consisted of r
direct investments, and a considerable part of the remainder also con­
sists of holdings which would be difficult to liquidate. Some of
these assets are already pledged for loans, while for many of the
countries involved the amounts held here are negligible.

Some', of the governments, however, w ill decide to liquidate s°me
or a ll of their holdings so as to pay for imports. In practice this
may be an alternative to borrowing from the United States. We cer­
tainly m i l not object to the governments using thèse funds. .The ques­
tion, of policy for us to decide is the extent' to which we can help
these countries in obtaining control of these assets. In the case
of unblocked assets, the only way the European governments can.get
control çf them under present circunstancès is through the compliance
of their citizens with local laws. In fa ct,' a considerable portion
of the assets formerly blocked in the United States haq. been unfrozen
as a result of- such action. While we do not have exact data on un­
blocked assets, we believe the amount is comparatively small.
■A- large part of the blocked assets are s t i l l blocked because their
owners have not obtained from their own governments the certification
that there-is no enemy interest in.their assets,, which is required by

— hr —

the United States Treasury before the assets are unblocked« The
National Advisory Council- and, ‘ the'executive departments concerned
with this matter are .giving very careful study to this problem« We
hope to reach a fin al view as to the most satisfactory solution of
this problem very shortly, and X should like at that time to appear
before you,again to outline our program*
I t w ill not be possible to obtain a l l the goods needed for the
Recovery Program in the United States, nor . would" i t be uesirable to
•attempt to do..so*. Seme commodities, are- in short -supply here^and
purchasing abroad would leave more available for our own population
and would in many instances reduce the net cost of the Program© XhG
needed amounts of food cannot be obtained in the United States© A
large percentage .of the requirements of .grain, fats and o ils , meat
and other agricultural products can be procured only in other countries
of the' Western Hemisphere* In this manner we can make i t possiole
for countries in the Western Hemisphere to supply larger amounts of^
foods and materials to Europe and at the same time maintain essential
imports from the United States*
_
I t is the opinion, therefore, of the National Advisory Council-that
the Economic Cooperation Administrator should be authorized to expend
funds for the procurement of supplies for the Recovery Program outside
of the United States© This would relieve pressure upon. gD.ods and
services in short supply in the United States, and would in spme in­
stances have the further effect of assisting third countries in main­
taining needed imports from the United .States* We definitely would*
not -permit the use of dollars to buy goods abroad where the supplies
available in the United States at reasonable prices are aciequate for
our needs as well as for the requirements of foreign countries« In
any case, a ll purchases would .be made according to an agreed program,
and the administering agency would control the use of. the funds .
appropriated by Congress* In addition to purchases in the Western
Hemisphere, there are special instances where it may be in our inter­
est to procure certain essential' products in one participating country
for delivery to another, making payment in dollars* For-example, we
might buy steel or coal in one participating country for delivery to
another* The dollars which are received would then be used by the
supplying country to pay for imports from the United States, thus
reducing the need for direct expenditures by the United States .for
aid to the supplying country*
I f the Recovery Program. Is to be successful, adequate.measures
for monetary stabilization must be taken promptly arid with, vigor by
the European countries* At the Paris meeting the 16 participating
countries undertook ” to apply any necessary measures leading to the
rapid achievement of internal financial, monetary and economic
stability while maintaining in each country a high level .of employ­
ment«11 They have recognized that recovery is not possible as long

/S
~* 5 -

as inflation continues, and Unless production is increased. The
measures which should be taken must vary somewhat from co untry to
country, but the general outline is clear® Budgets should be brought
into balance rapidly, so that the necessary expenses of government
can be met without increasing the public debt and Without increasing
direct inflationary pressures. In most'countries modifications in
tax’"structures and control of expenditures w ill be needed. As'deter­
mined steps ar‘e taken, the trend toward budgetary balances, increased
production, and; steadying: prices w ill a ll interact upon one another to
fa cilita te stabilization.
.
•. • '

•

V ; | '

'

|H ||

\

■

’

•*

The Administration proposes that each country receiving aid from
the United States shall enter into a separate agreement with this
Government, which 'will cover the terms on Trôiich aid w ill be given® The
European signatories w ill undertake to adopt the financial and monetary
measures' which are necessary to stabilize their currencies and to main­
tain and establish proper rates of exchange® These agreements w ill also
cover such matters, as cooperation with other countries, the proper use
of the goods supplied, and the establishment of a.separate account for
the local currency equivalent to. the aid supplied in the form of grants.
Moreover, each country would agree to supply the United States Govern­
ment with f u ll information about any pertinent aspect of the Recovery
Program, and to give a report on the Program to its own people. ^On the
basis of the information which the cooperating countries .w ill give us,
and also.lrom.the reports of our c^n missions in these^countries, we
can be informed about the situation and so be in a position to discuss
with the country the measures which i t has taken,or ought to take, to
contribute to the recovery of Europe and its own s ta b ility ..,
Me have a direct interest in assuring that the aid we provide to
Europe makes a maximum contribution to the reduction of inflationary,
pressures and the restoration of s ta b ility . To thir end we propose
that each participating country w ill deposit in a special .account the
local currency equivalent at an agreed rate of exchange to the dollar
cost to this Government of the goods supplied through^grants—in-aid.
These accounts should be drawn upon only for constructive, stabilizing
purposes. In many instances i t w ill probably be best either to. le t the
accounts remain idle or to authorize the use of this local currency to
effect a net reduction in the government’ s debt. There^may be instances,
however, in which i t might also be used' for reconstruction cr develop­
ment, or other purposes which would contribute to the increase of
production in the country. In thé view of the National Advisory Council,
such expenditures should ' be undertaken only In agreement with this
Government.
_.

I
-wish to make i t clear that the National Advisory Council, . In con­
sidering the financial measures which the European countries should
take, had very much in mind the necessity of preserving the spirit of
free and friendly cooperation between this Government and the European

*

6

**

governments* I-am sure- this country ..does -not wish to dictate to these
friendly.'countries either the- particular measures they should .take,
. or the exact manner in which they should be 'taken*
* '
. . ; . The adjustment of seme exchange.rates may be expected in the
course'of European re c o v e ry ,In fla tio n in Europe in' certain in­
stances has given rise to exchange rates which result in ari over- ,
valuation of the currencies in relation to the d o lla r .. This state
of affairs has tended to hinder the exports of such' countries-and, '
at the same time, to make imports relatively cheap in terms of local
currency* In some cases countries have resorted to export subsidies,
by means of special, exchange rates, or have used other measures"in
conflict with our own long-range international economic program.
*-'* The determination of an appropriate exchange, rate is a very com­
plex matter, involving the widest range considerations relatin g'
to prices, costs, and balances of payments* The d ifficu ltie s in setting
exchange rates' under present conditions are such that, although the
rates of some',of the participating countries w ill certainly have to be
adjusted, the timing of these adjustments w ill vary from country to
country. Accordingly, i t would not be good policy for us to insist
upon an across—
the—
board modification of exchange rates before we1ex­
tend aid. The revision of rates of individual countries should instead
be considered as a part of a developing program'of internal and external
•stabilization in 'conjunction with United States assistance* To ensure
that these revisions w ill ne.undertaken where necessary, 'the recipient
countries m i l be asked to agree that when, -in the opinion of the
United States Government, their exchange rates -are imposing an un­
ju stifiab le burden on their balances of payments, they w ill consult
with the International lionetary Fund about-revision* ' Countries which
are not members of 'the Fund would be expected •to consult directly
with the United States Government, The National' Advisory Council is :
making continual studies of the exchange rate problem and is the
agency directed by Congress to coordinate policy in this matter.
After progress has been made toward internal stabilization in the
European countries by balancing budgets,. increasing production, and
expanding trade, the time w ill arrive when.i t may be appropriate to
make stabilization loans "which would give greater assurance to the
people of the participating countries that the stabilization w ill be
permanent^ Thére is greater confidence in the stab ility of money-if
there is gold or dollars in the ‘hands of the central bank* At the
appropriate point in the Program it would be well worth while to
give countries t h is •additional assurance by extending a loan*to pro­
vide monetary reserves. I f the loan is given prematurely, the
reserves^might be dissipated through balance—of-payments d e ficits.
stabilization loan to be effective should come when there is
reasonable^assurmce that the internal situation of the country '
concerned.is satisfactory, and. that i t w ill be able to maintain its
exchange rate at a stable level for a considerable period of time.

1

I t is not lik e ly that this situation w ill be reached immediately, but
i t is possible that in the course of 1948,. and probably in 1949, some
countries w ill be in a position to use stabilization loans effectively#
At the appropriate time Congress may then be requested to appropriate
additional funds to be used by the U .S. Stabilization Fund to make these
loans.
Before I conclude my remarks oh this phase of the European Recovery
Program, I should like to comment briefly on the amount needed to carry ■
i t out# The President has recommended that $6.8 b illio n be appropriated
to support the program during the 15 months ending June 30, 1949«» The
National Advisory Council has carefully reviewed' . the procedures .which
have been u^ed by the inter—
departmental committees of experts in
arriving at this figure# These procedures involved a c ritic a l examina­
tion of European needs and of availab ilities in the United States and
in other major supplying areas, and careful estimates of European
dollar income and resources# The National Advisory Council believes
that this approach is sound and has" concluded that the recommended .
amount is needed to achieve the objectives of the program«
Finally, I should like to rake a brief comment concerning .the
financing of the Program» It would serve no good purpose'to ask the'
European countries to put their own houses in order if we, ourselves,
adopted methods.which might accentuate inflation in the United States
or upset our own economic stability# It is my firm opinion that we
diould finance the European Recovery Program within a
balanced'budget#
I am confident that, so long as we pursue a sound fiscal policy, we
shall be able to cover the cost of the European Recovery Program out
of current revenues.

TREASURY DEPARTMENT
Washington

FOR RELEASE, MORNING NEWSPAPERS,
Tuesday, January 13, 19^8______

Press Service
No. S-593

The Secretary of the Treasury, "by this public notice,
invites tenders for $ 1 ,000,000,000, or thereabouts, of 91 -day
Treasury bills, for cash and in exchange for Treasury bills
maturing January 22 , 19if8 , to be: issued on a discount basis
under .competitive and non-competitive bidding as hcrinafter
provided.
The bills of this series will be dated January 22,
19*18 , and will nature April 2?., lot 8 , when the face amount will
be payable without interest. They 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 (maturity value);;'
•Tenders will be received at Federal Reserve Banks and
Branches up to the closing hour, two o'clock p. m . ,: Eastern
Standard time, Friday, January 15, lQt 8 . Tenders will not
be received at the Treasury Department, Washington.•.Each .
tender must be for an even multiple of $ 1 ,000,, and in the case
of competitive tenders the price offered, must, h e expressed on
the basis of 100 ,. with not more than three' decimals., e. g.,
99.925Fractions may not be used.
It is urged.that tenders
be made on the printed forms and forwarded in the special.
envelopes which will be supplied by Federrl Reserve"Banks or
Branches on application therefor.,
Tenders will be received without deposit from incorporated
banks and trust companies and from responsible end recognized
dealers in investment securities.
Tenders from others must 5
be accompanied by payment of 2 percent of the face amount of
Treasury bills .'polled for, unless the tenders are accompanied
by an express guaranty of payment, by an incorporated bank or
trust company.
Immediately after the closing hour, tenders will bo
opened h t the Federal Reserve Denies and Branches, following
which public announcement will, be made by the Secretary of
the Treasury of the amount and price range of accepted bids.
Those, submitting tenders will he advised of the acceptance or
rejection thereof. The Secretary of the Treasury expressly
reserves the right to accept or reject any or all tenders, in
whole or in^part, and his action in any such respect shall be
xina,l. Subject to those reservations, non-competitive tenders
for $200,000 or less without stated price from any one bidder
will be accepted in full at the coverage price (in three decimals)
of accepted competitive b i d s , Settlement for accepted tenders
In accordance with the bids must be made or completed ait the
Federal Reserve Bank on January 22, 1911-8 , in cash or other

2
immediately available funds or in a like face amount of
Treasury bills maturing January 22, 19*1-8.' Cash and. exchange
tenders will receive equal treatement.
Cash adjustments will
be made for differences between the par value of maturing
bills accepted in exchange and the issue price of the new
bills.
The income derived from Treasury bills, whether interest
or gain from the sale or other disposition of the bills,
shall not have any exemption, as. such, idnd loss from the sale
or other disposition of Treasury, bills shall not have any
special treatment, as such, hinder the /Internal Revenue Code,
or laws amendatory or supplementary thereto.. The bills shall
be subject to estate, inheritance, gift or other excise taxes,
whether Federal or State, but shall be exempt from all taxation
now or herea.fter imposed on the /principal or interest therof
by any State, or any of the possessions of the United States,
or by any local taxing authority.
For purposes of taxation
the amount.of discount at which Treasury hills are originally
sold by the United States shall be considered to be interest.
Under Sections *12 and 117 (a) (l) of the Internal Revenue
Code, as amended by Section 115 of the Revenue Act of 19**1*
the amount of discount at 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,
the owner of Treasury bills (other than life insurance companies
issued hereunder need include in his.income tax- return only
the difference between the price paid for; such bills, whether
on original issue or on subsequent purchase, and the amount
actually received either upôn sale or redemption at maturity
during the taxable year for which the. return is made, as
ordinary gain or loss.
Treasury Department Circular îîo. 418, as amended, and
this notice, proscribe the terms, of the Treasury bills and
govern the conditions of their issue.’ Copies of the circular
may be obtained from any Feeleràl Reserve Bank or Branch.

oOo

26
TREASURY DEPARTMENT
*Washington
Press Service

for r e l e a s e , mo r n i n g n e w s p a p e r s ,

S-59A

Tuesday, January 13, 1948»_____

The Secretary of the Treasury announced last evening that the tenders for
‘) 1 , 000,000,000, or thereabouts, of 91-day Treasury bills to be dated January 15

and to mature April 15, 1918, which were offered January 9, 1918, were opened at
the Federal Reserve Bau»ks on January 12,.
Thè details of this issue are as follows:

Total accented^01* - ^ O o S ’oOO (includes ,511,020,000 entered on a nonTotal accepted
’0o^,etitive basis and accepted in full at the average
Average price

price shown below)
- 99 7 53 Eauivalent rate of discount approx, 0.9/o/0 per
1
annum

Range of accepted competitive bids:
--'99*770 Equivalent rate of discount approx,0,910/E Per
annum

High
T

Q Q

Low

7 q

— 99 ♦( 2-L

n

tt

it

n

0.985# n

n

(91 percent of the amount bid for at the low price was accepted)
Federal Reserve
District_______

Total
Applied for

Total
Accepted

3
2,939,000
1.311.915.000

5

Beston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kerens City
Dallas San Francisco

5,310,000
3.895.000
5.370.000
3.135.000
38.155.000

1.620.000

5,310,000
3.895.000
5.370.000
3.135.000
30.989.000

.

■ 36.595.000

1 620.000
1,995,000
15.377.000
11.601.000
36.595.000

31.117.250.000

rfl,003,366,000

1,995,000
15.377.000

.

11 611.000

TOTAL

2,939,000
875,237,000

•0O0—

. TREASURY DEPARTMENT
Washington
FOR RELEASE MOMING NEWSPAPERS,
Friday, January 94 19AS .
r*

l ...

.
‘:,-L

i t a ■, /..,.

Press service
"No* ^“ 595
*• _■

‘

Proposals for repeal of twVmihpi" hhsinesp,-taxes are discussed in .
a study entitled ’’Consolidated Retii-irts -and- intercorporate Dividends
which -was made pnblie v:by the Treasury Department - today«
*v . . r
That both’taxes should, be dispensed with;has,, been suggested in
a great many plans -for postwar ,revision ofthe-, corporate tax structure*
Today’ s study deals factually and'analytidally with tuese- suggestions*
On the basis of 1947 business levels, the Treasury estimates that
simultaneous -withdrawal.--.o-f both taxes would cost the federal Government,
about ^206,000,000 in revenue*
‘
.■ ■
Corporations how are taxed on 15 percent of the dividends they
receive from other domestic corporations* Regular corporate income tax
rates apply*
'r A
An additional tax of A percent is imposed upon the consolidated • ..
surtax net income of- a ffiliated groups of corporations, when these grpups
exercise the'privilege, of filin g consolidated returns.
Taxing of intercorporate dividends has-.had-a devious history* - Such
dividends were fu lly taxable to the recipient corporations under 1913-1916
revenue" acts* Dividend income was fu lly deductible-between 1917 and.
1935* In 1935 a tax was levied on a fixed portion of dividend income,
with the apparent purposes, largely, of combating the development of
holding companies and also combating corporate split-ups as a,means of
avoiding the graduated corporate income tax.
Present opponents say the tax is inequitable, and that as an
instrument for inhibiting the concentration of corporate ownership it is
ineffective* Proponents of the tax argue that the original reasons for
i t s t i l l exist, and say business has now become fu lly adapted to it*
Today’ s study examines the arguments in detail, and presents some
alternative forms of taxation which have' been proposed.
As in the case of the taxing of intercorporate dividends, the privilege
of filin g consolidated returns and the taxing of such returns have had
a checkered legislative history* The present law on consolidated returns,
with.a 2 percent penalty tax, dates from 1942*'
An important factor is the test of what constitutes an ‘’all iliated
group'* of corporations. Generally speaking, this test is based on the
existence of 95 percent stock ownership*
The consolidated return was adopted originally as a technical aid in
the collection of the firs t vTorld War excess profits tax* I t has since
become an issue in the dispute over industrial concentration* Supporters

~2
of the tax point •out that i t brings substantial^ tax savings to^its users.
These savings are said to accrue primarily to big business, which thus
obtains a competitive advantage. Hence the consolidated return is alleged
to contribute to the decline of small business 0
A bility to offset the losses of one member of an a ffilia te d group
against the gains- of another was the fir s t advantage of the consolidated
return to its users. An additional advantage arose when taxing o
intercorporate dividends began in 1935# The penalty tax on consolidated .
returns is intended to offset these advantages.
r The study analyzes various. criticisms of the tax. One complaint
against the principle of the levy is that an a ffilia te d group of corporations
is a single economic enterprise. Some other criticisms are that the rate
tax is arbitrary, that the base used is faulty, that the test of
a ffilia tio n should rest on control rather than on substantially complete
ownership as now, and that’ i f cdhselidatod returns are up oe permitced at
a ll, filin g of them should be compulsory rather than optional.
Appendices accompanying the study present the legislative history of
both intercorporate dividend taxation and consolidated returns, wx
extensive quotations from Congressional committee reports and other docu­
mentary sources,
•

ouo

CONSOLIDATED RETURNS ML INTERCORPORATE LIVILEHLS

Livision of Tax Research, Treasury Departnent
January 19^-S

29

Consolidated Returns and Intercorporate Dividends

The taxes on consolidated returns and intercorporate dividends •
arc a feature’ of the »tax law intended primarily to reduce the
complexity of the structure of corporate "business and to mitigate the
tendencies’ towards industrial concentration. It is the purpose of
this study to bring together available information oh the origin o f/
these■
taxes and their adequacy in achieving the intended objectives#
This study a lso ’discusses the-various equity, economic, and administra­
tive considerations raised by alternative methods of achieving the
desired* ends«. * The report is designed to provide a factual and/
analytic background which may bo helpful in formulating tax policy,
with respect to’ this aspect-of the postwar tax system*
■ •

t

i ■•

■ •
, ; •

.

.

.

,

;

.

1, ’

- *•

.

; ■?'.

Thais’ subjob t ‘ has been under consideration-by a committee composed
of *th'e technical tax staffs of the Treasury Department and the* Joint
Committee on. Internal Revenue Taxa-tion, This study has benefited at
various points by the committee*s discussions. The me/terial contained
herein, however, is not to be considered .as necessarily representing
in^any way the views of the staff of the Joint Committee on Internal
Revenue Taxation**
. -

Division of Tax Research
U.S. Treasury Department

Consolidated Returns and Intercorporate Dividends
TABLE OR CONTENTS
I*
II*

Introduction

The Tax on Intercorporate Dividends •

1# Considerations, basic to the establishment of the tax • • * . •
2* -Arguments advanced by opponents of the tax • • • *
3* Arguments favoring the retention of the existing tax » » « * •
Adequacy of the existing tax from the
standpoint of its basic objectives • «•. *. * . * - * • . • •
a* The¡tax as a deterrent to holding companies • •• * • * ♦
b* The tax as a deterrent to split-ups
* • • •• • • * •
5* Alternate forms of taxation* • • • • • » •• •
* %•
•a* Solutions, to the problem of. corporate split-ups « * • '
V* General substitutes- for the existing tax* . . * . * «
c*The substitution of a tax credit for an income credit
. i;.. .

I l l*

**
•*
• •.
••

The Tax on Consolidated Returns -

1* The existing tax and its precedents« • * • > * « • * • • • • •
2* The basis for the penalty tax on consolidated returns* « » • «
3* Criticism of the penalty tax on consolidated returns « • • • •
a* Criticism of the principle of
the tax on consolidated returns * * • • « • • • • • « • »
b* Criticism of the form of the tax now.in usé • * • . * * •
^1^ The rate 1of tax * • • . « « • * » • * • • * • • ♦ • - •
(2) The base of the tax * ....................... ....
c* The test of a ffilia tio n • • * . . • « • • • • • • • • * •
d* Optional vs* compulsory use of the consolidated return* *

n
u
TABLE'OP CONTENTS 2
Page
APPENDIX a - Taxation of Intercorporate Dividends legislative History * • * W « ♦ « • • >.« * * » •
APPENDIX B’~ Statutory Development of- the Consolidated R e tu r n * A

23

APPENDIX 0 - The Effects of Lowering the Percentage -Used in Deter­
mining A ffilia tio n for the Purposes of the Tax on .
Consolidated Returns (with Table9 nDividend Receipts :
• in 1936 Reported oh Corporation Income Tax Returns
,;r
Classified by Percent of each Dividend Receipt to
Total Taxable Dividends Paid by the Payor Corporation,
v
Showing Number and Amount of Dividend Receipts11)« • « ■
; 47
ARPENDiX D - Intercorporate Dividends"Received from Domestic
Corporations * 1926— 19^3'• • * • • • * • * •

APPENDIX E - Number of Consolidated Incomo

Tax

192S-19b4 , • . A * . * . . • • .

*

• * • • ' ^9

Returns Piled,
« .. * - • • * * • ♦

50

Consolidated Returns and Intercorporate Dividends
I #■ Introduction
Section 26(1)) of the Internal Revenue Code excludes from the
Corporate*normal and Surtax "base £5 percent of the amount received
as dividends from domestic corporationsi l/ The effect is to levy
the corporate income tax upon the remaining 15 percent of such dividendsi
Section ll+l(c) of the Internal Revenue Code imposes a penalty tax
of 2 percent Upon the consolidated surtax net income of corporations
using consolidated returns# Such returns arc available, to a ll hut
certain specified types of corporations, 2 / provided the companies
involved meet the statutory ‘definition of an a ffilia te d group*
She proposal to repeal both these levies appears in a great many
plans for the postwar revision, of the.Federal corporate tax structure»
The Treasury* Department estimates that the revenue loss resulting from
the repeal of the tax on intercorporate dividends would be OloOjOOOi'COO.
The estimated loss of revenue resulting from the repeal of the existing
tax on. consolidated returns is
That resulting from the
simultaneous‘withdrawal of*both taxes has been estimated at $206 , 300 , 0 0 0 » J+/
v II*

The Tax on Intercorporate Dividends

10 Considerations ba-sic to thè establishment of thè tax
The present tax on intercorporate dividends had its origin in the
controversy which took place during the 1930 ‘ s over the complexity of
the structure of corporate business and particularly over the develop­
ment of the holding company form* To a large extent the legislation
of 1935 » which set up the tax of intercorporate dividends, was intended
to direct business organization into forms loss apt to foster monopoly#
H istorically, J>/ three distinct tax policies towards intercorporate
dividends have been pursued».' Under the Revenue Acts of 1913 an& 1916,
dividends were fu lly taxable to the reel-plant corporation#. Between 1917
and 1935 » ^he dividend income of corporations was fu lly deductible in
computing taxable net income* In 1935» a fax was imposed on a fixed
However, the exclusion cannot exceed 85 percent of adjusted not income*
2./ Section lhl(e)#
3 / Section lHl(d)\*
% / Assuming personal income of $200 billion#
The definition of personal
income is given ii; !,Hational Income Supplement to Survey of Current
Business,“ July 19^7
5/ See Appendix A for the legislative history of this tax#
1/

-

2

31
-

portion of dividend income. Existing lav- levies the corporate income
tax on 15 percent of dividends received from domestic Corporations.
This is accomplished by excluding from the normal and surtax base
85 percent of the amount received as dividends from domestic corporations* 5/
While the réintroduction of the tax on intercorporate dividends in
i s explained in large part by the increasing h o stility toward con­
centration in business ownership characteristic of that decade, the
precipitating factor was the introduction of rate graduation in the tax
on Corporate net income. Progressive tax schedules place a premium on
tax avoidance by the technique of splittingMip a single laîfgo corpo­
ration into smaller ones eligible for lower-bracket r a te s ,. The thx on
intercorporate dividends tends,to prevent avoidance through corporate
split-ups*
1935

2,

Argitments advenecd by opponents of the; tax-

j. , .

The tax on intercorporate dividends has been opposed on the
grounds (l) that it is inequitable and (2) that i t is an ineffective
instrument for inhibiting the concentration of corporate ownership. :■
It is maintained that the tax is inequitable because i t fa lls indis­
criminately on a il corporation# 'holding the securities of other corporatiohs irrespective of: their structure or the nature of thôir business.
Insurance bonpanicsi banlli and;,other investment institutions are given
the same treatment as holding:Companies whose operations are much more
likely to Contribute to monopoly* ifo docount is taken of the fact that
legitimate business reasons* such aô the requirements of State law or
the opposition of minority stockholders* may compel multiple incorpo­
ration fo r many a ffilia te d groups,
*
It. is also alleged that the tax results in discriminatory multi­
ple taxation. This is an extension of the ndouble taxait ion” argument
directed at the corporate income tax it s e lf, which holds that the income
taxed to the corporation when originally earned is the same income
received by the shareholder as dividends. It is argued that the taxation
of such income , both ,at the corporate level and when received, by the
shareholder, constitutes discriminatory double"taxation regardless of
the corporate or personal identity-of' the recipient. Moreover, i f a.
recipient corporation redistributes,.its dividend income to other
corporations who in turn distribute i t to individuals, discriminatory
double taxation becomes discriminatory multiple taxation».
Opponents of the tax also question the need for its use as a •
device for preventing the splitting-up of corporations. It is pointed
out that,, in most instances, the typo of organisation -adopted w ill bo
determined primarily by business needs rather than the desire to reduce
taxes, and that oven though the latter factor sometimes .plays a
j

Note that the exclusion cannot exceed 85 percent of adjusiod net
income.

■

- 3-

considerable role in the decision, i t is rarely of primary importance*
In most lines of manufacture closely integrated operating companies
would find the diseconomies accompanying corporate split-ups so great
that the device would not bo practical* While split-ups for tax purposes
might bo feasible in the trade, service* and amusement industries where
low capitalization is more common, opponents of the tax object to its
general imposition in order to prevent a practice which is apt to occur
only in restricted areas»
’ ; ‘
• ti 1,;-j
* It.has been contended also.that the tax may have a detrimental
effect upon corporate investment," particularly in new and speculative,
areas*,' For some inhovating enterprises, corporate sponsorship and
intercorporate .investment in essen tial during the. developmental stage
when the product.4s as yet unseasoned. Certain enterprises, notably
public u t ilit ie s , .obtained a largo share of their in itia l capital
direct from corporations in allied industries*
3* Arguments favoring... the rétention bf: the existing tax

•

Advocates of tho existing tax roly heavily upon the sane .arguments
advanced in 1935 when tho tax.Was introduced, Rato graduation s till;
offers an incentive to corporate split-ups, ank the holding cônrpaiiy '
problem is s t i l l prosent. Despite the.admitted limitations to the use
of taxation as an instrument of control, it is potentially at leant an
effective- -means’ of changing" the patterns of business organization. In
the absence of completely effective direct controls, supporters of the
tax arguo that a ca.so can oe me.do for its use as a second best instru-r
ment of control.
Supporters of the existing tax also point out that, within the.,
ton years in which it has boon in operation, business ha„s adapted
its e lf to tho tax, administrative problems have boon resolved, and
tho effects of the tax on tho economy have-had a chance to work thornselves out. Specifically, the impact of the tax on corporate earnings
has been reflected' in the price of securities;' and to the'extent that
those have been transferred since 1935 * the tax has boon capitalized.
Under .these, circumstances repeal might bring a windfall gain to many
of thC> present shareholders* This is believed to raise a presumption
in -favor of the continuance of tho existing tax#
Adequacy of tho existing tax from the
standpoint of its basic h M eetives
Doubt has been." expressed concerning tho'efficacy of tho existing
tax on intercorporate dividends both as a device for eliminating the
holding...company and for deterring avoidance -through--corporate sp lit—
ups,

a. The tpjx as a deterrent to holding
' - I t is d iffic u lt to establish conclusively the irricdirte efiocts
3f. the to c S o n the pattern of business enterprise, s in c e r e considoriions cannot easily bo segregated fr.ofl other factors* Howavar, i t is
Blear that the results obtained by the use of the tax cap herOy
connarablo with those which’ could bo achieved through direct control*.,
tfhile a tax penalty of greater size would bring^norc substantial results,
the inequities of the law also .would be aggravated.
|

|

-.V . ■'

'

*

d- :

. ;;

•:- .

.

>. 2

'

; J;

_

*bj . tHoq tax as a dotorront to sp lit—
ups
- The increased rate graduation in the ^
bn corporate ineono
which has tnfccn place between ,1935 and, 19^5
deprived tne p
intercorporate dividends O f much of its effectiveness nt a deyice _
for preventing split-ups. .In the Hovenuo A0t of 19 J5 under which W
existing tax on intercorporate dividends was enacted t.,o rates on
coroorato income had.a range of 2.5 points, tjndor these conditions,
the" taxability of 10 percent of intercorporate dividends nigat ha-P
sufficed to deter thp split ting-up of corporations in order to
achieve a-preferential rate* 6

]

Under existing legislation the rates range fron 21 percent on a
corporation with an income up to $5*000 to a maximum of 3 perCy?}^ on
an income of $5 0 ,0 0 0 .or more, a spread of 17 points. ~hls means tha
the deterring e ffe c t’of the existing tax on 15 percent of tntercorporate dividends has been reduced greatly, A tax upon 35 to HO per­
cent of such dividends night- be required to set up a deterrent to,
corporate splitting equivalent to the tax on 15 percent, of such
dividends under the rates in effect in 1935* 7/
6/

Under the Revenue A ct,of 1936 the rates on corporations became
S percent to 1 5 .percent,, a range of 7 p o in ts,. and 15 percent of
the intorcorpor-ate dividends were taxable. Since these changes
were effective December 31 , 1935 , they superseded the corresponding
provisions o f the Revenue Act.of 1935*
7/ A ta.x on intercorporate dividends .at-. 15 percent, the maximum rate
under the Revenue Act of -1936, would produce an effective rate of
2 .2 5 percent, Uith /»^maximum corporate rate of 3^ percent, the
effective rate of tax on intercorporate dividends has risen to
5,7 percent. Since the.spread in the.tax rates on corporate incone
in the Revenue Act of 1936 was 7 points while the spread in the
present tax is 17 points or 2 .H times that of the eartier tax, a
proportionate increase in the tax burden would make intercorporate
dividend’s taxable to the extent of 36 percent of such dividends
( i.e , 15 percent taxability x 2 . H percent increase in the range
of graduation 36 percent taxability),

~55. , Alternate forms of taxation
\ : ;The inadequacies- of the existing-levy have inspired several
proposals for alternate methods of taxing intercorporate dividends.
A ll are of a highly controversial character.
'i

a*

Solutions to the problem of corporate split-ups

(1) The fir s t of these proposals rola.tes only to the
problem of corporate split-ups. It is- suggested that the income
of 0a ffilia te d 0 corporations he aggregated and that the rate of
tax applied he' that appropriate to such aggregated income# Under
section lUl(d) of tho Internal Rovonue Code, which relates to th etax on consolidated returns, corporations arc **a ffilia te d 0 i f one
ovms 95 percent of tho voting and non-Voting.stock of another,
exclusive of non-voting proferrod stock.
The aggregation of
the incomes of such’ a ffilia te s would necessarily take the profit
out of splitting up into smaller’ corporations. However, corporations
could avoid the proposed requirement-for aggregating'incomes by
disqualifying themselves under the a ffilia tio n testj and since the •
percentage used therein is very high, this could ho accomplished
. easily by a deliberate reduction of stock ownership. Therefore,
in order to achieve the desired re su lts,- i t would probably'be•
necessary to'reduce tlic percentage used in the'test of a-ffiliatiori
from 95 percent to a substantially lower figure, say 50 percent*
(2) A second approach to the problem of corporate split-ups
calls for the restriction of the benefits of the lower bracket rates
to corporations in which no-owner df a given percentage (say, w per-*
cent) of the stock of tho taxpayer corporation also owns a stated ■
percentage (say, '40 percent) of the stock of another corporation.- The
benefits of tho lower bracket rates might also bo restricted to cases
in which,no stockholder holding a given percentage (say, 25 percent)
of . the stock of tho taxpayer corporation is a corporation.
(3) S t ill another approach to' the corporate split—
up problem
calls for the reduction of the dividend received credit from S>5 percent
to oQ percent in cases whore the subsidiary corporation is subject to
a rate of loss than 3 & percent.
Each, of these three proposals constitutes a radical kdeparturo'
from existing law and practice. The fir s t is'not unlike ’the plan-to
make consolidated returns compulsory for 0a ffilia te d 0 groups',' which
is discussed on pages ltyeand 15 below. The second proposal is adminis­
tratively impracticable. The third- is' held to be unwise because- it
would penalize unfairly small busihes-s enterprises whibll- receive a
minor, part of thoir income in the: form of dividends. :

-

b,

6-

General substitutes for the existing taxy .,

(1) A more general' substitute for the existing tax'is the
proposal to treat dividend incone of corporations’ ihytho sane manner
as ordinary earnings, hut to specify that in cases where intercorporate
ownership is compatible vdth public policy the tax on dividend income
shall not apply. This proposal is highly impractical* It opens the
door to special pleading, and requires a high order of administrative
discretion.
|
(2) Similar in many respects is a proposal to restrict
the tax on intercorporate dividends to' companies fa llin g beneath the
definition of an "undesirable* holding company, which is written into
the tax law it s e lf. This device transfers a substantial part of the
burden of distinguishing between •’good11 and "bed" holding companies
from the administrative agencies -to Congress* The. draf ting of a
workable set of definitions would bo an extremely d iffic u lt, i f not
impossible, task. It would have, tp be done so as to exclude from the
tax companies whose security holdings do not connote control and whoso
receipts from dividends are a snail part o f their total income* i f
the tax could be restricted in this manner, the rate could be raised
to a truly punitive level,
c* . The substitution of a tax credit for an income credit
* The existing tax is levied upon an amount determined by means '
of a credit against income. I t has been pointed out-that this method
will produce unduly favorable treatment in cases where a holding
company's income is between $ 50»000 and $333 *333 » Por instance,
assume a company whose only income is a dividend of $100,000. Under
existing law, only $151000 of this inter corporate dividend would bo
subject to tax, «and i t would be taxed at a rate of about 23 percent
instead of the 3^'"PerCGiit* rate normally applicable to Corporations
With income in excess of . $50,000.* The lower rates ,now applied to
incomes below $ 50,0 00 were intended to benefit " small business'! and
the corporation, used'in this hypothetical illustration could scarcely
be regarded as. fa llin g Within that category. ' y#
The suggestion ‘has been ma.de that this defect in the existing
Iqw scould be corrected by calcul«ating the 'Corporation* s tax lia b ility
on thei basis c f its entire net income including dividends. A credit
would then be. allowed against this tax equal to 85 percent of. the
portion of the tax: which is based upon intercorporate dividends*
This procedure would mean a somewhat more complex tax computation.
While this substitution of ¡a tax credit for the income credit
used under existing law would produce greater equity, the extent of
the problem at issue may not be sufficiently groat to w«arrant a change
in an established procedure*

~7III«:-. The Tax on Gonsolidated Returns '
1.

The existing tax and, its precedents

Zf

£...

Under existing law consolidated returns are optional to a ll "but
certain specified types of corporations» £/ provided the companies
involved meet the statutory requirements of ah a ffilia te d group. The
. latter is .defined to meant
11one or more chains, of includible corporations connected
through stock ownership with a common parent corporation
which is an includible corporation i f —
H(l) Stock possessing at least 95 Pcr centum of,
the voting power of a l l classes of stock and at
least 95 PGr centum of each Class of the nonvoting
stock of each of the includible corporations (except
the common parent corporation) is owned directly by
one.or more of tho' other includible corporations; and,.-.
rt(2) The common parent corporation owns directly
stock possessing at least 95- per centum of the voting
power'of a ll classes of stock and at least 95 per
centum of. each decs of the nonvoting stock of at' .
least one of the other includible corporations«,
ttAs used in this subsection, the term ‘ stock* dobs not include
. nonvoting stock which is limited and preferred as to dividends« "

10 /

However the election to f i l e a consolidated return w ill bring into play
an additional tax of 2 percent of the consolidated corporation surtax
net income of the a ffilia te d group of includible corporations.*
See Appendix B for a-history of thb tax treatment of consolidated
returns*
9/ Section lUl(e) denies this privilege to corporations exempt under
section 101 , insurance companies subject’ to taxation under section
201 or 207 , foreign corporations, and companies entitled to the
benefits of section..251 by; reason of receiving a large percentage
of their income from sources within^possessions of the United States,
corporations organized under the China Trade Act of 1922,' regulated
investment companies subject to tax undor supplement'Q,, and certain
personal service 'and other corporations fa llin g beneath section 725(a)
and sections 727 ( g)(g) or (h), which have not file d a consent to be
treated as an includible corporation for the purpose of consolidated
roturns. Under section lbl(f) companies, each of which is an insur­
ance company and taxable under section 201 , are granted the privilege;
similarly companies each of which is an insurance company and taxable
under section 207 »
10/ Section lHl(d).
Zj

- g -

The privilège of filin g consolidated returns is restricted
further by the requirement that corporations'electing to use-such
returns must consent to the regulations governing their use' ' '
prescribed by the Commissioner of Internal Revenue under the
*
authority granted him by section, l4l(b) *. .

•'

Thé fir s t specific provision for consolidated returns was
made in 1917 when the Commissioner of Internai Revenue ruled that-.'
such returns were mandatory for a ffilia te d groups for the purposes
of the excess profits tax* This action-was based Upon a* desire to
fa cilita te administration and to prevent tax avoidance and evasion« u /
Under the -Revenue A«t of 1918 consolidated returns became mandatory
for income tax purposes as well. In 1922, after the excess profits
tax of World War I had been repealed,., rguph returns were made optional
to eligible corporations and remained so to date. Commencing in 193^
thoir use was denied to a ll corporations except ^'railroads* 12/
With the appearance of another excess x^rofits tax in the 2nd Revenue .
Act of 19^+0, the option to elect consolidated returns was restored to
corporations generally for the purposes of this tax* The option to
use such returns under the corporate income tax reappeared in 19^-2 ,
While the definition of an a ffilia te d group has varied materially •
over the years, the chief difference between thè present- rule and
that which applied during most of the earlier period is: thé. absence'
from the present'law of a provision for so-called class B a ffilia tio n s,
A class B a ffilia tio n is one in which the bulk of the- stock of Wo* or
more corporations is owned or .controlled by the sane interests but not
through a common parent corporation, .- This basis for 'a ffilia tio n was
removed in the-legislation of 1928* Only under the Revenue-.Act of 1917
was i t a prerequisite that the a ffilia te s be engaged in thé same or
closely related, business, or .bear a close business relationship to ‘
each other through .common assets, inventories and accounts, 12 /
The fir s t penalty imposed on the use of the co n so lid ated return
was enacted, in 1932 s the rate being three—quarters, of one percent,*
This was raised .to one percent' in the N .I.R .A . legislation" of 1933,
and to two percent.in the following year. Between 1936 l5/ and 19Û1 ,
when the privilege of using the consolidated returns for income tax
purposes was denied to most- corporations, no. tax penalty was inpobed.
When the- option to use- such returns, was restorod :ih •19^2 »^he ‘tvm-• '
percent penalty tax was roinposed,
' tV£'.t
11/ Thes o regulations were upheld in the Revenue Act of I 92 Ì*
12/ The privilege was extended to Ran American Trade Corporations
for taxable years beginning after December 3 !^ 1939.
i¿/ Avenue Act of 1921» section 133d* end the regulations validated
thereby,
in/ A tax of three-fourths of one percent levied under the Revenue
Act of 1935 was superseded a,nd rendered inoperative by section l4l(c)
of the Revenue Act of 1936 .

- 9The regulations now used to administer the consolidated return
have a peculiar significance. These regulations are the result of
turning over to the Commissioner of Internal Revenue a host of
technical Questions with ins true tions to meet tiiCm mdivxdua.~i.j.y
as they arise. As a natter of feet the ’ regulations have served to
correct the chaotic administrative problem which prevailed in the
twenties. However,- their legal position is obscure. Ho real test
has occurred because a, corporation which cLisilked any feature of the
regulations could abandon the consolidated return at the next exercise
of its option. Under existing law the next exercise is 'never, very far
off* 15/
2. The basis;for the penalty tax on consolidated returns

Although the consolidated return was adopted originally as' a
technical aid in the collection of an excess profits tax, i t has
become an issue in the dispute over industrial concentration. Those
who support- the tax point out. that the consolictatod return1brings
substantial tax savings l 6/ to its users. These savings, are said to
accrue primarily to big business which thus1obtains a competitive
advantage. Hence the consolidated return is alleged to contribute
to the decline of small business in the United States*

•

15/ Regulation 10h, Sec. 23.11(a), reads as follows:
«Consolidated Returns .Required for Subsequent Years.*—I f -a .consoli­
dated return is made under these regulations for any taxable year,
a consolidated return must be made for each subsequent .taxable
year during which the a ffilia te d group remains in existence un­
less ( 1 ) a corporation (other than a corporation created or organ­
ized, directly* or indirectly, by a member of the group) has be- . ■
. .come a member- of the group during such subsequent taxable year,
or (2) Chapter 1 of . the Code to. the extent applicable to corpo­
rations,; or these regulations, which have been consented to* have
been amended, and any such amendment is of a character which makes
less advantageous to a ffilia te d groups as a class the continued
.
filin g , of consolidated returns', or (3) the Commissioner, prior to
the time of making, the return, upon application made by the common
panent corporation and for good cause shown, grants permission to
change.«
16 / A. more thorough dotermination of tax savings woulci take into account
the .manifold accounting Adjustments on entering a consolidated return
and/'on ¡‘re verting -to,, a .separate.return ;basis,- Those''are means of
potential tax Savings o.r. tax avoidance. Such items are the carry­
back/, and. carryover provisions 'relating to net operating and not
capital losses, intercompany inventory gain or loss and similar
technical provisions*

tOi' *r*
"*%
. . . . . /

.5«

,

-

10

-

Prior to W W

tho'tax 11sc.vin,-;s" in question were principally the
to offset the losses of one
. o f « hffUintod
i-roup against the gains of another. With tno imposition of | ax
.
intorooroorate dividends in 1935. additional «tispAngs. xosnlten.
consolidated return eliminated the tax othorvriso due on dividends p^si- ^
between members of the affiliated group. Hence the existence of a tax
intorcor^rata dividends provided father Justification for a penalty tax

result

on the consolidated return»
3 .'

C r itic ism of the penalty tax
a.

o n

■consolldatodjrpturns.

Criticism of the principle of the tax on cqnjgol|teteirettO Tg

Critics of the tnx on consolidated returns arguc(1 ) that an a ffilia te d group is a single ..economic enterprisej
(2 ) that-a correct statement of the income of the group is
secured only by a consolidated return, with a ll intercompany transactions
e l S t d d f Such returns enable the group profits and losses to he brought
into account and to bo fu lly accounted for when they have boon subjected
to the acid tost of a. transaction outside the group, She returns also
eliminate the necessity of inquiring into the bona fides of thousands
of intercompany transactions;
(3 ) that a .correct statement, of income involves generally the
offsetting of the gains and losses of the several corporations,. Siich
action is a.s appropriate in computing consolidated net income as & &
offsetting of the gains and losses of the several departments or divisions
in.computing the net income ‘of a single corporation;
(k) that whenever matters not relevant to the a ffilia te d status
or the consolidated return period require exceptions to the rule of off­
setting the ga.ins and losses of the severa.1 corporations, t-iie ru cs
governing tip consolidated return have imposed, and should impose*
appropriate qualifications*
,

These critics also point out that i f the offsetting of tno ^aihs and
losses of the several a ffilia te s, in a consolidated return is to bo. rogarded
.-.as.«an advantage, i t is an,advantage limited by three factors f ir s t , y .c
'number of years, preceding or subsequent to the year o,f the loss, to whicn
the loss 1can be carried; second, by the profit -qnd loss cycle of the
. ness[in which'the, losing corporation is engaged9"and third, by the a b ility
©f the a ffilia te d group management to 1anticipate the loss of the a ffilia te
and channel profitable opera,tions to it sufficient to- offset the anticipated
loss ©
r-.h;
Because the carryover and carryback of a net
the less realized by a.non-af filia te d corporation
its gain in .other years, the special advantage ..of
ration is reduced to the fact that i t can rbalize

operating loss enables
to be-offset against
the a ffilia te d corpo­
an immediate offset

4 il while the non-affiliated corporation which cannot absorb the loss by a
carryback merely has a contingent offset against possible future profits*
So long as the carryback remains in the lav;, this advantage tends to dis­
appear in cases where non-affiliated corporations have profits'in earlier
years against which the current loss can be offset* It should be borne
in mind that the* foregoing argument applies .only to the part, of the
’’savings11'resulting, from offsetting gains against losses,. and docs not
relate to'the ”savingsB resulting from thd avoidance Of the tax on intorcorporate dividends* ,': .;
. ..
Advocates of the consolidated return deny-strenuously the charge
that i t contributes to the growth of monopolistic business groups and
to the disappearance of small business, They hold, that the general
social and economic forces governing the- economy arc of far greater
importance in this connection than the consolidated, return* I f a
trend toward monopoly exists, the appropriate remedy is alset of
direct, controls enforced by Specially authorized regulatory .agencies,
b*- Criticism of the f orm of the tax now i n use
Apart from the objections raised to the principle of taxing con­
solidated returns specific criticisms have been made of the form of tax
now., in use. The points .at issue are the size of the penalty tax, the
, tax.base, the test of a ffilia tio n and the provision which makes the
use of thé consolidated-return optional^
(l)

The rate of tax

.. .. The choice' of -the proper rate of tax depends in large part upon
ino objective sought* Logically, a, person who is convinced that the
consolidated return fosters a socially undesirable form of business
organization is led to- the conclusion that the consolidated return
should be either (a,) prohibited entirely, or (b) subjected to a tax
which wipes out completely the advantages accruing to the a ffilia te s
ns,,a result of the use of the consolidated return.
An•■'•attempt was made to relate the existing tax of 2 percent of the
consolidated surtax not income to the savings from consolidation. The
approximate tax reductions which consolidation produced in a sample of
215 consolidated 19^+3 tax returns were estimated and the results related
to consolidated adjusted net'income* 17/ A total of 136 , or 63 percent,
-kc 215 returns used v;crc those showing an adjusted net income which
v>e.ro available at the Bureau of Internal Revenue in Washington, D*C,
They •comprise about 17 percent of a total- of 1,286 consolidated return
file d by corporations on Form 1120 for the taxable year lQkp, The
existing corporate tnx rates wore 'applied to the pa.rent^s consolidated
adjusted net income increased by the deficits of their subsidiaries,
and also to the consolidated a,djusted net income as shown on Porn 1120«
Tho difference between the respective amounts of tax lia b ility was
assumed to be the net tax reduction attributable to the deduction of
Subsidiary deficits* I t was impossible to correct the data for the
possible effects of the loss carryover provided by section 122 of the
Internad. Revenue Code-* Because of this tho estimated ’’savings” arc
overstated*

12

36

-

of the 215 cases apparently had «savings» of less than 2 percent of
consolidated, net incone. She results indicate, however,. tnat t h n 1 ,
no consistent percentage relationship hetweep"savings» and consolidated
net inconc which is typical of the group as p, wnole. Sono large .ax
savings appeared where there wore heavy loss offsets and tne consolid .tc
firn had*little net income* Moreover, there iç not a single case in t is ^
s-iplo where the savings are precisely 2 . percent of consolidated not.incone.
It is evident that thé' relation between the existing rate of tax and
the usavings11 which arc the alleged occasion-for the tax is . highly
arbitrary/’5' It is also evident that the -application of any other percentage
of consolidated net income would-produce equally -arbitrary resultsc .
(2)

The base of the tax

' '.

On the''theory that the arbitrariness of the existing tax is due to
the. base'used, it has boon suggested that the tax .be assessed, not on
consolidated Surtax net income but upon: (l).i,an amount ecual .to the.
losses-of subsidiary corporations used as an offset cither, to the income
of the parent or that of the consolidation, and (2). the income brought
to the parent in the consolidation by the .subsidiaries«
I f it is accepted that the corporate revenue system is devised^to
function on an individuals firm basis and that a -combination of subsidiary
net income with net operating losses produces peal:tax savings, there is
some logic in this proposal*'- To the extent that, -.the losses orought _to
the consolidated income are deductible, they are a source o f. tax - savings*
Insofar as the profits the subsidiaries bring to the parent would otherwise
have been transferred to it through dividends,- the tax-on .consolidated
returns, is a substitute -for the tax on intercorporate dividends* But to
levy a t a x on those ''savings" on the-theory th t they axe the result of
a tax reduction device ignores the possible carryover of the not operating
losses of’ a ffilia te d corporations* Moreover, there, is po. reason for the
assumption that the entire earnings of a subsidiary ^o-iclá_boeoné "dividends
to the párente Thus, the precise-amount of net tax saving .resulting from
the Use of the' consolidated return in any .taxable year is not easily
ascertained* . This "amount can be determined only by requiring simultaneous
separate and consolidated returns and by. -Computing the difference in the
, tax lia b ilit ie s . Since i t is otherwise- impossible to determine accurately
tho- net tax nsavings" for any year-, any. rate used w ill bo mere or less
arbitrary* 18/
IS/ Exponents of th is :revision -in the base of the existing tax have
suggested a rate of 1 percent of the profits and losses in Question*
1, Undoubtedly this- rate would involve a net reduction, in yield* The
da.ta on the 215 consolidated 19^3 tax.returns mentioned above
indicate that the proposed, tax would yield less -than- lb percent of
that new in use*
.

, /:

V*

/\/

l
_

,

V

iv.'Jr

- ; « V '* • r . 1? - - , .
* '

.• «'

: :

. *. - -

' •••:',-

,.'•. : 4

.

^

k

.

.v

■■' As a. Variant tó t & foregoing, it has tec* proposed, ^ p t e ^
.«»¡.tWi --to of 5.7 percen't tire leviedonintorconpnny.diyr -en>iS :

'4a that Subsidiary ite?" o f f r i r
of net focone -lie Si8p»óie4*^.i8«>3feeti.«6

r
o
é
Mh
te

consqlidation

kxtsinjsxs’j^ rx s’g ^ s » E

e<1" a;l

l

v

;

OiVideks./ Heedless to say, a t o of this -sort runs flatly, ooUntpr .,
to the" rationale of a Consolidated return»
c. The test of affiliation

'■
Since the test of a ffilia tio n used in the Present
U the,
,
ownership of 95 percent of the voting .end^ 0^ °tin g s to d s ^ M .&
is evideat that the tost requires substantially conplote onhcrsnip. .
I f the. test of control were substituted, the presence of 51 P ® ^ “ *
'of the‘voting stock'bf, ¡the subsidiaries in. the tends oi. the -parent
would he adoqua'te t o establish affiliation*

.

v ' -While the. reduction of the stock
^
,
deki"w 0Uia:1 irin 5 jtho' consolidated return to a s u b s t a n t i a ^ ig g «
group of corporations, 20/ it; Would also reduce
.
/arkJtet:'tsk:,the consolidated return is necessary.because the.,,,
a ffilia te d group is a single economic unit©
, : The 'problem of affiliation nay aiso be resolved by.a b a n ^ ^
' the" te'st"6f ownership entirely and restricting the use of t.he con
•solilted return to 'groups of. enterprises which bpar
'
•business relationship'to one another. Advocates; of tnis ^ , .. .
point out that under-the, e:cisting test of rffi»<£i°»..a •»* '
....
could be consolidated with a'department.store. .ftiilo this, is
■
'•telling argument a-gainSt the ownership approach,' the suggestion th.
the test of "reasonable® business relationship be used-lnsteaa a
encounters a. substantial objection. The. difficulty of^diet n ^ s ^ n g
■ between "reasonable® and "unreasonable" Business v e - r X ia n ^ . p
,
’•¿rèdi' Por 'example!' I ere' the' r.cnbors of a vertical or hoiizo, -al.
...
loribihation unrelated? :'V/ha.t about a group of
a wide variety of products but using a conno» nar.c^in^app^a

-a-cannon

source-a? raw netorials,' «. comnon

sourcep-of finanping, *-»

sale or'sinilar na.chinery or methods of production?
If frMs'proposal is adopted, the tests, of reasonableness would
be based’on/the presence of corno»-assets, Inventories ana.acdod. . .
’if knfaistrativoly'feasible?, this' Approach nos the afvahtage
,■
denying consolidation in oases whore the only interconnection io.,
financial°one. If this type definition of affiliation is used, the
penalty tax on consolidated return« loses much of its support»
19/

accept "nonvoting® stock which is United and preferred as to dividends.
20/ See Appendix C«

37
- iu &.

Ontional vs. compulsory use of the consolidated return

If Cons.oljielated returns pre 5to* •>bci‘perriitted at all, logic -soens,
to require co^iiisdiy filing in this forn rnther than an /opti-pii- to-■
do so. If it is conceded' that the consolidated return,i s ^the correct
way to report the income of a group which, in. fact* constitutes a.
single economic enterprise, there scons no-good reason ¿why the. ccnso—
lidated return should not bo insisted upon* •
. The compulsory feature
is;probably essential to the full realization of the administrative
advantages1which result -from the •continuous filing, of; consolidated
returns» and’has the added advantage of tending, to-prevent the >■
*s
splitting up of a n •existing' enterprise into a/number of small corno-*rations in an effort to obtain ‘the benefits of the lower income tax.
rate applicable to corporations with' net incomes of less than $50,000*
or the initial organization of a series of snail corporations for this
pmrpose.
•
Oh the other hand"•a -number of" specific objections have been raised
to ,the 'conpulsory filing of consolidated returns. It has been pointed
out that udder existing law the requirement .that such returns be filed
can be ¿Voided easily by the redistribution of shares ^hich will dis­
qualify 'a group of companies from the definition of an •affiliated
group,’ This requires merely that the controlling group reduces, its
holdings to less than 95 percent of the-stock of .subsidiary corpo­
rations, Although steps night-be taken to discourage such reduction,
the efficacy of those measures is doubtful. A core, effective chock
upon this method of avoiding consolidation would-be a substantial
change in; the text of affiliation to the ownership of-more than...50 per­
cent of the voting stock-of the subsidiaries.
.
>
Making tho filing of consolidated returns conpulsory would
deprive the existing regulations dealing with then of the support
afforded by the consent provided in section lUl(a). It has been
argued that this would immediately bring into court tho question of
tho validity of the delegation of the rule-nnking power involved,
as well as subject particular rules included in the regulations to
judicial scrutiny and oVer—hauling* Doubt has been expressed that
the regulations could survive such a tes-t and the, question has been
raised whether making the consolidated return compulsory is suffi­
ciently important to risk tho invalidation of the existing regulations.
A more modest version of the proposal to make consolidated returns
compulsory is to make their continuation mandatory once the original
election to use such a return had been na.de. Under existing procedure,
an affiliated group ^^^hich chooses initially to file a consolidated
return obtains an option to change its mind and revert to separate
returns with practically every material change in tho law or regulations. This system fosters the use of Consolidated returns as an

- 15 -

instrument for achieving temporary tax reductions and encourages
frequent shifting "between consolidated and separate returns» Such
shifting is expensive to the government© Its price is not merely a
reduction in -tax revenue , "but also tne -loss of the administrative
advantages.which the continuous use of the consolidated return *
brings to the government©
To prevent the avoidance of this requirement by the reduction .
of stock ownership iri '.a subsidiary , corporation below the .% percent
now used-to establish the existence of affiliation^ tne law would
have to be amended so' that the withdrawal of an individual corpo*-*
ration could not take place un til ownership has drooped substantially
below 95 percent'. The figure of 50 percent suggests its e lf as an.
appropriate lim it for this purpose©
* . ,yf
To implement further the requirement that consolidated returns
bë continued once¡they have been entered upon, i t appears necessary
to depart from another feature of the existin g pro ce dure.* At the
present time, the. addition to the ;a ffilia te d groupi;~of any corporation 21/
‘is made the occasion for another exercise ,of the option to fileconsolidated or separate returns© To close this loophole, it is .....
necessary to require the inclusion Of newly a couire à subsidiaries
which qualify under the. existing test of affiliation- within the
consolidated return and to maintain the latter in the face^ of the. ,
withdrawal of other corporations in the group© This will- bring it .
about' that once the parent has chosen.to file a consolidated return
i t must continue to do so as long as i t maintains .-any includable
subsidiaries*

2l/. Other than a corporation created or organized dir act ly or
indirectly by a member of the .-affiliated groups . .. .

38

. AEOTBIX

A...

: ,

,

Taxation 6f?.Intercorporate- Dividends, **’ I»egislative History
Introductory
Dividends received byone"'corporation from another constitute
income* to the recipient corporation .under the l 6th Amendment 1/ and
section 2 2 , 2/ I,R .Ci and became; thereby a; constituent of .cprporate
net income under; section 21 © Por. the, taxable. ye<ars bfeginring*. after \
December 3 1 , 1935 *\intorcorporate dividends, have “been subjected,
;
not to the rate generally applicable to corporate net income, but..- , ;
a rate equal to 15 percent thereof. The 'method whereby this result
is re.ached is to- exclude from the bases of the true (normal tax end
corporation 'surtax net income) M85 per contun of the' amount ree'eived .
as- dividends from a domestic corporation which is. subject to taxation
under this chapter, but not in excess of 85 per centum of the adjusted
net income.'11 3/ -For thie,~purpose', .foreign -dividends and dividends
f3?o‘n China .Trade and section 251, corporations ere not counted, by *
reason of; the special tax status of such corporations. U/. For the
taxable year 1^46, the rate of 38 percent 5 / when applicable to other
net income, is to be compared to a rate of 5*7 percent on intercorporate
dividends, with corresponding differentials when a rate of less than
38 percent is applicable.
A tax on intercorporate dividends at a rate .of 15 per centum
of the general rate was fir s t applied to the fir s t taxable year
beginning*;after December 3 1 » 1935» §J end has been .applied to a ll ;
1J Constitutionality sustained in Brushaber v. Union .Pacific R.R.V
2ho U .S .l, 36 S. Ct. 2361 Of. Southern Pacific Co. v.- .Lowe,,
2^7 TJ.S, 330; &ulf Oil Co» v# Dowellyn, 2U8 TJ.S. 71*
2/ I*R.G. Sec, 22 (a) l,i Gross Income1 includes gains, profits, and
4 incone derived *** from *** d i v i d e n d s - I n substhnee, this
a. provision-appears in a ll legislation pursuant to the l6th Amend-;;
ment, 5 I t was also cle a r, from the Act of ,1909* Sec. 3^»- that _
dividends were regarded as income to a corporation, I.R.Q .. See©', 1150
defines fv dividend, a.s did a ll preceding income tax legislation after
the R, Ac o%1913 •
■ - .
J5/ I.R .C . Sec.,; 26 (b). Prior to . the Revenue Act of 19^5» i f ’was possible.
, un^er pertain,*circumstances.» for the 85 .percent dividend^ received
credit to .be larger for. surtax purposes than for normal tax use. The
19% Revenue Act simplified the computation so that the credit is now
* fhe name for,bpth;normal and. surtax*-■ihe, present credit OqUKts , >
,h. *85 .'percent of' eligible;; dividends received'or 8 5 ’percent pf 'adjusted
chovcr is the.lower
as amended by £6c. 12V, R*A*' 19.^5*

■*

17 -

subsequent taxfihÌQ years, Jj 'As respects taxable yours beginning
prior to January 1, 193°« intercorporate dividends .Were eitner
excluded -'from net incone- or were fu lly included therein© oj

Revenue Act of 193$
She present intercorporate -.dividends tax originated, in section
102, R«A* of 1935/ as an incident of the introduction*, into the - .
federal corporate tax system of graduated corporation income tax
rates,. In his message to Congress on June. 19» 193$.? tné President .
sai di« Ij therefore9 recommend■
the substitution of a corporation
income tax graduated according to the size of. c onoorrtioh Income in
place.of the present uniform corporation income tax of 13- 3/4 -percent*
The rate for smaller corporations night well be reduced to. iq - 3/4 percen t,. and the ratés graduated upward to a rate; of l6-3/4 percent.on
net income in the caso of the largest corporati 6ns, with such classif i cations of business enterprises as the puoiic interest nay suggest
to tho Congress.
'
.
”Provision should, of course, be made to prevent evasion of such
graduated tax on corporate incones through the device of nunorous
subsidiaries or a ffilia te s , each of which night technically qualify as
a small concern even though a ll were in fact operated as a single
organization. The most effective method of preventing such evasions
would be- a* tax on dividends received by corporations, . Bona fide
investment trusts that submit ’to public regulation and perform uhe function of permitting' small investors to obtain the^ oonefit o
diversification of risk may well be exempted from this true. l;
nXn addition to these three specific recommendations, of '.Changes
in our' national tax-policies, Ì commend to your study and considera­
tion a .number of others. Ultimately we should seek through taxation
the simplification of our corporate structures througn the elimina­
tion of unnecessary holding.companies in, a ll lines of business#
0
Should' likewise discourage unwieldy and unnecessary Corporato. surpXUsos# These complicated and d iffic u lt questions cannot
,quately be debated: in the tine remaining in the present session of
Congress*” (Quoted in ¥ays, & Means Committee, Report $loSl,- PP* jr *)
R.A* 193S, Scese 1 and 26 (b),
s/ E.Ài I 93 H, Secéo 1 and 26(b) ; 'EIRA, Scc. 21J! E.A. 1932 » Soos. l_m d
J
2 a(b); R«A. 192S, Secs. 1 and 26(b)* R.A* 1926, Secs* 2°p{a)t 2°T»
230 , ' and 234(a)(6); R*A. 1924, -Sees* 200(a), 207* and 234(a)(6),i -R*Ai
1921, SocsI 200(1),; 205, 230 > and 234(a)(6).;
191&*;^oc®* ? ° 9 *
230, and -23-4(a) ( 6) v ’B«À* 1917» Sec# 4; R*A. I? l6 , Sec# 10; R»À* 1913»
Sec* II (g)| Act of 1909»' Sec* 3^»
lf

.

ïn its report on the Hcvenue Bill of 1935 the Wr>ys m d Means

Connittee said:

•

i>Toi3r ‘ connittee is recommending the substitution of .the following
graduated tax on corporations in .lieu o f the present uniform rate o f tax: 13- 1 /H percent on tho fir s t $1 5 ,0 0 0 of the net income and W-l/4
percent on the remainder ..
ttjhG President suggested that i t night he w e ll.to consider in- posing a snail tax on inter corporate dividends in order to prevent
the evasion of the graduated tax'by moans of a m ultiplicity of
corporations. - In view of the moderate graduation provided for in thi*
h illi your connittee does not believe tnat suea a tax is necessary o
prevent evasion,- but i t proposes at a later date =tb : consider tho
proposition on its merits in connection with discouraging cnains of
holding 'companies. H (Ways & Means Connittee, Report frloSl,-pp. b~u)
The Senate Jfinance Connittee made the following recommendations:
•’The House b ill proposes a graduated tax on the not income .of
corporations of 13- l A percent on the fir s t $15,000 of net income and
plp-i/14. percent on the remainder of the not income over $15»000. -Tnis
is proposed in lieu of the existing 13“ 3 /i+ percent flat-rate
corporation tax. Your committee believes that this graduation does
not'substantially.conform to the President»« views, inasmuch as he
suggested that tho graduation might well begin at 10—
3 /M- percent and
end at 16- 3 /U percent, Therefore* a graduated corporation tax is
recommended as follows:
■»13-1/2 percent:on. the portion of net income not in excess ef
$1 5 , 000 .
1
• •. - : '
HlU percent on the portion of net income in excess of $1 5 ,0 0 0
and not in excess of $H0 , 000 ,
ttppj percent on the portion of not income in excess of .{3^+0 ,0 0 0
and not in excess of $10 0 , 000 .
*

*

sje

*

*

*

*

*

*

#

*

»Tho President suggested ns tho most effective method of pre­
venting evasion of a graduated tax •on- corporations,, a tax on aiviuen^.s
received by corporations. Under existing law, dividends receive«,
by a corporation from a domestic corporation are' allowed as a- deduc­
tion from gross income in computing not income. Your connittee has
amended existing lav; by restricting-tho deduction to S>5 percent of
the dividends.received from'domestic corporations. This has the ^ ,p
effoct of .imposing ax tax slightly in excess o f 2 percent upon dividends
received by a, corporation. -. Th-c •amendment applies no.t only to orai-nary

, « also
,
-i-j s
netirr^ncG comnaxxics other
corporations but
to all
insurance

than

life.**

(Finance Connitt-ee, Heport $12*^0» P* e*)
mho result reached by the Conference Committee on the "bill is
indicated by the: following, from the Statement- of the Managers on *

■nart of the House:.
lr

• •

*

•• .

‘

:

!

»Amendment Ho. 2: This emonctaent provides for a graduated
income tax on corporations as follows:
"Upon net' incomes, not in excess of- $15,000, .12-1/2 percent.
b o n net incomes ir. excess of $15,000 and not in. excess

of $H0,000, 1^ percent in addition of such excess.''

«TJmon net incomes in excess of $U0,000 and not in excess
of $100", 000, 15 percent in addition of such excess,
«Upon net incomes in excess of $100,000, l5“ l/2 percent
in addition of suen excess.
«The House b ill contains .the following rates in respect to this

tax : *

«Upon'not incomes not in^.excesS of 015.000»; 13*1/^20*cent‘
«Upon net incomes in excess of $15»000, lU-l/H percent in
addition of such excess.
•
«Tho House recedes with an amendment substituting the following
rates for those proposed in the Senate b ill:
»Upon net incomes not in excess of $2,000, 12-1/2 percent.
«Upon net incomes in excess of $2,000-and not in excess of
$1 5 , 000 *, 13 percent in addition of such excess.
«Uoon net incomes in excess of $15,000 ahd not in excess
of $U0,000, 1^ percent in addition of such excess.
»Upon net incomes in excess of $U0,000, 15 percent in
addition of such excess.”
11
Amendment Ho.. 6 i Under existing law, which.was not ^bangedin. _
this “
c tA
House .» I X , corporations,
pre allowed « deduction, in computing net Scotio,
divi^na» r-eeivea
fron domestic corporations subject to income tax (—
o f

40

20

-

received from a China Trade Act corporation or from certain corporations taxable on only gross income sources within the United States
because of receiving a largo percentage o f their gross income from
sources within ti possession of the United States) • The Senate amend—
nent confines the deduction to 85 percent of the amount of the divi­
dends. The House recedes with an amendment changing 85 percent to
90 percent,,w (Conference Report, #1885, pp« £•?£)
Revenue Act of 193&

■' - v v '

The Revenue Act of 193^» applicable, •as '-was the Revenue Act
of 1935* only to taxable years beginning after December 31, 1935,
retained the system of a.graduation in rate applicable to the tax
on corporate income "(but with an increase.' in ‘fatb), arid ’ reduced
the dividends received credit from .90 percent of the dividends
received to 85 percent of the dividends received» Two other
features of the Revenue Act^of 193^ which have become permanent
are (1) the elimination of the normal too; credit theretofore given
to the individual shareholder for domestic dividends received;
and (2) an increasing concern for <accumulations by holding com­
panies* With the'elimination of the normal'tax credit for divi­
dends received, the individual tax and-the corporation tax ceased
to bo parts of one system for the taxation of 'income; each tax'
became separate and distinct from the other«
'
• '
Revenue Act of 1938
The Revenue Act of 1938 introduced the. present lim itation'of
the amount of the dividends received credit to an .amount -not in
excess of Sp per centum of the adjusted net income« The reason
therefor appears in the "following.
11Subsection (b); The present law taxes at the normal rates ■
15 percent of dividends received* This result is accomplished by
Including the entire amount of dividends in gross income and allow-'
,'ing’a credit against net income for 85 percent of the amount received*
In.cases where a. net loss results from other sources, deduction as a
credit of 85 percent-of dividends received permits the 'taxpayer'tooffset -all his net loss-against'the portion*of his dividends inelu&ed
in taxable net- income* There seems■
nogjustifiable reason-why the •
total loss should not be allocated against total dividends received«,
The amendment accomplishes this by limiting the credit to an amount
not in excess of 85 percent of the adjusted net income*1* (Ways & ••
Means Committee Roport, #1860, p* 21*)

-

21

post-1938 Legislation
• Later revenue legislation introduced no changes in the taxation
of inter corporate dividends} nor were the elements o£:the corporate
incone tax system with which i t is connected eliminated.
pre-1933 Legislation
Por taxable years heginning after December 31 9 1917» and prior
to January 1, 1936 ( including dividends receivcd in the calendar
year 1918 ), a deduction 2 / was adlowed in computing net incone of
the amount rechived as dividends from a, domestic corporation, ^-.e
sane was true of such dividends .received in. the cadondar. year .1917»
hut only for the purpose pf the additional, tax laid by section v
of the •RGvenUe Act of 19l'f. 10/ Such, dividends wore similarly
excluded under the Act of 1909' U/, applicable to dividends received
after December 31 , 1908,, and before March 1» 1913*
The reason consistently assigned for the exclusion wa,s * that
a corporate tax has alrea'dy been paid upon the' earnings out of which
the dividends have been distributed,** (Report» Jays & Means Cbm“*
nittee, 72nd Gong,, 1st Session, House Report Ho, JOS» P® 12?
Remort, Sonate Pin.ance Committee, 72nd Cong#»■1st Session» Senate
Report flo. 665 » pp# l6-17<) During the effective period of the
exclusion, proposals were made which f ailed of adoption^ for e li­
minating the exclusion, the reason assigned being ,fto discourage
holding com panies,(Cong, Roc, » Vol» 7^» PP® 6551*"bl, OH-b7~71» )
And n* * * if^ you exempt the holding corporation, you w ill g°^ no
tax at adl /on individual shareholders/,^ . (Cong, Rec,» Vol» 55»
ire, 2H92-U .; "/The holding corporation7 is practically untaxed
*"* V i (Cong, Rec„, Vol, HU, p*. U030a)
The Revenue Acts of 1913 12/ and I9l6 13/ did not; eliminate
intercorporate' dividends from the base of the corporation tax either
by way of deduction or credit, Exclusion of the intercorporate divi­
dends from the base of the tax was4proposed .(the contention being
that double tax otherwise resulted), but the proposal failed .
9/

H.A. 193**. Socs. 1 rma 26 (’û) ; 1ÎIEA, Sec. 213; Hi A. 1932. fees. _1 find
- 26(1); R.A. 192S, Secs. 1 nsA..26(l>h H.A. .1926, Secs.- 200(a), 20?.
230, and 23^(a) ('6 ) ; R,A. 192U» Secs, 200(a) 20J9 and 23 (a)( )■»
I 9 IS» Secs,
R»A, 1921 / s c c s . 200(1), 205 , 23O» and 23^(a) ( 6 ;
200(1 ), 205, 230, and 23U(a)(6),

10/
11/
12/
13/

R.A. 1917 » Sec, %
Act of 1909 » Sec, 3S,
R,A. 1913 ,. Sec, 11(G).
R.A. 191b, Sec, 10,

;

-g22 ik -oreSsntinJ tho Revenue B ill df 19l6, Kr. Hull, O t a t a n of the
.Woys
m i Menus Connitteo said! I»®» dividends received M » « « ? »
ration from the stock of .anqther coloration
i f r co^otho tax. Shis provision was has.od upon tho policy t h ,J
- .h
ration desires to hold stock In; another corporation, with o il tho
cor->crato and business advantages arising therofron, i t snoul.. h^
Object to paying taxes accordingly. Upon this grow , no provisio . ‘
i s 1 1 1 S o n p t l o n s to individual taxpayers deriving income ironcomorate•earnings.« (Discussions Cong« Roc*9 Vol* 53» P*
In the Senate, Senator Williams,- in opposing Senator O' Gor a m s
.
notion to exclude intercorporate dividends, said:
Mr.
•
tho reason of that disorinina.tion *** is this: ‘ V)o did not wanK
ha?dink con-oanies to ho encouraged hy the tax laws of tho country,
n .ia in , oonp u*
desire to discourage then. Wo also desired
to°discourage the'syston of interlocking stockholder^, which lmnled
to very nuch abuse. Both those things have led to aouso
(Cong, R cc., Vol 53« N 13333^«*
Prior to the adopt!6», in xtho Revenue Act of 1935,-^ the .:
policy excluding from the base of the tax part, but not a ll, of ^
the intercorporate dividends, the only similar^ suggestion n , M w s ,,
that of the Senate Finance Committee in reporting section 4 of t^e
Revenue Act of 1917« This section credited the corporate not
income «with tho amount received-'as. dividends upor^the stoex 0 .
from the net earnings of any other corporation, joint-stock corpany
or association, or insurance company, which is taxaolu u on i
;
, income •aa-'-nroviclod in this, title ,-, less- that .proportion- of such
amount which the amount received by the distriouting corporation,
joint-stock company or association, or insurance company
J _
similar sources bears to the entire net income of suen distributing
corporation,Joint-stock company or association,, or insurance
company.» In its',report, the-Senate Finance Committee explainodthis provision as follows: «Eight, That for the purpose of tho •
ordinary .corporation tax, there .is allowed the same credit for
dividends from other corporations that is now allowed; to indivir
duals as to tho normal tax, except that this cred it, should be
allowed only: to the corporation
;?uch dividendsp.irectly
from the corporation earning the same and not receiving such^
amounts .from'-any other corporation as dividends, That is , tnis
'
credit shall only be allowed once on the same earnings, irrespective
of the number of corporations to which it may in turn be passed on
as dividends, (p. 21).» (Report, Sen-te Finance Committee, b^th
Cong., 1st Session, S. Report 103,} The' Conference Committee on
the b ill eliminated that part of the Senate Amendment designed- to
allow, but one exclusion as to the earnings passed dowh chain 0
corporations, with the result that section 4, Revenue Act of ¥?*(*•
excluded intercorporate dividends entirely from the b< sc of he
tax imposedo
r e c e i v i n g

\

- 23 APPMDIX
^ M t u t p r y Bovolopm -nt

B

.of tho

..
Cònsoli dated

Het o n

Bor a ll taxable years ending after December 31» 19^7» ^be.
consolidated return has been a feature of the Bederal^income tax
law. The law'applicable to prior taxable years contained no
provision either for a consolidated return or for any other
special method of determining.: the incomes of. groups of corpo­
rations under a common ownership or control,
The statutory development of -the consolidated return divides
its e lf into five principal periods; :
X,

1918-1921 (including

II,

1922- 1928,

III,

1929-1933*

jy .

1 9 1 7 .for

excess profits tax only),

~

1G3i^i9hl (not including 19^0-19*4*1 for excess profits
tax),

yè I 9I+2 to date (including 19*4-0—19*4-1 for excess profits
tax only),
A higher rate of tax on a consolidated return character ized a part
only (1932- 1933 ) of the third period, a part only (I934~i935) of •
the*fourth period, and the fift h period (19^2 to- date),
I,

1918-1921 (including 1917 for excess profits tax only) Income, excess profits, and war .profits taxes for years
ending in 1018 and beginning prior to January 1, 1022; and
excess profits and war profits taxes only for taxable years
ending in 1917,_____ .

_____ J._______

____ *--------------

(l) R,A, 1917 — As construed in the R,A«» of 1921, Soction
1331 (taxable years ending in 1917> but for excess profits tax
only) o—The consolida-ted return was evolved, without statutory _
authorization, by the Commissioner,. on the., re commendati on of his
Tax Advisory Committee, as a- compulsory method of. computing the
excess profits tax not income and tax under Title II_, H,A* of 1917-»
of a ffilia te d domestic partnerships and corporations.

-

zk ~

"Affiliated77 was sweepingly and indefinitely described as
followsî
n*#*a corporation or partnership is affiliated with .one or .
more corporations or partnerships (l) when such corporation
or partnership owns directly or controls through closely
affiliated interests “oí by a nominee or nominees all or
substantially all of the stock of-the other or others, or...
(2) when substantially all of the stock of two or more corpo­
rations or the business of two or more partnerships .is. owned
by the same interests and in both (l) and (2) it is found
that (a) such corporations or partnerships are engaged in . >
the same or a closely related business^ or <b) one corpc- .. .
ration or partnership buys from or sells to another
corporation or partnership products or services at prices
above or below the current market, thus effecting an
artificial distribution of profits, or (c) one corporation
or partnership i n 'any way so arranges Its financial relation-,
ships with another corporation or partnership as to assign .
to it a disproportionate share1 of net. income or invested
capital«17 (Regs* hl f Art, 77» as amended b y ï «D« 33^9*
August Z k 9 1922,. superseding ToD# 2662 and T*D* 29OI)«
"RailroèiCls, gas, electric; water and other public
service corporations when (à) operated .independently ^d.,
(b) not physically connected or m e r g e d particularly when
situated in different jurisdictions and-subject, to règü— .
lat ion by public service commissions. - "ill not K e r e c u i r e d
or permitted, without special permission obtained in advance,
to make a consolidated return«***77 (Regs« ^-1» Art# 78»
as amended by T «Re 3389 s August 2*+, 1922, superseding
T.D# 2662 and T.D. 290l).
.
The method met with considerable approval from affiliated groups,
since it eliminated the taxation of intercompany profits and
effected the offsetting of the losses of the one against the, gains
of another - thus relieving the group from the burden either of
,■
proper separate corporation accounting, or of arrangements whereby
the losses of one would through intercompany charges or allowances
be offset#
The method contemplated a thoroughgoing application to the
computation of the usages of consolidated accounting,,
"When all, or substantially all of the stock of a
subsidiary corporation was acquired for cash, the cash
so paid shall be the basis to be used in determining the
value of the property acquired« Where stock of a sub­
sidiary company was acquired with the stock of the parent

- 25 company, the amount to be included in the consolidated,
invested capital in respect of the company acquired
shall be computed in the same manner as if the net
tangible assets and the intangible assets hod been
acquired instead of the stock****” (Regs* Hi, Art« 7^»
as amended by T,D* 33^9*)
While the objective was stated to be the computation of
n***the amount of the tax properly due from each corpc- ;
ration or partnership on the basis of equitable' and lawful
accounting,” (Regs. Hi, Art«. 77» as amended by Td)* 33^90 »
it is clear from the foregoing that it involved shifting the
computation of the tax from the separate corporation to the group
so as to be free from the necessity of computing the results of
i ntrercompany transactions which, through indifference or design,
would not be representative of the separate corporations®
The'R. A, of 1921 validated, in Section 133100 » the definition .
of affiliation, and in Section 133l(&) provided that Title II of
the R..AC of 1917 should be construed as authorizing consolidated
returns for domestic corporations and partnerships which were
affiliated«,
'
.
(2) R,A» of Iftlg (Taxable vear«:.ceding 'after December 71, 19.11
and beginning r-rior to-January l»- 1922- Income r,excels. pr.ofjt_s^_^nd
war taxes)« -— The House revenue bill of 1918 contained no provision
as to groups under a common ownership or control, or as to consoli­
dated returns«» The Senate, accepting the recommendation of its
Finance Committee, required .’hinder regulations to be prescribed^
by the Commissioner, with the approval of the Secretary*” consol-idated returns for income, excess profits, and war tax purposes,
of affiliated-corporations, the definition of affiliation being
identical with that of Regs, Hi* The Senate debate elicited
both approval and disapproval
(Cong,, Rec*, Tol*, 57p PP®N66S—
669, 719 - 723 , 73H- 736 ), The Senate’s views prevailed in
conference, but only with the elimination of the restrictions as
to related businesses and artificial practices« As enacted,
the test of affiliation was ■v,
'- • >
”two or more domestic corporations shall be deemed to
be affiliated (l) if one corporation owns directly or
controls through closely affiliated interests or by a
nominee or nominees substantially all the stock of the
other or others, or (2) if substantially all of the stock
of two or more corporations is owned or controlled by
the same interests«,” (Sec* 2Ho(b), B«Ac 1918)®

Section 2^0(a) provided that on a consolidated return
fi***]^ total tax shall he --computed .In 'the -first instance as
a unit and shall then he assessed upon the ròspective
affiliated corporations i n :suoh-proportions as may he agreed
upon among them, or, in the absence of1'any. such agreement,
then on the basis of the net income properly assignable to
each«,***"
Except for this provision, and the provision that, there is to be
but one specific credit or exemption, the Act contained no
specification of the content or method of the return* Erom this
provision arose the long-drawn-out controversy and litigation
as to how the usages of consolidated accounting (looking to the
ownership of the parent in the group) are to be reconciled with,
and correlated to, the statutory provisions looking to separate •
corporations. Complex administrative difficulties also arose
from the phase of this provision fixing the only liability of
any affiliate for the tax #s its share of. the consolidated tax;
and assessment, collection, and adjustment of the tax on this
basis»

II,

1922-192S (Taxable years beginning,after December 31» 1921,
and not ending after December 51» 1922) «
— Income tax only.

In the D,A* of 1913, the;.consolidated .return-requirement of
affiliated corporations was thè only, met hod of obtaining from each
of them the tax properly due. The H,A, of 1921 introduced two
methods:
(l) the consolidation of t.he accounts of two or more
related trades or businesses (whether unincorporated or incorporated
whether organized in the United States or not), owned or controlled
directly or indirectly by the same interests (Section 2Ho(d));
and (2) at the election of the affiliated corporations, a consoli­
dated return (for taxable years beginning after December 31» 1921)
(Section 2^0(a) to (d)).
The first provision gave the Commissioner pow er to
n***c0nsolidetethe accounts of such related trades'
and Businesses, in any proper case, for the purpose of
making an accurate*distribution or apportionment of
gains, profits, income, deductions, or capital between
or among such related trades or businesses,"
The Ways and Means Committee explainedijiiat the power was solely for
this purpose
n***and not for the purpose of computing the tax on
the basis of the consolidated return»***Subsidiary
corporations, particularly foreign subsidiaries, are

« 27-

sonatines employed t."0 ’milk* the parent corporation,
or otherwise improperly manipulate the financial accounts
of the parent company»***** (^ays and Means Committee*
Report No, 350, p. Id, 67th Cong», 1st Sess.)»
y..

7/

The Finance Committee explained;

{

is necessary to prevent 'the Arbitrary shifting
of profits among related businesses; particularly in the
case of subsidiary corporations organised as foreign
corporations, ** (Senate Finance Committee, Report
p. 20, 67th Cong.*, 1 st Sess.)

;•

The change from r required to an optional consolidated return
was effective for taxable years beginning-after Dedenber 31» 19?1*
The committee report stfatedî
•
’ '* . ¡S
•:
.
...

•’■
‘

t o it s cosplcxity^ certain affiliated corporations ^.ould prefer not.to make à consolidated returh,
•■although such return benefits the affiliated.companies
when one or more of them sustain a loss****** (Ways end
Means •Committee, Heport Uo« 35P? vP»' 1^> 67th Cong*, ^?t
* S'esso)
”
7 \
;, ..
'\ ■Y - *
«♦»♦The consolidated -return -is necessary to prevent
-,
evasion ‘under the excess profits, tax, but. this, necessity
will disappear when ..the excess-profits' tax. is repeal ©d|jp
(Sénat ,e Finance Commit tee, Report No> 275> PP» 19-20,
/ 67th Cong*, .1st S’
ess»)
\ .

A change from one form of return to another might be c\ade only
withrthe permission of the Commissioner*. All. other consolidated
return features (test of affiliation, computation as a unit, assess*— «
ment*in proportions,-several liabilities, etc«) were identical; .
with t hose of the R.A* of 191S» An increase in the classes of . •_
ODrporati'ons taxed under systems different from that applicable
generally gives rise to a provision that domestic- o o r p ô T B t i o n ^ . ^
deriving income from sources within the possessions may UP.«
^
consolidated returns.
‘ .•
The H.A. of 192^ (taxable yearsending after December 31 j ..
1923) continued the 1921 provisions, both as to the consolida ed
accounts and the consolidated return,
the authorization to 'the Conmiseioneh to «consolidâte t h e a c c o m s,
Section 2lt0(dÿ aided the rWquirdnent that the Conmlssioner^ W i ....
consolidate the .accounts“ "at the request of the ^ - p e y e i ^ .^X
,

the test of affiliation,- precision gains ground
Sect! •
2U0(c) the ownership of «.at'least, 95 percent of . t h e j o H n g stock
is substituted for the omorship or control of sutstc-.nti
y
the stock***

.

-

>

1.

'

’

,,
•

The B 0A* ©f 1926 (taxable years ending after December 3^ 1924)
continued the 1924 provision with only minor changes*
In Section
2 4 @(d),
defining “affiliation,
the term ’’^tcck” is defined as net
including ”noni~yoting stock which is limited and preferred as to
dividends” and* s so defined, is substituted for the term ’'voting
Stock*”
*
', .
„
^
/. }
.
Regulations 65, prescribed October 6, 1925, states for the
first time the basic rule under which the computation in a consoli­
dated return has proceeded ever since*
’’Subject to the provisions covering the determination-of taxable
net income of separate corporations, and subject further to the
elimination of intercompany transactions (whether or not resulting
in any profit or loss to the separate corporation^), the consolidated
taxable net income shall be the combined net income of the several
corporations consolidated.**** (Art* 636)
(Cf» the provisions of
Regulations 41, Articles 77 and 78.)
The results in controversy and in litigation of the difficulty
and complexity of the problems presented by the consolidated return,
were clearly apparent by the close of the period* The statutory
test af affiliation had proved much too indefinite foç satisfactory
administration* The statutory provisions as to the allocation
ef the consolidated tax among the affiliates, the liabilities a f ..
which were limited to the part s© allocated, caused large losses
in revenue, and imposed heavy burdens in administration* The
method by, and the extent t o ..which, the data in the tax accounts
of the affiliates were to be ’'consolidated” into the computation*
of the consolidated tax (only one small detail of which the
statute prescribed) produced a great variety of conflicting views
among the courts* These conflicts were incapable of resolution
under the system o f ’review without, decision on each by the Supreme
Court; and only on a few of. them was such a. review possible* The
results were large losses of revenue and ,great uncertainty in
administration* ,A reflect ion of these difficulties will be found
in the debates on the elimination of the return in the revem©
revision of 1926, and in the 1927 report on revenue revision by
the Staff, of the Joint Committee on Internal Bevenue Taxation*

- 29 III*

X929- I 933 (Income tax for taxable years ending after
December 3!» 192S, and beginning prior to January 1* 1931+*
and the declared value excess profits tax for taxable
vears ending in 1933.
______ ___________________
■
Y ....... •-

Di s sat £sf a-cition :4ith And controversy as to the consolidated...
return characterized each revenue revision within, the period» accen-* .
tnated in the latter j?art by the elimination of the net'operating
loss carry-over* These resulted in tne retention throughout the
period of the essentials of the dual system introduced by the RpA, . ..
o f 1921 , namely?
:
• •
(1) power in the Commissioner'to redistribute income and
deductions of businesses under a common.ownership .or
control? and
^

.,

(2 ) a consolidated’return as the elective privilege of an
a ffilia te d group.
But though.the essentials of both remain, each is drastically^revised
by the R®A# of 192S0 As so revised, the dual system has continued
to date with the exception of the additional rate on a consolidated
return (introduced by the ReJU of 1932» abandoned by the R.,A* of .
1936 , and reintroduced by the RttA® of 19^2), and^the restriction
of the consolidated return privilege to certain industrial groups
(introduced by' the R„A, of .193^». and abandoned by the R,A, of 19^)*
(l) R*A* 192s»—In the revenue b i l l of !92S* the revisions in
the dual system proposed by. the Ways and Means Committee were.?
t .
Tirst*
3?or taxable years, ending after December. 3I 9 1927>•_ .
authorityTin the Commissioner, at !
-Uis discretion, to distribute .

nincome or- deduCtions***£tfnong***bus.inesses***
(whether or not affiliated ) owned or controlled,
directly ox .indirectly, by the same interests ^ ^ 5
i f he determines that su.ch distribution***!s^ - - ..
necessary in order to prevent evasion of taxes _
or clearly to reflect the income of any of such***
businesses*w.. (Section ^5 )^
.
.-

•'

This provision C&ition U5 of'the MX1, and of a ll later revenue laws)
the Committee stated was;
n***based upon Section 2^-0(f) of the 1926 Act,
broadened considerably in order to afford adequate
protection to the Government made necessary by the

45
- 30 elimination o f , the’ consolidated return provision« '< '
of the 1926 Act***to preve-nt evhsf6n'':(^' 'shifting •
of p ro fits, the naicing of fictitio u s sales, ‘-and .
other methods fregently, adopted for th& purposes
of »milking*) , and in order --clearly'--to reflect * ; ;
their trup .ta^/liai>iiity*H ; *’ *' § • .' ••
’
- HXt has been contended'that Section- 2^ 0 Of) ‘o f .>'i ‘ ■
the 1926 Act,'pernits^what •is in' ef fect-1'the .f ilin g * .
of a consolidated'return by twol-er-mford'- trades or
businesses.; even though they are hot' a ffilia t e d :;
within 'the;-meaning'', of the section^ flection ^5> of
the h i l l prov'onta this erroncons interpretation •
’(Vays ’and'jeans' Committee3 Report Ho0/2 S: ‘ ‘ ’
PP* 16^1,75 fOth ' G o n g •1st Sessa }• , Xj
;Se and,‘ withOU.t changes
by the Senate, became law«
r to Jan.nary■;U I 929 ,. the
Hdated re turn" a„s an; elective
* the -taxable . ye are there—
privilege of an a ffilia te d .groupe
r©db ■for• taxabl e-years ending
after the oonéoiidated returnfwâs'
after December 311 IPSSl-the loss ¡.owe?erl5 Of' an ■aff.i'lia te-Mn an
ght, by
•wly- defi ned)
affiliated group (nor pr eci feiy and
.neone :oî another a ffilia te
written agreerne»t , fbe >:f.fsot- ''agains t
he ’(ßOmnittee s r ec6vinendat ion
(Section 118) A Thc’ Hbds'e di sapprc
for no substitu. te either
as to offsetting ‘ bhe‘‘ lo sises, and j
for s-n.ch offset or' for à consolidated return
The Senate, accepting .the re00nnendabion of its Finance Committee,
approved the provi sions of the Honse b ill :an.thorlzing the 'Commissioner,
to distribute', ineorfè and' deductions among business- owntéd of* controlled
by the same interests, and restoring, as under existing law, the
consolidated return, as an elective privilege of an a ffilia te d group
for taxable years ending prior to January I , 1929 « - For taxable years
ending after December 3 d? 1-923, the Finance Committee,1with a spirited
defense of the consolidated return proposed its restoration —
' Min Class A a ffilia tio n s but not in Class 3 .a ffilia tio n s 1*
(p* 29 ) ‘»with certain necessary, amendments'- to eliminate
the administrative problems of the present law* 11 (p i l ) ;
expressed a conviction

■
'

i;

»^^that the elimination of the consolidated returns
provision w ill not produce an increa.se in revenue? w ill
not impose any greater taxes-on corporations, and will
in a ll probability permit o f ‘ta x ‘avoidance to such
an extent as to decrease revenue «,*•**11 (¿op* 13~1^0 Î

~ 31 ~
assorted that *>***to require for tax purposes the
breaking .up of a.siQ ^ le.^ siaess into its consti- , f:
tnent part s î s*^u^è’p<sonà^lef^^11 (p.*,l^)î that
Rthe revenue . lays ^otiÌ4 teijbçoiight nearer to .a
recognit ion;of*** businéss'prâctice s and standards
***rt(p© x^ /an d
and coripli*- '.
cated proviens,” ¿ 0 weVé'r‘have arisen in the.
administrât ion of the x^rovision's permitting ihe
filin g of .consolidated r e t u r n s I t . i s , obviously »
of utmost
tiia^rthese questions he
answered] with . certainty ’and ’a"' definite rule be
prescribed» , frequently,' tho partici-rlar policy is
comparatively im a te ria l, so long as the rule to he.
applied is known, The committee believes it to he
impracticable to attempt by legislation to prescribe
the various detailed and complicated rules necessary
to meet the many differing and complicated situations©
Accordingly, i t has found it necessary to delegate
power to the commissioner to prescribe résiliations
legislative in character covering them* The standard
prescribed by the section keer?s the delegation from
being a delegation of pure legisNative power, and is
we.ìl within the rules established by the Supreme
Court* (See Hampton, J r . , & Co. v© United States,
decided by the Supreme ’ Court on April % 1923, and
ca.ses there cited«) furthermore, the section requires
that a ll the corix>rations joining in the filin g of a
consolidated return must consent to the regulations
prescribed prior to the date on which the return is
filed «1* (Senate finance Committee, fìexoort Ho. S&0»
P-© 15, "(Oth Cóng., 1st Sess.)
The Senate adopted the recommendations of its finance Committee
and ^prevailed in conference© The outstanding features (hereinafter
called the H.Ao of 1928 system) v/eres
(a) The consolidated return is an elective privilege of an
**af f i 1iated group* **
(b) A ffilia tio n is more narrowly and precisely defined© The
ownership by the same interests of 95 Per centum of the stock of
two or more corporations nò longer qualifies© The a ffilia te d
group is required to have as a head "a common parent corporation*1
with, which is **connected through stock ownership** ^one or more
chains of conoorations*’ but only i f
**(l) at least 95 per centum of the stock of each of
the corporations (except the common parent corpo­
ration) is owned directly by one or more of the
other corporations; and

—

(2)

the comon parent corporation owns directly
at least 95 P^r :centum of the stock of at least
one of the other corporations; and the tern
* stocké does not’ include'non-voting stock -which
is limited and preferred1as to' dividends*0

(c) The making of the return is upon the condition that a ll
members of the group consent to a l l the legisl/itive re fla tio n s in
effect priorato the maiding of the return« The development of the
regulations under this provision-rapidly eliminated the greater
part, of a ll litigatio n as to consolidated returns«
(d) 4 Authority to make legislative regulations, with the
approval of the Secretary, is delegated to the Commissioner* The
plenary scope;-of the delegation is emphasized -

(a ) by the requirement that 11the taxm shall be determined,
complied, assessed, collected,hand adjusted in_
accordance with' the- regulations under subsection (b)
pro scribed prior to the date on which Such return is
made* Only one specific credit, computed as provided
in Section 26(b)f shall be allowed in computing the
* tax*0 (Section 1^-1(c) ) ; • ;
:
(B)

by the standard prescribed - °such regulation** as he
may deem necessary in order that the tax. liability
of an affiliated group***and of each -corporation in
the group,; both during and after 'the period of
affili option may-be determined, computed, assessed,
collected, and adjusted in' Such manner as clearly

to reflect the income and to prevent avoidance .of.
tax lia b ility * 1’ (Section lhl(b));
;
(C)

by the few details -prescribed by the statute*. * Thus
’’in the case of a corporation which is a member of
the affiliated group for h *.fractional part of the
year the•consolidated:return- shall include the income
of SrieH- corporation for Such x>art of the :year as it

is'a, member of the a ffilia te d group«” (Section lhl(a))
11Only one specific credit , computed as:provided in .
Section 26(b)v shall be allowed in computing the tax*0
(e) The commitment to -the regulations of the assessment, collec­
tion, and adjustment of the tax d ispla.dhs the. provisions of prior'law* This provision enabled the Commissioner in n is regulations to
treat the consolidated tax as the joint and several lia b ilit y of the
affiliates* This ^¿;ether with the agency of the parent solved
the many xoroblens vfoich had for so long burdened administration*

~ 33

(f) As under-prior law,..corporations taxe,& nnaer systems
different from, that g e n ia lly applicable are excluded fr<?m the consoiidated return, .although ah' insurance c o d p a f t y i t q , ; tne^-tax imposed
■by Section ¿Older RO1* . is not. excludedfrom a consolidated return with
such an insurance company. Certain wholly-owned foreign, subsidiaries
of domestic corporations might, however, he treated as a domestic at
the election;, of:-the parent»
(g)

Section

k$.

has; already been described,

(2 ) r »a , of 19o2 (Taxable years ending after December 51, 1933)
The'Ways and Means Committee reported the revenue h i ll of 1932» con­
tinuing the IUA»•;192&-system, *!$ie -.Committee, however, .found it. necessary
to propose to. the.. Hou.se.. an- amendment imposing .an aloitionhl into of
1—
X/2 percent on a consolidated return, the Chairman saying.
»5?he; House i s divided***and this .is a compromise***«
(Congo Roe., Yol« 75# P'k«,'75''P v7127) •
She Speaker said:.

I'

'

v' ;

N

wj imagine no one can defend'the proposition, that •
you. must give a m ultiplicity *of corporations an,
advantage over an individual corporation and at the
..'same time say that that advantage•.shqnild..not he
equalized, or a. test made to see. what benefits they
•get out of it* * * it w ill yield..a. large sum of money
***it w ill test out in the next, year or two, mother ,
or not. the opposition to consolidated and-affiliated
return? is correct«11
.
(Cong, Rec0 Yol«, 75»
73 P° 7127»)
She debate was extensive and amendments to eliminate the con­
solidated return and to impose an l^ditionaX' rate of . 2—
1/2. percent
v/ere rejected by the House.which adopted the Committee amendment«
(Cong, Rec,, Yol, 75, p t. 7> P*.7130» 72nd Cong,, 1st Sess»)
The Senate, eliminated the additional 1—
1/2 .percent, adopting
the re commendation of it s Committee o n finance., v/hxch could sec
nno jus tx fi cat ion'1 fpr the . additional rate, or; for nthe exaction
of a price for the use of- this form of return,lf reaffirming
the conclusions set .forth in its report upon the revenue.bill of
192S* (Senate Finance Committee Report Hoa 665s Po 33» 72nd Cong,,
1st Sess,) The Conference amendment was for an additional 3/^ ° f
1 percent, but only for taxable year? ending, ih 1932 and,.1933°.
(Section ld l( c )»)

- *3^ ~
(3)
National Industrial Recovery Act (Taxable years ending
in 1933» 193$»"and 1935) •—The House nado no change relating to
consolidated returns. She Senate, as recommended by its Conr.ittoó
on Finance, provided that the additional rate on a. consolidated
return should he-. 1 percent for taxable years ending in 1933 » 3-93^»
and 1935 . (Senate -Finance. Committee, Report Ho* ll^ f P*-7» 73r&
Cong., 1st Sess.) . The Conference agreement was for an additional
rate of 3 /U of 1 percent for taxable years ending in 1933 »
f°r
ant-additional rate of 1 percent for. taxable years .ending in 193^
and I 935 . (Section 213(e).,. H .I.R .A .) IV.

193^19^1* (Taxable years beginning af ter .December 3 1 » 1933»
and prior to January 1,
Xf (not including taxable
years'beginning, after December 3 d» 3-939» forexcess profits
■- tax pnrposQ|)
' , ■
'
.
'
________________

Throughout this period, a consolidatedreturn is eliminated
for corporations generally, the only a ffilia te d corporations ,.-v, g /
permitted to filé being those constituting a ’’railroad11 group 2/
l/ For special-application to personal holding company, tax, see
Section *402(c), R.A* 193^* •
2/ Section 1^1 (d)(3)» E-oA« of 193^» added to the requirements of’’affiliate d groups” in the R.A. of I 928 system thé requirement
thatjf ”Each of the corporation's is either. (A) a corporation
whose-principal'.business is that of a common carrier by r a il­
road or (b) a corporation the assets of which consist principally
of stock in sn.ch corporations and which does not .its e lf operate
a business other than that of a common carrier by railroad*
For the purposes of determining whether the . principal business
of a corporation is. that of a common carrier by railroad, i f
a common carrier by railroad has leased its railroad properties
and such properties arc operated as-such by another common
carrier by. railroad, the business of receiving rents for such
railroad properties shall be considered as the business of a
common carrier by railroad*!’ -

- 35(for taxable years beginning after December 3I» 1933)-» and those
constituting a Pan-American Trade Corporation group J_/ (for taxable
years beginning after December 31» 1939)* This railroad class
v/as opened up to admit as a "railroad" a "street, suburban, or
interurban electric railway" by Section 1*4-1(b)(3 )» R»A. 193&
(for taxable years beginning after December 3 !» 1935)» end A
'•street or suburban trackless trolley system" or "a street or
interurban bus system of transportation operated as a street or
electric railway*' of a trackless trolley system" by Section 1*4-1 (b)(3 ),
R.A. 1933 (yfoT taxable years beginning after December 31» 1937)*
An additional rate of 2 percent is imposed for taxable years
beginning after December 3 1 » 1933» end prior to January 1, 193^»
for a ll subsequent years \iithin the period the’, rate ' on the
consolidated return is the sane as the rate on a separate returnf
Ji/ Section 22p» R*A* 1931» which provided!
"SEC* 225* PnH-AI'iSRICAlI TRADE CORPORATIONS*
"The Internal Revenue Code is amended by inserting after
section 151

"SEC. 152. PAN-AMERICAN TRADE CORPORATIONS.
" I f a domestic corporation engaged in the active conduct
of a trade or business within the United States (hereinafter
referred to as the 'parent corporation* ) owns directly 100
per centum of the capital stock of one or more domestic
corporations each of which is engaged solely in the active
conduct of a t rade or business in Central or South America
(hereinafter referred to as a Pan-American Tra.de Corporation),
such corporations (including the 'parent*) shall bo deemed
to be an affiliated-group of corporations Ydthin the., meaning
of section 1*4-1 of this chapter, provided that the follov/ing
conditions are satisfied!
"(l) At least SO per centum of the gross income for the
taxable year of the parent corporation is derived from sources
other than royalties, rents, (Avidends, interest, annuities,
and gains from the sale or exchange of stock or securities;
and
"(2) At least 90 per centum of the gross income for the
taxable; year of each of the Pan-American Trade Corporations
is derived from sources other than royalties, rents, dividends,
interest, annuities, and gains from the sale or exchange of
stock or securities; and
"( 3 ) No part of the gross income for the taxable year of
any- of thè Pan-American Trade Corporations is' derived from
sources vdthin -the United* State's."

In a ll other )i;espect s,. the H,A* of 192$ system continued. 0 •
To affilia te d ; groups any.member of which, has a net loss, the
advantage h/ of a consolidated return continues by reason of the
denial of a carry-over of net losses for a ll taxable years in the
period beginning prior to January 1, -19^0, and is increased to
all groups halving intercompany dividends by the imposition of the
so-called intercorporate dividends tax, resulting from,the restriction
of the dividends-paid credit under Section 26(b) $ R#A* 193^> to .S5 percent
of the dividends received (applicable to a ll taxable years beginning
after December 3I 1 1935)®.
(1) HeA* of I 93U (Taxable years beginning after December 31,
the revenue revision of 193^» "^e Subcommi110 e of
the Ways and Moans Committee recommended the denial of the con­
solidated return privilege to a ll corporations, expressing the
view that in a tax system applicable generally to separate
corporations,- the income of an a ffilia te d group was not a proper
base for the tax, and that permitting such a base unduly favored
large-scale enterprise organized in many corporations, and
had undesirable collateral effects in unfair competition and
trade practices.«. The Acting Secretary of the Treas'dry, in his
statement regarding the Subcommittee's report, expressed a
contrary view:
1933) •*-~In

"IFor many years business enterprises hare found i t
de sir «able for business reasons other than tax considerations
to incorporate separately different branches of their enter—■
prises* Thus, i f a,, corporation does business in several
States, it may bo necessary under State law, as well a.? con­
venient, to form separate local corporations to handle the
local businesSo Another illustration of the same.general
si tuoti 0n appear s anong r«ailr 0ads , where numer ous 1i ne s,
legally owned by distinct corporations, have been combined
to form a single system* Thus,^ a traveler-over a railroad
from Hew York'to (Chicago may pass over rights of way legallyowned by a member of different railroad corporations*
•MSeparate corporations forming a part of a single enter­
prise of course have innumerable business relations with
each other* Contracts are no.de, property is transferred, loans- are negotiated, and services are,performed by and between
individual members of the a ffilia te d group* Within broad
lim its, these arrangements can be made on whatever terms
are chosen by the officers and directors of the parent
J^/ By Sec. I 53 , R.A* lQ*+2f net operating losses for taxable years
beginning after December 3 1 , 19*4-1, were a carry-back to taxable
years beginning after December 3^» 19^-0*

corporation* By neons of then, inodne as well as property can
"be shifted from one corporation to another as business or
tax considerations nay be deemed to require* If the arrange­
ment is a palpable evasion of the tax lav;, it can and should
be disregarded, but many contracts,vhieh do shift income
from one subsidiary to another or to the parent, are perfectly
reasonable in themselves and Cannot be proved to be evasions*
"Businessmen and their professional advisers, the lawyers
and accountants, have long recognized that the one way to
secure a correct statement of income from affiliated corpo­
rations is to require a consolidated return, including therein
the income and deductions of the parent and every subsidiary,
with all intercompany transactions eliminated* Such- a con­
solidated statement is.simply a recognition of the actual
fact that the separate corporations, though technically
distinct legal entities, are, for all practical business
purposes, branches or departments of one enterprise* This
fact has been so‘
.thoroughly established for many years that
many affiliated corporations today would find it a practical
impossibility to determine the income and deductions of any
one member of the group* For example, the telephone and
telegraph systems are composed of many separate corporations
operating in tho several States* To determine the income of
each individual corporation in the case of each interstate
message, would, require a tremendous number of computations,
both by the taxpayers'and by the Treasury*
■"Tile'principal reason given in the subcommittee' s report
for the abolition of the consolidated return is that'this
would prevent the loss of one subsidiary from being absorbed by
the income of" another or of the parent* For reasons already
stated, this result is not likely to follov; as a practical
natter* . Subsidiary corporations'now showing losses in separate
statements, could a r r a n g e b y intercompany contracts and by a.
readjustment of acoourffcing methods, •to obtain a fair share of
the profits of the;affiliated group* There is no way to prevent
the bulk of such contracts because the Treasury cannot hold
that a.contract which enables a company to.make a profit is .
necessarily unfair or evasive* Moreover, full recognition of
intercompany tr.ansn/ctions would often result in deductible
losses as'well as. taxable gains*
The fact that consolidated
returns have been regarded as absolutely essential to check
these practices in the past is sufficient basis for the belief
that these evils will recur in the future*

49
- 33 g ,
H3?or those reasons the Department believes that the abolition
of consolidated returns, mi¿ht well be a backward step, which,
would result in lit t le ,, i f any, additional revenue*; On the other
hand, ther® are considerable savings to the Treasury, as well
as to taxpayers,' in’ the present arrangement* The. administration
of the law is simpler since it conforms to established business.,
practice* The Treasury need deal, with only one .corporation, : the
parent* On the' taxpayer's side,- the requirement of separate
returns vrould cause largely increased expense to set upt separate
sets of bookb for tax purposes, an undesirable result in its e lf*
The present, law permits a return in accord with business
practice, and gives the Treasury broad* powers to make the
necessary rules and regulations to prevent escax>e from the
tax* In the’ judgment of thé Department, the law should not
be changed in this particular*
.
nXn considering this proposal on its merits, the committee
may wish to discuss as well other forms of taxation on largescale businesses, such as the excess profits tax* Recommendations
as to these are .beyond the scope of this statement*” (Hearingsi
Revenue Revision, 193^* Committee on-Ways and‘î-lcahs, 73r& Congress,
2nd Sess*, December l6 , 1933» .PP* É&-85*)X)
The Committee* rejecting the.recommendation of its Subcommittee, »
' ,fIt. cannot be denied that the privilege of filin g consoli­
dated returns is of substantial benefit to the large groups
of corporations in -existence in this country* This is especially
true in dépréssion years, for the. effect of the consolidated
return is to allow the loss of one corporation to reduce the
net income and tax. of another, and during a depression- more
losses occur,, Another effect of the consolidated return may
be to postpone tax* This is because there-is no profit
recognized for tax purposes on intercompany transactions, and
profits on a product of the consolidated group, passing
through the hands of the different members of the group, are
not taxed until the product is disposed o,f to persons outside
the group*
”In the past, when any corporation could carry, forward, a
net loss from one year to another, the cpnqolidated group did
not have such a.great advantage; over the separate corporationo
How that this net loss carry-over has been denied, the advantage
of the consolidated return is much greater on a comparative
basis* .

. “The importance o f .the matter may be seen from the following
figures which show the relation beWeen the gross' income of-.:
a ll corporations and corporations filin g consolidated returns:

Ycar
__

:
:

G-ro-ss incorno
________: • Percpntage of total
A ll corporate : Consolidated :
gross incoine shown
rèturns______ ;
returns .
• on Consolidated return

Î 92 &. . §15 7 , 25 ^ , 907 , 7 3 1 . $6 9 , 525 , 3 9 6,^8 8
1929

i 6 o , 62 i , 50$ ,i 8i :

1930

13 g,,312', 05 9 , 06 s

1931

10 7 , 515 , 2 3 9.03 7

72,

;

* •

hh.h-

^ , 327,976

6 5 , 906 , i

y

■

,^7

5 0 , 2% , 11 6,91 0

'

r

*6

^ *7

“Your committee" considered at length the question , of abolishing
thé consolidated return* Our com^itte# originally recommended this
action* The Treasury believed thi# policy un desirable, The-. Treasury
pointed out that the one way to secure a correct statement of income
from a ffilia te d corporations is to require a conso3,idate-cl return* with
a ll intor-company transactions eliminated* Otherwise, profits and • .
losses may be shifted from one wholly owned subsidiary to another,
and'their separate statements of income do not pro.sent--an accurate
picture of earnings of the group as ta whole*. Tbr-fall "practical
purposes the various' subsidiaries, though technically .distinct
en tities, are actually branches or" departments of one enterprise,
For these reasons, consolidated- statements of income have been the
rule for'ordinary business purposes, and .for l6 years the income ta.x
lav; has provided for consolidated returns# The administration of the
income tax law -is simpler with the consolidated return since ft
conforms to "ordinary business practice; enables the Treasury to
deal with a single teuepayer instead of many subsidiaries; and
eliminates.' the necessity of examining/the bona fides of thousands
of inter company transactions*
:'
“ Consequently, after careful consideration of the question, the
committee decided that it would be undesirable, to abolish the con­
solidated return at this time*.' It appeared in the hearings that such
action would be especially burdensome to many corporations, such as

kJ

- Uo the railroads, which are frequently, obliged to maintain- separate
corpore,tje . structures ih the several States in which they operate^ */.
although for a ll ordinary business and accounting purposes,-the . .
subsidiaries form a single operating system* .Moreover, complete
data are not' yet available as to! consolidated returns for 1932 ,
'
when the 1-percent differential was 'first .imposed, upon corporations
filin g such •returns, in view, of the advantages obtained by corporations1'exercising; the'privilege of', filin g consolidated,
returns, however, the committeetconcluded that an.additional
tax of 2-percent should be' levied on corporations availing them-selves of this option, instead of the:l percent provided by. the
present law. The Treasury estimates that under present conditions
this plan w ill bring in more revenue than .the abolition of the.
consolidated return," (Ways-and'Means- Committee, Report WqV jok,
pp, lé-17» 73^d Cong,, 2nd Sess*)
The committee1s recommendation was extensively debated oy the
House, j)/ and a letter from the Secretary of the Treasury to the
Chairman was read, paying:
"The Treasury approves the decision of the committee to
retain the provision for consolidated returns* . To eliminate
this provision at this time would cause greatly increased
expense to the many corporations in the setting up of new
accounting systems, without compensating advantage, to the
Treasury* Our experience-with the differential, rate of tax
upon corporations filin g consolidated returns is not yet
long enough to enable the Department to state accurately the
results of the provision, • The increase in the. differential
rate of 2 percent will,; of course, provide increased revenue
from such corporations *"
•.
The House adopted the recD*mmeridation of its Committee on Ways .
and Means « •:Tbe Committee on Finance recommended to •••the» Senate the
approval of the House b ill* The Senate, after extensive debate &f t
however, adopted Mr* Borah's amendment eliminating consolidated
returns* The Conference Committee restored the provision of the ..
House b i l l , including the additional 2-percent rate, but only f e r ­
tile benefit of an a ffilia te d group of corporations» each of whichis a railroad, •
5/ Cong* Rec,, Vol* 76, pt„ 3C p. 2512, 7Jrd Cong*, 2nd Sess*
2 / Congo Rec>, Vol» 7 6 , p t, 6 , pp® 5^7» 630^07» 73r& Cong,,
2nd Sess®

- •la _
(2) lUA, of 1935 (Taxable year s'beginning after Decenber 51c
1935) «>-—fhe changes made' "by the revenue M il of 1935 represented
merely the adjustment of the adc.itioaal rate of tax on a consolidated
return to the system of graduated rates, of corporation tax intro­
duced by that Act, ‘ Section 102(b), amending Section 1^-1(c)R.A«,193^> fixed a rate. of;;
per centum on a consolidated return
which is jjb of 1 percent above the rate applicable to the net
income in excess of $^40,000• These rates were inoperative, since
the R.A; of 1936 , applicable also to taxable years beginning after
December 3 1 ? 1935» revised both the graduated system of corporate
ra.tes hnd the consolidated return rates.
(3 )

R,A* of 1936 (Taxable years beginning after December 3 1 ,

1935 ) »—The •Subcommittee of the Committee on Ways and M'fcans recom­

mended that ftrail roads be subject to t
d
profits tax provisions of the revenue
of filin g consolidated returns be continued as to them1 and that
’ the rate of tax be the same as in the case of other corporations,.’ ”
(Ways and Means Subcommittee, March 26, 193^» J^th Cong.i 2nd Sess0)
The House adopted the recommendation of its Committee on Ways and
Means so providing, including a provision 'for treating'as a
’’railroad11 ”a street, -suburban, or inter urban electric railroad, ”
Both the Senate and the Conference Committee agreed, (Section l^-l(d),)

(4) iUAo of I 93S (Taxable years beginning after December 31 »
1937) •-’-The Revenue Act of 1933 again expanded the class entitled
to f ile consolidated returns by defining the term ’’railroad” to
include ”a street or suburban trackless trolley system of transpor­
tation or a street or suburban bus system of transportation operated
as a part of a street or suburban electric railroad or trackless
trolley system J ’ This expansion was made by- a. Senate amendment
(Senate finance Committee, Report Wo, 15^7» P*. 23, 75^h Cong,,
2nd Sess,}, from which was absent the limitation imposed in Conference^
that the bus system must be ’’'Operated as a part of a street or suburban
electric railroad or trackless trolley system,”
(5) R»A. of 1939 (Taxable years beginning after December 31,.
1939),—This Act again expanded the class entitled to a consolidated .
return by constituting ’’Pan—
American Trade Corporations” an
a ffilia te d group entitled to elect consolidated returns, (Section 225 )
The Act also restored the net operating loss carry-over for two years
(by Section 211, for -taxable years beginning after December 3 1 * 1939*

51
-•■fëv'
V. 19*4-2 to date (inciuôi«G ’
'.fer excess profits tax only) Taxable yeats beginïling after December
1939 fQr excess
profits tax only, and taxable y nor s 'beginning after December 3 1 ,
19*4-1, for incone tax«_________ . . . . . . . .
.
.. ;__
. . ............. .
For excess profits tax only, the elective privilege o f.a
consolidated return is restored to corporations generally for taxable
years "beginning after December 31 » 1939» ll Ho additional rate of
tax is imposed. The R-*A. of 192S system is thus reinstated in its
entirety for excess j>rofits tax purposes, with minor changes« Two ..
refinements are introduced- for the fir s t time, each narrowing the
test of membership in the a ffilia te d group# These were;
( 1)

In the tost of. a ffilia tio n "at least .'%, per .centum .
of each/class of the stock” replaces Mat least 95
percent of the stock” in Section l'*+l#

(2 ) The consolidated"return privilege, with.one exception,

Zj

is. denied altogether to .non~includible ..corporations, ,
namely, those classes of corporations to which, afe
applicable. special methods of taxation; j|/ for the
fir s t 't in e , ' the l i s t of ,non—includible corporations, .
is comprehensive, andran—incliicLible corporations,
with the exception noted, nay neither file a , .

,________________ ■

............. ....................

....

1

.

■

' -y-

2/ Section 201, 2nd R„A* 19^0, adding .Section ,730 o f 'SUbchapter .
2B of the C5q.de. The provisions originated as a Senate amend—. ••
ment in substantially its enacted form« The Ways and Means
Committee, Report ho» 289*4-, p* 1§, 7^th Cong., 3 d S.ess#, said;
"Your committee gave considération to requiring
consolidated returns in connection with the excess
profits tax. However, i t was not' possible to prepare
a consolidated return provision without delaying the
b ill for a consi.dera.ble length of time.”
The levying of an additional rate was apparently not, considered#
J3/ Two or more domestic insurance companies,- each of which is
subject to taxation under the same section of Chapter 1#
In Section 73P"(d) » Second R.A. ,'pf 19*4-0*

■ ------ >..

- *+3"~

.

consolidated return nor constitute either a
parent, or any other link in the chain require—
nent of. a ffilia tio n . 10 /

The making of a consolidated return is "consent to a ll the regulations
♦♦♦prescribed prior to the last day prescribed’ hy law for the filin g '
of such return.»" •(-displacing "consent to a ll the regulations***
prescribed prior to the maid.ng, of such return" of the income tax
lav/) •
For both incone and excess profits taxes, l l / the elective
privilege of a consolidated return, and the E .A .o f 1928 system
is restored to corporations generally for taxable years beginning
after December 3 1 , 1941, subject, however,- to an additional rate
of 2 percent, of the consolidated corporation surtax net income.
The refinements introduced for the fir s t time for excess profits
tax purposes (narrowing the test of a ffilia tio n by requiring
ownership of classes of stock and by excluding non—includible
corporations, and allowing more time for the prescription of
regulations, were carried over into I.E .C . Section 1^1. 12/
For the first, time, the s tatute in Section 159(a), E.A®
removes, as to v/ar losses, limitations theretofore since
applied by the regulations on carry-over items of an
a ffilia te originating in a separate return period. ?

19^-2 ,
192 S,

.

p

r .

.

.

- 1

r- • • -

----- ------- 1

* 1

- ................. —

.................

.................................. —

....... ■■ 11

10/'' Thus, throughout, the definition of "a ffilia te d group" in
Section 730(d), the term "includible corporation" replaces the
term "corporation";' and the term "includible corporation" is
defined as "any corporation, except (1) Corporations exempt from the tax imposed by this
subchapter•
(2) Foreign-corporations.
(3 ) Corporations organized under the China Trade Act, 1922^
(4 ) Corporations entitled to the benefits of Section 25.1*
by reason of receiving a large percentage of their
income from possessions of the United States
( 5 ) Personal service corporations.
(6 ) Insurance companies"subject to taxation under
Section 201, 20*4-, or 2 0 J.w
¿ 1 / Section 159(a), E.A. 19^2, amending I..E.C, Section 1*4-1. ^
12/ This involved a number of changes in the definition of "includible
corporations," only one of which was other than technical (Section
l*4-l(e) (7 )) which, together with Sections 727 (a) and 727 , had-the
effect of permitting a corporation otherwise exe;rpt from excess
profits tax to be an "includible corporation" ano. as a member of
an a ffilia te d group, to f ile a consolidated return, but such filin gsubjected the corporation as a member of the group to excess profits tax#

Substantially in its enacted form, these provisions of the
R.A. of 19^2 originated in the Ways and Means Committee b i l l .
Mri' Randolph Paul, Tax Adviser to the Secretary of the Treasury,
speaking before the Ways and Means Committee on March 3> 19^2, said:
"At the present tine corporations subject to the
excess profits tax are permitted to file consolidated
returns for- the purpose of:that tax i f they.must .meet
certain standards of consolidation, and i f the;/ consent
to regulations prescribing the method of computing the
tax on a consolidated basis« Sxcept for railroads and
certain corporations in foreign trade, these corporations,
however, arc not permitted to. file-consolidated returns,
for the purposes of the corporation income tax» This
divergence in treatment*‘makes fpr. considerable, complexity
in the application of the two taxes, a. complexity which
burdens taxpayer and the Bureau of Internal Revenue alike.
Moreover, an accurate--measure of. the. income of a, .
group of a ffilia te d corporations can only be obtained
through the use of consolidated returns* Under the
rates of tax now suggested for the corporation income
tax, the inaccuracies that occur through separate returns
may* work, a severe hardship« It is therefore suggested
that a ffilia te d corporation# be given the privilege
of filin g consolidated returns for the purposes-of the
corporation .income tax as well as the excess profits
tax». • Any group .of corporations .electing such privilege
should be required to do so for both taxes« The
Committee nay wish to consider the desirability of
having a differenti-al in tax for. .corporations electing
to f il e consolidated returns*# (Hearings, Revenue
Revision of 19^-2, u« SS, March 3» 19^2, Committee on
Ways and Means, 77^^ Cong«, 2nd Sess«)
No statement of policy appears in the reports or debates«
The authority under I.JioC. Section-.4-5 to distribute a ll
items of the- tax account among-the-.members of a.group.is made
clear by the amendment made by the R«A. of 19^3» Section 12$(b)e

13 /

The1repeal of the- excess-profits tax for taxable -years beginning
after December 3 1 » 19^5 lty/ increases the ba.se of the additional
2~percent rate laid on tlie consolidated corporation surtax net income,
such net income being no longer diminished by ’’the credit for income
subject to the" excess profits tax0
12 / 11»'■is

believed that the amendment nakes.no change in existing law«
(Senate Finance Committee Report, No* 627 , p* 6 l ; Ways and Means
Committee RejDort, No* S71»'P« §G«)
lit/ Section 121(a), Sect ion-122(g) (3 ), 'JEUA. 19^5*

•- 2$ StMKABY

Year’s for which additional tax was levied
'on consolidated r e t u r n ____

Bate of incogs tax 9-M -consol i dated returns
X.
II*

Ilio

1^—l^iy
19 IS -I 93 I

•#••. ».

«Ho Consolidated, return

.............. ..................................................Sane as for separate
■
" return.
’ * ’ * * ' «,jcugner uxicAu
separate return.

1932-1935**
Taxable years

Imposed by

lit t e r by

1* ¿aiding in 1932,1933* • •* • •*3/2 bf ^

B.A.

2* Ending in I 93B hut
beginning prior to
j.
Jan* 193^’*." •?'»* •• •••»»*«•»•*• >• »1/^

(iTIHrij Sec* ¿18>(e) ,
(See IÌ.A. 1932,
(Sec* 121(c))f

3* Beginning after Bee* 3 !» 1933
and prior to Jan, 1, 193'b',*--'......... *2/^

B.A. 1932, Sec. l2l(c)

2*

IT .

V.

Inoperative ;
•. . ;
Beginning after Dec*. 31 »
. ...
I 335 . ,
not less than 3/2 of
1936-1921 (Taxable years beginning
after Dec.' 3 1 , 1935 -and prior to
Jan* 1, 19^2 ,

1c
]o

1932 ,

Sec. l2l(c)

R,A. 1935, Sec. 102(b)
superseded by Sec* ,■
■
! Ì2 l(c ), B.A.- ’1936 *.

. . .Same as for separate
return* .

•*-.*•••*••• . . .Higher than for
separate return.

I 922 to date Q
.

Higher by

Taxable years beginning
after Dec. 3I , 1921*...,2 per centum of the con* t- i:) < solidated corporation
surtax net income of the
•'
___ a ffilia te d group* - '

_

Imposed lay
Sec* 1^9, B.A*
19^2

53
W m

-U6••

■ ■

Except for the years 1934,and 1935 , the periods during which a
higher rate is laid on a consolidated.return, have been periods during
which the consolidated return'privilege was not restricted to those engaged
in a particular industry (i.e., ’’railroads11 and ’’Pan-American .Trade
Corporations”). This restriction characterized the period 193^~*19^1*
This and the additional rate have been..the- only substantial innovations
in the consolidated return system established by the R J U of 1928#
Each of the acts levying the additional tax was concerned with
the distribution of the burden of a n ’increase in revenue.
At no time, has an additional tax been.laid on a consolidated
return under any of the additional income taxes laid by chapter 2
of the I.R.C. and the corresponding provisions of prior law. The
consolidated return has at all times been a feature of the excess
profits tax laid by
chapter 2E (1940—1946), and corres­
ponding provisions applicable to the years 1917 ~ 1921 * ihe con­
solidated return has been a feature of the declared value excess,
profits tax only for 1933 (i.R.C. chap. 2B and corresponding^
provisions applicable' to earlier revenue laws) and, to a limited •
extent, of the personal holding company tax (193 ^ ^0 date)
(I.R.C. chap. 2A and corresponding provisions of earlier revenue.,
laws). It. has been regarded as inapplicable to the excess profits
on Eavy contracts (rc.xt.Cv chap. 2 C and corresponding provisions
applicable to earlier revenue’laws) and to the tax on unjust
enrichment (i.xt.C.-chap* 2D and corresponding provisions applicable
to earlier revenue;;,laws) #
■
The consolidated return has been an elective privilege of an
affiliated group at all times since 1921. The common parent has
been a requirement for an affiliated group since 1928, as has the
requirement that every other member of the group be connected with
the parent by a chain of ownership representing 95 percent of its
voting stock. The consent of allmembers of the group to the legis­
lative regulations which the Commissioner, with the approval of the
Secretary, is authorized to prescribe, has. also been required^ since
I92S. The revenue laws have "Contained, since 1920, an uncertain,
and since I 927 a fairly comprehensive, provision designed to enable
the Commissioner to obtain, in the case of organizations owned or
controlled by the same interests, a proper reflection of income and
the prevention of avoidance of tax#

I

~
. . . .. .. .

.

. APBMDIX C . . . .

V

h

'

Thé* Effects of Lowering thé Percentage Used in determining A ffilia tio n
for the Purposes of the Tax on Consolidated Returns.
Recent sta tistica l data showing the effect of reducing the
percentage used under the test of application are not available*
However, a dividend tabulation made by the W.P*A* on the basis of
1936 corporate income tax returns is available if and the results
have been summarised in the attached table.
In this table dividends received by corporations are classi­
fied according to the ratio between t&e amount of the dividend received
and the total dividend payment made by the payor corporation» This
percentage has been computed separately for each dividend received by
a corporation* Column (2) shows the number of time’s ‘the dividend
received was the indicated percentage of the total dividend of the
payor corporation. Column (3 ) shews* the amount of the dividends
received which were the indicated
df the dividends of the
payor corporation.
It is evident that out of 181f.000 returns tabulated only ^,526 *' *,
would qualify as a ffilia te d i f the test were the ownership of 90 pore’ent
of the stock of one corporation by the other* The’ reduction of tho
percentage used to 75 would increo.se the number qualifying, by less
than lh percent* The number which would qualify i f the percentage
used were 50 Is roughly half again as large as the' number qualifying
with a stock ownership tost of 90 percent.

1] This tabulation is in the file s of tho S tatistical Division of
tho Bureau of Internal Revenue and is identified e;s' follows: :
Table Ufc., Source Book, Volume
B. I.R , Special Study 32?
Cabinet 3, Shelf 1 ,

tjms

i

Dividend leeeipts in l$j€ Imported on Corporation Income Tax
Returns Classified. -by.
of «¡sck Dividend Receipt 1J
to Total' Taxable "Dividends B ail by the Payor Corporation,
Showing Fumber and ¿¿mount- of Dividend, Receipts 2]
Percent classes each;- -w
jpivid end receipts H/
dividend to %
total
. .
.•ft'
t axahi o. divid end paid
Amount
dumber
•
by payor corporation
-4
,..
“TO------------ -T ------ T TT
(3) "
Total

.*

-

1

5

-

10
20

50
60

60
90

5

10
20

30
Uo

30
Uo
50
75

,089

1 , 58 2 , 5 7 8,89 6

To Under

Prom
1

if*

and <Dver

75
90

%

•
TO ^
■* Î
* : 1If
-■
■
■TO
'
\ -

158,127
8,15^
2 .U25
1 ,4 6
977

,7^5
l.lHU
771
,615

U,526

.

1 7 6 , 569,06 0
9 0 , 707,050

. 51,312,006
; 9 2 , 689,823
151,026,337
5 2 , 25 3 , OUU
5 5 , 676,690
-8 5 , 01. 6 ,3 8 9
: 8 3 , 9 7 9.87 2
lUS,l3U#lUb
595,l99,u3i

1/ A dividend receipt is the total amount of taxable dividends received
by a corporation from one corporation in a twelVermonth period*
2/ Dividend payments to the number, of 8 ,9.6l and the amount of $1^9*3^9»$02
have been excluded from the tabulation because no information was
available on the payor corporations.
Payor corporations include both domestic and foreign corporations
filin g on Form 1120 or 1120L.
]jj This column represents the sum of dividend receipts for cases where
both recipient and payor corporations report on a calendar~year
basis, and for cases where either or both recipient ^nd payor
corporation report for fisca l years ended in the period July 1936
through June 19^7*
Additional tabulations are available at the Bureau showing
dividend receints in 1936 classified by (l) asset classes of
recipient corpor^tions, and (2) industrial groups of recipient
corporations«

- 1+9 ~
appendix U ■■

TAPLB II '•
Int ercorporat e Dividends -Peceived: from Domestic ^Corporations
1926 ~19l+3
Year
1926

1927
• 192 S ‘
1929
1970 .
1971
1932
1933
197U
1979
1976
1937
193S
1939
19 HO
19Ul
• iql+2
I 9I+3

:
:

, •
Dividends received
(millions of $ rs)
1 .5 0 6
1 , 65 s

1,917
2,397
2,571

1 ,9 6 9
1 , 2.60
1 , 02 b

2,217
3 . 01 k
2 .6 7 7
2 , 6 S2

1,791
1 ,9 0 6
2,021

2,235
l,3'4l+
1 , 33k

Sources i I 926- I 9I+I» Stati sties of Income for 19^15 ?ert,. 2 ,
ppe 272-273.
191+2-191+3» mreas ury Bullet in ? June 19H6, p„ 220

55

-5c-

APPENDIX f
TABL3 T i l

Humber of Consolidated Income Tax Returns Riled
1 Q2 S

-

19 V+

t- Humber of
Consoli dat ed r et urns
Yon r *
: '.With net ine‘ome s Hi tip no net income : Total ; subsidiaries
192S
1929
1930
1931
1932
1933
193^
1935
1976

1937
193S
1939
19Uo
I 9U1
19^2
I 9U3
I 9UU

5,S70
5,U0S
U,o67
2 , 69s
1»272
i , ssq
1 U7
9
35
30
22

31
kk
65

737
1 ,0 0 5
1 ,0 0 9

3,^3 0
3 , 3^6

9*300
S.75U
S.951
S,Uq5
7 . ^26

5,2 2 1
29 S
5)4

7,10 1
UU5

U,SSH
5,797
6 , 15 U

63
63

SO
77
1!
6S
U2
205
277
2 S9

63

9S

93
102
10 s
112

107
qlilj *
1, 2 S6 *
1? 300 *

Hot available
30,112

32,209
31,707 I
29 ,232
2S , 5 S9
2 ,5 2 2
H6H
722
693
69Ò

715
709
706
5 ,5 9 6
6,16 5
5,78 1

* Total includes returns of inactive corporations*
Sources: 192S-19H1, Statistics of Income for 19^-1, Part 2 , p* 293«
19^-2j Treasury Press Release Ho»' ^4—5^* 'December 31, 19^»
p* ; l 6 , and Io 9 V~2295 February 25, 19^t P» 6 »
19 ^3 , Treasury Press Release Ho; V-229, February 25* 19^6»
pp? 6 and 10 o
19 UUS Statistics of Income for 19^> Part 2, Preliminary,
ppn 10 —11 *

56
TREASURY DEPARTMENT
Washington

Press Service
W o . s -5 9 6

FOR RELEASE MORNING NEWSPAPERS
Thursday, January 15, 19^8«

During the month of December, 19^7> market
transactions in direct and guaranteed securities
of the Government for Treasury investment and
other accounts resulted in net purchases of
$ 696 ^391 ,000, Secretary Snyder announced today.

0O0

ï

TREASURY DEPARTMENT
f

Tíashingt on

FOR IMMEDIATE RELEASE
Friday»
January 16« 1948

Press Service
No0 S-597

The Bureau of Customs announced today preliminary figures showing
the imports for consumption of ccximodities on which quotas were pre­
scribed by the Philippine Trade Act of 194-6, from January 1, 1947 to
December 31, 1947> inclusive, as follows:

: Established Quota
Products of
Quantity
Philippine Islands :
Buttons

850,000

:
Unit’ of
: Quantity
Grosd

: Imports as of
: December 31, 1947
94,902

Cigars

200 , 000,000

Number

3,261,568

Coconut oil

448 , 000,000

Pound

21,988,520

6 , 000,000

it

2 , 322,672

Cordage
Rice

/

i , 040,000

11

Sugars, refined )
unrefined)

1 , 904 , 000,000

it

. 6 , 500,000

it

Tobacco

50
_ _

1,316,548

TREASURY DEPARTMENT
Viiashington
POE'IMMEDIATE RELEASE
Friday« January 16, 19AS

Press Service
No« S-$98

The Bureau of Customs announced today preliminary figures showing the
quantities of wheat and'wheat flour entered* or withdrawn from warehouse, for
consumption under the import quotas established in the President's proclamation
of May 28, 1941* as modified by the President's proclamations of April 13* 194-2,
and April 29, 1943* for the 12 months commencing May 29* 1947* as follows:

Country
of
Origin

•
•
i
s

Wheat
• Imports
Established : May 29* 1947, to
Quota
: Dec* 31* 1947
(Bushels)
(Bushels)

Canada
China
Hungary
Hong Kong
Japan
United Kingdom
Australia
Germany
Syria
New Zealand
Chile
Netherlands
Argentina
Italy
Cuba
France
Greece
Mexico
Panama
Uruguay
Poland and Danzig
Sweden
Yugoslavia
Norway
Canary Islands
Romania
Guatemala
Brazil
Union of Soviet
Socialist Republi cs
Belgium

•

352
—
1 - "

795* 000
—
—

—

-

—

100

—

100
100

—

—

—
—

—

100
2 ,0 0 0
100 '

—
—
—
—
-—
—
—
*—

—

1 ,0 0 0

—

100

—,
'—
_
-,
—
-—
1 ,0 0 0 .

—

-

100
100

Wheat flour, semolina,
crushed or cracked
wheat, and similar
wheat products
:
Imports
Established :May 29, 1947,to
Quota
: Dec. 31, 1947
(Pounds)
(Pounds)
3,815* 000

1,198,004

24 ,0 0 0
13 * ooo
13*000
8 ,0 0 0
75* 000
1 ,0 0 0
5 ,0 0 0
5*000
1 ,0 0 0
1 , 000
1 ,0 0 0
. 1 4 ,0 0 0
2 ,0 0 0
1 2 ,0 0 0
1 , 0 Q0
1 ,0 0 0
1 ,0 0 0
1 , 000
-1 , 000
1 , ooo
1 , ooo
1 , ooo.
1 ,0 0 0
1 , ooo

8 ,4 0 0

M
W

-

320

—
—
—

—

—
—
—
-4
—
—
—
—
—
—
—
—
—
—
;.
—

100
100

-

-

-

800,000

352

4 * ooo, 000

1,206,724

-oOo-

TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS
Friday , January 16 , 19^8.______

Press Service
N o , S-599

The Secretary of the Treasury announced today that the
Governments of Italy, Bulgaria, Hungary, and Rumania, and nationali
thereof, are no longer deemed to he "enemy nationals" within the
meaning of General Ruling No. 11.
Treasury officials pointed out that today's action, which
is in the form of an amendment to Public Circular No. 25, was
taken in view of the ratification of the treaties of peace with
Italy, Bulgaria, Hungary, and Rumania.. The amendment does not
authorize transactions under certain Treasury licenses nor does it
in any way affect* the definitions appearing in Executive Order
No. 9193, which established the Office of Alien Property.
It was also announced that the Treasury Department is pre­
pared, in appropriate cases, to grant licenses for payments to
creditors resident in the United States of business organizations
and individuals in Bulgaria, Hungary, and Rumania from blocked
accounts in this country in which the debtors have an interest.
It was recalled that on May 20, 19^-7 a similar announcement was
made concerning payments to creditors of persons in Italy.
Treasury officials explained that the step with respect to
Bulgaria, Hungary and Rumania, is being taken even though the final
disposition of the blocked assets of these countries has not been
determined. They pointed out, however, that in talcing this step
the Treasury Department is in substance applying to its unblocking
procedures the principles of Public Law 6'J1} Y9th Congress, which
authorizes the Office of Alien Property to pay debt claims of
American citizens out of vested assets of.their Bulgarian,
Hungarian and Rumanian debtors,
It was stated that, in general, licenses•will be issued only
in those instances where thè debt was incurred either prior to
the date of the blocking of the country involved or as a result
of a transaction entered into subsequent to that date pursuant
to a license specifically authorizing the use of blocked funds.

TREASURE DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Friday,
January 16« 19AS

Press Service
No» S-600

,

The Bureau of Customs announced today preliminary figures showing the
imports for consumption of commodities within quota limitations provided
for under trade agreements, from the beginning, of the quota periods to
December 31,.. 1947* inclusive, as follows:
T
~
1
"
Commodity
:
Established. Quota
■
__________ , _________________ Period and Quantity

: Unit
s Imports as of
:
of
: December 31,
: Quantity t_______19¿7

Whole- milk, fresh
or sour

Calendar year

3*000,000 Gallon

7* 662

Cream, fresh or sour

Calendar year

1,500,000 Gallon

1,768

Fish, fresh or frozen,
filleted , etc*, cod,
haddock, hake, pollock,
cusk, and rosefish

Calendar year 23*906,4-23 Pound

Quota Filled

White or Irish
potatoes:
Certified seed
Other

12 months from
Sept »15* 194-7

90 , 000,000
60 , 000,000

Pound
Pound

69* 594-, 647
29* 569* 084

Cuban f ille r tobacco
unstowned or stemmed
(other than
cigarette leaf
tobacco) and scrap
tobacco

Calendar year

Pound
(unstemmed
22,000,000 equivalent) Quota Filled

Red cedar shingles

Calendar year

1,380,300 Square

Quota Filled

Molasses and sugar sirups
containing soluble nonsugar solids equal to
more than 6% of total
soluble solids

Calendar year

1,500,000 Gallon

580,550

TREASURY DEPARTMENT
Washington
Press Service
No# S-601

FOR IMMEDIATE RELEASE
Fri dayft Janui

The Bureau of Customs announced today that preliminary data on imports of
cotton and cotton waste chargeable to the quotas established by the President’ s
proclamation of September 5* 1939, as amended, for the period September AO,
X947 , to December 31* 194-7, inclusive, are as follows;COTTON (other than linters)
(In pounds)

County of
Origin

Less than 3/4(<
1-1/8” or more
Under 1-1/8” other
harsh
or rough j/
but
less
than
than rough or harsh
1-11/16"
U
under 3/4”
Imports Sept# Imports Sept# Imports Sept.
20,1947, to ' 20, 1947, to'
Established 20, 1947, to
Quota
Dec* 31*1947 Dec# 31 , I 947 Dec. 31, 1947

Egypt and the
Anglo-Egyptian
783,816
Sudan# ***•
247,952
Peru,•••*••»*#•*,
British India*,,*
2,003,483
China,#■••*#•*•••• 1,370,791
8,883,259
Mexico••. « . . . * . * *
618,723
Brazil,, . . . . . . . . .
Union of Soviet
Socialist Repub­
475,124
lic s , », »* •.*, « , •,
Argentina,,
5,203,
237
Haiti,*, #••, ***, «•#
E c u a d o r », •, ,
9,333
Honduras,. *. . . * * *#
752
Paraguay*. , , . #.• #
871
124
Colombia* * . . . * ..,*
Iraq,.* * * * ••#, #*#*
195
British East
2 ,2 4 0
àfrica* •*,,*,#_*#*
Netherlands East
71,388
Indies,*.♦* *, *, **
Barbados*. , .*#•##
r-i
Other British
■fest Indies l/* .»
2 1 ,3 2 1
N i g e r i a , , .#*, , ,
5,377
Other British
, 16,004
fest Africa 2/♦*#
Other French
Africa 3/».* **.* »••
689
Algeria and Tunisia
14,516,882
---- -------- —

---/

---- 7

227,888
19,000
8,883,259
618,723
249,068

¿ 3 , 574,472
1 , 903,999
r
'T.

T

177,949
—
—
-

x

9,997,938

Other than Gold Coast and Nigeria*
Other than Algeria, Tunisia, and Madagascar,
Established Quota —45,656*420#
Established Quota -# 70,000,000*

—
. ^

—
—
—
—■

ü
-

—
—

-

- .
—

-

—
l o , 54 2,714
**•

—

—
-

if

*4

—
45,656,420

—
10 , 64 2,71 4

62
-

2

-

COTTON WASTES
(in pounds)
COTTON CARD STRIPS made from cotton having a staple of less than 1-3/16 inches
in length, COMBER -V/ASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER.
OR NOT MANUFACTURED OR OTHERWISE ADVANCED IN VALUEi Provided, however, that
not more than 33- 1/3 percent of the quotas shall be fille d by cotton “wastes
other than comber wastes made from cottons of 1-3/16 inches or mere, in staple
length in the case of the following countries: United Kingdom, France,
Netherlands, Switzerland, Belgium, Germany, and Ita ly :
*

Country of Origin t Established
i
*t TOTAL QUOTA
United Kingdom» *..»
Canada» *••••*«••»»*
Franc e* #••»•.4 v»»* •*
British India»».* *»
Netherlands »«•»**.*
Switzerland »«•«.»••
Belgium*. . . . . . . . . . .
J apan♦••»*»•»»»•***
China« «•«• * »• .«.*•*
Egypt •**»•• v*......... *
Cuba*«*«<»*»»....**
Germany.. . . . . . . . . . .
I t a l y .•..*«•*«»•*•»
Totals

4,323j 457
239,690
227,420
69,627
6 8 ,2 4 0

44,3 8 8
38,559 ,
341,535
17,322
8,135
6 ,544
76,329
21,263
5,482,509

Imports
Total imports Established
Sept* 20,1947, 33-1/3?» of Sept.20,1947,to
to Dec*31,1947 Total Quota Dec* 31*1947 1/
19,703
70,818
69,627
«

1 ,441,152

75,807
*
22,747
1 4 ,7 9 6

■

**
A* '

160,148

1/ Included in to tal imports, column 2*

-oOO'

13 853
—
—
4»
25,443
7,088
1, 599,886

19,703
—
*T

—.
—
¥*

g*
#*
19,703

TREASURY DEPARTMENT

63

Washington

Statement of Secretary Snyder before the
Ways and Means Committee of the
House of Representatives,.
January l6 , 1948

I
am glad to have this opportunity to appear^before the
Ways and Means Committee to discuss the issues raised by
H.R. 4790.
I
am sure that this Committee fully appreciates the great
responsibilities I have as Secretary of the Treasury in pur­
suing a sound fiscal po l i c y . The financial integrity of our
Government must always be my first consideration,
Its founda­
tion must rest upon a revenue system that will provide the
cost of maintaining government and financing its necessary
functions, with provision for funds to manage, service and
reduce the national debt.
I
can make no other approach to our tax problems than
through a realistic appraisal of the hard facts of the current
situation.
It is not a question of what we would like to have
at the moment, but what in the long run is in the national
interest. Nor is it a matter of what would be desirable and
proper under different circumstances but what is the proper
action to take under the conditions which now prevail.
The cold facts are that present economic conditions,
budgetary considerations, inflationary pressures, and debt
management problems require the maintenance of government reve­
nues at present level.
It is from these viewpoints that I wish to discuss the
issues raised by HR 4790*
This bill would reduce individual Income tax liabilities by
In addition, estate
and gift tax liabilities under the provisions at present in
the bill would be reduced by $60 million.
If this bill were to
be enacted, effective for calendar year 1948 incomes and with­
holdings at the lower rates were to start April 1, the surplus
of $ 7 .5 billion estimated in the President's Budget for the
fiscal year 1948 would be reduced by $1.1 billion.
But in the
fiscal year 1949 receipts would decrease $6 .5 billion and re­
funds would, increase $0.4 billion.
The estimated surplus of

$6.2 billion for a full year of operation.

S -602

64
-

2

-

$ 4.8 billion in fiscal 19'49: vp'iild Jbë. converted into a déficit
of $2.1 billion, thereby increasing the public debt.^ (Exhibit 1,
page i 3 .)-’> —
^
r ;
1-;
Under current conditions, it is m y firm' Conviction- that*
a tax reduction: of the■magnitude involved in H.R. 4-790 would
constitute'.a major' threat tq the Wationvs';’
f inàftclal integrity
and economic stability,
I cannot conceive of any consideration#
under existing conditions that would justify a tax policy or
program that•wbuld fail to balance the -budget in-the* fiscal
year 19^9 and\also make provision!for’the adcquate*■retir em ëh t
of .the •-pub 11 c 'd e b t .
‘
/
G u n progress in debt retirement since the peak'of' $279 »8
billion, which Was. reached on February 28," 1946,' th the present
level of <$257 billion has been effected' largely tjby drawing' dewa
the large Treasury cash balances from a wartime {to a peacetime
level.
Only in the last fiscal year of-1 9 were we able te
make a substantial reduction’from surplus tax revenues. We
have now reached a position where the anticipated surplus for
fiscal year 1948 will make possible a substantial debt reduction
which provides one of the most effective:anti-inflationary
weapons possessed by the Government,
: '3 '
Treasury debt retirement and debt management policies have,
been continuously directed against the inflationary monetary
pressures. Not only are we able to follow the sound principle
of reducing the public debt during a period of prosperity in.
order to maintain financial integrity, but at the same time,
we are able to maintain a wholesome pressure against inflation.
The gross public debt has b e e n •reduced by over ;$23 billion
since its peak was reached in February, 1946. N o t !only baa
this entipe amount been taken out ef the debt held by thé banks
(commercial banks a n d .the Federal Reserve "banks) but through
the sale of government securities to non-bank holders, including
individuals and trusts, an additional $2 billion has been
moved out of the banking system ;■
'* '
The effect of the reduction ef coiirnierciai bank-held’ gbyernment securities' .is to reduce bank deposits ahd the mpney supply,
I need not -point .out to this 1 committee the importance to cur .
economy to .continué this-effective'prograiri. r
-*
,
- ;
--;;

K

? *

' < » ' -"v'; X •f*

* 7

** '**4*

. - It--is .alepr- that the -present inf la t i ohd^ÿ pressures’tih îfeun
economy require *that the; .revenue loss resulting’f rom* .any tax>.;.
•adjustments should be ‘offset by upward 'revisions in other, taxes.
There must be no reduction in aggregate revenue.” In view of my
responsibilities for the sound management of the Federal finances,
X cannot endorse a bill which would reduce revenues when income
and^employment are at peak levels and which would'result in a
deficit in the fiscal year 1949,

H

WÊSÊ&8Ê.

M

êéèÊ

ÊÊ

^•> Economic conditions

a *1

:

Lasibsphlnfei* wheh.'ypur' Cominit.tee w a s ’consIdprinp H.R. 1, v'
a bill whljcÎT Voülb'iaVb .2?èdùc'ed-:-our .tax re venues .very 'sub,s,tan-.
t tally * it .was w g e d that buch a réductl-bn wq-s necessary\bo:
.f,. ;
fore stall a’dec! ihe .
=i n ..prbdiic t ion and bu-s ine s s act ivity
Sub-. ;.'
:
sequent developments.,. have 'shown that this appréhension was-not
well founded.
v
" ’j s
’
Since' the ^Presidentrs veto of H .R . 1, national income, V #-,L *
production, and' employment have all made new record peacetime
highs,. .Infldtiohary’pressures have also continued -strong. " W ? M
Production 'has:- continued virtually at capacity l e v e l s a n d . .
there is '‘every reason, to believe that if a tax reduction bill
had b e e p ;enacted, over the Presidentfs veto, the; result w o u l d ■
have-been, not more production, but even higher prices*
V
'
The same- considerations which impelled the President t o ’
veto H .R. 1
and also to veto its successor bill/ H ;R\ 3950.. -are controlling today.. As the rPresident said in his- veto- ., 1
’’
message^ on'H'.R>vv 1 ^ "Ample evidence points to fthe:continuation.//;
of infietiohary pressures . Tax reduction now would -increase
them,"r This': has proved to' be a s©und •Coneluslor.«
’
The need for a t a x .adjustment
.> - From June 1946 to November, 1.9^-T, consmer/^ood- prices rose'
39 percent; all consumer prices rose 2b percent i ''/'Exhibit. 2/
page 14,: Chart 1.•)
‘^ l vi
'
r:
l
■ '‘IS Sfhe.h i g h ••cost of living; has/.'brought*'real hardship to many
families with- -lw- incomes . --Price increases .have" made Federal
taxes unduly burdensome Ten »the.se t a x p a y e r s ‘It is- for this, v;/'
reason that the President has .recommended, a oost-bf~living
adjustment in the individual income tax,, - ;
\ 3 ;
*'
The President is suggested adjustment,is in the form of a
tax credit of $b0 per capita;
Its effect is to increase; the
.•exemptions from $ 300' to a little over $700 per capita at- the
bottom’of the, income scale and by amounts which gradually /.' /
decrease for taxpayers’ In the higher bracket's, where-there! is '
less^preSsing .need for a '.cast-of-living adjustment.
It is
estimated that this would drop 10,3 million taxpayers with the
lowest incomes.•from t h e 'Income-tax rolls.
It wauld cost*$3»2
billion; of revenue in a full year. Ninety-three' p-ercent/of ,
this relief, would go to taxpayers with net incomes under $ 5 ,000,
(Exhibit 3 , page 1 5 ,) '
. '-

- 4 -

65

As the President recommended, the revenue loss resulting
from the cost-of-living adjustment should be made up by
increasing the tax en corporate-profits, Taxes on corpora­
tions- have been considerably reduced since the war years.- The
corporation excess-profits, tax was repealed, as was^the
declared value capital stock tax. The; corporation income tax
was reduced.
Since that time and under the inflationary
conditions'which have persisted, many corporations now realize
profits greatly in excess of those ever realized m a stabi­
lised peacetime economy. Under existing conditions, t h e ^
fairest way of levying a tax on corporate profits which the
President, recommended would be to reenact the excess-profits
tax 'with a few modifications. .The small corporations should '
b e ,exempted•by providing a specific exemption of ^50 ,0 ^ °
excess profits for all corporations.
The-rate should be re­
duced from the 85.5 percent in effect for 19^5 to F5 percent
and the standards for normal profits (both the average earnings
and invested capital credits) should be raised.by 35 percent.
With these modifications the tax would still yield .the;
billion needed to offset the revenue^lbss resulting from the
individual income tax cost-offliving adjustment. Thé tax would
apply only to 22,000 corporations with the largest excess ,
profits, out of a total of 360,000•taxable corporations. The
imposition of a. corporate-.excess-profits tax to compensate in
revenue for the cost-of-living tax adjustment is the, most
equitable way of maintaining the Federal revenues at their
present strength and with the least adverse effect on our
economy. .
.
Under the President’s proposal, we will maintain a
balanced budget', including provision for the Marshall Plan,
and make substantial payments on our p u b l i c debt . His- ’proposal
makes only a temporary changé in our tax system .leaving basic
structural changes to a more appropriate time when our entire
tax structure can be revised on an equitable b a s i s .

Ccraraeut3 on H »R. 4790
I turn now to specific comments on H.R.^4790..
I have
appended to my statement a number of statistical table-s to aid
the Committee in its consideration of the bill,., (Pages 11-41.)
■H,R. 4790 includes, the. following tax-reducing provisions:
an increase -in the per capita exemption from $509 to $603,
resulting in .a 'revenue less of $1,744.7 millien; a special
additional exemption of $600 to all persons ^65 years of age
and over, resulting in a revenue loss of $ 268,2 million;.a.
special exemption of $600 f ©r the. blind to replace the present
deduction ©f- $500, resulting in a revenue loss of $300 thousand
the eaual division of incomes of husbands and wives for tax

-

- 5

I

. ,

1

;

||

purposes resulting -in a •revenue.,-loss- of- $ 803.5 million; -an
increase in the standard deduction for single persons and mar­
ried Couples filing joint.returns vith adjusted gross incomes
of over $ 5 ,000, resulting .in a revenue .loss of .$93.8 million;
a reduction in tax' rates'. ranging from; 30 percent for taxpayers
with net incomes after, exemptions of; $ 1,000 o’r less, to .10 .per­
cent for amounts of net incoine ‘after exemptions in excess of
$4, 000^ r e s u l t i n g in a revenue loss of $3,334.4 million; .and
repeal of the 1942 amendments relating to the estate and gift
taxes as they apply in community-property states, resulting in
a -revenue loss of $60 -million. . The tòtal revenue loss from
the reduction of both income and estate tax would be $6,305
million in’ a full y e a r .
;
; '.
The revenue loss from .all the individual income tax provi­
sions' amount to $6.2 billion for a full year.
(Exhibit 4.,
page l6 ,)
The estimates of revenue .loss 'from each of the
individual income tax changes are given by net income classes in
Exhibit 5, page 1 7 .
Under present law there would be 52 .1 million income tax­
payers in 1948.
The bill would remove 6 .3 million from the tax
rolls.
Of the total number dropped, the $100 increase- in the
per :capita exemption accounts for 5.3 million and the special
exemptions for the. aged and the' blind for 1.0 million. ;
Increase in exemptions
The individual income tax exemptions were lowered several
times during the period•after 1939'to increase the Federal
revenues in support of the defense, and war effort.
Millions
"of individuals were added to the tax rolls, the number of taxable
returns ,increasing from 4 mil lien in 1939 to almost' 43 million
In 19^5. (Table d , page 40.)
The first postwar change in exemptions was made effective if
1946' by the Revenue Act of 1945. ’ The normal-tax (exemption of
$500 was revised to take into account, marital; and dependency
status.
This was done by making the $500 per capita systemwhich since 1944 Was applicable only to the surtax, also ap­
plicable to the normal t a x .
.
The present exemptions which had their origin in the war­
time emergency would.be too low under-peacetime’conditions even
if there had been no price .increases. However, consumer prices
increased' 31 .-percent from 1944 to November 1947 alone.
For these reasons the President on several-.occasions has
stated that the millions 'of taxpayers with l o w :incomes should
have high priority for relief from their wartime tax burdens.
It is for these reasons that he has recommended in his State-of
the Union Message the tax credit of $40 per capita as a cost-ofliving adjustment. Although the economic and budgetary

"> 19IIS||.
|l

A
É
ff

-

6

66
-

situation'does not permit/a redaction in total .taxes, the ,
Federal tax /system 'sHouldy ’nonetHelesg, ::
be /ad’jjusted in .a•manner ;
which would "bring "relief to the millions, o f .hard-pr.es sed tax­
payers :'With the lowest ihepmes ,7. This can.best bo .done under
the President-' s 'recommended tax credit which, yeuld. completely »*
relieve. 1 0 .3■‘million"'lpWaincbpie:'taxpayers frem income .tax this
year. "I' A’f *
Xl _
- ' ■ . *‘"
.
..
,
V;
-.
■-H.R. 4790 would'Increase the exemptions from $500 to $6.00
per capita.
This increase is .inadequate in-.the light of the - .•
very- substantial increase in the-c'ost ;of ■livlng-v" • ' :
Income, 'splitting- : :

//

’\

,./V 1. '.

The bill- contains" a provision which would per m i t .
-married . t
couples filing jbintf'returns/'to' divide., 'their combined -incomes - |
equally between them in computing, their income, taxes . This is • ;
designed.’to 'eliminate' a; long-standing tax- discrimination against ;
married coup lbs residing in non-commun!ty^property s t a t e s ^ -^5- f^l|
I do not question the importance of the:, problem to which this - i
provision is dd'dre s sëd be cause iseveral common-law states have,
in recent'years, adopted community-property laws designed
primarily to give their residents the. tax -advantages previously- ■/
enjoyed only in' the original coimnunity^property 'states
The'
subject is one which should be given ..a high priority among, the
structural changes in the federal tax-.system;.-. :I believe;, however, that it•wouid/be unwise to make this or any other major
structural' change in the current situation which would result
in a substantial "revenue loss, ./As previously indicated-,:
splitting the incomes of husbands and wives would result in a.
loss of $ 803.5 million, 97.5 percent of which would go to
individuals with net incomes, in excess of $ 5 ,000.
Rate reductions
H.R, 4790.would make ,d'substantial redu-ctiqn -in individual
income tax -rates. It wo.ulcC reduce the normal: tax and surtax
rates by: 30 percent'for taxpayers whose net incomes after
personal exemptions aie'/$l,00.0 ■or less,., and- by percentages
ranging from 30/ to"‘2 Q in the notch; area between $ 1,000 and
..
i>l,?00, For net incomes after...'exemptions between $1,400 and.
'
$4,000, the reduction would be 20 percent.
For amounts of
income In excess of $4,000, the. reduction would b e -10 perdent 7 :
The effect of these rate••ehange&’--^h 'the”''combined normal tax
and surtax bracket rates is shown in Exhibit; 6 , page 1 8 ,

23.7 million taxpayers would’get a 30 percent rate reduc­
tion . 7.9 million would get aVràte reduction ranging from 30.
t(> 20 percent , .12 .5 million taxpayers would get a 20 percent ’ Î
reduction. T h e 'remaining 1.7 million would got reductions •.
ganging fnofif20 'percent'*down .to approximately 10 percent ;
(See Exhibit 7, page 20,)

7
:‘As X have already-stated, any .'tax adjus/tonent at this time
should be concentrated at the bottom of thé income s c a l e T h e
most efficient tray of d oing this is through 'the cost-Of-living
tax. adjustment credit recommended by the- Président-» V I cannot
endorse -any general reductions in tax rates under, present
circumstances.
As soon as the inflationary forces have been
checked, as I have previously said, it will be proper to fit
rate reductions; into a well-balanced tax revision program
designed to'maintain incentives and broad ’consumer markets.
-Exemptions for the aged and the blind
The hill provides an additional $600 exemption for persons
years of' age:, . It, also, provides a similar exemption for
the blind;* The exemption for the blind• is not ra" new ’feature
off-the.; tax law;lt;. merely: makes *û technical revision of the
present allowance and increases the amount.‘by $100.: These as
well-as ether-low-income groups ’and'disabled persons have been
.hard-pressed by •rising prices and the high"‘cost of living.
It
is- my view that the cost-of-living adjustment recommended- by
the -President is; the most equitable way of providing tax .'relief
•for the aged,.- the disabled, and low-income taxpayers generally,

over „6$

■Increase; in ,the. standard deduction

. >/

;H.Ri 4'790 would increase .the standard'^deduction for single
.persons-and-married couples filing joint •returns if "they have
incomes, -above $5> 000.
The increase in-the deduction is from
$500 .to- 10 percent of adjusted gross income for those' with
incomes between $ 5,000 and $ 10 ,000 ,
and $500 t o -$1,000 for those
.with incomes of $ 10,000 or more*
^ X
The increase in the standard deduction-for married tax­
payers is apparently intended as a ne ce s sary'pent of the
split-income provision*
It is designed to.-equalize, the standard
deduction allowed to residents of commcn-law states'with that
now-allowed to residents qf community-property states-, - The
increase in the standard deduction for single persons is not,
however,-related in any way to the split-income provision.
It
would reduce the taxes of single persons', with incomes in excess
of $ 9,000 if they .elected to use the -standard deduction,' I can
see no justification for this provision,
; • •
Repeal .of, 19^-2 estate and gift -tax -amendments -/

•

The.I 9A 2 estate and. gift tax amendments'were, in general
designed to equalize the tax treatment of gifts and transfers
of property at death in community-property and common-law
states.
The amendments have been tested in the Supreme Court
and held to be constitutional. H .R.. ¿j-790 would ,repeal these
amendments and again give the residents of community-property
states the benefit of splitting property for gift and estate

tax purposes, Moreover, it is, my-understanding that it is
•contemplated that the bill in. later form, will include a pro-,
vision' which would exempt transfers between husband-land wifeunder the gift -tax to the. extent of. 5.0 percent and completely '
exempt such .transfers -under the/ estate tax up to :50 .percent- of
s
t
a
t
e
, 1 ,? : l';. * *
7 ’■
the net e
If all married couples took fuli advantage 1cxf this- provi- 7
sion, the combination of such estate and gift tax changes'Would
involve a'loss -in revenue amounting to $245 million or 30 per­
cent of the yield of ;these t axes. *As I ,have already' stated,
this is 'not the proper .time., to *make such major structural;
changes In the tax- system- involving -a significant .loss of 5
revenue.
. i --'a-

^-he President1s. Program compared, with H.R;. 4790 "
The benefits to individuals are distributed m o r e ’equitably''
under the President’s cost-of-living adjustment than under
H.R. 4790* H.R, 4790 removes 6 .3 million from, the tax rolls ,
The President’s program removes 1 0 .3 million,
in additionV
taxes would be lower under the President's program for single
persons with net incomes (before personal exemptions) up to
$968 (or gross incomes up to $ 1 ,050); for married persons with
no dependents up to $ 1 ,93? (or gross incomes up to $ 2 ,12 5 );
for married persons with two dependents up to $3,874 (or gross
incomes up to $4,300), etc.
(Exhibit 8 , pages 21-23 and Exhibits
9 and 10,. pages 24-35 *)
Altogether, the President 1s program
provides greater relief to 13 million taxpayers with the
lowest incomes. These are the taxpayers who are in most urgent
need of relief from the•*burdens of the present.high'cost of
living.
-•
Under the President’s individual income tax adjustment,
of $3.2 billion;’
. 93*0 percent would go to individuals with net
incomes under $5,000. This compares with 66,3 percent under
H . R . 4790..
\ ■
. , ■• ■
It is also true.- that- .H ,R. 4790 reduces, the taxes of .
Individuals with net incomes i n •excess of $5,000 by $2,1 billion
as against $0.2 billion, under the President ’s recommendation.
It Is clear that H.R. 4790 g*es far beyond the -requirements of
a ^cost-of-living adjustment especially with respect to the1 $2,1
billion relief given to :Individuals with incomes' in excess'of
$5,000.
-.; - 1p
.h %
™

- 9 ■Conclusion ....
In the light of nil the facts, the. conclusion Is inescapable
I must oppose H ,R., 1:790 because it Is neither •i n :the interest
of sound fiscal management of Che Government nor in the public
interest. It is unbelievable that any tax proposal would be
seriously promoted that would.produce a budget deficit and an
increase la the public debt of $ 2 ,1 billion in .the' fiscal year
of ;1 9 l 9 . .say:'¿y iy ^ ■ V . • ...• C 1
y
'^ ,
I must repeat, .that in the* present circumstances, there
should be no general tax reduction. As the President has
recommended, any revenue loss from tax-adjustments to relieve
taxpayers from the impact of high cost oil living should be
recouped by increasing the taxes on corporate profits,
The tax system is being called- upon to play a major role
in this country’s struggle against inflation. W e 1 have preserved
our financial strength, ,Let us not undermine it at the critical
time when, it can serve us best, - . ■/
In his State of the Union Message, the President said:
"When the present danger o f .inflation has
passed we should consider tax reduction based upon
a revision of our entire tax structure,
"When we have- conquered inflation, we shall
be in a position to move forward toward our
chosen goals/'
On my appearance before this Committee last year I indica­
ted what I conceive to be our chosen goal in taxation.
It
is the revision of the tax system on the basis of fundamental
principles.
In that revision, we should seek to correct
existing inequities.
I quote from. my. statement of last'May:
"I believe that a sound tax system should
meet the following essential tests. The tax
system should produce adequate revenue.
It
should, be equitable in its treatment'of different
groups.
It should interfere as little as possible .
with incentives to work and to invest.
It should
help maintain’the broad consumer markets that are
essential for high-level production and employment.
Taxes should be as simple to administer and as easy
to comply with hs possible. While the tax system
should he flexible'and change with changing
economic conditions, it should be possible to achieve
this flexibility without frequent revisions of the
basic tax structure. A stable tax structure, with
necessary flexibility confined largely to changes
In tax rates and exemptions, will mo.ke it easier
for business and. Government to plan for the future,"

68
-

10

.-

I have a firm conviction that4"pursuing these principles
we can together build a peacetime system oT taxation that
will play an important.role in- keeping this country prosperous

Exhibit 1

Table of. Contents
.. i .. • •
v' T
' ' ' 1“v *->^7 .
*
Estimated effect of H„R. U79O on budget receipts,
expenditures and surplus, fisca l years I 9 US and

’
Page Eo.

Exhibit 2

Wholesale,-, retail and consumers1 price indexes,

Exhibit 3

Estimated number of taxable income recipients and
their total individual income tax under present
law and under the proposed cost-of-living tax
adjustment credit of $UQ per capita, distributed .
by net income classes, in calendar year 19^8••**•••• ^5

Exhibit

Estimated number of taxable.income recipients and
their total individual ipebitti"ta?: under present law
: and u n d e r H;it, ¿ 790 , distributed by net income classes,

k

Exhibit 5

.,

Estimated revenue loss from each individual income
tax provision of H.R, ^790, distributed cy net
income classes, in calendar year 19^8 •. •<.......................

^

Exhibit 6

Comparison of combined normal tax and surtax rates
under present law and under H.R. ^790 * . . . . . . . . . . .

Exhibit 7

Estimated number of taxable income recipients distrib­
uted by the various percentage reductions provided .
under H.R. ^7 9 0 * ih calendar year 19 ^-S. . . * . . . . 20

Exhibit 8

Comparison of amounts and effective rates of individual
income tax under present law, H,R. ^790»
the pro­
posed cost-of-living tax adjustment credit of $Uo
per capita,.- for selected amounts of- net income under
$ 5 ,0 0 0 ,.,... . . . . . . . . . . 4............ . . . . . . . . . . ---- . . . * • 21-23

Table 1 Single person - Eo d e p e n d e n t s . . . . . . . * 21Table 2 Married person - Eo dependents...................22
Table 3
Exhibit 9

Comparison of amounts and effective rates of individual
income tax under present law and under the proposed
cost-of-living tax adjustment credit of $U0 per capita

^^29

Table 1 Single person - Eo d e p e n d e n t s 2e
Table 2 Married person - Eo dependents.................................................26
Table 3 'Married person - Two d e p e n d e n t s 1 • 28

69

_ i2 _
EXHIBITS
7
•;
.Exhibit 10

Table 1
Table 2
Table 3

Table of Contents
■
' ''
- 2-

Page Bo, 0\

Comparison of amounts and effective rates of
individual income tax under present lav/ and
under H.R. ^790... •«•• • < • • •.. ..............................
Single person Ho dependents . ..............................
Married person - Ho dependents . ..............................
Married person - Two d e p e n d e n t s . . . . . . . . . . . . . .

30-35
30
32
3^

Chart 2

Consumers1 Price Index, 1939 to Date, A ll Items,
Food and Clothing, 1935'_ ,39=:100, . . . . . . . . . .
follows p, 35
Effective Rates of Individual Income Tax,
Present Law and H.R, ^790.» Married Person,
Ho D e p e n d e n t s . . . . . . . A . . . . . , . , . . . , . , . , . . . . . . . . follows' p.35

Appendix A

Tables A - D.................................. ............ ........ ..36“*^

Chart 1

1

- 13 -

EXHIBIT 1
Estimated effect of H* R* U790 1/ on "budget receipts,
expenditures and surplus, fis c a l years 19^3 and 19^9
(In "billions of dollars)
* Receipts 7^^eRAitaures *^^v^’î'?'S7 0F
Fiscal year 19^-3
Without H» B. U79O

SH5 .S ..

•^ 3 7 . 7

With H. R, U790

. kk .1. ■

3 7.7

Decrease-under H*. B* ^790
Fiscal year-19^-9' '

1 .1 .

^.
.

$7-5
1. 6 «1+
l. l

' 0

. . .

Without Hr R, H79O

UH. 5

39*7

M

With H, B, U790

33.0

H o .l

- 2 .1

Decrease under K. R> 47^0
Treasury Department

'

6.5

* ......

o.U*

6.9

January l6, 1948

^Represents increase resulting from larger individual income tax refunds
under H, R. ^790»
1/ A b i ll introduced in the House of Representatives, 80th Cong*,
1st Sess*, on December 18., 19^7»
Source:

Estimates without H* R. 1+790 are from The Budget of the
United States Government for the fiscal year ending
June 30, 19^9«

EXHIBIT 2
Wholesale, retail and consumers* price indexes, 1939 to1 $ate
.
;
rear or i ¥^olesale .
... .
prices
m°nth

•(igggaoo)

: Consumers* prices 1/
Hetail
; (1935-39^100)
prices
v
i'j-ucs
. ~h i .
]( 1935-39=100). it a M . Tood .t01othlae

Monthly average*
1939
19U0
19U1
19U2
19^3
19UU
19H5
19A6
19U7

‘

,
.■
.

77.1
7 8 .6

S7..3 . .

98*8
1 0 3 .1
ioU. 0
1 0 5 .6
1 2 1 .1

? 151.7 f .
>'■' . / ;
January
107 . 1 • *
February
1 0 7 .7
108 f9
March
‘
no.2 , ,
April
'
l l l »0 ; .
May •
1 1 2 .9
June
I 2U.7
July
August
129,1
12 U,0
September
13
U.1
October
liovember ,
139>7
iUo#9
December
19U7 :
lU i. 5
January
February
iU'4 .5
March
1U9..5
April
147,7
May 5 V* . \
1 4 7 .1
* 14 :7 .6
June
’
■July
1 5 0 ,6
August
153-6.
September
157-H
October
153-5
November
159.5
December ,
1 6 2 .7 1 /

19U6 :

9 9 .0

99 .U

95*;2

1 0 0 .5

100.6

100.2

96*6

tioi.T

ios «3
1 0 5 .2 1 0 5 .5
1 0 6 .3
<12H;.9 ■
l i 6.'5 1 2 3 .9 ' : 12U. 2
131+wQ ‘ ‘ ‘ 123¿6
13 s . 0
1 2 9 .7
1 3 7 .6
I 2 5 .5 Ï36# X 138*6
lUl.U
“ 128 .U 139 . I 1 1^5.;9
15 5 .9
2/

IU3 .I,
1 4 2 .9
1 4 3 .7

139*3
2/

.

1 6 0 .2
2/

l4l.O
1 4 9 .7
1394 6 1 5 0 .5
i4 o .i
153*1
1 5 4 .5
1 3 1 .1 i4 i.7
i . 131*7 l42*‘6 1 5 5 .7
133*3 145*6 . 157*2
158*7
1 U1 .2
1 6 5 .7
i44.a 17 Ü 2 1 6 1 .2
1 6 5 .9
1*
4 5 .9 17U .Í
1*48.6 180*0 • 1-6 8 .1
1 7 1 .0
1 5 2 .2 167*7
• • 153*3 18 5.9; 1 7 6 .5

I 29.9
:• ... I 2 9 .6
I 3O.2

144.8
rU5.‘7‘
1U7 . 7,
1 5 6 .3
1 5 9 .8
1 6 4.3
1 6 7 .2
1 7 1 .5

172*7'
172*7
1 7 2 .7

177.2
177*2

177*1
1 7 6 .7

159*6
2/

179*7;
181.4
184.9
1/
2/
1/

153*3 I 8 3 .8
153*2 182.3-•
1 5 6 .3 189.5156 . 2 - 188.0,
196 . 0 ' 1 8 7 .6
157.1 190 . 5.
158,4 19 3 .1
1 6 0 .3 1 9 6 .5
1 6 3 .8 . ,203.5
1 6 3 .6 201 . 6.
164 . 9m 202.7
2/

Í 2/

1 7 9 .0
181.5

184*3
184*9
185.0
185.7
184.7
185*9
1 8 7 .6
I 89 .O
1 9 0 .2
2/

treasury Department "
.. January 16, 19^8 .
l/ For moderate*-income families -in large c itie s .
2/ Hot available..
; •. •
f ■
3/ Sstirnate from Sconomic Report of the Bresideiit-., January 14, 19^-8,
Source? Wholesale and consumers* prices! W.S, Department of
Labor; retail' prices 1 TJ.S. Department of Commerce.

EXHIBIT 3
Estimated a m b e r of taxable income recipients and their total individual income tax under present law 1/
and under the proposed cost-of-living tax adjustment credit of $4o per capita, distributed by net
income 'classes, in calendar year 1943
(Assuming personal income of $200 billion)
.

’•* #
To#tal tax
•
: Under
i Decrease under the $40;
: Made' nontaxTaxable
Taxable • ■
* Under : the $4q
1
t,
able
by
the
.
per capita tax credit’'
* under, the .
under *!
s present
rp-er
capita
present : $4o per capita : $4o per capita ]
■ -imArmfr' ' * Percentage "•
law
:.tax credits Anount ; distribution
: , tax credit
tax credit
law . :
(Humber ,o£ income recipients in thousands; money amounts in millions)
Humber of income recipients'

Het income
class
($000)

Under 1
1-2
2-3

5
Under 5
l

-

5 .332.7
20 ,533.1'
15.096.3
5,750.1
2,512.9
^ ,775.2

1,463*2
5 v lo
60S .1
10 -~ 25
1 U 9.5
25 - 50
5 1 .4 .
50 - loo
10.3
100 - 250
250 - 500.
1.3
500 - 1,000
•3
1,000 and over
.1
5 and over 2,234.1
Grand total

52 ,059 .“»

Treasury Department

3 ,090*2
15,700»7

. .

12,801*6
5,3?3«o
• 2 ,447.0 . .
39, “»3?-5
i ,“»63.2

603*1
i“»9-5
5 1 .4
* ' 10 ;3 * •

“»,332.“»
2 ,29“».3
357 .I

65.9
10 ,342*7 —
—
—
—
'— - -- '
—

1 .3
.3

»1

-...

2r2S“».l
4l,7l6.6

2 ,7 “»2.6

.;

10 ,3^2 .7
.

$ 252 .3.
79 .fr ' '$‘-17225*
3,039.6 : 2 ,057.7
• 981.9 ,
1 ,072.2
4,132.0
3 ,109.3
2 ,“»39.“» 1,977.7
5U.7
250*0
1 ,561.6
1 ,3 11.6

• 7.S

ll,52“».b* ': 3,536;5 ; •-2,9S3.3: *

93.0

1 ,626*5
2,464.1
2,l44.2.
1 ,378.9
’.. . 9$0.*0
321 .s
17 7 .7
124.9

1,478.3
i “»7.7
2,405*6
53.5
2 ,130*9
13.3
4 .5
1,37“».“»
#0
979.2
32a'.7'' '• > ’• ■.las
' 177.7
I f
'
124,9
I f
9,“»93*1

225.0

21,242*9- AS, 029.6

3 ,213.2

9,713.1

•

Internal Revenue Code, as amended by the Revenue Act of 19^5*
2/ Include,s normal "tax, surtax and alternative tax on net longterm capital gains*
3/ Dess than $50 thousand*.
if

~%f

Less than *05 percent»

lote:

ITigures are rounded and will not necessarily add to totals»

5*4^ :

30.6 •
33-3

1 5 . 9 ...

'
4 .7
1.3
.*4.. ...

.1
\ 4/ t¡ i f

3,
I f

•* 7-.0 ...

100,0
January l6, 19^&

,

•EXHIBIT 4

-Estimated number.of taxable.income recipients and their- total.individual- income. tax tinder present law 1/
•and under H*R. 4790, 2 / distributed-by.net income classes*- in calendar year 194S
(Assuming personal income of .$200 billion)

Total tax¿/

Humber of income recipients
Hot income
class
.'($000 )

Under 1

1-2
2

- ^

Under .5

Taxable
■under'
present
-law
5 *2 3 2 .7
20 , 5 3 3 .1
1 5 , 0 9 6 ,3
5 , 7 5 0 .1

■2,512.9
^?,775,-2 '

5 -1 0
10— 25
2 5 — 50
50 - -100
100 - 2 5 0 ,
250 - 500
500 - 1*000
1,000 and over

1,463.2
' 6OS.I
' 1^9.5
: 5I .4
■ 1 0 .5

5 'and. .over

2,284*1

*

Grand total

becreasi i tinder
tender , * Under 1
■’ H*El * »320 —
Made non—
taxable tinder
i Percentage
present ^
1^79 0 ;
law ».
•
• . •Amoyip.t o ; d is tr ib u tio n
H.R. ^790- ■
(Humber of income recipients in thousands; money amotints in millions)

;

1 .3
*3 '
.1

52»059

Taxable tinder
h *r % 4790

3 , 9 3 6 .0
1 7 , 6 6 0 .7
1 3 , 7 6 2 .9
5 , 6 3 5 .6
2,4 9 5 .9
43 , 4 9 1 .2

V

1,.296.7'
2,922*4*.
1*333«M
114*5 '
17*Q
■ 6,234,1

1,463.2
6 0 8 .1
1 4 9 .5
51 .^

—

— ..
. _

apri

— "■

*
I0-.3 Ï
• ' ■1*3 ; >-43 •
• ' A
: 2 , 2g4.1

:

^5,775.3 .....

6,284.1

- .~mmf
•"

$ IO3 .2
$ 25 2 .I
3,039^ • 1,770.24,182*0 . 2,733.4
2,489*4 , 1 , 6 6 7 .3 1 ,5 6 1 .‘6 . 1 , 1 0 3 .0
11,524.3 , 7.332,3.
1 , 6 2 6 .5
2,464.1
2|l44,2
1,878.9'
9-80,0
32 I .8
1 7 7 .7

1 , 1 3 3 .0

1,825*4
1,697.2
£,554.2 ■
844,3 :
• 2 S6',6
■I 6O.3 *

124,9
9,712.1

7 »6 1 5 .2

21,242*9

1 ^ , 9 9 3 .0

1 1 3 .6

$ 1%.Q
1-,269.4
1,443.6
321,6
458*6
4,142.0
%3»5
6 3 3 .7

446.4
324.7
I 3 5 .7
35*2
■1774
11.3
2,102.9
6,244.9

Treasury Department
...
,
'
Janix
lj Internal Revenue Code, as amended by the Revenue Act of 19^5*
2/ A b ill introduced in the House of Representatives, 80th Cong,-, 1st Sess*, on December 18, 19^7*
j / Includes normal tax, surtax and alternative tax on net long-term capital gains.
Rote: Figures are rounded and w ill not necessarily add to to ta ls.

2*4fo
2 0 .3
2 3 .1
1 3 .2

7 »3
6 6 .3

7.9

1 0 .2

7.1
5.2
2 .2
•6

.3
.2

33.7
1 0 0 .0

EXHIBIT

5

' Estimated revenue loss from-eaoH; individual income tax provision; of H.E, U79O, l/ distributed "by net income
f{ ;"/
a
-• v».,, ...
classes,, in. calendar year 19 b8
(Assuming personal*,income of $200 billion)
Tax decrease from each individual income tax provision of H.R. b790 2/
X

Total ' ;— ff----------

‘decrease*1 ’.Increase
-, in tax ’
the
5 under .; ’per capita
•,*HvR;H790 !¿xenrpti'on'

Net income
class
( $ 000 )

•v

* to

$600

i Allow t •
I Reductions of tentative normal tax
Additional’
—
-__x
.
.
Special
imarried,
.5
*
.
Increase
j
and surtaxr—
exemption
£
—rrrrl:—1------ ------*---------—<—
for
; »provision . »couples t ine " 1 lotau :
:
$2 0 1 ,6 0
1
for
the
¿to
split
i^t.hndard
.
¿¿from
•
a
•
^
^
persons m i n d ' \ K
r
e
p
^.• $67 l.b .5$;
2 ^ of.
excess
over 65 :
«incomes : - .
rtions i
.
: *,
over ifrSHO
( In'-mill ions of, dollars)

Under 1
1-2
-2 - 3
3 - b
b - 5
Under 5

«
”•
.$ ibs. 9 :$
9 6 .5
l,269.b'
v:5 2 2 .1
•
1.UH3.Ô- ; ‘:553*9
•
S2i; 6, ■ 26b.3 ■ r*
b5S.6
1 3 1 .2
b,ib2,0;;/ 1 ,5 6 7.9 •

5-10
10 - 25
2-5 - 50 . .
50 - loo ,
loo - 250
250 - 500
500 - 1,000
1,000 and over
$ and over
’rand t otal ,

8.1
• '-70.7
•73.0
..6s.b
•18.0
r2 38.2

8 7.9 ’ *te *19.2
U9 3 .3
63.8 . ?*.: 5S.3;’: k.7.4
kk$.h- •. • 20.1 ‘1 - *’ 2.2
32U ..7 :
s.b .'
*' .9
.3
135.7 ' • 1.8 •*
35.2
.2
- . 1/
‘ .1
• ,l7.b
1/
'lia
3/
6 Î-.' 3/ -v
2,102.9
30;0 *; ■
1 7 6 .8
6,2bb.9.

1 .7 V4 .7

" 26S . 2 *•

-i
, .

:—
" ■* .5
5*3
lit. 5
20.3

$ >bb.3
*■ 6 7 6 .5
■’ ^4• 0 -gi6a
‘
HS3.5
1 *. 8*2.1 • 1
292.8
2a
2,313.2

$bb*3 ; —
3U9 .2 $ 3 2 7 a
289.6
39-6
1 1 8 .7
35.2
32.2
83b.0 " U73 A

r..•' 69..6
;
.'296 a
.22b.b
- Ib2.2
• • bb.3
5.6
-.9
--j?
a
;
73
3
.2
2/

,;
%
68.1 , I- 2U8.7
256.O
;
20.9 /
•197.b
-. a 2 .3
V;
.b ..a;. 1 7 2 .8
: 8 9 .3
• - 3./ '
2 9 .b
* 3/
1 6 .b
3/
”1 1 .2
’ ‘ 91; 7 . .1 ,0 2 1 i2

2.b-‘
■.■ —

—

3/
a
a
a
3/
.3i/
2/
n3A
3/
3/

;i: .3

.

S0 3 .5

'

■a
:—
-- ■ — _

b.o
—
—
—

-A—
,i
— ‘ *• .2,b • b.o
—

-—?
8 . .2
bs6.9
$93.3
; 183.3. 3 te.i
b2. 1
9 6 3 .7
. 1 1 7 .5
-•2,9
•, —
\ *'• — ■’. —
-#a_.
s
—

12 0 .b

3.33^»u ;S3 6 .b .¿7 7 .^' i , o s b a

::93iS

.Figures- are. rounded and will not necessarily add to totals.

' r

.

i

12b .,8
253.I
1 9 7 ,4
1 7 2 ,3
39,3
29.b
i6.b
1 1 . 2 ...__
89b. b
9 3 6 ,5

Treasury Department*
-J, ' : ' V : " . 7 .* . ..
•/ ' ' •
.*; . .
*** r
January 16, 19b8
if A h ill introduced in the House of Representatives, 80th Cong., 1st Sess.r on December 18, 19^-7*
2/ The provisions are estimated consecutively, each individual loss depending on the cumulative effect of the proceed­
ing provisions. .
-V .
*/
3/ Less than $50 thousand*.
: •''
Notei

V

EXHIBIT 6

Comparison of combined normal tax and surtalx rates under present law 1J and under H.R. 479O 2/
Surtax net income
Combined normal tax and surtax rates
> Per c ent age-p 0 in t
H.R, 4790
* decrease (—) or
Present law
:
•
Hot
Tentative
Hates
after
/
:
•
Rates
after
:
increase. (+) in
Exceeding - ; exceeding.-í reductions . . : ...rates., compared
fates
• 5$ reduction
•*•,>: i ^*
'>
wJLth.j)resent law
"

%■

% X>:% ‘ . ■$1,000 •
. 1,'400
i.OOC 3 /
i , 4oo
2,000
. a,ooo . . .. .. .4,ooo 4,000
6 ,ooo
8 ,0 0 0
6 ,ooo
8, 00 0.
--•1 0 ,0 0 0

10,000

12,000

12,000
i 4 ,o co
16,000;
18, 000.

i 4 ,ooo
l6y ÔOOI S ,-600
20,000:

20,000
22,000 .

22,-000

26,000

32,000

)
)
)

Footnotes on next page#

22

, 2O. 9O

26

24.70
28.50
32-30

30
#

32

36.IO

**3 ,

40.85
44.65

bf

50-

26^,000
32,000
..3S,ooo

»'

■V- ' . .*■.-•.-ISI ,'p;
a; 19#OOP;. 'V; /*

2 #,

13 . 300^‘

20.000
I 5 . 2OÖ
16 . 72O
22 . 23O
25.650
29 .O 7O

32.49O

- 4. ©85.
- 4.465
-4 .7 5 0

50*35

U5.315

- 5 .0 3 5

56. •
59 •
' 62 -

53.20
56.05

58*90

47.^80
50:¿445

65

61.75

-5.3 2 6
-5 .6 0 5
-5 .S9 Ö
-6.175

53.Q10

55.575

‘

- 3*230
-3 .6 IÛ

40.185
42* 750'

36-765

H î.jc

- '-5.700$.
+1.000
-3.800
7 -4.180'
- 2.47 0
-2.850

53

■
........ ::
;’"

-

Continued on next page
l

V

" , ■. 4'

'¿!4>rX ^ ß ^

fNJ

EXHIBIT 6
Comparison of combined normal tax and surtax rates under present law 1/ and ^ider H*R* H79O
Combined normal tax and surtax rates
H»R» H79Ö'
Present law
Rates after
Bates after
Tentative
reductions
5/0 reduction
rates

Surtax -net income
Hot
exceeding

Exceeding

3Sf00o

HU,000 "-

$ HU,.000
50,000-

72

70,000

75
73

50,000
60,000

6o , ooq

70,000

80, 000.
90,000

SI
su

100,000

150,0.00

37
39

150,qoo

200,000

90

SOiOOÖ

<
{
0

0

200,000 and

[4^

100,000

90,000

-------- ——-----7 : '
Treasury department <

:

-

“

* ‘ N

Percentage-p 0 int
decrease (~) or
increase (+) in
rates compared

65* W '
6svU5
7**25

53*995:

-6.555#
~6*sHo
-7*1?5
~7*UlO

76.95
79#sp
¿2*65
SU..55

69*255

- 1 .6 9 5 ,
-7:*900 :
-8.265
-8.455

05*50
S6.H5

76.950

~

:

7U#iô

91

?J

61*560
6U-125
66*690

71*320
7U*3S 5

76.095

-Sj550
-8.6,45

77*305

-

*

January' lb* 19^3
'

l/ Internal Revenue Code* as- amended by the Revenue Act*of 19^5*
••
k
.
2/ A b i ll introduced in the House of Representatives^ SOth Congress, 1st Sop's#, on December 1&, 19^7*
Designates notch area under H*R. U79Q. The. exact .upper lim it of the notch area is $1,395*33*
kf Tax is.subject to the following maximum effective rate limitations^ under present law, 85*5 percent;
under H,R. U79O, 77 percent*
\
'
:
• I

l
M
VO
v

■

"EXHIBIT 7

Estimated number of taxable income recipients distributed by the various percentage reductions
provided under H; It* h79C> _!/ i® calendar year 19^2
.

$1 ,00 0

t
•

Reductions' of
actual present
lay 2/ tax

»
►

Humber of taxable
income recipients
,7 (millions)
•

,

-

1,395*83

Séductions of
Tentative
7'!
tentative normal
’ normal tax and- surtax. tax and surtax

*

;

-

’ "

0
0
0

1

-e
at— 1

0

.

, '

Surtax net income

(Assum-idg pers onâl ineofee of $200 billion)

$200

1,395-83
h,ooo

.

h ,0 0 0 and over

0

*

279.17

7- $20G-y

3 3 - 5$

SHO'

ShO and over

2h î-

23*77

;

to 20foy

. [' 2 cfo

'

7*9*
12.5*

m

$201.60 plus ih . 5^ $159.60 plus .10$
of excess ever
of excess over
$8ho
$79$
Total;

Treasury Department

30 ^

30$

-t|£79: 17
-

■

-

1*7

.

h5 .s

,

t

______ n C

inliff'

1/ A b i ll introduced in the House of Eepresentatives801h4Cpn g . , 1st Sess,, on December 12, 19^7
2/ Internal Bevenue Code, as amended by; ,the ^Revenue Abt of '19^5*

/

EXHIBIT 8
Table 1
Comparison of amounts and effective rates ©f individual income «tax under present law, 1/■ E.R. 4?9®, and the proposed cost-of-living
tax adjustment credit of $40 per capita* for selected amounts of net income under $5*000
Single person - No depend eat s

Effective rates

Amounts of tax
Net .income
'before
personal "Present
exemption
law

H.R.'
4790

$40 per
Present
capita
law
tax credit

if
$

600
700
800
900
968 y
1, Q'OQ

1,200
1V 500
2,000
2,5.00
3,000
3,500
4,000
4/500
5,000

.

: .9 5 . i 53
133
80
190
• 120
285
213
380'S • 289 .
485

' •=

$13
27
40
49

• 371
589
454
538
694
798
622
922 i 727
.

H.Ri4790

M

$40 per
H.R.
, capita
479O
^tax credit

- ' Decrease

in

Tax decrease as

Tax decrease as a
percentage ©f
a percentage
net income
of present
after present
tax
liability__ ‘__ _ tax liability
: $40 per
: $40 per
H.R. : $40 per
H.R. :
H.R. . capita
Capita
4790 : capita
tax credit 4790 ;tax credit 4790 : tax credit
CX X 3
*V*C? X cl û 3/
compared w i t h
present l a w

V

49

3 .2%
5 .4
7 -1
8*4
9.2

55
93
150

9-5 .
1 1 .1
12*7

245
340

M *i
15.2

5*3
6*7
8*0
ik)*6
11*6

445
549
654

16*2
16*8

12.4
13.0

17*3
. 17*7
.18*4

13*5
13*8
14.5

0
0

0

$ 19
38
57
•
76
89

$40 per
capita '
tax credit

"
-

Decrease in
amounts of tax
compared
with present law

$

17
36

. 758
: 882

0

0
0
2.1%
4*0
5*1

3-3
4*4
5*1

5*5
7*8
10.0
12.3
13.6

•

$

19

25
30
36
40
42.'
53

-

14.8
15.7 •
16.3
16.8
: 17*6 f

?o

72
91
114
135
155

M
.194

'

$

19
38
40
: 40
40

3*2%

3*2% ■" 100.0% . 100.0%
65.O
100.0
5.4
7©. 2
5.0
53*3
52.3
4.4
47*5
45*o
4*1
47.5

3*5
3*8
4*Q
4.1

. 40
40
40
40
40

. 4.2

40
40
40
40
. 40

3*8
3.8

3*3
2.7
2.0
.1*6

4*4
4*7
3*6

3*6

3*9
3*9
> 9

44*o
40.0

4.0 '

1*3
1.1
1.0
.

.

Treasury Department

*9
•8

'

1/ Internal Revenue Gode^ as amended by the.Reyenjie.Act of 1945*.
,
2/ A bill introduced in the House of Representatives, 80th Cong*, *lst Sess., on December l8, 1947,
2/ Point at which the tax under H.R. 4790 »is;the same as the tax under the-.$40 per 'Capita tax credit*
ZL/

Assumes* taxpayer is* n«t e h t i t t h e

special- exemption.

;either the aged *r the;.fclind.

: t

3.3SÎ

3*3%

3*7
4 .1

5*7
5*4
4*9
4 .6

4*4
4*5
4.6
5.0

37-o
25*3
24.0

42.1
30.1
21.1
14.0
10.5

23.5
22.8
22.4
22.1
21.1

8.3
6.6
5*8
5*o
4*3

■4*5
■4*6

5*4
4*2
4*3

4*7
4.8
4.8

January 16, 1948

•

4*4
3*7 v
3*1 .'
2*3 '
1*9 ;?
1.6
1.4
1.2
1.1
1.0

!

rc
f

!EXHIBIT 8
•Table'2

.Comparison of amounts and effective: rates of. individual income tax under present law, 1/ H.R. 4790, 2/ and the proposed co st—of—living
tax adjustment credit of.•.$40-per.'capita, for selected amounts uf net income under $5,000
Married person 3/ ~ No dependents

Amounts cf tax
Net‘income s
before :
personal :Present
exemption: law

$40 per
:Present
capita
479O :tax credit’ law

H.R. :

y{ •;
$' 1,200

1,500
:1,600
1,700
1,800

$

• 0
3S ‘
$
40
95
53
114 '

133
152

67
80

1,900
IVI tr
93
98
1/937 ■>/ 178
.....io4
. 2, r ;.5 . 190
2,500 .,285- : 1 7 3 .
.
3,000.. 38O
; 239
3,500
.4S 5
4,000. v .589
4,500

5,000

Effective rates

■. 324

424
502
•
494 ■
798 : 5 7 8 ;

* $40 per
capita
'tax credit

t

Decrease in
;.amount s of "
tax compared
with present law

H.3U
479°

$40 „per
capita
'tax credit
$

38
80
80
• so.
.80

Decrease in . Tax decrease?as
effect iv e frit es a percentage
of present tax „
compared with
liability (; •
present law
H.%

4750

ip4v-.»per
capit a
tax credit

3«2^
3-7
3*8

3 *2^

3*9 .
4;0 .

4 *7 '
4 *4 -

5*3*
5*0-;

'■: $40 per
HiRi : capita
4790 :tax or.edot
ioo*o$
58.0.: *
53*3 *
50.0 • ■
47*5 ’

45*4
4*1
4*2
4*1
4*1 . .44*9 . 4*0 ;,: • 44*0
- P 9 :> -'4*2
... 8a " 4*5 - :
3*2
39*3 * ;
2.7
80..
37*o - •
4*7
80
80

;8o
80
r 80
' 80

’ 4*5 :
4*1
4*3
4*4

7

2,3
2.0'
1.8
1 .4

32.7
27.7
27.7
27.4

Treasury Department
Internal Revenue Cede, as. .amended by -the .Revenue'Act rbf 1545* *"
. •.yr. „-Tt,
A bill introduced-in th’C House..of Represerifati-res> 80th Ceng., '1st Sess., on December l8, 1947*
Assumes only one spouse has income*
Assumes taxpayer is not entitled to the special exemption for either the aged or the blind.
Point at which the tax undsr H*R* 4790 is the same as the tax under the $40 per capita tax credit*

100,0%

84.2
70*2:
4o .2'
52.4 '
4^8

Tax decrease as a
pércentage of
net income
after present
tax liability____
: $40 per
H’
.R.
: capita
4790 :tax credit
3.3^
3*9 .
4**1
4*2

. 3.3^
*5*7
■*5*4
‘5*1
> 9

4*4

4*4

4*5
•.■4*4
■ 4 *4-

44*9
42.Ì
28.1
21*1

: 5V1"
'•-5 *4

1 4 .5
13.4
.11,5•
10.0

5*3
4*8
■5*0
5*2

'
.

.
•:;.

4*5
. 4*4
3*8 :
3 *1'
2.7
2.3
2.1
1*9

January lG, 1948

-

.

. *

EXHIBIT
T&ble•3
Comparison

if amounts

and. effective rates of individual income tax under present law, 1/fi. R. 4790, 2^/ and the proposed cost7of-living
tax adjustment credit of $40 per capita, f*r selected amounts of net income under $5,000
■;

Married person 3/
- •Effedite rates'

Amounts- of tax

Net incoine;
before ;
$40.- per
personal Present : H.R*
capita Present
law*
;
exemption
4790 :tax credit ;law

$

2,400
2,800
3,000
3 ,50Q
3,600

$

0
.0
$- 30
125
144

0
15-2
190
285

; 304

$ 53
80
146
160

173
:i86
3M 4 ••5/ 356 196
3,900
•361 - 2QÓ
4; O00 ' : 3S0
213
3,700
3,800

4,500
5,000

163
182
196 •
201 .
220

323
■ 342

.485'
■ 589

286
386

•

325
423

3.2$
5*4
6-*3
8;i
8; 4
8.7
9 .0
9*2

9*3
9.5
10; 8
.11*8

— Two dependents
*

Decrease in

:
î tax cïompared
: $40' per
: capita :
$40 per
47,90 :tax,ere dit:
capita
.4/: , ;
s-4790 tax oredit

‘
0

0

1*9%

0

2*7
4w2
4 .4

'1.0%
; 3 *6'
4.0

47'A’
4*4
4*7:
4*S
4*9
5 .1 . - 5*1 '
5 .2
5.1
5*3
■5*5.
. 6.4.
7*7

$ 76
99
110
139
144

•7 *2
8.6

‘*

150
I36. r
■ l60
162
167

.199
203

4

'Decrease in
effective rates
compared with
„present law

HiR. . ■4
. '
: $4<J P «
4790 ‘ 0aElta : H-R - : capita
.. . - ^ qredat; 4790 :tax OI;eiit

$ 76 .

3 *2 %

3*2%

152
160
160
160'

3*5
3*7
4.0.
4.0

5*4
5*3
4*6
,4.4 *

160
160
160
160
160

. :4*i
4*1 '
4.1
4 .1
. 4.2

160.■
160

*• Tax decrease as
• a percentage
•of^present, tax
’ pliability.

4.4
4.1.

100 ;o%
65.0
58.0
4&7
47.5
46.5
45*6 .

4*3
4.2

4*1

■ 44*9

' 4*1
4.0
3.6
3.2

44.7
44*0.

tax^Iiability^p

; $40 per
H.R. : capita
4790 ;tax credit

3#
3*7;
3*9'
4*3'
4*4 -

3*3% '
5*7 *
5*7 ‘
5*o
4*9

49-5
46.8 :

4*4
4*5

44*9
44*3

4*5
4* 6
4*6 ,

4*5
4*5
4*4
4.0
3.6 '

42.1

.

41.0

33*0

4*9

34*5

27.2

4*6

'

4*7
4.6

Januarylë, Ï948"

Treasury Department
Internal'Revenue ‘Code, as amended by the Revenue Act of 1945*
A bill introduced in the Hopse of Representatives, 80th Cong., 1 st Sess., on December l8, 1947*
Assumes only one spouse-has income*
'
*
Assumes taxpayer is not entitled t» the special exemption for either the aged Sr the blind.
Piint at which the t a x under H.R* 4799 is the same as the tax under the

100^0%
100*0
84.2
56.I
52.6

Tax, decrease- -as a
percentage ©f
net income
after present.

$40

P e r •capi-fca tax eredit,

EXHIBIT 9

Table

1

Comparison of amounts and effective rates of individual income tax under present law
the proposed cost-tof-living tax adjustment credit of $U0 per capita

1}

and under

Single person - Ho dependents
:
A
, of_ tax
,
. Effective
"Decrease
in
-Decrease m-Tax decrease -Tax
decrease
as
.
.
Amounts
.
,
.
»
„
.
•&
of
i\‘et income •
____________________________ t
r a t e s _______ amounts of * efiective *as a percentage*a percentage
hefore '•
*
î
*$U0 per
compared- rates
-! of present inet income
personal i Present +$U0 per capita^Present: capita : with
: compared tax
: after
exemption •
law
i
tax credit: law :
: present
* with
-¡lia b ility
¡present tax
-i
:
:
•
: " law
present law:
_________ : lia b ility
$

700,
$
. soo /
1,000
1,200

1,500 '
2,000
• • 2,500
• 3,000 '■
U,oco
5,ooo
. . •6,ooo.
........ 8,000-

%

$

32
- 57‘ • •
95
133

17
55.
95

. 190
*
;

;■ .

285
320
us 5

■rd :v 69U
922
• • ■1,169•1,720:

0

0

/■

150
2U5
3U0
io+5

7*1
9*5

n*i

T

12*
*lU*3
*15*2
-1 6 .2

65U . 17.3

882 18* 1+ •
1,129 .•19* 5''

*

1,6.80- /■■21vp;,.

5*5

/ 12*3
" 13.6
* lU .8

2,3076 : 23., 5 : ■ 23.1
U,23G
28*2
28*5
33*2
6,605
' 33*0
'■ ...19^22';, , 37*>
. . 37*3

50,000
75,000
100,000
250,000

'

25,137

- U3, l +77 .
63, 5Hl
;
•191,772

Eootnotes on next page

.

63,501

F-

•

.

Continued on next page

l

3*7

x?

3*1

10*5

1*3

8.3

2.3
• 1*9
1*6 :

.5*2
U.3
3*H '
2*3

1*2
■ . 1*0
' .8
• *6

1 .0
.8
.>

Uo.

.*2

UO
Uo
Uo
Uo

\ ■
■ ,* i
*

.

' 5*U
u .u

2.0
1*6

■

•7 • t .
5 :
'Uo' 7„ ' ,;*U'
‘ 1*7
Uo' '
•3
*9
J
.'♦6
Uo
r+2

J■

• 50.2
.
. 57*9
■
■
63.5 ■ 63* 5 ‘
76.7 .- 76. 7 , ;

25,097
50*3
- 52.0
^3,^37 •■
191, 732.

:

21*0

5 3

21.1
lU*0

2*7

Uo
„Uo ;
' . uo :
. ; 0, Uoi

. 16*3
17.0

100.0$
70.2
'U2*l
30*1

3*3

Uo
Uo
Uo
Uo

10.0

18,8

5*U$
5*0
,U .o

32
Uo
i+0
Uo

• 7*2

10,000:
2, 3^7 :
1 5 ,ooo: - ^,270 ; \
: 20,000: ,
• 6, 6U5 •
25,000
• 9,362

.

‘J

C*V[

•U
.2
*1

. *1
*

'•
;

I

*5

*U

*3
*3
. .2
*1
. *1
. .1

cn

.;

■

1'

"

.

- EXHIBIT $

;

.. . Tablé X - concluded

Comparison of amounts and e f f e c t iv e ra te s o f in d iv id u a l income ta x under present law 1/ and under
the proposed c o s t - o f - liv in g ta x adjustm ent c r e d it o f $H0 p e r ■c a p ita
•

S in g le 'p e r son ~ Ho . dependent s

-*
Amount s of ta x

Net income •
"beforC *
p erso n al » Presentlaw
•exemption •
$ 350,000
500,000
750,goo
1,000,000

¡Decrease in
as/ a
♦ a percentage
» amounts o f • e f f e c t iv e r
a
te
s
!*
percentage
; o f net income
•tax compared
‘> 4 0 per
compared
t
Present
>
a fte r
î
w it h ■
t $H0 per c a p ita fP re se n t ‘ c a p ita
tax
present
tax
w ith
î
ta x c r e d it î law ‘ tax c r e d it l present
^present
lav;l
i
a
b
i
l
i
t
y
l
i
a
b
i
l
i
t
y
*
i
law

$ 272,222
U07 .S 97
62H,022
2HO,lH7

$

272,122 •
*107, 8 5 7 . , .
623,922
s Ho , io 7

► .E f f e c t i v e .
t , * - -rates
-

i s S

21*6
23,2

sh; o

79 - 5$
21*6
23*2
SH*0-

$

Ho.
Ho
Ho
Ho-

Treasury Department
1/

'internal -Revenue,;Codef, as amended "by tlip; Devenue Act of. 19.H5*

* •Less than ; *0'5 Percent*.

VI
*
*
*.

J anua ry T 6| I9H2

1
ro
-von

-’

TSsSISyJi,

---.>

mm

.«*»■-■

EXHIBIT 9
Table 2 - concluded

Comparison of amounts and effective rates of individual income tax under present law 1J and under the proposed
”
: * *'
cost-of-living tax adjustment predit of $*40 per capita
Married person 2/ - Ho dependents
Amounts of tax

Het inoome
before
personal.1.:'''
exemptiOii-G'
$

250,000
350,000
500,000
^ 750,00 0

Present
'law:
$

1,00.0*. 000

191,3140
2 7 7 , 790 ;
1407,1465
623, 590 .

839,715

Effective rates
._______ r__ __:
i, ; - I ';
3^€).
»Present i $*40 ■
iper .capita
per capita*
IhW
it ax credit
tax crédit :
$

191,260
277,710

**07,385

79^
81; 5

623,510

83;1

839,635 '

8*4.0

i Tax decrease
Decrease, ini. Decrease in i Tax decrease fas a percent­
amounts of » effective
Jas a percents age of net,
itax compared irates comparediage of present tin,come after
iwith presentiwith present itax lia b ility ¡present tax
: lia b ility
i
law
i
law
i

76:-5f^
79*3
8115
83*1
8*1.0

Treasury Department ’ 0
'
X/ Internal Revenue Code, as amended by the. Revenue Act of 19*45<
2/ Assumes only one.spouse has income. " ^
Less than

.0 5

percent*

80
‘January l 6 , 19*48

EXHIBIT 9
Table 3
Comparison of amounts and effective rates of individual income tax under present law
cost-of-living tax adjustment credit of $*40 per capita
Marrie d person 2/ - Two dependents

if

and under the proposed

♦
v•
>»
Tax decrease as
Amount s of tax
; Affective rates [ Decrease in* Decrease in
•
Tax
decrease
l a percentage of
, ilet income*
* effective
« amounts of ♦
before
•
; $*40
[tax compared[rates compared las a. percent- 1 net income
! AO
Present
after
personal * Present
’per capita]
[per capita [with present[with present ♦age. of present »
,
present
law
• exemption ’
law
itax lia b ility ♦
[tax credit [
[tax credit
lav/
[
law
♦
tax lia b ility
$

2 ,5 0 0

2, gOO

$

95
152

3 ,0 0 0

•

- A,ooo
5*000
6 ,0 0 0
g ,000
•1 0 ,0 0 0

•

j

1

15,0 00
2 0 ,0 0 0
2 5 ,0 0 0
. 5 0 ,0 0 0

.$ .
...........

190
380

.

*429
63 s

589
798
1 ,2 9 2

1 ,13 2
1,70 2

l ,g 62
3 .6 3 9
5 .8 9 0
g, 522

2*4,111

7 5 ,0 0 0
U2,323
10 0 , OÔQ... 62^.301
25 0,06 0
190 ,^ 7 5 .
.350,000 276,925

0
0
30
220

3 ,> 7 9

5,730

8,36 2

23,951
Up , 163
62,1*41'
•, 190,315
276 , 765 .

Footnotes op next page.

3 . 81>

-*

....

5A.
6 .3

9.5-

5.5g .6

11 . g

13*3
lb . 2
lg .S :
2 U.-3 ’
29.5
'3*4,1
Us. 2
5&A

0
0
1 . 05&

1 0 .6
1*4.2

3-7.0

-

$ 95
152
160
160
160
160
160
160

3 . 8^
5A

5.3
H.o
3.0
2 .7
2 .0
1 .6

100 . 0$
1 0 0.0

'*4.0$
5*7
5*7
HA
-3'*6

g*4.2
*42¿1
2 7 .2
2 0 .1
12 . *4
g .6-

‘
160
HA .
l .l
160
.8
28.7
2-7'
160
.6
' 1*9
33 A
. U7 .9
.160
*3
.7
: 56. 2 .
;. 160 •
A
' •
.2
' 6 2 .1 ..
6 2 .3
[ 160 .
.2
;
*3 .
J 160 ■ :• . . -rl; ■ .
.1
7 6 .2
•...7&.i
...... * ._. — ■- a
160 - ••.
79.1,continued
.. 79.1on•next page

3 .1
2 .U
2 .0 '

: J
“ S, ,

,

lA .

2 3 .2

•:
i

:

1 .1
1*0 l
■. 6 "
.5

A
*3
.2

■v•

.
1

EXHIBIT 9
Table 3 - concluded
Comparison of amounts and effective rates of individual income tax under present law 3J and under the proposed
cost-of-living tax adjustment credit of $H0 per capita
Married person 2 / - Two dependents' '
Amounts of tax

Het income
before *
personal
exemption

Present
law

$

Uo6,6oo

500,000

750,000

1 ,000,000

622,725

.838,850

Effective rates
| Decrease in * Decrease .in
Tax decrease
_
-----^ amounts of * effective
is
aa percent­
$U
0
*tax compared, -1‘ rates
compared*as
Perccn
$1+0
•
.
4 ... f t , ,
. .J .
.
infi'A
CiT
irPBAn
Presènt
age
©f Tpresent
.per capita*
^per capita^with present ^with present
. law *tax credit*
ttax lia b ility
law
*
law
tax credit

$

1+06, l+Uo
622,565
832,690

s i . 3$
S3 .0
83.9

81.3m

83.0
23.9

$,

16G
160
160

Treasury Department
1J Internal Revenue Code, as amended by the Revenue.Act of I 9 U5 .
2/ Assumes only one spouse has income.
Less than

.0 5

percent.

t*
.*

-**. * f
. * /
. *

: Tax decrease
tas a. percent­
age of net
tincóme after
present tax
t 1iabi l i t y
v2;
.1
*' .1

January l6, I 9 I+8

Table
Comparison of amounts and effective rates of individual income tax under present law 1/ and under H.E., 4790 %]
Single person
~* Ho dependents
Decrease in î
* Tax decrease
*üffective rates 0 Decrease in] effective
ï Tax decreasesas a percent] amounts of°;rates comparedjas a percent- îage of net
,
♦
^ta,x c o m p a r e d p r e s e n t ïage of presentlincome after
‘Present] H.R. ]with present,,
' pa^
îtax lia b ility îpresent tax
law ;U7 9 0 U/;
law
..
~
? lia b ility

Amounts of tax

Hat income
before
personal
exemption

Present
law

H.R. •
4/

4790

0

1,200

19
57
95
133

1,500

190

27
^3
8Ò
120

2,000

285

213

2,500
3,000

3 80

, 600
soo
1,000

. 4,000
5,000

6,000
8,000
10,000
15,000

20,000 :
25,000 :

$

485
694
922
1,169
1,720

2 . 3^7

U.270
6 ,6U5
9,362 .

$

289
371

538

3* 2^
7*1
9*5

0
3 .3 ^
5.3

11.1

6.7

12.7

. 8 .0
10.6
11.6

1^.3
15.2
16.2

17^3
727 . 18. 4
19*5
950
1,442
21. 5 , ,
2,003
23.5
28.5
3,723
33*2
5,856
8,296
37. ^ .

12.4
13*5
14.5
15.8

18.0
20.0
24.8
29.3
33.2

19
30
42
53
70
72
91
114
155
194
219
277

344
5^7
790
1 ,0 6 6

3.2$
3*8
4.2
4.4
4*7
3.7
3*6
3.8
3*8
3.9
.3*7
3.5
3*5
3*7
3*9
4.2

100,-0$

3 . 37^

4.1
4.6
5*P
5*4
.4.2
H.3
.4.5
4*7
,4.8
4.-5
4.4
^*5

5 2 .6

44.0
3 9 .8

'37*0
25*3
24.0
23*5
22.4
-2 1 .1
I 8 .7
I 6 .I
1 4 .7
1 2 .8

11.9
11.4

5 .1

•

5*9
6 .8

Continued on next page

ootnotes on next page.

-si

EXHIBIT 10
Table 1 - concluded
Comparison of amounts and effective rates of individual income tax under present law 1/ and under H.K.
Single person ¿/ - No dependents
•
Net income •
before
personal.
exemption
$

50 »000

75,000

100.000
250.000
350,006
500.000
750.000
1 , 000,000

$

.
Amounts of tax
Present
law

H.R.
U790

: Decrease in î
Decrease in , effective
î Tax decrease
amounts of :rates compared:as a percentage
tax comPa**el ; with present :of present tax
; lia b ility
‘Present ; h .r . with present. • law
law
1
»
law
!1
+790
4
/
i
„effective rates
*

hJ

5*3 $

5 2 .0

2,655
4,497

6 .0

l o * 6i ; 10.3

57.0
69.0

6,508
19,335

6.5
7.7

•

7 1 .5
7 3 .^

8.0
8.2

7M

27,980
Uo, 9U7
62,560

75.6

84,172

45.0^

191,772

22,482 50.3 «
38,980 5 8 .0
57,032 6 3 .5
172,437 7 6 .7

2 7 s ,222

250,242 7 9 . 5 ;

407,897

366,949
561,462
755. 97^

25A37
43,477
63 ,541

624,022:
840,147

$

81.6
83.2
sH.o

$

8.3
8.4

10.2
10.1
10.1
10.0
10.0
10.0

Tax decrease
as a percentag
of net income
after present
tax lia b ility
XO.jfo

14.3
17*9
33.2
39.0

44.5
H9.7

•

52.7

January l 6 , 1948
Treasury Department
1/ Internal Revenue Code, as amended by the Revenue Act of 19^5- .
-1« ■iq 47
1/ A b ill introduced in the House of Representatives, 80th Cong., 1st S e s s .c n December IS, 19 7*
V
Single persons obtain no benefit under the income-splitting provision of H.K. /+79 0 .
5/ Assumes taxpayer is not entitled to the special exemption for either the aged or the blind.

EXHIBIT 10
Table 2

U79O 2 /
Comparison of amounts and effective rates of individual income tax under present law 1 / and under H.±t.
Married person 3./ “*
dependents
: Tax decrease
•
: Decrease in
Effective rates . Decrease in; effective
Tax decrease «as a percent­
Amounts of tax
‘Net income
» amounts of»rates compared as a percentage age of net
before
of present
: income after
’.tax compared;with present
personal
tax
lia
b
ility
¡¡present tax
H.B.
Present ,,
, .with* preseht:
law
Present
• lia b ility
law
;H
790
4/
;
exemption
U79Q 4/
law
law
100 . 0$
$
38 .
0
3. 2 $
0
38
1,200
55 .0
95

1.500
2,000
2.500

190
265

3.000

3go

4.000
5.000
6.000
g ,000

10,000
15.000

20.000

4o
106

6.3
9o

173

11.4

239
426
57S

12.7

14.7

742

16.O
17.4

1,577
2,185
4,047
6 , 39^

1,076

19.7

1,455

21,9
27.0
32.0

9,0g2

5,589

36.3
; 49.6
57.5

5S9
798
1 , 04?

25,000
50.000

24,795

100,000

43,092
63,12g

75.000

$

2,62g
4,006

16,592

30,013
44,964

63.1

2. 7 $
5.35
6 .9

g .o
10.6
11.6
12.4

l 4l
163
220

13,5
14.5

501
730

1,419
2 , 3gg

22.4
33.2
4o ,o

3,493

45.0

44.0

39.3

303

17.5
20,0

Continued on next page

ootnotes on next page,

55

g4
112

8,203

13,079
l g , lb 4

38.5
33*1
30,4
2S.S

3XKIBIT 10
Table 2 - concluded
Comparison of amounts a ad effective rates of individual income tax under present law l/ and under H.R. k j $ 0 2 j
Married person
ff ect iv e rat ès
Net income
before
personal
exemption

Amounts of tax
Present
'law

3 5 0,00 0
500,000
750,000

191 , 31+0
277,790
1+0 7 , 1+65
623,590

1 , 000,000

639,715

>

250,000

H.R.

1+790
$

k/

152,092

228,001+
3>A,37>t
539.3S6
733.899

’Present'" H.R.
5 law ‘H790 b j

76.5^
79.^
8 1 05
8 3 .1

gl+.O

— No dependents
» Tax decrease
: Decrease in
Decrease in*, effective
.Tax decrease *as."a percentage
amounts of crates ccmpared.as a percentage*of net income
tax compared 1 with present *,of present
’after present
“
tax
1m hi1v
^ax liability
swith Present :
law
:tax liability

71.9

lav
$ 39,21+S
1+9,185
62,591
gl+,203

7 3 .^

105,216

60 «8 v
6 5 .3
6 9 .0

:

15 *7 ^

ll+ . l
1 2 .5
1 1 .2
1 0 .6

20.5>
17.7
15.1+

62,1
6 7 .6

1 3 .5

66.6

1 2 .6

66»o

viiSI
Treasury Department

January l6, I9I+8

l/ Internal Revenue Code, as amended by the Revenue Act of 191+5»
.
_•,
2*/ A bill introduced in the House of Representatives^ 80th Cong., 1st Sess., on December 18, 19L+7»
3 / ' Assumes only one spouse has income.
x
, .
4/ Assumes taxpayer is not entitled to the special exemption for either the aged or the blind.

3XHIBIT 10

Table 3
Comparison of amount s and effective rates of individual income tax under present law 1/ and under HfR. 4790 2j
Married person j$/ "*
dependents
Hot
income
"before
personal
exemption
$

2,400

Tax decrease
as a percentage
Effective rates Decrease in * Decrease in
Tax
decrease
amounts of “ effective
Amounts of tax
of net income
tax compared ’rate s compared as a percentage after
present
of
present
tax
with urcsent*
present
Present* H*R*
tax lia b ility
lia b ility
Present
] H.R.
law
:
law
law ;4790 4/
law
* 4790 4J
76

0

3. 2 ^

0
2. 7 $
5 .3

3,000

H,000

190
300

OO
213

5.000

539

306

6.000
0,000
10,000
i 5 sooo

793

1,292
1,062
3,639

51+T
076
210
320

13*3
16 * 2
24.3

9 .1
-1 0 .9
1 2 .1
1 5 .5

20,000

5,090

657
,200
,906
, 3*1-6

29-5
34.1
40.2
56.4

10«3
20 «0
3 2 .0
3 9 .1

44 ,225
>179

6 2 .3
7 6 .2

44*2
60 ©5

0 1 .3
0 3 .0

25,000
50.000
75iooo

0,522
¿4, i l l

100,000

62,301

250.000
350.000
500.000

1 9 0 ,4 7 5

276,925
406,600

,601
, 9Uo

750.000

622,725
030,050

53 6 , U53

1,000,000

42,323

6o3
9*5
11 .O

10*6

79d

,965 . 83-9

$

3 .6

167
203

4.2
4*1

57-9
44.0
34« 5

3*3 $
3*9
4»6
4.6

251
4i6

4.2
5*3

31*4

4.0

32*2

6 2

652

6 .5
0*0

76
110

7*7

1,319
,'

2,23 3
3 .3 2 2

3*2‘

11 ©2

100. 0 ?

35*0

0*0

36.2

11.6

37*9
39*0
33*7
30*7

15*0
20.2
31.4

47-9

8,125
12,976;.-

13*3
l 6o2
17*3

1 0 ,0 76

1 0 .1

39,296
49,244

15*7
i4.o

62,6 60

1 2 .5

29.0
20.6
17*0
15*4

7 1 .0

04,272

73*3

105,005

1 1 .2
1 0 .6

13*5
12*6

6 5 .1
60 .O

#

39*7
66« 0

67*4
67.1
66« 2

65*7
January lb, 1940

Treasury Department
Footnotes on next page»

X?

EXHIBIT 10
y&bic 11 - concluded

f nnounts and effettive ratea of individuai incorno tax under prosent la« 1 / and under H.B* U 790
Collari son o
Footnotes!
1/

Internal Revenue Code, as amended by the Revenue Act of 19^5.

2/ ;A -bill introduced in the House of Representatives, bOth Cong., 1st Scss„, on
December lo3 I 9U7 «
7 / Assumes only one spouse has income*

', .
,
*
Assumes taxpayer is not entitled to the special exemption for either the aged

If

or the “blind#
V_»J
VJ1

I

Chart I

CONSUMERS’ PRICE INDEX 1939 TO DATE
All Items, Food and Clothing
I935-’39 =I00

Source:Bureau o f Labor S tatistics consum ers'price index fo r m oderate-incom e fam ilies in la rg e c itie s .

Office of the Secretary of the Treasury

P-3I6-A

C h art 2

E F F E C T IV E R A T E S O F IN D IV ID U A L IN C O M E T A X
Present Law and H.R. 4 7 9 0
Married Person, No Dependents

if
Office of the Secretary of the Treasury

B-833

83
r 36

-

APPENDIX
Table of Contents
Page N o ,
Table A-

Estimated number, of taxable and nontaxable
income recipients, their income;and
individual income tax under present law,
. in calendar year 19*+8.
,
V
.

,...

37

Table B

-

Estimated number Of taxable income recipients
under present law, their surtax net income
and combined normal tax and surtax, distrib- --- uted by surtax'net income‘brackets, incalendar year 19 *+8 . , ........... ..........

Table C

Estimated number of taxable income recipients
under present law, their net income before
exemptions, surtax net income and total tax,
distributed by net income classes, in calendar
year 19 *+8 ... .... 1 ......... ...................

Table D
Number »f taxable individual and fiduciary
...... returns, tax and net income, I913 -I9H 6 and
estimated for 19 *17- 191*8 ..................

•

39

—
.
‘ 1*0 ’

- 37 -

Table
Estimated number of taxable and nontaxable income reciuients,
their income and individual income tax under present lav/,, l/
.........
in calendar year 19^3
( Assuming personal income of $200 billion)
: Number'of t Amount of l Total tax
* income « income • (millions

-recipients ’•(millions of *of dollars)
♦(thousands): dollars) :
Total, a ll income recipients
Nontaxable income recipients
Taxable income recipients
Subject to surtax
Subject to normal tax
Subject to alternative tax
Treasury Department

!

71,573

$1^7.932

2/

19,519

15,020

2/

52,059
52.059

52.059 1/

23

132,912 2/
s 6 ,i o s y
s 6 ,o s j y
373/6/

$2 1 , 2^3
—

2 1 , 2*0

i s , 603

2,^53

137

Jo jiuary 1 6 , 19^3

l/, Internal Revenue Code, a.s amended by the Revenue Act of I 9 Ì45,
/ Net income before exemptions,
3/ The number of persons paying normal tax is estimated to be less than
500 smaller than the number paying surtax.
k/ Surt ax net income.
y
Normal tax net income,
6/ Net long-term capital gains subject to alternative tax.
2

84
JaTxLe B

~ ^

“

Estimated number of taxable income recipients underepresent law, lj
their surtax net incone and combined normal tax and surtax, dis­
tributed by surtax net' income brackets, ih calendar year 1943
(As surdnr; personal income of $200 billion)

! -e.
o
o
o

------r
:
Combined normal
;
Taxable income , :
Surtax
Surtax ne;t income : recipients cumulated : net income
;
tax and surtax
brack'ets
in bracket 2/
: f pom. hiaiiesit bracket : ■in bracket - i
.Humber . : Percent 1 Ahount : Percent 3 Amount ; Percent
(Humber of income recipients in thousands ; money amounts in millions)
.Under 2
6
2 —•4
4- C • - :
xri
r
0 wb
nt
o — 10
10 - 12
12 ~ I 1
*
l4.~ 16
l 6 —12
12 - 20
20 - 22
22 —26
26 - 32 .
32 - : 3? 4 • .
*Tg ^ 44
44: - 50
50 - 60
60 - 70
7 0 - so.
20 - 90
90 - 100
100 - 150
• 150 - 2C0
Over 200
. Grand total
Ireasury Department

100*00 53¿*4*49.*+
2 1 .5 0 1 0 ^ 9 9 .6
4*52 3*175.1
2**42 2 , 0 % .5
1.70 1 , 592.1
1*39 1,224*2

52 . 0 5 9 ,4
1 1 , 190*6
2 , 352*3

1,253*3
9 2 6 .9
725 .S
5 6 9 .4

;

335*5
322*5

27^*3
2 3 7 .0
1 7 6 .4
120*1
92 . 0

,

. 73*0
60 *54o*2
27.7
i a cOa
J~p
» .3
16*7

4.2

2 .2

2 .3 3
1 .8 5

1*42

9 9 4 .9 .. ,. 1*16
322*2
*89
*95
690*8
.30
»74
.63
■, 6 2 - ■ -503.5
50 2 .2
*50
*53
*46
.9 6
325.9
943*4
•1 .0 9
•5^
6
6 5 .0
.2 3
' .77
crc*
t>po
■.is
' 502.8
.4b
#1*4
394*4
474*4
*12
.55
326*4
»os
. 3O
227*2
’ *26
¿05
•04 *
165 . S
.19
*i4
118.9
. *03
«02
'342*7
.4o
*01
142.3
' .17
4
4)1.4
.47
1 .0 9

462*5

S6,l03.4j/

52.72
10.42
3*72
2.77
2.44

67*83 11,105.1
■1 2 .1 9
2 , 1 9 4 .3
734*2
3 .6 9

100 «00

533.2

5l4.2
441.9.
4o6.4
3 6 7 .1
3 2 8 .1
293 .O 2 6 7 .1

462*9
553.9
4io.6
3 2 9 .6
2 6 9 .7

338.0
24l.S
174*3'
132.3
9 S .3
289*7

2*10

1*93
1.74
1.56
l.4 o
-*
•

1 .2 7
2*20
2 .6 3

1.95
1.57
1*23
1 . 6l
I .I 5
*03
.6 3

1 2 2 .1
3 4 7 .0

1*30
.5 3
1 .6 5

2 1 , 0 5 6 .2

100.00

January l 6 , 1948

Internal' Revenue Code, as- .amended by the Hevenue Act of 19^5»
Uornal tax and surtax were obtained separately by’ applying the appropriate
rates to normal tax and surtax net income* Since normal tax net income is
somewhat less than surtax net income, these amounts w ill, differ slightly
from the result obtained by applying the combined rates to surtax net income*
| | Excludes amounts subject, to the alternative tax»
Less than *005 percent*
1/
2/

Note* Figures are rounded and w ill not necessarily add to totals*

Table C
Estimated number of taxable income recipients under present law^ d/,their net income before
•exemptions, surtax net income and total'tax/ distributed by net income classes, ;
in calendar year 1948
(Assuming personal income of $200 billion)
Net income
classes
($000)

Taxable, income
recipients
Number

i

Net income before
exemptions zf

Percentage
distribution) Amount

l

Surtax net income . :

Total, tax 3./

4
-4

. Percentage
) Percentage )
Percentage
i distribution £i Amount
. ■... • ' [distribution) . ' Amount • 5distribution
9

(Number of income recipients in thousands; money amounts in millions)
$ 252 .I
'$ U,228,1
3 . 2$
11.2$
*- 1.2$..
$ 1,327.2 . . 1.5$
Under 1
5,832.7
2 3 ,4. .
1- 2
20,583.1
18.6
3.039.6
39.6
. 3 1 *0 5 0 .8
.14.3
15,99S.3
4,182.0
21 , 9 4 7 .2
*3 ;., 5 0 3 .0
’ 28.1
29.0
2 5 .5
19*7
2 -3
; 15 , 0 9 6 .3
1 9 , 7 5 8.2
14.9
2,489.4
12,849.5'
11.0
14.9
3- 4
5,750.1
11.7 ,
7.4
1
1
,
1
0
2
.9
•
8.4
1
.
5
6
1
.6
7,908.0
4.8
9.2
4 -5
.2 ,5 1 2 .9
Under 5
103 »6U3 .1
6 0 , 0 3 0 .2
11,524.8
78.0
4 9 , 775*2
9 5 .6
5 4 .3
6 9 .7
8.8
2.8
1
,
6
2
6
.5
5 - 10
7
,
6
0
9
.0
1,463.2
7.1
7.7
9 , 457 . 3 . •
6.8
2,464.1
11.6
1.2 ' ' 9 , 0 3 5 .6
8 , 2 9 0 .8
10 - 25
■ 608..1
9.7
10..1
5,081.8
4 , 8 3 0 .2
--.2,144,2
1 U9 .5
5.6
25 - 50
.3
3 .«
8,8
2.6
3,286.0
3.8
50 - 100
■5 1 .it
.1
3,422.5
1,878.9
4.6
•980.0
ioo - 250
, i>61 0 .3
•1.1
1,458.5
1 , 3 5 0 .9
4/
428.6
250 - 500
3 2 1 ,8
.4
380.5
.3 \
1.5
1.3
s
500 - 1 ,0 0 0
.2
.8
226,3
.2
.3
. 19 9 .5
177.7
j/
'
.,000 and over ____ ^ .1
124.9
.6
.2
.1
13 1.2
1 5 8 .0
Over 5
4 5 .7
2,284. 1; '
2 9 , 2 6 8 .6
2 6 , 0 7 8 .2
22.0
x \
9,718.1
30.3
G-rand total
100.0
100.0
100.0
86,1 0 8 ,4
1 0 0 ,0
21,242.9 •
5 2 , 0 5 9 .4
1 3 2 , 91 1.7
January 16,
Treasury Department
1/ Internal Revenue Code, as amended by the Revenue Act of 19^5«
2J Includes amounts subject to the alternative tax.
3/. Includes normal tax, surtax,; and alternative tax on net long-term capital gains.
3E/ Less than ,0 5 percent.
/
> 81
; *
Hotel Figures are rounded and w ill not necessarily add to totals.

1

\j*
VO
I

Humber of taxable individual and fiduciary returns, tax and
net income, 1913~19*46 and estimated for 19*47*719*46
Yea,r
1913
1914 ■■
1915
1916

1917

i
:

-Humber of
returns
1/

i/
u

362,970 .
2,707,23*4

:

(In thousands of dollars)
$ 28,25*4 2/
1/
.
. . -Ux,o+6l/
b
67, 9 ++ 2 /
y
s 5,037,233
173.387
10 , 59.2 , 9 3 7 1 /
795,381 +/

3 , 392,863
" *+, 231,181
5, 518,310
3?569,965
3 , 681 , 2*49

1,127,722
1,269,630
1,075,05+
719,'387
861,057
661e666

1926
1927

.*+,270,121
U, *439,692
2, 501,166
2 ,+ 70,990
2, *4*40,9*41

I 92 S
1929
1930
1931
1932

2 , 523,063
2, *156, 0*49
2 , 037 , 6U5
1 , 525 , 5+6
1,936,095

1913
1919
1920
1921
1922

1923
192*4
1925

1,7*47,7*40
1,795,920
2,110,890
2,361,108
1936
1937
3,37i»++3
3,0*48,5*45
193S
1939
399593297
19*40
7.50+.6+9
IS*!!
17,587,^71
19*42
27 , 718 , 53+
19+3
+0,337,293
19*4*4
*42, *4*46,837
19*15 prel.* *42,76*4,062
19*46
36,800«000 g/
19+7 2 /
*4*4,000,000 "
19+s 2 /
*46,000,000
1933
193U
1935

treasury Department
footnotes-on next page*

Het income

Tax

13 , 392 , 7 7 6 .
17 , 691,620

20,228,959

13 , *409, 6s 5
1 5 , 0 +3 , 51+

6/

70+.265
73+» 555
732,+75
830,639
1,16*4,25*4
1 , 001,936
+76,715
2*46,127
329,962

37*4,120
511,*100

17,+97,383

19 ,+ 68 , 72 +
17 ,+71, 219
1 7 , +22,633

18,090,065
21 , 031 , 63+
20, *493, *491
13 , 692 , 58 +
9 , 297 , 01 s
7 , 919,588

7 , 372.660
6 , 3 *43,556
10 , 03 *4,106

657,+39
1 , 21*4,017
1 , 1+1,56 9

1*4,218,85*4
15 , 26*4,162

765,833
928 , 69*4
1 , *496, *403
3 , 907,951
8 , 926,712

12 , 671,537
15 , 805 , 9+5
23 , 558,030
*■
45, 902 , 88*4
67 , 0 6 0,^6 2

1+ , 590 , 01 s. 2 /
16 , 3 +7 ,+ 7 9 ■
17 , 225,933
1 7 ,*400,000 o/
2 0 , 600,000
2 1 , 2 *42,870

98 , 150,189

3/

hi

i
3/

132 , 9 1 1,67 7

January

16 ,

19*48

■-/

,-

hi

-

Table D - concluded
Humber o f taxab le in d iv id u al- and, fid u c ia r y retu rn s, ta x and
not income, 1913~19^6 and estim ated f o r I9H7—
Fo o tn o tes •
1/
2/

3/
bj

¿/

GJ

2/
3/
%]

Hot a v a ila b le » The t o t a l number o f taxab le and non taxab le returns
f i l e d were as fo llo w s : 1913 » 357 »593 ; 191^-* 357»5155 and 1915»
336,652.
•)
R e ce ip ts ( in clu d in g f in e s , p e n a ltie s , a d d itio n a l assessm ents, e tc -)
, fo r the f i s c a l year ended June 30 immediately fo llo w in g , as shown
in annual rep o rts o f the Commissidner o f In te rn a l Revenue*
Hot a v a ila b le *
;
.
In cludes war e x c e s s - p r o fit s ’ taxes o f $101,2^9,731 on in d iv id u a ls
and $103,gg7^9SV on p artn ersh ip s*
‘
Tax ba.se fo r taxab le return s w ith net incomes o f $ 2,000 and over*
There were 1 , 591,513 ta xa b le re tu rn s'w ith net incomes o f $ 2,000
and over, fo r which the t a x amounted to $ 675» 2,495H50*
Amount a f t e r the 25*-*percent red u ction provided by S e ctio n 1200 (a ),
Revenue A c t o f I92U*
Excludes a d d itio n s to l i a b i l i t y under the Current Tax Payment Act
o f 19^+3 amounting to $ 2 , 555 >39&»pOO*
Obtained from C o lle c t o r s 1 Monthly Report to Commissioner o f
Returns F ile d in. period Jan ua’r y 1 , I9U7 through Hovember 30 » 19^ 7 *
Estim ated*
r
'

Source:

Data fo r I916—A5 from ffS t a t i s t i c s o f Income*” ,

United States Savings Bonds Issued and Redeemed Through December

191+7

J>1,

(Dollar amounts in millions - rounded and w ill not necessarily add to totals)
“................ ""7
........... 1
...... . ’
'I'”" . ” ■
*
Amount
j Amount
¡Amount O u t - ‘ P e rce n t Redeeme*.
Iss u e d l / Redeemed l/ j sta n d in g 2/ o f Amount Issue-.
Series A-Di
Se ries A-1935
Series B - I 9 3 6
S e ries C-1937
S e rie s 0-193$
S e rie s D-1939
Se ries D-191+0
S e rie s D -I 9 I+I

1

J

( m a t u r e d ) ....
( m a t u r e d ) .,..
( m a t u r e d ) ,...
.............
..................................
.............
• . ...........................

i

E - I 9 I+I . . . . .................... ..
E - I 9 I+2 ..................................
E - I 9 I+3 . . . .......................
E-191+1+ . . . . . . . . . . . .
E - I 9 I+5 • • • • ................. . .
E - I 9 I+ 6 ............................... .
E - I 9 I+7 ..................................

T otal S e r ie s E

1
;

990

Total S e r ie s A-D . . . . . . . .
Series E:
Se ries
S e rie s
S e rie s
Se ries
Se ries
Series
S e rie s

255
¿+63

8
21
92
510

9 6 . 86%
9 5 . 1+6
81+.21+

1

!
1

669
1 ,0 3 6
1 ,2 1 9

219
236

983

52U

92

1+32

k , 755

1 ,8 9 2

2,861+

» .7 9

31+6

1 ,1 3 0

2 , 1+05
i+, 653

i +,267

159

1,1+77
6,672
10,919
12,751+
9 ,9 5 8
It-, 362
5,716

.................

$

2i+7
1+1+2 _
1+97

817

23.77
2 1 . 11+

1
j
j

1 9 .3 6
1 7 .5 6

1 ,2 5 2
1+50

5,821
3,110
3,266

23-1+3
3 6 .O 5
i+2 . 6 l
1+3-1+9
1+1.1+3
28.70
12.11

1+9,038

18,770

3 1,0 6 8

3 7 .66

5I+, 593

20,662

33,931

3 7 .8 5

T o tal S e r ie s A - E ..............

6 ,2 6 6
7 ,2 0 7

5,51+7
i + ,117

—

Series F and G:
Series F and
Se ries F and
Series F and
S e rie s F and
Series F and
Series F and
Series F and

G - I 9 I+I
191+2
G - I 9 I+3
G - I 9 I4I +
G - I 9 I+5
G - I 9 I+6
G - I 9 I+7
G -

* ...............
.......

206

1 ,3 2 6

1+96

2 , ¿9 I+

.............
.......

3,561+
3,693
3,11+6
2,991+
2,1+73

T o tal S e r ie s F and G . . . .

20 , 39I+

...........

................
...........
..

U n c la s sifie d s a le s and
redemptions ............ ..........................
T otal A l l S e r ie s 3/*
jy
£/

1,533
3 ,1 9 0

♦••••

In cludes accrued d is c o u n t.
Current redem ption v a lu e s .

2,832
3,21+7

532

1

1 3 . 1)1+
15.55
15.81
12.08

¿+¿+6
271

8 .6 1
1+.91

2 ,8 7 5

11+7
23

2,81+7
2 , 1+50

2,121

1 8 ,2 7 3

.9 3
10.1+0
—

:

121

75,108

151
- •i
2 2 , 931 +
!

-30
52 , 171+

L
3 0 .5 3

3/ Includes Series A-C (matured), and therefore does not agree with totals
under interest-bearing debt on Public Debt Statement.

Office of Fiscal Assistant Secretary
Treasury Department

■-

87
TREASURY DEPARTMENT
Washington

Press Service

FOR RELEASE, MORNING NEWSPAPERS,
Saturday, January 17, 1948.

S-603

The Secretary of the Treasury announced last evening that
the tenders for $ 1 ,000,000,000, or thereabouts, of 91 -day
Treasury bills to be dated January 22 and to mature April 22,
1948, which were offered January 13, 1948, were opened at the
Fédéral Reserve Banks on January l6 .
The details of this issue are as follows;

Total applied for
Total accepted

$1 539*292,000
1 ^002^890,000 (includes $40,840,000 entered^
on a non-competitive basis and accepted in
full at the average price shown below)

99 .752 .Eqiv. rate of discount approx. 0 .981$

Average price

per annum
Range of accepted competitive bids;
High - 9 9 .7 T 5 Equiv. rate of discount approx. 0 .890$ per annum
Low - 99.751
"
1
"
"
n
0.985$
"

(98 percent of the amount bid for at tie low price was accepted)
Federal Reserve
D istrict_______

Total
Applied for

15,815,000

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco

1,384,24.2,000
13 ,365,000
8 ,025,000
4.930.000

9.815 ,000

892,512 , 0 0 0

36.455.000
2 ,983,000
4,000,000
1 5 0 3 3 .0 0 0
12 ,305,000
40,024,000

3,365 , 0 0 0
8,025 , 0 0 0
4,930 ,00 0
1,915 , 0 0 0
12,285 , 0 0 0
2,977 , 0 0 0
4,000 , 0 0 0
14,913 ,0 0 0
10,269 , 0 0 0
37,884 ,0 0 0

$ 1 ,539 ,292,000

$ 1 ,002,890,000

2.115.000

.

TOTAL

Total
Accepted

0O0

1

88

TREASURY DEPARTMENT
W ash in gton
FOR RELEASE, MORNING NEWSPAPERS
Tuesday, Ja n u a r y 2Q, 1968.

P ress S e r v ic e .
S-604

S e c r e t a r y o f th e T re a s u r y Sn yder to d a y announced th e o f f e r in g s th ro u g h th e
Federal R eserv e B a n k s, o f l - l / S p e r c e n t T r e a s u r y C e r t i f i c a t e 's o f In d e b te d n e ss
of S e rie s B—i9n9.? open on an exch an ge b a s i s , p a r f o r p a r , t o h o ld e r s o f T re a s u r y
C e r t i f ic a t e s o f In d e b te d n e ss o f S e r i e s B -1 9 6 8 , i n th e amount o f $ 3 ,9 6 6 ,6 6 0 ,0 0 0 ,
which w i l l m ature on F e b r u a r y 1 , 1963. Cash s u b s c r ip t io n s w r ill n o t be r e c e iv e d .
The c e r t i f i c a t e s how o f f e r e d w i l l be d a te d F e b r u a r y 1 , 1968, and w i l l b e a r
in te r e st from t h a t d a te a t th e , rate* o f one and o n e -e ig h th p e r c e n t p e r annum,
payable w ith th e p r i n c i p a l a t m a t u r it y on F e b r u a r y 1 , 1969. They w a l l be is s u e d
in bearer form o n ly

$1,000,000.

P ursuant t o th e p r o v is io n s o f th e P u b l ic D ebt A c t o f 19Î11, a s amended,
in te r e s t upon th e c e r t i f i c a t e s now o f fe r e d s h a l l not have any exem ption,'' a s ; s u c h ,
under the I n t e r n a l Revenue C o d e, or law s am èndatory or su p p le m e n ta ry t h e r e t o .
The f u l l p r o v is io n s r e l a t i n g t o t a x a b i l i t y a re s e t f o r t h i n th e o f f i c i a l c i r c u l a r
released t o d a y .
S u b s c r ip tio n s w i l l be r e c e iv e d a t th e F e d e r a l R e se rv e Banks and B r a n c h e s ,
and a t th e T re a su r y D ep a rtm en t, W a sh in g to n , and sh o u ld be accom pa'nied b y a l i k e
face amount o f th e m a tu rin g c e r t i f i c a t e s .
S u b je c t to th e u s u a l r e s e r v a t i o n s , a l l
su b scrip tio n s w i l l be a l l o t t e d i n f u l l .
The s u b s c r ip t io n books w i l l c lo s e f o r th e r e c e i p t
the clo se o f b u s in e s s T h u rsd a y , Ja n u a r y 2 2.

p f

a l l s u b s c r ip t io n s a t

S u b s c r ip tio n s a d d re sse d t o a F e d e r a l R eserv e Bank or Branch or t o th e
Treasury D ep artm en t, and p la c e d i n th e m a il b e fo r e m id n ig h t Ja n u a r y 2 2 , v a i l be
considered as h a v in g been e n te r e d b e fo r e th e c lo s e .p f th e s u b s c r ip t io n b ç o k s .
The t e x t o f th e o f f i c i a l c i r c u l a r f o l l o w s :

89

UNITED STATES OF AMERICA
1-1/8 PERCENT TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES B-1949
Dated and bearing interest from February

1943
Department Circular,No.

822

I , 1943

Due February 1, 1949

TREASURY DEPARTMENT
Office of the Secretary,
Washington, January 20, 1948*

Fiscal Service
Bureau of the Public Debt

I.

OFFERING OF CERTIFICATES

1.
The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par, from the people of
the United States, for certificates of indebtedness of the United States, desig­
nated 1-1/8 percent Treasury Certificates of indebtedness of Series B-1949, in
exchange for Treasury Certificates of Indebtedness of Series B—
1948, maturing
fbbruary 1, 1943*
II*

DESCRIPTION OF CERTIilCATES

1* The certificates w ill be dated February 1, 1948, and will bear interest
from that date at the rate of 1-1/8 percent per annum, payable with the principal
at maturity on February 1, 1949* They w ill not be subject to call for redemption
prior to maturity«
2* The income, derived from the certificates shall be subject to a ll taxes
now or hereafter imposed under the Internal Revenue Code, or laws amendatory or
supplementary thereto* The certificates shall be subject to estate, inheritance,
gift or other excise taxes, whether Federal or State, but shall be exempt from
all taxation now or, hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any local taxing
authority*
3* The certificates w ill be acceptable to secure deposits of public moneys*
They will not be acceptable in payment of taxes*
4* Bearer certificates w ill be issued in denominations of $1,000, $5,000,$10,000, $100,000 and $1,000,000. The certificates w ill not be issued in regis­
tered form*
5* The certificates w ill be subject to the general regulations of the
Treasury Department, now or hereafter prescribed, governing United States certifi*
cates* •
III*

SUBSCRIPTION AND ALLOTMENT

1* Subscriptions will be received at the Federal Reserve^ Banks and Branches
and at the Treasury Department, Washington*' Banking institutions generally may
submit subscriptions for account of customers, but pnly the Federal Reserve Banks
and the Treasury Department are authorized to act. as o ffic ia l agencies.

JPHPJFT'
11

/

7

-r •
.: :

- ; ■:;' - v:: !' :

'

-

2

:

''

:'C:

-

2.
The Secretary of the Treasury reserves the right to reject any subscrip­
tion, in whole or in part, to allot less than the amount of certificates applied
for, and to close the books a s t * any or a ll subscriptions at any time without
notice; and any action he may take in these respects shall be fin a l. Subject t«r
these reservations, a ll subscriptions w ill be allotted in f u ll Allotment notices
Will be' sent out promptly upon allotment.
IV.
1.

PAYMENT

Payment at par for certificates allotted hereunder must be made on or

before February 2, 1918., or on later allotment, and may be made only in Treasury

Certificates of Indebtedness of Series B-1918, maturing February 1, 1918, which
will be accepted at par, and should accompany the subscription. The f u ll year’ s
interest on the certificates surrendered w ill be paid to the subscriber follow­
ing acceptance of the certificates.
' V.

GENERAL PROVISIONS

1. As fis c a l agents of the United States, Federal Reserve Banks are author­
ized and requested to receive subscriptions, to make allotments on the basis and
up to the amounts indicated by the Secretary of the Treasury to the Federal Re­
serve Banks of the respective D istricts, to issue allotment notices, to receive
payment for certificates allotted, to make delivery.of certificates on full-paid
subscriptions allotted, and they may issue, interim receipts pending delivery of
the definitive certificates.
2. The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the offer­
ing, which Ydll be communicated promptly to the Federal Reserve Banks.

JOHN ¥. SNYDER,
Secretary of the Treasury.

TREASURY DEPARTMENT
Washington -

(Statement by Secretary Snyder, on the
European Recovery.Program, before the
House Committee on Foreign A f fairs)
January 21, 1948
The President,, in his message to. the Congress recommended
that ¿6.8 billion be appropriated to finance the European
Recovery Program for'the 15-month period ending June 3.0,. 1949 .
The National Advisory Council on International Monetary and
Financial Problems has carefully considered all the .financial
aspects of the Program, The following statement, which was
approved by the Council for submission to the Committees of
the Congress, summarizes the conclusions reached by t h e .
Council on the principal financial aspects of the program.
First, as to the overall figure recommended by the President
to.be appropriated for the first 15 months, the Council has
carefully reviewed the procedures which have been used by the j
inter-departmental committees of experts in arriving at this
figure. These procedures involved a critical examination of
European needs and of availabilities in the United States and
in other major supplying areas, and:Careful estimates of
European dollar income and resources. The National Advisory
Council believes that this approach is sound and. has concluded
that the recommended amount is needed to achieve, the objectives
of the Program.
■The first matter of detail which I wish to take up is
the question of the .form in which aid should be extended to
Europe,-. • This assistance should be provided as a combination
of grants—in-aid and loans.
The criterion for selecting one
or the other form should be the capacity of the participating
countries to earn, in the years to come, the dollars which
would be needed to pay interest and principal. We must keep
in mind that the'se countries have already incurred an obligation
for'large annual payments of interest and amortization arising
from the dollar loans extended to them over a period of years
by the U T S . Government or the United! States private capital
market. We should take care not to insist that.these countries
contract additional dollar debts which will absorb so much of
their dollar earnings as to operate to the disadvantage of
future trade and private investment.
If the entire aid for
European countries were, to be on a loan basis, it would be
practically impossible for them to meet the-additional annual
charges from their- earnings of dollars, even after trade and
investment return to normal.
The proportion of total aid which
S -605

\

~2 can prudently be provided o n 'a loan basis must depend on the
estimate of the borrowing- country's capacity to repay in dollars
and also on the degree of flexibility which can be introduced
into the terms of repayment.
The International Bank may be expected to -finance part of
the capital requirements of the European countries, particularly
where they require the financing of permanent additions to
their equipment. It does not seem likely, however, that the
Bank will be able to carry the whole, or even the major,-part
of the Program which properly ought to be put on a loan basis.
We propose, therefore, that when the Administrator for* Economic
Cooperation decides, after consulting the National Advisory
Council, that it is desirable to extend aid on a-credit basis,
he will allocate the funds to the Export-Import Bank of
Washington, which will then make the loan as. directed and on
terms specified by the Administrator in consultation with the
National Advisory Council. This procedure.will enable the
Administrator to draw upon the broad experience of the ExportImport Bank, in the making of foreign loans. Incidentally, this
is one example of the manner in which the National Advisory
Council would perform its customary role, of coordination of
U.S. foreign financial policy. I shall be glad to describe this
role in greater detail if the members of the Committee wish me
to do so.
It is also important that the American business enterprises
be given opportunity to participate in the Recovery Program by
making new investments abroad, or by- expanding existing facili­
ties where the Program- calls for additional capital equipment.
In this way they will contribute to the restoration of Europe,
while at the same time they will be carrying out their own
programs for expansion abroad. But we must recognise; that new
investments would be made at a time of. great Uncertainty and
that investors may anticipate encountering difficulty in
converting their earnings or their .original principal into
dollars. To .facilitate-private. investment, therefore, it will
probably be necessary for the Government to guarantee the con­
vertibility into dollars of local currency'.earned by the invest­
ment or available for the repatriation of the original investment
While we may expect that the participating countries will try
to make dollars'available, it is possible that they will not
have adequate dollars to permit conversion'. The Economic
Cooperation Administration should not be expected to guarantee
American companies making these investments against normal risks,
but merely -to give them a ‘transfer guaranty. We propose that
not more’than 5 percent of the funds appropriated by Congress
for the Program should be obligated for these guaranties, and
that the guaranties themselves should not exceed the,amount of
the original investment and should not be extended more than
10 years from the termination of the four-year program,

Some people have argued that the participating countries
should pay for part of the Program by using up their gold-and
dollar assets in the United States, and by liquidating the
American investments of their own citizens.
I need not labor
the point that the European countries must have some gold and
dollar reserves to finance.their international trade if they
are to return to normal operations after 1952.
It should be
kept in mind that uhe Economic Recovery Program’ is. not intended
to cover the entire import requirements of these countries.
It
would be folly on our part to force the European countries to
use up their gold and dollar balances to a. point where they
would not have adequate funds to operate smoothly through
ordinary commercial and financial channels. By insisting that
the participating countries exhaust their gold' and dollar bal­
ances, we would merely add further instability to their monetary
systems. As a matter of .fact, all of the participating, countries
except Switzerland, Turkey, and Portugal have already reduced
their dollar balances to or below the amount which would normally
be regarded as s a f e .
When we turn to the possibility of liquidating European
investments in the United States, we must also look at the.
problem in terms of its long-run consequences.
These investments
annually earn a dollar- income, which will be used to cover part i
of the cost of the Program, and which will be used in the future/
to meet part of the cost, of imports after the Program ends.
Without these investments, the balance-of-payments situation of
th,e participating countries will be worse in the future, I
doubt very much that it would be wise policy for the United
States to require European countries as a general rule to
liquidate the property owned in the United States by their
nationals as a condition for receiving aid from this Government.
Even if. these countries could liquidate all of the property
owned by their citizens in the United States, they could not pay
for mere than a-small part of the Program. Vie estimate that as
of last June 30 the long-term dollar assets held by persons in
the participating'countries amounted to about $4.9 billion*
Of
this amount $ 1 .5 billion consisted of direct investments, and a
considerable part of the remainder also consists of holdings
which would be difficult to liquidate. Some of these assets are
already pledged for loans,, while for many of the countries in­
volved the amounts held here, are negligible.
Some of the governments, however, will decide to liquidate
some or all of their holdings so as to pay for imports.' In
practice this may be. an alternative to borrowing from the United
States. We certainly will not object to the governments using
these funds.
The question of policy for us to decide is the
extent to which we can help these countries in obtaining control
of these assets.
In the case of .unblocked assets, the only way
the European governments can get control of them under present

4

circumstances Is through the compliance of their citizens with
local l a w s . In fact, a' considerable portion of the assets
formerly blocked .in the 'United States has- teen, unfrozen as a
result of such action. While we do not have exact data on un­
blocked assets, wé believe the ‘
amount;is. comparatively small.
' A large part of the blocked, assets are-still blocked
because their owners .have not obtained'.from their own .governments’
the certification that there is no enemy interest in their- assets
which is required by the United States Treasury before the assets5
are unblocked.
The National Advisory Council and the executive
departments concerned with this matter are-giving-very careful
study to this problem. We hope to reach-a final'view as to the.
most satisfactory solution of this problem very shortly
It will not be possible to obtain /all the goods needed
for the Recovery Program in the United States, nor would it be
desirable■to attempt to do so.
Some commodities are in short
supply here, and purchasing abroad would leave more available
far our own population and would in many instances reduce the
net cost of the P r o gram . . The, needed amounts of food cannot be
obtained in the United States. A large percentage of the
requirements of grain, fats and nils, meat and other .agricultural
products can be procured only in.other countries of the Western
Hemisphere.
In this manner we can make It possible for countries1
:In the Western Hemisphere to supply larger amounts of foods and
materials to Europe and at the same time maintain essential
Imports from, the United States.
It is the opinion, therefore, of the National Advisory
Council- that the Economic Cooperation'Administrator should, be
authorized to expend .funds for the procurement of supplies for
the, Recovery Program outside of the United States . This would
relieve, pressure upon goods and-services: In short supply in the
United States, apd would In some instances h a v e •the further effect o f ■as sisting third countries .in maintaining, needed im­
ports from the United-States. We definitely would-not permit
the use of dollars to buy goods abroad where the 'supplies
available In the United States at reasonable prices are adequate
for our needs as well; as for thevrequirements of foreign coun­
tries.
In any case, all purchases would be made according to
an agreed program, land the administering agency would- control
the use of the funds appropriated by Congress.
In addition to
purchases In t h e 'Western. Hemisphere, there are special instances
where it may he in our interest to procure certain essential
products In one participating country for delivery to another,
making payment in dollars. For example, we might buy. steel or
coal in one participating country for delivery _,to another .

The dollars which are received would then he used by the sup­
plying country to pay for imports from the United States, thus
reducing the need for direct •expenditures by the United States
for aid to the supplying country.

■
• 93

^

if the Recovery Program is to be successful, adequate
measures for monetary stabilization must be -taken promptly and
with vigor by the European countries . At the Paris meeting the
16 participating countries undertook "to apply any necessary
measures leading to the 'rapid achievement of internal financial,
monetary and economic stability while maintaining in each
country a high level of employment." They have recognized that
recovery is not possible as long as inflation continues,^and
unless production is 'increased.
ÿhe measures which should be
taken must: vary somewhat from country to country, but the general
outline is :clear. Budgets should be brought into baldnçe rapidly,
so that the-necessary expenses of government can be met without
increasing the public debt and without increasing... direct
inflationary pressures.
In most 'countries modifications ir. tax
structures and control of expenditures, will be. needed. As
determined steps are taken, the trend .toward budgetary balances,
increased production, and steadying prices will all interact
upon one another to facilitate stabilization.
5
.
• The Administration proposes that each country receiving aid
from the United States shall enter into a separate agreement with
this Government, which will cover the terms on which aid will
be. given. The European signatories will undertake, to adopt the
financial and monetary- measures which, are necessary to stabilize
their currencies and to maintain-and establish proper rates of
exchange. These agreements will also cover such matters as.
cooperation with other countries, the proper use of 'the goods
supplied, and the establishment of ,a separate account for the
local' currency equivalent to the aid supplied in the' fo.rm of
grants. Moreover, each country would agree to supply the United
States Government with full information about any pertinent
aspect of the Recovery Program and to give a report on the Program
to its own people.
On the basis of the information which the
cooperating countries will give us, and also from the reports of
our own missions in these countries', we can be informed about
the situation and so be in a position to discuss with the'country
the measures which it has taken, or ought to take, to contribute
to the recovery of Europe and its own stability.
We have a direct interest in assuring that the aid We pro-"
vide to Europe makes a maximum contribution to t h e .reduction of
Inflationary pressures and the restoration of stability.
To this
end we propose that each participating country will'deposit in
a special account the local currency equivalent at an agreed
rate of exchange to the dollar cost to this Government of the
goods supplied through grants-in-aid. These accounts should be
drawn upon only for constructive, stabilizing purposes.
In
many^instances it will probably be best .either to let the accounts
remain Idle or to authorize the. use of this local currency to
effect a net reduction in the government's debt.
These accounts,
of course, will be available to finance some of our administrative
expenses -in connection with this program,
There .may be Instances
In which it might also be used for reconstruction or develop­
ment, or other purposes which would contribute to '

-

6

-

the' increase of production in the country.
In the view of the
National Advisory Council, such expenditures should he .undertaken
only in agreement with this Government.
I wish to make it clear that the National Advisory Council,
in considering the financial measures which the Europeon
■ countries should take, had very much in mind, the nece'ssity of
preserving the spirit of free and friendly cooperation between
■this Government and the European governments. X am sure this
couptry does not wish to dictate to these friendly countries
dither the- particular measures they should take,, or the exact
'manner in which they should be taken.
The adjustment of some exchange rates may be expected in
•the course of European. recovery.
Inflation in Europe in certain
instances has given rise to ex-chonge rates which result in an
over-valuation of the currencies in relation to the dollar.
This state of affairs has tended to hinder the exports of such
countries and, at the same time, to make imports relatively
cheap in terms of local currency.
In some cases countries have
■ resorted to export subsidies, by means of special exchange
' rates, or have used other measurest in conflict with our own
long-range international economic program..
a
The determination of an appropriate exchange rate Is a
very complex .matter, Involving the widest range considerations
relating .to prices, costs,-and balances of payments.
The dif­
ficulties In setting exchange rates under present conditions
*are such that, although the rates of some of the participating
countries will certainly have to be.adjusted, the timing of
these adjustments will vary ,from country tb country . Accordingly
it would not be good policy for us to insist upon an acrossthe-board modification of exchange rates before we extend aid.
The revision of rates of individual countries should instead
be considered as a part of a developing program, of internal
and^external stabilization in conjunction.with United States
assistance.' To e n s u r e ‘that these revisions will joe undertaken
where necessary, the Recipient countries will be asked to agree
that when, in the opinion of the United States Government,
their exchange rates are imposing an unjustifiable burden on
‘their balances of payments, they w i l l 'consult w i t h .the Inter­
national Monetary Fund about revision.
Countries which are not
members of the Fund Would be expected to consult directly with
the United States Government. The National Advisory Council is
making continual studies of the exchange rate problem and Is
the. agency directed by Congress to coordinante policy in this
matter.
After progress has been made .toward internal .stabilization'
In the European countries by balancing budgets, increasing
.production, and expanding trade,- the time will arrive when it
may be appropriate to make stabilization loans which would give

94
7 cip-'itine: countries
greater assurance to the people of the parti
_
>
.*$**.
that the stabilization véli he permanent. There is greaee
confidence in the stability of money if there is gold or dollars
in the hands of the central banks At the appropriate point in
the Program it would be well worth while to give countries this
additional assurance by extending a loan to provide monetary
reserves . If the loan is given prematurely, the reserves might
be dissipated through balance-of-payments deficits. A stabili­
zation loan to he effective should come when there is reasonable
assurance that«the internal situation of the country concerned
is satisfactory, and that it will he able to maintain its
; I
exchange rate at a stable level for a considerable period of
time.
It is not likely that this situation will be reached
immediately, but it is possible that,in-the course of 19 ^ 8 , and
probably in 19^9, some countries will be in a position, to use
stabilization loans effectively.. At the appropriate timeCongress may then be requested to appropriate-additional funds
to be used by the U.S. Stabilization Fund to make these loans.

sly.

' Finally., I should like to mi ike a brief comment concerning
the financing of the Program.
It would serve no good urpose
n order
to a s k 1the E u r opean'countries to put their own houses
if we, ourselves, adopted methods -which might accentuate
inflation in the United States-or upset our own economic
stability.
It is my firm opinion that,we should finance the
co h m e e d b u dget.
within ;
European Recovery Prog
sound .fiscal policy, we
fident that, so long a we pursue
shall be able to cover the
m m cost of the European Recovery Program
out of current revenues

oOo

L

TREASURY DEPARTMENT
;:.:ra §¡1

r;; j

... Washington

POR REiméà, MORNING, NEWSPAPERS, ' .f
Friday, January 23, 1948.

; ’: :

Press Service
No. S -606

The Secretary of the.. Treasury,; "by ‘this public "'notice,
invites tenders for $ 1 ,0 0 0 ,0 0 0 ,0 0 0 , or thereabouts,' of 9 1 -day
Treasury, bilie> ■for cash and. i n .exchange' for'Treasury bills
maturing January .,2 9 , •1 9 ^8 , ,'to be issued on a discount basis
under competitive: and.npn~competitive:bidding as hereinafter
provided,.. The.:bills-of this series.' will be1 dated'January 2 9 , »
1948 ,- and- will -mature. April 2 9 , 1.
9 4 8 , ;when:the :face amount will
be payable without.interest. ' They, will be' is-sued in bearer
form only, and. in denominations, of .$1 ,0 Ò0 ,;$ 5 ,0 0 0 ,: $ 1 0 ,0 0 0 ,
$1 0 0 ^0 0 0 , $ 5 0 0 ,0 0 0 .,..and $ 1 ,0,0 0 ,0 0 0 .(maturity value).
Tenders will; be received at Federal Reserve";Banks •and
Branches up to. the. closing hour, two o .1clock p.m., Eastern
Standard time*. Monday, January 2p,, 1948. ' Tenders will not be
received at the Treasury Department, Wàshington. ' Each tender
must be for an even multiple of. $ 1 ,000,, and in the case of
competitive tenders the price offered m u s t ’be expressed on the
basis of 100 , with not more than three .decimals, e . g ., 99 .92$, 5
Fra^tibna. may not be used,. It is .urged that tenders be made
on the printed forms and forwarded in.the special envelopes
which will be supplied.by Federal Reserve Banks or Branches
on application-therefor.
t
.....
:
Tenders will be received without deposit from incorporated
banks and trust•companies and from responsible■and recognized
dealers -in investment securities, ..Tenders from others must be
accompanied by payment of 2 percent .of the'face 'amount•of
Treasury bills-, applied for,..unless the tenders 1 afe Accompanied
by an express -guaranty of.payment by :an incorporated-bank or
trust company.
■' .‘
Immediately after the closing hour, tenders will be opened
at the Federal Reserve Banks and Branches, following which
public announcement will be made by the Secretary of the Treasury
of the amount and price range of accepted bids . Those submitting
tenders will be advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to
accept or reject any or all tenders, in whole or in part, and
his action in any such respect shall be final.
Subject to these
reservations, non-competitive tenders for $ 200,000 or less
without stated price from any one bidder will be accepted in
full at the average price (in three decimals) of accepted
competitive b i d s . Settlement for accepted tenders in accordance
with the bids must be made or completed at the Federal Reserve
Bank on January 29 , 1948, in cash or other immediately available

g* i-

.funds or in a like face amount of Treasury bills maturing;
January 29, 19^8.
Cash-and exchange tenders will receive equal
treatment.
Cash adjustments will be made for differences be­
tween the par value of maturing bills accepted in exchange and
the issue price of the new bills.
The income derived from Treasury bills; whether interest
or gain from the sale or other disposition of the bills, shall
not have any exemption, as such, and loss from the sale or
other disposition, of Treasury bills shall not have any special
treatment, as such, under the Internal Revenue Code, or laws
amendatory or supplementary thereto.
The bills shall be subject
to estate, inheritance, gift or other excise taxes, whether
Federal or State, but shall be exempt from all taxation now or
hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any
local taxing authority. For purposes of taxation the amount of
discount at which Treasury bills are originally sold by the
United States shall be considered to be interest. Under Sections
k2 and 117 (a) (l) of the Internal Revenue Code, as amended by
Section 115 of the Revenue Act of 19^1, the amount of discount
at 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, the owner of Treasury bills (other
than life insurance companies) issued hereunder need include in
his Income tax return.only the difference between the price paid
for such bills, whether on original Issue or -on subsequent
purchase, and the- amount actually received either upon sale or
redemption at maturity during the taxable year for which the
return Is made, as ordinary gain or l o s s .
Treasury Department Circular No. 4lB, as amended, and this
notice, prescribe the terms of the Treasury bills and govern
the conditions of their issue.
Copies of the circular may be
obtained from any Federal Reserve Bank or Branch..

0O0

96
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS
Tuesday, January 2 7 , 1 9 4 8 .

Press Service
No. S -607

The Secretary of the Treasury announced last evening that
the tenders for $ 1 ,000,000,000, or thereabouts, of 91 -day
Treasury bills.to be dated January 29 and to mature April 29 ,
1948, which were offered January 23 , 1948, were opened at the
Federal Reserve Banks on January 2b.
The details of this issue are as follows:'
Total .applied for - $1,546,942,000
Total accepted
- 1,001,464,000 (includes $56,438,000 entered
on a non-competitive basis and accepted in
full at the average price shown below)
Average price - 99-750 Equivalent rate of discount approx. 0 .990$
per annum
Range of accepted competitive bids; (excepting two tenders
totaling $ 150 ,000)
High - 99.765 Equiv. rate of discount approx. 0.930$ per annum
Low - 9 9 . 7 4 8
"
"
»
»
"
0 .997$ ”
”
(43 percent of the amount bid for at the low price was accepted)
Federal Reserve
District______

Total
Applied for

Total
Accepted

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St, Louis
Minneapolis
Kansas City
Dallas
San Francisco

$

$

11,495,000
1,354,299,000
5,STO , 000
6.240.000
12 ,090,000
7.485.000
49.658.000
5 .802.000
6 ,185,000
15.778.000
9,670,000

6 2 6 70.000

11,495,000
877,464,000
3.570.000
6.240.000
12.090.000
5.485.000
24,.098,000
5 8 0 2 .0 0 0
6 .185.000
1 5 ,7 ^ 8,000
9.670.000
23 .587.000

$1,546,942,000

$1,001,464,000

.

TOTAL

0O0

.

TREASURY DEPARTMENT
Washington
fOR RELEASE MORNING NEWSPAPERS
Wednesday, January 28, 1948

97
press Service
No, S-608

Nellie Tayloe Boss, Director of the Mint, announced today that
arrangements had been made for the Mint Bureaus 156th annual »tria l of the
coins», with the Philadelphia Mint as the scene and February 11 as the date.
The personnel of the "court» before which the triad is to be held w ill be
the members of the Annual Assay Commission* Twelve members of the 1948
commission have just been appointed by President Truman, Three others are
designated by statute.
Such a commission meets each February in Philadelphia to determine
whether coins produced by the various Mints during the calendar year
recently ended were of proper -weight and fineness. The tr ia l is conducted
in accordance with provisions of law fir s t laid down in 1792 at the sugges­
tion of Alexander Hamilton, fir s t Secretary of the Treasury, The Director
of the Mint is required to be present,
Mrs* Ross w ill convene the commission the morning of February 11 for a
two-day session. Named by the President as members are Howard M* Abbott,
Hardesty Chemical Coe, Inc*, New York; Capt, 0#H. Dodson, Bureau of Naval,
personnel, Washington; EoM, Kaufman, 3914 Revere Drive, Toledo, Ohio;
August C, Stenger, 3308 Hillen Road, Baltimore; Charlbs J# McGrath, 46
Columbia-Road, Dorchester, Mass*; Mrs, Margaret M. Cobb, 36 Huron Street,
Oakland Beach, R ,I*; Thorras Dannaher, Manchester, Conn*; Mrs, Reeve Schley,
Far H ills, N* J . ; C*A, Young, Greenwood, S,C*; Richard J# Finnegan, Chicago
Sun-Times, Chicago; Dr, Wilmer Souder, National Bureau of Standards,
Washington; Mrs* Irvin Reid, 121 34th Street, Newport News, Va, The
statutory members are Judge William H* Kirkpatrick of the U#S# D istrict
Court for Eastern Pennsylvania, Philadelphia; Preston Delano, Comptroller
of the Currency, Washington; Joseph Buford, Assayer of the UoS* Assay O ffice,
New York City*
Committees on counting, weighing and assaying will be named from the
commission’ s members, and these w ill supervise the t r i a l ’ s procedures#
The/first step in the tr ia l is to open the pyx box, in which specimen
coins are stored, and determine that the count of its contents is correct#
Into the pyx box throughout the calendar year goes one specimen coin from
each lot of 1 0 ,0 0 0 silver coins minted#
After the count is verified, sample coins are removed and weighed.
Other coins are turned over to the committee on assaying for chemical tests
to verify their silver content# Finally, a number of coins from each of the
three Mints — Philadelphia, Denver and San Francisco — w ill be melted
together and the silver mass assayed©
Upon completion of its work the commission wall prepare a formal report#
The commission members receive no pay for their services, but their
expenses are defrayed* Each member receives a bronze medal commemorating
the tr ia l 0
The 1947 silver coin production of the Mints totaled 254*916,051 pieces
with a total value of $35 *323 , 425 #50 *
- 0-

98

TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS
Thursday, January 29, 19^8„

Press Service
No. S- 6 09

Secretary Snyder today characterized the use of United
State's Savings bonds to secure investments in private com­
panies or other enterprises as contrary to the purpose and
spirit of the savings bond program.
"The plan is definitely misleading and the Treasury
strongly disapproves of the device as opposed to sound fiscal
policy as well as to the interests of the general public,"
the Secretary said.
As brought to the attention of the Treasury, the plan
becomes operative when a company invites investors, and
guarantees to each the full amount of his investment in ten
years even though the venture is not successful.
The supposed
guarantee is carried out, for example, by the participant
putting up $5,000 of which $3/750 is invested in Series E
Savings Bonds and the remaining $1,250 goes to the company.
The latter amount is represented by stock or some other form
of participation issued by the company. When the savings
bond matures in ten years the investor receives the face
amount from the Government.
The guarantee by the company of the return of the invested
principal at the end of ten years is misleading, the Secretary
said, since actually the only principal invested in the
company is $ 1,250 and the investor could lose that ^amount.
That the bonds purchased with the $3*750. are worth $5*000 at
the end of ten years is not due to any inherent worth of the
company, but to the fact that the United States Government
pays interest at the rate of 2 .9% compounded semi-annually on
Series E Savings Bonds if held to maturity.
Savings bonds are the best and safest investment obtain­
able, the Secretary pointed out, and the Treasury has made
it possible for any person to purchase them directly in his
own name and at any time at the approximately 25,000 issuing *
agencies throughout the country.

oOo

TREASURY DEPARTMENT
Washington

FOR RELEASE,- MORNING NEWSPAPERS,
Friday, ’January 30, 1948.

Press Service
No, S.-610

' The Secretary o f ;the 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 maturing February 5 ,
1948, to be issued on a discount basis under competitive and non-/
competitive bidding as hereinafter provided.
The bills of thisY^
series will be dated February 5 , 1948, and will mature May 6 ,
1948, when the face amount will be payable without interest.
They 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
(maturity value).
Tenders will be received at Federal Re s e r v e .Banks and
Branches up to the closing hour, two o'clock p.m., Eastern
Standard time, Monday, February 2, 1948-. Tenders will not be;
received at the Treasury Department, Washington.
Each tender
must be for an even multiple of $ 1 ,000, and in the case of compe­
titive tenders the price offered must be expressed on the basis
of 100, with not more than three decimals, e. g., .99 .925 . Y
Fractions may not be used.
It is urged that tenders be made on
the printed forms and forwarded in the special envelopes which
will be supplied by Federal .Reserve. Banks or Branches on applica­
tion’therefor.
v
. . .
.
Tenders will be received without deposit from; incorporated
banks and trust companies and from'responsible and recognizeddealers in investment securities.
Tenders from others must-be
accompanied by payment of 2 percent of the face amount of. Treasury
bills applied .for, unless the. tenders, -are. accompanied by an
express guaranty ..of payment by an incorporated bank .or trust- 1
company.
'•
. .
,
•
Immediately after the closing hour, tenders will be opened
at the Federal Reserve Banks and Branches, following which public
announcement will be made by the Secretary of the Treasury of the
amount and price range of accepted b i d s . Those submitting tenders
will be advised of the acceptance or rejection thereof.
The
Secretary of the Treasury expressly reserves the right to accept
or reject any or all tenders, in whole or in part, and his action
m any such respect shall be final.
Subject to these reservations,
non-competitive tenders for $200,000 or less without stated price
r°m any one bidder will be accepted in full at the average price
i m three decimals) of accepted competitive bids.
Settlement for
ccepted tenders in accordance with the bids must be made or
ompleted at the Federal Reserve Bank on February 5 * 1948, In
ash or other immediately available funds or in a like face amount

2
of Treasury bills featuring -February 5* 1948.
Cash and exchange
tenders will receive equal treatment.
Cash adjustments "will be
made for differences between the par value of maturing bills
accepted in exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest
or gain-from the sale or other disposition of the bills, shall
not have any exemption, as such, and loss from the sale or
other disposition of Treasury bills shall not have...any special
treatment, as such, und„er the Internal Revenue Code, or laws
.amendatory'or supplementary thereto.
The'"bills shall be subject
to estate, inheritance, gift or other excise taxes, w h e t h e r -b;.
Federal'or State, but shall b e .exempt from all taxation now or
hereafter imposed on the principal or interest thereof by any..
State, or any of the possessions of the United'States, or by
any local taxing authority.
For purposes of taxation the- amount
of discount at which Treasury bills are originally sold by the
United States shall be considered to be interest.! Under;
Sections 42 and 117 (a) (l) of the Internal Revenue Code, as
amended by Section 115 of the Revenue Act of 1941, the' amount
of discount at which bills issued hereunder are sold shall not
be considered, to accrue until such bills shall be -sold, redeemed
cr otherwise disposed of, and such bills are excluded-from con­
sideration as capital assets. Accordingly, the owner of
Treasury bills (other than life insurance companies) "issued,
hereunder need include in his income tax return only •
'the
difference between the price paid for such bills, whether on .,'
original issue or on subsequent purchase, and' the amount
actually received, either upon sale or redemption at maturity
during; the taxable.year for which the return is made, as
ordinary gain or l o s s ,
Treasury Department Circular No. 4l8# as amended, and this
notice, prescribe the terms of the Treasury bills -and govern
the conditions of their issue.
Copies of the circular may be
obtained from any Federal Reserve Bank or Branch.

oOo

nu
n
u
TREASURY DEPARTMENT
Washington

FOR IMMEDIATE RELEASE,
Thursday, January 29, 1 9 4 8 .

,

Press Service
N o . S-oll

The Secretary of the Treasury today announced the subscrip­
tion and allotment figures with respect to the current offering
of 1-1/8 percent Treasury Certificates■:of Indebtedness of
Series B-1949, to be dated February 1, 1948.
Subscriptions and allotments were divided among the several
Federal Reserve Districts and the Treasury as follows:
Total Subscriptions
Received & Allotted

Federal Reserve
District
Boston
New York •
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury

$

• .1

TOTAL

\

1 1 8 ,3 0 1 ,0 0 0
l , o o 6 ,0 8 9 ,0 0 0
. 4 7 ,6 8 9 ,0 0 0
9 2 ,9 8 6 ,0 0 0
33 , 2-^,000
71 , 410,000
2 6 2 ,9 4 5 ,0 0 0
8 2 ,6 6 1 ,0 0 0
6 1 ,5 7 8 ,0 0 0
1 1 1 ,8 7 5 ,0 0 0
6 0 ,7 3 9 ,0 0 0
2 3 7 ,4 6 0 ,0 0 0
2 ,7 1 3 ,0 0 0

$ 2 ,1 8 9 ,2 9 0 ,0 0 0

By arrangements made between the Treasury and the Federal
*ve System, holdings of the System of maturing» certificate;
amounting to $1,614,072,000 will be presented for cash redemp­
tion on February 2.

oOo

101
CAUTION:

HOLD

FOE

RELEASE

(The., following correspondence is for release at
12 O'clock, NOON, MONDAY,, FEBRUABY 2, 194-8.)

My dear Senator;
You w ill recall that when I appeared before the Senate.Foreign
Relations Committee to discuss -the financial aspects of the European
Recovery Program I indicated that I would soon be ready to report
the results of the National Advisory Council's consideration of the
extent to which this Government should assist countries lik ely to
receive financial assistance under the European Recovery Program in
locating the assets of their nationals concealed in the United States*
On that occasion I discussed the extent to which the dollar and
gold holdings of the•participating countries could be integrated with
the European Recovery Program, In that connection I stated:
“Some people have argued that the participating countries
should pay for part of the program by using up their gold and
dollar assets in the United States, and by liquidating the
American investments of their own citizens, I need not labor
the point that the European countries must have some gold and
dollar reserves to finance their international trade i f they
are. to return to normal operations after 1952, I t should;'be
kept in mind that the European Recovery Program is not in­
tended to cover the entire import requirements of these coun­
tries* I t would be fo lly on our.part to force the European
countries to use up their gold and dollar balances to a point
where they would not have adequate funds to operate through
ordinary commercial and financial channels. By insisting that
. . the participating countries exhaust their gold and dollar bal­
ances, we would merely add further in sta b ility to their mone­
tary systems. As a matter of fa ct, a ll of the participatingcountries except Switzerland, Turkey, and Portugal have already
reduced their dollar balances to or below the amount which
would normally.be regarded as; safe©
V
"When we turn to the possibility o f liquidating European
investments in the United States, we must also look at the
problem in terms of its long-run consequences. These invest­
ments annually earn a dollar income, which w ill be used to
cover part of the cost of the Program, and which w ill be used
in the future to meet part of the cost of imports after the
Program ends, Without these investments, the*balance-of—
• payments situation of the participating countries w ill be worse
in the future, I doubt very much that i t would be wise policy
for the United States to force European countries as a general

- 2rule to liquidate the property owned in the United States
by their nationals as- a condition for receiving aid from
this Government*

“Some of the governments, however, ;wi11 decide to l i ­
quidate some or a ll of their holdings so as to pay for
imports. In practice this may be. an alternative to borrow­
ing from the United States. * * •* • • *"
I emphasize again that, in. the judgment of the National
.Advisory Council, i t would not be wise to force countries likely
to receive financial aid from the United States (referred to here­
after as “recipient countries“ ) to liquidate the private holdings
of their nationals as a condition to receiving such aid. But the
problem of. assisting these countries in locating the private assets
of their nationals is separate and distincto. I t is this problem
which the National Advisory Council and. the executive Departments
concerned have been studying for some time*
'The problem stems from the fact that nationals of some recipient
countries, have for many years followed the practice of concealing
their assets.in the United .States* Some hold property directly in
:their own names; others hold indirectly through intermediaries in
third countries, notably Switzerland* These assets;are concealed in
this country despite the fact that the foreign exchange laws of the
recipient countries.typically require that foreign exchange assets
be declared; some also require the.turning over of liquid dollar
■holdings in exchange for local currency; practically a ll require
that licenses be obtained for the expenditure of foreign exchange
assets*..'
1 ■:i v
;;' ‘ - i ...; .-v.... •
I t is important to distinguish joetween two categories of assets:
blocked assets and free assets.# By blocked assets we mean those
which are frozen in the United States under the Foreign Funds Control
of the Treasury Department* I t ;w i ll;be•recalled;that as a wartime
measure the President, pursuant to Section 5(b)"'of the Trading with
the enemy Act, blocked, under, control of the Treasury, the private
arid public holdings In the United States of a ll of the European countries
except the United Kingdom,.Eire, and Turkey, Beginning in Octobery
1945 , machinery has been put in e ffe c t•which provides for the unblock­
ing of assets of persons in most of-the formerly yenemy-oecupied and
neutral .countries i f the. government of the., country where the bene­
f ic ia l owner of funds resides certifies to the private American
custodian holding the assets that there is no enemy interest in such
assets* The primary purpose of this procedure is to find concealed
enemy property. The procedure is now applicable'to a ll the recipient

102
countries whose assets were blocked* •However* not a ll the nationals
of these countries have availed themselves of this procedure, -which
has the incidental effect of disclosing to their respective govern­
ments the ownership o fassëts in the United States* As a result the
Treasury through Foreign- Funds'-Control is s t i l l controlling a fa irly
substantial amount of blocked assets*■
Free assets include a ll the dolALar assets owned by nationals' of
^Britain, Turkey, . and Eire, for these assets, to repeat, were never
blocked* In addition, free assets have accrued in the United States
on behalf of residents of the other recipient countries since
December 1945 when controls were lifte d from a ll current transactions
between the United States and nationals -of these countries*
I t is obviously impossible to ascertain accurately the amount
of private dollar assets owned by resident citizens of-recipient
countries which are unknown to their governments despite the report«ing requirements of such governments* Moreover, we have nb<controls
which require complete- and continuous reporting of foreign-owned •
assets* However, we have, made certain estimates based on ah analysis
of the best facts and figures available to this Government*
As far as the free assets are concerned, we have concluded, as a
result of investigations and consultation with the various governments,
that they are for the most part known to the governments of the recip­
ient countries* We have estimated that, as of June 30, 1947* ■private
persons, including non—citizens, residing in the récipient countries,
had free assets in the United States approximating $4*3 b illio n , Of
this amount $2*3 billion represents' holdings of nationals of the :
United Kingdom, which has adequate information respecting these assets#
In addition, from Foreign Fund's Control operations’ we know that about
$1*3 billion represents assets of residents of recipient countries
which have oeen certified for unblocking and henc-e ere known to those
governments.* The balance includes proceeds from the liquidation of
securities which has taken place in the United States with the knowl­
edge of the appropriate governments; accruals from purrent transac­
tions which are. subject to control by the governments of-the recipient
countries; and assets' of non-citizens -resident in these countries#
Some free assets hay have accumulated here unknown to the respective
governments, but wTe consider that the amounts are probably
insignificant* «Ve come-now to the question of the blocked assets held directly
in the names of citizens of recipient countries and indirectly for
their benefit through Swiss intermediaries* These assets are for the
most part unknown to the respective governments; otherwise the
appropriate unblocking certifications would have-by nbw been obtained
and the identity of the respective 'owners disclosed* Precise figures
on the amount of these blocked assets1are not available* -Under the

existing certification ‘procedure, as haê already been indicated,
the certification is made directly by the foreign government to the
private American custodian holding the assets and no report is made
to the Treasury other than general summaries which have been obtained
from the countries concerned*' To have maintained current records on
changes in blocked accounts would have‘ subjected American financial
institutions and the Government to unjustifiable costs and difficulties
.According to bur best.estimates resident citizens of recipient’
countries hold in the United'States approximately $700 million of •
blocked assets which are in a form readily available for meeting the
balance—bf-paÿment problems of the recipient countries« Of this amount
about $4-00 million are held here directly in the names of the resident'
citizensf the balance of about $300 million is held indirectly through
Switzerland. In addition, resident citizens of recipient countries
hold blocked investments in controlled enterprises, in estates and
trusts, "etc,, which cannot readily be liquidated, although most of.then
are valuable sources of current dollar income* Vie estimate that they
hold directly in this non-liquid form of investment about $400 million
and an additional small but unascertainable amount indirectly through
Switzerland.
I t appéârs that so far as the recipient countries are .concerned
the Resident citizens ‘of France have in the United States the largest
amount of concealed private blocked assets in a form which could be
used in meetingxbaIance-of-payment problems or to supplement‘o fficial
réservés.; We estimate that the amount of the directly-held assets in
this form of inyestmerit would run between $100 million , to $150 million.
The French Ministry'of Finance has estimated that these- assets amount
to about $150 milliono In-addition, French residentjcitizens hold
indirectly through Switzerland liquid assets of probably between $200
and $250 million*
:
The policy we should adopt with respect to assisting the.recipient
countries in obtaining control of the private dollar assets'which are
hidden in this country by their citizens has been a subject of much
discussion ih recent months. Representatives of financial institu­
tions havé urged that i t is fundamental to our free private enterprise
system and, in particular to our capital market, to respect private
property whether o r ‘not i t is held by foreign nationals. Some fe lt
that the United States Government should, not adopt the policy’ o f co­
operating with foreign countries in the enforcement of their exchange
control laws. Finally, i t was argued that to adopt measures having
the effect of forcing the disclosure to foreign governments of private
property held by their citizens in the Unfted States, would put this
Government in the position of supporting partial confiscation of
private property* This last point relates to those cases where foreign
countries require the surrender of dollar assets, against reimbursement
in local currency at unrealistic rates of exchange.
/:

- 5 -

The.. .National Advisory Council gave serious consideration to
these views* The Council doubted that under ordinary conditions
this Government should assist foreign governments in "enforcing their
foreign exchange'laws« However, these are not ordinary times*
Some. European, countries are in dire need of dollars to permit their
survival as free nations«- American taxpayers are being called upon
to make substantial contributions to European recovery. Moreover,
most of the foreign governments have repeatedly asked our assistance
in obtaining control of the holdings of their citizens, who have
■concealed them contrary to the laws and national interest of their
countries. I t is these circumstances, I am sure, which have inspired
marked public interest in the problem and have produced various legis­
lative proposals for action, such as the Kunkel B ill (H.R. 4.576) and
the Norblad Resolution (H .J. Res• 2680©
The Council studied in detail many alternative proposals for
dealing with this problem in an effort to arrive at a solution which
would assist, ¡recipient- countries to! obtain the use of concealed pri­
vate .assets in the United States without doing violence to the
traditional status of private property. None .of these alternatives
promised at the same time;actually to protect the private interests
of foreign nationals, to assist the. recipient countries to mobilize
the concealed dollar assets of. their resident citizens, and to prevent
the escape of concealed enemy-assets. ■
The Council concluded that no action should be taken regarding
free assets because the amounts which are unknown-to the governments
of recipient countries are probably insignifleant, and ,in any event
serious practical d ifficu ltie s would be involved. Effectively to
search out and take control cif these fyee assets would require ex­
change controls and other measures which viould do maximum .vlolen'ce
to our position as a world financial center and to our policy of
keeping the dollar substantially free o f,restrictions*
- The Council also concluded, however, that this Government should
assist the recipient countries to obtain control of the blocked assets
in the United States of their resident citizens. Accordingly, It was
agreed that the program described below, which has been developed by
the Justice and Treasury Departments, should be;put into operation
promptly. In the opinion of the Council this program is the meet
effective way to accomplish, the' above objective-and to prevent the
escape of enemy: assets.
The'program provides that public notice w ill shortly be given
that at the end of three months, assets- remaining blocked, including
assets not certified by the appropriate foreign government as free

- 6
of enemy tain t, w ill be transferred to the jurisdiction of the Office
of Alien Property in the Department of Justice* To permit this
Government and the foreign governments concerned to concentrate on the
areas where important results are likely to be obtained, accounts .
containing small amounts of property, say up to #5,000, w ill be un­
blocked in the near future without requiring'certification or other
formalities'except'where a known German, Japanese, Hungarian, Rumanian
or Bulgarian interest exists* The Office of Alien Property w ill take
a new census of the assets which remain blocked as of the deadline
date. In order effectively to help the recipient countries obtain
control o f •the blocked assets o f’ their resident citizens, the Office
of Alien Property w ill then promptly carry gut'the following policies;
(a) To deal with the directly-held assets by making'available.
to governments of recipient countries the information from
the new census of blocked .assets of their citizens, includ­
ing juridical persons, residing in their territories which
remain uncertified as of the public deadline date; referred
. . to above* Each country receiving such information w ill,.be.v
required to investigate the beneficial ownership of property
held in the names of its citizens for the purpose of dis­
covering any enemy interest# Pending a reasonable period
for such investigations, such, property w ill not be vested
but m i l remain blocked under the jurisdiction of the Office
of Alien Property. I f these investigations show,.thet the
assets are .owned by" residents of the country receiving the
information the assets w ill be. released#
(b) To deal with indirectly-held assets by a,vesting program
with respéct 'tc accounts which remain-uncertified after the
deadline rate* Processing of uncertified assets in Swiss
and Liechtenstein accounts for Vesting under applicabili law
as enemy property w ill be started immediately after the
receipt of the census information by the Office of Alien
Property. The vesting program .will also be applied to un­
certified assets held indirectly through recipient countries
where the program described in (a) above 'does not result in
disclosure" to the beneficial owner’ s government (e .g ., French
assets held through the. ?Jetfierlands ), In the absence of
definite evidence of non-enemy ownership, fu ll weight w ill
be given to the presumption'of enemy ownership arising from
the failure to-obtain certification* Evidence-of ncn-renemy _
ownership or interest offered either before or after vesting
w ill be checked in accordance with the usual investigative
procedures of the Office of Alien Property* These procedures
involve disclosure to the governments of the countries of
which persons claiming legal or beneficial .Interests are
residents© Of course, any vested assets, which are proved to
be non-enemy may be returned under existing law applicable
to the return of vested property.

g

- 7-

The Attorney General has Informed the Council that there is adequate
authority under the Trading with the enemy Act, as amended, to carry
out a ll aspects o f the above program*
The vesting aspect of this program appears under the circum­
stances to be the most effective means of. rendering help to countries '
with regard to indirectly-held assets* There is no satisfactory
alternative to à procedure which.will, compel foreign nationals either
to disclose their. concealed.dollar. assets. to their respective/govern­
ments or to fo rfe it them to the United States* To date the. c e r tifi­
cation procedure, which .applies to Swiss and. Liechtenstein accounts, ..
as well as to accounts of recipient, country nationals, has not been
u tilized by‘many citizens of. recipient countries to obtain the un­
blocking of accounts in the United States* . This is so with regard:to
assets held- through Switzerland for resident citizens of recipient.
countries because the owners, of these assets .know that Switzerland
cannot, under the existing procedure, certify their assets without
securing a cross-certification from the government of the country
where they reside thus disclosing their identity to their government* .
Actually, however, there is no effective way to ascertain whether
property held in Swiss accounts is Swiss-owned, enemy-owned, or
owned by resident citizens of recipient countries, except to rely on
the Swiss and other interested governments*
I t must be recognized that resident citizens of recipient coun­
tries who hold their assets through third countries and who have not
revealed such assets to their own.government may choose not to declare
their assets to their own governments for certification, notwithstand­
ing the announced program to. vest these assets, and even notwithstanding
any amnesty which countries may offer* These persons would, in effect,
choose to fo rfe it their Indirectly-held assets to the United States
rather than to disclose them to their governments* I f this proves to be
the case, consideration could be given at a later date to the alloca­
tion by appropriate Congressional action of the vested assets among
the recipient countries*
/ •vvl. n
*

■

*V*w/

„

.

s

%

.

'

-L - t

In conclusion, I want to c a ll your attention to the fact that
this program also provides for the orderly termination of Treasury’ s
blocking operations* This follows from the fact that, in addition
to specifying the treatment to be accorded the uncertified assets, in •
recipient country accounts and Swiss and Liechtenstein accounts, the
program calls for the transfer to the jurisdiction of the Office of
Alien Property of a ll other assets' remaining blocked as of the public
deadline date* Thus German and Japanese assets w ill be transferred
and vested* Hungarian, Bumanian and Bulgarian assets w ill be trans­
ferred and w ill remain blocked until a settlement of war claims with
these countries is made* Finnish, Polish, and Czechoslovakian blocked
assets, which do not exceed $5 million, w ill .be transferred and remain

blocked for the tine being, Yugoslavian, Estonian, Latvian, and
Lithuanian blocked assets vdll also be.transferred to the Office of
Alien Property and ronain blocked until various current problems "
have been resolved, Spanish and .Portuguese assets'are still blocked
pending the completion of the current negotiations vdth Spain and
Portugal covering looted gold and German assets. If these negotia­
tions are successfully completed before.the public deadline date,
arrangements can promptly be made .for the unblocking of these assets;
on the other hand* if the negotiations are not completed by that date
these assets would likewise be covered in the transfer to the Office
of Alien Property and would remain blocked' pending the. conclusion
of the negotiations*
, It is the intention of the Treasury and Justice Departments
to proceed promptly to carry out the above ..program.
.Sincerely yours,

/s/

JOHN W. SNYDER
Chairman. '
■ •■
National Advisory Council on
International Monetary and Financial Problems

Honorable Arthur H* Vandenberg
Çhairman, Sonate Foreign Relations Committce
,United States. Sonate
Washington, D, C ,'1 February 2, 19/$

105
TREASURY DEPARTMENT
Washington
FOR RELEASE-, MORNING NEWSPAPERS
Tuesday, February 3, 1948,

Press Service
N o . S-612

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 February 5 and to mature May 6, 1948, which
were offered January 30, 1948, Were opened at the Federal Reserve
Banks on February 2.
The details of this issue are as follows:
Total applied for - $1,769,487,000
Total accepted
903,224,000 (includes $51,210,000 entered
on a non-competitive basis and accepted in
full at the average price shown below)
Average price - 99.750 Equivalent of discount approx. 0 .990$ per
annum
Range of accepted competitive bids*
High - 99.765 Equiv. rate of discount approx. 0.9^0$ per annum
Low - 99.748
M
!f
"
"
n
0 .997$ "
M
(24 percent of the amount bid for at the low price was accepted.)
Federal Reserve
District

Total
Applied for

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco

$

37,696,000
1,444,614,000
22.235.000
28 .890.000
5.470.000

.

11 232.000
127,830,000
8.594.000
2 .300.000
11.461.000
7,715,000
6 1 .450.000
TOTAL

$ 1 ,769 ,487,-000,
0O0

' Total
Accepted
$ 3 1 ,296,000
629 ,854,000
22 .235.000
23 .890.000
5 ,2 7 0 , 0 0 0
1 1 .232.000
99.390.000
8.594.000
2 .186.000
10.932.000
7,715,000
50.630.000
$903,224,000

1 06
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Wednesday, February 4, 1948

Press Service
No. 3-613

In response to numerous inquiries as to the policy of
the Bureau of Internal Revenue regarding subversive organiza­
tions, George J . Schoeneman, Commissioner of Internal Revenue
today issued the following statement:
The tax lavs do not contemplate and it has
never been our policy to grant tax exemption or
other tax privileges to subversive organizations.
Whenever ve discover an organization that obtained
exemption by misrepresenting its purposes and
activities, we revoke these privileges immediately.
We have, for instance, noticed public comment
regarding the fact that the Attorney General has
declared subversive certain organizations which
had at various times in the past obtained exempt
status under the guise of charitable, educational,
fraternal or similar bona fide organizations.
The exemption of one of these organizations,
"kfo® International Workers Order, was revoked on
February 27 , 1947, and the exemption of the Joint
Anti-Fascist Refugee Committee was revoked on
January 22 , 1948. Revocation of the exempt ions
of six other organizations on the Attorney
General's list has now been made.
These organi­
zations are the National Council of AmericanSoviet Friendship, Hollywood Writers' Mobilization,
Ohio School of Social Science, Samuel Adams School,
School of Jewish Studies (New York City), and
Philadelphia School of Social Science and Art.
Revocation of the exemption of the abovenamed organizations will preclude any allowance
of deductions in tax returns for contributions
made to them.
It is the policy of the Bureau to take steps
promptly to deny exemption to any organization
where evidence demonstrates It to be subversive.
oOo

TREASURY DEPARTMENT
Washington

FOR IMMEDIATE RELEASE
< x\
Wednesday, February 4, 19^8

Press Service
No, S-6l4 ■

Secretary of the Treasury Snyder today announced that
arrangements have been made'with the Federal Reserve Banks,
effective March 1, 19^8, for the telegraphic transfer of
Treasury bonds in coupon form, in addition to existing facili­
ties for the telegraphic transfer of Treasury notes, certi.fi—
cates of indebtedness, and Treasury bills.
These arrangements
have been made fof the purpose of facilitating a broader
market for Government securities.
Transfers will be made as
at present only against bona fide sales."
In order to cover the expense of handling such telegraphic
transfers, fees will be charged for the transfer of securities
which will not mature within one year of the date of transfer,
or in the case of callable Treasury bonds which will not mature
within one year of the date of transfer and on which the call B
privilege has not been exercised. A fee of $5 will be
charged for each such transaction involving securities in a
face amount of $ 50,000 or less, and a .fee of $10 will be
charged for each such transaction involving securities in a
face amount in excess of $ 5 0 , 0 0 0 . No fee will be charged for
transfers o f .such securities which will mature within one
year of the date of transfer, or which'have been called for
redemption within the year.

TREASURY-DEPARTMENT
Washington
FOR RELEASE, MORNING.NEWSPAPERS,
Friday, February 6 ,, 1948.
. -

Press Service
No. S -615

.. The Secretary of the Treasury, hy this public notice,
invites tenders for $1,000,000,000, or thereabouts, of 90-day
Treasury bills, for cash- and in exchange for Treasury bills
maturing February 13, 1948, ;to be Issued on a discount basis
under competitive and non-compe tit ive bidding as hereinafter
provided. ■ The bills of this series will be dated February 13,
1948,'and will mature May 13, 1948, when the face amount will
be payable without interest. They will be issued 'in-bêarer
form only, and in denominations of ¿1,000, $5,000, $10,000,
$100,000, $500,000, and $1,000,000 (maturity value).
’
Tenders will be received at Federal Reserve Banks and
Branches up to the closing hour, two o ’clock .p ,m., Eastern
Standard time, Monday,:February .9 , 19^-8, . Tenders -will not be
received at the. Treasury Department, Washington. Each tender
must be for an even multiple of $1,000-,. and in the case of
competitive tenders the price offered must be expréssed on
the basis of 100, with not more than three decimals, e. g.,
99.925* Fractions m a y not be used. -It is urged that tenders
be'made on the printed forms and forwarded in the special
envelopes which will be supplied by Federal,Reserve Banks or
Branches on application therefor--.
Tenders will be. received without deposit from Incorpora­
ted banks and trust companies and from responsible and recognized
dealers in investment securities.
Tenders from others must
be accompanied by payment of 2 percent of the face amount of
Treasury bills applied for, unless the tenders are accompanied
by an express guaranty of payment by an incorporated bank or
trus;t company.
’
Immediately after the closing hour, tenders will be
opened at the Federal Reserve Banks and Branchés, following
which public announcement will be made by the Secretary of the
Treasury of the amount and price range of accepted bids. Those
submitting tenders will be advised of the acceptance or rejection
thereof. The Secretary of the Treasury expressly reserves the
right to accept or reject any or all tenders, in whole or in
part, and his action in any such respect shall be final.
Subject
to these reservations, non-competitive tenders for $ 200,000 or
less without stated price from any one bidder will be accepted
in full at the average price (in three decimals) of accepted
competitive b i d s . Settlement for accepted tenders in accordance
with the bids must be made or completed at the Federal Reserve,
Bank on February 13 , 1948, in cash or other inpe.diately available

- 2 funds or .in a like face amount of Treasury bills maturing
February 13, 1948.
Cash and exchange tenders will receive-,
equal treatment.
Cash adjustments vill be made for differ­
ences between the par value of" maturing bills' accepted^ih%exchange -and .the issue price of the new bi l l s .
The income derived from Treasury bills,, whether interest
or gain, from the sale or other disposition' of the bills., shall
not have.any exemption, as such, and loss from the sale- or
other disposition of Treasury bills shall, not have any special
treatment, as such* under the Internal Revenue Code, or laws-amendatory or supplementary thereto.
The bills shall be sub­
ject to estate, inheritance, gift or other'excise taxes, whether
Federal or State, but shall be exempt.from all taxation.now or
hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by
any local taxing authority.
For purposes, of taxation the
amount ‘of discount at which Treasury bills are originally sold
by the United States shall be considered to be interest. Under
Sections 42 and 117 (a) (l) of the Internal-Revenue Code, as
amended by Section 115 o f the Revenue Act of 1941, the amount
of discount at 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, the, owner of
Treasury bills (other than life, insurance companies) issued
hereunder need Include in his income tax return only the
difference between the price paid for such bills, whether on
original issue or on subsequent purchase, and the amount
actually received either upon sale or redemption at maturity
during the taxable year for which the return is made, as
•ordinary gain or loss.
Treasury Department Circular N o . 4l8, as amended, and this
notice, prescribe the terms of the Treasury bills and govern
the conditions of their issue. -Copies of the circular may be
obtained from any Federal Reserve Bank or Branch.
0 O0 .

FOR RELEASE NEWSPAPERS
Sunday, February 8. 1948

TREASURY- DEPARTMENT
Washington
Press Service
No» S-616

Substantially larger seizures by Customs agents at ports and borders
brought an increase in total captures of contraband narcotics durin?’
i^47j Secretary Snyder was informed today by the twb Treasury agencies
concerned with the suppression <?£ tr a ffic is dope.
Edson Jo Shamhart, Deputy Commissioner of Customs, and Harry J p
Anslinger, Commissioner of Narcotics, reported total seizures of 7 388
ounces of opium and its derivatives during the year, compared with
5,464 ounces during 194-6#
The Bureau of Narcotics reported arrests to ta llin g , for both
opiates and marihuana violations, 2,827 in 194-7, compared with 2,911 in
194-6« This represents an increase in the number of arrests per officer
as a few less narcotics agents were employed in 194-7«
*
Total marihuana seizures increased durin? 194-7 to 26.300 ounces
from 22,400 in 1946«
*
*
Host significant development during the year from the standpoint of
narcotics enforcement was the reappearance in some areas of heroin and
cocaine, which had been extremely scarce during the war years0 Customs
made some very large seizures of heroin, the source for which aoparentlv
was France$
J
^Corrmissioner Anslinger reported that prices for narcotic drugs in
i l l i c i t tr a ffic declined slightly from wartime highs« Principal
source continued to be Mexico, but frequent seizures were identified
as being of Turkish, Indian, or Iranian origin«
&

.. „ ,Ther® continues to be a large number of robberies, burglaries and
theits of narcotic drugs from pharmacies and other registered
establishments*
. . ,? ne of the most important opium seizures during the year was made
jointly by Customs and Narcotics officers incident to a witched gun
battle with smugglers at the Woodbine Check, near Calexico, California
m^ Juneo Fifty-two pounds of contraband were seized« One,'of the
principal smugglers, Jesus Maria Reyna-Celaya was convicted at
San Diego on October 8, and sentenced to 10 years in prison« This
Ilad.a Pr°found effect in deterring activities of narcotic
traffickers in Lower California«
,

dar8est opium seizure, more than 55 pounds, was made by Customs
and Ne¥ York -in a three day search of a British steamship
arrived, from Indian ports by way of the Mediterranean« Fart of the
cow hand was found sewed into a lif e preserver« Several Chinese crew
members were arrested©
. An interesting Mexican border seizure involved
opium packaged in corn shucks to resemble tamales0

pounds of raw

- 2Bureau of Narcotics agents were responsible for the arrest and
conviction at Brooklyn, New York, of Lawrence Peden, considered one of
the most important distributors of heroin in Washington, Do C» Peden
was arrested in September, at LaGuardia airport, in possession of three
ounces of heroin for which he liad paid £1,500, and which he was
reselling in highly adulterated form in Washington« Be is awaiting
sentence in the New York case, and is under bond in two other Washington
cases involving narcotic law violations®
An extensive investigation in cooperation with New York police
resulted in arrest of Frank Tornello, alleged to be an important supplier
of heroin there« Agents conducted surveillance of Tornellofs activities
in California and New York to obtain evidence upon which he was apprehended
in November« Other arrests in the case are expected«
Participating with local aubhorities in the Baltimore enforcement
d istrict, which includes Maryland, Virginia, West Virginia, North Carolina,
and the D istrict of Columbia, the Narcotics Bureau reported apprehension of
23 persons for narcotics burglaries and holdups«
Also illu strative of tints type of depredation was a case with
ramifications extending from Wisconsin to Texas« In January 194-7, four
armed men staged a holdup of a wholesale drug company at Madison, Wisconsin«
After binding the manager with adhesive tape, the robbers escaped with a
large quantity of narcotic drugs« Narcotics agents found the operation of
a pattern with those of a notorious north Texas gang, and subsequent joint
efforts of the Bureau and Wisconsin enforcement officers resulted in arrest
and return to Madison of Walter Mack Burns, Glen Lee Alvey and Robert Morgan
Massingillo They are being held for t r ia l in state court at Madison«
An offshoot to this case involved Tommy Bryant, oldtime bank robber,
thief and narcotic peddler0 Bryant, who was listed as a witness for the.
defendants in the Madison case, was found to be smuggling narcotics to an
inmate in Texas State Penitentiary« A search warrant was obtained, and a
quantity of narcotics found in his room at Mesquite, Texas0 Bryant, who
was in Madison at the time, was arrested and returned to Texas, and his
parole in a robbery case was revoked, leaving him to serve forty years, the
unexpired portion of a fift y year sentence«
Both Customs and Narcotics officers reported a number of substantial
cases involving marihuana of Mexican origin« Narcotics officers in October
arrested Jose Arias in New York City, seizing 35 pounds of the weed© In
December, four persons were arrested at El Paso in connection with the
capture of 17 pounds contained in a suitcase which two of the defendants
vrere transporting to New York«
The Chicago underworld was the destination of considerable tr a ffic in
Mexican marihuana, with several large seizures and arrests being made at
both ends of the line*
Alejo Ineges Agredano was fa ta lly wounded by a narcotics agent on the
night of November 4-, 1947 when Agredano, in resisting arrest, drew a

Ill
*• 3 *pistol and attempted to shoot the agent* The Treasury officer who
had been working undercover, was attacked when he identified himself and
sought to arrest Agredano who had just delivered a quantity of marihuana to
him*
A coroner*s jury returned a verdict of justifiable homicide ahd
commended the agent for his courage0 Agredano had a long criminal record*

**• 0

TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERSMonday, February 9« 1946

112
Press Service
No.S-617

Swelled by capture of more than $2,100,000 in counterfeit
United States currency in France and $87,000 in other counterfeits of
foreign origin which reached this country, seizures of bogus money by
the Secret Service totalled $2,854,000 in 1947, the largest since com­
prehensive records have been kept*
James J . Maloney, Chief of the Service, today reported to Secretary
Snyder that counterfeiting activities also increased sharply within the
United States during the past year, with seizures of domestic origin
totalling $621,000, the largest since
I the middle ^O ’ s.
However, of the total of almost $3,000,000 in bogus money captured,
only $85,000 worth actually got into circulation, and thus represents
loss to the puolic. ' The remainder was confiscated before i t could be
passed, as investigative techniques of the Treasury enforcement agency
continued to finger most counterfeiting enterprises before they could
get effectively underway.
Losses to the public from bogus money during the previous calendar
year were $47,000.
The Secret Service during 1947 arrested 124 persons for making,
holding, or passing counterfeit b ills and coins. Of 6,6 individuals ’who
were tried during the year, 61 were convicted*
Other crimes within the jurisdiction of the Service also increased,
with some" 45,000 forged Government checks and bonds received for in­
vestigation.
Nearly 2,000 persons were convicted in such forgeries on evidence
obtained by the Secret Service.
The capture of more than $2,000,000 in bogus United States $10,
$20, and $100 notes near Marseille, France, in September of 1947 was
effected by United States Secret Service agents and cooperating
French police. A raid on an isolated farmhouse resulted in capture
of the notes, together with elaborate manufacturing equipment, and
the arrest of eleven persons. United States agents were sent to
France when a trickle of bogus b ills reaching this country appeared to
have originated there, and with the assistance'of French authorities,
succeeded in tracking down the gang responsible within a few weeks.
In December a group of former counterfeiters of ration stamps
was arrested by Secret Service agents in bv^cago for the manufacture of
more than half a million dollars face value of fake $5, $10, $20, and
$50 b ills . The gang, allegedly headed by Joseph Moschiano, printed
about $600,000 before agents made the arrests. Several notes were
passed successfully, a quantity was burned as unsatisfactory, and the
agents captured the plant and more than $365,000 in counterfeits.
The principals in thu elaborate enterprise are awaiting t r ia l.

-

2

-

Chicago agents also apiked a one-man counterfeit factory when they 1 1 ?
arrested Fiorendo P. Pinzon, a Filipino, on June 30, for making 7 plates
for $>20 b ills . Other paraphernalia was seized* On October 29, Pinzon,
an employee of a photographic studio, was sentenced to serve four years
in a Federal penitentiary. No notes were printed from his plates.
New York City agents in N0vember arrested Perry Bunero at Fort Lee,
New Jersey, when he delivered $>30,000 in counterfeit $>20 b ills to an
undercover agent who had posed as a buyer. Chief ¿ealoney said that
Bunero previously had sold another $>20,000 worth of bogus b ills to
Felton Bland of Metter, Georgia, who was arrested with Alfred D* Collins
at Hallandale, Florida, October 26* Bland carried nearly $15,000 worth
of counterfeits on his person.
*
Through leads developed from the investigation of Bland, agents
and police arrested as alleged fellow conspirators, Joe L* Clark, Bornie
Spivey, Joseph T. Bridges, Jan B* Knight, G. Richard Van Lien, J r . , and
Floyd C. Fallen.
Fallen, according to Chief Maloney, was caught in the act of deliver­
ing $>7,500 in phony $20’ s to Alfred D. Collins, and is believed to have
supplied the $50,000 worth which other members of the gang were attempting
to distribute and pass.
Secret Service agents followed up the arrest of a note passer by
police at Monterey, California, with an investigation that turned up two
accomplices and led to the capture in November of the. complete counter­
feiting plant and $>570 in finished notes in the home of Norman G. Rie del
in Fontana, Californià. Only one of the fake splO b ills allegedly made
by the trio was passed successfully before they were arrested* They
had been more successful with counterfeit State of California employ­
ment checks, 125 of wrhich had. been passed in San Diego the previous
month. Plates for the checks also were found by the Secret Service
raiders.
At Bichmond, Virginia, agents seized zinc plates and negatives, and
$40,000 face value, of ”playn money, some of which actually was passed
upon unsuspecting persons as genuine. The commercial novelty was
patterned after $1 and $10 b ills , printed on cheap paper, and was used
for advertising purposes. The heading on the notes read, ,!The Unique
Skates of America.,T The designs, while crude, approximated those on
genuine money and vere held to be in violation of laws which prohibit
photographs or other impressions in likeness to currency.
Agents found a new'twist to the forgery racket with the arrest in
New York City of three men who dressed in women’ s clothes, rouged and
powdered their faces, and successfully negotiated stolen checks payable
to women..
Samuel xhompson, the leader, was sentenced to two years in prison,
and his accomplices to a year and a day each.

TREASURY DEPARTMENT
Washington
FOR RELEASE, AFTERNOON NEWSPAPERS
Tuesday» February 10, 19AS________

Press Service
No*' S-618

Deputy Internal Revenue Commissioner Carroll E* Mealey*
in his annual enforcement report to Secretary Snyder* today told how
a “one-two'1 investigative punch supplied by the Alcohol Tax Unit and
the Bureau of Narcotics put a notorious New York-Detroit hoodlum away
for a four-year prison sentence*
The criminal* Nicholas Martello, known as “the Bulldog“* was
sentenced in Detroit for violation of the Federal Firearms act* which
the Alcohol Tax Unit enforces#
Martello* who has had previous convictions for grand larceny*
assault, and narcotics law violations, apparently became panicky when
narcotics agents pressed a new investigation of his activities in his
usual territory in New York City; so alarmed in fact that he failed to
claim a sub-machine gun he had shipped to himself in Détroit* to which
city he had transferred his residence#
When the suitcase checked by Martello remained unclaimed* i t was
opened and the weapon discovered* The surveillance by,the Treasury
agents had been so thorough that they were able to connect Martello
with the gun* and he pleaded guilty to the charges brought by the
Alcohol Tax Unit*
During 1947 the Unit continued to press a nationwide campaign for
registration of machine guns and other automatic weapons brought into
the country as war souvenirs* Urgency of this program was demonstrated
by continued evidence that a large number of such weapons were fallin g
into the hands of criminals through ille g a l sale or Jiheft* and were
being used in robberies and slayings*
Nearly 100*000 investigations v^ere conducted in this phase of the
Unit’ s work* resultirlg in the registration with the Commissioner of
Internal Revenue of more than 10*000 firearms*
With reports of hundreds of persons killed or wounded in the
handling of war trophy explosives and weapons* the Alcohol Tax Unit
broadened its program into a drive to make such souvenirs harmless*
The Secretaries of Treasury* War and Navy* and representatives
of the National Rifle Association approved organization of an emergency
committee for education of the public in the handling of dangerous war
trophies* F acilities of the organizations, and of local police agencies
throughout the country are made available to trophy owners who consent
to the deactivation of explosive devices or weapons* Thousands of such
items have been made harmless through this campaign*

m

m

m

- 2~
Deputy Commissioner Mealey reported that a smaller force of agents
employed in 1947 captured 6,026 i l l i c i t liquor d istillerie s compared
with 6,461 in 1946; and made 7,333 arrests, against 3,229 in the previous
year* Nearly 97 percent o f the s t ills seized were in fourteen southern
states*
Mr* Mealey said that there is evidence of an upturn in attempts
at i l l i c i t liquor distribution since the termination of sugar rationing
on July 28, 1947, not only in the traditional-trouble spots in the south,
but in some metropolitan areas*
Increased availability of materials necessary for d is tillin g ,
d iffic u lt to obtain during the war years, is reflected in larger and
more elaborate equipment seized in some cases, and the appearance of
some sizeable, well-financed operating rings*
A typical enterprise of this type was a large i l l i c i t d istille ry
captured in Chicago, a copper column type capable of producing 69O
proof gallons of alcohol a day. Treasury agents seized 2'55 gallons of
alcohol, 21,000 pounds of sugar, and 200 pounds of yeast, and pumps,
motors and other extensive equipment. I t was estimated that, had the
d istillery operated at capacity for 90 days, the Government would have
been defrauded of more than half a million dollars in revenue* James
Bruno and two associates were sentenced to prison terms totallin g six
yeaps in this case*
Another successful prosecution case closed during the year brought
the conviction of members of a well organized syndicate operating in
New York and New Jersey areas. The group at various times during a
three year period operated six different d istille rie s and maintained
thirteen places, consisting of garages, warehouses and stores as "drops”
for assembling raw materials and storing and distributing non-tax-paid
spirits*
Five members of another ring, headed by Berry Lee Dooiin, were
convicted of conspiracy to violate internal revenue liquor laws in the
operation of two large d istille rie s in Virginia and North Carolina*
They produced nearly 1,400 gallons of high proof whiskey, resulting in
a tax fraud in excess of $12,000*
Robert Grogan and two associates were convicted for operation in
the same area, of five large, unregistered d is tille r ie s , producing more
than 2,000 gallons of whiskey on which $19,000 in taxes was evaded*
Principals of two large syndicates operating in Georgia also were
convicted, with prison sentences ranging up to two years being imposed.
In one case the revenue fraud was placed at $450,000, and in the other
$146, 000*

116
- 3-

.

. v>

Nearly a million and a half dollars worth of chrs, trucks, tax-paid
liquors and other property was confiscated during the year in connection
with violations of the internal revenue laws*
Evidence gathered by the Alcohol Tax Unit in cooperation with other
Government agencies enforcing Sugar and price control legislation
Resulted in numerous further convictions of violators brought to tr ia l
during the year. Six persons were convicted in one New York City sugar
black market case in which millions of pounds of the commodity were
traded at prices a s ‘high as $25 a hundred pounds, through employment of
bogus and overdraft sugar ration currency*

.^oOo^

TREASURE DEPARTMENT
Washington

FOR RELEASE, MORNING NEVifSPAPERS,
Thursday. February 12, 19AS

Press Service
No® S-619

With commercial shipping voiame mounting sharply during 194-7,
Customs officers were called upon to exercise increasing vigilance to
protect the revenues, Frank Do?;, Acting Commissioner of Customs today
reported to Secretary Snyder0
While the progress of world trade into something like normal,
peacetime patterns was accompanied by l i t t le evidence of any large-scale,
organized attempts to smuggle goods into this country, there were
numerous investigations of violations involving false or fraudulent
declarations on regular importations of merchandise of high value©
A dozen larger cases of this type involved merchandise having
a total forfeiture value in excess of $3 , 000 , 0005 and there were many
investigations involving individual shipments valued at several
thousands of dollars© A half million dollar penalty was imposed in one
case involving shipments of a single commodity®
Commissioner Dow said the volume of shipping from Far Eastern, Near
Eastern and European ports increased steadily, and commercial tr a ffic
with Latin America continued heavy© International air tr a ffic likewise
called for increasing attention on the part of Customs©
Intensive searches of incoming vessels were made regularly, with
excellent results from an enforcement angleo Baggage scrutiny of
incoming travellers provided the usual run of amateur smuggling attempts,
chiefly of small but costly items such as jewelry, gems, and perfume©
There vrere some fa irly substantial seizures of liquor, alcohol, meat
and sugar on the Mexican border0
Customs officers continued to render assistance to the Office of
International Trade in enforcing ejqport controls, and with the Foreign
Funds Control of the Treasury in policing movement of certain blacklisted
securities©
At the request of, and in cooperation with the Department of State,
Customs agents at Miami, Tampa, New Orleans, Baltimore, Chicago,
San Francisco, and Los Angeles made extensive investigations into a
conspiracy on the part of Dominican, Cuban, and American nationals to
foment a revolution in Santo Domingo© The plot involved exportation
from this country of war materials in violation of the President’s
Proclamation forbidding such shipments©
The investigations were responsible for large scale arrests in
Cuba and seizure in Cuba and in the United States of a number of
airplanes and implements of war© A number of persons are under indictment
at Miami in connection with the conspiracy®

~2 Tito diamonds found by Customs officers at San Francisco in the
watch pocket of a United States army colonel returning from Japan
led to the discovery of 528 additional gems valued at $200,000 in
a safe deposit box, which had been brought into the country
illegallyo The officer vías turned over to military authorities for
prosecution, and further investigation by the army resulted in
discovery of a large number of diamonds in Japan©
Another army officer was turned over to military authorities
for prosecution after Baltimore Customs agents seized several
thousand dollars worth of s ilk s , tapestries, jewelry, and precious
stones he had shipped into the country from Korea0
Unset diamonds worth $20,000 were seized at Elizabeth, New Jersey,
from two seamen who had obtained them in Belgium and intended to .
dispose of them in this country«»

—o0o—

TREASURY DEPARTMENT
Washington

FOR IMMEDIATE RELEASE,
Friday, February 6 , 1 9 4 8 •

Press Service
No . S-620

The Bureau of Customs announced today that the
tariff-rate quota for the calendar year 1948 of fish,
fresh or frozen (Whether or not packed in ice) filleted,
skinned, honed, sliced, or divided into portions, not
specially provided for:

cod, haddock, hake, pollock,

cusk, and rosefish, determined in accordance with the
proviso to item 717(h) of Part 1, Schedule XX of the
General Agreement on Tariffs and Trade is 24,930,188
p o unds.

STATUTORY DEBT LIMITATION
AS OF JANUARY 31-, 1943

10

February 10* 194-8

Section 21 of the Second Liberty Bond Act, as amended, provides that the face
under authority of that Act, and the face amount of
principal and interest by the United States (except sue!
guaranteed obligations as may be held by the Secretary of the Treasury), "shall not
exceed in the aggregate %275*000,000,000 outstanding at any one time* For purposes
of this section the current redemption value 'of any obligation issued on a discount
basis which is redeemable prior to maturity at the option of the holder shall be
considered as its face amount«"
The following table shows the face amount of obligations outstanding and the '
face amount which can s t i l l be issued under this lim itation:
Total face amount that may be outstanding at any one time
$275*000,000,000
Outstanding
Obligations issued under Second Liberty Bond Act, as amended:
Interest-bearing:
Treasury b i lls .••••••••.»«•* $ 14,833,224,000
Certificates of indebtedness
20,677,424*000
Treasury n o t e s . . 16, 777, 152, 750 $ 52,292,800,750
BondsTreasury...................................... 117,862,835*750
Savings (currait redemp. value) 52,479*468,227
Depositary.•••..••.••••••«
321,391* 000
Armed Forces Leave.. . . . . . .
719*810,050
Investment Series.............. .. ........... 969,960,000 172,353*465*027
Special .Funds—
Certificates of indebtedness 14*793*500,000
14,354,208,000 29,147,708,000
Treasury notes
Total interest-bearing.. . . . . . . . . . . . . . . . . . 253,793*973*777
Matured, interest-ceased.....................
335*692,242
Bearing no interest:
62,193*775
War savings stamps.......................
Excess profits, tax refund bonds
11, 488,868
Special notes of the United States:
Intem at’ l Bank for feconst*
\
and Development s e r ie s ...
215*785,000
1*595*467,643
Intem at11 Monetary Rind Series 1,306,000,000
T o t a l............................................................ .............- ............. 255,725,133*662
Guaranteed obligations (not held by Treasury)
Interest-bearing
Debentures: F.H.A.......................
27,909*536
Demand obligations: C.C.O. ♦
43,607,603
71*517*138
Matured, i n t e r e s t - c e a s e d . * _______ 5*431*200
76,948*338
.255,802,082,000
urand total outstanding... #
. . . . . *•
19,197,918,000
Balance face amount of obligations issuable under above authority.,
Reconcilement with Statement of the Public Debt —January 31* 1948
(Daily Statement of the United States Treasury, February 2, 1948)
amount of obligations issued
obligations guaranteed as to

O utstan din g -

Total gross public d e b t * , . . . . . . . . . ..........• •• . . . . .
iUaranteed obligations not owned by the Treasury,•
Total gross public debt and guaranteed obligations.
Deduct - other outstanding public debt obligations
not subject to debt limitation. . . . . . . * . . . . . .

5-621

256,573*665,698
______ 76,948,338
256,650,614*036
848,532,036
255,802,082,000

121
TREASURY DEPARTMENT
Washington

FOR RELEASE, MORNING NEWSPAPERS
Tuesday, February 10., 1948.

Press Service
N o . S-622

The Secretary of the Treasury announced last evening that
the tenders for $ 1 ,000,000,000, or thereabouts, of 90-day‘
Treasury bills to be datéd February 13 and to mature May 13,
1948, which were offered February 6 , 1948, were opened at the
Federal Reserve Banks on February 9.
The details of this issue are as follows:
Total applied for - $1,524,512,.000
Total accepted
- 1,000,348,000 (includes $47,945,000 entered
on a non-competitive basis and accepted in
full at the average price shown below)
Average price - 9 9 .751 Equivalent rate of discount 0.994# per
annum.
Range of accepted competitive bids:
High - 99.765 E q u i v . rate of discount 0.940# per annum
Low ~ 99 .750
"
."
"
1.000# "
"

(33 percent of the amount bid for at the low price was accepted)
Federal Reserve
District

Total
Applied for

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

$

1 1 ,180,000
1,339,153,000
2.745.000
5 .610.000
6.405.000
2.870.000
8 1 ,121,000
5.250.000

4.890.000
15.573.000

.

8 855.000

TOTAL

Total
Accepted____
$

11 ,113,000
844,534,000
2 ,176,000
4 .270.000
6 .070.000
2.870.000
63 ,090,000
5 .250.000
4.389.000

12.239.000

40.860.000

8 .855.000
35.492.000

$1,524,512,000

$ 1 , 000 , 348,000

0O0

treasury

department

Washington

FOR RELEASE,' MORNING NEWSPAPERS
Thur s day t February l £ , 19 4 8 .

Press Service
No* S -623

Secretary Snyder today announced Treasury plans for a
Security Loan drive starting April 15 and continuing through
June 3tv Its purpose is to promote savings and fight inflation.
The United States Savings Bonds Division of the Treasury will
be in charge.
A great volunteer army of Savings Bond Salesmen and sales­
women is being recruited for the drive, in the same manner
that the wartime bond-selling campaigns were organized,
Definite
area quotas are in process of determination and. probably will
be made public at a national conference to be held in Washington
March 18-20.
President Truman sounded a call for intensified Government
efforts to sell Savings Bonds when he sent a spedial message
to Congress last November 17. He pointed out that increased
savings by the public provide one of the effective weapons
against inflation.
Secretary Snyder quoted the President’s words
in announcing the Security Loan.
The drive Vill emphasize sales of Series E Savings Bonds *"the people’s bond." These will be termed "Security Bonds"
during the campaign. Every American will be urged to contribute
to his own future security and the security of the national
economy by buying them.
Secretary Snyder said:
"The Treasury has two specific purposes in conducting the
Security Loan.
One is to encourage Americans to build greater
security for themselves through greater savings.
The ether is
to relieve inflationary pressures.
These purposes are inter­
locking; one serves the other, and both serve the welfare of
the nation.
"There is general recognition of the fact that buying
Savings Bonds is one of the best investments an American can
make* Millions who bought these bonds during the war continue
to buy them,. Many are able to buy more -- by saving more
and
vill do so if they are asked. We are about to dc the asking.
"The relief $f ..inflationary pressures will be accomplished
through the Security Loan in two w a y s . The money received from
the public will be withdrawn from the consumer markets, and it

2

1??

asL.

will be used by the Treasury to pay off bank-held or other
potentially inflationary portions of the public debt now out­
standing. This shifting of ownership of the debt is sound debt
management.
’’During the Security Loan, efforts will be made to reach
every family.
This task will require the assistance of a
great many patriotic, volunteer workers.
But the Savings Bond
program always has been a people's program.
Its success has
been due to the volunteer spirit and volunteer activity.
I am
sure that there will be another resounding response to the
Government 1s appeal.!T
The three-day conference March 18-20 in Washington to
decide sales goals and other final problems of the drive will
be attended by public-spirited leaders of groups expected to
head up the volunteer selling organization.
Included will be
representatives of industry, labor, retailers, newspapers, radio,
magazines, banking and business.
Already, according to Secretary Snyder, President Truman's
call of last November has brought widespread assurances of
volunteer help for the campaign, along with comment from many
sources that such a bond-selling effort is vitally needed to
ease the present dangerous price situation.

oOo

x1 c9
.

Publicity Division
DEMOCRATIC NATIONAL COMMITTEE
Ring Building
Washington, D. C.

R - 152 (2/19/4-8)

ADDRESS BY THE HONORABLE JOHN W. SNYDER,
SECRETARY OF THE TREASURY, AT THE ESSEX
HOUSE, NEWARK, NEW JERSEY, BEFORE THE
JEFFERSON-JACKSON DINNER*

FOR RELEASE IN MORNING NEWSPAPERS, FRIDAY, FEBRUARY 20,
1943. FOR RADIO RELEASE, UPON DELIVERY (EXPECTED TO BE
ABOUT 10‘,30 P*M*, THURSDAY, FEBRUARY 19* 1948.)

Tonight the National Democratic Party is redeclaring its firm purpose
to protect and preserve for every citizen o f this country the great social
and economic gains made during fifteen yekrs of Democratic leadership*
In gatherings, such as this throughout the Nationj we are reassert­
ing the fundamental principles of our Partyj ind we are rededicating those
principles to the continued progress and prosperity of this Nation*
I
believe i t particularly appropriate that at this same time we pay
joint honor to Thomas Jefferson and Andrew Jackson, as well as to those
other statesman who molded our Party doctrines and purpose, and who
contributed so immeasurably to the spiritual and material growth of the
United States*
Thomas Jefferson’ s sane philosophies and truths are deeply imbedded
in our system of Government* He endeavored continually to convince
Americans how v ita l i t was, even as i t is today, to defend staunchly their
basic liberties and standards of free endeavor*
Jackson, too, was an outstanding advocate of human rights, and his
ideals and work ably complemented the achievements of Jefferson* He
brought to the leadership of the Nation and Party vigor and resoluteness
of purpose*
I t is well to remember that in the annals of our Party history, the
accomplishments of these men, and their notable contributions to our
system o f Government, were the results of unceasing and steadfast
devotion to country*
Thomas Jefferson said that ’’the whole art of government consists in
the art of being honest,” and upon this truth, the Democratic Party
has consistently and conscientiously based its pattern of service and
its policy measures.
The history of Democratic leadership amply supports our assertion
of accomplishment*
We are entitled to particular satisfaction with the social and
economic progress of this country during the past fifteen years of
Democratic Administration*
The fifteen years that have passed since our Party assumed the
responsibilities of Government cannot dim the recollection of the
economic disorder that prevailed at that time. Nor do they allow us
to forget that our present social and economic achievements have, in
a large part, been accomplished only through hard and continuous
fighting by the Democratic Administration against bitter oppositon*
Fifteen years ago we were in the depths of a depression for which
the then-incumbent Administration had not the slightest remedy. Twelve
million workers were vainly seeking jobs, while factories were closing
their doors. Businesses were fa ilin g at the rate of over 30,000 a year.
Most great industries were operating at fractional capacity.

-

2

126
-

In this extremity* the speedy and courageous action of a Democratic
Administration brought to a halt the worst depression of modern times#
It took dynamic leadership* with great vision* to appraise properly the
weaknesses of the old system and to compel their elimination#
In 1933* we had two huge tasks to accomplish: first* to halt the
deflationary trend which had been under way since 1929j and second*
to develop a balanced and expanding economy, based upon the maintenance
of a high volume of production and of purchasing power* To gain these
ends* the entire level of employment and incomes had to be greatly
increased, along with the overall business activity, and at the same time
a repetition of the speculative unbalance which had developed in 1929
had to be prevented,
Shortly after the new Democratic Administration took office and began
a constructive expansion program* the national income started rising# By
the end of the year* income payments were 20 percent higher than in
March, 1933* With the rise in purchasing power, re ta il trade immediately
began to increase and a general business improvement spread over the
country# The industrial production rate started to climb* employment
began to increase* people began to spend more money* and the improvement
became cumulative#
Inspired Democratic leadership gave a discouraged people a new
hope and a new sense o f responsibility for the social and economic
welfare of their fellow men. Through aggressive action* the Administration
achieved lasting benefits for unemployment and old-age security* for the
protection of individuals against unjust practices, for the safeguarding of
our banking system* for the expansion of credit fa c ilitie s which were not
available to banks, railroads* and other private industries, for the
improvement of our agricultural resources, and for the healthy and strong
development of our entire national economy#
The wage earner's position had been strengthened by national
recognition of the rights of viorkmen to bargain collectively with their
employers#
Laws enacted for the regulation of security offerings* requiring
sellers to reveal the facts about new security issues* have done much
to protect people against misrepresentation in this field*
Agriculture has been placed in a stronger position by legislation
for the conservation o f the so il and for the encouragement o f better
farming practices* The strengthening of our agricultural industry
brought welcome dividends during the war* when our farms yielded one-third
more food than before the war despite shortages of equipmoit and
man-power#
The insurance of bank deposits under the Federal Deposit Insurance
Corperation has provided protection against a repetition o f the bank
failure tragedy of 1933*

127

- 3These and other measures inaugurated during the Democratic
Administration have given a new sense of economic security to our people,
and., have enormously contributed to our record peacetime level o f business
activity and to our present high standard of living*
Me must not forget, either, the far-sighted steps taken to provide
for the military preparedness of our Nation — steps taken against
stubborn opposition — which nevertheless proved our salvation.
During World War I I , we came nearer than ever before to learning
our true strength and our national capabilities. These factors of
strength Supplied the men and materials for the greatest all-out
war effort in history* When called upon to give v ita l assistance in
protecting the very core of modem civilizatio n , the United States not
only out—
produced the rest of the world, but at the same time maintained
its own national standards o f liv in g .
Our wartime strength could not have developed without an essentially
strong foundation. Under the recovery measures taken by the Democratic
Administration, the health of our economic structure has been steadily
improving since early 1933. The steel industry, as an important example,
turned out only one million tons of ingots in March, 1933, but it
raised its output to over four million tons per month at the outbreak of
war in August, 1939* and to seven million tons per month when we entered
the war in December, 1941. And now, in time of peace, i t has reached
the total of 7,4-60,000 tons per month.
The victory over our enemies precipitated the tremendous peacetime
problems of demobilization and reconversion — problems which were
no less v ita l to our national security than those faced — and solved __
in wartime.
The problems of peace and postwar transition f e ll on the shoulders
of President Truman. He has borne his heavy responsibilities, the
heaviest in the world, with outstanding' courage and sk ill*
was
our
and
our

Of foremost concern, certainly foremost in the minds of their families,
he return to civilian lif e of more than twelve million members of
armed services* The swift and orderly discharge of our servicemen
women, their return to peaceful pursuits, and their absorption into
economy, are accomplishments of which we can be proud.

The industrial changeover from war to peacetime production was
completed more rapidly than anyone dared predict. War contracts were
quickly settled and war plants were speedily cleared for a volume of
civilian output never before equalled*
...

^ Presen t, with our economy again soundly established on a peacebasis, we find that the total personal incomes are now running at
n annual rate of over $200 b illio n , as compared with $49 billion in 1932.

Workers in manufacturing industries now average $1*27 an hour, or
$51 ,0 0 in weekly earnings. In March,. 1933* their average earnings were
$15*00 a week and 43- cents an hour* And they fe lt lucky to even get that.
Corporate earnings have likewise shown an enormous improvemoit since
the dark days of fifteen years ago* In 1932, corporations Showed a
d eficit of over $3 b illio n , but by 1934* they had moved into the black
and profits rose sharply in succeeding years u n til in 1947, they are
estimated at $17 b illio n , after taxes.
These comparisons in dollar terms are in part due to the present
high price levels* But comparisons on a purely physical basis t e ll the
same story. Perhaps the best measure of economic welfare is the number
of people employed. This figure in recent months reached the unprecedented
t o t a l of 60 m illion. In 1933a the average number of employed was only
39 million persons.
The output of our manufacturing and mining industries has been at
the highest levels in cur peacetime history, and far above the prewar
level. The index of industrial production reached 191 in December,
1947, as compared with the depression low of 54 reached in March, 1933*
This present business activity is a tribute to the v ita lity of the
American system of free enterprise* But, i t i s also the product of
wise policy and prudent management on the part of this Administration
under the leadership of President Harry S, Truman,
Our fis c a l policies have been closely related to those in the
economic fie ld . Our purpose is to practice economy in Government, and
to maintain the revenues at a level sufficient to secure a balanced
budget and provide for debt reduction.
As Secretary of t he Treasury, I feel that the financial integrity
of our Government must always be a fir s t consideration. Particularly
so, with a Government debt, largely war-created, of $253 b illio n .
Under such circumstances, i t is not only the financial integrity of the
Government which is at stake, but the soundness of the whole economy.
This Government's fis c a l policies are irrevocably wrapped up in the
entire financial structure of our country.
I t has been estimated that in the current fis c a l year which ends on
next June 30, the surplus of Federal receipts over expenditures w ill
amount to $7*5 b illio n . However, the Senate Foreigi Affairs Committee has
recommended that $3 billion of this amount should be earmarked for
application on the European Recovery Program, I f this Is done, the amount
of surplus remaining to be applied on the debt would be reduced to $4*5
billion .
<kq have been using this surplus., as i t accumulates, for debt retire­
ment in the manner in which i t would be most effective, and we shall
continue to do so*
The President’ s budget estimates for the fis c a l year 1949 show receipts
of $44*5 b illio n , and a surplus of $4*8 billion in that fis c a l year to
apply toward further reductions in the debt.

- 5On the expenditures side, the President has pared the budget to the
minimum which he considers consistent with the Country’ s domestic and
international responsibilities.
Expenditures are estimated at $39*7-; billion in the fis c a l year
194-9« Seventy-nine percent of the estim^ied expenditures for fis c a l
194.9 are war related — they either reflect the direct costs of war, the
aftermath of war, or our efforts to prevent a future war*
In this category, we have expenditures for national defense which
amount to $11 b illio n , or 28 percent of the total budget* I t would be
possible, of course, to cut this amount, but I do not believe that the
Congress w ill want to take this step at the expense of -our national
security.
Expenditures for international aid programs also come in this
category, and total $7 b illio n , or IB percent of the total budget*
This i s the amount which has been determined as the necessary require­
ment for the period ending with the fis c a l year on June 30, 1949 . Any
adjustments made in timing by the Congress would not materially change
the end result for the fis c a l year.
Veterans’ benefits amount to $6 b illio n , or 15 percent of the budget
They represent an obligation which we owe to those persons who made great
personal sacrifices for the Nation during the war. I t is an obligation
for which a Democratic Congress has already provided by legislation, and
certainly none of us want to propose that any of this legislation be
repealed*
The other two items which enter into the ’’war cost” category are
$5 billion for interest on the public debt and $2 billion for tax
refunds* These are financial obligations of the Government which i t
must meet.
In analyzing the Government’ s peacetime operations, we find that
or $6*2 b illio n , of the budget covers expenditures to finance the
Government’ s programs in many broad areas, such as social welfare,
agriculture, natural resources, and transportation and communication.
These programs include expenditures for public assistance, for flood
control, for so il conservation, for reclamation, for state aid to
highways, for development of rivers and harbors, and for atomic
energy.
1 6

%,

These programs include activities which the Government must perform
in order to conserve our natural resources. More importantly, however,
they finance functions which the Government is obligated to perform in
conserving our human resources — for programs which contribute to the
health and well-being of the American people and which have long been
a part of the Democratic platform*
Any reduction in these programs would be false economy.

10
dL

O

0

- 6~
The remainder of the budget, that which is le ft for the operational
costs o f the Government, is not relatively large, amounting as i t does
to only 5%, or &2.1 b illio n . This amount covers the Congress, and the
Executive Office* I t includes Treasury activities in collecting taxes,
administering the public debt, end keeping the Government’ s books, and
the expenditures o f various other agencies* To cut large sums out of
this group would be a d iffic u lt undertaking*
As a matter of fa ct, any cuts in this budget w ill be d iffic u lt i f
we are not to jeopardize our national defense, ignore our national
welfare, or threaten our efforts to attain world peace.
Finally, le t me c a ll your attention to the policies of President
Truman and your Administration in the field of foreign a ffa irs, ^s
Democrats and as citizens of these United States, we can be thankful
for the leadership that has brought about an unprecedented unanimity o
opinion in this country in our dealings with other nations*
Our international policy is essentially an American policy and it
represents the views and the wishes of the Nation.
Looking toward the future, the task of Democratic leadership is
clear. Under the continued guidance of President Harry S. Truman, we
w ill direct our policies toward developing a balanced and expanding
economy* We must maintain a high volume of purchasing power to provide
a broad market for the products of industry and agriculture* We must
insure that business profits remain at adequate levels to provide a
steadily expanding industrial capacity, and that the capital markets
function smoothly in financing our business expansion.
We must provide for the development of our human and material^
resources, to the end that we may continue as a Nation of high living
standards and high productivity*
The aims and purposes of the Democratic Party can be eloquently
summed up in the words of President Trumans f,We seek a peaceful
world, a prosperous world, a free Y/orld, a world of good neighbors,
living on terms of equality and mutual respect*”
i

-oOo—

131

TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS/
F rid ay, February 13, 1948. .
.

-

■ ;

.

• Press S e rv ice
No. S-624

The- Secretary of the Treasury, by this public notice,
invites tenders for $ 1 ,000,000,000, or thereabouts, of.
.9 1 -day
Treasury bills,, for cash and In exchange for Treasury bills
maturing- February 19, 1948, to be issued on a discount basis
under competitive and non-competitive bidding as hereinafter
provided. ' The bills of this series ¥111 be dated February 19,
1948, and will -mature M a y ‘20, 1948, when the face amount will
be payable without interest.
They 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 (maturity value;.
Tenders will be received at Federal Reserve Banks and
Branched up to the closing hour, two. o rclock p.m., Eastern
Standard time, Monday, February 16 , 1948.
Tenders will not be
received at the Treasury Department-, Washington. Each tender
must be for an even multiple of $ 1 ,000, and in the case of compe­
titive tenders the price offered must be expressed on the basis
of 100, with not more than three decimals, e. g., 99 .925 .
Fractions may not be used.
It.is urged that tenders be made
on the printed forms and forwarded in the 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,trust companies and from responsible and recognized
dealers in investment securities.
Tenders from others must be
accompanied by payment of 2 percent of the face amount of
Treasury bills applied for, unless the tenders are accompanied
by an.express guaranty of payment by an incorporated bank or
trust company. .
Immediately after the closing hour, tenders will be opened
at the Federal Reserve Banks and Branches, following which public
announcement will be made by the Secretary of the Treasury of the
amount and price range of accepted b i d s . Those submitting
tenders will be advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to
accept or reject any or all tenders, in Whole or In part, and
his action in any such respect shall be final.
Subject to .
these reservations, non-competitive tenders for $ 200,000 or less
without stated price from any one bidder will
be accepted in
full at the average price (in three decimals)
of accepted
competitive bids.
Settlement for accepted tenders In-accordance
with the bids must be made or completed at the Federal Reserve
Bank on February 19, 1948, In cash or other immediately available

2
funds or in a like face amount of Treasury bills maturing
February 19>• 1948.
Cash and exchange tenders will receive
equal treatment. Cash adjustments v.ill be. made for differences
between the par value of maturing bills'accepted in exchange
and the issue price of the new -bills .
. ’ The income derived from Treasury bills, whether interest'
or gain from the sale or .other disposition of the bills', shall
not: have any exemption, as such, and loss from the sale or
other- disposition of Treasury bills shall not have any special
treatment, as such, under the Internal Revenue Code, or laws
amendât o.ry o r supp lament ary there to. .The bills shall- be sub•ject to estate, inheritance, 'gift or other'excise' taxes, whether
Federal or State, but shall be exempt from all taxation now or
hereafter imposed on the principal or interest thereof by.any
State, or any of the possessions of the'United States, or by
any local taxing authority . .;For purposes
of taxation the amount
of discount at which Treasury bills are originally sold by the
United States, shall be considered to.be interest. Under Sections
42 and 117 (a) (l) of the Internal Revenue Code, as amended by
Section 115 o f the Revenue Act of 1941, the amount of discount
at 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, the owner of Treasury bills (other
than life-insurance companies) issued hereunder need include in
his income tax return only the difference.between the'price paid
.for- such bills, 'Whether on original issue or on subsequent
purchase, and.the amount actually received either upon sale or
redemption at maturity during -t h e -taxable year for which the
return is made, as ordinary gain or loss.
; . Treasury Department Circular No * 4l8, 'as amended-, and this
notice, prescribe the terms of the Treasury bills and govern theconditions of their issue.
Copies of the circular may be
obtained from any Federal Reserve Bank or Branch.

oQo

TREASURY DEPARTMENT
Washington
for r e l e a s e , m o r n i n g n e w s p a p e r s

Sunday, February 15, 1948._____

Press Service
No. S - 6 2 5

Treasury enforcement a c t i v i t i e s in c id e n t to the c o lle c t io n
of taxes due the F ed eral Government continued to se t new records
in number o f in v e s t ig a t io n s , persons in d ic te d and c o n v ic te d , and
additional revenue assessments during 1947, George Schoeneman,
Commissioner o f In te r n a l Revenue, today reported to S e cre ta ry Snyder.
The In t e llig e n c e U n it o f the Bureau, headed by W. H . W oolf,
working w ith revenue agents and deputy c o lle c t o r s , in v e s tig a te d
more than 4,000 cases in v o lv in g p o s s ib le evasion of. ta x e s , o b ta in ­
ing evidence le a d in g to indictm ent o f 3 7 3 in d iv id u a ls during the
year. Cases going to. t r i a l t o t a lle d 2 0 9 , in v o lv in g 2 6 7 in d iv id u a ls ,
of whom 2 5 2 were co n v icte d , approxim ately/ 9 5 p e rc e n t.
Nearly a m illio n d o lla r s in fin e s were assessed in a d d itio n
to prison sentences ranging up to f iv e y e a r s . A d d itio n a l taxes
and p e n a ltie s imposed as a r e s u lt o f these in v e s tig a tio n s by the
In te llig e n ce U n it , w ith i t s personnel o f about 1,000 s p e c ia l a g e n ts,
aggregated n e a rly a quarter o f a b i l l i o n d o lla r s ; and enforcement
a c tiv itie s o f the Bureau as- a whole sw elled the t o t a l o f such
additional p o te n tia l revenue fo r the year to $ 1 , 9 8 2 , 1 6 7 , 0 0 0 , a g a in st
approximately $ 1 , 5 0 0 , 0 0 0 ,0 0 0 in the 1946 calendar y e a r .
T yp ical o f the seriou sn ess w ith which the crime o f ta x evasion
is regarded in many fe d e r a l court ju r is d ic t io n s was the case in ­
volving Norton Samuel Locke o f D a lla s , Texas, operator o f se v e ra l
corporations engaged in Government co n stru ctio n work. .Locke was
sentenced by Judge T.-W Davidson to serve fiv e years in p riso n and
pay a fin e o f $25,000 fo r defrau din g the Government by f i l i n g f a ls e
and fraudulent income tax retu rn s fo r h im s e lf; h is w ife , and s o le ly
owned c o rp o ra tio n s.
In senten cin g Locke, Judge Davidson sta te d ;
"The law o f our country provides th a t a l l people who re ce iv e
and accumulate or earn a c e r ta in amount o f income must make a
report; That i s the way our Government is being m aintained to a
very great d eg re a . I t i s a burden th a t must be shouldered by a l l
men, and. whenever one sh irk s h is d u ty , i t leav es th a t much more on
tne^next one to c a r r y . I f a l l men broke the law and concealed
eir Income, i f a l l men were enabled to w ithhold th e ir ta x e s , the
government could not fu n c tio n .- I f the Government could not itm ctlo n ,
wnat would a man’ s g a in , p ro p e rty , be worth i f the Government could
not affo rd i t s p ro te c tio n ? "
f 4. Additional taxes and peanlties recommended in the Locke case
stalled more than half a million dollars;

fh A federal court in Los Angeles dealt with equal severity with
v-u .r®®'surer
a "wool jobbing firm and the accountant who super­
sea the corporation records. Elias Berger, the accountant, and

133
2

•Tsador K aplan, tre a su re r o f M orris Kaplan and Sons, I n c ., each were
given a year and a day in p riso n and two other o f f i c e r s o f the firm
vere given sentences o f s ix months each , and heavy f i n e s .
The scheme to evade taxes in volved system atic d iv e r s io n o f
sales r e c e ip ts to a s e c r e t bank acco u n t, and u ltim a te ly to in d i­
vidual bank accounts o f the ta x p a y e rs , T o ta l taxes and p e n a ltie s
recommended were in excess o f $800,000,
Agents started investigation of the accounts of the owner of
a popular Tacoma, Washington, restaurant when they learned he had
a fondness fbr $1,000 bills. The taxpayer ultimately drew a 10months r prison term.
Taxpayers convicted of evasion covered a wide range of bus­
inesses and the professions, A New York City furrier has a year
and a half to repent bookkeeping practices designed to evade
federal excise taxes.
An optometrist, two dentists and a physician were among^those
given heavy fines or sentenced to prison for income tax evasion.

A d d itio n a l taxes and p e n a ltie s in excess o f h a l f a m illio n
dollars were imposed upon a D e tr o it luggage m anufacturer, who
was sentenced to two years'im prisonm ent and fin e d $10,000.
The Bureau continued effective Investigation of accounts of
wartime black marketeers, among those sentenced in 19^7 being a
Georgia dealer in cotton sheeting, a Massachusetts lumber dealer,
and partners in a Los Angeles meat business .
A Seattle gambler drew 10 months in prison, and a New York
night club operator two years, the latter for evasion of cabaret
taxes,
~
One of the largest evasion cases involved a distributor of
agricultural products. Additional taxes and penalties in excess of
$800,000 were recommended against Elmer Hartner, head of the
Hartner Products -Company of Denver, and he was sentenced to 15
months * imprisonment,

An ex ten siv e In v e s tig a tio n o f ta x accounts o f M assachusetts
fishermen culm inated in two c rim in a l case co n v ictio n s in one o f
which a f is h in g boat ca p ta in was sentenced to a year and a day
in p riso n .
0O0

TREASURY DEPARTMENT
Washington

(The following address by Secretary Snyder, before
the Chicago World Trade Conference at the Hotel
Sherman, Chicago, Illinois, is scheduled fon__
delivery at 1:15 P , M . , C.S.TV, Monday,-F ebruary ^ ,
1948 , and is for release at that time»)
"World Trade - A Neoessary Component of our Economy.
Economic growth and economic stability are the twin safe­
guards of Private Enterprise, We must first understand the
financial and moral forces active today in our national and
international life if our economic growth is to be paralleled
by our progress toward economic stability.
The postwar situation has financial and economic aspects
entirely new to world history, which insure that we will never return to prewar conditions. This is a fact we have recognized,
and must continue to recognize ih dealing with all^questions
■.
of postwar national and international policy, and in determining
the type and adequacy of measures which must be taken to achieve
our basic objectives.
The United States is contributing substantially to the
advancement of a sensible and orderly international worxing^
economy.
Our leadership in this program is by no means entirely
unselfish, • For we know that world economic equilibrium is ggj
absolutely necessary as a stabilizing influence and an Incentive
to the growth of the United States.
We are convinced that nothing less than an enduring basisof international cooperation will provide the Incentives^neces,sary to produce and exchange goods and to create the environ­
ment in which private enterprise can profitably function.
There is a strong tendency throughout the world to adopt
a series of piece-meal and unilateral actions designed•to meet
day-to-day problems even though tthey multiply and aggravate |
the problems of tomorrow.
But It is tomorrow's business ^ a
must be carefully planned today.
Otherwise, we might well waste our resources and energies in programs doomed to failure.
Good business relations do not permit restrictive trade
practices such as stem from cartels and monopolies which
limit production, allocate markets, fix prices, and otherwise
interfere with the production, distribution, and consumption e
goods , Trade relations cannot be mutually profitable in the
face of high tariff barriers, preferences, ^penalizations., and
discriminations.
These practices cause injury and breed
S -626

retaliation.
There can be one result only of such procedure;
a spiral of reprisals in which everybody gets h u r t .
This is precisely what happened after World War
Economic self-preservation became a thinly disguised formula
for economic aggression.
It strangled world commerce.and
played a- major role in the greatest depression of-all times.
It bred and multiplied world friction and was a major cause
of World War II.
The whole international economic policy of the United
States today is predicated on the proposition that these mis­
takes shall not be repeated. ,
The proposed Charter of the International Trade Organiza­
tion already has the distinction of being the product of thelongest period of continuous and intensive collaboration in
diplomatic history. Both the millions of words written during
that period and the thousand or more conferences held can be
summed up in a single philosophy:
"fair play".
As President Truman said, the. whole purpose of these
conferences is to set forth a code of simple principles of
fair dealing for world commercial relationships. Instead of
permitting unlimited freedom to commit acts of economic ag­
gression, we, and other nations must frame a code of economic
conduct and agree to live by its r u l e s . Instead of adopting,
without warning and without consultation, measures that might
be harmful to our neighbors, we shall all agree to sit down
beforehand and talk things o v e r . In economics, as well as
in international politics, this is the way to peace. We can
also be sure that it is the only way to world prosperity. .
The factors which have generated our present powerful
economy are vast natural resources, industrial and agricultural
capacities, and, most important, the creative abilities and
the characteristic diligence of the American people.
Our job
is to use the elements of our strength boldly and wisely in
that manner which will result in the greatest possible return
to the American p e ople.
The Nation entered this year with business activity at
the highest level of the postwar period, an activity in which
the Chicago area shared fully,
Personal incomes are running at the rate of over 200
billion dollars a year.
Combined iron and steel production is
almost double prewar average: coal and petroleum, 64 percent
■above; manufactured foods, 56 percent higher; while agriculture
products showed a 35 percent increase within the past year.

138
- 3 Electric power output, now running at an all-time high,
continues steadily to expand, with last y e a r ’s figures exceed­
ing the prewar average by 12r
6 percent .
The steadily increasing volume of freight.carried by the
railroads is further testimony to our expanding enterprise.
As the railroad center of the United States, Chicago played
the leading role last year in the greatest peacetime traffic
in railroad history.
And perhaps the best business activity index of all -employment — continues at record levels.
In spite- of record-breaking performance, however, the
current high levels of production are still not sufficient to
meet the demand in many lines. A number of industries have been
limited by insufficient industrial capacity, basic materials,
and to some extent a shortage of labor. Prom the standpoint
of domestic needs, the most important deficiencies are in steely
automobiles, petroleum facilities, construction, freight cars,
and electric power.
The needs for industrial replacement and expansion, our
road building programs, our municipal construction, and ishe
urgent requirements for housing, are a measure of the pent-up
demand, and add to this demand an appraisal of the rehabilita­
tion needs of war-devastated countries, .and the needs of the
many countries that look to the United States for a substantial
part of their imports.
In view of this huge deficit of both consumer and capital
goods, it is difficult to foresee any important decline in
American business f©r some time ahead.
The United States is keenly aware of one Important
economic factor which'I should like to emphasize and that is
that the under-developed countries of the world will play an
important part in the international trade of tomorrow. All
possible assistance should be*extended them in promoting their
economic development.
A certain portion of our products is now being and will
continue to be sent abroad to restore the economies of other
countries.
But, in return for the things we send, we are receiving
many products from overseas, and our imports should expand as
productivity in other nations is revived*
These imports will
supply us with materials required to feed our industrial plants
and at the same time will provide other countries with dollars
to pay for American goods.

137
- 4 This two-way traffic will receive additional stimulus as
our own productivity climbs to even higher levels ,. We must
expand our export markets to maintain high production, full
employment, and rising standards of living*. We must, however,
be prepared to open our markets to foreign goods and services
to an increasing extent so that dollars can be earned by other
nations to pay for our products.
Then we can be assured of maximum benefit from the inter­
change of goods and services.
In this period, public funds are necessary and desirable
to meet temporary short-term emergency requirements . But public
funds lack the flexibility needed in long range development
since such funds are fixed by legislation as to amount, timing,
and purpose. Clearly, this is a job for private capital, which
is available on a much more flexible basis.
Capital is a commodity, and will be exported only to the
most attractive markets* What is required, then, to stimulate
the flow of private capital is a code of fair investment
practices that will enable capital to flow abroad under
mutually profitable conditions and with adequate safeguards.
Otherwise, private capital will stay at home where it can find
a more prudent balance between profit and safety.
The American dollar is playing an increasingly important
role as the standard of exchange in international trade.
High among our obligations, then, is the duty of safe­
guarding this international currency -- of keeping the American
dollar sound. And the soundness of the American dollar rests
upon the solidity of the American economy and the financial
integrity of the American Government.
We fully realize the great responsibilities of the United
States Government in pursuing a sound fiscal policy to assure
our national economic welfare *
The fiscal foundation of the Government must rest upon
a revenue system that will provide the cost of maintaining*
government and financing its necessary functions, with adequate
provision for funds to manage, service and reduce the national
debt,
There is only one approach that I can make to our tax
problems, and that is through a realistic appraisal of the hard
facts of the present situation.
It is not a question of what we
would like to have at the moment, but what in the long run is
in the national interest. Nor is it a matter of what would
be desirable and proper under different circumstances,' but
rather, what is the proper action to take under the conditions
which now prevail,

The cold facts are that present -economic conditions,
budgetary considerations, inflationary pressures, and debt
management problems are such that we cannot deliberately allow
revenues to drop below present levels at this time.
The President's budget for the fiscal year ending June 30,
1949, was presented t o .the Congress on January 12.
Current
estimates of budget receipts for fiscal year 1949 are $44.5
billion. We estimate that peak production and employment,
together with substantial price inflation, will combine to keep
receipts at these high levels .
During the fiscal year 194?, the Federal Government showed
a surplus of approximately $753 million.
The estimated surplus
for 1948 is $ 7.5 billion, and this would be reduced in 1949
to $4.8 billion, if the conditions set forth in the Budget
Message prevail.
Budget expenditures for fiscal 1949, estimated at $39-7
billion, have been pared to the minimum consistent with our
responsibilities.
Let us look objectively at the framework
of the budget for possible areas of curtailment.
Seventy-nine percent of the proposed budget is war related.
The largest single item is $11.0 billion for national defense,
accounting for 28$ of the entire budget.
I do not believe that
the Congress, in view of the dangerously unsettled conditions
which prevail throughout the world today, will make a reduction
in the estimated expenditures for this division. As a matter
of fact, the Congress' may increase this amount,.
An inflexible item of the 1949 expenditure is the $5-3
billion allowance for interest on the public debt, making up
13$ of the total,
$ 2.0 billion for refund of overpaid taxes and duties, or
5$> represents a deduction from revenues rather than a true
expenditure.
Veterans 1 services an4 benefits account for 15$ of the
total, with a current estimate of $ 6 .1 billion for the program.
Our proposed international commitments, the grave importance
of which a r e ‘self-evident, total $ 7*0 billion, or 18$ of the
budget,
So together, the programs thus far mentioned make up 79$
of the budget, or nearly four-fifths of the 1949 expenditure
estimate, They are all, as I have said, largely war created
obligations.

-

6

139
-

As we analyze the G o v e r n m e n t s peacetime operations, we
find that 12$, or $5.0 billions of the Budget, covers^such item
as flood control, reclamation and other public works items,
agricultural programs and state aid, that is, public assistanc
and highways. These are hardly items that will be materially
cut this year.

This leaves, then, 9
,
%ro $3.3 billion, in the
cover all the running expenses of the Government:
the Exeouti
office the Congress, the State, Treasury, Justice, Post Office,
Interior, Agriculture, Commerce, Labor, atomicJtoergy Com^asicJi|
and the various agencies.
To cut large sums out of thi g
P
will be difficult.
We are in the midst of the transitional period between a
war and a peace economy. The high cost of Government today
results from our war and postwar commitments « In view ox
existing world-wide conditions, we must not reduce our revenues
to a point which would make it impossible for us to meet the
financial, economic and moral obligations of the people of
this country. •
I
cannot conceive of any considerations under existing con­
ditions that would justify a tax policy or program that would
fail to balance the budget in the fiscal year 194$ and also
make provision for adequate retirement of the public debt.
It will take the cooperation and the forbearance of all
our people and all elements of our national life to meet the
challenge of maintaining our obligations while striving always
to reduce as rapidly as is prudent the total cost of operating
our Government,,
In the light of the position of the United States in world
trade and economic recovery, the Treasury Department has under
taken, among other studies, to reexamine the tax treatment o
Americans doing business abroad.
Taxes affect the willingness of investors to send their
capital abroad in pursuit of new ventures or the developmen
of uld ones .
The policy of the United States at this time is to make^
no special tax concessions to American citizens and corporations;
who go into foreign market s , There have been some departures
from this policy when special circumstances required I t . In
general, however, the effect of our laws has been to make
.
Americans engaging in business abroad stand on their own feet
and to rely upon American industrial techniques and business
acumen to meet competition,
One of the most persistent criticisms of this policy^is
that it places Americans at a disadvantage in competing with
nationals of other countries,

140
- 7 There Is no doubt that if we accorded special tax treatment
to American income derived from-£ trade or business in foreign
countries f the flow of private American investment funds into
foreign markets would be encouraged.
It would assist in the
development of backward areas, in the economic rehabilitation
of war-torn countries, and might reduce the volume of inter­
governmental loans and assistance..
Consideration must be given, however, to the extent to
which preferential tax treatment might weaken the structure
and strength of our income taxes when our entire tax system is
becoming increasingly reliant on the income tax as its principal
component.
Past experience indicates, too, that preferential
tax treatment is an inefficient technique. Subsidies are
generally more effective when they are direct and specific and
not disguised in the form of tax exemption or tax reduction.
Though taxation of income derived from foreign sources
is considered too harsh by some Americans, it has the virtue of
preventing the charge being made against the United States
Government that it subsidizes our citizens to compete with
nationals of other countries in their own home m a r k e t s .
Particularly because of our leadership in world trade and the
world economy, and the importance of our role in stimulating
world rehabilitation, we must exercise extreme care not to
give the false impression of striving for foreign economic
penetration and domination.
As on every tax issue, the problem of taxing Americans
doing business abroad involves the balancing of a number of
considerations, and this is not a matter easy to resolve. But,
let me repeat, we are making a special and careful study of
this Important problem. By analyzing the available facts and
the relevant considerations, a creditable and satisfactory
solution to the problem should be developed.
In closing, let me again emphasize that our domestic
economic prosperity will be materially affected by the trade
policies which we pursue at this time in shaping our future
position in world trade relationships.
Our objectives are clear.
If we are to reach these objec­
tives, we must act within the knowledge of the economic, social
and political forces inherent in our domestic and International
problems- today. We must broaden our horizon to. encompass
closer relations with other countries and other peoples through­
out the earth in order to fully develop and utilize the w o r l d fs
productive resources.
0 O0

TREASURY DEPARTMENT
Washington

Remarks of Secretary Snyder on
the Occasion of Receiving the
Citation of Merit from
the Poor Richard Club
Philadelphia, February 17, 19^8

I
am grateful, Mr, Hawkins and Poor Richard Club members,
for this Citation of Merit.
I
accept this Citation on behalf of M r s . Nellie Tayloe
Ross, Mr. John R. Sinnock, and all others in the Treasury
Department- and the Bureau of the Mint who played a part in
the authorization, the design and the production of the nev
coin.
I should like especially to mention the designer,
Mr. Sinnock, engraver of the Mint, whose talent gave to our
coinage and medals much of their outstanding artistry.
I am
sure you share my regret that Mr. Sinnock did not live to see
the Franklin half dollar come from the coining press.
Surely there could be no more natural choice than to
have the portrait of the First Citizen of Philadelphia on the
obverse of the nev half dollar teamed with a representation
on the reverse of that First Institution of Philadelphia,
the Liberty B e l l .
I recall a discussion which we had in the Treasury Depart
me n t . It concerned the question whether people were likely
to call the new coin the Franklin half dollar or the Liberty
Bell half dollar, assuming that not many would go to the
trouble of combining the two n a m e s .
You of the Poor Richard
Club will raise no objection, I imagine, if people resolve the
problem by just calling it the Philadelphia half dollar -and that solution probably would strike Ben Franklin, too, as
a happy o n e ,
Whatever you call it, the new coin will be finding its
way into millions of pockets within the next few w e e k s , It
becomes, as you know, a coin of regular issue, supplanting
an older half-dollar design of which almost half a Jbillion
have been minted since 1929 .
I suspect that B. Franklin, printer, would favor attach­
ing to each of the new coins a tag with some such inscription
as ''Spend Me Wisely.” Actually, however, the coin probably
will not need a tag to become a social force.
I think the
Franklin !,Phiz” as he liked to call it, stirring remembrance

142

-

2

-

of pithy Franklin tributes to thrifty living, will serve the
same purpose. And certainly the new half dollar, to the
extent that it spreads a message of thrift, will contribute
to the national well-being in these days when wise spending
is a pressing national need,.
Thus the day may come when this coin itself, much more
than its authors, shall have well earned a Citation of Merit
from this distinguished body.

(REMARKS ON COUNTERPRESENTATION)
And now, as a token of my esteem for the Poor Richard Club,
and of my appreciation of the generous expression I have re­
ceived from it today, I make available to it this portrait in
bronze of Benjamin Franklin, whose name and fame are closely
linked with the traditions of this Club.
This is an exact replica of the portrait which the new
fifty cent piece will bear in recognition of the contribution
oi this illustrious patriot to his own and succeeding genera­
tions as scientist, statesman and philosopher.
0 O0

143
TREASURY DEPARTMENT
Washington

(The following address by Secretary Snyder, on
Federal Finances in Relation to the Rational
Economy, before the Association of Stock Exchange
Firm? and the Atlanta Chamber of Commerce, at the
Piedmont Driving Club, Atlanta, Georgia, is
scheduled for delivery at 6:^0 P.M
E S ~
Friday Fe bruary IS",.19 W , "a n O ? for release
at that time.jr
"
------ ~— r

primary fiscal concern is the financial integrity
of the United States Government.
The only way in which such
integrity can be sustained is by firm adherence to a sound
national financial policy.
This policy must rest upon a
revenue system that will adequately meet the cost of government and Its necessary functions, and provide funds to manage,
service, and reduce the public debt.
v

#

.

*>

. '

-f-f.

' '%I

Jf1 planning our fiscal program, it is not a question of
S? ° S da,1 :Lie
have at the moment, nor is it a matter

oi what might be desirable and proper under different circum­
stances.
Our fiscal decisions must be made with a view to
tne long-term national interest.
What we seek is to stabilize our present high level of
material welfare while, at the same time, encouraging an
expanding economy. 6
a foyndatlon for this program, federal financial
determined by a completely realistic appraisal
oi existing f acts.

H
Positive factors in our economic outlook are definite
and gain and are entireTy encouraging for future consolidation
* ^ 7 > we achieved a .level of peacetime prosperity
mhp on.°eforf lcaovn in this country, or in any other, country.

aggregate output of goods and services for civilian use
was at record heights.
of

a peacetime industrial production of 187 percent
bfle 19J5-39 average.

emPl o S ? y?ecord!aChed ^

S-627

6° mllll°n

a trUly great

144
2

The n a tio n a l income vas d is tr ib u te d broadly throughout the
country and a l l se cto rs shared in the prosperous business a c ­
t i v i t y , Wages and s a la r ie s , business p r o f i t s , and farm income
each reached nev p ro s p e rity l e v e l s ,
American r a ilr o a d s in 194-7 handled the g r e a te s t peacetim e
t r a f f i c in h is t o r y , E le c t r ic power output and o i l production
both set nev records .
The standard o f li v i n g o f the American p eo p le, measured
in terms o f goods and s e r v ic e s , was h igh er than ever b e fo r e .
Today, the su p p lie s o f raw m a te r ia ls , machinery and equip­
ment, and lab o r a v a ila b le fo r producing new goods are being
used p r a c t ic a lly a t c a p a c ity l e v e l s .
Such fa c t s argue fo r expansion o f economic a c t i v i t y and
higher n a tio n a l income, w ith r e s u lta n t b e n e fits fo r a l l .
We have i t w e ll w ith in our power to move forward to fa r
greater business growth and in d iv id u a l w e ll-b e in g . Our produc­
tion p la n t and equipment are being c o n sta n tly expanded; our
labor fo rce is more than adequate to the ta s k ; our in d u s t r ia l
and business management is a g g re s s iv e ; and our savings are equal
to meeting in c r e a s in g c a p it a l requirem en ts.
These are the p o s itiv e fa c to r s in our economic o u tlo o k .
Because o f these f a c t o r s , we are in a p o s itio n to generate fa r
greater c a p a c ity i f , in the fa ce o f c e r ta in obvious storm
s ig n a ls , we now c o n so lid a te our g a in s .
Economic r e tr o g r e s s io n can come only from f a ilu r e to take
a ffirm a tiv e a c tio n to r e in fo r c e the weaknesses and to counter­
balance the d is to r tio n s which are p re s e n tly ap p aren t.
The stro n g e st undermining fo rce and the most d e f in it e
threat to our s t a b i l i t y during the past months has been i n f l a t i o n .
The r e a l i t y o f t h is danger was pointed out in P resid en t
Truman's recen t warning to the Congress th a t "The f i r s t o b je c ­
tiv e fo r 1948 must be to ha.lt the in f la t io n a r y tr e n d ."
An e f f e c t iv e a tta c k on in fla t io n a r y trends could not be
marshalled from a s in g le so u rce. I t was not a qu estio n o f
Government co n tro ls versus vo lu n tary r e s t r a in t , but a co o rd in ated ,
sustained, w e ll-b a lan ce d e f f o r t in v o lv in g b o th . B u sin e ss,
lab or, a g r ic u lt u r e , and Government, a l l had to u n ite in a t t a c k ­
ing the problem.
A most d ir e c t co n tin u in g a t t a c k on s c a r c it ie s and r is in g
price and wage le v e ls can be made by a broad n a tio n a l savings
effo rt^ w ith every in d iv id u a l keeping h is or her expenditures
io a minimum. Every d o lla r we can save makes a d ir e c t co n trib u ­
tion toward c o n tr o llin g i n f l a t i o n by reducing the pressure on
p r ic e s .

145
. - 3 Although some correction in the upward spiral o*f the high
cost of living has been made in the past week by a decline
in commodity prices, these adjustments must be viewed carefully
in terms of our whole economy.
In a transitional period, in
which prices are seeking a more stable relationship, such as
we are now having, there is a delicate balance between inflation
and deflation.
Certainly, we do not want an excess of either.
We should recognize that while there is room for price
adjustment in many fields, such adjustments can be made without
creating a serious recession.
It is merely necessary that*we
steer our way through the present situation with courage and
energetic effort toward the objective of a better balanced
economy.
N
We have been working earnestly toward the goal of arrest­
ing inflationary pressures. Whether the peak of these pressures
has been reached remains to be seen. A careful balance between
restraint and encouragement should be maintained.
This Administration believes that Government controls
should be restricted to the minimum essential to the full
operation of our free enterprise system.
The job con best be'
done, and more quickly, if government, business, and the public
together exercise commonsense restraints.
A government surplus of receipts over expenditures is our
most effective weapon in controlling the aggregate volume of
purchasing power. . Government surplus represents money which
is taken from the spending stream by taxes and Is not returned
to it by government expenditures.
A surplus of receipts over expenditures has been one of
the strong anti-inflationary forces operating in the economy
during the present year.
When the proceeds of a government surplus are used to
retire debt held by the banking system, two objectives are
accomplished.
The current spending stream is cut down and the
money supply curtailed.
It has consequently been the Treasury
policy to reduce as much as possible the amount of debt held
by the commercial banks.
The problems of debt management, however, are much more
Intricate than merely using revenue surplus to pay off the
debt. Differentiations of debt ownership, for instance, have
a-widespread effect upon our economy.
Practical management is
therefore essential in debt retirement, in the reissuing of
debt maturities, and in distribution of debt holdings.

146

- 4 Ownership of the debt, broadly speaking, is divided
three ways. About one-fourth is owned by individuals.
About three-eighths is owned by other nonbank investors,
including such groups as insurance companies, non-financial
corporations and associations.
The remaining three-eighths
is owned by commercial banks and the Federal Reserve B a n k s ,
The public debt reaohed a peak of $280 billion in
February, 1946.
Since then, it has been reduced by over
$25 billion. Most of this reduction was effected by drawing
down the Treasury cash balance from a wartime to a peacetime
level. We have only just begun to make sizable réductions
from the revenue surplus.
During the period since the peak of the debt,, total
holdings of government securities" by commercial and Federal
Reserve Banks have been reduced by f27 billion.
In order to reduce bank holdings of government
securities by $27 billion during the period in which the
total debt decrease was $25 billion, it was necessary to
increase the government security holdings of nonbank inves­
tors . The sale of savings bonds has been an important
factor in making this shift possible,
We expect to push the sale of savings bonds even
harder in.the period a h e a d . These, like other forms of
savings, are a means of taking money from the spending
stream, and so of cutting down inflationary pressures,
In the management of the debt, it is always an attrac­
tive temptation to postpone debt reduction.
Tax; reduction
has a strong immediate appeal. But because of the fanreaching effect upon our national economy, I cannot
conceive of any considerations under present conditions
that could justify a tax policy or program failing to
balance the budget in the fiscal year 19^9 and making n ec­
essary provision for adequate retirement of the public debt.
We are in the midst of the transitional period between
a war. and a peace economy. The high cost of government
today results In the main from our war and postwar commit­
ments .
In view of present world distress, we, of all nations,
should not and cannot reduce -our revenues to a point which
would make it impossible for us to meet the financial,
economic and moral obligations of the people of this
country.
'
*

1 47
AT/
- 5 The proposed Budget of the United States for the
fiscdl year ending June 30, 19^9 3 calls for total expendi­
tures of $39.7 ’billion. This is a tremendous outlay, but
I doubt seriously, considering final net expenditures, that
it will be reduced significantly at this time.
Of the total amount of the proposed budget, 79 percent
is directly related to the costs of war, the effects of war
and our efforts to prevent a future war.
The estimate' for national defense alone is $11 billion.
This one figure amounts to 28 percent of the 19^9 budget.
Provision for veteran services and benefits amounts to $6.1
billion, or 15 percent of the total. $7 billion, o r ' 18 percent of the budget, is estimated
to be needed for international finance.
Interest on the public debt amounts to $5,3 billion.
This .fixed charge, totaling 13 percent, is an inflexible
item.
'•
Nearly $2 billion is provided to cover refunds of re­
ceipts, a figure which represents an estimate of the overpay­
ment of taxes and duties which the government must repay.
So, the foregoing programs make up nearly four-fifths
of the 19^9 expenditure estimate.
In analyzing the government's peacetime operations, we
find that 12 percent, or $ 5.0 billions of the budget covers
such items as flood control, reclamation, and other public
works items, agricultural programs and state aid, that is,
public assistance and highways;
It is doubtful that these
items will he materially cut this year.
This leaves, then, 9 percent, or $3,3 billion in the
budget to cover all the running expenses of the Government:
the Executive Office, the Congress, the State, Treasury, Justice,
Post Office, Interior, Agriculture, Commerce, Labor, Atomic
Energy Commission and the various other agencies. To cut
large sums out of this group would be a difficult undertaking.
_
I am firmly opposed to a hasty tax reduction which would
lower our present revenue level before we have determined
what our total outlay of expenditures is to be for the fiscal
year 1949 and before a complete and proper survey of revision
01 our entire tax structure is undertaken.
For many years, taxes have been adjusted piecemeal to meet
rgent requirements. The depression years, followed by
Preparations for defense, and later by the war itself, called
1 or continually increased sources of revenue. cur first step
in. changing our tax structure should be to iron out these

-

6

-

The Treasurer Department began to lay plans for the
revision of the tax structure even before the conclusion of
the war.
It has already placed before Congressional committees
fifteen tax studies.
I should like to mention here, some of those areas in
which revision appears to be particularly desirable in the
interest of basic economic goals.
The excise tax structure was rapidly expanded during the
war, and some undesirable features crept into it. There is
•need to revise some of these excises, especially those which
bear heavily on business costs or tend to fall with dispro­
portionate weight on low income groups in the process of
shifting through consumer prices .
The tendency of more and more states to adopt community-property laws for the purpose of giving tax benefits to
their residents has high-lighted the need for uniform taxation
of family incomes in all the states ♦
In the field of business taxation, the so-called double
taxation of dividends requires attention. We should also
explore fully the potentialities of the tax system to foster
the growth of small business.
It would further seem desirable that more liberal provi­
sion should be made for the offset of business losses incurred
in off years against the profits realized in prosperous years .
The role of Federal estate and gift taxes has to be
strengthened. A better integration of the estate with the
gift tax, and of both with the income tax, will contribute
tb this e n d .
Several phases of the tax structure Involve problems of
Federal-State tax coordination.
Postwar tax revision can
make an important contribution to inter-governmental fiscal
integration.
There is need also for a large number of technical
adjustments
in the present law which would contribute to
better relations between the taxpayer and the government, im­
prove tax equity, promote., simplicity .of reporting for the
taxpayer, and simplify tax administration.
It is most important that we create a well-balanced and
fair tax system. However, we must keep In mind that most
Revisions necessary to put the tax structure on a sound and
basis will involve loss of revenue.
Therefore, wise
judgment e,galn counsels against hasty dissipation of our
margin of surplus through general tax reduction.
If we exhaust
our revenue reserves prematurely, we may deny ourselves the
opportunity to make tax revisions necessary to the economy.

-7 Since our overall fiscal policies will essentially
affect the expansion and competitive vitality of our free
society, these policies definitely must he-predicated on
the permanent national interest and not on immediate ad­
vantages or individual wishes .
American free enterprise is the first consideration.
But the horizons are far broader,
Today, the entire world looks to the United States to
determine whether or not our free society is capable of
resolving its fundamenta,! problems by overcoming forces
that endanger our economic structure.
Our success in these efforts should demonstrate that
the most effective economic system to assure the welfare and
happiness of man is found in a free, competitive economy.

0 O0

TREASURY DEPARTE;T
WasHington,
Press Service
Do. S-62S'

FOR IMMEDIATE RELEASE
Wednesday, February I I , 19AS

150

The Bureau of Customs announced today that preliminary data on imports of
cotton and cotton waste chargeable to the quotas established by the President's
proclamation of September 5, 1939, ■as amended, for the period September 20,
1947, to January 31, 194$3
as follows :
COTTON (other than !l inters )
(In pounds)
*
:
Country of
Origin

Under 1-1/8” other
•than rough or harsh
under 3/4”
Imports Sept*
î
î Est abl i shed 20,1947, to
2 Quota
Jan. 31* 1948

Egypt and the
Anglo-Egyptian
783,816
Sudan.................... ......
Peru............................
2-47,952
British In d ia.. . . .
2,003,483
China........... ...............
1,370,791
Mexico. . . . . . . . . . . .
8,883,259
Brazil.......... .............
618,723
Union of Soviet
Socialist Repub—
lies........................
475,124
5} 203
Argentina.. . . . . . . .
Haiti* •. . . . . . . . . . .
237
Ecuador...............
9,333
Honduras. . . . . . . . . *
752
Paraguay.. . . . . . . . .
871
Colombia....................
124
Iraq... . . . . . . . . . . .
195
British East
Africa.................. . .
2 ,2 4 0
Netherlands East
Indies.. . . ............. .
71,388
Barbados.....................
_—
Other British
•«est Indies 1 / ,...
2 1 ,3 2 1
Nigeria.. . . . . . . . . .
5,377
Other British
•<est Africa 2 / ... •
16,004
Other Ireneh..
Africa 3 / . . . . . . . . .
689
Algeria. and Tunisia
-

247,952
19,784
—

1-1/8" or more
Less than 3/4”
but less than
Harsh or rough ^
1-11/16» LJ
Imports Sept* Imports Sept* 20,
1947 to
20,1947, to
Jan. 31* 1948
Jan. 31ì 1948
43 , 574,472

1,903,999

14,214,810

8 , 883,259

618,723
249 ,

068

177,949

45 , 6 5 6 ,4 2 0
14,516,882 10,018,786
Other than Barbados, Bermuda, Jamaica, Trinidad, and Tobago«
Other than Gold Coast and Nigeria.
Other than Algeria, Tunisia, and Madagascar.
Established Quota - 45,656,420*
Established Quota - 70,000,000*

14,214,810

2

-

-

COTTON WASTES
(In pounds)
COTTON CARD STRIPS made from cotton having a staple of less than 1-3/16 inches
in length, ODMBEh WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER
OR NOT MANUiACTURED OR OTHERWISE ADVANCED IN VALUES Provided, however, that
not more than 33- 1/3 percent of the quotas shall be fille d by cotton wastes
other than comber wastes made from cottons of 1 - 3/16 inches or more in staple
le n g th in the case of the following countries: United Kingdom, France,
N e th e rla n d s, Switzerland, Belgium, Germany, and Italy:
Country o f

Origin

united K in g d o m ..# .*
Canada....................... ....
France.-................................
B r it is h I n d i a . . . . . .
|e t h e r la n d s . . . . . . . .
S w itz e r la n d .. . . . . . .
Belgium.

Japan...........

China.
Cuba..................................
Germany.. . . . . . . . . . .
I lastly••♦•«•••••••••
T o ta ls

1/

:

Established
TOTAL QUOTA

Total imports Established
Sept* 20,1947, 33-1/3# of
to Jan.31,1948 Total Quota

4 ,3 2 3 ,4 5 7
239,690
2 2 7 ,4 2 0
6 9,62 7
68,240
44,388
3 8,559
3 41,535
1 7 ,3 2 2
8 ,1 3 5
6, 544
76,329
2 1 ,2 6 3

1 9 ,7 0 3
7 0,81 8

5 ,4 8 2 , 509

I 6O, I 48

1 , 44I , I 52

-

Imports
sept. 20, 1947, to
Jan. 31» 1948 1/
19,703

75,80 7
6 9,627
2 2,747
1 4 ,7 9 6
1 2,853

~
■—
-

2 5,443
7 ,0 8 8

In c lu d e d i n t o t a l im p o r ts , column 2 .

-o Do-

1 , 599,886

19,703

1

CO

V»»'

TREASURY DEPARTMENT
Washington
FOR IMiffiDIATE RELEASE
Wednesday, February 11, 1948

Press Service
ho* S-629

The Bureau of Customs announced today preliminary figures showing
the imports for consumption of commodities on which quotas were pre­
scribed by the Philippine Trade Act of 1946, from January 1 , I 94 B to
January 31, 1943, inclusive, as follows:

Products of
: Established Quot,
Philippine Islands :
Quantity
Buttons

8 5 0,00 0

Unit of
Quantity

10,723
97,885

200 , 000,000

Number

Coconut o il

443,000,000

Pound

Cordage

6 , 000,000

ft

Rice

1 , 040,000

h

Tobacco

1 , 904 , 000,000
6 , 500,000

Imports as of
January 31, 1943

Gross

Cigars

Sugars, refined )
unrefined)

:
:

9,733,193
61, 3 H
—

h
11

tt

29,177,173

153

TREASURE DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Friday« February 20, 1 9 4 3 » ___

Press Service
No« S-630

Secretary Snyder today nade public, in accordance with a provision of the
Internal Revenue Code, a supplemental 'lis t of individuals receiving from corpo­
rations compensation for personal services in excess of $7 5 ,0 0 0 for the calendar
year 1944 and fis c a l years ending in 1945, and for the calendar year 1945, and
fiscal years ended in 194&0
The Secretary of the Treasury is required ty Section 148 (f) of the Code,
as amended by Section 407 of the Revenue Act of 1939, to make public the names
of such individuals as were reported by employing corporations in their income
tax returnso The l is t compiled shows the amounts paid to officers and employees
ty reporting corporations in the form of salary, commissions, bonus or other com*
pensation for personal services 0
Section 14S (f) of the Internal Revenue Code, as amended by Section 407 of
the Revenue Act of 1939, is as follows:
»Compensation of Officers arri Employees: - Under regulations
prescribed by the Commissioner vfith the approval of the Secretary,
every corporation subject to taxation under this chapter sh a ll, in
its return, submit a lis t of the names of a ll officers and employees
of such corporation and the respective amounts paid to them during
the taxable year of the corporation by the corporation as salary,
commission, bonus, or other compensation for personal services
rendered, i f the aggregate amount so paid to the individual is in
excess of $75 , 000 o
»The Secretary shall compile from the returns made a lis t con­
taining the names of, and the amounts paid to , each such officer
and employee and the name of the paying corporation and shall make,
such lis t available to the publico I t shall be unlawful for any
person to s e ll, offer for sale, or circulate, for any consideration
whatsoever, any copy or reproduction of any l i s t , or part thereof,
authorized to be made public by this Act or by any prior Act,
relating to the publication of information derived from income tax
returns; and any offense against the foregoing provision shall be
a misdemeanor and be punished ty a fine not exceeding $1 ,0 0 0 or by
imprisonment not exceeding one year, or both, at the discretion of
the court: Provided, that nothing in this sentence shall be con­
strued to be applicable vdth respect to any newspaper, or other
periodical publication entitled to admission to the mails as secondclass matter©»
The names of the corporations and of the officers and employees who re­
ceived compensation in excess of $75,000, as reported to the Secretary by the
Bureau of Internal Revenue, are as follows:

OF CORPORATION
AND OFFICEES OE
EMPLOYEES

IfAME

CALENDAR OE
EISCAL YEAE
ElfDED

SALAEY

COMMI SSIOH

BOMIS

OnHEE
COMPEN­
SATION

TOTAL

NEW YOEK (Cent.)
LOEW’ S, INCORPORATED (Cont.)
Franklin, Sidney
Freed, Arthur
Friedman, Leopold
Gable, Clark
Garnett, Tay
Garson, Greer
Gibbons, Cedric
Goetz, Ben
Gordon, Leon
Gumm, Frances (Judy Garland)
: Hepburn, Katharine
Homb low, Arthur, J r .
Itu rb i, Jose
Johnson, Laraine
Johnson, Van
Katz, Sam
Koster, Henry
Leonard, Eobert Z.
Le Roy, Mervyn
Licht man, Â1,
Mandl, Hedwig K. (Eedy Lemarr)
Loew, Arthur M.
Manniz, E. J .
Mayer, J , G*
Mayer, Louis B.

2/31/45
201,000,00

106 , 0 0 0.00
93 »6 0 0 .00
229 , 637.50
119 *250.00

10 , 4 0 0.00

00

104.000.

00

212 . 000.

92 . 750.00

21, 999«99
62, 333*33
141 . 666. 66
192, 667.27

3 1 ,4 1 6 .6 7

9 2 . 7 5 0.00
2 1 , 9 9 9 .9 9
99 . 75 9 .0 0

02

141 . 666. 66

125.500.00

10 ^,0 0 0.00

51, 532.53

1^5,750.00

159 . 000 .
229 , 6 3 7.50
119 . 250.00

212,000.02

34 . 500.00
159 . 00 0 .

201, 000.00

53 ,ooo.oo

00 ^3 , 571.43

212 . 000 .

00

132.000.

00

159 . 000 .
130 . 416.67

00 4 3 ,5 7 1 .4 3

161 . 650.00
123 . 000 .
159 . 000 .

*+3 , 571.43

3 2 ,4 3 0 .3 s

00
00
3 4 3 ,5 7 1 .4 3

36 , 922.96
60 , 00 0 .0 0

192 , 667.27
135 . 500.00
103 . 000 .

83,461.49
94 . 5 0 0 .0 0
202 . 57 1 .4 3
145 . 750.00

212 . 000 . 00
182 , 000.00

202 . 57 1.43
130 . 41 6.67
82 , 430.38
205 . 221.43
123 , 0 0 0.00
502 . 571.43

00

NAHE o r COPPO-RAT I Oli
AND OFFICERS OR

EMPLOYEES

CALEî'TDAR OR
FISCAL YEAR
É3É

OTHER

SALARY

COMMISSION

COMPEN­
SATION

BONUS

TOTAL

NEW YORK (Cont.)
LOEW1S, INCORPORATED (Cent.)
McGuinness, James
M61choir* Lauritz
Minnelli, V. C«
Montgomery, Robert
Morgan, Frank
Moskowitz, C# 0»
Milrphy, George
Nathan» Robert
Pasternak, Joseph
Pidgeon, Walter
Powell, William
Raphaelson, Samson
Rathbone, Basil
RiSkin* Everett
Roberts, Marguerite
Robinson, Casey
Robinson, Edward G.
Hogers, Ginger
Rogers, William P,
P-ubin, J . Robert
Schenck, Nicholas M.
Sidney, George
Sidney, Louis K.
Siegel, Morris J#
Sothern, Ann
Thau, Benjamin
Thorpe, Richard
Tr.urog, Forman
Eracy, Spencer

S/3 I/U5

132,500*00
121,770*83^

13R,500*00

121,770*83
78 , 000*00
226 , 333 , 3h
101,597*29
102 , 700*00
119 . 250.00
92 , 250.00

78 ,000.00

226 , 333. 3 h
16 , 9 0 0,00

.
,

158 ,2 50 .0 0

158 250.00
121 125.01
196 , 250.00
96 , 250.00
87 , 666.66
132 . 500.00
60 . 116.67
131 . 000 .
110 . 000 .
175 . 000 . 00

ioh,ooo.oo
88 ,h 0 0 ,0 0
105 . 300.00
22 , 900.00
96 . 916.67
106 . 000 .
111 , 666,66
92.750.00
92.750.00
159 *0 0 0.00
ih6,S90.97

101,597.29
119 , 6 0 0.00
119 , 250.00
92 , 250.00
177,191.68

56 , 0 6 6.67

196., 250.00
96 . 250.00

87,666.66

132 , 500.00

92.750.00

32,633.33
00
00
10 . 600.00
15 . 900.00
25 . 175.00

ill,3 5 7 .lh
9 h ,h io .7 2

57,hhi.67
00
83 , 257 . 9s

131 . 000 .
110 . 000 .
175 . 000 . 00
i i h , 6oo.oo
215 , 657 . 1h
22h , 885*72
80 , 3hl . 67
96 , 916.67
106 , 0 0 0 .0 0
111 , 666.66
176 , 607.92

92,750*00

159 *0 0 0,00

ih6,890.97

on

cn

00
00

- 5NAME OE CORPORATION
. AND OEEICERS OR
EMPLOYEES

CALENDAR OR
FISCAL YEAR
ENDED

COMMISSION

SALARY

BONUS

OTHER
COMPENSATION

TOTAL

NEW YORK (Coni..)
LOEW’ S, INCORPORATED (Cent.)
Tnimbo, Dalton
Turner, Lana
Vogel, Joseph R*.
Warren* Harry
Weingarten, L*
Whorf, -Richard
Wilson, Carey
Young, Robert
Elmbali s t, Sam

S/3 I /45

84 . 500.00
176 . 000 .
93 *6 0 0,00
117,361006
172 . 250.00

75,624.99
121 . 000 .
122 . 500.00
139,166.67

RUSSELL, BURDSALL & WARD BOLT & NUT CO. 6/30/45
Ward, Evans

22 , 500.00

50 , 0 0 0.00

00

30,535.71
00

84,500.00

226 , 0 0 0 .0 0

10,400.00 104,000.00
117 , 361.06
202,785*71
75*624.99
121 , 0 0 0 .0 0
122 , 500.00
139,166.67

100 , 96 3.01

123*463.01

OHIO
THE RIDOE TOOL COMPANY
Ingwer, 0. H.

12 /31/44

75*240.00

75*240.00

7 0 *4 9 1.01

78 , 49 1.01

112 , 500.00

112 , 50 0.00

CALIFORNIA
ANDY RUSSELL, INCORPORATED
Russe IL, Andy

3 /31/46

CAGNEY PRODUCTIONS, INCORPORATED
Cagney, James

7 /31 / ^

NORTH AMERICAR AVIATION, INCORPORATED
Kinderberger, J . H,

9 /30/46

100 ,.000*00

50 .0 0

100 , 05 0 .0 0

cn

- 6 -

1

HAKE OF CORPORATIOH
AITD OFFICERS OR
El^FLOYEES

CALENDAR OR
FISCAL YEAR
EHBEB

SALARI

C O M I SSI OH

OTHER
COMPERSATIOH

BONUS

TOTAL

GEORGIA
BI3E MOUFACTURIHG COMPANY
Anderson» William B.

S/31 /U6
^9»999*92

35*000.00

2^*999-92

IOWA
COLLIHS FABIO COKPAHY
Barkley, William J»
Collins, Arthur A*

7/3 i/U6
99-999.8 ^
81,999.8!*

50.00
125.00

100 , 0 ^9 . 8^82 ,iaU.SH

MASSACHUSETTS
BRAPER & COMPANY, ÌHCOEPORATEB
Braper, Paul A#

11 /30 /U6

WIHSLOW BROTHERS & SMITH COKPAHY
Marriner, Kenneth W..

IO/31 /U6

75 *00 0.00

28 , 900,00

30 , 000.00

137*275.00

103,900.00
220.00

167^95*00

175.00

90 , 175.00

MICHIGAN
3UEDY TUBIEG COMPAHY
Anderson, Wendell W,

7/3l/>t6

GIBSOH REFRIGERATOR COMPANY
Gibson, Charles J*
Hamper, L.

7 /31 /wj

^ASH-KSIVIHATOE COEPORàTIOÌÌ
Mason, George W.

9 /3 0 A 6

90 , 000.00
100 , 00 0 ,0 0
60 ,.000.00

%

125 , 000 . 16-A

15 .000.
18.000.

00
00

115 *0 0 0,00

78,000.00

125 , 00 0 .1 6

170TE A - Does not include directors fees paid by
Refrigeration Biscount Corporation in the
amount of $80 *00 *

-y
cn
00

- 7NAME OF CORPORATION
AND OPPIOPES OR
EMPLOYEES

CALENDAR OR
FISCAL YEAR
ENDED

SALARI

COMMISSION

BONUS

OTHER
COMPEN­
SATION

TOTAL '

MIM! SOTA
NORTHERN OPJMàlTCE, INCORPORATED
• Hawley, John. B ,, J r ,

6 /3 0 /U6

100 , 000,00

100 , 00 0 .0 0

NEW JERSEY
CAMPBELL SOUP COMPANY
Porrance, Arthur 0«

7/31/U6

EASTEFF W O D PRODUCTS COMPARÌ
Tipton, H, R,

II/ 30 /Ud

FORSTMANN WOOLEN COMPARÌ
Forstmann, Curt E,
Forstmann, Ju liu s G-.
Wilson, Kenneth

11 /30/^6

-

9^*625*00

9^ , 625*00

95.35^.bl
25.000.
15 . 000 .
15 . 000 .

95,35^ .6 1
00

136 , 809*75
6 g ,W .g g

00
00

6s ,W .S 7

1 , 200,00

i,Uoo.oo
1 , 0 0 0.00

163 , 00 9 .7 5
8Û,8üU.8 S

gÌ4,U0U.S7

NEW YORK
DAVID CRYSTAL, INCORPORATED
Crystal, Philip
Draddy, Vincent

XX/30 /Ï+6

JULIUS FORSTMANN CORPORATION
Rosenberg, Bernard A,

H / 30 /U6

JOE LOUE CORPORATION
Nissman, Morris

H / 30 /U6

OERBACH*S, INCORPORATED
Ohrbaeh Fat han M.

15,283, 28
19 , 6Ui , 6ìi

91,'*+6 2 ,6 3
91 . **6 2 .6 3

107,3^5*91
111 , 10.**. 27

36 , 000.00

59,.{fi*M3

95 , 2 ^6 ^ 3

95,629*69

95 , 6 2 9 .6 9

1iJl/kb

.0 0 , 000,00

100 ,000.00

cn
(JD

-

FAME'OF CORPORATION
AND OFFICERS OR
EMPLOYEES

CALENDAR OR
FISCAL YEAR
ENDED

8

-

SALARY

COMICI SSI ON
-

BONUS

OTHER
COMEENSATION

TOTAL

NEW YORK (Cent.)
11 /30 /U6

50.s9u.96

7/31/U6

STEHLI AND COMPANY, INC.
Dillmuch, William L#

9/30/*+6

vn

I. SCHNEIEESON & SONS, INC.
Schneierson, S, S.

STERLING DRUG, INCORPORATED
H ill, James, J r .

IR/3I/H5

TIMON SECURITIES CORPORATION
King, Joseph H.

I 2 /3 I /45

UNIVERSAL FILM EXCHANGES, INC.
Scully, William A.

IO/3I/U6

UNI VERSAL. TI'TTEHNATIONAL FILMS, INC.
Seidelman, Joseph H*

10 /31 /1+6

UNIVERSAL PICTURES COMPANY, INC.
Abbott, Bud
Aumont, Maria Montez
Blumberg, N. J .
Brent* George
Costello* Lou

10 /31 /1+6

0
0
*0
0
0

CHESTER H. ROTH COMPANY, . INC*
Roth, Chester H*

50,000,00

100,89*+. 96

^3 ,^ 73.5 2

97**+73* 52
101,365.53

101,365.53

65,000.00

25,000.00

550.00

90,550.00

^ 9>999*92

^5,000.00

011.37

95, 611.29

91,000.00

91,000.00

75»^oo.oo

75»^oo.oo

1i13.gg9.iD
76, 375.00
117.000.
187.000. 00
156, 229.17

30.653.06
00

106,622.60
30.556.77

17^ , 5*+3.02
76, 375*0)0
223,622.6g
187, 000.00
188, 785* 9^

£—k
CO

O

YORK (Cont.)
/ront.)

'ARDER BROTHERS CIRCUIT IMAKAOEHEHT CORP,
Coston, James E.
Hoffman, I. J*
Ealmine, Harry-

117»000,00
128, 125.00
2^-3.000.00
100,000*00
so,025.00
26,250.00
101,333*35
150,000.00
75,Uoo.00
129,000.00
2U5,000.00
136,,200.00
6
21,500.,00
&c
o
Dj ,00

10 /3I/U6

17,,500,
22,,500,,00

0
0

ALBBURÖER G-RAITT & COMPAHY, IHC.
G-rant, Dana H»
Waldburger» Ernest R. J»

10 /31 /U6

0
0
*0

UBIVERSAL PICTURES COKPAM,
Cowdin, J. Cheever
Donlevy, Brian
7ae
Durbin, Edna V
Duryea, Dan
Ees si er, Michael
Pox, Matthew
Jackson, Eelix
Oakie, Jack
Prutzman, Charles D.
R.eisch, Walter
Sèiter, William
Siodmak, Robert
t'/anger, Walter
Work, Clifford

S/31/kl

^8,130O4,00
52,,000«,00
76,,550«AO

f

j|^

name o f corporation
a n d o e e i c e p r op .

■ ;_______ EMPLOYEES______________

CALENDAR OR
EISCAL YEAR
ENDED

. OTHER
COMMISSION

SALARY
__________

BONUS

COMPENSATI ON

TOTAL *
______________

NEW YORK (Cont.)
' WIENER BROTHERS PICTURES, INC*.
Bernhard, Joseph
Bernhardt, K*
Blanke, Henry
Bogart, Humphrey
Butler, David
Carson, Jack
Crawford, Joan
Curt i z, Mi chael
Daves, Delmar
Davis, Bette
Dunne, Irene
Einfeld, S. C,
Elynn, Errol
Porbstein, Leo
e-arfield, Jules
Grant, Cary
Greenstreet, Sydney
Henreid, Paul
Lupino, Ida
Massey, Raymond
Morner, Stanley
Raines, Claude
Rapper, Irving
Reagan, Ronald
Schneider, Samuel
Sheridan, Ann
Sherman, Vincent
Stanwyck» Barbara
Starr, Herman

S/31/U6

800,00

102 , 00 0 .0 0
1 1 6 .4 6 6 .67

192,916*67
123 , 291*66
150 . 000 .
123 , 250.01
200 . 000 .
25 5 . 600.00
89,725*00

00

.

200 ,000.00
258 ,600.00

00

89,725*00

221 ,000.00

221 ,000,00
7 7 , 5 0 0.00

81,000,00
21^ , 000*00
91 , 00 0 .0 0
8^ , 0 0 0.00
S9*5S3*33
128 ,000.00
1 6 0 ,8 3 3 *3 7

128, 000.00
8*1, 00 0 .0 0
261 , 0 0 0.00
85 , 0 0 0 .0 0

155.500.00
1^5,233.33
73,750.00
1 3 3 *9 2 8 ,6 7

89,750*00

116 .6 6 6 .6 7

78 , 000*00

106 , 800*00
116 , U6 6 ,67
192 , 916*67
123 . 291.66
150 , 00 0 ,0 0
123 , 250.01

1*50 *00 '

13 , 0 0 0 .0 0

77 , 500.00
81,000.00
21^,000.00
91 , 0 0 0 .0 0
8*+, 000 . 00
29*523*33
128 ,000.00
160,833.37
128 ,000.00
8^,000.00
261 , 0 0 0 .0 0
'85 ,000.00
155 , 500,00
1 ^5 *233*33
87 , 200.00
133 *928.67
89,750*00
116 . 666.67
78 *0 0 0.00

[»«A

cn
ro

-

NAME OF CORPORATION
AND OFFICERS OR:EMPLOYEES

11 -

SALARY

NEW YORE (Coat*)
W a r n e r b r o t h e r s p i c t u r e s , i n c . (cent.)
Trilling, Steve B.
Wald, Jerry
Walsh, Raoul
Warner, Albert
Warner, Harry M.
Warner, Jack L.
WARNER BROS..PICTURES DISTRIBUTING CORP
Ealmenson, Benj.

8/31/46

V

s/31/46

OTHER
COMPENSATION

BONUS

78 , 0 0 0 .0 0

99.175.00
173.S33.33
91 , 0 0 0 .0 0
182 , 000»00
182 , 0 0 0.00

15,000000

TOTAL

■7 S , 0 0 0 .0 0
99 , 175.00
173 . S3 3 .33
io4, 500.00
182 , 150.00
182,100.00

0i
13 , 00 0 .0 0

500.00
1 5 0 .0 0
100.00

13 , 0 0 0 ,0 0

84,600.00

8 /3 1/46

JULIUS N.WERK FABRICKS, INC
Werk, Julius N*

COMMISSION

,

97 , 600.00
92 , 73 7.45

23.737.4 5

OHIO

11/30/46

THE ANDREW JSRGENS COMPANY
Jergens, Andrew
Nelson Joseph D.
•
DANA ■CORPORATION (formerly Spicer
Mfg. Corporation)
Carpenter, R, E.
Dana, C. A#
THE GENERAL TIRE <?■ RUBBER COMPANY
O ’Neil, W.
-.

. v-

THE WM. TAYLOR SON £ ¿‘
Q MPANY
Scholl, D. H.

8 /31/46

11/30/46

5 . 000 . 00
5 . 000 . 00

250 . 000 .
250 . 000 .

3 ^, 0 0 0 .0 0
100 , 00 0 .0 0
10 , 0 0 0 .0 0

255 . 000 .
255 . 000 .

00
00

6 3 , 250.00

\

99 , 250.00
100 , 00 0.00

97 , 00 0.00

87 , 00 0 .0 0

\

1 /31/46

3 2 , 500.00

6 7 , 500.00

100 , 0 0 0.00

cry

00
00

líAME

OF

COiíFÔRÂTÏÔN

ÜID OFFICERS OF
EMPLOYEES

~
___

O ALEETEfi r,fi
F ISC A L YEAR
ENDED

SALARY

OTHER
COMMISSION

BONUS

COMPEN­
SATION

TOTAL

PENITSYLYANIA
AL PAUL LEFTON COMFAiry ESTO.
Lefton, A l PatcL
•FORT PITT BREWING- COMPANY
Berardino, M.

10 /tl /U6
J 1

10/31/1+6
• ■

75.31^0^
ll+ , 1+00,00

EHQBE. IS&AND
BRADFORD DY1 INGP J&SOCÍATrON (U. S. A)
Smners’by* Oeoajg0?

105,532.95

119*932.95

55, 000.00

85,000.00

I I /30 /1+6
30,000.00

TEXAS
Ttoerson, clayton & co;
AMersoar
L»
CN&nafax* D. B»
Partas, T. A.
Fleming» Lamar Jr^.
Johnson, J . M.
Koaiv W. H.
¡ieAafe^n*. S. M. J r ..
Oden», SydnopWhíttington, Harmon

7/31/1+6
2 0 .0 0 0 . 00

35>ooo.oo
17»962*85
1+0,000.00
20 ».000. 00
2 0 .0 0 0 . 00
2 0 .0 0 0 .
2 5 .0 00 . 00
1+0,000.00

65,691.32
io i» 3 i6 .3 2
87,61+9.2 3
136,003.82
65,691.32
8l+, 1+1+1, 32
00
65,691*32
gí+#ijj+ i.3 i
136,003.82

65,691.32
136.316.32
105,632.08
176,003.82
85,691*32
101+,1+1+1.32
65.691.32
109,1+1+1.31
.176,003.82

VIRGINIA
PRAPERS NUT Al© CHOCOLATE COMPANY
Amedeo

9 /30 /I+6
' f

5,000.01+

150,558.59

1+00.00 ,

155*956.63

(JO

A-s»

165
United States Savings Bonds Issued and Redeemed Through January 31, 194-8
(Dollar amounts in millions - rounded and w ill not necessarily add to totals)
-----------j Amount
Amount
¡Amount Out- Percent Redeem
¡Issued jj/ Redeemed l/ ! standing 2/ ¡of Amt. Issues
|
Series A-D
I
Series A-193 5 (matured)
248
1 0 255
! # 8
9 7 . 25 /
Series A-1936 (matured)
95.60
20
i
463
443
Series G-1937 (matured)
522
68
!
590
88.47
Series r —io
|
672
20S
! 2/4.63
30.95
Series D-1939-.. . . . . . . .
1 ,0 4 0
221
819
21.25
1,226
238
988
Series D-1940
19.41
526 .........93............ ..433..............
17.68
Series D—
1 9 4 1 .. .... ... .
s

J 0 0 0 0 0 0 0 0 0 0

Total Seri

4,772

A—
D. . . . . . . .

'es E:
Series
Series
Series
Series
Series
Series
Series
Series

E-I 94 I
E -I 942
E-1943
E-1944
E-1943
E-Ï 946
E-1947
E-1943
Toto.1 i>eri(
Total Series A - S ..„ ...
&ei les F a]id U
Series F and
Series X and
Series F and
Series X and
Series TPX 'jtne. G-194
oenes F and
Series F and
(1 mo.)
Series F SLUG.
Total Series F and G . . . .
V

“ 71

T.1

Unclassified sales and
redemptions................ ..................
Total A ll Series ¿¡J

1,974

1 1,470
351
1 6.683
2,433
! 10,930
¿ ,7 0 3
5,611
! 12,775
4,172
I 9,946
1,287
! 4,3,65
3,999
524
;...... 159 ____*
J 50,337 19,081

2,799

41.37

1,127

23.75

4 ,2 5 0

3 6 .4 1

6,228
7,164
•5,774
3,078
3,475
159
___
¡31,255

43.03
43.92
41,95
29.48

! 55,109 , 21,055______ , 34,054
!
— *
1
209
1,324
! 1,53 3
506
2,687
; 3,192
542
2,823
! 3 ,3 6 5
3,238
458
3,6(;'6
2 ,8 6 6
281
! 3,147
2 ,8 3 6
158
5 2,994
! 2 ,5 8 2 1
2 ,5 5 2
31
147
!j—ppWSyp
147p W
H
! 2—
0 ,6 5 7
18,474
j—
—...— ..... 2,183

3 8 .2 1

149
rI..... 196 —
■75,962 23,387 '
i----- ---- —'

....... 47
52,575

1 3 .1 0

37.91

1 3 .6 3

15.85
1 6 .1 1

12.39
8 .9 3

5.28

1 .2 0

10.57
!!
30.79

i/ Includes accrued discount.
2/ Current redemption values.
Includes matured bonds w M ch­ ive not been presented for payment.
y
LÌ includes Series A-C (matured ), and therefor does not agree with totals
under interest-bearing debt on Public Debt Statement.
Office of Fiscal Assistant Secretary
Treasure Department

TREASURY DEPARTMENT
Washington
FOR IMEDIATE RELEASE
Wednesdays February 11, 194-8

Press Service
No. S-631

The Bureau of Customs announced today preliminary figures showing the

quantities of wheat and wheat flour entered, or withdrawn from warehouse, for
consumption under the import quotas established in the President’ s proclamation
of May 28, 1941* as modified by the President’ s proclamations of April jg., 1942,
snd April 29, 1943* for the 12 months commencing May 29, 1947, as follows:

Country
of
Origin

:

Wheat

:

: Established
:
Quota
(Bushels)

Canada
China
Hungary
Hong Kong
Japan .
United Kingdom
Australia
Germany
Syria
New Zealand
Chile
Netherlands
Argentina
Italy
Cuba
Irenee
Greece
Mexico
Panama
Uruguay
Poland and Danzig
Sweden
Yugoslavia
Norway
Canary Islands
Rumania
Guatemala
Brazil
Union of Soviet
Socialist Republics
Belgium

795*000
-

—■

:
Imports
:May 29,1947 to
: January 31, 1948
(Bushels)
500

/ —■
-

100

—

—

—

100
100

—
-

—

_

—

—

100
2 , 000
100

—

-M
—

'—

-

1 ,0 0 0
—

—

100

—
—

—

—

—
—

—

—

—
—

—

_

1 , 000
100
100

3,815,0 0 0

1,247,338

2 4 ,0 00
1 3 ,0 0 0
1 3 ,0 0 0
8 ,0 0 0
75,0 0 0
1 ,0 0 0
5,00 0
5,0 0 0
1 ,0 0 0
1 ,0 0 0
1 ,0 0 0
1 4 ,0 0 0
2 ,0 0 0
1 2 ,0 0 0
1 , 000
1 ,0 0 0
1 ,0 0 0
1 ,0 0 0
1 , 000
1 , 000
1 , 000
1 ,0 0 0
1 ,0 0 0
1 , 000

5,6 0 0
—

80
—
—
_
—
—

__
—
— .
—
—
—
_

--

—

—
—

100
100

800,000

Wheat flour, semolina
crushed or cracked
wheat, and similar
wheat products
: Imports
Established :May 29, 1947 to
Quota
: January 3 1 » 1948
(Pounds)
(Pounds)

-

-m

mm

*4
500

-0O0*-

—

4 , 000,000

—

1 , 253,018

.

1

167

TREASURY DEPARTMENT
itehington
FOR I MEDIATE RELEASE
Wednesday, February 11, 19¿8

Press Service
No. S-632

The Bureau of Customs announced today preliminary figures showing the
imports for consumption of commodities within quota limitations provided
lor under the General Agreement on Tariffs and Trade, from the beginning
of the quota periods to January 31* 194-8* inclusive, as follows:
•
:

Commodity

Established Quota
Period and Quantity

9 Unit
:
of
: Quantity

: Imports as of
: January 31*
:
1948

Whole milk, fresh
or sour

Calendar year 3*000,000 Gallon

542

Cream, fresh or sour

Calendar year 1,500,000 Gallon

134

Butter

3 months from
Jan. ■
1, •1948 30,000,000 Pound

9,269

Fish, fresh or frozen,
fille te d , e tc ., cod,
haddock, hake, pollock,
u)
cusk, and rosefish
Calendar year 24,930,188 Pound

3,518,292

White or Irish
potatoes:
Certified seed
Other

(l)

12 months from JL50, 000,000 Pound
Sept* 15* 1947 60,000,000 Pound

92, 545,087
40,262,924

The proviso to Item 717(b) limits the imports for
consumption at the quota rate to 6,232,547 pounds
during the fir s t 3 months of the calendar year*

Due to a provision of the President’ s proclamation No.'27t>9 of
January 30 , 1948 in which the entry of a specified quantity of Cuban f ille r
tobacco, unstemmed or stemmed (other than cigarette leaf tobacco) and scrap
tobacco affects the rate of duty on such tobacco from countries other than
C u b a,reco rd is maintained of imports from Cuba* 2 , 434,346 pounds of
such Cuban tobacco were imported for consumption during the period January 1
to January 31* 1948, inclusive*.

t Mè a s u r y
,

'' _ ‘ V ‘ .

department
'

/ X

’

vf

-

'

'

•

'

¿

y

®

..."

Washington

FOR. IMMEDIATE RELEASE
Monday, February 16, 19^-8.

Press Service
N o . S -633

During the month of January, 1948, market transactions
in direct and guaranteed securities of the Government for
Treasury investment and other accounts resulted in net
sales of $200,000, Secretary Snyder announced today.

DO

TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Tuesday, February 17, 19^8.

.; Press Service
N o . S -634

The Secretary of the Treasury, by this public notice,
invites tenders for $ 1 ,100 ,000,000, > r thereabouts, of 91 -day
Treasury bills, for cash and in exchange for Treasury bills
maturing February 26, 1948, tfc be issued on a discount basis
under competitive and non-competitive bidding as hereinafter
provided. The bills of this series will be dated February 26,
1948, and will mature May 27 , 1948, when the face amount will
be payable without interest.
They will be issued in bearer form
only, and in denominations of $ 1 ,000, $ 5 ,000, $ 10 ,000, $ 100 ,00,0,
$500,000, and $ 1 ,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and
Branches up to the closing hour, two o'clock p'.m., Eastern
Standard time ,4 Friday, February 20, 19^8.
Tenders will not be
received at the Treasury Department, Washington. Each tender
must be. for an even multiple of $ 1 ,000, and in the case of compe­
titive tenders the price offered must be expressed on the- basis
of 100 , with not more than three decimals, e. g., 99 *925 .
Fractions may not be used.
It is urged that tenders, be made
on the printed firms and- forwarded in the special envelopes which
will be supplied by Federal Reserve Banks or Branches on appli­
cation. therefor.
Tenders will >0 received without deposit from incorporated
banks and trust companies and fn*m responsible and recognized
dealers in investment securities. Tenders from others must be
accompanied by payment of 2 percent of the face amount of
Treasury bills applied for, unless the tenders are accompanied
>7 an express guaranty of payment by an incorporated bank or
trust company...
Immediately after the closing hour, tenders will be opened
at the Federal Reserve Banks and Branches, following which
public announcement will be made by the Secretary of the Treasury
of the amount and price range of-accepted bids.
Those submit­
ting tenders will be. advised ^if the acceptance or rejection there­
of. The Secretary of the Treasury expressly reserves the right
to accept or reject any or all tenders, in whole or in part,and his action in any such respect shall be final.
Subject to
these reservations, non-competihive »tenders for $ 200,000 or'
less without stated price from ;
,an>y one bidder will be accepted
in full at the average price (ik ,.th:cee decimals) of accepted
competitive b i d s . Settlement for accepted tenders in accordance
with the bids must be made or completed at the Federal Reserve
Bank on February 26 , 1948, in cash or other immediately available

■funds or in-a- like facd amount o f 'Treasury M i l s .maturing,-;. :
'■’’^February 26, 1948.. Cash and exchange tenders--yill r e c e i v e r ,
•■equal treatment. Cash adjustments .will' be macie for differences
..between the par value of maturing bills accepted in -exchange .
• and the issue price of the new b i l l s „
' ..
The income derived from Treasury, . b i l l s w h e t h e r interest
or gain from the sale or other disposition'of the' bills, shall
not have any exemption-,. •as. such, and loss from-the sale or.
other disposition of .-Treasury ‘bills shall not have any special
• treatment, as such, under the "Internal Revenue Code, -or laws
amendatory or supplementary thereto. The bills,.shall be subject
• to estate, inheritance, gift or other excise taÿes,' whether
• Federal or State, but shall be -exempt from all'’taxation now or
hereafter imposed on the principal'or interest thereof by any
s State, or. any of the .possessions of the United.. States, or by-any
local.taxing authority. For purposes
o f ’taxation the. amount
of discount* at which freasury bills are* originally sold by the
. United States shall he considered to be interést. Under .Sections
42 and 117 (a) (l) of the Internal Revenue Code, as amended by
Section 115 of the Revenue.’Act .of 1941, the amount of discount
..at 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,.the owner of Treasury bills
(ohter than life-"insurance companies) issued hereunder need
include in his income tax feturn only the difference'between
the price paid for such bills, whether on original issue or on
subsequent purchase, and the amount actually'received-either upon
£ sale or redemption at maturity during the taxable year for which
" the return is made, as ordinary'gain or'Toss .
Treasury Department Circular N o » 4l8, as amended, and this
notice, p'rescribe the terms of the Treasury bills and govern
the conditions.of their issue.
Copies of the circular may be
obtained from .any Federal Reserve Bank or Branch.

oOo

TREASURY DEPARTMENT

Wàshington
Press Service
No. S - 6 3 5

FOR RELEASE/ MORNING NEWSPAPERS,
Tuesday, February 17, 1948.

- The Secretary of the Treasury announced last evening
that the tenders for $ 1 ,000,000,000, or thereabouts, of 9 1 ~day
Treasury bills to be dated February 19 and to mature May 20,
1948, which were offered February 13, 1948, were opened at the
Federal Reserve Banks on February 16.
The details of this issue are as follows:
Total applied for - $1,460,777,000
Total accepted
* 1,000,528,600 (includes $43,288,000 entered
on a non-competitive basis and accepted
in full at the average price shown below)
Average price - 99.748 Equivalent rate of discount approx.
0 .996$ per annum
, Range of accepted competitive bids;
High - 99*765 Equiv. rate of discount approx. 0 .930$ per annum
Low - 99.747
"
M
"
M
"
'1.001$
"
M
(59$- of the amount bid for at the low price was accepted)
Federal Reserve
District .

Total
Applied for

Bo st on
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco

$

TOTAL

13 , 610,000
1,277,727,000

3 , 150,000

Total
Accepted

$

1 2 , 3 8 0 ,0 0 0
8 4 7 , 6 2 9 ,0 0 0
3 . 1 5 0 .0 0 0

8.465.000
3 .170.000

8.465.000

61 ,862,000

43.605.000

1 0 , 0 8 0 ,0 0 0

4.190.000
6

. 0 5 3 .0 0 0

3 . 1 7 0 .0 0 0
7 . 6 7 0 .0 0 0
3 . 8 8 3 .0 0 0
5 . 7 2 5 .0 0 0
1 0 . 1 8 3 .0 0 0

13.259.000
5,645,000
53.566.000

4 9 . 0 2 3 .0 0 0

$1,460,777,000

$1,000,528,000

0 O0

5.645.000

171
TREASURY DEPARTMENT
W ash in gton
foe RELEASE, i'O R N im NEWSPAPERS

Wednesday, 'F e b r u a r y 1 8 . 19 A S.

P r e s s S e r v ic e
No* S-6 3 6

S e c r e t a r y o f th e T re a s u r y Sn yder to d a y announced t h e o f f e r i n g , th r o u g h th e
Federal R e se rv e B a n k s , o f l - l /8 p e r c e n t T r e a s u r y C e r t i f i c a t e s o f In d e b te d n e s s o f
Series 0-194.9, open on an exch an ge b a s i s , i n a u t h o r iz e d d e n o m in a tio n s, t o h o ld e r s
of y/g p e r c e n t T re a su ry C e r t i f i c a t e s o f In d e b te d n e s s o f S e r ie s 6y£L948, m a tu rin g
garch 1 , 1 948, i n th e amount o f $ 2 ,3 .4 1 ,7 3 1 ,0 0 0 , 2 p e r c e n t T re a s u r y Bonds o f
1948-50
(d a te d M arch 1 5 , 1 9 4 1 ), c a l l e d f o r red em p tio n on L a r c h 1 5 , 1948, i n th e
amount o f 3 1 ,1 1 5 ,3 6 ? ,9 0 0 > o r 2 -3 /4 p e r c e n t T re a s u r y Bonds o f 1 9 4 8 -5 1 , c a l l e d f o r
redemption on L a r c h 1 5 , 1948, i n th e amount o f $ 1 ,2 2 3 ,4 9 5 ,8 5 0 . E xch an ges w i l l
be made p a r f o r p a r i n th e c a s e o f th e m a tu rin g c e r t i f i c a t e s , and a t p a r w ith
an adjustm ent o f i n t e r e s t a s o f L a r c h 1 5 , 1948, i n th e ca se o f th e c a l l e d b o n d s.
The c e r t i f i c a t e s now o f f e r e d w i l l be d a te d M arch 1 , 1 94 8 , and w i l l b e a r
in te re st fro m t h a t d a te a t t h e r a t e o f one and o n e - e ig h t h p e r c e n t p e r annum,
payable w ith th e p r i n c i p a l a t m a t u r it y on L a r c h 1 , 1949. .They w i l l .b e is s u e d
in b e a re r form o n l y , i n d en o m in a tio n s o f $1 , 000, $ 5 , 000, $ 1 0 , 000, $100,000 and

$1, 000, 000 .
P u rsu a n t t o t h e p r o v is io n s o f th e P u b l ic Debt A c t o f 1 941, sls amended,
in t e r e s t upon’ th e c e r t i f i c a t e s now o f f e r e d s h a l l n o t have an y e x e m p tio n , a s s u c h ,
under t h e I n t e r n a l Revenue C o d e, o r law s am en d atory o r su p p le m e n ta ry t h e r e t o .
The f u l l p r o v is io n s r e l a t i n g t o t a x a b i l i t y a r e s e t f o r t h i n th e o f f i c i a l c i r c u l a r
released t o d a y .
S u b s c r ip t io n s w i l l be r e c e iv e d a t th e F e d e r a l R e se rv e Banks and B r a n c h e s ,
and a t th e T r e a s u r y D ep a rtm en t, W a sh in g to n , and sh o u ld be accom pan ied b y a l i k e
face amount o f th e s e c u r i t i e s t o be exch an ged a n d , where m a tu rin g bonds i n coupon
fom a re p r e s e n t e d , b y paym ent o f a c c r u e d i n t e r e s t on th e new c e r t i f i c a t e s a t
the r a te o f $0 .4 3 1 5 1 p e r $ 1 , 000", s in c e i n th e s e c a s e s i n t e r e s t i s t o be a d ju s t e d
as of March 1 5 , 1948. S u b je c t t o th e u s u a l r e s e r v a t i o n s , a l l s u b s c r ip t io n s w i l l
bé a l l o t t e d i n f u l l .
The s u b s c r ip t io n books w i l l c lo s e f o r the" r e c e i p t o f a l l s u b s c r ip t io n s a t
the c lo s e o f b u s in e s s F r i d a y , F e b ru a ry 2 0 .
S u b s c r ip tio n s a d d re s s e d t o a F e d e r a l R e se rv e Bank o r B ran ch o r t o th e
Treasury D e p a rtm en t, and p la c e d i n th e m a il b e fo r e m id n ig h t F e b ru a ry 20, w i l l
he co n sid e re d a s h a v in g b e e n e n te r e d b e fo r e t h e c lo s e o f t h e s u b s c r ip t io n b o o k s .
The t e x t o f th e o f f i c i a l c i r c u l a r f o l l o w s :

172
UNITED STATES OF AMERICA
1-1/8 PERCENT TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES C-1949
Dated

and bearing interest from March 1, 1948

1948
Department Circular No. 823

Due March 1, 1949

TREASURY DEPARTMENT,
Office of the Secretary,
Washington, February 18,1948.

Fiscal Service
Bureau of the Public Debt
I.

OFFERING OF CERTIFICATES

1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions from the people of the United
States for certificates of indebtedness of the United States, designated 1-1/8 per­
cent Treasury Certificates of Indebtedness of Series C-1949, in exchange for 7/8
percent Treasury Certificates of Indebtedness of Series C-1948, maturing March 1,
1948, 2 percent Treasury Bonds of 1948-50, dated March 15, 1941, called for re­
demption on March 15, 1948, or 2-3/4 percent Treasury Bonds of 1948-51, called
for redemption on March 15, 1948. Exchanges w ill be made par-for par in the case
of the maturing certificates, and at par with an adjustment of interest as of
March 15, 1948, in the case of the called bonds.
II.

DESCRIPTION OF CERTIFICATES

1. The certificates w ill be dated March 1, 1948, and w ill bear interest from
that date at the rate of l - l /8 percent per annum, payable with the principal at
maturity on March 1, 1949. They w ill not be subject to ca ll for redemption prior
to maturity.
2. The income derived from the certificates shall be subject to a ll taxes,
now or hereafter imposed under the Internal Revenue Code, or laws amendatory or
supplementary thereto. The certificates shall be subject to estate, inheritance,
gift or other excise^taxes, whether Federal or State, but shall be exempt from a ll
taxation now or hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any local taxing
authority.
3. The certificates w ill be acceptable to secure deposits of public moneys.
They w ill not be acceptable in payment of taxes.
4. Bearer certificates w ill be issued in denominations of $1,000, $5,000,
£>10,000, $100,000 and $1,000,000. The certificates w ill not be issued in
registered form.
5. The certificates vd.ll be subject to the general regulations of the
Treasury Department, now or hereafter prescribed, governing United States c e r tifi­
cates.

-

III.

2

173
-

SUBSCRIPTION AMD ALLOT!¡EH?

X* Subscriptions w ill be received at the Federal Reserve Banks and Branches
and at the Treasury Department, Washington. Banking institutions generally may
submit subscriptions for account of customers, but only the Federal Reserve Banks
and the Treasury Department are authorized to act as o ffic ia l agenciesi
2, The Secretary of the Treasury reserves the right to reject any subscrip­
tion', in whole or in part, to allo t less than-the amount of certificates applied
for, and to close the books as to any or a ll subscriptions at any time without
notice; and any action he may take in these respects shall be fin a l. Subject to
these reservations, a l l subscriptions w ill be allotted in f u l l. Allotment notices
will be sent out promptly upon allotment.
IV.

PAYMENT

1. Payment for certificates allotted hereunder must be made on or before
March 1, 1918, or on later allotment. Payment of the principal amount may be made
only in Treasury Certificates of Indebtedness of Series C-1918, maturing March X,
1918, in Treasury Bonds of 1918—50, called for redemption on March 15, 1918, or in
Treasury Bonds of 1918-51, called for redemption on March 15, 1918, which w ill be
accepted at par and should accomoany the subscription. The f u ll year’s interest
on the certificates surrendered w ill be paid to the subscriber following acceptance
of the certificates. In the case of the called bonds in coupon form, payment of
accrued interest on the new certificates from March 1, 1918 to March 15, 1918
($0.13151 per £>1,000) should be made when the subscription is tendered. In the
case of maturing registered bonds; the accrued interest w ill be deducted from the
amount of the check which w ill be issued in payment of fin a l interest on the bonds
surrendered. Final interest due March 15 on bonds surrendered w ill be paid, in
the case of coupon bonds, by payment of March 15, 1918 coupons, which should be
detached by holders before presentation of the bonds, and in the case of registered
bonds, by checks drawn in accordance wmth the assignments on the bonds surrendered.
V.

ASSIGNMENT OF REGISTERED BOFDS

1. Treasury Bonds of 1918—50 and Treasury Bonds of 1918-51 in registered
form tendered in payment for certificates offered hereunder should be assigned by
the registered payees or assignees thereof to "The Secretary of the Treasury for
exchange for Treasury Certificates of Indebtedness of Series C—
1919 to be
delivered to __________
", in accordance with the general regulations of the
Treasury Department governing assignments for transfer or exchange, and thereafter
should be presented and surrendered with the subscription to a Federal Reserve
Bank or Branch or to the Treasury Department, Division of Loans and Currency,
Washington, D. C. The bonds must be delivered at the expense and risk of the
holders.
. VI.

GENERAL PROVISIONS

1. As fis c a l agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions, to make allotments on the

- 3 basis and up to the amounts indicated by the Secretary of the Treasury to^the
Federal Reserve Banks of the respective Districts, to issue allotment notices,
to receive payment for certificates allotted, to make delivery of certificates
on f u l l - p a i d subscriptions allotted, and they may is sue interim receipts pending
delivery o f the definitive .certificates*
2 . The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the'offer­
in g, which w i l l be communicated promptly to the Federal Reserve Banks,

JOHN F , SNYDER,
Secretary of the Treasury.

TREASURY DEPARTMENT

175

Washington
FOR RELEASE MORNING PAPERS,
Sunday* February 22, 1948

Press Service

No. S-637

Eight ..Americans distinguished in the fields of industry,
education and government have been named as the Advisory Com­
mittee to the newly formed National Academy for Public Purchas­
ing.
Interim Chairman Clifton E* Mack, Director of the Bureau of.
Federal Supply, said the members will advise on policy matters for
the Academy. They are:
Phillip Young, Dean of the Business School,
Co lumb i a Unive rs ity •
Emery Olson, Dean, School of Public Administration,
University of Southern California.
Walter Kirkman, Director, Department, of Budget
& Procurement, State of Maryland
Harry Erlicher, Vice President, General Electric
Company.
'John R. Steelman, Assistant to President Truman
William C. Foster, Under Secretary of Commerce
Albert Browning, Vice President, Ford Motor Company
W* Z. Betts, Director of Purchase & Contract, State
of North Carolina,

,■

Mr. Mack said the appointees, who will serve without pay,
bring a ’’needed wealth of experience W one of the. largest
problems in the realm of government -- Federal, State and
Municipal.”
”It is estimated that the Federal Government alone spends
over one billion dollars a year in the supply operation, ho 'A
said* ’’Certainly its efficient conduct is therefore a matter of
critical importance and any improvement in ¡the procurement sys­
tem, however small, results in sizeable savings.
’’The National .academy for Public Purchasing vd.11 act as a
focal point for the distribution of latest information rn purr
chasing techniques used by industrial, as well as governmental
purchasing officers.”
The Academy, sponsored by the Treasury’s Bureau of Federal
Supply, will hold its initial seminar conference in Washington
beginningsApril 5th, at which time purchasing officers from
throughout the nation are expected to attend. Officials prominent

176
in the purchasing world* governmental and industrial, w ill act as
lecturers* It is expected that the in itia l sessions w ill uncover
"purchase techniques and practices now employed in localized
areas which may well be fitted into a larger, national plan*"
Interim Chairman Mack stressed the importance of industryrs
participation. "American industry produces the things govern­
ment purchasing officers buy. Its operations have always been
the hallmark of efficiency. In addition, its own purchasing
systems work very well, and many of the purchase practices can
become parts of the governmental procurement technique, despite
the fact that the latter in many cases operates under limiting
statutes and directives•"
The original idea for the National Academy came from a sug­
gestion lodged last year by W. Z# Betts, one of the new appointees,
and also President of the National Institute of Governmental Pur­
chasing.
President Truman publicly endorsed the plan with the state­
ment that "Federal purchasing o ffic ia ls , as well as those who buy
for state and local governments, should benefit from this mutual
exchange of experience in buying techniques."
A purely non-profit undertaking, the National Academy w ill
represent no increase in costs to the government, as existing
fa c ilitie s of the Bureau of Federal Supply w ill be utilized and
members attending the seminars w ill defray their own expenses.
Mr. Mack said that invitations to attend sessions would go
out shortly, and that purchasing men everywhere could contact the
Bureau of Federal Supply in 'Washington for further information*
The agenda for the in itia l sessions w ill be announced in March.

0 O0

177
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Saturday, February 21, 1948«
'

'

press Service
^°* S-638

The Secretary of the Treasury announced last evening that the tenders
for $1,100,000,000, or thereabouts, of 91*-day Treasury b ills to be dated
February 26 and to mature May 27, 1948, which were offered February 17, 1948,
were opened at the Federal Reserve Banks on February 20.
The details of this issue are as follows:
Total applied, for - $1,537,578,000
Total accepted
- 1,105,989,000 (includes $36,526,000 ^entered on a
non-competitive basis and accepted in f u ll at the
average price shown below)
Average price —99*748 Equivalent rate of discount approx. 0.997$ per annum
Range of accepted competitive bids:
High - 99.756 Equivalent rate of discount approx. 0.965$ per annum
Low - 99.747
§§
I
I
F
I
1.001$ I
I
(68

percent of the amount bid for at the low price was accepted)

Federal Reserve
District.

Total
Applied for

Total
Accepted

Boston
New York
Philadelphia'
Cleveland
Richmond
Atlanta
Chicago
St, Louis
Minneapolis
Kansas City
Dallas
San Francisco

$
8,785,000'
1,396,831,000
11 ,‘835,000
3 ,4 2 7 ,'ôco
3 , 15 0,00 0
4 , 150,00 0
43 ,‘671,000
2,785,000
2 , 7 3 0 ,0 0 0
4,-631,000
7 , 0 9 0 , 00 ©
¿,8,493,000

$

$1,537,578,000

$1,105,989,000

TOTAL

0O0

8,625,000
998,084,000
1,835,000
3 ,427,000
3 , 150,-000
3,510,000
26,513,000
2 , 785 , 00 ©
2,634,000
4 , 523,000
6,954,000
4 3 , 949,000

0

178

.,

ÌRÈASURY DEPARÌMEUT
Washington

POR REIEASE, MORIJING HEWSPAPÈRS’ ,
Friday, February- 27, 1948, • ; . .

'.
'

. Press Service
No, S- 6 3 9 ,

- The Secretary of the Treasury, by.this public notice,
invites' tenders for $ 1 ,100 ,00.
0,000', or thereabouts, of 91 -day
Treasury bills> for cash and in exchange for Treasury bills
maturing ^March 4, 19*48, to be issued on a discount basis .under
competitive and non-*competitive .bidding as. hereinafter provided.
The bills o f .this series will.be dated March 4, 1948, and will
mature,: June;. 3 , 1948, when the fa,ce amount will be payable with­
out interest. They will be issued in bearer form' only, and in
denominations of $ 1 ,000, $ 5 ,000, $ 10 ^000, $ 100 ,000, $ 500,000,
;and $JL-, 000,000.(maturity valued V
Tenders will be received at Federal Reserve Banks .and
Branches up to the closing hour,., t„wo o 'clock, p.m., Eastern
Standard time, Monday, March L, Ì946-. 'Tenders will not'be
received at the Treasury Department, Washington. Each tender
must'be for an even multiple of $ 1 ,000, a n d in the case, of
competitive tenders the price offered must be expressed on the
basis of 100, with not: more -than, three decimals , e. g .,' 99 .925 .
Fractions, may not be u s e d . It is urged that tenders be made
oa the .printed forms, and forwarded in the. 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 trust companies and- from responsible and recognized
dealers in investment securities.* Tenders from others must be
accompanied by payment of 2 percent of the face amount of
Treasury bills applied for, unless the tenders are accompanied
;-by an express -¡guaranty of .payment by an incorporated bank or
trust company*
‘
.
.. •
Immediately after the closing hour, tenders, will be opened
at the Federal Reserve Banks and Branches, following which
public announcement will be. made by the Secretary of the Treasury
of the amount and price range of accepted bids.
Those submit­
ting tenders will be advised of the acceptance or rejection
thereof. The Secretary of the Treasury expressly reserves the
right to accept or reject any or all tenders, in whole or in
part, and his action in any such respect shall be final.
Sub­
ject to these reservations, non-competitive,tenders for $ 200,000
or less without stated price from any one bidder will be accepted
in full^at the average price (in three decimals) of accepted
competitive bids.
Settlement for accepted tenders in accordance
with the bids must be made or completed at the Federal Reserve
Bank on March 4, 1948, in cash or other immediately available

- g funds or in a like face amount of Treasury bills maturing
March 4, 1948, Cash and exchange tenders will receive equal
treatment;
Cash adjustments will be made for differences
between the par value of maturing bills accepted in exchange
and the issue price .of the new bills.
The income derived from Treasury bills, whether interest
or gain from the sale or other disposition of the bills, shall
not have any exemption, as such, and loss from the sale or
other disposition of Treasury bills shall not have any special
treatment, as such, under the Internal Revenue. Code, or laws
amendatory or supplementary thereto. The bills shall be subject
to estate, inheritance, gift or other excise taxes, whether
Federal or State, but shall be exempt from all taxation now or
hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by
any local taxing authority. For purposes of taxation the amount
of discount at which Treasury, bills are originally sold by the
United States shall be considered to.be interest. Under
Sections 42 and 117 (a) (l) of the Internal Revenue Code, as
amended by Section 115 of the Revenue Act of 194.1, the "amount
of discount at 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 con­
sideration as capital assets. Accordingly', the owner of
Treasury bills (other than life insurance companies) issued
hereunder need include in his income tax return only the differ­
ence between the price paid for such bills, whether on original
issue, or on subsequent purchase, and the amount actually re­
ceived either upon sale or yedemptioh at maturity during the
taxable year for which the return is made, as ordinary gain or
loss.
Treasury Department Circular No. 4l8, as amended, and this
notice, prescribe the terms of the Treasury bills and govern
the-conditions of their issue . Copies of the circular may be
obtained from any Federal Reserve Bank or Branch.

oOo

17

UNDER SECRETARY OP THE TREASURY

0
0

p

February 26 , 19 HS

I
My dear Mr, Chairmani

As you know, Secretary Snyder has urged in appearances before
your Committee the desirability of undertaking at the earliest
possible opportunity the steps necessary to eliminate from the tax
structure its inequities and administrative and ®ther defects.
Under present conditions we cannot safely undertake this year some
of the basic structural changes that will ultimately be desirable
due to the large losses in revenues they might entail. X am con­
fident, however, that we can adopt many revisions which would move
in the direction of a much improved postwar tax system.
To assist in accomplishing this purpose, there is transmitted
herewith, for consideration of your Committee, a list of some of the
items which this Department believes desirable to have enacted into
law during the present session of the Congress,
There is now in course of preparation a further list which I
hope to submit to you as soon as it is completed. Those lists by
no means constitute a complete statement of desirable amendments to
the tax lav/» They include items with respect to which our consid­
eration and study have progressed sufficiently to enable the
Department to make specific and definite recommendations. As to
many of them, tentative legislative drafts have already been com­
pleted, In this connection it should be understood that the brief
descriptive explanations of the items in the attachment are intended
only to present the general outlines .of the recommended revisions.
In the interest of expeditious legislative action, I am not
now suggesting a number of controversial or complex matters which
the Department believes need attention. These items will require
our joint study and consideration before they could be made ready
for legislative action. I am hopeful that hy persistent cooperative
v/ork of the technical staffs of the Joint Committee on Internal
Revenue Taxation and this Department many of these more controver­
sial and complex items can be disposed of as soon as agreement can
be reached on their solution.
Sincerely yours,
(Signed) A.L.M. Wiggins
Under Secretary of the Treasury
Honorable Harold Knutson
Chairman, Committee on Ways and Means
House of Representatives
Washington, D, C,
Enclosure

TECHNICAL „TAX L1G-ISLATIIO! KSVISIOITS ESCOI-illSKDSD FOB. SNACTIIENT III 1948

1 4 Het Operating loss Deduction*

It is recommended that the present
system of a two-year carryback and a two-year carryover of net
operating losses be revised so as to provide for a one—year carry­
back and a five-year carryover of such losses* In connection with
this revision, it is also recommended that the present rules with
respect to the determination.of the amount of the net operating
loss and of the carryover and carryback be retained, that the rules
for determining the applicable lav/ in computing the amount of the
loss to be carried over be clarified, and that certain technical
errors in the present law be corrected«

2.

Stock Options« It is recommended* where an employer grants to an
employee an option to purchase stock, that if the option price is
substantially less than the fair market value of the stock at the
time the option is granted, the amount of the difference be
included in the income of the employee as compensation in the year
in which the option is granted* In the case of an exercise of the
option to purchase stock, the excess of the fair market value at
the time of the exercise over the option price (or the fair market
value of the stock at the time the option was granted if that is
substantially greater than the option price) would be treated as
ordinary income, to the employee in the year of exercise of the
option, but the tax computed on such income would be payable only
in the year of disposition (vrhether by sale, gift or bequest) of
the stock by the employee. Moreover, in any case where the option
had been held for a period of three years or longer, the tax would
be determined by spreading the amount of the income over the
period during which the option was held. The employer would bo
permitted in the year in which, the option is exercised an expense
deduction to the extent of the difference between the option price
and the fair market value of the stock at such time, subject to
the usual rules applicable to such deductions*

3*

Tax on Small Corporations* It is recommended that there be explored
the question of whether the tax rate structure with respect to cor­
porations with incomes below $50,000 can be revised'so as to substi­
tute for the present notch rate of 53 percent on that portion of the
corporate income between $25,000 and $50,000 a more desirable rela­
tionship between the lower rates on smaller incomes and the ordinary
corporate rate of 38 percent.

4.

Capital Gains,
(a)

It is recommended that the existing loopholes through v/hich
short term capital gains nay be converted into long term
capital gains, and through v/hich fictitious losses are used
to offset real gains, be closed by providing, in effort, for
(l) non-recognition of any gain or loss attributable to

-

2

-

fluctuations in the market price of securities, ànà* conno&*•
ities which occur during a period when the taxpayer holds
both long and short positions in substantially similar
commodities and securities, and '^2) exclusion of such period,
from thè ’’holding period”«, The statutory provisions should
be made broad enough to apply to simultaneous long and short
positions in different futures of the same commodity and
different securities of the same corporation. Such a statute
would eliminate-most of the abuses arising under present law
from the use of the short sale device* However, experience
thereunder may indicate that even broader' treatment is.,
necessary to provide adequate protection for the revenue,
(b) ,It is recommended that the provisions of section 117 (f) of
the Code, treating amounts received upon retirement of cer­
tain securities as capital gains, be made inapplicable to
securities which do not meet the requirements of the
section at the time of their issuance.
(c)

It is recommended that in computing the holding period of
a capital asset, there be disregarded the holding period
of a, non— capital asset which is exchanged for such capita.1
asset,

5.

Income of Estates and Trusts, It is recommended that the present
treatment of the income of estates and trusts under section 162 of
the Code be revised. The principal purpose of this revision would
be to eliminate the so-called ”6&~day rule” and ”13-month rule”
now uàed in measuring the portion of any. distribution by a trust
or estrate which is to be taxed in the year of distribution to the
recipient. Under the proposed revision, distributions would,
generally speaking, be taxed to the recipient to the extent of
the current year’s income of the estate or trust. It would also
overrule certain Circuit Court decisions treating as income to a .
beneficiary certain distributions which do not constitute income
to the estate or trust,

6#

brar Loss Recoveries. It is recommended that the present income
tax-treatment of war loss recoveries be revised and that there
be substituted a rule under which the tax upon recovery of
property for wliich a deduction was taken should be eaual to the
tax saving that resulted from the related deduction. ~ In the'
interest of administrative simplicity, the recommended revision
would also eliminate the present rule requiring all property
recovered to be aggregated in determining the tax upon-recovery
and would provide that recovered property be taken in either »
at its former adjusted basis or the fa,ir market value, at the
election of the taxpayer«.

7.

Income from Annuities. It is recommended that the present rule,
under which three percent' of the cost to the taxpayer of-an
annuity is included in income each year until there has been a
tax-free recovery of cost, he replaced hy a. system under which
the taxpayer would be permitted an annual tax-free recovery of •
cost based upon a proration of the total cost over th,e expected
period of the annuity,
1
.

8.

Income from Proceeds of Life Insurance paid in. Installments.. It
is recommended that frhere the proceeds of life insurance paid hy
reason of the death of the insured are paid in the form of an
annuity (whether for a fixed period or for life), the interest
element should he taxed annually upon the same basis as in the
case of an fiDonuitj^Under existing lawj the entire proceeds
have been held by the courts to be exempt even though paid as
an annuity,

9.

Powers of Appointment, It is recommended that the present y ,
provisions with respect to the application of the estate and
gift tax to powers of appointment be revised in accordance with
the provisions of H, B. 3533 (80th Congress, 1st Session).. To
the extent possible, it would be desirable to re-examine the
provisions of this bill with a view to simplifying its terms.
Under this revision, the time:for tax-free release of powers
should be extended to July 1, 1949,

10. Income of Surviving Partners and Estates- or beneficiaries of
Deceased Partners. It is recommended that in cases where,
under the terms of a partnership agreement, the surviving
partners for a period of time pay to the Pstate, or beneficiary
of a deceased partner a share in the partnership income, such
payments sha.ll not be. included in the taxable income of the
surviving partners and shall be included' in the income of the
estate or beneficiary, with a proper adjustment for the esta.te
tax upon the value of the right to such payments in the estate
of the deceased partner. This recommendation should be applied
only to personal service partnerships. Under present law, the
tax treatment of this type of case is trot clear.
11* Income of Life Insurance Companies. It is recommended that the
present method of computing the taxable income of life insurance
companies under sections 201, 202 and 203 of the Code,be revised
so as to more clearly and equitably reflect the taxable income
of such companies, A detailed proposal for carrying this recom­
mendation into effect is novr in course of preparation.

- 4 -

12,

Treatment of Involuntary Conversions, It is recommended that
the present provisions with respect to the.trx tre.atnent of
involuntary conversions of property contained in section 112 (f)
of the Code be amended to permit the same treatment to apply in
the case of acquisitions of property made in anticipation of
involuntary conversion or the receipt of proceeds from such
conversion. At the present tine, the provisions of section
112 (f) are, in general, confined to cases where the converted
property or its proceeds can be traced into subsequently
enquired property,

13,

Certain Distributions of Corporate Assets. |t is recommended
that, in order to prevent inequity and tax avoidance upon dis­
tribution and sede of corporate assets, the appreciation in
value of corporate assets distributed in kind to the stock­
holders of the corporation be taxed as a gain
^he corpora­
tion,

• 14,

15.

Dividends Received Credit,
(a)

It is recommended, with respect to dividends of certain
foreign corporations, that the present dividends received
credit be extended so as to apply to dividends received
by domestic corporations from foreign corporations at
least fifty percent of whoso gross income is from sources
within the United States ; the credit would be limited to
such portion of the dividends as the domestic income bears
to the total corporate income,

(b)

It is recommended that a technical error in section 15 (a)
of the Code, resulting from an amendment to that section,
by the Bevenue Act of 1945, be corrected. This error
affects the computation of the dividends received credit
where the receiving corporation has partially tax-exempt
interest.

Pension Trusts.
(a)

It is recommended that the period after the close of the
taxable year, provided under section 23 (p) (l) (D) of the
Code, in which a taxpayer on the accrual basis is deemed
to have made a payment on the last day of the taxable
year, be extended from 60 days to 75 days.

1. UX.
8?
4

-

<

✓

-

(b) It is recommendedj in lieu^òi the''present- provision in
section'165 (b) of the Code treating^certain lump sum

•

■

distributions of''/pension .trusts, as. long-term capital
gains, that Such•distributions be treated.as.ordinary
income for .the year of. .payment, and accorded treatment
similar to that now provided for. compensation earned

'

over a period of: time by section.107 .of.thè Code«• This
treatment‘Should'also be extended to distributions from
non-trusteed annuity plans
i, ...

(c) It is recommended that the personal liability of a
trustee for the,-estate tax of a deceased beneficiary
be made inapplicable in the case of trustees of
pension trusts.
< .
16.

17.

Foreign Tax ’Credit for Estate Tax Purposes « .It is* ,recommended
that there be allowed against the estate tax .a credit .for
foreign estate or inheritance taxes paid in respect.of property
■ included in the gross'-estate, which, would b.e comparable to the
foreign tax credit now allowed^for Income tax purposes*
Puerto Rican Estates* I t is recommended that in the case of
'the estate tax imposed upon the estates of citizens Of the.
"United States who were resid en ts of^Puerto Rico.a t t h e .time
of their deaths, a credit be allowed for the amount of the
Puerto Rican estate tax. It is also recommended that property
located in the United States of citizens of Puerto Rico.be
made subject to the Federal.estate, tax in the same manner as
• property'of non-resident aliens.

18.

Installment Obligations. It is recommended that where a
decedent has elected to '-report income from, installment obliga­
tions upon the installment, basis provided in section I4U of the
Code, a proper allowance for estate tax imposed upon the value
of such obligations be allowed to the estate•or beneficiary of
the decedent who elects to continue to report such income upon
the installment .basis *
,
.

19.

Deductions by itelated Taxpayers. It is recommended that section
2lb (c) of the "Cede be'.amended to eliminate a technical error
which results in certain cases 'in the loss of a corporate deduc­
tion for compensation or interest payable to the stockholders of
the corporation, even though’the recipient is required t o ‘in­
clude subh amounts, in his taxable.income within the lim ited'
period specified in this section..

-

6

-

2Q#

Deductions for ork Clothes» It is recommended that the
long-established administrative'practice of ;
the Bureau of
Internal Revenue, with respect.to the allowance of deductions
for the cost of work clothes, be confirmed by specific legis­
lation disallowing such deductions except as to work clothes
which are especially adapted to a particular occupation, and
which do not substitute for, or relieve the taxpayer from
providing himself with, ordinary working or wearing apparel,

21.

Corporate Reorganizations. It is recommended that pending a
complete study and review of the present law with respect to
corporate reorganization's, and without prejudice to•any recom­
mendations that might result therefrom, the definition of
reorganization under section 112 (g) be amended so as to in­
clude within such definition a transfer of substantially all
the assets of one corporation to another corporation in exchange
solely foi* votings stock of a corporation owning all of the
voting stock of the acquiring corporation, This typè of reor­
ganization does not appear to differ substantially from the
type of reorganization now included in tpe definition in which
the assets of the transferor corporation are transferred in
exchange for the stock of the acquiring corporation# The
transaction also appears to be substantially similar to the
case now within the reorganization, definition where one corpor­
ation acquires all the stock of another corporation in exchange
for part of its own stock,

22*

^ or>hgage Foreclosures # It is recoijpiended that the present rules
with respect to the income tax treatment of mortgage foreclosures
be revised to treat the foreclosure as a recovery of the amount
of the indebtedness up to the fair market value of the property
at the time of foreclosure, and to treat the final disposition
of the property foreclosed as a completion of the transaction.
This, among other things, would eliminate the holding of the
Midland Life Insurance case-under which the bid price at the
foreclosure is used as the measure of taxability. Upon final
disposition, if the property: is sold for less than its fair
market value at the time of foreclosure, there would be a fur­
ther bad debt deduction. If sold for more, there would be "a
bad debt recovery, except that any amount received in excess of
the indebtedness would be deemed a capital gain.

23,

Surtax on Personal Holding Companies*
(a)

It is recommended that the present provisions applicable
to the liquidation of a personal holding company be amended
so as to prevent the imposition of the personal holding
company surtax in any case where all the assets of the per­
sonal holding company have been distributed in liquidation,

■

*'

-

-

- 7 -

24,

(h)

It is recommended, that the alternative capital gains .*2';
tax he made inapplicable as an alternative to the
personal holding company surtax,

(c)

It is recommended that the deduction allowed for-worthless stock of a subsidiary under section 23 Cgl ( 4 ) (B)
be extended to include a. deduction for worthless stock
of an operating subsidise with investment- income, even
though ten percent or more of its income may be from
royalties, rents, dividends, etc.
. „

Foreign Tax Credit,
(a)

It is recommended that the present provision of section
131 (f) (l) of the Code be; amended so as to permit a
foreign tax credit to a domestic corporation with respect
to taxes paid by: a foreign :subsidiary, even- though the
domestic corporation owns less than a majority of the
voting stock of the foreign corporation, provided that
it owns at least twenty percent of the stock of such
corporation and provided; also that the business of the
foreign subsidiary is a direct and integral part of the
domestic corporation,

(b)

It is recommended that a period of limitation of seven
years (in lieu of the present shorter period) be allowed
to a taxpayer claiming a foreign tax credit* in which to
claim an increased credit by reason of an increase in
the amount of the foreign tax,

25,

Government Personnel in 1T„ S, Possessions, It is recommended
that the present exemption for earned income under section 251
of the Code by revised so that it will not apply to the salaries
of civilian or military personnel of the United States Govern­
ment stationed in the possessions,

26*

Reciprocal Exemption for International A i r c r a f t It is recom­
mended
income of foreign airlines operating partly
within, the .United States be extended income tax exemption
similar to that applicable in the case of foreign shipping
corporations under section 231 (d) of the Code, This exemp­
tion is provided on a reciprocal basis,

27,

Extension of Business Bad-Debt Deduction, It is recommended
that a bad debt resulting from an obligation, which arose in
the course of a taxpayer’s business be treated as a business
bad debt even though the taxpayer has terminated the business
at the time the debt becomes worthless.

183

#

28.

8

-

Statute of Limitations. It is recommended that the following
amendments he adopted with respect to the statute of limi­
tations applicable in certain cases!
(a)

Estate tax. The period of limitations under section
874 be extended to five years where more than 25 per­
cent of the gross estate has been omitted from the
return. . The present period is three years.

f

(b)

Gift tax. Section 1016 be amended to extend the
period of limitations to five years where the donor
has omitted more than 25 percent of the total gifts
made in one year. The present pe.rJ.od is three years.

1

. (c)

Waiver by a transferee or fiduciary. Section 322 be
amended to extend the period of limitations for refunds
where a waiver of the statute of limitations has been
executed by a transferee or fiduciary.

■(d)

Extension for assessment of deficiencies. An amendment
be made to give the Commissioner additional time in
which to assess a deficiency where the taxpayer has
filed a claim for refund.

1

I

Transferee liability. The additional time for assessmeat in the case of a transferee for income tax purposes
be limited to cases where the transfer has taken place
prior to the expiration of the statute of limitations
in the case of the transferor.
<f)

29.

Valuation of gifts. The gift tax provisions be
amended to provide that the value of property in
respect of which a taxable gift tax return has been
filed may not be revised, for the purposes of computing
the tax on subsequent gifts, after the expiration
of the statute of limitations applicable to a prior
gift.

Technical Errors in Repeal of Excess Profits Tax in 1945.
(a)

(b)

It is recommended that for the purposes of the
application of. section 102 of the Code to fiscal
years beginning in 1945 and ending in 1946, the credit
under section 26 (e) be properly adjusted.
It is recommended that the treatment of installment
income from long-term contracts received after the
repeal of the excess profits tax be amended to prevent
the imposition of normal tax and surtax in addition
to the excess profits tax.

- 9 -

30.

Rstaté Tax Déduction 'for; Support of'dependents,..: ïtvis recom­
mended that the déduction f o f estate. tsi: purpose^* £©r-payments
made in support of dependents be repealed,
-,v/ -h'dfh'ihiV*!

31.

Withholding Taxes on Wages«- •.Xt is recommended•that & Cfidfil -■'•

y ' penalty be imposed -upon -employers"fot ¡failure.-to mpkë ua .timely

. payment of withholding taxes

collected

.from employees.

'

32. ■ Charitable Contributions. It is. Recommended, that tbeprpvi- .
sions under the estate» gift and, income ^axes-with respect to
gifts made to charities be put upon, a .comparable basis,
33.

Wages to Dependents. It is recommended that- amounts paid by .
a taxpayer as wages to a dependent f or whom he. claims an
exemption be made not deductible for income -tax purposes.:
Because of the limitation upon allowance of credits for depend­
ents j this recommendation would only affects,casps-wh-pre the ,
wages and other income of the dependents, ape lass' than,$500♦

34«

Dividends on Preferred Stock of Public Utilities;. It is recom­
mended that a technical omission in the Revenue Act of 1943^be
supplied to provide that the dividends, received, credit ahal^ .not be reduced in cases where the dividends on- th- pneferfc
stock did not give rise to the dividends paid credit», under
section 26 (h) of. the Code. . ,
'

35,

Rxemution from gtp.irrp
for Loans of Bonds. It is recom­
mended that loans of corporate bonds be exempted, from, the
transfer tax imposed by section 3481 of. the Code in the .same
manner that loans of corporate stocks-are exempted. .

36,

Standard Deduction. It is recommended that permission be granted
to revoke the election with respect to the,standard-deduction.at
any time within the statute" of limitations.^.

37 ,

Statistical Reports» It is recommended that the provisions of
the Code be amended to eliminate the requirement that the Bureau
of Internal Revenue-.report-;to.the;.Congress small refunds and
the requirement that corporations report to the Bureau o f
Internal Revenue salaries' in excess of $75s000*

380

52-Week Year. It is recommended that permission be granted:
,ij
- taxpayers in appropriate cases and subject to the Commissioner1s
: regulations -to compute*'theip .Income ..on the basis of the so-called
52-week* year.

-IQ39.

notarization o~f Beturns. It* is recommenced that authority . .
he given to the Commissioner, with the approval of the
Secretary, to eliminate the requirement of the oath from
a ll returns,

40.

Withholding of Tax on lion-He side nt Aliens, I t is recommended
that the date for the filin g of returns un d er section^l43 he
adjusted torconform with the date for payment of the wax,

41 .

■
.Delinquent Government Employées, I t is recommended that the
Federal Government he authorized to withhold compensation from
its employees who are delinquent in income taxes,

42.

Distraint on Salaries. I t is recommended that à continuing
distraint on salaries he permitted for the purposes of collect­
ing delinquent taxes,

43.

Fiduciary Returns, It is recommended.that a fiduciary having
custody of the property or the business of a corporation be
required to include -all income of such corporation in the
return to he file d by him,

44.

Compromises. It Is recommended that the requirement of the
Secretary’ s approval of compromises relating to cases where
tax lia b ility is less than $50.0 he eliminated, and authority
he given to the Commissioner to delegate to his agents the
right to compromise such cases.

45.

Dobson Rule. It is recommended that the rule of the Dobson
case, giving a greater degree of fin a lity to decisions of the
Dax Court than to decisions of the District Courts, he
eliminated.

46.

Administrative Procedure Act, It is recommended tnat the
Tax Court be specifically excluded from the provisions of the
Administrative Procedure Act,
.
“>

47.

Technical Amendments with Respect to Tax Court Procedures. It
is recommended that certain minor toclinical amendments ho made
with respect to procedures governing the Tax Court of the
United States,

48.

U. S. Court for China, It is recommended that the provisions
in the- Code relating“ to the U, S* Court for China be eliminated
in view of the fact that such Court no longer exists,

49.

Travel Allowances for Field Agents. It is recommended tha^
specific authority he included in the Internal Revenue Code,
for travel in the case of revenue agents, as in the case of
deputy collectors, under section 3600.

TREASURY DEPARTMENT
Washington

POH RELEASE AFTERNOON PAPERS,
Friday, February" 27, 19^8,

;

Press Service
Noi S-640

A staff study entitled ’'Federal Excise Taxes on Tobacco” was
made public by the Treasury Department,, today. The, study, one of a
series on the commodities and services subject to excise tax, pre­
sents information and analyses intended to assist in determining
whether any of the taxes involved should be revised in connection
with .postwar tax changes. No policy recommendations are m a d e ,
The history of each tobacco tax is"given, and the economic
background of each branch of the industry is studied with reference
to the character of supply, character of demand, end outlook for
the future. Effects of the various taxes on profits, on competi-,
tion and on consumers are analyzed* The administration of the
taxes ,and the principal .technical problems that arise in connection
with them also are considered., The taxes imposed by the Federal
Government in the United’ States are compared with,tobacco taxes in>
Canada and the United Kingdom.
Tables presented with the study chart such data as sales rec­
ords, changing prices of tobacco products, prices paid growers of
tobacco, production records, profits, and tax rates and yields.

* * *
An excise tax on cigarettes has been levied since 1864.« .Rate
increases made during ea,ch World War have been the only important
changes in the tax since 1913» The rate on small cigarettes -’ the
commonly, used size - went from $1,25 per thousand to $2,.05 in 1917
and to,$3 in 1918.
In, 1940 the rate was increased to $3*25 and in
1942. to $ 3 ,50 , where it has remained.
The cigarette tax is second only to the tax on distilled
spirits as a single source producer of excise tax revenues. In the
fiscal year 1947 the cigarette tax yielded $1,145,300,000, approx­
imately two-thirds as much as the tax on distilled spirits.
Cigarettes have so displaced.other forms of tobacco in general
consumption that in 1946 cigarette manufacture took 70 percent-of
the total tobacco used in production of tobacco products.. This
compared with less than 10 percent in 19 15 . Per capita consumption
of cigarettes grew from l80 in 19.15 to more than 2,300 in 1946,
The proportion of the. population smoking cigarettes increased heavily
The demand for cigarettes is relatively .'insensitive to fluc­
tuations in income and to changes in,price. However, both of these
factors appear to have substantially affected, from time, to time,
the proportion of cigarettes of different price classes which- the ò
public has consumed. Thus after 1930, with the introduction of

-

2

~

1

^

economy brands , the proportion of economy brands consumed in a year
rose as high as 15 percent. This was in 1939.The .outlook for cigarette consumption as a whole seems favor-able, according to the study.
Increased tax-paid withdrawals indi­
cate a rise in production in 19 ^ 7 .
While.aggregate consumption might have been somewhat larger in
the absence of the tax, continuous growth of consumption has'tended
to offset effects of the tax.
•
The study points, out that cigarettes constitute an important
element in consumer expenditures.
It is estimated that the ciga­
rette tax. increases the Consumers1 Price Index by nearly one per cent
The excise tax on small cigarettes became a flat dollar amount
per thousand in 1911, and the single r a t e .specific tax has been continued to th present, though on several occasions the desirability
of this form of tax has been, questioned. A flat tax on physical
volume represents a different percentage of manufacturers 1 selling
prices for cigarettes in different classes, The flat tax is pro-'
portionately higher as the selling price of the cigarettes is lower.
'It has now been .suggested that the form be modified to provide
different rates of tax for the two principal classes of cigarettes,
economy brands and standard brands.
As to the effect of such a change on consumers, the study notes
that a differential tax rate would enable lower income consumers to
buy economy brands with a smaller total expenditure and with the
amount of tax involved representing a lower proportion of their in­
come.
As to the effect of such a change'on the cigarette industry,
production of cigarettes is so highly concentrated in the hands of a
relatively few concerns that the decisions of leading makers might *
be controlling.
In view of the outlook for continued growth in con­
sumption of cigarettes, it is possible that sales of the standard
brands would continue.to expand under a differential rate.

*

*

*

Tne tax on cigars weighing more than three pounds per thousand
which includes most cigars sold - varies with the intended retail
.selling p r i c e .
An excise tax on cigars has been levied continuously since 1862
The rates were, generally increased in 1918 , lowered in 1926 , and in­
creased again in 19^-2. The 19^-2 scale, which remains in ^effect,
took note of the .once well-known ”two-forsf!, or cigars retailing at
% cents each. The minimum rate was $ 2,50 per thousand for cigars
of the 2 g cent price-or less . . The scale“ ranges up to $20 per thou­
sand for- 20-eCnters and higher.
'

- 3 Collections from the .tax on cigars .slightly exceed those from
the-taxes on manufactured tobacco, or smoking arid chewing forms and
snuff. But they were equal to only about 4 per cent of the revenue
from cigarettes in the fiscal year 19^-7> when the cigar taxes
^
yielded $48,400,000,
•
The number of cigar factories has declined almost steadily for
30 ve a r s . There were about l6 ,000 factories in 1915* and only about
2 4Q0 in 1943. The decline., was interrupted during World war II, but
the interruption appears to have been..'but. temporary. : However, there
are many more producers of cigars than there are producers of ciga­
rettes and manufactured tobacco.
There has been a basic change in the industry, from, a fcondition
in which a substantial share of.the business was done by small pro­
ducers of 'hand-made cigars to .a. condition in which most cigars are
made by machine in largo factories,
.
. .. .7
Demand also h a s ’changed. .Cigars have never been the m o s t ,im­
portant form of tobacco consumption,,and in terms of the quantity of
raw-tobacco used they are now less important.than cigarettes and
manufactured tobacco. The high point of cigar consumption was
reached in 1920 when about 8 ,100 ,000,000 cigars were produced.
From
1920, per capita, consumption of cig£tps declined about 20 per cent
by 1929 . There was a further sharp, drop during.the depression.
Consumption increased during the war years, but has, remained sub­
stantially below the 1929 level.. f.
Present taxes are lower In relation to retail prices in the
case of cigars than in the case of cigarettes and most manufactured
tobacco. The bracket tax system gives rise to inequities when price
relationships change appreciably, and the study suggests that some
revision in the present cigar tax^brackets is necessary to bring
them into better alignment with price relationships which have de­
veloped since 1942.
The Treasury study states that there may be some question whe­
ther the industry is able to pass the full amount of the tax on toconsumers. However, to the extent that prices to consumers are in­
creased by the tax, it appears that the tax borne by them is not ver^
regressive.

* * *
The manufactured tobaccos -- chewing and smoking tobacco and
snuff -- all are taxed at the same rate. They have been taxed
since 1862 , and the present tax of 18 cents per pound has been in
effect since February 25, 1919*
The revenue from the l 8-cents per pound levy is almost as much
a s .that from the tax on cigars, but is less than 4 per cent of the
yield of the clgarbtte taxes.
Collections on manufactured tobacco
were $43,600,000 in the fiscal year 1947*

-

b

-

For many years manufactured--tobacco vas the principal f®rm-of
tobacco consumption, but its use has declined approximately pO per
cent from the peak reached in 1918. Most of the decline prior to
World War II occurred in chewing tobacco♦
During and subsequent to the recent war, smoking tobacco con­
sumption declined sharply, suggesting that consumers shift to
cigarettes when:incomes improve.
Restrictions against smoking may have, curtailed the use of
smoking tobacco during the war, while radsing thé consumption of
chewing tobacco and snuff.
Since the.end of the war chewing tobacco
consumption has again turned downward.
With regard to the effect of the tax on profits, the study
notes that the'rate has not been changed for nearly 30 years and
that during this time the industry has been faced with a long-term
downward trend in demand for its products. This has necessitated
a large cut in the output of chewing tobacco. By tending to narrow
the market thé tax may hove added to the pressure.for curtailment
of-production, but the fact that the rate of tax has been relatively
much lower than the tax on cigarettes has not prevented a declinein manufactured tobacco consumption.
Expenditures on manufactured tobacco are relatively higher
among low income families, and decline rapidly in relation to in­
come as the sise of family income increases.
To t h e .extent that
it is .passed on t o ■consumers, this tax is apparently highly re­
gressive .

FEDERAL EXCISE TAXES OF TOBACCO

Part I

- Excise Tax on Cigarettes

Part II

- Excise Tax on Cigars

Part III

-

Excise Tax on Manufactured Tobacco and Snuff

Part IT

-

Exci se Tax on Cigarette Papers and Tubes

Part T

Compari son of Tobacco Taxes in the United
States, Canada and United Kingdom

Division of Tax Research, Treasury Department
February 19^-S

Federal Ibccise Taxes on Tobacco

One of the important questions in tax revision concerns
the charges to he made in the extensive lis t of excise taxes.
This study is one of a series on the comnodities and services
subject to excise tax. The purpose of the studies is to maire
available data on tax rates, revenue and the economic back­
ground of the industry and to discuss the effects of the tax
on p rofits, business costs, competition and consumers. The
administration of the tax and the principal technical problems
that arise are also considered. The studies are not intended
to make policy recommendations but to provide information and
analyses whi ch would be useful in appraising the desirability
of revising the taxes.
The study was prepared in the Excise Tax Section of the
Division of Tax Desearch. In its preparation valuable
assistance was received from other members of the Treasury tax
sta ff, including the Office of Tax Legislative Counsel on
legal matters and the Bureau of Internal Revenue on adminis­
trative matters.

Division of Tax Research
U. S. Treasury Department

February

19*+8

PART 'I •

Excise *Tax on Cigarettes-:
Page H o .

I«
II.
III.
IV.

•Description of the tax ................ ............... .
, Changes in the tax since 1913 ....... ..-.

1

....

Revenue collections, 1936-1947

2

Economic background of the industry . . . . . . . . . v . . , . .
A* Character of »apply . . . . . ; ............... .................................
1 • Concentration of supply ;
.........
2. Competition and price policy . . . . . . . . . . . . . . . . .
3. Costs and prices ’ / . ................ ..................... - . . . . . . . .
B. Character of demand ....................................... ........................
C. Outlook for the industry . ' . . . . . . . . . . . . . ; . . . . . . . . .

V.

Effects of the tax ........................................................................ . . . .
A.
' On profits , .
•.- . . . . . . . . . . * . . . . . . . . . . . . . . . *.
B. On competition ............................................................. .............
C. On consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *

VI.

Administration and compliance . . . . . . . . . . . , . . . . . . . . . . . . . *

VII.

Technical problems . * . . . . . . . . ............................. .
.,..........
A* Elat vs* differential tax *........... . . . . . . . . . . . . . . .
‘ ' 1# Economic and equity considerations -affecting
desirability of change in tax . . . . . . v . . . . . . . . . .
a* Consumers . . . . . . . . . . . . . . . . . . . . . ................ , . . .
b. Manufacturers .................................. . . . . . . . . ..........
c. Tobacco growers .............. ...............
do Distributors
i. . . . . . . . . . . . . . . . . .
2. Revenue considerations . . . . . . . . ' J ......... ..
3. Administration and compliance problems ........... .
*Bi Eloor stocks taxes and-r efunds. v .
PART II —Excise Tax on Cigars.

I. ,
II.
III.

j

Description of the tax ...........................................................
‘Changes in' tax since•1917
Revenue collections -t 1936-1947........ .

(Continued)

1

....

TABLE OP CONTENTS
2

PART II

-

*

(Continued)

Page Eo,

IV*

..... .
Economic Background of the industry
A, Character of supply ...............................
B , Character of demand ............... ...............
C, Outlook for the industry ..........................

35
35
42
45

V*

Effects' of the tax
.... .......................... . ..
A*. On profits
..........................
B, .On competition ....................................
C* On consumers
♦

4747
49
50

VI,

Administration and compliance ............................

50

V II,

Technical problems ........................ .
A, Revision of tax structure .........................
B, Ploor stocks taxes and refunds

50
51
52

PART III - Excise Tax on Manufactured Tobacco and Snuff ,,

53

I*

Description of the tax ...................................

53

II.

Changes in the tax 3inco 1917 ..,, ................... ....

53

III.

Revenue collections, 1936-1947 ........................

53

IV.

Economic background of the industry ....................
'A* Character of supply
..... .......
B* Character of demand
...... ......56
C, Outlook for the Industry ............. ............

54
54

V.

Effects of the tax-,........ .
A, On profits ....... .... ...........................
B, .On. competition ....................................
C, On consumers ................ .....................

61
61
62
63

VI.
V II.

Administration and compliance ............................

63

Technical problems ......... .............................

64

PART IV

-

Excise Tax on Cigarette Papers and Tubes

61

65

I.
II.

Description of the tax

Changes in the tax since 1917 ..................

65

III.
IV.
V.

Revenue collections, 1936-1947 ............... ...........

66

Production and use of cigarette p a p e r s .......... .

66

Effects of the tax •..,. ...................................

67

VI.

Administration and compliance ......................

7@

.............. .........

65

189

TABLE OP CONTENTS
- 3 -

PART V - Comparison of Tobacco Taxes in the United States,
Canada and United Kingdom . . . . . . . . . . . . . . . . . * . . . .
I.

Limitation on comparisons........................................... ..

I I . ‘ Types' of taxes levied bn tobacco- ............ i . * * * . . . * . , . .
A. Canada . . ............................................................... ...........
B. United Kingdom........................... ...................
I I I ’.

Comparison of taxes for selected products ‘V .................

Page No.
71

71
71
71
73

7^

TABLE OF CONTENTS
- 4 TABLES
Page N o »
PART I
1

2

3

4

5

6

7

Q

9

10

-

Excise Tax on Cigarettes:

Unit sales of cigarettes “by major brand
.... groups, 1929—1946
^
-

*
•

5

'Comparison of manufacturers1 net prices after
deducting discounts and Federal excise tax for
• standard and economy brand cigarettes, 1931—1947#•«..

7

Manufacturers1 sales of economy brand cigarettes
as a percent of total sales of cigarettes*
by monthst 1931-1935 .............................. .

'8

Production and average price per pound received by
farmers: flue-cured, burley, and Maryland tobaccos,
1919-1947
...................... .................

10

Frequency of change of manufacturers1 list prices
for economy and standard brand cigarettes, by fiveyear intervals, 1920—1947 ....... .............. ......

12

Leaf tobacco used in manufacturing cigarettes,
cigars and tobacco and snuff, 1915, 1920 and
1925- 1946 .... ....... ............ ................ .

13

Production of small cigarettes and per capita
consumption, 1915-1946 .............................. .

14

Net profits and rate of return on net worth of
cigarette manufacturer© reporting to Securities
and Exchange Commission, 1936-1946 ............... .

18

Comparative prices paid to farmers for leaf tobacco
used in standard and economy brand cigarettes,.
1931-1941 .... ........ ................ ..... ........ .

27

Combined wholesale and retail margins per package
for standard brand cigarettes, 1920-1921,
1926- 1937 .................................. ........

29

TABLÉ OF CONTENTS
- 5 -

■

■

TABLES (Concluded)

'■
Page No«

PART II

Excise Tax on Cigars;

-

1

Number of cigar factories,, production of large
cigars, per capita consumption,. and average ,
retail price per inexpensive cigar, 1915—1946*«

JL

2

Number of cigar factories by size of production
and percentage distribution of production by
size of production of factories, 1921, 1925,
1930, 1935, 1940-1946 **/.*.■.,..... ........ 39

•

Tax-paid withdrawals of cigars by price classes
estimated from sale of tax stamps, 1918, 1920,
1925, -1929-1946 .-,
.............................

3

4

5

PART III

--

1
2

3

PART IV

1

36 - 3?

•-

41

Production of and average .price per pound received
by farmers for cigar type tobaccos, 1920, 1925,
1930-1947
..................... .. . ....... *p

43

Net -profits and rate of return on net worth of
cigar manufacturers reporting to Securities and
Exchange Commission,- 1936-1946 c................ * o

48

Excise Tax on Manufactured Tobacco and Snuff2
Production of manufactured tobacco by types,
1916-1946 ................,---- -------------

55

Average retail price of pipe tobacco and plug
chewing tobacco and average wholesale price of
snuff, 1920-1921, 1926-1946 ... .... ..........

57

Selected cost items and profit margin for chewing
and smoking tobacco as a percent of net sales for
selected manufacturers, 1936-1939, 1941 and 1943*•

58

Excise Tax on Cigarette Papers and Tubes;
Tax-paid and tax-free withdrawals of cigarette
papers and tubes, fiscal years 1929—1946

N

m#

68
68

FEDERAI, EXCISE) TAXES OH TOBACCO

PART I - Excise Tax on Cigarettes

I * Description of the tax
Th.e tax is imposed on cigarettes,which are defined as rolls of
tobacco or any substitute therefor wrapped in paper or any substance
other than tobacco. The tax differs according to the weight of the
cigarettes. Those weighing not more than three pounds per thousand,
commonly referred to as ” small cigarettes,” bear the lowest rate, l/
The tax applies to cigarettes upon removal from the place of
manufacture or upon release from customs custody, or upon sale i f
prior to such removal*or release.
. The tax is payable by the manufacturer or importer and is paid
by purchasing tax stamps to be affixed to the packages prior to re­
moval from the factory or upon release from customs custody.
Exemptions from tax are provided on withdrawals for:
1.

Export*
2. Use as sea stores*
3. Use of the‘United-Sta-tes Government (but not
for resale in the United States)*
Persona,! consumption by employees of the
manufacturer. 2 /
v
II.

Changes in the tax since 1915 '

Cigarettes have been subject to excise taxation since 1S6U. The
only important changes made' in the tax since 1913 were the rate in­
creases made during each World War. The ta,x rates and effective dates
of the changes since 1913 are shown below:

l/

The.production of cigarettes weighing more than three pounds per
thousand is insignificant.
2/ -This exemption is 21 cigarettes per week, the same number as for
cigars.

2

Changes•in tax rates since; 1913
v ' ., (Per. thousand•cigarettes):
Revenue Act' .

\* '

fc\',

:~y.‘ Iffe c .ti^

v ;.y.. V
date •

,
Rate
■Vr-.' 'large-'
.!•: Small’ ’
•4 cigarettes a/ :• cigarettes b/*

■ In offopt
' dW ;'31, I 9Í 3

*'
1917

ITov. 2

1916

Feh. 25,

19 U0

July 1
' Ifoy.

19^2

.■?-" ••

$

$ i.25
|

2*05

3 . 6o

• if. SO"

3,00 .

1919

1

/ V

3 ,2 5

’,

3 ,5 0

;

^

7.20
7 . SO

■

•S.ifO

a/ Weighing not'more than:three pounds per thousand.
.;
■• b/ Weighing more than throe pounds per thousand. I f more than'.
6 - l /2 inches in length, ouch 2 - 3 /UJ inches or fraction thereof
is counted as ohe cigarette and taxed at the rate applicable
•
to small cigarettes. 'Ifa.e limitation on length was fir s t made
applicable on May 11, 193^- by the Revenue Act of 193^*

-

I I I . Revenue collections, 1936-19^7
The tax on^cigarettes is the second largest .single source of excise
tax collections, and in the fis c a l year 19^7 produced^ approximately' • •
two-thirds as miich as the tax on
distillod spirits* .-the largest
source of excise tax revenue.
'
-■*
;y

• ; ’■•Collections, fis c a l years l93&-19^7 • •
. ;
(In millions)»
.
«*. V
f

Fiscal year '
1936
1937
193s
1939
19^0
19U1

• *.'

•

.

*

r

Collections, .

.J L ;*

$ t e 5 .5 ’
Mi >+76.0
> 9 3 .^
50^.0
. .
533.1
.
6 16 .g

• .*

V

.

* * Fiscal year

•

19^2
19^3
19UU
19^5
19^6
19^7

.t

* ••.Collections :;
$ 705.0
■ S35*3
9 0 ^ .0

' 6 3 6 .8
1,073.0
. 1 ,3*5.3'

'

m

m

t

. _■■
■
'■
■■..-.

PPPp
"

m

h e h

*mmmmm

- a ®

- 3IV# Economic background of the industry
There are three distinct price classes for small cigarettes# The
predominant group is represented by the sowcalle«L standard brands and
the next most important group is the so-called economy brands# if The
third group, which is relatively unimportant in the industry, consists
of cigarettes featuring principally Turkish^type tobacco and selling above
the price of standard brands# Some producers make cigarettes in a ll
three of these price classes but for the most part each producer concen­
trates on one price class#
A# Character of supply •
1.

Concentration of sup-ply

The total number of cigarette producers is small, and the indus­
try has long been characterized by a high degree of concentration of
business among a few firms* 2/ In 1910 one company produced about
84 percent of the total cigarette output in the United States# 3/ Subse­
quent to the dissolution of this company in 1911 by court decree, three
of the successor companies continued to produce most of the cigarettes
for many years# 4/ The proportion declined substantially during the
19301s when two additional companies began production of standard brand
cigarettes and the production of economy brands expanded considerably#
1/ The term ^standard brands’1 has come to be used to designate the
brands sold at the ’’standard” price, or the price at which the bulk of
cigarettes is sold# The term ’’economy brands” has come to be used
to designate the cigarettes which normally sell for less than the
’’standard” price, JPrior to the war, when economy brands were usually
sold at 10 cents per package, they were often referred to as
”10 cent brands” .
2/ On January 1 , 1946, there were only 62 cigarette factories in operation#
(Annual Report of the Commissioner of Internal Revenue for the Fiscal
Year Ended June 30, 1946, p, 131*) The total number of companies is
smaller because the larger companies operate several factories#
Bearly a ll of the production is concentrated in the important tobacco­
growing States of Borth Carolina, Virginia and Kentucky#
3/ Federal Trade Commission, Agricultural Income I nquiry, Part I , 1938,
p# 275.
4/ These companies are American Tobacco Company, R. J . Reynolds Tobacco
Company and Liggett & Myers Tobacco Company* The production of these
three companies reached its highest ratio to the total in 1931 when it
amounted to approximately 91 percent# (American Tobacco Company et a l i „vs# United States of America, 328 U, S# 792-793# Considerable detailed
information supporting the above brief description of the structure of
the industry and its practices w ill be found in the proceedings on this
case*)

- u

192

Although the proportion represented by the three leading brands has
increased in recent years, it is s t i l l below its previous peak,
(Table 1 ) The two additional companies that entered the standard brand
fie ld have maintained a substantial volume.1ôf- production, but the produc­
tion of economy brands is now unimportant.
The concentration in this industry had its inception in the early
story of cigarette production. Nevertheless, there are certain economic
characteristics which tend to result in a high degree of concentration.
ihe.princxpa1 factors which appear to contribute to this tendency arei
U ; the economies of machine production, ( 2 ) the heavy capital investment
required in relation to sales, particularly in le a f tobacco inventory l/
and K3) effective establishment of consumer preference by advertising.
The successor companies that operated in the cigarette fie ld after
t e dissolution decree in 1911 were in a position to maintain leadership
.in the industry because they had the capital resources and established
brand names. Large scale advertising, the value of which had been
established by the predecessor company,- was continued. The development
of a satisfactory tobacco blend apparently has not been a basic factor
in limiting competition, “The tobacco used for cigarettes in the United
ptates includes the domestic light type (flue-cured, burley,- and Southern
arylpjidJ and Turkish type tobacco imported principally from- eastern
Mediterranean countries. Turkish tobacco is . . . blended with domestic
tobaccos to give the characteristic flavor of the popular brands of
American cigarettes.» g] Prior- to 1920 ,. each of the leading producers
had developed a burley blend cigarette, which became the popular type
of cigarette,
\
-

Competition and price policy

Competition appears in the cigarette industry between the standard
rands as a group and the economy brands as a group, and also within
each of these major groups. For a considerable period prior to 1930
practically a ll production was of the standard brand type and the basis
of competition among the producers of this cigarette had become well
established. Each followed the policy of selling a similar product,
y elding a substantial margin of p rofit, and supported by large adverlsmg expenditures,. This policy evolved in the early history of the
cigarette industry after.experience had indicated that profits could be
seriously affected by small changes in costs where cigarettes were
1/ Inventory represents the principal physical asset o.f the cigarette
companies and is approximately equal to' annual sales. A s of
??■».
one of the largest companies reported an inventory
o! tt « • milllon compared with total assets of $390 million.
J
«ï v 1 States t a r iff Commission, Trade Agreement Digests. Vol. VI,
o acco and Manufacturers,fl p* 9« ‘‘Imported Turkish, tobacco accounted
■ho-p a ° 5 ° Percent of the leaf used in domestic cigarettes immediately
l
m
War’wbut the Proportion fell to less than 5 percent by the
end of the war.“

1/ 32S u. s. 792-793.

- 5 -

■:
Unit;

:

Table' 1' * . /

•.............

'

of;.,cigarettes by major brand groups, 1929-19b6 l/bj
(Pillions of cigarettes)

Year
1929

1930 .
1931
1932.
1933
19 3b

:
Percent
Number
: Total 2J :;Three major: Economy : A ll ff :Three major;
brands ;
: • brands : brands : other5/
. **
86.03$
1 6 .7 0
I I 9 .OO . 102«30•
O.09 ■1^.59
.10b . 92
11 9 . 6 0 .
87-7
8 8 .6
1 2 .5 0
i i 3 .bo
10 0.51
0.39
IO . 7 O,. • 1 1 . bO
. 6 1 .5 0
76,7 = •
. IQ3 .6 0
1 0 . lb
81.9
1 0 .1 2
' ,111.60
91.5>t
97-29
1 2 5.60
77 -5 •
- 1 3 . 7 6 . 1^ .5 5

1939
19 bo.

13 b . 60
1 5 3.20
1 6 2.60
1 6 3 , 70-,
172 . 60.
189 . 3 b

19U1
19 '42
19U3
19 bb
19 H5
I 9 b6

21 7 . 66 ’
2 5 7.36 '
29 6 .2 6
3 2 1 .6 6
33 5 .0 0
3 5 2.00

1935
1936

1937

193 g .

. 1 5 . 7s . .1 6 ,8 6

• 10 1 . 9 b
1 1 3 .6 2
11 6 .9 1
1 1 3 . 8b

lift. 19
120 , 3 b
1 3 5.32

. l b l .25
19U.19
2 1 5 . 31+
232.00
2 7 2 .OO

16 .7 5
1 9 .6 1
2 3 .3 6

.

22.60

. 32.85
ft6 .b0

22 .3 0

60 . 0 b

25.56
.

2 2 .5 3
2 6 .0 6
2 6 .5 0

l 6.,20
12 *. 10
5/

,5/
5T*

79-93
69.97
1 0 6.52
1 0 3.00

80.00

Treasury .Department, Division of Tax Research

.

75.7
7b.3 ;
71.9
6 9 .5
6 6 .2
6 3 .6

distribution
Economy' : ' All
brands : other 1/
lb .0
.1

•3

;1 0 .3
,-9.1
1 1 .0

$

$

1 2 .2
11 .0
1 1 .0
BA
■ 1 1 .6

n>7 • 1 2 .5
lb .s
• 1Q:.9
16 .0
1 2 .1 •
1 6 .2
lb .3
. 1 9 .0
:ibVS. 11.9' • 2b . 5

. 2 7 .6
62 . 2 > • 1 0 .2
6 :. 3
62.7:
: ■
‘ 31.1
6 5 .5 ■
■ . b .i • • 3 0 . b
66,9
3 3 .1
if.
6 9 .3 .
3 0 .7
.. l!
2 2 .7
77.3
1/
- .

- ■

Source:. , Standard and Poores Industry Surveys, "Tobacco,” February 21, 19^7»
. Table .9 . Data-for ;,1929-19b-0 are from record of Sherman Anti-Trust
Act case-against American Tobacco Company, Liggett 8a Myers Tobacco
. Comrany and R. J , Reynolds »Tobacco>.Company in the D istrict Court -of
... the United States for .the Eastern D istrict cf .Kentucky. For 19^1, .I9 H6 data are estimates by Standard & Poor1s .Corporation. '
vif Total sales in years 19 b0 - 19 b6 ; tax-paid sales in prior years.
2/ Totals not exactly' comparable to Bureau of Internal Revenue..figures bu.t the
data serve to indicate relative importance of various brands.- -.
3 / Data for'one cotripany are for fis c a l year ending March. 31*. •
%f -Includes a ll exports and cigarettes given, away f o r advertising, purposes in
years 12b6-19ft6.'
.
.- .
,
•.p : . :; .
5 / In- these years the amount of economy brand ,sal.es was small and. was . not
reported 'in the published estimate.
..
;
• .

-

6

-

priced on a narrow margin. i j Each oí the three-leading companies^has .
concentrated its business in a popular brand and, with few exceptions,
manufacturers’ list prices have ‘b e e n ’the same for all standard brands.
Experience had indicated that a significant increase in price for one
brand alone had;an adverse effect on its sales. The maintenance of a
common price--for ,steward brands ..at tfce manufac-turars’.level also extends
to wholesalers who have been, influenced to -sell the..standard brands a
a uniform price through various measures. Z J •
-Although...there have hee.n.conflicting claims regarding the differences
in physical characteristics Of the■several standard brands, the arge
dependence upon advertising' to maintain consumer preference would seem to
indicate that competition within the standard, brand group s ase
® a
substantial degree on name association*.' In 'the earlier history or- the ‘
cigarette industry producers'promoted sales through the use of, premiums,
prices and other price-cutting devices. The present practice appears to
be. a imore effective method of maintaining sales than price reductions
involving comparable amounts. 3/
' ''' :
‘
>;
Competition in the industry between .the standard and economy brands
is based largely on a price differential*' The economy brand competition
developed after 1931 when lower toWcco prices made > t possible to produce
cigarettes:to sell for 10 cents per package and.lower levels-of dneomp
provided a substantial market for the 10-cent cigarette. .In- June 1931
the manufacturers5 list price on standard brands was raised frames.40
to $6.85 per thousand and retail prices were adjusted upward. ,(¿able
The' sale of ,10-cent brands expanded rapidly and by November .1932- ré,ached,
an estimated 23 percent of the total cigarette sales« (Table 3) The
larger producers did.net engage extensively in the production* of -.lower
priced cigarettes, but in 1933 reduced the price -ofCtandard brands sub­
stantially. Following this price adjustment the sales of economy.brand
cigarettes were reduced to about '6 percent of the total. .The profit margin
on' standard brands had. been greatly reduced and the manufacturers ^price
for these cigarettes was subsequently increased.in 19Í34 and again in 193 .
’ Following the price increase the producers concentrated on .sales’efforts
to meet the competition presented by the lower .priced pi garet te s *
hp ^
ever after the increase in price of standard brands the sales^of-economy
brands again increased and continued to account for a substantial percentage
until wartime developments affected their position»
‘j * \
~"
Prior, to about 1915 the principal'brands of cigarettes sold at 5 cents
per package. Changes in ‘tax rates:,.as. well, as -changes m costs, made
it difficult to maintain the 5 -c.ent. pr-ice,. In 1910 when the tax rate
was increased to $1.25 per M the package size was reduced to 15 cigarettes
and after the increase in the tax rate to $2.05 in 1915 tne 5 cent pack-'
age was discontinued.
. ,, ,
Z j The most common methods appear to be the possible withdrawal of advertis­
ing allowances or removal from the direct dealer list. However, cigarette
producers have not undertaken to maintain prices at the retail l®vel
have encouraged price reductions .at this level. (147 E 2d 104) .
3/ It has been estimated that advertising expenditures currently amount to
about one— third of a cent per package on standard brands# xhis is su stantially smaller than the price differential that appears to be neces­
sary to stimulate the sale of an unadvertised brand*
4/ 328 U*S. 804-808.

0

- ,7 ~
Table 2

Comparison of manufacturers* net prices after
deducting discounts and Federal excise tax for
standard and economy brand cigarettes, 1931 1947
♦
•

Manufacturers1
net prices
%
• ner thousand
*• Standard s? Economy
brands
brands

Date

*

From

To

Spread between
manufacturersv*
net prices
»
ft Per
1 Per pack
9
ft thousand % (cents)
ft
ft

$ 3*04

$ 1.19

$ 1*85

' 3c.70

Jan© 3, 1933 —Feb* 10, 1933

2*29

1*19

1 *10

2 .2 0

Feb* 11* 1933- Jan*

1**5

lol9

o66

1*32

Jan* 9, 1934 - Jan* 19, 1937

2*38

1*19

1*19

2*38

■Jan* 20, 1937- June 30s 1940

2.51

1.19

lo 32

2o64

July 1, 1940 —Jan*

2«51

1*20

1*31

2*62

Jan* 9* 1942 - Sept* 4* 1943

2*51

1*29

1*22

2*44

Sept * 5, 1943-Apr. 248 .1946

2.51

1*66

*85

lo ?0

Apr* 25, 1946- Oct*

2.76

1*88

*88

1*76

3.01

2*13

*88

1*76

Juae 24f X931- Jan*

2„

Oct* 7, 1946 to date

89

8,

6,

1933

1934

1942

1946

Treasury

Departments,

Division of Tax Research

Sources

Standard and Poores Industry Surveys, ^Tobacco, 8 February 21 v
194'7, Section 2, p. T4-3 and Office of Price Administration,
Price Schedule No« 62#

194
- g -

Table 3
Manufacturers1 ’sales of economy brand cigarettes l/ as a percent
■of total sales of cigarettes, by months, 1931 ~ 1935
♦
Month . [
January
February
March
April
May
June
July
August
September
October
November
December

«y,
1931
.2 6 •p

.27
.28
.2 7

.23
„28
.57
1.82
2 .0 0

2,kl
2.39
2 .8 8

;

f.■
»'»■
,»■■
»■
....
1932
; 1933
2.33
3.30

f>

10.00 $

1 1 .6 0

9 .9 6
10 .U3
11 .1 1
10 .3 7
10 .0 1

3 -2 6

7.07
8 .5 5
6 .U3

19.57

1 9 .0 0
22 .7 8
.21 .3 1

1931+

l 6 . 76 ^

6.13 .
6.59
9 .1 2 .
1 2 . kS
1 7 .7 6

!

.

7.03
9 . 5s
8 .6 7
9 .7 8
9 . 5^
1 1 .2 1
9 .2 6

12.09
12. 3s
1 1 .6 2
1 2 , U6
13 .1 3

12.28

;

.1935
10 .8 5 p
1 1 .7 1
11 .2 5
n .7 0
1 1 .7 2
u .3 6
11 „87

13.72
13.53

11 .0 1
12 .1 5
12,5k

’

Treasury Department, Division of Tax Research
Source:

Fedoratl Trade Commission,-Ag;ri crl rural Income Inquiry',
Washi ng bon, 195&> Part I,

l/ Represents sales of eight economy brands, which accounted for substantially a ll of the production of economy brand cigarettes ;

- 9Sales of economy brand cigarettes declined after 1939, although
there was no further change in manufacturers1 net prices until
January 1942» 1/ Under the price ceilings established during the
war the spread between the prices of standard and economy brands
decreased«, 2/ As the demand for economy brands declined and costs
increased, most of the producers of economy brands discontinued pro­
duction or shifted to the standard price class* Since the close of
the war the price differential has b@@n lower than during most of
the 1930*8 and there has been no indication that:the demand, for
economy brand cigarettes will recover, tinder the lower price differential
at the present high levels of income*
.'** “ ’
’
3*

Costs and prices

Tobacco leaf represents the largest part of cigarette manufac­
turing costs* 3 j Substantial fluctuations occur in tobacco prices but
there is less variation in reported costs of cigarette producers
because of their practice of accounting for tobacco on an average
cost basis* 4/ Since 1919 the annual average price of flue cured tobacco,
the principal type used by cigarette producers, has ranged from about
8 to 48 cents* After tobacco acreage liras limited under the Agricultural
Adjustment program beginning in 1933 the price of flue cured tobacco
increased'from a low of about 8 cents per pound in 1931"to over
20 cents, and it fell below this level in only two years* 5/ (Table 4 )
Prices rosie further under the pressure of increased wartime demand,
reaching a level more than twice the average for the 20 years preceding
the war. The price of lower grades of tobacco, which had increased
relatively more than the prices of higher grades from the low level
of 1931, rose more than the prices of higher grades* The narrowing
spread in the cost of different grades increased the cost of economy
brand cigarettes in relation to standard brands.

1 / The manufacturers of economy brands have contended that a decline

2/

3/

4/
5/

in their sales resulted from the tax increase of 25 cents per
thousand effective July 1, 194Q which made it necessary to raise
retail prices above the convenient 10-cent figure* (Revenue
Revisions of 1942r Committee on Ways and Means, pp, 20li and 293^-)
Standard brand prices remained unchanged* Manufacturers 1 prices
on economy brands were increased in January 1942 and again in
September 1943; the retail ceiling price was raised to 13 cents
per package.
For 1939 the cost of tobacco amounted to 43 percent of the value
of products of the cigarette industry, exclusive of revenue stamps*
(Department of Commerce, Census of Manufactures. 1939, Vol* IX, Part 1 .)
Leaf- tobacco is customarily aged from 18 to 36 months before being
used in the manufacture of cigarettes.
When acreage limitations were removed in 1939, the unusually large
crop produced resulted in a substantial decline in price during
1939 and 1940*

195
-

10

-

Table 4
Production and average p r ic e per pound receiv ed
lay farmers* P lu e-cu red , b u r le y P. and Maryland to b acco s, i9 i> *-l
(Production in m illio n s o f pounds)
Year

Maryland.¿■pice
per
pound
(cents)
20
25*9
Ì
27 .
1 6 .9
19 .
2 3 .8
2Ò

Burley
Plue-cured
Price i
«
P r ic e
per .Product ion*
.Production*
per »Production.
pound *
•:
i
pound
(cents!
( cents)
44,4

1919
1920
1921
1922
1923 •
19 24
I 925

477
616

359
415
5SI
4^7 .
575

21.9

I 926
I 927
I 92 S
I 929
I 93 O
I 93 I

560

24.9

719

20„5

1932

1933
193^
1935
1936
1937
193 s
1039

19'40
19 U1
1^42
1943
1944
194.5

1946

7

1947 1 /

739
750
S65
670

374
733
55 S
i n ’.
633 ;
g66
■787 W.
1,171
760
650
S12

' 790 1,090
I . I 73
1,352
1,331

2 1 .5

1 3 .5

276

27*2
20 . g
2 1 .6
2 0 .0

■

340
296

278
289
176
269

I 7 .3
lg .0
1 2 ,0

337
349

1 1 .6

£25
304

g.4

1 5 .3
2 7 .2
2 0 .0
2 2 .2
23 . O'
2 2 .2

33*2

1 300
2 gg
176

:

;

402
' 339
14.9 . 395 V
16 ,4
375
2 S.1
• 337
•38.4. . ■ 344
40.2. .391
42.4
591
4 3 .6
577
6i4
4g.3 .
4i.o . . .519

2 0 ,0
2 0 .1
.18 „0

24

.

1 6 .9

.

19 .i.
35.7

2 0 .1 -,

19.0
I 7 .3 '
1 6 .2

29.2
4 leg

2 7 .7
22 .7
2 3 .7

.2 1

I3 .I
25-9
3 O.5
21. g
I 5 .5
8.7
12*5
IO.5

378
252
222
220

21*5
26 . g

25
26
26
20

. 2Ö. 2
23*4

25

27.7
2o>6
1.5 .0
l 6 «g

2 7 ,2

20
28

29

1 7 .8
1 7 .5
2 0 .0

?2
26

29 §
31
23.
29
33.
33
71

4 5 .6

28
21

44.0
39.4
39.7
4g»5

38
18
47
38.,

25.4

■

17*2
lg .5
2 1 .1

33.0
3 0 .1
5 6 .5

4-5.3
55*5
57*0

4 4 .3 1 /
2/

Treasury Department, Division of Tax Research
Sources: Department of Agriculture! Dirst Annua.l Report_on—^ob_acco
S ta tis tic s., Washington, 1937» Annual Report on Tobacco Statis tic s ,
19^?, 19Û5 , iq U6 ; Crop frenort as of May 1 , 1946, ”Tobacco-1945
Revised” ; Cron Report as of May 1, 1Q47> "Tobacco-1946' Revised”;
The Tobacco Situation, January . 194g«
l/ Preliminary.
2f Not available. '
.

-

11

-

Changes in c ig a r e t t e p r ic e s have shown no c lo s e correspondence to
changes in le a f, c o s t s . Between 3-920 and 19^0 m an u fa ctu rers 1 p r ic e s o f
stan d ard Brands were changed o n ly 10 tim e s, "but no change occu rred in the
p r ic e o f economy B ran d s. (T ab le 5) -An in d ic a t e d aBove, changes in p r ic e s o f stand ard ^Brands d u rin g the 1930 1 s were in p a r t in flu e n c e d By
the co m p etitio n o f economy Brandy* However, a f t e r the in c r e a s e in p r ic e
o f "standard Brands in Ja n u a ry 193^» u n t i l th e B e g in n in g o f th e war,
m an u fa ctu rers 1 n e t p r ic e s were .in c r e a s e d o n ly l / b ce n t p e r package a l ­
though the p r ic e o f toBacco l e a f rose s u b s t a n t i a l l y . D u ring the war
m an u fa ctu rers 1 n e t p r ic e s o f economy Brand c ig a r e t t e s were in c re a se d
n e a r ly 2 c e n ts p er package w h ile no adjustm ent was made on stan d ard
Brands u n t i l 1 9 '4 6 . P r ic e s on B oth brands were in c r e a se d By about 1 cent
p e r package in 19^-6 But no f u r t h e r in c r e a s e has o c cu rre d .
• The p re se n t m an u fa ctu rers 1 n e t p r ic e s on standard Brands are h ig h er
than th e y have Been s in c e 1 9 2 1 and consumption i s alm ost e n t ir e l y com­
posed o f t h is c la s s o f c ig a r e t t e s as i t was p r io r t o . 1931• There are now,
however, s e v e r a l more e s t a b lis h e d p rod u cers in th e stand ard Brand p r ic e
c l a s s . A ggregate p r o f i t s o f the in d u s tr y B e fo re income ta x e s have grown
w ith in c r e a s in g consuurotion. The r a te o f retu rn on investm ent has r e ­
covered from the r e l a t i v e l y low l e v e l reached d u ring the dep ression period
But appears to Be somewhat Below the l e v e l s reached p r io r to the advent
o f the economy B ra n d s. 1/
B.

C h a ra c te r o f demand

C ig a r e t t e smoking is- one o f s e v e r a l form s o f toBacco consum ption.
A lthough one form may Be s u b s t it u t e d f o r a n o th e r, th e s a t i s f a c t i o n derived
i s o f such an. in t a n g ib le c h a r a c te r th a t s o c i a l a t t i t u d e s , as w e ll as
p r ic e and income f a c t o r s , p la y an im portant p a r t in consumer c h o ic e .
C ig a r e t t e s have r a p id ly d is p la c e d o th e r forms o f toBacco consumption and
in 19^-6 accounted f o r 77 p e rc e n t o f the t o t a l ' tobacco used in p rod u ction
compared w ith l e s s than 10 p e rc e n t in 1915* (T ab le 6 ) The s h i f t to
c ig a r e t t e smoking h as r e s u lt e d in a la r g e in c r e a s e in the consumption of
to b a c c o . P er c a p it a consumption o f c ig a r e t t e s has grown from ISO in 1915
to over 2,300 in 19^6. (T able 7 ) B u rin g t h i s p e r io d the com position o f
the p o p u la tio n changed and the p ro p o rtio n smoking c ig a r e t t e s in cre a se d to
a g r e a t e x te n t..
;
There i s c o n sid e ra b le evidence r e g a r d in g .th e r e la t io n s h ip Between
c ig a r e t t e consumption and such fa c t o r s as th e growth o f economy, f lu c t u ­
a tio n s in income, and changes in the p r ic e o f c i g a r e t t e s . Consumption
o f c ig a r e t t e s has expanded more' r a p id ly than income and p o p u la tio n . I t
has Been e stim ate d th a t in the p e r i o d - 1 9 to 19^1 th ere was an average
annual in c r e a s e in c i g a r e t t e . consum etion o f 6 , U B i l l i o n due to fa c t o r s
17

For r a te o f re tu r n p r io r to 1938 see Temporary N a tio n a l Sconomic
Com m ittee, In vestm en t, P r o f i t s , and R ates o f Return f o r S e le c te d
I n d u s t r ie s , p p . I 7667 - I 7 6 7 2 * For 193& and su b seq u en t. ye a r s see
‘ Table 8 . ~

Table 5
Frequency o f change o f m a n u fa ctu re rs 1 l i s t p r ic e s f o r
economy and standard "brand c i g a r e t t e s , "by f iv e - y e a r
i n t e r v a l s , 1920-19^7 l/
"4
P e r io d
1 9 2 0 - 192^
1 9 2 5 — 1§29
1930 - 19 3 4

; 1935 - 1939
19 U0 - 1 9 * #
19*0' - 191*7

:

iTumber o f p r ic e change s
Economy Standard
:
brands
brands
:
3
2
If
1

£/. •
U
0
:

2 1/

bkj

Z

2

0

Treasury Departm ent, D iv is io n o f Tax R esearch
S c a rc e :

l/

2/
3/
¥/

Com piled from Standard and P o or1s In d u stry
S u rv e y s, ttTobacco , 0 February 21, 19^7»
S e c tio n 2 , p# Tb-3 and O f f i c e o f P r ic e
A d m in is tr a ti on, P r ic e Schedule No* 6 2 .

L i s t p r ic e s in clu d e F e d e ra l e x c is e ta x e s and ta x
chan ges, th e r e fo r e , are r e f l e c t e d in the l i s t
p r ic e s .
"Very few so ld p r io r to 1931«
B o th changes due e n t i r e l y to in c r e a s e in t a x .
One change due e n t i r e l y to in c r e a s e in ta x and
one p a r t l y due to in c r e a s e in t a x .

-13 -

Cable 6
Leaf tobacco used in manufacturing cigarettes, cigars
and tobacco and snuff, 19X5, 1920 and 1925 - I9H6 j J

Amount

•J»V/ChJL
Tear

•

Percent of total
♦
xooacco
.
Total [Cig,arettes*♦ Cigars 2 / ’
Cigarettes * Cigars 2 /’ 10 Dacco
and snuff:
and snuff
(<Millions of pounds)

1915

565

57

I38

371

10.0 io

2H.H $

I92O

6H0

1 H7

169

32H

23,0

26.3

*50.7

I925

71 S

2HH
268
290
310

1 H9
152

325
3X7

3H .0
36.3

H 5.3
ik 3 . i

39*0
H1 .1
^3.5
HU. 6
^3.9

20.7
2Ô .7
20.5
20.1
1 9 .1

1926

1927
I92S
1929
1930
1931
I932
1933
193U
1935

1936

1937

193s
1939

19^0
19 Hi
19H2

19^3 .

19 HU
19H5
19H6

737
7HH
755
797

780
752

690
711
776
776

*

153

301

151

'293

3^7

152

3HS
330

138

298
29H

128

295

299
326
375 399

8H7
S73
S65

H53
HSO
HsH

885

923

509
.535

1,131

755

1,009

1,229
1,255
1,291

1,307

0

627

860
920
9 HU
l , 001

lOH

287

105
.1 1 1

280

llH

127
129
119

123

127

136
lH l
132
130

128
138

,

289
263
267
26H
263

253

26l
2H6
236
236
20H
218
168

-

%-5
U5.9
Hg.H

,

51*5
53*5
55-0
55*9
57*5
58.0
62.1
66.7
70.0
73.

73*1
76.6

65.6 $

Ho .5
38.9

17.0

37*H
37*7
39*2

15*1
1 H .7
1 U ,3

Hi . 6
39 .^
37-3

17*7

1^.7

33*9

lU .9
lU .7

31.6

13*7

3 0 .H

13*9
13*8
13*5

28.6
28.3

1 2 ,H
10.7
1 0 .H

9*9
10.5

30.3

2H.H
20.9
19.2
16.3
16.9
12.9

Treasury Department, Division of Tax Re search
Source:
Rote:
1/

2/

Annual Reports of the Conmissioner of Internal Revenue. Unpublished data
for 19H 6 . '
7
"
:
:
Figures are rounded and will not necessarily add to totals.

The quantities given are unstemmed equivalent of all kinds of tobacco used.
Stemmed leaf" and scraps, etc. used in the manufacture of cigars and cigarettes
have been converted to unstemmed equivalent at the ratio of 3 pounds stemmed,
etc. to 4 pounds unstemmed.
Roes not include tobacco used in bonded manufacturing warehouses.

-

ik -

197

Table J

Production, o f sm all c ig a r e tte s and
per c a p ita ..cpnsumption, 1915-19^6

*

Y ear

;

P ro d u ctio n

P e r c a p it a
consum ption, l/

*

( In m illio n s )
.1915
.

1916

lè i?
I 9 IS
I 919
I 92 O
I 92I

.

1922

•
r

.

19 3 4

.

1932 \
I 939 .
1 9 U0
I 9 UI
19^2
19^3 - ,
19^
19^5 •
19^6

426
kis
468
4g6

f ..
..

6 6 ¿ 7 1 5 .8
7 2 ,7 0 9 .0
8 2 ,2 4 7 .1
' 9 2 ,0 9 7 .0
9 9 , 809. 0 '
: l o g , 7 0 5 .5
1 2 2 ,3 9 2 .4
1 2 3 , 8 0 2 .2

575
622
690
76 1
8 16
•■
■ ■ 379 ■

977.
• 972

.-■ ■W

1 1 4 ,8 7 4 ,2
1 2 9 . 9 7 6 .3
1 3 9 , 9 6 6 .2
. 1 5 8 , 89^.0
1 6 9 . 9 6 9 .3
1 7 1 . 6 8 6 .U

.

.

915

10 6, 652. U

1935
19 3 6
19 3 7

2 U7 •
33s
362

11 7 ,0 6 4 .2

I 93I
I 932
1933
.

178

.1 7 ,9 6^ .3
. ; . 2 5 , 290..3
. • 3 5 ,3 3 1 .3
4 6 , 6 5 6 .9
5 3 , 1 1 9 .8
...
4 7 , 4 3 0 .1
.5 .2 ,0 8 5 .0
55 .7 5 3 -0 .
>

1923

1924
I 925
I 926
I 9 27
I 92S
I 929
I 93 O

(Number)

:
. ..

1 8 0 ,6 6 6 .8
189.371-3
217.93^-9
25 7,520.9
296,1 7 3 .3
3 2 3 ,5 2 3 .9
332.16!». 7 Î
350,038.1 '

.

830
890
99 ^
1 ,0 5 8
1 ,1 9 6
1 ,2 6 2
1 ,2 6 1
1 , 31s
1 ,3 8 6
1 ,5 2 0
1 ,8 9 5
2 ,1 4 2

2,286
2 ,3 3 4
2,3 24 2/

Treasury Department , D iv is io n o f Tax R esearch
Sources:

¿/
2/

P ro d u ctio n : Annual Reports, o f the Commi s s io h e r o f I n t e r n a l
Revenue ; P e r .c a p it a consum ption: Department o f A g r ic u lt u r e ,
Annual Report on Tobacco S t a t i s t i c s , 1942, p . 812, 194?. p . 8 8 .

Consumption for 1940-1946 includes consumption by forces -overseas
and is the sum of tax-paid and tax-free withdrawals less exports.
Preliminary.

- 15 -

other than the increase in the level of disposable-income. !_/ As cigarette
consumption came to represent a higher proportion of total tobacco use, the
rate of growth.has declined. Nevertheless, the upward trend still appears
to be substantially more than is accounted for by increases in income,
alone. Both world wars .-greatly stimulated cigarette consumption, the
increase of each being roughly 100 percent. The present popular blend
was developed just prior to World War I and the introduction of cigarettes
in ration packages, and gifts to the armed forces is generally credited
with having stimulated consumption. The growth of smoking by women between
the two world wars expanded the adult proportion of the smoking population.
Since 1915» por capita consumption has decreased only in the vears 1920
1930 ~ 1932 , 1938 and 1946.
Cigarette consumption is relatively insensitive to fluctuations in
income and to changes in price. 'The evidence seems to indicate that
total consumption is more responsive to changes in the level of income
than to changes in cigarette prices. Nevertheless, during the period
929 7 1943 changes in the physical volume of consumption were, on the
average, less than half as largo as the annual changes in the level of
disposable income. 2 j Because of the .apparent dominant effect of the
income factor it is difficult to measure the effect attributable to
price changes. Eowover, it seems reasonably certain that price changes
ha e had^much smaller effects on total consumption than equal percentage
changes in income. 3/ Unless very substantial changes occur in cigarette

1/ Department of Agriculture, The Tobacco Situation. April 191 *6 , p. 20.
n t. e basis of average consumption for the period this represented
an annual average increase of 5-9 percent. However, as the level of
consumption increases the rate of growth in relation to consumption
ecreases. In conjunction with the analysis indicated in 3 / below,
the average annual increase was found to be about U percent.
(Disposable income represents income payments less personal taxes,
unless otherwise noted, Department of Commerce data on income and
expenditures in this study are those issued prior to the revisions
published in "National Income", Supplement to SurVoy of Current
Business, July I9U7.)
~
~~— 1
---- -— :— 1
— ■-------2/ Computed from data in the Survey of Current Business. June. 194H.
Data on the relationship between cigarette prices and consumption in
the years 1929- 19 ^3 , inclusive, indicate that a 10 percent change
n retail price was associated on the average with a change of less
1 percent in unit sales. This estimate, which is derived by
statistical methods'designed to- allow for the effect of fluctuations
m income and the rising trend in .consumption, is subject to a
margin of error. ;The chances are only 1 out of 100, however, that
- the change in sales associated with a 10 percent change in retail
price was as much as 3 percent.

/

- 16 prices it appears that consumption is likely to be largely determined
by other factors, 1/
Although total 'éonsumption of cigarettes seems to be only moderately
affected by fluctuations in income and very unresponsive to price changes,
both of these factors appear to have had a substantial effect on the pro­
portion of cigarettes consumed iri different price classes* After 1930
the proportion of total consumption in any one year represented by
economy brand'Cigarettes rose as high as 15 percent in 1939* (Taole l)
The experience during this'period is not sufficient to reach definite
conclusions, on the quantitative importance of income and price in the
demand for -economy brand cigarettes*' It may be stated generally that a
substantial decline in the level of income appears to stimulate the
demand for cheaper cigarettes* 2/ The extent of the. shift from higher
priced cigarettes* however, depehds upon the size of the difference in
price between standard and' economy brands* In 1931, the. differential
was 3«7 cents per pack (àt manufacturers’ level), and with that differen­
tial sales of economy brand cigarettes reached a high in one month of
23 percent of the total* When the price of standard brands was twice
reduced in 1933 and the differential was cut to 1,32 cents, economy brand
sales dropped to as low as 6 to 7 percent of the total* (Table 3) The
evidence of this period seems to indicate that a fairly substantial price
differential is necessary to induce much of a shift to economy Grands*
There is some evidence that the shift becomes very definite when there
is a difference of about 25 to 30 percent in price at the retail level* 3/
It is possible that continuation of such a differential over a longer
period of time than existed prior to the war would, under similar condi­
tions, result in a larger shift*
_____
'
_
:
1/ It has been stated that the existence of the iO-cent cigarette and
its influence in keeping down the price of the standard brands “result
in cigarette consumption being at least 10 percent over what.it
would be if there were not 10-cent cigarettes ... n (Hearings before
the Committee on Ways and Means, Revenue Revision, 1934a p, 774c)
This estimate of price effect is much higher than the‘evidence appears
to substantiate. On the basis of the 1929-43 experience it is doubtful
whether consumption would have increased by 10 percent if all cigarettes
had been reduced to the 10-cent price,
2/ The representatives of two of the largest economy brand manufacturers
stated that they did not think consumers were sufficiently interested
in saving a few cents to make a 10—cent brand successful in the 1920’s,
(Revenue'Revision, 1934„ p* 769,)
3/ The industry appears to have felt that the effect depended upon the
absolute amount of the differential* This would mean that the effect
would be the same whether the prices were 10 and 13 cents or 11 and
14 cents. It is doubtful, however, whether this would be true at all
levels of prices.

_______________

_________

_________________

__________________________________________________________________-

__________________________________________

- 17 -

a.

Outlo,ok f o r th e in d u s tr y

The .o u tlook f o r c ig a r e t t e consum ption -as a whole seems fa v o r a b le .
P ro d u c tio n in I 9 U6 reach ed about 350 b i l l i o n c ig a r e t t e s or n e a r ly
double the 1939 't o t a l and h as'b d en in c r e a s in g in , 1 9 4 7 . As in the case
o f World War" I { t appears th a t the in c r e a s e e x p e r ie n c e d .in tld s war
w i l l be su s ta in e d i n . the postw ar p e r io d . - • :
, * ■
• .....
Por a, tim e d u rin g the l a t t e r p a r t of the war when la r g o shipments
were b ein g made o v e rsea s s u p p lie s were- not a d e q u a te . to meet dom estic
c i v i l i a n demands The subsequent d e c lin e in t a x - fr e e shipm ents abroad
en ab led -p ro d u cers to meet dom estic, requirem ents w ith ou t en larg e- i n ­
cre ase in p r o d u c tio n . Prom 19hh- to 19^6 more -tnan 60 p e rc e n t o f the
inc-rease in ta x -p a id w ith d raw als wac a c c e n t e d , fo r by the decrease in
t a x - fr e e w ith d ra w a ls. S u p p lie s o f l e a f tobacco have in c r e a s e d sin ce
the c lo s e o f the w ar. The I 9 U7 crop i s n e a r ly a s .l a r g e as. the lW b
reco rd crop and ex p o rts are ex p ected to be sm a lle r .tnan fo r tne 194b
cro p . 1/ In v e n to r ie s o f m a n u fa ctu rers, however, are r e l a t i v e l y low,.
P r ic e s - on the 1 9 U7 crop have been h ig h e r on b u r le y but^about 15
p e rc e n t low er on f l u e —cured tobacco which i s the p r in c ip a l typo o f
tobacco u sed in c i g a r e t t e s . Z j The p r i c e , on flu e - c u r e d tobacco cannot
d e c lin e much.more, however, b e c a u s e 1i t i s now near tne support l e v e l .
The course o f tobacco p r ic e s as w e ll' a.s the p o l i c y fo llo w e d w ith respect
to c ig a r e t t e p r ic e s w i l l bo im p ortant f a c t o r s in d eterm in in g fu tu re
p r o f i t s o f the in d u s t r y . The in c r e a s e in tobacco l e a f c o s ts has
appeared to have a more se rio u s e f f e c t on tho p r o f i t s o i tu c product-rs
o f economy brands than the p rod u cers o f stand ard b ra n d s.
V;

E f f e c t s o f the ta x
A.

.Oh p r o f i t s

By 19^2 the a gg reg a te p r o f i t s o f the c ig a r e t t e in d u s tr y b e fo r e
ta x e s , had in c r e a s e d by more than 5 0 ap e rc e n t over the 1936*1939 average.
(T ab le g) D uring the l a t t e r p a r t of the war, however; p r o f i t s de­
c lin e d . Tho r a te o f retu rn , on s to c k h o ld e r s ’ investm ent i s h ig h e r than
k
in the prew ar y ea rs b e fo r e allow an ce foe? income ta xe s b u t i s su b sta n tia lly
1 ower a f t e r In c ome t axe s ,

l/
Zj

Department o f A g r ic u lt u r e , Crop Deport as o f September 1« 15^7»
September 1 0 ,' 19^7
,
Department o f A g r ic u lt u r e , The Tobacco S i t u a t io n , Ja n u a ry 1948,
P. h.

lg h
Table 3
ci

r[W,

-Net profits and
'cigare tte;manuf ac turars repoJrt|fig^to":SecUr’
ities
and:.Exchange Cora^issïçn^ 193^7^9^7 % J '

■•••"Net^profits’as a
Net -profité
-....-f -V. ,
-J-,
, —T7"J~\--V f .
•'
Year j.! Before
* 7 After .v /j7 7 Jpcfbré ... 5 7 After H >
ï income-taxes » incpmel taxes *.¿income. taxes .°« 'income;taxes
•
.
«
(Millions)./
/1
-■■ .
■ ,• .
*7 .•!
«p
- 1936
: 1937; ..;
,1938
1939
. 1940.

$ 9 6 «6
97*4
98*4
’ 103*2
116*7

133*4
.1941
152c 9
1942
.150*8 ”
7 '1943■
1944 - ':';'7 128 ¿5 *
119«.9 ‘
7
. 1945
1$
140*3
-; 1946 ;

T reasu ry

$ 80ol
” 80*9 * ;
80*2
7 ’
83*9
86,5
-i —

•

75*6
69*9
67*4
62*9 ’
64*9'
85 «5

■" '14*1
17.0$
14*4 •
'
"17,‘
3
• -14,,2.
17*4 ‘ '
' 1.4*7;
iô*i •
14^-7 /19*8
''
...

22*2
24*7
24*1
’'19*6
’ 10*6
II 19*4

-

12*6
■•J;- 11*3
l0*8
’
; -1 .9$6i
-/t

11*8

, 1

.J--’

;ment.' Ölvisioh of Tax Research

Souröst Securities and Exchange Commission;, Survey of, American
,7 • . '7 ;;Listed- Corporations,, wDat.a on Profits and Operations, ” :
7.-, -.. Part
. T g ■ .”
_ ' ,/'• 'r
•' ;h I
l/ Companies included-for the whole period’are4
. -American- Pob^cçô
Company, Benson & Hedges, Liggett & Myers Tobacco Company,
?* Lorillard Company, Philip Morris & Company, Ltd,, and
R e si* Reynolds, jrobaocp -Company*r The, AxtonrPisher Tobacco .v -1 ,
•'^Gbmpany,;-which.was included from 19.3.6 to 194'2S was •de7ll.ste.d; . ~
' in :1943 -and, the /company sold to Philip. .Morris, & Company in u T
June 1944* Fleming Hall Tobacco Company .included only in 1945
• and ■1946 * / ••-£ $ •;••.,{. / . >/ •• ■
^
. ,
2/ Net worth as* of the ■beginning- of ;year# !.,Inciudes proferred and-

-* * coprjon stock -And-surplus*

rw * ’ m

19
The wartime changes in the Federal excise tax on cigarettes were
relatively small, the combined-increase in 1940 and 1942 amounting to
$*50 per thousand small cigarettes or an increase of only 16-2/3 percent
in the rate of tax*-. The increase in ta± was reflected in increased
prices of manufacturers* In view of the limitations on supplies and
the existence of price controls total sales probably were not affected
by the increase in the tax* Moreover, the effect of the tax increase
of 1 cent per package on total cigarette sales under normal conditions
is likely to be very small* 1/
The present tax amounts to nearly
50 percent of the retail price (exclusive .of State and local taxes)» 2/
While the evidence does not provide a basis for predicting what a
change in price of this magnitude would have on consumption, the relative
insensitiveness of demand to price changes suggests that complete
removal of the tax would not result in a large increase in consumption*
Moreover, the tax of 6 cents per package was in effect from 1918 to
1940 and it may be presumed that the industry had become substantially
adjusted to this level of taxation* During most of this period the
profits of the industry showed a relatively high rate of return on
investment and some producers entered the business on a profitable basis» 3/
Consideration should also be given to the possible effects of the
tax on other economic groups primarily dependent upon cigarette consump­
tion, particularly tobacco growers and tobacco distributors,- The
profits of most leaf tobacco growers depend to a substantial extent
on the demand for cigarettes. But since the demand for cigarettes
does not seem to be greatly affected by the tax the raising of cigarette
prices by the full amount of the tax probably has had a proportionately
small effect on the demand for tobacco*
It is probable that aggregate
consumption of tobacco would have been somewhat larger in the absence
of the tax, but the continuous growth in consumption has tended to
offset any decrease resulting from the tax* it is doubtful whether
farmers would have received significantly higher prices for tobacco
in the absence of the tax. An increase in prices to farmers over
what they havé received would have tended to stimulate production and raise

l/ As noted on p* 9» supra, the increase in tax resulted in the
raising of the price of economy brand cigarettes above the 10-cent
figure and, may have affected sales of this class of cigarettes
relative to the total* •
2 /
'The taxation of cigarettes by State and local governments has been
increasing* For a review* Of developments in this fieldr see
Treasury Department 'study,, "Federal-State Tax Coordination, " July
1947*
3/ Temporary National Economic-Committee,. Investments». Profits and
Rates of Return for Selected Industries, p p 1 7 6 o 6^17 d 127

j

output to or above the higher level of demand. After the adjustments in
production had/ taken ./place,, prices for leaf tobacco probably, wo did not nave
been substantially different'ffiomithe prices received under the present tax.l/
An increase in consumption would tend to benefit distributors of
cigarettes.’• Distributors/ profits depend on large volume and quick turnover,
but ¡widespread-' cpmpafition tends to keep the 5inargfn l o w ;and it is douotful
whólher. the: spread between .m^iufacturers1and distributors':prices, would be
materially affected, by. a redaction in the tax rate.*’
'w. ;• It is •believed that, the'elimination óf the tax would not result in any
substantial change in .the' prices of cigarettes received -by manufacturers
land 'distributors i*et of tax.-,or in the prices received by the growers of leaf
tobacco . Since.*;the ’increase in volume of consumption of cigarettes and
cigarette— type tobacco probably would be small, the total returns, of these
groups;would not-be increased materially.- ‘
y’*
. % ,
...... B . . .
O n competition

-

, •

- ■'-*/

-

;‘ Despite the fact' that ,the tax on cigarettes has for some time been much
higher in’relation to price than .the-:taxes on,,cigars and. manufactured
tobacco, the consumption of cigarettes has rapidly outstripped the other
forms of tobacco c on sumo tion. It is possible that the shift to cigarettes
would have been accelerated by a lower tax, but all forms of tobacco con­
sumption 'seem to have been'influenced so largely.by social considerations
that the high rate of tax probably has not been a very important factor in
the competitive position of the cigarette industry. ...
\t -

The' p r in c ip a l e f f e c t o f .th e ta x on co m p etitio n appears, to be w ith in
the c ig a r e t t e in d u s t r y . A f l a t . tax- on p h y sical'.v o lu m e r e p re s e n ts a
d iffe r e n t 'p e r c e n t a g e o fm a n u f ac t u r e r s 1 .s e l l i n g p r ic e f o r -c ig a .fs t.to s in ­
d if f e r e n t c la s s e s * , The p ro d u ce rs of. economy, brand -cigaret-1oS a p p a re n tly
have f e l t th a t i t i s n e ce ssa ry to compete on a p r ic e b a s is s in c e la r g e
a d v e r tis in g exp en d itu re s cannot .be undertaken where the p r o f i t m argin i s
s m a ll. However, the f l a t t a x i s p r o p o r tio n a te ly h ig h e r the low er tne s e l l i n g
p r ic e o f the c ig a r e t t e s . D u ring the p e r io d Ja n u a ry 1937 to J u l y 19^9» the
$ 3 'tax on c ig a r e t t e s was e q u iv a le n t to
a .r a t e o f 252 p e r c e n t o f the manu­
f a c t u r e r 's n e t p r ic e on •economy brands compared w ith 120 p e rc e n t on stan d ard
b ran d s. The m a n u fa ctu re r's n e t p r ic e on economy brands was US p e r c e n t o f
the pric-e fo r stan d ard brands b e fo r e a d d itio n o f the ta x.. A f t e r the a $ tjitib ttjj
o f the $3 ta x and e q u iv a le n t tra d e and c a s h ’ d isc o u n ts the m t i o in c r e a s e d to.
76 -Dcrcont. The retail price of economy brands was only aoout 20 percent less
than, the price of standard brands.
In order to set a. retail price low enough
to, attract consumers the producers of economy brands had to operate on a
very narrow margin of profit. Profits, therefore, were very sensitive to
•changes'’in costs’and soles., and 'the competitive position of the producers
of these cigarettes was weak. -If the tax on economy brands had been the
same ratio to price; as the $3 tan was on standard brands, either manu­
facturers* net prices could have been increased or the retail price on
1/ This analysis does not consider the, effects which the tobacco control
~ program has, had on prices or whether the program would have been
different in the absence of the tax.

-

21

-

economy /brands reduced 'by about 1*3 cents per pack,
C,

i f

On consumers

Cigarettes constitute an important element in consumer expenditures*
It is estimated that the tax increases the Consumers1 Price Index "by
nearly 1 -percent. 2/ The tax appears to be moderately progressive in
the lower income groups» where there is the relatively heaviest con­
sumption of smoking and chewing tobacco. A study of consumer expenditures
for the year 19.I+I showed that cigarette expenditures were only about
one-half as large in relation to income for the income group under $500
as for the income groups between $1,000 and $5,000*
The proportion
was about the pame at the different income levels between $1,000 and
$5,000, A subsequent study for the year I9UU covering urban areas only
indicated a relative increase in cigarette expenditures in the lowest
income group compared with 19^-1» ]+/t Since the cigarette tax is a flat
rate per thousand cigarettes, the tax represents a larger proportion
of the retail price of economy brands than standard brands.
If the
economy brands are largely consumed by low income groups, the tax is a
larger proportion of their income than is indicated by the overall
figures on cigarette purchases.
Expenditures for cigarettes fluctuate much less than disposable in­
come. 5 / The tax thus has the effect of withdrawing relatively more
purchasing power from the income stream in periods of low business activity
than in periods of high business activity.
This effect is attributable
in part to the fact that the tax is bn a specific basis.which prevents
variations in prices being reflected in tax collections* When smokers
shift to lower priced cigarettes they continue to pay^ as much tax per
package although their expenditures are reduced*
VI.

Administration and compliance

The tax on cigarettes does not raise difficult problems and the
cost of administration is low in relation to the revenue collected. There
were only 62 factories making small cigarettes as of January 1, 19^-6.

The d e t a ile d reco rd s re q u ire d o f m an u factu rers p ro v id e c lo s e checks upon
t h e ir t a x l i a b i l i t i e s b u t r e p o rts e n t a i l somewhat more, work f o r manufac­
tu r e r s than the re p o rts on most e x c is e t a x e s .

17
2/

3/

4/
5/

The question of a change in the form of the tax is considered in
Section VII, below.
This is substantially larger than the effect of any other excise
tax on the Index* Alcoholic beverages do not enter into the Index.
Bureau of. Labor Statistics, Family Spending and Saving in Wartime,
Bulletin Wo-, S22,-Washington 1945, P* 185; Department of Agriculture,
unpublished data« It should be noted, however, that there may have
been some under-reporting of tobacco expenditures in this study*
Unpublished data of the Bureau of Labor Statistics.
P. 15» supra.
,

-

VII,

22

-

Technical problems
The principal technical

A.

under, this tax are:

1.

Whether the tax should be levied on a flat basis
or varied according to the price of the product,

2.

Whether floor stocks taxes should be imposed or
refunds made on floor stocks if the tax rate is
changed,

Plat vs, differential tax

The excise tax on small cigarettes has been a flat dollar amount
per thousand since the beginning of the fiscal year 1911* On several
occasions the desirability of this form of tax on cigarettes has been
questioned, and considerable attention has been given to the matter, l/
Nevertheless, the single rate specific tax has been continued in effect
until the present time. It has again been suggested that the form of
the tax.be modified to provide that different rates of tax apply to
the two principal classes of cigarettes, economy brands and standard
brands* 2/ The effect of the proposal would be to tax cigarettes under
a bracket rate system, the type of tax which has been applicable to
cigars since 1917, The cigar tax, however, has seven brackets and
approaches more nearly an ad valorem or flat percentage tax than the
two-bracket tax suggested for cigarettes* Z j

1/ In 1934 the manufacturers of economy brand cigarettes stated that a
graduated rate is the fairest method of taxation from the point of
view of both the manufacturer and consumer, (Revenue Revision. 1934)
and the question was considered by a special subcommittee of the Ways
and Means Committee and by the Senate Finance Committee•(Hearings
before a Subcommittee of the Committee on Ways and Means, Tobacco Taxes;
Hearings before the Committee on Finance on Reduction of Tax on
Cigarettes). The enactment of a differential rate tax was supported by
the Secretary of the Treasury (Reduction of Tax on Cigarettes, p. l)
and by the Chief of the Tobacco Section of the Agricultural Adjustment
Administration (Department of Agriculture, Press Release, 238—55). In
1937, the Federal Trade Commission recommended to Congress that the tax
be graduated accordingly to the manufacturers’ selling price, (Rppn-r+.
on Agricultural Income Inquiry. Part I, p. 46) and in '1942 a differential
tax was recommended by the Secretary of the Treasury. (Revenue Revision
of 1942. p. 16)*
•§/ gearings before the Committee on Ways and Means on Proposed Revisions
of the Internal Revenue Code. 1947, pp. 576-580.
3/ The proposed revision in the cigarette tax in 1934 provided for^ three
rates, one applicable to the economy brands; another applicable to
the standard brands and the third, applicable to cigarettes sold at
prices above the price of standard brands.

23 The basic reason for the suggestions that;cigarettes be taxed at
differential rates is tha,t this 'would increase the difference between
manufacturers’ prices, tax included, for economy'and standard brand
cigarettes and thus improve the competitive position of"the manu­
facturers 'of economy brands. At present the spread on manufacturers’
net prices exclusive of tax is $.&8 per thousand and because the tax
is a flat amount per thousand the spread is the same on the basis of
net prices including tax.
If the difference in tax on the two classes
of
arettes were SI . 75 per thousand, as has been suggested, the
spread including tax would be increased to $2 .63 . l/ This is
substantially higher than the spread in prices between the two classes
of cigarettes which existed at any time after economy brand sales
became important. 2 /
The choice of the most desirable form of an excise tax -involves
a number of considerations. At present most Federal excise taxes
are levied on an ad valorem basis «under which the amount of the tax ‘
varies with the price as well as with the volume of the transaction
subject to tax. ¿7 Under this form of tax, prices for different
products tend to be in the same ratio after tax as before tax. Under •
the present specific tax on cigarettes the price relationship before tax
between the different classes of cigarettes is changed substantially

17

The rates suggested by the manufacturers of economy brands were:
$3-50 per
(the present rate) for cigarettes on which the
manufacturers’1 not price .after discounts and Federal excise tax
■ is more than $2.25 per M, and $1.75 por M for cigarettes on vfcic:
the manufacturers’ net price after discounts and Federal excise
tax is not more than $2*25 per M .•
2/ It has been stated that the reduction in tax proposed on economy
brands would permit their being retailed at a price of 10 cents
exclusive of State and local taxes, (Proposed Revisions of the
Internal Revenue Code, 19^7» P* 577*)
3/ The principal products on which the tax is related only to the
volume of business are: . alcoholic beverages, cigarettes,
manufactured tobacco, gcasoline, lubrica-ting oil, and tires- and
tubes.

202
- 24 by the tax* 1/ Since the present tax is relatively high, a change to an
ad valorem form of tax or a differential rate tax might have important
effects* The principal issues involved in the proposed changes are the
economic and equity effects on the various groups concerned, the revenue
effects and the possible administrative and compliance difficulties.
1*

Economic and equity considerations affecting
desirability of change in tax

There are four principal economic groups concerned with the
effects of the tax on cigarettes? consumers, cigarette manufacturers,
distributors of cigarettes and growers of leaf tobacco*
^
a*

Consumers

The manufacture of low-priced products tends to expand the market
for consumer goods since the availability of such products leaves con­
sumers more to “spend on 6ther products* The present cigarette tax,
however, results in consumers paying more tax in relation to their
expenditures when they buy low-priced cigarettes than when they buy
higher priced cigarettes* low-income consumers tend to purchase the
lowest-'priced product available or forego consumption of the product*
A differential tax rate would enable lower income consumers to purchase
economy brand cigarettes with a smaller total expenditure and the amount
17 The principal difference between the specific and ad valorem forms
of tax is that under a specific tax the absolute amount of the spread
between two differently priced products is the same with the tax
included as with the tax excluded, while under an ad valorem tax the
absolute, amount •of the spread between the prices of the two products
is increased by the tax* Under a specific tax the amount of the tax
varies as a percentage of the price of the product* For example,
where two grades of ‘products sell for $1 and $2, respectively, in
the absence of a tax, the same volume.of consumption of the different
products results in ’a large difference in total expenditure* However,
if these prices should be raised to $9 and $10, respectively, by a
specific tax, the same volume of each could be purchased with rela­
tively little difference in aggregate expenditure by the consumer*
Consumers would tend to purchase slightly.smaller quantities of the
higher priced product instead of buying the lower priced product.
On the other hand, a very high ad valorem rate of tax would tend to
increase the absolute amount of the. spread between the two products.
In such a case consumers would tend to purchase the cheaper product
because of the large saving involved in relation to the comparative
prices including tax. Inasmuch as the volume of cigarettes smoked
probably depends to a large extent on habits, a shift from one
price cigarette to another would be expected to involve little, if
any, change in volume of consumption but a change in aggregate
expenditure for cigarettes.

-25 -

of tax involved would-represent a- lower proportion;, of their-income-, The
sent flat .tax tends to-have >a regressivci-cffect because .lower prices
. Are. .not. reflected in reduced tax ,
-paymentsK ■ The pressure; *of ^declining
,....income usually; ..stimulates a shift.to lower-priced products* *•b/ith a lower
t.ax ;on „the lower priced product,' the shift to economy grands :which occurred
in the Thirties would have resulted in considerable tax saving to consumers.
b . Manufacturersa

ra»M

*It af>hears''tHèit' ^h.o-effects of ;a ctiàngc in’the form pf: the cigarette
* -tax would relate' pirimarfiy to changes in the comparative v^ò.lume of sales
in the different price classes. The discussion in SectichslV and V above
reached the conclusion that the level of the tax probably does not have a
very significant effect on total sales. ■However; the' experience of the
* 19301s indicates,-that, sales in -the different price classes, arc: very
sensitive to .changes in the price, spread between the. classes.;,; - •
r In view, o f t h e high degree of concentrati on-of'production in the
cigarette industry the* decisions of ¿Loading manufacturers would play an
ijpportent.:rpart- in. the effects which: a -.change vin- the form .of- the tax would
have, on the industry.: The effects.; would also, depend!to a, largo degree
.upon the .extchit /md.character; of ¡Government- control.over tob.ècco pro...ductioh;., The,manufacturers; of standard, brands-- have-not; generally met the
competition of the lower-profit economy brands by .offering a lower, priced
product; themselves. As.economy.brand, sales increased in the early Thirties
the"aggregate profits of the large producers gf*standard,brands- declined,
although duping this period the strong upward tyend in consumption pre­
vented an,absolute decrease in the.sales af, standard brands, l/ -Between
I93Ì and'b93? the total output Of the three'largest companies increased from
106 billion cigarettes to 123 billion, although their..proportion;of the
total declined from about 9 1 percent to &8 percent. 2/ In view of the out-look for continued growth in consumption, the sales of the standard brands
might continue to expand under a differential rate.. The sales and profit
‘effects would Vary with the size of the differential, and the extent to
which•the reduced tax would be reflected in lower prices to distributors

•|7 From I93I to 1933 earnings before Federal income taxes of the three
large¿t companies declined, from 25 percent of stockholders1 invest■ 'mentito .11 percent. ,
■There wais also a marked change in the profits
of smaller companies' producing economy brands. One of those had
profits” of $3.2 million after taxes in 1932 compared with losses in
the years ’1929-31 .'* Profits after taxes of another increased from
$.6 million in 1931 to $1*7 million in 1932. (Temporary Hationaj
Economic Committee, op. cit., pp. I 767O, 177ÓJ» 177^9•)
2/ 32S IT. S. 795* These data are not comparable with those in Tabic 1
since Table ! covers only the'leading brands of these companies.

t

203
- 26 and. consumers* l/ The effect would also depend upon whether the: larger
producers, under a, tax differential, would generally, engage in producing lower priced cigarettes. ' The effect on their profits might, he
minimized hy such action, although it is possible that lower unit
profits would he realized on the lower priced product.
Another factor upon which the effect of a. change i n .the tax would
depend is the future relationship in the prices for different grades
of tobarco. If a tax differential were set to provide a given price
"margin for economy-brands on the basis of present leaf costs, it might
prove to -be more effective under declining tobacco.prices. The advent
of the, economy brands i'/as made possible in paxt by the low tobacco
.prices w M ch. prevailed in the early Thirties. From June 193^January 1933. the'mahufactureTs1 net price on economy, brands' was 3*7
cents per package less-than ‘the net price on standard bhands, compared
with the present spread of 1*7^ cents. . (Table 2) Subsequently tobacco
prices increased. 2 / However, there appears to have been a. relatively
larger increa.se in the price of tobacco used in economy brand cigarettes
than in the'price of tobacco used in 5standard brands. .-...(Table 9) Al­
though, ns indicated .in/Section IT A above, there does not appear to be
a. close relationship between change's -in tobacco .prices and cigarette \
prices, a decline in tobacco priefb might result in relatively lower
prices on economy brands exclusive of tax. and thus stimulate a, shift
In consumption to these brands.
The importance of the tax differentia.! would also vary with
fluctuation’s in the level, of national, income., since consumers are more
conscious p f price differentials during„periods of low employment than
high employment. Although a, two-bracket differential tax would tend
to produce some shifts under changing income conditions, the movements
probably, would not be as great as under an ad valorem, tax; Under the
latter the tax differential would change with relative'changes in
prices. 3./
1/ As shown in Table 3 above, when the difference between the prices of
standard and economy brand cigarettes, varied significantly there was
a decided response in the proportion of economy’brand sales. >The
present differential in nanufact.ure.r-s' -net prices of about l.S> cents
per park appears to be insufficient to produce significant sales of
economy brands. It is not known how large the differential would
have to be to stimulate sales under present high employment condition’s,
but it is likely that it would have to be larger than under loss
fa.vorable condi ti ons.
2/ Government controls were instituted in order to raise prices to farmers
According to the testimony in the 193^ Revenue Hearings, the tax dif­
ferential requested by the producers of economy brands in 193^ was
ba„sed on cost increases arising out of the Rational Industrial Recovery
Act and the Agricultural. Adjustment Act.
¿/ For example, under an ad .valorem tax if the price spread (before tax)
increared from $1.00 to 51*50 por thousand the difference in tax undor
a tax rate of 100 percent would increase by 50 cents; i.e,, by the
amount of the increase' in the price spread multiplied 'ay the tax ra.te.

- 27 -

Table 9

Comparative prices paid to farmers for leaf tobacco^ Used
in standard .and economy brand cigarettes, 1931-19'41
(Cents per pound).
i

Standard brand cigarette
♦
Economy brand cigarette
:
.leaf tobacco grades _____ : .
leaf tobacco grades^______
Tear i
. i Eastern : Western :
X .Eastern : .Western
• Burley, 1/1 .flue- : flue- : Burley l/ : flue-, : flue:
^ ~ i cpred 2/: cured 3/» ___
♦ cured Z j i cured 3/

1931
1932
1933
, 1934 .
. 1935 .
1936
1937
1938
1939
19^0
19^1

i6.o4
y

21.71
26.73

35.01 6 1.7 1
36 .71 .
27.00
25 .i4

22 .88
27.15
28.36
37,.92

31.07
3 5 .11
7U.9U
31M

. 26»71

24. 58
28.11

U2.71

37.77

24.83
29.08
31.27
te .37
3 1 .5 s
41,50
3 s. 42
33 »33

5.98

3.20

2.65

4/
10.35
15.23
1 5 .5b

6»70
9*10
14.88
9-91
. 8,7!
11.43
15.58
11.68

5-89

38,00
20.33

16.62

26,88

15.91

32.25
H 2.75

17.2 1
31.33

14.31
26.54

%61
13.37
, 7.48
, 9„08

13.13
16.60
11.85
.-14.13
pp: 7P
•J J

Treasury Department. , .Division of Tax Research
Source«

l/
2j

Hearings Before the Committee on Ways and Means, Be venue
Revision of 1942, 77 th Congress, 2nd Session, p. 2010- ;

.Type 31•
Types 12, 13» and l4.
3/ Types 11A and 11B.
47 Government figures not given*

o
c
- 28 ~
c-*

Tobacco growers

The effect of a change in the form of the tax on the growers of
leaf tobacco involves considerations similar to those discussed with
respect to manufacturers«. TKe tobacco farmer, of course, is interested
in the maximum return for his entire crop’rather than thè price of a
particular grade* Since the total consumer demand for cigarettes has
not generally shown a large degree of variation from year to year, changes
in prices for cigarette type tobacco result principally from changes in
the size and quality of the crop hud export demand*. The prewar and wartime
experience indicates that the quality of tobacco used in cigarettes is
flexible depending .upon the total.supply of tobacco*. VJhen supplies were
excessive in the early 19304s, the larger producers of cigarettes did not
purchase much low grade tobacco, but in the war years lower grades were
needed in order to meet the expanded demand with the limited supplies*
The control over tobacco acreage exercised by the Government can
serve to reduce fluctuations of this character* However, such factors
as the weather and the use of fertilizer will produce,variations in the
size and quality of the crop* A more favorable tax rate on the lower
priced cigarettes would stimulate demand for lower grade tobaccos and
tend to prevent declines in the price of such grades relative to higher
grades when crops were large. A large crop would, of course, tend to
depress average prices. Butfsince the total demand rWould probably not be
greatly increased by a differential tax, the average price vrould tend to
be about the same as under the present type of tax* 1 Some improvement
might result from additional manufacturers bidding for tobacco and the
greater assurance of a market for the lo'rer grades* However, there would
be limits to the increase in*use of tobacco in lower priced cigarettes,
since the increase in this use would tend to raise prices for the lower
grade tobaccos Snd reduce thè spread between these grades and higher
grades of tobacco*
d»

Distributors

The effect of a change in the tax on the profits of cigarette
distributors must also be considered* Distributors4 margins on standard
brand cigarettes appear to have decreased;substantially during the 1920Ts*
A comparison of manufacturers* net prices and reported retail prices
shows that the difference decreased from 5*68 cents per pack in December
1920 to 2.52 cents in June 1929* (Table 10) Because of the decline in
the level of cigarette, prices.during this period, however, the margin for
distributors as a percentage of the retail price declined by only about
one-third. The margin for distribution declined somewhat further from
1929 to 1933, which included the period just prior to and subsequent to
the introduction of the economy brands. 1/ In the three years following,
both retail prices and the margin for distribution approximated- the .
levels that prevailed in June 1929* Subsequent comparisons are distorted
1/ During the first part of this period the price of standard brands
was first increased and then drastically reduced.

Table 10
Combined Wholesale and. retail- margins -per :package
for standard brand cigarettes, 1920-1921, 1926-1937
v ' (As of December 15 ) .

-

:

‘

Year

V
r
.5

;
.*

.

•*19.8 f
18*7
;

1920
. 1921
... 1926
1927
. 1928
1929

’

1930
1931 -*
1932
' 1933 ■
:: i?34
• 1935 '
- 1936
1937

’»
Net
*.
' * manufac— S \Margin
*tur er ‘s prie j

Average
retail,
price

.14*6
,.14*4
13*7
Ì3.4

14.12 %
.14.12
.

'

13*3 •
14*2.
14.2
12*2
13*1 2/ '*
13.2 3/.
. 13*2 3/.
13*8
'7v. * "

: 5*68 ji
> 4*58 .

11.26
11.28
10.50
11.28

December'31

3.32
3.12 ‘ 3*12
2.12

11.28
12*08
12.00
9.70 .
10.76
10.76
10.76
il.02

:Date of change
:in manufac.turer1
i
price

2.02
, 2*12 :'
2.12
2.50 1/
.2.34

‘

2*44 ■
2*44 '
2*70

«*
April 21 ”
October 5

June 34
' •.
...
Jaii# 3; Feb* ll
January 9
‘\
■' * ’
•
+4*
January, 20-

'■

;

4

Treasury Department', /Division., of. Tax Research
Sources? (l) ..Manufacturers' prices and date of change! Standard
,, v ‘ " and Poor1s Industry Surveys. "Tobacco," February 21, 1947,
Section 2, p* 14-^3; (2) Average retail price per package:
Department of Labor, Retail Prices. May, 1936, p* 11*.
Monthly Labor Review, December, 1937, p* 1568; price for
December 1937 is published by the Department of Agriculture
in the Annual Report on Tobacco Statistics. 1940, p. 32,
Rote: Data not available for years 1922-1925«
l/The low for the whole period covered was reached in June -of this year
when the margin declined to 1*8 cents;
2/Price for November» December price not published*
2>/Price for July which is more representative than the December price»

' jS

M

■

^

*

i

ii-vT • 2»

^

■■,■-■

. ..

"1

-

^

iitgii p w i l
i - ■

one

L U J

, - 30 "by the growth of State and local cigarette taxes# Except for the initial
period: of adjustment to'economy "brand competition, -however, it does not
appear that distributors* margins on standard brand-s were affected appre­
ciably "by the sale of lower priced cigarettes.
Prior to the war the dollar margin "between manufacturers* and retail
prices was generally lower on economy brands than on standard "brands, 1J
Since handling costs probably differed little except for lower invests
mentrin inventory required on'economy bfkn&s*v it is likely that distri-butors found sales of standard brands more profitable. Economy brands
usually retailed at 1G cents per package except where State or local taxes
necessitated higher Prices, and it is possible that the niargin for distri­
bution was affected by the practice of adhering to this convenient coin
interval. The producers of economy brands appear to have been strongly
interested In maintaining the lO-cent retail price and" did not change
their net prices prior to the war despite increases in costs. After the
price of economy brands was increased;to more than 10 ceiits, the margin
for distribution on these cigarettes increased. Under a differential
tax distributors* margins on economy brands would depend to some extent
on the size of the tax differential and the price.’ at which they could
most conveniently be sold at retail,
2-,

Revenue considerations

The revenue effect of a differential tax favoring lower priced
cigarettes would depend upon a number of factors. Revenue would be
lost to the extent that cigarettes taxed at the lower. rate replaced
standard brands«. This might be. a. substantial amount, but probably
would vary greatly depending upon the level of income and the size
of the tax differential. ^Subs t i t u t i o n of economy brand, cigarettes,
for smoking tobacco would add revenue because of the relatively
lower rate of the present tax on smoking tobacco.
Any increase in the
use of. cigarettes by present smokers or use by new smokers would
l/‘There were exceptions during nrice wars, when standard brand
cigarettes retailed at as low a price as the economy brands."
2./ The effect of price'differentials and the level of income is dis­
cussed on page l6, supra,. If the tax rate, on economy brands were.
Pne—half the rate on standard brands, consumption of economy brands
would have to increase by 2 percent of total consumption to offset
each 1 percent loss in consumption of standard brands.
M The present rate of tax on smoking tobacco is 18 cents per.pound. .
If instead of using one pound of smoking tobacco a consumer smoked
400 economy brand cigarettes, tbe revenue, would be increased.from
18 cents to UO percent of the rate per thousand cigarettes on economy
brands. ..Assuming a differential in.tax of $.1.75 per thousand and
^ke present rate of tax on standard brands, the substitution of
economy brand cigarettes,for roughly l o .percent of the present smoking
tobacco consumption would be required to offset a shift of* 1 percent
in the present consumption of standard brands to economy brands.

- 31add revenue. As indicated above* however,' a reduction in price would not
he expected to produce a large increase in consumption.
3*

Administration and compliance problems

Experience with the bracket system of taxing cigars suggests that it
could be applied to cigarettes without much additional work for taxpayers
or serious administrative problems» Manufacturers presumably maintain
adequate records to provide the reports that would be required* The
necessity of prescribing a particular form of record-keeping might involve
some changes in the industry*s practices* Some additional work would be
imposed upon the Bureau in auditing records by price classes and, also,
in handling stamps for different tax rates. It would be necessary to
provide in the lav/ the method of determining the price on the basis of
which the tax was to be differentiated and to include provisions protect­
ing the revenue in the case of sales not made at arm!s length.
B,

Floor stocks taxes and refunds

Increases in the rate of tax on cigarettes in 1919» 19^0
19^2
were accompanied by taxes on floor stocks. Cigarettes are not highly
perishable and there might be substantial accumulation of tax—paid stocks
by producers and dealers in the absence of a tax on floor stocks. Since
the passage of tax legislation usually affords considerable notice of a
possible tax increase, a tax on floor stocks is necessary to prevent loss
of '¿revenue which would r esuit from advance purchases in excess of normal
needs. In addition to the loss of revenue which would arise from failure
to impose a tax on floor stocks, there would be large differences in the
extent to which producers and distributors might benefit* Some could
finance relatively large excess stocks while others must of necessity
make their purchases from day to day*
There e.ppear to be strong ree„sons for the imposition of a floor
stocks tax when the rate of tax on cigarettes is increased. Since, however,
there has been no experience with a tax reduction on cigarettes considera­
tion has not previously been given to the factors that would be involved
in the granting of refunds in connection with a. reduction in the rate of tax,
A reduction in tax witheut provision for refunds on tax-paid floor
stocks might disturb normal trade relationships and cause some losses to
the industry. Although consumers are unlikely to reduce purchases in
anticipation of a decrease in tax, producers and dealers would tend to
reduce stocks. Businesses which reached the market first with cigarettes
withdrawn at the lower rate of tax might gain an advantage in the
form of increased sales at lower prices or a higher profit margin. On
the basis of IhUo and 19^2 floor stocks tax returns, it appears that
tax—paid stocks in the hands of producers and distributors combined
were equal to about five weeks1 sales* Minimum business requirements
limit the extent to which stocks might be reduced in anticipation of a

206
- - 32 tax reduction not accompanied by,a provision for refunds on tax-paid
stocks. Retailers carry relatively much smaller stocks than producers
and wholesalers and in most ca.ses could not reduce them substantially and
maintain normal sales. 1j
Producers and wholesalers could reduce stocks
for a temporary period and under the uniform pricing policy tha,t has heon
followed by the industry make a,.general revision in. price after the^ stocks
ta-x-paid’at the-former tax rate wore cleared* It might no.t "be feasible
for producers t o .wait until, wholesale stocks were cleared. In, tnis case a
loss would occur...on the stocks held "by wholesalers. In the past when the
larger producers have made price reductions ..they have protected the stocks
in the hands of direct customers against the decrease in price. Z j However,
they might not follow this policy with respect to a change in the tax. The
.amount involved would depend upon the size of the tax reduction and the
extent- to- which dealers? tax—paid stocks could he reduced.
. ,
The administration of floor stocks taxes has involved considerable
work
About 4Q0,,000 returns .were filed under the floor fstocks taxes on
cigarettes in-19lK) and 1942. ¿/ Only a few of these represented manu­
facturers who filed returns, for cigarette taxes. The problem of. dealing
with such large numbers of businesses not filing returns regularly would
be greater in ,the case of refunds because of the necessity for verifying
claims. Experience has indicated that the filing of fraudulent returns
is more likely in the case of refunds than in the case, of floor stocks
taxes. The number of returns involved could bo limited Dy providing that
refunds would be granted only on stocks in excess of a certain minimum
figure,-but this would discriminate against smaller dealers. 4/ Tho work
involved for the Government could be ,reduced somewhat by providing tha-t all
refunds be made through manufacturers and importers, who, in turn, would bo
made responsible for verifying inventories of distributors. If this^wore
done it would be administratively desirable to limit refunds to stocks
held by producers, importers, and wholesalers, little loss would be in­
volved for retailors and they would be treated more equitably as a gr.oup
than under a minimum limitation. Instead of using the floor stocks refund
procedure, producers might withdraw dealers* stocks remaining on the
effective date of the lower tax, recover the tax Paid, and re-stamp speh
goods at the lower .rate. . It would be necessary to allow a peasonablo
period of time between the passage of the legislation ana the effective
da-te of the .lower „rate.
, -

TJ

2/
3/
~

4/
~

In 1942 producers held about 46 percent of the tax-paid stocks.
Agricultural Income Inquiry, Pa.rt I, p.
1^4
The 1940 floor stocks tax on cigarcttos resulted in over 438,000.
returns, the 1QU2 tax in 387,000'returns. \ The 1942 figure is
lower because chains werq permitted to file one return for all
their outlets.
^
The reduction in the cigar* tax under the Revenue Act of 192b was
accompanied by a. provision for refunds on tax-paid floor stocks
where the amount wa-s not less than $10.

S3 -

PAR2J

IV

II

-

Excise "lax on Cigars

Description of the tax

,2

'

^

1V vlf; ♦V .y

The tax is imposed on cigars, which are defined as rolls of tobacco
or any substitute therefor wrapped with tobacco. The tax differs accord­
ing to the weight of the cigars. Small cigars, those weighing not more
than three pounds per thousand, are taxed at a flat rate. i f Large
cigars, those weighing more than three pounds per thousand, are taxed
■at rates which vary with the intended retail selling price. .
The tax applies to cigars upon removal^from the place of manufac­
ture or upon release from customs custody, or upon sale if prior to
such removal or release.
■ 'Jhe tax is- payable by the manufacturer or importer and. is paid
by purchasing tax stamps to be affixed to the packages prior to removal
from thè factory or upon release from customs custody.
Jr
■ Exemptions from tax are provided on withdrawals for?
1. Export.
. 2*

.

3.
.

• ■4.
Ilo

Use as sea storas.
. Use .of the United States Government (but not for
resale in the United States).
Withdrawals for personal consumption by employees. 2/

Changes in tax since 191?

Cigars have
1862o Beginning
according to the
in rates in 1917
thousand and the
and dates of the

been subject to excise taxation continuously since
with 1917 the tax on large cigars has been varied
intended retail selling price. Prior to the increases
large cigars had been taxed at a flat rate of $3.00 per
rate on small cigars was $.75 per thousand, Tax rates
changes since 1917- are shown below;

1j The production of small cigars is insignificant»
2/ The exemption is 21.cigars per week*

207
"

f

- 34—

;

.

Changes in tax rates since 1917
(Per thousand cigars)

Revenue Acts and effective date

%

Class of cigar s
0
»
«

1917
!
1918: .
(Nov« 3) *(Feb. 25s, 1919):
;
•
$ 1.00/

Small'cigars

$ 1.50

1926
(Mar. 29)

$

1

J

1942
(Nov, 1)

$

.75

.75

Large cigars
Intended retail
price per cigar
Over ■ Hot over
3.00 a/

4.00

2.00

2e50

4

3.00 a/

4.00

2.00

3.00

4

5

4.00 b/

4.00

2.00

4.00

5

6

4.00 b/

6,00

3.00

4.00

6

7

4.00 b/

6.00

3.00

7.00

7

8

6.00 •

6.00

3,00

7.00

8

15

6.00

9.00

5,00

15

20

8.00

12.00

10,50

15,00

10.00

15.00

13,50

20,00

0
&

20

2

1

k ì

;

10.00

a/ Price class was nless than 4 cents",
b/ Limits of price class were n4 cents' and not over 7 cents".
‘ III«

:
Revenue collections. 1936'-1947

Collections from the tax on cigars are.slightly larger than those
from manufactured tobacco, hut in the fiscal year 1947 they were equal tc
only about 4 percent of the revenue from cigarettes.

- 35 Collections, 'fiscal years 1936 - 1947
(In millions)
Fiscal year
1936
1937
1938
1939
1940
1941

IV.

Fiscal year \* Collections
?- Collections .îÎ
*
*•.**
$ 12,4
13,4
12,9
12,9
13.0
13.5

1942
1943
1944
1945
1946
1947

$ 14,5
. 23.2
30.3
36,7
41.5
48,4

Economic background of the industry
A.

Character of supply

just prior to the war more than 95 percent of the cigars consumed, in
the United States were "produced hy domestic manufacturers,^ hut nearly
one-half of the tobacco used in the domestic production of cigars was
produced outside of the continental United States« 1J
Since Uorld Bar I there have been marked changes in the character
of the domestic cigar industry, The number of cigar factories has been
declining almost steadily for about 30 years, (Table l) From about 16,000
factories in 1915 the number had declined by 1943 to about 2,400, or by
approximately 85 percents The decline was interrupted during tne Wc*r
Lwheri shortages of low priced cigars provided a profitable market for
small establishments, but it appears that this was temporary. Despite
this decline, the number of cigar producers 2/ is large in comparison
with the number of producers of cigarettes or smoking and chewing tobacco.
The decline in the number of cigar factories reflects a basic change
in the industry from one in which a substantial proportion of the business
vas done by the small producers of hand-made cigars to one in which the

United States Tariff Commission, Trade Agreement Digests, Yol, u*
HTobacco and Manufacturers," 1946, pp. 5-6, 15, host imported cigars
came from the Philippines in prewar years, while during the war
increased shipments from'Cuba supplied most of. the imports*
.
Puerto Bican cigar filler, which is usually'blended with domestic
filler, accounted for about 23 percent of the tobacco used in domestic
production of cigars in the years 1935-1939*..Imports from Cuba and y
the Philippinesaccounted for about an additional 20 percent of the
tobacco used. Cuban-filler is used.to a larger degree in the higher
priced cigars. Substantial amounts .of Sumatra leaf were imported,
for cigar wrappers before the w § j v
2 j The number of producers is somewhat smaller but not greatly
different from the number of factories.

u

J;-fgf

;}

V;•.Tv

,.;1

/■

208

’ - ’56 ~ gig!!
Table I

\
Number.- •of-Zc igar..fact0ries#i .product]Lon of large elgaPs per capita
^'consumption:, -and averaga r et ai l ,pri ce..per inè'xpensiv'e c igar,‘1915 - 19^6
-T4--'i
j *■,. Ber capita t^*y
Average retail
« ' Number of !i ..Production :• . consumption. ’ •f
price per
.... Calendar
factories
.*>.■ ■
-s,--of l a r g e . • pf tobacco ;
... year
.'inexpensive
at end
~.cigars... :-; iused-in cigars' ; - cigar 2 j
of. ^yëâr1
i l ^ ÇC":
"■:■ ri' ?•---'■;...$ .
: ..■ 1 /
:V
»' /•; :
•■(Millions), - : .i(Pounds) , ' ,’ (Cents)
'h

1915

1916
1917

1918
1919

1920
1921
1922

15,732
11+, 576
13,217
11,291
1 1 ,^ 3

11,109
12,105
11,5 76

6,599
7.042 7,560
7 ,05147,072
8,097

6,726
6,722

1923
192^

10 ,62g

6,950

9,877

1925
1926
1927
192g

8.533
8,1427

6,598
6,1463
6,1499

1929

7,974
7,502
6 ,7 go

1930

6,195

6,519
.6,373
6,519

1931
1932
19?3
:.193U
1935
1936
1937
I93S

5,982
5,787
5 .U73
5,190
4,905
4, 522
4,157
3,834

1939
19^0

3,553

19^1
19^2
19U3
19^
19U 5
19U6

3,254
2.939
2,5^1
2 ,UlU

2,973
2,799

1 «U? ■' •:
1/
-:l ' . 5 g " - r ' ’ :• ■ V
1 .6 5 . :3/
1/
1 .5 1
\ M
2/
1.66
1 1 .0 U/
10*3 r
1*36
1 .1+g
1/
1 .5 1
1/

5,8914

5,3l4«
4,383

l.Og

14,300
14,526
U,6g5

.89
•95
.96

5,172
5,303
5,015
5,198
5,235

.89

1.03
U (M

.97
.99

i
z lk y
8*2

g.O
7.7

6,2
5.^
u.g
U ,6
5.0
U .7
U*5
U .6
KG
KG

1.02

i+.6

1 .1 2

KG
K z

5,610
5,Sl4i

1.09

5,363
5A99
5,275
5 ,6ig

.98
.98
.96

Treasury Department, Divsision of Tax Besearch
footnotes on next page.

1*42
1.37
1.39
1.35
1*34
1.31
l.lg

5.8
7.0

7 .2
7.9

- 3.7 ^
(Footnotes

Table 1)

,>*;t -*-,t ** . 'j.~

%v \ - "*■ ;

Sourest

(l) Number of factories and productions: Animal Reports of
the Commissioner of Internal Revenue; (S) Per capita consump, tions. Department of. Agriculture, Annual .Report1on Tobacco
Statistics» 1942a n, 82, 194^, p« 8
Average retail price:
.Department of Labor * for 1980-1934 data are published in _
Retail Prices, May. 1936« p, 11; for 1935-June 1937:data are
published in Monthly Labor Review. December 1937, p* 1568,
Subsequent data are published by the Department of Agriculture
• I*1 the Annual Report on Tobacco Statistics

1/ Includes both large and. small cigars« Represents uhstemmed equiva­
lent of the tobacco used in their manufacture* Consumption for;
1940-1946 includes consumption by forces overseas and is the sum of
tax—paid and tax-free withdrawals less exports*.
2/ Arithmetic average for year computed from average for sample
periods. In some years the prices were taken oh.only two dates, :
sometimes on three, and sometimes on four, The prices are for
32 large cities. Approximately four dealers in each'city are asked
to report the price of their largest selling brand* • The average •
price in each city is weighted by the.population of.the metropolitan
area in computing the over-all average for the sample periods,
3/ Rot available*
4 / December price only, .
**\
5/ Preliminary,
..
.;

■bulk of cigars is now made by machine in large factories, l ] Formerly
most cigars were sold in local market areas.. ,The development of machine
production, however, was accompanied by the growth in sales of nationally
advertised and nationally distributed brands by a few large firmso
The mechanization of production resulted in large savings in costs# Z j
These .changes made it difficult for the small,.local, hand-operated. '
establishment, to continue pn.a.profitable basis. In addition, competi­
tion became more’ intense as the industry experienced a decline in total ,
consumption -after 1920. It has been estimated that by 1936 machines
were used in producing about 80 percent of. the industry’s total output. 3/
But only about 1 percent of. the. manufacturers used cigar-making machines
and these producers had sufficient capacity to meet total demand* 4/„
While the continued market for hand-made cigars has enabled a
substantial number ;of-small producers to remain in the business, the ‘
concentration of .‘
production has increased considerably* In 1921, the
first yea r: for Which data are available, about 16 percent of the cigars
were made in factories producing over 40 million per year. (Table 2)
The number of.factories of this size increased and their percentage of the
total output rose to a prewar peak of 70 percent in 1941, By 1937 four.,
companies accounted for nearly 40 percent of the total value of cigars
produced. 5j The degree of concentration, however, is lower than it
has been for other tobacco products. § ] ‘The producers of cigars generally
do not also produce other tobacco products, such as cigarettes, smoking
,
tobacco and chewing tobacco.

l/ The cigar-making machine was successfully introduced in 1917.
2 J It has been estimated that machines displaced about one—fourth
of the workers in the industry. (See W. D. Evans, "Effects of
Mechanization in Cigar, Manufacture," Department of Labor, Monthly
Labor Review, May 1938.)
3/ Evans, loc* cit.
4/ Federal Trade Commission, Agricultural- Income Inquiry, Part I,
1938, p._ 470.
< •• •
5/ Temporary Fational Economic Committee, The Structure of Industry,
Monograph Ho, 27, p. 479.
§ J Evans, op. cit. The reason for this is attributed in part to the
delay in the development of.a successful cigar-making machine.
Prior to its dissolution in 1911 the American Tobacco Company had
obtained control of only about 15 percent of total production of
large.-cigar s. Although this Company had experimented with cigar­
making machinery, apparently it was unable to develop production
economies that had much advantage over small producers. When the
first successful cigar-making machine was introduced in 1917 the
cigar business was not dominated by a few entrenched companies.

Table

2

Number of cigar factories by size of production and percentage distribution of
production by size of production of factories, 1921 , 1925 , 1930 , 1935 , I9HO-I9H 6

Production o f
:
c ig a r s per fa c to r y :
(Thousands)
:

•

1921 :

Under 250 [
250 500
500 - 1,000
1,000 - 2,000
2,000 - 3,000
3,000 - 4,000
4,000 - 5,000
5,000 - 7,500 (
(,500 — 10,000 (
10,000 - 20,000
20,000 - H o ,000
Over HO,000
Total

» 1935
•

Under 2'50 \ i3 ,lH g
250
500
500 - 1,000
510
1,000 - 2,000
32H
2,000 - 3,000
1H7
3,000 - H.ooo
76
H,ooo - 5,000
73
5,000 - 7,500
/ 17S
7,500 - 1 0 ,0 0 0
10,000 - 20,000
S5
20,000 - H0,000
25
Over H0,000
11
T o tal

: 1930

1925

1^,578
13.7$
5*3
6.8
5.3
X Q
4, f
18 . H

9.789
282
213
106
65
50
. 152
77
18
10,786

10 2
.

$

3 .1

4,7

H.6

3*5
3*4
17.0

1 6 .0
10.0

16.5

15.7

21.8
100.0

100.0

15*7

e
5 19H0
•S

1 19Hl

Number o f fa c t o r ie s
5*112
3,330
2,966
18H
138
m
98
119
S7
8H
Hb
30
Ho
21
19
28
12
10
lH
11
9
28
18
19
20
11
y
30
25
23
O
K
C.J
23
23
30
32
27

I9H2

: 19H3

♦
•^•
: 19HH ? I9H5
•*

2,620
1H1
71
31
19
11
6
16
13
25.
29
33

2,256
156
72
52
15
19
8
25
8
28
3S
30

2,601
260
1H5
88
H3
15
10
25
lH
26

5, 709. 3.762
3.015
7,552
3.377
Percentage d is tr ib u tio n o f production
3 -97Î
' 2.7?
2.3^
2.0^
l .H
.8
1.3
*9
*9
1
.8
1.1
1 .7
1*3
*9
2 .8
.8
.8
2*5
1*3
1 .0
2.1
.8
2. 5 .
.9
2 .1
.8
76
.7
2*5
l .H
1.9
»9
*7
*5
2 .2
2 .0
5 *P
3*7
1*7
3 *b
2 .0
1*7
1*5
ll.H
6.H
6 .2
7*0
9 .1
13.0
12.1
12.7
1H.2
13*7
. 6 8 .H
70.1
% .«
55,3
69.3
100.0
100.0
100,0
100.0
100.0

2,707

6.752
22H
lHg
116
61
H2
25
Hq
23
%
28
35

: 19H6,
••

30

2,795
32H
203
1H2
Hs
25
lH
20
16
35
3S
30

2,H89
205
13H
128
56
¿9
11
22
16
33
32
39

3,300

3,690

3.19^

*3

2.2£
1 .0
*9
l .H
*7
1 ,2

3 . 1$
1 ,8
2 .0

*7

*9

2.3

2 .0
1 .0

2.9 .
2.9
1.4 *
6.9
7.-7
20.2
23.2
51.6
59.7
100.0
100.0

Treasury Department, Division of Tax Research
Source: Annual Reports of Commissioner of Internal Revenue. Unpublished data for 1Q46.

5 . 8$
2 .2
2 ,7
1 .2
2*1
1 .6
1 .2

2*3
2.7
9*9

-2 0 .6
^7.5
100.0

2 , 3&
1 .3
1*7
3*2

¿ .4
1*9
*9
2.3

2.5
8 .8
l6 .1
56.6
100,0

Cigars arc
over a wide range of prices, and in, most stores can
be purchased at from 5 to 35 cents a piece. However, prior to World War
II the "business had become 1 argely concentra,tod in the .¡Lower price
classes. (Table 3) By 1939, tfieWproportion of cigars produced to retail
at 5 cents or less had increased to nearly SO percent of the 'total. Most
of the large manufacturers produce cigars in different price lines although
not necessarily in all price lines* The smaller producers confine them­
selves to the hand-made products, some for special orders. Most of these
are in the higher price classes although apparently some lower-priced
cigars are hand-produced, l /
The increasing concentration in the indus­
try has probably reduced price1competition to some extent and resulted'
in competition being more largely on a brand basis. The larger producers
have placed increasing emphasis on advertising their largest selling
brands, nevertheless, consumers can still purchase different cigars at
relatively small differences in price and thus shift their consumption
to some extent on a price basis.
The manufacturers of cigars have made considerable effort to persuade
distributors to maintain the list prices on their products, 2/ With the
development of the Pair Trad© Acts many of the important companies
priced their products under those laws. The cigar manufacturers have
not been able to make as large advertising expenditures as the cigarette
companies and have had to depend upon the selling efforts of their
distributors to a greater extent. With the declining market for cigars
profit margins of wholesalers and retailers have been ah important
factor in securing sales. The wholesale distribution of cigars is
assigned largely on an exclusive territory basis. •
/ ’ ’The advertised retail prices of cigars have generally*been changed
infrequently. Tire leading brands have been more stable in- price than
the largest’ selling brands of cigarettes. Prior to World War I most
'cigars sold for 5 cents or less. 2/ With the increase in costs, prices
'were raised generally and ..during the 1920* s the most popular brands sold
for 10 cents straight or 3 for 20i Two of •
,the .largest: selling brands of
cigars were reduced to a; 5-cent price in 1931 and 1933 from their-a
previous prices of 3 f o r ’20 cents and-10- cents straight. They remained
at this level until 19^2 when they.were raised to 6 cents. b j
In I9 H5

17
2/
¿/
k/

7

W. D. Evans ~ op. cit. p. 118.
;
Pedoral'Trade Commission, ■op l ¿it. p p . ■5^^519*
Department of A g r i c u l W e , ’^ericaji7Tobacco.T;,pcs, Uses, and.
Markets, Circular - 6 . 21+9.» •Washington 19^2, p. 91» •
About onc-third ef-.-the 19f e increase-was occasioned by the.
.tax increase. ' (Office of* Price p p i n i strati oh, Press release
of November 3» 19^ 2 s) ' r-" -■ (• - .;•

- 41
Table 3
Tax-paid withdrawals of cigars by price classes estimated
from sale of tax stamps, 1918, 1920, 1925, 1929—1946
t

,

Percent of
! 15,1*5- 5 Over : total in
! 20^
?
20^ : 5—cent and ,
•
:under jclass 1/
«

Intended retail price per cigar

: 8.1p: 15)5
•
•

:Not over? 5.1*5! 5)4
* 8*
:
:
(Millions of cigars)
17
1,180 3/ 4,425 4/ 1,797 5

Tear :
•

Total

1918

7,44Q

1920

8,502

2,043

2,620

3,641

1929
1930
1931
1932
1933
1934
1935
1936
1937

6,850
6,198
5,626
4,691
4,592
4,868
5,031
5,394
5,534

3,859
3,861
3,986
3,734
3,932
4,197
4,434
4,749
4,867

582
395
173
53
34
60
68
55
57

2,236
1,799
1,368
842
574
566
487
644
563

1938
1939
1940
1941
1942
1943
1944
1945
1946

5,326
5,510
5,568
5,96Œ
6,207
5,228
4,786
5,014
5,920

4,230
4,943
4,991
5,326
5,385
3,944
2,312
1,424
1,385

52
43
42
45
57
162
432
1,649
1,789

6/
6/
6/
6/
6/

503
484
493
...
541
688
7/
992
7/
7/ 1,778
7/ 1,594
7/ 2,371.

22

15.9

142

56

24,0

145
121
86
56
46
41
39
41
42

27
21
13
5
5
4
5
5
5

56,3
62.3
70,8
79,6
85.6
86.2
88.1
88.0
87,9

37
36
37
' 42
57
115
192
189
206

4
5
4
5
10
15
72
158
169

88,8
89.7
89.6
89.4
86,8
75,4
47.3
28,4
23.4

Treasury Department, Division of Tax Research
Source* Department of Agriculture, First Annual Report on Tobaccp...^tatjLstics and succeeding Annual Reports, Tax-paid withdrawals include
cigars of Puerto Rican and Philippine manufacturers, and are
totals of the data from the preliminary monthly releases of the
Bureau of Internal Revenue*
\ ] Includes cigars intended to retail for not over 7 cents in
1918 andnot
over 6 cents in the last two months of 1942, and the years 1943-1946,
2/ Exclusive of June figures for Philippine imports,
3/ Cigars
intended to retail for less than 4 cents*
4/ Cigars
intended to retail for 4 cents and not over 7 cents.
5/ Cigars
intended to retail for over 7 cents and not over 15
cents,
6/ For the last two.months of 1942 and subsequent years represents cigars
intended to retail at 6 cents or less as follows: (in millions;
Dot over 2,5^ 3.6^ —
4*1^ —
479
'443
79
1942 (Hov. i^ Dec,)....
2,865
738
341
1943
___
1,839
284
188
1944 ......
949
428
47
1945 .....
975
34
376
1946 .....
7/ For the last two months of 1942 and subsequent years represents cigars
intended to retail between 6,1 and 8 cents.

211
- 42

-

they were raised to 7i cents and in 19^6 to 9 cents. Thus, there was
a period of over 9 years during which prices were unchanged and over
l^l- years during which they were changed only three times. There is,
however, an indirect method of adjusting cigar prices to changes in
demand through changes in size and quality. Cigars are made in a
wide variety of sizes and shapes and it is possible to effect a change
ih price by introducing a new size or shape while maintaining the
former price. The stability of prices may have been influenced in
part by. the practice of producing cigars to bo retailed at, convenient
coin intervals, e.g., 2 for 5 cents, 5 cents, 2 for - 15 cents, 10 cents.
The changes in price involved in shifting from one accepted coin
interval to another represent la,rge percentage differences. J j However,
wartime-price adjustments resulted in odd prices such as six, nine and
eleven cents and since the end of price control there has been no
general effort to reprice brands on the basis of customary prewar
price intervals. If odd-cent prices do not prove to be a sales deterrent,
smaller'percentage changes will be possible in the future and prices may
bo changed at more' frequent intervals than in the past.
Hand-produced cigars involve a high proportion of labor cost. The
development of machine production reduced these costs but for the
industry as a whole factory wages in *1939 woro 23*percent‘of net sales
(after deducting "excise taxes) as compared with only 5 percent for
cigarettes and 9 percent, for snuff and chewing and smoking tobacco. 2 f
While smaller producers were being forced out of business by increased
use of machine production and the declining consumption of cigars, the
largest producers operated on a profitable basis during most of the time
since 1920 . 3/ Profits were substantially lower after the price re­
ductions in the early 1930 *s. Although at the time of the price re­
ductions the cost of cigar-type tobacco had declined, these costs
subsequently recovered to approximately the level prevailing between
I92O and 1930 . (Table 1+) 4During the war both costs and prices in­
creased substantially.
B.

Character of demand

The large expansion in cigarette smoking apparently has affected
other forms of tobacco usage to'a considerable extent. Shifts in con­
sumption have probably been based in part oh taste and social consider­
ations and in part oh rele.tive costs;- Cigars have never been the most

17
2J
3/

The problem i's apparent in a number of other, low priced products,
such as candy, chewing gum, and soft drinks.
Census of Manufactures: 1939» Vol. 2, Pt. 1.
The rate of return, however, was substantially lower than in the
cigarette industry, T1TEC, Investments, Profits and Rates of Return
for Selected Industries, pp. 17»669-70 *

*

ïable 4
i} ••

i;

Product! bfi of and average price per pound received
by farmers’for cigar type tobaccos, 1920, 1925, 1930-1947

i

X

o

.

'•

Production

1

.!

:.

Price pea: pound

’Binder 5Wrapper
: Wrapperj Filler '’*
$
c
•
*•«
(Cents)
(thousands of pounds)

’ Filler... *
o» . } i • *

Binder

1920

102,542

106,944

11,941

1925

91,751

95,159

7,538

1930
1931
1932
1933
1934

74,128
89,233
70,060
34,132
39,920

95,192
90,271
72,980
38,213
27,898

11,486
8,205
6,984
6,060
7,280

33,845
41,776
51,910
53,722
63,296
67,943
61,619
55,711
51,357
57,049
62,075
70,856
65,856

7,795
9,418
8,508
9,029
11,376
9,499
10,136
9,242

49,849
1935
. 53,220
1936
50,219
1937
1938
. 51,530
63,055
1939
1940
66,543
1941
. 71.0466.
‘ 53,620
1942
47,384’
1943
1944
.59,283
49,940
1945 :
64,376
1946
67,640
1947

10,020
11,290
11,214
12,601
13,252

13.5

:

10.7 i *
8.3
6.8
4.5
5.4
9.1

.

24.6

75,0

15.3

83,8

15.4
8.8
‘ 6*9
8.7
12.1

68.7
62,4
- 50.7
57.6
75.1

79.7
12.7
82.6
14.7
i i .o
• 89.4
13.4
i o .o
64.9
9.6 .
12.4
67.7
11.7
16.6
14.5 • :77.6
11.9
9-8.4 '
16.9.
• 12.4 .
132.1
• 20..3.
13.2
168.0
18.6 , , 30.3
30.9
196.0
19.5
197.0
47.7
34.0
227 JO
. 51,8
32.8
9.7

il
;

•

if
-

lj

treasury Departmentf . Division of 2ax Research
Sources

Department of Agriculture, First Annual Report on Ppbacco
Statistics; Annual Report on 1'obacco Statistics, 1942, 1944,
1946: Crop Report as of May 1,. 1947, ’’lobacco—1946 Revised
Crop Production,.'4 S' of December« 3.947,
...

o
£_
- 44 -

.

, .... .. : ■• V.

important forni- ó.f ■tobáceo consumption. In terms of the quantity -of rav;
tobacco used they aré now. less important than the other general'hate-*,
gories of cigarettes and Manufactured tobacco* However, the demand
for cigars^has not declined as much-as the demand for manufacture!
tobaòco'products¿ Ì v’f"
t
'

The .high point of cigar consumption'was reached in 1920 when about
8»1 hillion cigars were produced* (Table 1) The proportion of tobacco
used in manufacturing cigars also reached a peak of about 26 percent in
that year*,l/ With the increase in cigarette consumption the proportion
of tobacco used for-cigars has declined and in 1946 was only about
10 percent of the total, Prom the high point reached in 1930 the’per
capi tar c onsumpi ion: of tobacco in the form of cigars declined about
20 percent by 1929• (Table 1 ) •A further sharp drop occurred during
the depression when per capita consumption wá’s only a little more than
one-half the 1920 level, 2/ Per capita consumption increased somewhat
in the years immediately preceding the war and during the war but has.
remained substantially below the 1929 level.
Changes in cigar consumption since the latter part of the 1920fs
appear to have been associated .to. a considerable extent with fluctua­
tions in national income. The changes in consumption, however* have
not been as great as the changes in income. Por the period 1927 to
1943, after adjustment for the downward trend,‘tax—paid withdrawals of
cigars fluctuated proportionately only half as much on the average as
disppsable income of consumers, Z j
, ,.
It is more difficult to determine the effect which price changes ’mayhave had on the consumption of cigars. Cigar.smoking is relatively thè
most expensive form of tobacco consumption, 4/ The decline in cigar con­
sumption has occurred despite decreases i n .the price of cigars,.
1/ Part I, Table ~67
*
~
~
!
2/ Because of changes in the proportion of different si z e e igár s :the
comparisons are expressed in terms of tobacco used in producing
cigars rather than the number of cigars,
'
-'i
3/ Disposable income based on Departments of Commerce data prior to the .
revision of July 194?,: -Because of changes in prices,.fluctuations
in consumer expenditures for cigars;were larger than fluctuations in
the number of cigars consumed.,
4/ Based on average prices for different forms of tobacco use, ,At
:
present prices the cost of a ’'popular priced cigar" is about twothirds as much as a package of standard brand cigarettes, A ‘person
smoking 5 cigars:a day would thus spend about three time :as much as
one smoking a package of standard brand cigarettes,' On' the. lowest
price cigars,, the cost of 5 è igàré: would be about 50 percent more
than the price of a package of standard brand cigarettes. Smoking
tobacco is considerably cheaper than the equivalent in factorywnade
cigarettes.

It appears that retail cigar prices decreased by ©no-third daring the(Table l) This was approximately ,th8 same as tho decrease in
tho retail price of cigarettes daring this period. The. decline in
cigar prices after 1929 was »much larger than the decline in cigarette
prices. However, cigar consumption failed to recover significantly
while there was a large increase in cigarette .consumption. It is
possible that, because of the large difference in cost between the two
forms ofsmoking, pricevadjustments "on cigars have relatively little
efiect ph consumer c^s'i’ce between cig-aretto- end cigar smoking as a
habitual, fprm' pf 'tobacco:cbnsumption. Eowovor, price, changes could
still be .an,••important factor in determining the, number of cigars
purchased by a cigar smoker ;and the price 'class in.-which- he makes his
purchases. Cigar prices'were increased mubh more than cigarette.and
smoking tobacco prices during- the war l / and-’-sin.ee February 191-7 there
has been a. significant decline.-in consumption..
The present level
of Qonsujaptlqn Is lower than would be expected on the basis of the
prewar relationship^ between cops.ump.tion and income after allowance for
downward trend.
y '
"
/ ;

1920 *s.

0.' Outlook for, the; industr-v .

•

Unless important changes occur :In consumer attitudes, the outlook, for increased consumption of cigars --docs not seem favorable.. .The increase
in consumption during the war was no greater than would be expected from
the increase in the level of incomo, but was probably-limited to some,
extent oy the availability: of supplies. Although consumer incomes have
continued to increase,, cigar- consumption. In lQl-7 fell below .the- corre­
sponding month of -191-6,\ except in September. .-The'.anticipated1expansion
as the -result .of -cigar;consumption by-members of the armed forces during,
the war- apparently 'has not -materialized. .Hecent 'increases -ill'the cost
of living may have •affoe ted -the demand f or -ci gar.s. 1 Consumers must now'
pay d cents a piece for cigars which prior to the-war sold. .a.t 2 for 5- '
cents, an increase of lhO percent. ¿/ ..
y*. -fy

¿y According to the Bureal 01 Labor Statistics data on retail prices,
the increase in cigar prices since 1339 has been about SO percent :
compared with 30 percent for. cigarettes, and 15 bercent for smoking
tobacco.
■ „* ’ l i
1
V.V..' . '
2/ The industry has recently given attention-to the'advisability of
adjusting prices -more often to .neejb'changes in consumer income, and
the price-level, generally. Cigar iianufacturexs Associa'troh. of ■
America,, Inc. , Press release of; July
13 U 7 . '}7 " .' ..-...*
2/
March 191-2 .stated price’'of 2 f o r '5 cents was increased to 5 ‘
cents straight,.-..-effective November 1 3 , lalh. ’.’
(Office of Price
Administration^
Price Ke&il&tl-Op ffo. ?6o.) After the. termination
ol price controls, the,price '"was .increased to-the present 6-rc.ont '
level.

A4 Îffi

¿16
-

bS -

• „Civilian demand was limited somewhat by available supplies during
the latter part of the war and the supply did not" become adequate until
q^Ij-6 , Since production is now lower than in 13^-1 the industry nas
certain problems ci adr
juétméntl The opportunity.for expansion <of hand­
made ciga:t? production whi ch devèloped during thé war,;appear s>,to ,nave
been temporary*' ' Compétition., with1;machiné production^ had..grcu-«h increasingiy'difficult prior to./'tbeyvrar ahd';t h e increase\in wages since' thén
may have Placed hand production at à' greater disa&vehtage« • niere was
also" a. substantial increase during the 'war in the 1proport ion of cigars ■
selling in the higher price classés*■■ Por èxample,*•tax—phid wi-lhdr?rs,wals
of the highest'priced cigars, those ’Selling for over"'20 penis,^increased
from aJbout ’U'milllon in 133 ^ to 169 million in 19^-6, (Table 3^ - This
increase may in part have resulted from a temporary snort age in medium
price brands.

rThe indus try has also experienced relatively large :raw. matériel
ahd wage* iHcreas.es* Wages:in this industry,-wh-^ch before
..wash.wer©%_
éûông:the >lowest in 'the mahuf acturing-’industries,, have increased. ,/i
relatively more' than in foost manuf acturi ng in ¿us tries; s'ihe e 1939. 1/ The
unit'productivity of,'workers has increased but it '
‘appears to oe subrstantlàlly'loss th’
ah: the Increase in hourly’wfxgés. 2]■ A more efficient
cigar-making" machi no developed just prior to the war -.may offset ;increases,
in costs' to some extent. Little hand production, however remr^nsyto be
displaced. ’The prices of the cigar' typo tobaccos,/ filler,-«bi^dor/.-ohd
wrapper,'have each increased by about 200 percent or mere.. ( *ablc }■) .
The:19 ^7 ’crop of ciga.r typo tobaccos is expected, to■
■be about the. same
ras in 19^-0 and with decreased consumption of cigars tne prices for* leaf,
' tobacco» appear to be declining. ¿/

1 / Thé’ increase’ in7 average' hourly earnings from 1939 to-Kay: 19*1-7 was10 h percent for the cigar industry :compared with'91 percent for 1 all
manufacturing; 89 percent for cigarettes and 57 percent for auto­

~

mobiles, The absolute amount' of,the increase, was about the same tas *
the average' for all manufacturing. Dhta '^re^from1Dqpartm^t-of- *
Labor! Monthly Labor Review, August 19^7•.
2.[ Although output per man-hour increased by 33 percent between 19 j>9
and 19 ^ 5 ,' the increase was more than offset b y higher wages -and
unit labpr costs increased by 33 .percent*(Department .of Labor,^
P ro duct ivlty and' Unit Lab or Cost in Selected; H a iufacturing I ndustries,

1939-19^.1

: v ..“

;~

'* y ' ” T 7:. '•

X
■

Y1' >v

.'

£

r

‘

‘

'

i

jf Department of Agriculture,'The Tobacco1 Situât ion, October '19h 7 > p. 1 7 ^

Another'féétqr 'loading'to- a decrease in 'the-demand for cigar-typo
•••tobaccos' is the decline' in:
: chewing tobacco^'censumption.
-

- 47 -

V*

Effects of the tax
A,

On profits

c.

- ';

.

_

The present tax approximates 10 percent of the retail price of
cigars including tax, compared with -roughly 5 percent prior to the
increase under the Revenue Act of 1942. 1/ The industry was granted an
increase in ceiling prices to cover cost changes and to reflect the.,
change in tax in 1942«. 2
The increase in tax in 1942 probably did not
affect profits appreciably because of the ceilings imposed on cigar
prices and the fact that for a considerable part of the war period supply
was insufficient to meet civilian demand,. As demand increased some pro­
ducers shifted output to higher price classes and the aggregate profits
of leading companies,increased substantially. 3/. (Table 5)

/

Present taxes are lower in relation to retail prices in the case
of cigars than in the case of cigarettes and most manufactured tobacco.
Although there is no evidence that the consumption of cigars is very
responsive to price changes, it is doubtful whether price has relatively
as little effect as it appears to have on cigarette consumption, Jfhen
the tax on cigars was reduced by the Revenue Act of 1926 the volume of
cigar consumption did not seem to be affected appreciably, however * •
since the change in tax amounted to a fraction of a cent on most cigars,
it was difficult to reflect the change dn prices to consumers except
through adjustment in the size and quality of the products. The tax
increase of ¿942 was made under abnormal conditions which prevented
indication of its possible effect* Since the tax was increased the
price of cigars (tax included) has risen substantially. For,example,
cigars selling at 5 cents prior to 1942 now sell for 9 cents. Only *8
cent or about 20 percent of the increase represents higher tax» 4 f Consequently, any reduction in consumption since the* tax was increased would
be largely attributable to changes in prices due to higher, costs and
other factors affecting consumption.
1J

On cigars retailing for less than 20 cents the tax in each bracket
is about the same percentage for prices at the mid-points of the
brackets, but is a higher percentage of prices nearer the lower
limits of the brackets and a lower percentage of prices nearer the
upper limits of the brackets,
2/ Maximum Price Regulation Ho. 260. effective Hovember 1, 1942*
3/ Beginning in the first quarter of 1945 the Office of Price Adminis­
tration required individual producers,to maintain the same proportion
of output in each price class as they had produced in the period
January 1 - June 30, 1943* after adjustment for the higher ceiling
permitted in 1945, (Maximum Price R egulation ITo, 260. Amendment 10»)
4/ Part of the higher tax is the result of the shift in the cigar
to a higher price class bearing a higher rate of tax,

48 -

Table 5
.'
w
Net profits and .rate of return on net worth, of
cigar manufacturers reporting to Securities and Exchange
r*
Commission, 1 9 3 6 — 19^6 l/
•*• * .

;*,0
r

Net profits

ft.

Tear. :
■f
•
*p
#

1936
1937
133 s
1939

.
. 19^0
I 9 UI

19^-2
■ 19 U 3
I9 U 3 :
' -19^6 •••.

Before . . : •
After
income
i
income
taxés
:: taxes. ’ K ■
.(pillions)
$ U .3
•■ M

V
Net profits as a ; p /
t__-percent, of net worth ■=/
!
Before
;
After
î
income
!
income
!
taxes
» • taxes

■5*6
5.5

S.l '$
7.8
7.2
7.9
11.5

12;8

5>5
i**g
■5 .6

12,5
13.1
19.3

- 13.0
1 1 *2 .

5.0

20,5

5*8

• 17.3

8,2

2 1,8

$ 5-2 •
■ M
‘
' .K5 '
•5 ,0. ,
7.0"

7.9

1 3 .7

.■ ,
■
■

■

‘

34

6*8 $
6 .lt
, -9,9
,6*5

8.*8 \
8 ,6
7.3

.

B. k

•

7.9
7.5
13.1

.
.

Treasury Department, Division of Tax Research
Source;

Securities and Exchange Commission, Survey of American
Listed Corporations, nData on Profits and Operations,”
Part 2,
if Companies included are!
Alles and Pisher, Bayuk Cigars,
Consolidated Cigar Corporation, DWG Cigar Corporation, General
.Cigar Company, D. Emil Klein Company, Waitt and Bond, Webster
Tobacco Company*
2/ Net worth as.of the Beginning of the year. Includes preferred
and common stock and surplus.

-49
B,

On competition

A f t e r the R e v e n u e Act of 1917 cigars were taxed under five price
brackets until the'Beveme Act of 1942 when the number was increased
t0 seven© ^he bracket system ©an be used t0 levy a tax on the basis
of physical units and yet approximate an ad valorem ©^percentage tax.
Unless the bracket intervals are very small, however, the rela ive
importance of the tax will vary at different points within the bracket
to a degree which may have important effects on the competitive
position of products selling;at different prices. 1/ Ihe^competitive
effect1was an-important consideration, in the revision of the brackets
in 1942, 2 ] and the Industry has indicated that a further increase
in the number of brackets would be desirable. 3/

Although the bracket system tends to reduce the competitive
inequities of a flat specific tax applicable to all cigars, it is
difficult t0 devise a bracket system which would substantially avoid
such inequities under changing price conditions. From 1917 to 1942
the first bracket covered cigars selling for not more than 5 cents
retailo4/During this period, however, the sale of cigars retailing
at 2 for 5 cents and 3 for 10 cents became important.. Thc tax was a
much higher percentage of the selling price for these cigars than for
the 5-c'ent cigar, 2he first bracked was replaced b:y three brackets in
the Revenue Act of 1942. When the .manufacturers of :cigars, selling
for 7.J5 cents wanted to raise prices in 1946 they found that an increase
in price over 8 cents involved a shift in tax bracket,6/ A price
increase to 3 for 25 cents would have yielded a net increase in return
to the manufacturers of only $1*40 per thousand compared with a price
increase to buyers of $8*33 per thousand. Under these conditions the
majiufacturers increased prices to 9 cents, which resulted in the same
increase in tax but a higher return t0 the seller.

1J Por ‘example, the $10 tax rate in the -cigar tax bracket 8 to 15
cents ‘is equivalent to au ad valorem rate of 21»7 percent of
manufacturer & ’ net price for 3 for 25—cent cigars and 11*3
percent for 15-cent cigars.
2/ The bill as passed by the House of Representatives contained nine
brackets.
*
Zj

Proppsed_Revisions of the Internal Revenue Code. 1947j PP* 592-601.

4/ Although the introduction of the bracket rate system may have tended
to stimulate a shift to production of lower priced cigars, it should
be noted that the mechanization of production which developed after
the adoption of the bracket rate system enabled the industry to
reduce costs and the downward trend in the demand for cigars exerted
pressure on producers to reduce prices.
^ /¡Proposed Revisions of the internal Revenue Code, 1947, pp# 592-601.

215
_ 50 -

Q%- O.n consumers •'
.Tli^e may be1'some question whether the industry is able to pass ■
the full amount of the tax on to consumers. However, to the extent
that prices to consumers are increased by the tax, it appears that
the tax borne by them is not very regressive. Studies of consumer
expenditures in 19^-1 and 1 9 indicate that cigar expenditures
represented about the same proportion of income for all income
groups under $5,000, x j . */, ,
,
, „
Cigar expenditures are not relatively large but ar© represented
in the Bureau of labor Statistics1 Index of Consumer Prices. On the
basis of the relationship of the tax to retail price of inexpensive
cigars, the tax increases the Index by about .05 percent.
'Vlv

Administrati on and compliance

• :••

-he number of manufacturers filing returns is-.about 3,000 and
gtttost of t^icm arc relatively small. -.Some enforcement'problems arise
because of the turnover among smaller producers.: However,- through
long established procedures the problems: involved both, for taxpayers
apd the Bureau of Internal Revenue have been minimifeed.. The detailed
required of manufacturers provide a close check upon their
liabilities» In order to maintain those special records, however*, tax—
payers .must do more work than is necessary to make tax reports on most
excise taxes.
••
•
....
VII.

Technical problems

•

•
~®^?* principal technical questions which arise under the tax on ••*<•>-•
cigars arc: - ••f : •'>
...:
^ip’possibiiity of revising the tax to create
a ko re; uniform’rate- of tax between different .
price classes.'
2

. . Whether floor stocks taxes should bo .imposed

v

VQ^unds'-kade on tax-paid floor stocks if
the tax is changed. " '
• ,

J
data .from: ( Bureau ;of labor Statistics, family Spending and
: ■ ,-.§â.ying in Wartime, Bulletin Ho.. 8 2 2 , Washington -19% , p.%g|^.tment 0f Agriculture, unpublishe d data. I 9UU data are'un... ..published m.ateriaJ from the Bureau of liabor Statistics. 'It ’
should be not ed, hoWevef , that therh may'have boon some under- 1
reporting of tobacco expenditures in thesd studies. ' '

-

A,

51

-

Revisión of tax 8truc turo

As a result of industry developments since 19^2 some revision in the
present tax brackets is necessary in Order to "bring them into "better
alignment with present price relationships of cigars. However» as noted
in section V above, the "bracket system would continue to give rise to
inequities whenever price relationships changed appreciably unless the
rate schedule was revised to reflect such changes. Moreover, inequities
would continue to exist within price "brackets, if the brackets had very
large intervals. Those problems could be largely avoided by adopting an
ad valorem tax for cigars, i f
While such a change would generally result
in more equitable taxation of cigars, it would increase:the tax on cigars
selling above 20 cents relative to the tax on lower priced cigars unless
some limitation» such-as- the one-in the present law, were placód on the
amount of tax on higher-priced cigars. The principal difficulty that might
bo encountered in the adoption of an. ad valorem tax would bo the possible
additional work required of manufacturers and the Bureau of Internal Revenue.
Under the present tax cigar manufacturers are required to keep records
showing the number of cigars withdrawn according to the retail price classes
specified in the law. If an ad valorem tax were adopted, it would be
necessary to continue requiring records on the physical volíame of withdrawals
as a part of the general controls over the use of leaf tobacco and tho
disposition of the products made therefrom, z f At present manufacturers also
are required to purchase and affix stamps on every package, the stamps
indicating tho tax bracket for which the tax was paid together with the
intended retail price. In .addition to the tie-in with production controls
which the stamo system provides the Bureau of Internal Revenue, the stamps
permit distributors and consumers to chock whether tho reto.il price conforms
to the cla,ss of cigars on which, the tax was paid. Continued use of stamps
for collection of the cigar tax is considered administratively desirable.
It probably would be feasible to maintain a system of stamp control in
conjunction with an ad valorem tax, Hor purposes of the a.d valorem tax
manufacturers and importers would have to file, in addition to present
reports, a monthly return showing dollar sales figures and maintain detailed
'records to enable the Bureau to check the accuracy of the returns. If the
use of the stamps were continued together with the reports necessary for an
ad valorem tax, some additional compliance burdens would be imposed on.tax­
payers and additional work would be required of the Bureau in verifying
returns.
\ J In 19'U6 the Canadian tax on cigars, which previously had been levied

on a bracket system, was changed to a low ra.te specific tax of $1 per
1,000, plus an ad valorem tax of 25 percent. The change was made
because of the competitive inequities created by the bracket system
under the high rate specific tax, (Canada., House of Commons Rebates,
Vol. LXXXV, Ho, 69, p, 30^9*) Representatives of the United States cigar
industry have indicated that the ad valorem form of tax would be prefer­
able but did not recommend it ’’because of ,the administrative burdens
on the Treasury Department” (Proposed Revisions of the Internal Revenue
Code, 19U 7 , pp, 592-595)»
2/ Regulations, Ho, S,
\;

*

in' rr,r'u1■
'7

' 1J' T,l,r" ^

••

•” “'

N*

§‘

iiS :
52 B.

Floor, stocks taxes and refunds

Floor stocks taxes were imposed'when the tax on cigars was increased
in, 1919 and in 19U 2 . i f The reduction in tax. under the Revenue Act of 192b
was accompanied by a provision for refunds on tax-paid floor stocks where
the amount was not less than <p!0 .
,
«V
.. A tax increase made without .pro1vision.^fortaxing floor ...stocks would
nermit producers and .distributors'.to .accumulate\stocks" ip excess, of normal
requirements, ? In addition to the ;.l.os.s in f evenue involved-,., some producers
and distributors would Benefit more ..than others by their. superior finan­
cial position. Although cigars cannot be held for long periods without
affecting their saleability, -the■possibility of accumulating stocks
probably would Jbe?important- enough to make the imposition of a floor stocks
tax appear desirable if a substantial increase .were made- m -the tax on
cigars, .

(

^

4

,

,

With respect to the refunds on floor stocks some question may be
raised concerning the policy followed When thé tax on .cigars^was reduce
under the 1926 Act. A tax reduction made without provision for refunds
on stocks tax-paid at the higher rate would fend to disrupt the normal
flow of business and result in losses for, those holding tax-paid stoccs.
The possibility of loss t^ould be less for retailers than for others and
the payment of refunds might result in windfalls for mast retailers.
That is, unless the tax' réduction on cigars represented a large proportion
of the present tax, it would amount to such a small fraction of a cent on
most cigars that it would not be feasible for retailers to adjust prices
by the amount of the refund. Because their sales, are in larger -quantities
producers and wholesalers could adjust prices by the amount of the tax
change and IP-would be difficult for them to avoid losses because their
stocks tax-paid at the higher rate probably would have-- to •-be* reduced in
price-to meet the'competition of new supplies tax-paid at the lower rate.
On: the-bands of floor1 stocks returns filed under the 19^2 Act, most of
the tax-paid stocks normally appear to be in the hands of wholesalers and
retailers. The total stocks amounted to about seven and one-half weeks
sales.

^
'jr’.Vw
The handling of floor stocks returns involves considerable work for
the Bureau of Internal Revenue, 2/ Refunding of tax on floor atocxs raises
• more; possibility of: fraud than, the collection, of a floor stocks, tax and
requires closer examination of returns. ' 1 The minimum amount of,refund
specified in the 1926 Act reduced the number of floor stocks returns, but
this type Of provision discriminates against :small dealers, J J The number
of returns and difficulties involved could be limited more effectively
and with greater equity by providing for refunds, only to producers and
•wholesalers. Instead of providing for refunds it might be desirable to
have producers take back from distributors stocks tax—paid at the higher
rate and re— stamp such goods at the ney rate of tax*

1/ The.increase in ta x .in .1917 was not-accompanied by a floor stocks tax,
but »provision was made for an additional tax,.equal to 5^ percent of
the.increa.se in tax, on withdrawalSsduring the period between the date
of the pa.ssage of the Act and its effective date.
•
.
2/ In iql+2 about U0 0 ,000 returns were file d covering cigarettes and cigars.
1/ Only"about 25,0 00 refunds were paid on cigars under the 1926 Act.

53 PART III

I*

-

Excise Tax on Manufactured Tobacco and Snùff

Description of the tax

The term ^manufactured tobaccon is commonly used to describe
tobacco products other than cigars and cigarettes. Although the tax
on snuff, is imposed by a. separate subsection of the law, chewing tobacco,
smoking tobacco and snuff' are all taxed at the same rate.

The tax applies to manufactured tobacco upon removal from the place
of manufacture or upon release from customs custody, op upon sale i f
prior to such removal or release.
The tax is payable by the manufacturer or importer and is paid by
^purchasing tax stamps to be affixed to the packages prior to removal
from the factory or upon release from customs custody.
Exemptions from the tax are provided on withdrawals for;
1. Export.
v-.';-'•
1;;:.
2., Use as sea stores.
3. Use of the United States Government (but not for
resale in the United States).
II«

Changes in the tax since 1917

A tax has been imposed on manufactured tobacco since 1862. The
present tax of 18 cents per pound was imposed by the Revenue Act of 1918
and has been in effect since February 25, 1919. The Revenue Acts of
1917 and 1918 each increased the tax by 5 cents per pound. The rate
imposed by the 1918 Act was higher than the tax had been for approximately
40 years«,
| • *
111 *

Revenue collections . 1936-1947

The tax on manufactured tobacco yields approximately the same amount
of revenue as is derived from cigars, but less than 4 percent as much
as is obtained from cigarettes.
Collections, fiscal years 1936-1947
(in millions)
Fiscal year
1936
1937
1936
1939
1940
1941

i

Collections
$ 63.0
61.7
60.7
61.7
61.2
61.8

;% Fiscal year
1942
1943
1944
f 1945
1946
1947

; ■Collections
$ 59.6
55.4
53.0
57.3
49.3
43.6

- 5U
IV. Economic background of the industry
A® Character of supply
Manufactured tobacco products d iffer to a considerable extent
with respect to the types of tobacco used in their production, the
methods of production and the trends in consumer use. Nevertheless, with
the exception of snuff, most of the major companies produce the various'
types of products. 'There is more Specialization among smaller producers#
Prior to World War I , there were about 2,500 factories engaged
in the production of. manufactured tobacco', but the number has declined
more or less steadily until at the end of 1945 there were only 394# 1J
During this, period there was a large decline in total production*
(Table l)
Despite the reduction in the number of factories producing
manufactured tobacco., there has been no substantial change in the
concentration of production since 191Q. 2/ About three-fourths of the
chewing and smoking tobacco is produced by the four largest’ producers.
Snuff is produced almost exclusively*by three companies. The concen­
tration is higher for some individual types than others. I t is highest
in the case of snuff and plug chewing tobacco. The large cigarette
producers occupy a dominant position in smoking tobacco and plug
chewing tobacco* Smaller companies produce the larger proportion of
scrap, twist and fine-cut chewing tobacco, but the latter- two products
represent only a small proportion of total manufactured tobacco. The
largest number of producers is engaged in the production of smokingtobacco* In 1945 only 38 factories produced more than 500,000 pounds
of manufactured tobacco, l/ .
The leading manufacturers of chewing and smoking tobacco market
their output under a large number of different brand names and in
different price classes* The products-may be purchased at re ta il over
a substantial price range and in different package sizes. In most
P^iee classes there are several competing products. Most of the
business is in the low and medium price lines and the advertising of
manufacturers is generally limited to one or two brands in which sales

Annual Report of the Commissioner of. Internal Revenue* • Published
| r data are classified on a factory basis; some of the larger firms,
of course., own more than one factory*
& Federal Tpade Commission, Agricultural Income Inquiry. Part I ,
P* 275» In 1910 the American Tobacc-o Company produced 76 percent
of the total smoking tobacco and 84 percent of the total chewing
tobacco. In 1934 four successor companies produced 74 and 70 percent
6f the respective totals# The three: snuff companies established in
1911 after the dissolution of the American Tobacco Company produced
97 percept of the to ta l1snuff in 1935. ( Ibid*, pp* 472-73)*

- 55 -

Table 1
Production of manufactured tobacco by types,

19 Î 6 - 19H6

(In millions of pounds) '
Calendar;

rm

. •K :

. ■

•**

•• - -

"t " ~ .

-"nr

jr

V i ,r .«

Chëwinê'

r « 'J - r M,—

—

year, i : T o tal t Smoking. 1,i : T o ta l 1./; P lu g : Scrap
»
•
*
, '

1915s" H66. 2
US3.0
1Q17
191S . % ? a 1919 ■/ HaH . i
1920
H l2 .6

239.7
2%.-6
257.9
228.6
2X8:3

1921 ' 357.0
1922
M S
1923
Hl.2,8
192^ t HÍH.2
1925 , U13.9

222.7
2H3.H
■
23^.9
.“2H7.O
; : 2h7,7

1926
1927
1928
1929
1930

H iè .6
396.3,
; 386. 3 '
381.2
37178

165.6
179 . h
174.7
lH i.,0
138.6

2HS.H
237.9
231.1
2*29.0
232.ó

1 6 .O '- : 10 .8 . .
15.2
11.3
■
9 , 8. '
17*5
: • . ¿1 - ■
j 11.3
. 8 .2
i
8 .1
11.8
{.

109.8
IO 3 .9 ’
100.6
96.7
8 6 .J

371.2
3^7.3
3H 2.I
3^5 .6
3f e .7

• 182.9
191.0
191.8
193.1
191.8

115.7
IIH .9

1936
1937
193s
1939
19H0

3HS.0
3H0.6
3U5.4
343-3
3HH.H

‘I9H.0
'137.8
" POO. 7
‘202.3
2 0 5 .I

116.0
115.7
IO 7 .6
103.1
101.5

59‘. 2
58.3
54.5
51.3
Hg.S

19H1
19H2

. 3H2,.H
336.4
r 327.1
306.9
„ 330.$
253.2

*1 197,7
IO 5 .I
*175-.7
I I 3 .7
162.8 '
121.1
125.2
. 139.9
•168.5:
:‘118.1
'1 0 6 .4 ' : ' IO 7 .5

50.2
t ?4 .3
58.9
61.7
59.7
51.8

13U3

/:: Twist : ' P in e-cu t : X Snuff

II 3 .U :
120.2
*120,8
I I I .5
l ll .H

1931
1932
1933
193H
1935... .

19HU
19U5
19H6

' / Vrár—

1

lS s',5
120.3
Ilk, 2

76.7
61.9
o l.H
•62.8 -•
60.6

61.2
•’
5 O .I •
HH.7
HH.g
hh.o,
..
:• % . 3'
U5.6 ■
■
U2.8
H i.H
H2.9
HH.2
Hg.3
5 1 .H
52.9
h 7.7

-H6..1

3H.0
33.5
37.2
35.0
3^-3

7, 3;:
10.9
10.7
9 .9
9 .7 '

6 .9
6.9
7 ,1
6.8
7.2

3M
33.1
39.2
39.O
37.S

9 .2
8 .0
8.9 - ■
.8 .2
•
7.6
-

7 .0
6.3
5 ,2 ;
5*6
5 .1

38.2
H0.2
Ho.5
H1.1
Ho. g

H.2
■: ■ 3 *H
3 .1
3 .0
: ^*7 •

39-9
-.36.0
36.1
36.9
36.1

6.H
k

.9

5 .0
'5.-1 .
.5.6 .

.6.H
■5.I
6 .8 , . ... 5 .0
•5-7 • v H.b
5 .7
. . H-7
5 .6
' H.2

5 .6
6,0
. 6 ,3
6.-5
, 6 .7
5-8

5 .1
5.i
. l 4.5
... H .l
U;o'
3 -S>!

‘

38.0
37.1
37.2
38.0
37.9
39-6
Hl.O
H3,2
H2.0
.H3.S
■39-^

Treasury Pép artmen t , D iy i s i on •o f Tax Re se arch
Source'; ' Annual Reports o f : the Commissioner o f Inte m a l Revenue *

*1

.

\

1J Prior to 1931 production of scrap chewing tobacco was included 'with figures
for smoking tobacco.

are presumably concentrated, l/ Within the. principal price classes
most of the manufacturers se ll their products at substantially the same
price and published information indicates that these prices are not
changed frequently. In general» the large producers of chewing and
smoking tobacco have not sought to price their products under fa ir
Trade Acts J3/ and in some instances have taken steps to induce retailers
to lower their prices, particularly in the case of smoking tobacco. Zj
The producers of snuff have long-established brand names and in certain
market areas one company often has most of the business. There has been
l i t t le evidence of price competition in the industry, but efforts have
been made to promote sales by the distribution of samples. 4/
On the basis of the information available i t appears that prices
of manufactured tobacco have followed the general pattern of changes
in cigar and cigarette prices* Hetail prices of chewing and smoking
tobacco declined by about 10 and 30 percent, respectively, during the
1920*s and by approximately 10 percent more during the 1930*s.
(Table 2) Present prices are from 20 to 30 percent above the 1939
levelo The price of tobacco leaf which represents the largest element
in the cost of manufactured tobacco has fluctuated much more than the
prices 6f finished products. Prom 1936 to 1943 the cost of this raw .
material rose from 22*3 percent to 38.5 percent of the net sales price
(exclusive of . Federal excise tax) for certain producers of manufactured
tobacco* (Table 3) Operating profits of these Companies, which were
relatively stable from 1936-1941, had declined substantially by 1943.
B* Character of demand
As a group, the products classed as manufactured tobacco constitute
the second largest form of tobacco consumption* However, neither smoking
1J It has been stated that in 1939 the smoking tobacco sold by the
four leading cigarette producers under their six most popular brand
names amounted to 45.percent of a ll the smoking tobacco produced
in that year» (Data compiled by Elmo L . Jackson^ for doctoral■thesis
for Harvard University from stenographic transcript United S.tates
of Airierlea et al v s American' Tobacco Company in the D istrict Court,
Lexington, 'Kentucky,., 1939*, )■ ~
...
2/ Federal Trade «Commission, Report on Resale Price Maintenance, 1945,
Pc 454.- Snuff also is rarely Rfa ir—traded** 1
; ■■
3/ Federax Trade Commission, Agricultural Income Inquiry, Part I,
pp* 506-508c See also respondent-s brief in American Tobacco
Company et al vs* United States of America. Locket Uos* 9137—9139,
Sixth Circuit Court of Appeals.
4/ Ib id ,t pp„ 473-475»

Table 2
Average retail price of pipe tobacco and plug chewing tobacco
and average wholesale price of snuff, 1920- 1921 , 1926-1946
(in cents per ounce)
, Year

Average;retsd l price 1 / ■ :
chewing :
Pipe tobacco :: Plug
tobacco
-

i

192b ¿/ ..... :
>1921: ;■
* 1926 :
11927
192s
* 1929 ' ‘
- 1930 * . . . .

mi

.4

1932
1933
193*+

8*9

..

...
.

19^3
%shk
19145
•1946

.

6,5

6.7

, - 6.9

1940 :
. 19^1

..

7 . 2 '1/
.7.2
• 7 .2 :

6*6
.6.9
- 6. S
.6.7
6 .5

. 1935
193S

•:

: 7.1
. 6.-9

..

•1937
193S
•M 939'

•S . 7 ’

•

: \

\

'

Average wholesale
price of snuff 2/
(per oz. )
w

7*8
7-9 :
7. 3 1 /
7*2
7*2
7*1 '
6 , 9'

: 6 .S
- 6.6
.. m
6.3
. 6 .3
6.1
v

U .9
4.9

• - 4'. 9

. . :. 4

>+.9

4.9
• 4:»9
¡+.9

•

6.6 •
• 6,4 ' '

■•
'

%/

'

.

4,5
4.2

,
-

6*5 ^ ' > 5/
•
„
6.5 A . 4
. 6.5 ' •
Ç/
'
- 6. 5, '
-%
'
■
. 6 *5'. •■' "
.
© ••
•
. 6.7
5/
7*6
7-3

v

• 4.9,
. 4 .9
•4.2
-,

■*

.

.
.

4.2
.
4.2 * ' '
•4.4
4;4
4.4
4.4
4.6

Treasury Department, .Division of Tax Research
Sourest' Department of Labor, Bureau of Labor S ta tistics. Retail prices
for 1920-1934 are published in Retail Prices, May 1936» P* H î
for 1935 -* June 1937 in Monthly Labor- Review, December 1937»
-J
p. 156 S; subsequent prices are published by the Department of
'
Agriculture in the Annual Reports, on Tobacco S ta tistic s, .
Wholesale prices.are published by the Department of Agriculture
in the .Annual Reports.p'n- Tobacco Stati s tic s .
Note: Products not priced, 1Q22-1925..
1/ Simple average of prices for sample periods during the year,- . In some
years the prices were taken only on two dales, sometimes on three,
:* and sometimes on four. The prices are for 32 large c itie s . Approxi­
mately four dealers in each city are asked to report the price of
their largest selling brand. The average price in each city is
weighted by the population of the metropolitan area in computing the
overall caverage for each sample dale.
Zj Simple average of weekly prices. Delivered l is t price based on one-half
gross of 1-1/2 ounce cans of dry, sweet snuff.
3/ Priced only in December,
2/ Not priced.

213
- 52 ’ ' '.T&ble 3

Leaf
Casing
Labor
Wrapping material 1
Other costs
Profit l/

100.0
' 22.3

—4

100.0 ' 100,0 ~100.0

22.8
6.1
9.8 • • 10.3
1U.1
1 l'4.0
52.1
■21.5
26.3*' v 2h.6
6 .1

100.0

1Ö0.0
cr>04 oi -prvo vji

j sales (exclusive of
Federal excise tax)

1936

■
1■
?Percentage’ <bf net' sales
‘
Ì9U3
19Ul
r
■
■
1
9
3
9
:
1938 ’ i

tei

Item

[h1

. Selected cost items and profit margin for chewing
an$. smoking tobacco "aS:a percent of net -sales for* ‘ ;!i
selected mantifacturers, 1936- 1939 » 19^1 ana 19^3 •
:

2 9.O .
38*5
29.O • 27.3
■5 .2 ' 5-3
,■ 5*9
- 5 »3 ■
•11 .k
8.7' • - 8.69*3
12.6: - 12.5
-A .10*3
' 13a
2 1 .U- 21 ¿8
• 2 0 .3
2Ò.5
13.6
22,8 .
22.8 • 2h.g

Treasury Department, Division of Tax Research

;

Source: ' Department of Agriculture,: Marke ting and. Manufacturi ng Margins
for Tobacco, Technical Bulletin Ho.. 913»' March 1946T Based on
data assembled by the Office of Price Administration.
Hoter Comparison with 'the Census' of 'Manufactures: 1937 and 1939indi,cates that the manufacturers included -in the-: sample sold, about
28 percent of thè total value of chewing and'smòking tobacco?.
1/ Operating profits before deduction of income tax and interest..

- 59 -

nor chewing tobacco, the largest items in the group* is now as important
as cigars in terms of leaf tobacco used* For many years manufactured
tobacco was the most common form of tobacco consumption* but apparently
changes in social attitudes have affected consumption substantially*
ihe convenience and social acceptance of other forms of tooacco consume—
tion have tended to make the demand for manufactured tobacco more largely
dependent upon the income status of the.consumer and the traditional
use of tobacco in a particular form* There is a certain amount ox compe­
tition among the various manufactured tobacco products but smoking tobacco
probably is the only one of these which is substituted to a significant
degree for cigars and cigarettes*
Aggregate consumption of manufactured tobacco has declined from
the peek reached in 1918 by approximately 50 percent., (Tabxe l) ¿here
was a sharp decline shortly after the close of World War I* followed
by a gradual decline.during,the next SO years and a further drop since
the close of World War I I . ' Most of.the decline prior to 1941 appears
to have occurred in chewing tobacco* while the more recent decline is
largely attributable to the drop in smoking tobacco. 1j Consumption of
snuff has remained substantially unchanged for about 30 years* On the
basis of per capita figures a ll forms of manufactured.tobacco have been
declining for a considerable period of time* 2J The differences in the
long-term trends of consumption of the three types of manufactured
tobacco indicate some variations in responsiveness to social changes«
The stab ility of the demand for snuff has peen associated w ith,its
traditional consumption by certain low income groups and .persons of
certain national origins* These groups have exhibited a strong haoit
tendency, but have become relatively less important-with the growth in
population and increase in the level of income* The striking change
in the consumption of chewing tobacco coincides.more or less with the
development of popular priced cigarette blendsc At the same time impor­
tant changes occurred in standards of public health and personal
appearanc eZ
1/ Prior to 1931 the production of scrap chewing tobacco was reported with
smoking tobacco* Although the total had not declined significantly
since 1918, i t is possible that there was a decline in scrap chewing
and .an increase in smoking tobacco» Because tax-paid withdrawal's
are not given in detail consumption of different types is based on
production figures*.
2/ It has been estimated that'per capita consumption reached its
peak around 1909* (Department,of Agriculture, Annual Report on
Tobacco Sta tistics. 1942* Washington, 1942, p* 82*)

Totcol consumption of manufactured tobacco has not fluctuated much
in response to changes in income, but there has been more fluctuation in
some forms than m others* With the decline m incomes during the de­
pression the drop in chewing tobacco was accelerated slightly,. Analysis
of data for the years 1927- 19^3 » however, indicates that most of the
change corresponded to the long-term downward trend, 1J It is generally
believed that during periods of low income smoking tobacco is substituted
for factory-made cigarettes, particularly through its use in making
roll-your-own cigarettes. 2/ However, the data in Table 1 indicate that
any shift of consumers from factory-produced cigarettes to roll-your-own
was not a largo enough factor to increase the total consumption of smoking
tobacco substantially during the depression, although i t may have pre­
vented a decline in the total use of smoking tobacco.
The changes which occurred during World War II may in part have
been associated with the rise in incomes. Smoking tobacco declined in
importance while the volume of chewing tobacco and snuff increased* It
is likely, however, that at least some -part of the change is attributable
to the fact that production for war purposes, under strict security
regulations, included restrictions on the smoking but not on the chewing
of tobacco. Since the end of h o stilitie s chewing tobacco consumption
has turned downward again although income has risen above wartime levels.
Shortages of cigarettes and cigars may have sustained demand for smoking
tobacco during the latter part of the war. The recent large decline in
the consumption of smoking tobacco suggests that consumers do shift to
higher priced forms of tobacco when incomes improve.
The effect of the price changes upon the demand for the different
types of manufactured tobacco is even more d iffic u lt to ascertain than
the effect of income changes. Except for the increases during the past
four years quoted prices have changed l i t t le for a number of years.
(Table 2) Manufactured tobacco provides the cheapest form of tobacco
use and the average cost is considerably below the cost of cigarettes
which is the next cheapest form of tobacco use. ¿/ In view of the large
On^the basis of income data reported by the Department of Commerce. f.
prior to the revisions published in the Survey of Current Business
July 192+7.
------ —------------------ ’
2/ It has been estimated .that roll-your-own cigarette consumption
increased from 12 b illio n in the fis c a l year 1929 to 50 b illio n in
fisca l 1933» (Hearings before a Subcommittee o f the Committoe on
Ways and Means, Tobacco Taxes, 73rd Congress. 2nd Scasinn, p_ me,
Committee Print-Unrevised.) The increase in withdrawal of cigarette
papers during the early 1930 * s has been taken as evidence of this.
However, i t is d iffic u lt to determine the significance of the changes
in these figures,
3/ On the basis of consumption of one ounce of smoking or chewing tobacco
per day, which would constitute "heavy use," the medium priced prod­
ucts would cost less than one-half the price of a package of standard
brand cigarettes.
if

-

61

-

difference in cost, it is cloubtful whether a change in the price of
nanufactured tobacco relative to other forras of tobacco would induce
very significant shifts in consumer choice unless the change in price
were large. Moreover, because of the low cost and the importance of
habit and; social considerations, a price change alone is not likely to
have a relatively large effect on the decisions of new consumers to
start its use or of existing consumers to increase or curthil their
consumption. .
’
•
.
.
-,
C. Outlook for the industry
■iartime conditions appear to have interrupted the downward trend
in the use of chéwing tobacco and. given some stimulus to the use of
snuff, but since the close of the war consumption of these items has
tended to conform to the prewar pattern. The use of smoking Tobacco
which was reduced during the war has declined further and now is only
about half the prewar level. Por the1fir s t 10 months of. 19U7 pro­
duction was .slightly higher than in the corresponding period of 19^6Unless fundamental changes occur in consumer habits, the outlook is
for a long-term declinp .in chewing tobacco and a fairly- stable level
for snuff. The future trend of smoking tobacco is le ss clearly indicaled but i t is probable that its use w ill fluctuate in response, to
consumer needs for a lower priced form of tobacco.
In addition to the decline in consumption, the industry together
with the producers of other tobáceo products has experienced 'large
increases in costs over the prewar lev el. In the purchase of tobacco
leaf, the most Important element in costs,, the industry must compete
to some extent with'cigarette and cigar producers. Tobacco prides for
the 19^7 crop are somewhat higher than for I 9 U6 and the present loan
rate is much higher than the prewa.r price. 1/ Moreover,, in addition
to large increases in wage rates, output per man-hour declined during
the war. 2/ The industry apparently has not raised prices to the extent
of the higher wage and tobacco leaf costs.
. . .
V.

Effects of the tax
A.

On profits

1ro|i—
*

The tax ralo^of IS cents per pound represents different percentages
of price for diffcrent. types and grades of tobacco and sizes of container.
At present prices, the tax amounts to about 15 percent of the retail price
/ The Tobe,cc0 Situa,t ion, January 19^-S.
/ 7or 19H5 it was 13 percent below the 1939 level.- This may have
respited from conditions ^peculiar to the war, but ln.tcr data
are not available. (Department 5f Labor, Productivity and Unit
Labor Post in Selected Manufacturing Industries, 1939^19^-5»)

221
-

62

-

(tax included) of the common "brands of smoking tobacco and .a slightly
lower percentage on chewing tobacco. 1 / The tax rate has not been
changed for nearly 30 years. During this time the industry has been
faced with a long-term downward trend in. the consumption of its products.,
which prior to the war resulted in a substantial reduction in the .
production of chewing tobacco. The tax.may have added to the pressure
for curtailment of production, but the fact that the rate of tax on
manufactured tobacco has been relatively much lower than the tax oil
cigarettes has not prevented a decline in the consumption of manufactured
tobacco. A reduction in the tax and in prices to consumers (tax included)
probably would not change consumption appreciably. A'reduction in tax
not reflected in lower prices to consumers would afford some re lie f to the
industry.. This re lie f would tend to be temporary because in most phases
ef the industry further reductions in capacity must be made as the
consumption of these products decline. A tax reduction might postpone
but could not prevent the need for ultimate withdrawal of investment
which appears to confront the industry.
As noted in Section IV, above, a substantial part of production is
accounted for by the large producers of cigarettes. Because of the . .
expansion in cigarette consumption, the decline in manufactured tobanco
is of relatively small importance to such producers. Any a.dversc effects
of the tajf are a more serious consideration with respect to the positionof the smaller specialized producers.
3.

On competition

The tax does not appear to discriminate against this .form of tobacco
consumption. I f the present amount of revenuo,from a ll tobacco products
were to be raised from a fla t tax per pound of lo af tobacco used, the tax­
on manufactured tobacco would be much higher than at present. In the
calendar year I 9 H6 the industry used about 13 percent of the leaf tobacco
consumed by domestic producers while the Federal revenue from its
products was only 3*7 percent of the total for tobacco.
The fla t tax per pound is probably less equitable than an ad valorem
tax would be but several factors tend to prevent the fla t tax from having
an adverse effect on particular producers. The bulk of chewing tobacco
and snuff sells at about the same price. While there arc substantial,
differences in the prices of smoking tobacco, the larger producers usually
have brands in different price classes. Where there is specialization in
one product by smaller producers it is frequently in the higher priced
product which would be adversely affected by an ad valorem tasr.
1/ Computed from Table 2.

0« On consumers

63

-

v

;
.

Expenditures on manufactured tobacco ?„re relatively higher among
low income families and rapidly decline in importance as the size of
family income rises. A study of consumer expenditures for 19^-1
indicates that the proportion of income spent on smoking and other
manufactured tobacco was five times as large for families with incomes
of iess than $500 compared with families having incomes of $1 ,0 0 0 to
$1 ,5 0 0 and twenty times as high, as for families with incomes over
$2,000. 1/ A subsequent study for I 9 HU covering only urban areas
showed £ similar pattern of expenditures. 2j To the extent that this
tax is passed on to. consumers i t is apparently highly regressive.
Because of the apparent small effect of fluctuations in income
on total consumer expenditures for manufactured tobacco the tax
withdraws relatively much more purchasing power from the income stream
in periods of low business activity than in periods of high business
activity. In the case of smoking tobacco there is some indication^
that tho tax may absorb a larger absolute amount of purchasing power
in periods of low business activity than in periods of high business
activity.
*■
Aggregate consumer expenditures on manufactured tobacco have only
a small weight in the Bureau of Labor S ta tistics 1 Index of Consumer
Prices and it is estimated that the tax increases the Index by less
than »05 of 1 percent.
V I.

Administration end compliance

The taxes on manufactured tobacco and snuff do not often give
rise to d iffic u lt a.dministrativo problems. Ho important Changes in
tho tax havo occurred for many years and procedures have become well
established. There axe only about UOO taxpayers involved. ' The
detailed records required of manufacturers provide a close check upon
their tax lia b ilitie s but involve more work than is necessary to make
tax reports on most excise taxes.
iy Bureau of Labor S tatistics, Paraily Spending and Saving in
Wartime, Bulletin Ho, 822, Washington, 19^5, p . TS 5 ; Department
of Agriculture, unpublished data,
2 / Unpublished data of the Bureau of Labor Sta tistics.

VII*

Technical problems

Few technical questions arise in connection with the tax on manu­
factured tobacco, but it may be necessary to give consideration to the
treatment to be accorded floor stocks in the case of a change in tax rate.
Ho tax was levied on floor stocks when the rate of tax on manufac­
tured tobacco was increased in 1Q1J and 1Q1Q. 1./ A tax increase without
provision for taxing floor stocks would encourage wholesalers and
retailers to add to their inventories in order to avoid the higher rate*
A floor stocks tax probably would be ju stified in the ca,se of a substantial
increase in the rate in order to prevent undue losses to the Government.
The desirability of providing refunds in the case of tax reduction is
less clear. It would depend to a large extent on the size of the reduc­
tion. A decrease of only a few cents a pound would not be large enough
to be reflected in the retail price of most pocket size containers. A
large tax decrease, however, would tend to be reflected in r e ta il prices.
While there has been no recent floor stocks tax which would give an indicsrtion of the magnitude of inventories of manufactured tobacco, it is believed
that the situation is comparable to that revealed for cigars in 19^-2 where
it was found that the inventories were larger relative to sales than in
the case of cigarettes and most of the tax-paid inventories were in the
hands of wholesalers and retailers. In the absence of a refund, retailers
probably could reduce normal inventories somewhat, i f they were able to
secure deliveries from wholesalers on a reasonably prompt basis.
The, administration of floor stocks returns would be d iffic u lt because
of the-large number of returns involved. 2/ The handling of refunds re­
quires careful, work in checking the accuracy of the claims. A substantial
reduction in' the number of returns to be processed could be achieved by
restricting refunds to those in excess of a minimum dollar amount, but
this would be discriminatory against small dealers. Administrative
problems would be reduced by limiting refunds to producers and wholesalers.
Instead of providing for refunds it might be desirable to have producers
take back from distributors stocks tax-oaid at the higher rate and re-stamp
such goods at the new ra,te of tax.
1/ The increase in tax-in 1Q17 was not accompanied by a floor stocks
tax, but provision was made for.an additional tax, equal to 50 percent
of the increase in tax, on withdrawals during the period between the
date of the passage of the Act and its effective date.
2/ Henrly ^00,000 returns were received for the floor stocks taxes on
cigars and cigarettes in IQbp.. It is believed that practically a ll
of these dealers handled manufactured tobacco.

- 65 -

PART IT

-* Excise Tax on Cigarette Papers and Tubes

I® D.escrj-ption of the tax

'

.

The tax is imposed on cigarette papep made up into packages*
booksg sets, or tubes*.
'*
The tax applies to the sale by.the manufacturer or importer* On
imported cigarette papers and tubes the tax is collected at the time
of removal from customs custody* The tax on cigarette tubes produced
by domestic manufacturers is paid by purchasing tax stamps to be affixed
to packages prior to removal from the place of manufacture* while the
tax, or cigarette paper made up into books is paid on the basis of a
monthly return®. 1/
The following are exempt from tax:
1 ?'

Sales to a manufacturer of cigarettes for
use in the manufacture of cigarettes.
2® '
■Export sales*
3* Packages, books or sets of papers containing
not more than 25 papers.
.4« Glosed-ehd tubes sold to others than manufacturers of
. cigarettes* 1j
11 *

.Changes in the tax since 1917

The tax on cigarette paoers and tubes was imposed by the Revenue
Act of. October.3,. 1917* The Revenue Act of 1918 modified the unit
of taxation; slightly, but no changes have been made since then®

The .present rates .are as followss
(a)

On papers made up into books, etc:

26-50 sheets . . . . . . ---- . . . . . . . . . .
51-100 sheets ........ ,........
Each additional 50 sheets or *

fraction th ereo f..............
(b)

1/2

cent

1 cent

l/ 2 cent,

On tubes:'
Each 50 tubes or fraction' thereof.. 1 cent

223
-

66

-

I I I • Revenue collections, 1956 - 1947
The tax on cigarette papers and tubes produces a very small propor­
tion of the total collections from tobacco taxes« In the fisca l year
1947 the collections from this tax were only about 1 percent as much
as the'collections from manufactured tobacco, the next smallest source.'
of tobacco revenue*
*
Collections, fisca l years 19'36 - 1947
(In' thousands)
. Fiscal . Total
year ♦
1936
1937
1938
1939
1940
1941

$ 1,282
1,116
1,183
1,494
1,279
1,431

.

Papers
$ 1,269
1,103
1,171
1,478
1,252
1,408

•
••
\.t
♦Tubes •*’•F iscal’’1 Total
'■] year
£-9
9
$ 13
13
; 12
16
27
23

1942 $
1943
1944
1945
1946 \
1947

1,961
1,473
1,164
1,390
1,758
539

.Papers » Tubes
C
*
$ 1,942
1,465
1,159
1,370
1,757
538

$ X9V
8
5 'v
20 •
1
X

IV* Production and use of cigarette papers
Prior to the war most of the cigarette paper used by cigarette
manufacturers or prepared in books or packages for use by consumers
was imported, but it is now largely produced -in this country. 1/ Some
of the paper was imported in the form of packages or books* On the
basis of reports to the Bureau of Internal Revenue, there are only
three important domestic producers of cigarette papers in package form
and two domestic producers of cigarette tubes* There are three importers
of cigarette papers packaged abroad. Tax-free packages of cigarette
papers distributed by tobacco manufacturers are generally purchased
from independent producers of cigarette papers.
l/ Tariff Commission, Cigarette Paper. War Changes in Industry Series
Report Ho, 11, 1945, p. 1.

V

- 67 -

Consumers who make their own cigarettes must purchase cigarette
papers unless they are provided in connection-wi th the tobacco used for
this purpose. The papers purchased are generally, tho'se subject to tax.
Tax-free papers are usually distributed in connection with smoking- tobacco
customarily used for making cigarettes. The number of cigarette papers
tax-paid has never been large compared with the total number of factory- :
produced cigarettes. 1J Since 1929 the number of tax-free books or
packages has exceeded the number tax-paid. (Table l) However, a ta x -.
free package may not contain more than 25 papers while in recent years
i t appears that the tax—
paid packages have on the average contained
about five times this number.. On the basis of this ratio, it appears
that the number of tax-paid papers was larger than the.- number withdrawn
tax-free in the years 1929- 1931 * but has been ’smaller .for subsequent years.
The number^ of tax-free packages increased greatly after 1931 and-continued :
at a high level prior to the war. 4.Tax-paid packages declined for several ■
years after 1932 and have exceeded the 1932 level in only.two subsequent
years. The number of tubes used has'never peon large in relation to the
number of papers in package form. The exemption of packages containing
not more than 25 papers does not apply to cigarette tubes. V'
V. Effects of the tax
^The present tax amounts to from 20 to 30 percent of the reta il price,
tax included, of the common brands of tax-paid cigarette papers sold. 3 /
This nay be sufficient to induce some consumers not to purchase papers.
Tax-free papers are included with most brands of tobacco used for ro llyour—own cigarettes. Some consumers pr'efer to purchase papers because
1/ The-maximum number of packages of cigarette papers tax-paid &inc<a
1917 was I 37 million in the fisca l year 19^-2. Assuming that the ,
average package contained 15 Q, papers, or slightly more, than is indi-"
cated by the average iax/ only.'about 20 b illio n cigarettes could have
been made i f no papers were wasted. Thus, on the basis of the maximum
possible use, this would no/t represent more than 9 percent’ of the
factory-produced cigarettes tax-paid in that year.
2/ Complego information is no.% available prior to 1929 . I t is generally
assumed that the number of papers in tax-free packages does not
average more than 15 to 20. On this basis the number of papers in
. each class ha.s been approximately the same in recent years.
1/ Depending upon whether the package contains* 100 or 156 papers.- Sinco
abcub 1932 the-larger proportion of thb books tax-paid apparently has
contained 150 papers.

- 68 Table- 1 .
Tax-paid and tax-free withdrawals of cigarette papers
and tubes, f i seal ■
years 1929 - 194ft .
(in millions)
Papers
Tubes
1
year ♦
• Total t* Tax-paid o1 Tax-free... +
* Total * Tax-paid Tax-free
•
»
(Humber of packages» bo-sks, or sets 1])
(Humber) .
1929
1930
1931
1932
1933-

423*7
254*6
335*9
l p388o9 .
1,983*3

1934
1935
1936 ,
1937 ;
1938 ’

2 g538*6

2,758*6
2,953*0
2,791.7
2,036.9

68.9
71.1
91*4
79*4
83.7

1939
' 1940
1941
1942
1943

2,267*5
2,365*2
1,734*3
1,745*4
1,043.7

106.0
87.9
101.3
136*7
102*8

1944
1945
1946
1947

959*0
1,018*9
788.2
. 622.2

81.2
103.1
130.7
39.8

107.7
118*6
124*4
127.7
67.7

316.0
51*8..
136.0 * 45c 8
58*4
211*5
1,261.3 290*4
1,915*6 218.5
2,469.8
2,687*4
2,861*6
'2,712*4
1,953.2

100*5
87„ 6
83.8
85*9
76.9

r 2,161.4
95*9
2,277.2 145*8
1,632*9 137*3
1«6.08*7 108*9
940*9 . 58.9
877.7 .
915*8
657.6
582.4

32.0
98*6
25.1
15.9

15*9
16*0
19.0
276*6
197*6
77 *3
61A
64*7
65*5 :
58.4

35*9
• 29.*8.
39*4
13*9
20*9
23*3
26*2
19*2
20*4
. 18*6

76*4
137.5
119*2
90*6
43*6

19.5
8*3
18,0
18tt3
- .15*3

24*2
92«5
15.3
9.4

7,9
6*1
;■9„9
6*5

Treasury Department, Division of Tax Research
Source: •Annual Report of the Commissioner of Internal Revenue for the
Fiscal Year Ended June 30,. 1938, 1940, and 1946* .
sj ine number ,of papers'in a package is. not uniform. Tax-free sets
of papers may not contain more than 25 papers» but there .is no
' limitation on the number that may be contained in tax-paid packages,
2/ Open-end tubes withdrawn for use by cigarette manufacturers or for
export, and closed-end tubes withdrawn for use by others than regis*
tered manufacturers of cigarettes*

2/

of a difference in. quality or convenience of the package. Where tax-free
papers are not included with smoking tobacco, the tax on purchased papers
may induce* some consumers to shift to brands that provide papers. However,
it probably does not materially affect the total number of papers used
or the amount of manufactured tobacco purchased for making cigarettes-. 1J
The tobacco used represents the bulk of the cost of cigarettes in this
form even when tax-paid cigarette papers are purchased by the user. Sub­
stantial savings are possible to ¿the consumer in mailing his own cigarettes
compared with the purchase of, factory-produced cigarettes. 2j The
difference in cost arises principally from the.lower taxes oh manufactured
tobacco, 3J
The tax may have some discriminatory effects on producers. Tobacco
manufacturers limit, the number of papers in the packages included with
their product to the permissible number for a tax-free package. Those who
desire to provide more than 25 papers with a unit of tobacco have .followed
the practice of including two packages of 25-papers, or less, in order to
avoid the tax-. It is not practicable for producers selling-papers
separately to distribute them in such small packages and as a result the
common brands of cigarette papers sold are taxable. Domestic producers
arc engaged in producing both tax-free and tax-paid papers but the packages
imported are largely taxable. Since no exemption is provided on cigarette
tubes sold to consumers the present tax nay adversely affect the sales of
tubes relative to papers. The specific rate of tax on tubes is also
higher than it is on taxable papers, but the tax may be no higher in
relation to the; retail selling price.
While there is no direct evidence on consumer expenditures for
cigarette papers by income groups, it is probable that the distribution
is similar to expenditures for manufactured tobacco which appears to be
very regressive, h/ The tax also places those consumers using manufactured
tobacco for pipe smoking in a. more advantageous position than those who
11ro ll their own*M .
1f The exemption may result in some waste of cigarette papers.
2/ The amount of the tobacco contained in a standard package of
cigarcttoS when purchased in a package of cigarette tobacco of the
leading brands costs les's than one-half the price of a package of
cigarettes. After allowance for substahtia.1 wactnge the cost
probably would not greatly exceed onc-half.
3/ Sta,te taxes as well as the Federal tax pro lower on smoking tobacco
than cigarettes. As of July 1, 19^-7 only 9 States taxed smoking
tobacco, compared with 38 taxing cigarettes ( Treasury tax study,
nFederal-State Tax Coordination,n July 19^-7) •
U/ Part I I I , p. 6 3 .

225
- TO In the early stages of the depression the number of tax-paid
vrithdravals of cigarette papers increased, but with the rapid expansion
in the supply of tax-free papers made available the number tax-paid
declined by nearly 50 percent. The number increased subsequently, but
there has been no clearly defined relationship between tax-paid, taxfree/ or total withdrawals of cigarette papers and changes in the
level of income.
?!',

Administration and compliance

There is only a small number of producers and importers from which
this tax is collected, and no serious problems have arisen either for
taxpayers or the Bureau of Internal Revenue.

- 71 PART Y - Comparison of Tobacco Taxes in the United States,
Canada and United Kingdom
X. Limitation- on comparisons
International comparisons' of excise- taxes present numerous
d iffic u ltie s . The form in which the' taxes; are imposed may not he
the same for each country, the, products taxed may not he stric tly
comparable, while differences in internal prices and'consumption
patterns prevent an accurate indication of the relative burden of
the.taxes compared. Although the Canadian taxes on tobacco are
somewhat similar in form to those of the United States, in the case
of the United Kingdom i t has been necessary to derive taxes for the
finished products from those imposed on the raw material in order to
place the taxes on a comparable basis.
With' these limitations the comparisons presented below can be
used as an approximation of the range of taxes imposed on tobacco
products by thè central governments in the three countries. Customs
duties in the-Uni ted States and Canada have not been considered,
because they are imposed in addition to the internal taxes. It is
necessary to refer to British customs duties, however, because tobacco
is largely imported. The comparisons presented do not take into
account State excises and sales taxes in the United States, Provincial
sales and excise taxes in Canada., the Canadian Dominion manufacturers1
sales tax of 8 percent, and the British Purchase Tax. Conversion of
foreign taxes to United States dollars has been made on the basis of
o ffic ia l rates of exchange, l/
II.

Types of taxes levied on tobaccó
A.

Canada,.

As in the United States, tobacco taxes are imposed by the Dominion
Government in Canada at different rates on different types of tobacco
products. Uith the exception of cigarette papers and tubes both an
excise duty and an excise tax are imposed on each type of product. The
11excise duty” is an internal tax and is to be distinguished from the
’’customs duty.” The present rates are as follows:
if

The o ffic ia l rate on the British pound "is .03, but for convenience
conversion is made on basis of an even $U.OO. Since the. o ffic ia l
rate of exchange on the Canadian dollar is at par no conversion is
necessary in this case.

Cigarettes
Weighing not more than
2o pounds per M . . . . . . . . . .

$ 6 per M

' 2^ for each 5 cigarettes
or fraction

Weighing more than 2f>

pounds per M . .. .....................
.

$ 11 per M

2^ for each 5 cigarettes
or fraction

Cigars ......................

$ 1 per M

25°/° of mfrs. price a/

Manufactured tobacco
and snuff .............. .....

35^ per lb»

2jé per oz. or fraction b/

Cigarette papers ............

-

Cigarette tubes ........ -... *

-

per package of 100 or
f raction
lH^ per package of 100 or
fraction

Statutes of I93U, Chan. 52; Statutes of
Chap. Ug; and
Excise Tax Act, IQU 7 , Secs. 77A and SO, Schedules I and II.
a/ In determining the value for excise tax purposes, the excise duty
of &1 per M cigars is included in the manufacturers 1 selling price.
On imported cigars the excise tax is based on the duty-paid value,
b/ The tax is based on the amount of tobacco in the retail package,
fractional parts of an ounce being taxed as a full ounce.
Source:

The cigarettes most comparable to those commonly smoked in the
United States are those weighing not more than 2-* pounds per thousand,
n these cigarettes the combined excise duty and excise tax amounts to
$10 per thousand for cigarettes packaged in even multiples of 5 cigarettes.
If a package does not contain an even multiple of 5 cigarettes, the tax
is higher.
The United States tax on cigars most comparable to the Canadian
tax is that on large cigars. Although the taxes in both countries depend
on selling price, the comparative taxes will vary for .different priced
cigars. The tax portion of the Canadian excises is based on the manufac­
turers1. price while the United States tax is based on intended retail
price. Moreover, the former is a percentage tax while the latter is a
specific tax with bracket rates.

- 73 -

h^ne.combined excise duty and excise tax on manufactured tobacco
ar<d-siduff in Canada amounts to o~J cents per pound where the tobacco
is retailed in packages containing even multiples of an ounce. Where
the packages contain fractional ounces the tax would b e ’hi'^er i ' In
the .case of one-half ounce packages the combined excise' duty-and tax
would equal 99 cents per pound.
3. , United Kingdom

', i *^ • -;

7

~

C.

Although excise duties are imposed on tobacco in tho United
kingdom, because of the virtual absence of domestic tobacco production ,
most of the tobacco revenue is obtained from customs duties, i f
The
duties vary according to the weight and moisture content of the tobacco.
Since the duty on cigars and cigarettes is much' higher than the duty
on unmenufactured tobacco inroorts of manufactured-products arc un­
important. 2/ Customs duties on unmanufactured tobacco are as follows; 3J
Duty per pound a/
Pull
Preferential
rates
>
' . raies...

Description of tobacco
Containing 10p or moreof moistureUnstripped
. Stripped

$ 10.97
IO.9S

$io.S6

Containing- less than .10$?
of moisture ■
■ Un stripped - •
Stripped-

. .11.17 .
.11.18

• 10 .S3

Source:
- ' . -

3

Mfpo

10.83 b/

and Pirst Schedule,

'■

Pindldy Sliirras .and L . Rostas,. 'The' Burden ‘ of BrTtish Taxation,'
Cambridge? 19^3, p. 127;
.
™7~ " ' -' ’' .

/ ibid. ' ,;;;;

/

Sec. J ,

-

10.66 b/

■.?. a/ British sterling converted to dollars on the basis of
to the pound.
b/ She ra.te oh 'stripped' loaf is 3'/Sd higher than on uii- >
stripped leaf, but due to rounding this difference is
not evident after conversion.
.

.

b

Kinanco Aht,
Part I .

•3% , !if : ./ |

7 V;

^

j 3.V7'\

iio tax is imposed bn'cigarette papers or .tubes.

f

\

,

. ,:
M

;

lp

m

r

MHH Wmm

W im m

997

■■ ■

The rate of duty which is generally applicable in' deriving'the
tax for cigarettes is that on non-Empire le a f. containing 10 percent
or more of moisture, 1/ .The number of cigarettes obtained from a
pound of tobacco varies with the size of .the cigarette* On. the basis
of data for i 9 Ul-H2 .it was estimated that there were 520 small British
cigarettes or U-20 middle-sized cigarettes per pound. On this basis
the duty is equivalent to about $21 per. thousand on small cigarettes
and $26 per thousand on middle-sized cigarettes, or U-2 and. .52 cents
per package of 20 cigarettes, respectively. On the basis of con­
sumption of about equal proportions of the different sizes in 19U1 - •
I 9 U2 the average would be kj cents per package. 2/
Information is pot available on the extent to which Empire and
non-Empire leaf is used in the manufacture of cigars in the United.
Kingdom nor on the average weight of cigars. In the United States, the
amount of tobacco used per thousand cigars
about 2U pounds.’ Be­
cause of the high rate of duty it is. possible that the ave rage weight
of cigars is lower in the Uni ted Kingdom. Assuming the United States
ratio, the duty equivalent per 1 ,0 0 0 cigars would be $256 oh cigars
made from Empire leaf and $2'60 on cigars made from hon-Enroire le a f.
It appears* that chewing and smoking tobacco are manufactured ;
principally from Empire le a f.
The duty represented in the manu­
factured product would vary according to the amount of moistening and
flavoring agents mixe.d with the tobacco le a f. . Information on this
point is not available for British tobacco, but in -the.United States
in recent years only .-about two-*thirds of the'weight of smoking and
chewing tobacco products has consisted of tobacco. On this basis the
duty in the United Kingdom would be $7.10 per pound of manufactured tobacco
where a ll Empire leaf is used and slightly higher where non-Empire
leaf is used.
I • Comparison of taxes for selected-produets
The comparisons below are presented a.s far as possible on what
appears to be the common unit ’of consumption in each of the three
countries.
In the case of cigarettes the amount of tax. shown probably approxi­
mates the average figure for a ll consumption. The British figure, how­
ever, is based on 19UI-I 9 U2 consumption ihi ch may not be typical at the
present time.
17 Shirras and Rostas, op. c i t . , p. 127.
2/ Ib id ., p. 1 3 2 ,
1/ I-bid,, p. 127, Smoking tobacco was reported as averaging roughly
SO percent Empire le a f.

-75 cigars th e t y p ic a l s iz e or p r ic e i s not known fo r th e th ree
c o u n tr ie s . Consequently the com parative ta x e s are shown fo r c ig a r s
r e t a i l i n g at" d i f f e r e n t p r ic e s in th e U n ited S t a t e s . Because o f the
h ig h e r ta x e s in Canada and th e U n ited Kingdom the r e t a i l p r ic e o f
comparable c ig a r s in th o se c o u n tr ie s would be h ig h e r . Most c ig a r s in
th e U n ited S t a t e s r e t a i l at l e s s than 15 c e n t s . The w eight o f c ig a r s
in the U n ited Kingdom i s assumed to be uniform and th e r a te i s based
on the use o f a l l —Empire l e a f . The r a te would be low er f o r l i g h t e r
Weight c ig a r s and s l i g h t l y h ig h e r f o r c ig a r s made- from non-Empire
l e a f . S in ce th e p r in c ip a l p a r t o f the Canadian e x c is e on c ig a r s i s
imposed o n 'a n ad valorem basi.s i t . has been n e ce ssa ry to compute the
amount o f th e . t a x from assumed m a n u fa ctu re rs 1 p r i c e s . These wereo b ta in e d from th e r e la t io n s h ip between m a n u fa ctu re rs’ and r e t e d l
p r ic e s fo r c ig a r s ' in the U n ited S t a t e s , i^hich e x is t e d p r io r to the
te rm in a tio n o f p r ic e c o n t r o ls , i f M a n u fa c tu re rs 1 p r ic e s now are
p rob ab ly somewhat h ig h e r in the U n ited S t a t e s and may d i f f e r from
p r ic e s in Canada..

The amount o f ta x on m ahufactured to bacco i s a ff e c t e d by- the
s iz e o f th e package o n ly in Canada. In both the U n ited S t a t e s and
Canada th e t a x i s imposed on the b a.sis o f th e w eight o f th e nroduct
so ld w hile in th e 'U n ite d Kingdom i t i s based on the amount o f tobacco
used in the p ro d u ct. In th e absence o f in fo rm a tio n the amount o f o ther
m a te r ia ls co n ta in e d in m anufactured tobacco in the U n ite d Kingdom
i s assigned to -b e the same p ro p o rtio n a s in th e U n ited S t a t e s , •
_
The com oarative ta x e s fo r each o f th e types o f tajees le v ie d
by th e th re e c o u n tr ie s are as fo llo w s i '
*

'

' Amount o f ta x

U n ited
S ta te s

Cariada

U n ite d
Kingdom

C ig a r e t t e s ; (Package o f 2 0 )
W eighing not over 3 pounds p er M,,
W eighing not over 2^pounds p er M..
Average o f sm all and m id d le - s iz e d .*

if Maximum P r i c e

If
20 j

R e g u la tio n ^ N o. 260, Amendment ITo . 10. e f f e c t i v e
November 1 3 , I 9UU. ~
""

228
-

76

-

Amount o f ta x
U n ited
S ta te s

Canada

U n ited
Kingdom

C ig a r s i (Thousand c ig a r s )
R e t a i l p r ic e in U . S ,

••••••...... *
2 fo r 1 5 ^ . . . . . . . .
10jé
15)5

20p
^5)5 ................. ..........

$ u
7
1©
10
15
20
20

$ 9
12
15
22
31
3*
71

è 256
256
256
256

256

2e)&
2S6

Manufactured tobaccoJ (Pound)

In even-ounce packages . * .............................
P ack ages o f 'k ounc$ o, . . t ......................

IS

67)5
99

7.10
7.10

C ig a r e t t e pap ers and tu b e si (Package o flO O )
Papers
Tubes

U
2

l b

In in t e r p r e t in g the B r i t i s h taxes on tobacco i t should be re co g n ize d
th a t the ta x was g r e a t ly in c r e a s e d in 19^ 7 in an e f f o r t to conserve
d o lla r exchange. The C h a n c e llo r o f the -¿xcnequer, m h is xi.pia.
9 •(
Budget Statem en t, p o in te d out th a t the v a lu e o f to b acco p ro d u cts con­
sumed in G re at B r i t a i n was ap p ro x im a tely equal to the whole of the
t o t a l B r i t i s h ex p o rts to th e U n ite d S t a t e s . He went on to say • It- i s
q u ite c le a r th a t we are smoking much more, as a n a tio n , than we can
a ffo r d
. . . . I now th e r e fo r e propose . . . . . .
to make a v e ry *
steep in c r e a s e in the tobacco d u t y ............................." The in c r e a s e amounted
to about 5 ° p e r c e n t .

229
TREASURY DEPARTMENT
Washington

FOR IMMEDIATE RELEASE
Thursday, February 26, 1948.

Press Service
No. S-641

The Bureau of Customs announced today that preliminary
data on the tariff-rate qusta on potatoes, other than
certified seed for the quota year beginning September 1 5 ,
19^ 7 , show such quota to be approximately 75 percent filled
on February 21.
Collectors of customs have been instructed to collect
estimated duties on the entries for consumptidn of such
potatoes at the rate of 75 cents per cwt on and after March 1
pending determination of the actual date on which the quota
of 60 ,000,000 pounds is filled.
The tariff-rate quota on certified seed potatoes for the
quota year beginning September lg, 1947, was approximately
68 percent filled on February 21.

0O0

TREASURY DEPARTMENT
Washington
FOR IMPEDIATE RELEASE,
Friday, February 27, 1948

Press Service
No« S-642

The Secretary of the Treasury today announced the subscription and allotment
figures with respect to the current offering of 1—1/8 percent Treasury Certificates
of Indebtedness of Series C—1949, to be dated March 1, 1948, open to the holders of
Treasury Certificates of Indebtedness of Series C-1948, maturing March 1, 1948,
2 percent Treasury Bonds of 1948-50 (dated March 15, 1941), called for redemption
on March 15, 1948, and 2-3/4 percent Treasury Bonds of 1948-51, called for redemp­
tion on March 15, 1948*
Subscriptions and allotments were divided among the several Federal Reserve
Districts and the Treasury as follows:
Federal Reserve
District

Certificates
Exchanged

2% Bonds
Exchanged

2-3/4$ Bonds
Exchanged

Total
Exchanges

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St, Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
«/

$

60,832,000
769,600,000
44,974,000
63,186,000
19,693^000
81,635,000
236,484,000
75,931,000
51,617,000
83,936,000
48,688,000
148,534,000
2,444 ,000

$ 40,193,000
573,552,900
19,832,500
51,306,000
14,088,500
3,172,000
65,709,000
9,491,000
17,666,300
21,502,500
3,533,500
71,064,000
1,661,000

$ 36,820,000
636,126,100
16,663,5OO
43,174,000
8,543,500
9,393,000
84,776,000
11,535,000
16,112,700
10 ,200,500
2,667,500
84,443,000
1,192,000

$ 137,845,000
1,984,279,000
81,470,000
157,666,000
42,325,000
94,200,000
386,969,000
96,957,000
85,396,000
' 115,639,000
54,889,000
304,041,000
5,297,000

$1,687,554,000

$897,772,200

$961,646,800

$3 ,546,973,000

TOTAL

By arrangements made between the Treasury and the Federal Reserve System,
holdings of the System of maturing and called securities amounting to $455,258,000
will be presented for cash redemption on March 1 and March 15*

I

..

. "■ '

'• • ■ . ... .

' _

' '

231
•

TREMtte

.

Washington

‘
>7

*V..t

Statement of Secretary Snyder submitted
to the "Senate iCommittee on^F.inance
•

... March 1, 1948

X am “
glad .to have, .an opportunity to, present to
Committee my views on the House Bi l l , H .H 4.79b, . 1
fine my remarks t’
o the more important issues raised
bill*
'’
*- • ‘
;
'.

this
'«hall co.n-.:
by the ;
* '• ‘ *

The Committee fully appreciates, I- am sûre, the compelling
considerations which., require me, as Secretary of the Treasury,, .
to placé the protection of the financial integrity of our
Government above all other objectives. A sound financial
structure is the essential cornerstone of the Nation*s economy. •
Wise management of the Government’s fiscal affairs will insure
a continued contribution to lasting prosperity, t© further
industrial growth,and expansion, and to h i g h e r 'standards of
living. This requires that in considering tax reduction and
tax revision we- never lose sight of the paramount importance of
preserving the strength of the 'revenue system at a level adequate
to finance necessary Government services- and to provide funds
for servicing and reducing the national debt,
.
I want to »stress the importance of gearing any tax bill to ,.,
the-needs-of the Government’s basic financial policy,. The .
Federal tax system must produce, large amounts of revenue if
essential; domestic governmental services are t a be maintained,,
the public debt reduced, our foreign, commitments fulfilled.
Premature weakening of our revenue system will involve serious
consequences both for our domestic prosperity and for the peace
of the-world-.
■
.
■ I recognize that postponement of tax reduction requires an
unusual measure of self-denial, Each of us .would weleeme relief
from the high taxes necessitated' by the cost of the war.. How- ■
ever, the.,financial conséquences of the war are still'with u s .
In addition to the normal expenses- of running the Government
there are heavy demands on the budget for national defense, the
care of veterans, the servicing of the war debt, and the. .
rehabilitation of war-torn countries «

S-6^3

'-•2 -The Budgetary Situation
The present tax system, in combination with high levels
of employment and national income, resulted in a surplus of
$754 million during the fiscal year ended J u n e -30, 1947.
In
the current fiscal year the surplus will for the first time
reach substantial proportions,- This affords an opportunity to
make a significant reduction in our large public debt.
In his
Budget Message, the President estimated that In fiscal year
1948 it will be possible-to apply $ 7 - 1 /2 'billion to debt reduc­
tion. During the piast 4 :months--which included, of course, some
of our best tax collection periods— we have used more than
$4 billion of the surplus to apply to debt reduction.
This
debt reduction would have been impossible had the tax reduction
proposed in H.R. 1 become effective last year.
For the fiscal year 19^9 , the anticipated decline in non­
tax receipts^ coupled with the increased expenditures projected
in the President Vs Budget will reduce the surplus available fer
debt reduction in that year to $4.8 billion.
(Exhibit 1,
page 1 7 ). I believe that this amount of debt reduction .is
desirable under present conditions of full employment and general
prosperity. We .mus t ever bear, in mind the. fact that the public
debt of t h i s .country is in .excels of $250 billion . If we con­
tinue td:make, the very.best use of .our opportunities, it.will
still, take many years to make an appreciable dent in the size of
the public debt1. We must make sizeable payments on the debt in
good' years for we know that there.may be years in the,future
when no payments can be made.
• A Cost-of-Living Tax Adjustment
Under current economic conditions it is essential to
maintain the present level'of Government; receipts, This, how­
ever, does not preclude some readjustment in the distribution
of the tax load,
Cn the contrary, the persistence of high
prices makes some readjustment imperative. During the second
half of 1947 wholesale prices rose at an annual rate of 21 percent
and consumersf prices, 13 percent. By the first of this year,
wholesale prices Were 45 percent and consumersf prices 25 oercent
higher than in June 1946.
(Exhibit 2, p a g e •18; - Chart l ) . ■
Although the Nation is operating at peak levels and the
country is enjoying higher standards of living than ever before,
some-groups In the population are suffering real hardship.
These include not only families with relatively small fixed
incomes, but also others whose incomes have not kept pace with
the increase In the cost. of. living,
The problem,.of course, is
most serious for.those in the lover income groups who have no
appreciable savings to fall back on as a. cushion against high
prices 1
•

232
3:' Estimates of what people spend in relation to their
incomes graphically illustrate'the' 'hardship suffered by low. income -groups.. -It has' been estimated that in 19^6 about a
third of the families with incomes below.$ 3,000 spent more.than
their income.
(.Exhibit 3, page 1 9 ). They financed consumption
by dissipating accumulated savings and b y ;going into ,deb't.
Under present conditions, the taxes paid by; the' lowest income-'
groups reduce the. already inadequate incomes available for -a
minimum living standards.
Tax reduction alone cannot provide
adequate.relief to this group. But the right kind of .tax
•
adjustment can make some contribution to the relief of the plight
of .low-income.people . Since fiscal and economic considerations
preclude any reduction in the overall ’strength of our tax; system,
relief to this group should be provided by appropriate increases
in ether taxes.
s
\
•■
The President recognized that inflation has brought real
hardship to.millions of families with low incomes and recommended
a cost-of-living adjustment in the form of a tax credit .'of $40
per capita. He recommended also that the revenue -loss resulting
from this 'adjustment should be made up by increasing the tax on
corporate profits. As I indicated in my statement before the
Ways and Means Committee:
* ■
"Under existing conditions, the fairest way of
levying a tax on corporate profits which the President
recommended would be to reenact the excess-profits tax,. .'
with a few modifications.- The small corporations should
be exempted by providing a- specific exemption of .........
$50,000 of excess profits-for all corporations .' The ./'
rate should be reduced- from the 85.5 percent in effect"
for 19^5 to 75 percent and the standards for normal
profits (both the average earnings and invested'
capital credits) should be raised by 35 percent. With
a
these modifications the tax would still yield the
$ 3.2 billion needed to offset the revenue loss result-’
ing from the individual income tax cost-of-living ad­
justment.
The tax would apply only to 22,000 corporations
with the largest excess, profits, out of a total of
r
:
360,000 taxable .corporations. The imposition of a
'*
corporate excess-profits tax to .compensate.in revenue a
for the cost-of-¡living tax adjustment is'.the .most .
equitable way, of maintaining, the Federal revenues. "
.4
at the.ir present, strength and-with the least adverse '
•
effect on our economy.”
•
We cannot escape the obligation to find a-source of replace­
ment revenue to compensate for that, lost; by providing tax relief
0^low-income groups . The President 's program accomplishes -’’ '‘
_
trough the excess-profits tax.
In view. of. the •record
_rnings °f some ^corporations, this, appears to- be a sound solu- both on equity and economic grounds,
I de*not- know-¿f any '
otner source of replacement revenue that measures up to the
required tests .

4
Comment on H ,R/. 4790.
I now turn to an-examination- of the principal provisions of
H.R. 4790.
Thes.e provisions can be briefly stated.
The bill would Increase; personal exemptions from $500 to
$ 600; would permit husbands and wives to divide their incomes
equally for tax purposes; and would reduce tax rates by
percentages -ranging from 30 percent'for taxpayers with small
incomes to 10. percent for those with large incomes..
In addition,
the bill would grant a special $ 6.00 exemption to- all persons
over 65 years, of age; would replace the present $500 deduction
for the blind by a special $600 exemption; and would increase
the standard deduction for single persons and married couples
filing joint returns with adjusted gross incomes of over $5,000,
The bill also would reduce estate and gift taxes. For'residents
of community-property States the reduction would be achieved by
restoring the law in effect prior to 1942. For residents of
common-law States, comparable reductions are achieved by permit­
ting deductions for transfers of property between husbands and
wives .
To. assist the members of the Committee in their consideration
of the bill, I have appended to my statement some statistical
materials bearing on its provisions.
(Pages 15-50).
H.R. 4790 results in excessive reductions
and1 a deficit "for .fiscal year 1949
' "
The bill would reduce individual income tax liabilities
by an estimated $6.2 billion in a full year of operation, or by
almost. 30 percent of the $21.2 billion total individual income
tax liability under present law,
(Exhibits'll and 12 pages 4o-4l).
In addition,estate and gift tax liabilities would be reduced
a o 425 Q million, which is also about 30 percent of the estimated
$820 million estate and gift tax liabilities under present Taw.
If H.R. 4790 were enacted, the surplus of $7.5 billion
estimated in the President's Budget for the fiscal year 1948 would be reduced by $1.1 billion.
In the fiscal.year 1949, re-v
Ce^A?S
decreased by $ 6.6 billion and refunds increased
aT & = ^ million.
This would convert the estimated surplus of
^4.8'billion in fiscal year 1949 into a deficit of $2.2 billion,
necessitating an increase in the public debt.' (Exhibit 1,
page ■ I? ).,
'
'
y
,None. of the developments which have occurred since the
transmission of the President's Budget Message — either those
in the field of domestic prices-or those in the field of inter­
national affairs, or otherwise
warrant changing t h e ’President's
estimates of either receipts or expenditures to show a more
favorable budget picture,. No one can say with certainty what

233
- 5 any future level of income will be. With relatively full
employment and with our present production facilities running
at virtual capacity, it would not seem prudent to predicate
estimates of receipts on a level of personal income higher
than the $200 billion level of personal income utilized in
preparing the estimates contained in the President’s Budget
Message.
The level of personal income in calendar.yearn? 1947
was $197 billion.
Members of this Committee Will undoubtedly agree that
there can be no justification for a tax program which would
prevent adequate provision for a substantial retirement of the
public debt in fiscal year 1949.
This alone is sufficient.reason
for rejecting H.R, ¿1-790 .
H,R, 4790 would not increase current production
The proponents of H.R. 4-790 claim that it would, by, pro­
viding substantial individual income tax reduction, overcome
capital shortages and improve business incentives . I ,would be
the first to recommend tax incentives if there were a present
need to accelerate capital expansion.
The fact is, however, that
capital formation is at a high level and the number of businesses
is increasing. In 1947* gross private domestic investment
accounted for $ 27.8 billion or 1 2 ,1 percent of the gross national 1
product.
This rate of investment compares with an average of
11.5 percent for the inter-war period from 1919 to 1941.
Outlays
for producers’ durable equipment accounted for almost 8 percent
of the gross national product in 1947 -- a record*rate, even
including the 1 9 2 0 ’s. ■ (Exhibits 4 and 5*.pages 20-21) . Moreover,
the number of businesses has continued to increase since the
low point reached during the war. By the end of 1947 they
totalled almost 3 *900*000 compared with the prewar peak of
3,400,000 and the wartime low of 2,800,000.
(Exhibit 6 page 23 ).
These figures suggest that under current conditions there is no
lack of business incentives.
There are times when tax incentives can play an important
role in stimulating production.
This fact should be recognized
in the revision of the tax system for peacetime n e e d s , Its
potentialities should not be dissipated by poor timing.
Today
tax reduction is almost certain to raise prices by increasing
consumer and investor competition for t h e -limited supplies; it
holds little promise of increasing production above the 1948
goals set in the President's Economic Report,
H.R. 4790 gives inadequate tax relief for the lowest income
taxpayers; the'relief is inequitably distributed ’ "
1
Another argument advanced in support of H.R. 4790 is that it
givqs adequate and correctly distributed relief. Under this bill,
personal exemptions are increased by $100 to compensate for a
calculated $100 decline in the purchasing power of the average
income after taxes during the.past two years.

34 6 These .calculations, do not .provide an adequate measure of the
need for tax' relief in- the lower income groups. Under the stress
of war needs., personal exemptions, were reduced to emergency
levels.,. It was then recognized that the: $506 per capita exemptions.y.stem would endanger- the health and living standards of
large segments of the population if retained for many years.
Fiscal and economic considerations do not. yet permit exemptions
to be raised to a level.compatible with long-term-living standards
just as they preclude general tax reduction at this time.' The
hational.interest nonetheless requires•sufficient immediate
relief for those in greatest need to-help tide them over this
■difficult period.
In this respect.-H,R. 4790 stands in sharp con­
trast with the President’s cost-of-living adjustment plan.
(Exhibits 7, 8 and 9 * pages' 24-38). ,
.
H .R. 4790' would exempt- 6.3 million from, income taxation in
comparison with the 1 0 .3 million exempted under the P-resident’s
program. Moreover, 13 million additional taxpayers with the
lowest incomes would receive more tax reduction under the
President’s program than under- H.R. 4790.
These, are the groups
most- urgently in need of relief-from the,high cost of living.
Under the President’s program, 93 percent of the income tax
reduction would go to individuals with net incomes under $ 5 *000.
This compares with 66.3 percent under H.R. 4790*
(Exhibits 10,
1 1 , and 1 2 , pages 39-^ 1 ).
The pending^bill would reduce the taxes of those- with net
incomes in excess of $ 5,000 'by $ 2 .1 billion as against $225
million under the President’s plan.
It is my belief' that we
cannot go beyond a cost-of-living .adjustment at this time.
The
$ 2 .1 billion tax' reduction provided high-income taxpayers under
H . R . 4790 .goes far beyond this requirement.
The pending hill would also provide additional relief to the
aged and the blind in the form-•o f .special exemptions. These and
other low-income groups and disabled' persons' are hard-pressed by
high prices.
The cost-of-living adjustment recommended by the >
President is the most equitable way of providing tax relief to
all these groups. ' .
H.R. 4790 equn 11zes income taxes in community-property and
common-law StaTes "at' the cost o f substantial revenue but’
does not equalize esTo^te and gift taxes"
The hill under consideration contains proposals designed to
equalize ..income, estate and gift tax .liabilities among taxpayers
in community-property-and-common-law States . .
• ... With reference to the personal Income tax, the bill contains
a provision which would permit married couples filing joint
returns to divide their ..combined incomes equally in computing
their income taxes ; : This is designed to. eliminate a long-standing
tax discrimination against married couples residing in non­
community-property States.

234
7. T h is * provision là .address eel:tò a problem-which has ac­
quired*. importance in recent years. ' Several common- law’.3 tate s'
have adopted community-property laws designed primarily; to give
.their residents:.tax advantages previously enjoyed only in the
originai community-property■'■States! _ As you know, I believe
that:;.this subject should be" given a high priority among the
'structural changes' in the Federal tax system. In the current
situation, however, it would be unwise to make this or other
major structural changes which would result in substantial
revenue losses.
Splitting the incomes of husbands and wives
would result in-a loss o f :$ 803.5 million, 97.5 percent of which
would go :to; individuals with ^net incomes in excess of $5*, 000.
(Exhibit 12, page 4l ).
”
With reference to the estate and gift taxes, the bill
would repeal the 1942 estate and gift -tax community-property
amendments.
This would decrease the liabilities of married
residents of those States by a relatively substantial amount.
However, it.is also-proposed to provide similar relief.for
residents of common-law States,' by amendments which it is hoped
will produce relatively equal treatment with community-property
States.
Prior to 1942, residents of community-property States paid
relatively less estate'and gift taxes than residents of other
States. The 1942 Act, in recognition of fundamental similarities
in the family ownership of property in all the States, sought
to correct this discriminating situation by equalizing the
effects of the law under the different concepts of property
ownership.
It increased the transfer tax liabilities of
community-property residents to approximately the level paid
by residents* of other States and generally succeeded in equalizing
transfer-t a x 'liabilities among residents of all. States .
: This bill would replace thè' plan adopted in 1942 with a
system which is apparently intended to establish equality by
reducing the transfer tax liabilities of all persons to the
level paid by community-property residents before 1942.« It is
my view that there is. no valid basis for this change.. While
some differences in the impact of transfer taxes on residents
of different States remain, these do not. appear to be of major
significance'. However, they could be further narrowed by
relatively simple amendments within the framework of the present
structure.
The proposal, on the other, hand, would create new
areas:- of inequality' and.^ administrative problems that, outweigh
those remaining under present law.
The estate and gift tax provision, it has been said, is
related to the split-income plan considered for purposes of
income taxation. :A n y such relationship, if it exists at all, is
superficial.
The problems are not analogous.or comparable.

~ - ■8 .
ri

7,.v 4.

...

>

N

.

In the, income taxi field*,. ^'sidonfcs of uonmunlty-prcacrty
and common-law States-, are''not'ltreated equally. . The income-' ■
splitting plan is designed.'to.; remedy this situation by providing
a single system of taxation applicable to all married residents
of every State without exception. Moreover, it is also intended
to go beyond removing the discrimination between communityproperty and common-law States by equalizing, the now unequal
tax treatment of family income from, earnings and investments
in all States.
An entirely different situation prevails in the estate and
gift tax field.
Present law already achieves substantial
equality .of treatment between common-law and community-property
States.
This bill would reduce the revenue yield of the estate and
gift taxes by as much.as $250 million. Economic and fiscal
requirements compel us to postpone- urgently needed reductions
in many sectors of our tax system.
It is also necessary to
require a large segment of the population to bear tax.burdens
which impinge upon their living standards, Under these conditions
the transfer tax provisions of E , R . 4790 conflict with fairness
and sound fiscal policy. Any structural revision in the system •
to remove'inequities should be accomplished in a way calculated
not to weaken or further complicate the transfer taxes.
In view of the technical complexity of the estate and gift
tax provision of H.R.'"479.0, I am submitting for the use of the
Committee a memorandum discussing the problems involved in
greater detail.
(Pages 10-14).
H eR 0 4790 would prejudice much needed tax revision
It is clear that many of the tax revisions required to
modernize the American tax system will result In a reduction of
revenue.
If the revenue system is prematurely weakened our
opportunities to improve it would be dissipated.
In his State of the Union Message, the President said:
"When the present danger of inflation has
passed we should consider tax reduction based
upon a revision of our entire tax structure."
On several occasions I have outlined the basic principles
of taxation as follows:
"I believe that a sound tax system should meet
the following essential tests. The tax system should
produce adequate revenue.
It should be equitable In
Its treatment of different groups. It should Inter­
fere as little as possible with incentives to work
and to invest.
It should help maintain the broad
consumer markets that are essential for high-level

235
- 9 production and employment.' Tcaxes should he as simple
to administer and as easy to comply with as possible.
While the tax system should be flexible and change
with changing economic conditions, it should be
possible to achieve this flexibility without frequent
revisions of the basic tax structure. A stable tax
structure, with necessary flexibility confined
largely to changes in tax rates and exemptions, will
make it easier for business and Government to plan
for the future.”
While we cannot safely undertake this year the basic
structural changes that will ultimately be desirable due to the
large losses in revenue that are entailed, we can adopt many
technical revisions which would move in the direction of an
improved tax system.
I urge upon the Committee the desirability
of undertaking the steps necessary to make such administrative
and technical revisions as will clarify present tax laws and
correct some of the existing inequities without any substantial
loss^of revenue.
This can and should be done at an early date.
Specific proposals along these lines have already been submitted
by the Treasury Department to the House Committee on Ways and
Means.
Conclusion
X am confident that sound tax policy can contribute in an
important measure to the continued prosperity of this country.
I^am also conficlont that your Committee will give full considera*
tion to the financial requirements and obligations of this
Government. These considerations counsel against the adoption
of H.R. 4790.
■

ANALYSIS OF THE ESTATE AND GIFT TAX PROVISIONS OF Hi R. 4790

Enactment of the estate and gift tax provisions of Hi R, 4790
would-be undersirable’
, Apart, from causing unjustified’revenue lasses,
(involving a large portion of the,total revenues from these taxes)*,
these provisions would not establish the equality of transfer tax treatymen t of community property and non-community property which is said
to justify the revenue less; they would open the doer to tax avoidance;
they would create new administrative problems and complexities; and they
would lead to 'disruption and distortion of well-established methods of
property disposition in common-law states. Moreover* these amendments
are not required as the counterpart of the.proposed income splitting,
provisions for husbands and wives, under the income tax« The following
discussion will amplify these objections,
*
Discrimination
It is the principal purpose of the estate and gift tax, amendments
in the bill to, restore the pre-1942 treatment.of community property
'under which each-spouse is recognized as owning one-haIf-•of the community
property regardless of its source. Since mere repeal of the 1942 admentments governing the estate and gift tax treatment of community property
would revive the former discrimination existing in favor of such property
ana against non-community property, the highly complicated.provisions
of sections 361 ana 372 of the bill have been added in an'attempt to
provide equality of treatment for both types of property; i,e,* it is
intended to permit,husbands and wives in common law states to divide
their property equally with equivalent estate and gift tax results,* To
accomplish this* secbion 361 provides* in general* that there may be
deducted frem the gross estate of a deceased spouse the value of edrtain
interests in property passing to the surviving spouse* but not to exceed
one—half of the gross estate reduced by claims and- .similar deductions«
Where* however* the estate of a spouse includes only his.one-half
interest in community1property* no marital deduction would be allowed.
Section 372 of the bill provides what is intended to be comparable gift
tax treatment.
An analysis of these sections of the bill reveals that they not
only fail to bring, about equality of treatment* but in fact/produce
inequalities not present. und.en existing law. Thus* where in a commonlaw state the estates ©f husband and wife are substantially equal and
one dies leaving his property to the survivor* an estate tax would* by
reason of the marital deduction* be payable on only one-quarter of the
family wealth* i.e,* on one-half of the decedent*s half. However* in
the corresponding situation in which the family wealth consists of
community property.earned by both spouses* an estate tax would be payable
on the death of the first, spouse to die with respect to one-half of the
family wealth. Under these circumstances* a similar discrimination
would result’as to gifts made by one spouse to the other by reason. of the
gift tax marital deduction. This discrimination under both the estate
and gift taxes is inherent in the approach to equalization set f©rth in
the bill;

*

' '

■

- u

-,v

...... ..

To take another example, a husband in New York who has earned all the
family wealth may give half to His wife by gift, and, under the bill, pay gift
bax~- on.'one-quarter* At death, he may leave his remaining half to the wife
and pay estate tax on one-quarter» A husband in the same situation in
Texas would pay no gift tax but Would pay an estate tax on one-half at death.
The sum of the gift tax on one-quarter and the estate tax on one-quarter
in the. case of the New York husband would be less than the estate, tsix on
one-half in the Texas case, because of the lower brackets, lower gift tax
rates and two sets of exemptions, Thus, in this type of situation, communityproperty would be discriminated against; there would continue to be inequality
^f treatment* On the other hand, where the New York husband gives one-half
the family property to his wife during life, and the remaining half to his
children at death, he would pay'a gift tax on one-quarter and an estate tax
on one-half of the property* The total taxes paid by the New York husband
would exceed the estate tax payable by the Texas husband who left his half
of the community property to his children and who was not required to pay
gift tax on the half acquired by his wife by operation of law* In this case,
the discrimination would run in the opposite direction, i*e*, against
common-law property*
.Discrimination may also occur where the wife dies first* If the wife
in Texas leaves t© her surviving husband her half interest in community
property earned solely by the husband, she would pay an estate tax on such
half and the husband, at his death, would pay estate tax on the entire
property* The New York wife would pay no tax at her death, an estate tax on
the whole estate being payable upon the husband1s subsequent death*- In this
situation, the total taxes paid by the spouses in Texas would be greater
than the total taxes imposed with respect tc the New York spouses * property*
Conversely, the Texas family would have the advantage if the wife left her
half of the community property to the children. In that case, the total
taxes payable by the spouses owning community property would be an estate
tax on the wife*s half plus an estate tax on the husbandTs half, as compared
with a tox, computed at higher progressive rates and with but a single
exemption, on all the property of the New York husband*
These- examples serve to demonstrate that the estate and gift tax amend­
ments in the bill will not produce equality in the transfer tax treatment of
community and non-community property* Furthermore, a comparison of the tax
consequences under the bill with those of the present law shows that the bill
will produce inequalities #where they do not exist tinder the present law*
Effect on Estate Planning The method by which equalization is sought is inherently defective be­
cause the amount of the proposed marital deduction would depend on the amount
of property »going from the New York decedent or donor tc his spouse* Thus,
if only one-third of his property goes to his spouse, the amount of the
deduction would bo equal to the value of such one-third*/ In the case of
community property, however, each spouse acquires title to one-half by oper­
ation o f ■law* Equality, therefore, would be obtained under the system of
taxation proposed in the bill only 'in the event the deceased or donor

gives his spouse one-half of his property. Since it is a frequent practice
in common-law states for a wealthy husband to give his wife a. life interest
in his estate with remainders to his•children or other beneficiaries, equality
of treatment would be achieved only by interfering to a large extent with
this long-established pattern of family dispositions. No such criticism
may propèrly be directed against the 1942 amendments.
Estateand Sift Tax Provisions Not Necessary t o ‘Income Splitting
The estate and gift tax trèatment of community and non-community property
provided in H.R. 4790 is not^ as has been suggested, a proper adjunct rtf the
income-splitting provisions of the bill. The proposed system for income­
splitting by husbands and wives constitutes a single, nation-wide plan for
taxing income from all sources, whether derived from earnings or investments,
or from separate or community \property. Such a plan is not concerned with
local rules of ownership of income. Instead, it overrides such rules and sets
forth a uniform concept for determining the tax on family income* . The estate
and gift tax provisions of the bill, however, do not create a single, overall
plan for taxing transfers of family wealth. On the contrary, the bill provides
one method for taxing transfers of community property, based on the local
rules of. property ownership peculiar to such- property, and' another method for
taxing non-community property, based on the local rules of property ownership
peculiar to the latter property. The bill disregards the fact that by
according full recognition to the formal distinctions between the two systems
«f property ownership, disparities of tax treatment necessarily arise. It
then attempts, as a means of obtaining equality in the taxation of transfers
of both types of property, to conform transfers of non-community property
to the pattern of transfers peculiar to the community-property system, through
the use.of a marital deduction. Equality of taxation cannot be successfully
achieved through a hybrid tax system, such as that created by H.R. 4790, which
implements rather than disregards the formalities. and technicalities of local
rules ®f property ewriership.
Terminable Interests'
.The hybrid plan for. taxing transfers contained in the bill is fundamentally
defective in another, important respect. Sections 561 and 372 disallow a
marital deduction with respect to certain terminable interests in property
passing to a surviving spouse, or transferred by gift. Typical examples of
terminable, interests which are not: deductible are:life estate-s or annuities
given to a spouse, where remainder, interests pass to other,beneficiaries.
Thus, where a decedent leaves property in J;rust, providing fur the payment of
the income from the trust to his wife for life with remainder to his children,
ao marital deduction may be taken. The apparent purpose of this rule is to
insure that all the .property of the family is .included in .either the estate
of the husband ®r of the wife«»

- 13
The difficulty is that the husband m y easily avoid this rule by
use of other types of terminable interests, which are deductible under._
the bill. The bill; permits the deduction of terminable interest pur­
chased by the donor or decedent or by the executor at the- direction of
the decedent. This creates a wide avenue, for avoidance of tax upon
either spouse* Thus, a person who wishes to provide a life income for
his spouse with remainder t.o his children without losing the benefit & f
the marital deduction need only purchase, or direct^ his executor to
purchase, a life annuity for his spouse with part of his estate .and to
hold the balance in trusts for the children. The value of such annuity
would be a marital deduction from the decedenti gross estate, and would
not thereafter be includible in his spouseTs gross estate. The value
of the annuity would thus completely escape taxation.
jjcix could, similarly
be avoided in the case of other purchased terminable interests, such
as:leases and insurance proceeds payable in installments.
Cn the other hand, if the marital deduction were not allowed as
to any terminable interest, so that there would be deductible only such
property transferred to a spouse as would bo subject to transfer tax
in her estate, a further large area of inequality of treatment as be­
tween common.-law and community-property states would be crated, in-view
of the fact that terminable interests may be'held as community property.
This dilemma appears to be inherent in the "equalization" plan of the
bill. The 1942 amendments present no such problem.
Tracing of Property
One of the chief arguments advanced by proponents of the repeal
of the. 1942 amendments governing community property is the- supposed
difficulty in some instances in tracing such property to its source.
While the existing problem does not in fact appear to be serious, this.__ _
bill itself substitutes some new tracing requirements.
Sections 36l and 372 of the bill properly provide that no marital
deduction may be taken as to separate property which was at any time
acquired in exchange for or through partition of community property.
It is apparent that under these provisions it will frequently be
necessary to trace separate property passing between spouses back to its
original source. Accordingly, to the extent that the criticisms of the
1942 amendments based on tracing difficulties may be valid, H. R* 4790
is open to the same type of criticism.
Basis
In addition to the difficulties in the estate and gift tax treat­
ment of spouses, the plan incorporated in the bill also gives rise to
income tax problems involving basis for gain or loss. Under existing
law^ the basis of property acquired by a surviving wife by bequest, devise,
or inheritance from her deceased husband would be ft# value at time of
his death. The bill makes no change in this rule, even though the marital
deduction taken by the husband results in exclusion of the property,

14
from his taxable estate* In the case of community property* however* the
surviving wife’s- basis for her half of the community property would be. its
cost to the community, since such half was not acquired by bequest, devise
©r inheritance. Where the property has appreciated in value this operates
disadvantageously t® community property»
• In determining:1.the.:appropriate 'policy respecting basis* consideration-r
must be given t© the relationship between non-community property qualifying
for -a marital deduction and the surviving spouse*s interest in community
property. The plan' of estate taxation embodied in H.R* 4790 treats property
passing to a surviving spouse and qualifying f»r a marital deduction as the
equivalent of a surviving spousers interest in community property. Accordingly,
it may be presumed that similar basis treatment should be given to both types
of property# Similar treatment, however, cannot be achieved if the estate
tax plan of H.R« 4790 is. not accompanied by a change in the present provisions
of law governing basis» The bill fails t.o deal with this question.
If, in spite of their fundamental and serious defects, the estate and
gift tax provisions of this bill should be enacted, ft would appear that a
satisfactory basis for determining gain .or loss could only be established by
eliminating entirely the provisions of existing law which permit the basis
of inherited property to be determined by reference to the value of the
property at the time.of death* This type of treatment would provide equality
for income tax purposes of both community and non-community property*
Other Technical Defects
The bill in its present form does not deal with a number of troublesome
technical problems which must be resolved and presumably will be by amendment.
These involve matters relating to proper allowance of'credit for gift tax In
the case of property subject to the marital deduction, cases of disclaimers
of legacies and other matters* However, even assuming that these problems
ore satisfactorily disposed of, it must he recognized that their solution will
unquestionably lengthen and further complicate the estate and gift tax
provisions of the bill, which already are far more lengthy and complex than
can be justified by the. tax results they achieve*

15 EXHIBITS
Table of Contents
Page Ho.
Exhibit 1

Exhibit 2

Estimated effbct of House bill (H.H, Uf 9'0)
on budget receipts, expenditures and surplus,
fiscal years 19 ^S and 19^9 •'«•»•••••*•••••»•*•*

'.17

Wholesale, retail and consumers’ price indexes,
1939. to date............. ............ .

18

Exhibit 3

Percentage distribution of positive and negative .
savers, by income groups of family units, 19^6
19

Exhibit H

Cross national product and gross private domestic
investment, 1929-47 •».......... ...............

20

Exhibit 5

Cross private domestic investment, total and
major components as percentages of gross
national product, 1919 - 19 ^7 »•»•..........21

Exhibit 6

Number of operating business firms, 1939-^7....

23

Exhibit 7

Comparison of amounts and effective rates of
individual income tax under present law, the
House bill (H.H. *4790), and the §U0 per capita
tax credit, for selected amounts of net income
under §5 »000.........................".........

24*-26

Table 1 Single person - No dependents....... ...........
24,
Table '2 Married person - No dependents............. .... ~ 25
26
Table 3 Harried person - Two dependents. .'....... *......
Exhibit &

Table 1
Table 2
.Table 3
Exhibit 9

Table 1
Table 2
Table 3

Comparison of amounts and effective rates of
individual income tax under present law and
under the $Uo per capita tax credit....... ..
Single person - No dependents...................
Married person - No dependents..................
Married person - Two dependents..... .

27-32
27
.29
31

Comparison of amounts and effective rates of
individual income tax under present law and
under the House bill (H.H, U79O) ..... .........

33-38

Single person - No dependents............... .
Married person - No dependents,'..... ......... .
Married person - Two dependents.... ............

33
35
37

239
- 16 EXHIBITS
Table of Contents

- 2 Page H o .
Exhibit 10

Exhibit 11

Exhibit 12

Exhibit 13

Exhibit lU

Chart 1

Estimated number of taxable income
and their total individual income
present law and. under the $h0 per
credit, distributed by net income
in calendar year I9 H8 ..... .

recipients
tax under
capita tax
classes,

1

39

Estimated number of taxable income recipients
and their total individual incomevtax under .
present law and under the House bill
(H.R. i+790), distributed by net income
clhsses, in calendar year 19 ^+8 ;...............

40

Estimated revenue loss from each individual
income tax provision of the House bill
(H.R. U790), .distributed by net income classes,
in calendar year 19^-8...... ............. .. ..

41

Comparison of .combined normal tax and surtax
rates under present law and under the* House
bill (H.R. W790)....... ......................

42

Estimated number of taxable income recipients =
distributed by the various percentage re­
ductions provided under the House bill
(H.R. - 4 7 9 0 ) in calendar year 19^*8............
44

. .. Chart 2

Consumers’ Price Index, 193.9 ,^° Date, All Items,
Rood and Clothing, 1935- ,39~100 ....... ....follows page 44
Effective Rates of Individual Income Tax, •
Present Law and House Bill (H.R, 1+790) ,
Married Person, Ho Dependents...... ..follows page 44

Appendix

Tables A — D

45-50

17 -

EXHIBIT 1

Estimated effect of House Bill (H. R. ^790) on Budget receipts,
expenditures and surplus, fiscal years 19^8 and 19^9
(in Billions of dollars)
: Surplus or
■ • Receipts ’Expenditures '
¡deficit (-)
Fiscal year-19^-8Present law 1./
House Bill (H. R# U790)

$^5 »2

- $37 »7

k k .l

37 *1

$7-5
_

6#‘U

Decrease under House Bill

(:U 1!. U790)

$ 1.1

$1.1

-

Fiscal year 19^9
Present lav? 1/
House Bill (H*: R* ^+790)

$UU.5
37.9

.

$ 39 .7

$4, g

R0 .1

- 2.2

$ o M

$ 7.0

Decrease under House .Bill

(H. R. ’
4730) - .: '
Treasury Department
1/

$ 6,6

March 1, 19^-8

Internal Revenue Code, as amended By the Revenue Act of 19^5*

^Represents increase, resulting.from larger individual income tax
refunds under H. R. ^790*
Source:

Estimates under present law are from The Budget of the
United States Government for the fiscal year ending
June 30» 19^9«

> - 18
• EXHIBIT 2

W h o le sa le , r e t a i l and consum ers 1 p r ic e in d e x e s , 1939
♦

Year or
month

1 ' v-iv'• •:

♦

’
Wholesale ’Detail prices*
: prices
; ( 1935-39=100);
: (1926=100)

Monthly average:
1933
19U0 ...........

77.1
78.6
87.3
98.8

99*0

100.6
108.3
124.9
- 134.0
137.6

I 9I+I:
19^2 •
103.1
1943................. ............
1944
. 10U .0
19U5
105.8
1946
121.1
19U7 •
151.7
1946 - January
107.1
February
107.7
March
108.9
April
110 .2
May
1 11,0
Ju n e
112.9
Ju ly
124,7
Augus t
12 9 .1
September
. 124.0
O ctober
134.1
November
139.7
December
1^0.9

1 6 3 .2

1948 - Ja n u a ry

16 5 .6

147.1

158.5
159.7

•

99.4
100.8 '
,105.2
"116.5

100.5
101*7

138.0

129.7
138.8
145.9
160.2

106.3
124,2

, 136 a
v 139.1
159.6
193.8'

129.9

V 141.0
13 $. 6
i4 o a
l4 i .7
142.6
145.6
165.7
1 7 I .2
, 174a
180,0
1 8 7.7
185.9
I 8 3 .8
182.3
189.5
188.0

164.3

1 4 5 .9

16 7 ,2

l 4 g .6

171.5

15 2 .2

17 2 .7

153.3

172.7
172.7
177.2
177.2
177.1
178.7 ■■
179.7
1 8 1.4 •
1S4.9'
184.9
185,9

153.3
153.2

u
2/

-

95*2
56 v 6
105,5
123.9

125.5
128.4
139.3
159.2

129.6
130.2
131.1
131*7
133.3
141.2
144.1

1 4 5 .7
1 4 7 .7
15 6 .3
15 9 .8

1 4 7 .7

Consumers* prices 1/
. (2935=325100)_
All-:■ ‘.Food^ • "Oldthing
’ items !

123.6

155.0
2/
, ,143 a
142.9
1 ^3 .7
i 4 4 .s

1 4 9 .5

14 7 .6
150*6
15 3 .6
157. 4

.

i4i.4

141.5
144. 5

19^7 ~ Ja n u a ry
:F e b r u a r y .
MArch
A p r il
May
Ju n e .
Ju ly
Augus t
September
O ctob er
November
-December <■
-.

d ate

15 6 .3
15 6 .2
15 6 .0

157.1
1 5 8 .4
1 6 0 .3
16 3 .8 ■
16 3 .8 .

164.9
16 7 ,0

• ■ 1 6 8 .8 '

Treasury Department

135.8

149.7
150.5
15 3 .1
1 5 4 .5
15 5 .7

.1 5 7 . 2
15 8 .7
1 6 1,2
1 6 5 .9
16 8 .1
17 1.0
1 7 6 .5
17 9 .0

•• 1 8 1 . 5
184.3
184.9
I 8 5 .0
I 8 5 .7
184.7
185*9

18 7 .6

190.5
193.1
19 6 ,5

203.5

18 7 .6

2 0 1 .6
2 0 2 .7
206 . 9 ' ' '

I S 9 .0

2 O9 . 7

.

1 9 0 .2

’• 1 9 1 . 2
19.2 a

March l s 194g

.1/ For m oderate—income f a m ilie s in la r g e c i t i e s .
2/ Not a v a i l a b l e .
Source:

W holesale and consum ers’ p r ic e s : U , S . Department o f L ab o r;
r e t a i l p r ic e s : 17. S . Department o f Commerce.

- 19 -

EXHIBIT. J
Percentage distribution, of positive and negative savers,
by income groups of family units, 19^6

:
All
: family
J units

Income groups 1 /

* Positive *
l savers 2j \

! Fegative
savers 3 /
CJ

1—

100$

All family units U/

Zero
savers

■ ii

Under $1,000

100

39

22

33

$ 1,000 - $1,999

100

57

10

33

2,999

100

65

3

32

3,000 - 3,999

100

75

2

23

if,000 -

U .999

100

7S

- 5/

22

5,000 -

7,1+99-

100

tx

|

100

gg

2,000 -

7.500 and above

Treasury Department

7

'

1
1

~~

lg

12

/

"1...

March 1 , 19 %

l/ .Based on 19^-6 money income before taxes*
2/ Family units with money incomes in excess of expenditures*
V
Family units^with expenditures in excess of money incomes*
_/ Includes families of one or more persons*
5/ >^ess than one—half of 1 percent*

Source:

Survey.of Consumer Finances, Part III, Consumer Savings in
19^6 and^Ownership of Selected Nonliquid Assets,” Federal
Reserve Bulletin. August 19^7, Table 13 , p. -12. ‘

-

20

-

EXHIBIT h
Gross national product and g r o s s private
donestic investment, 1929- 19^7
(in Mi-lions of dollars)

Year or
quarter

'
■•#.>.'9
. Gross
national
i product

1929
1930
1931
1932
1933

103,3
90*9
75.9
53.3

193^

6^,9
72.2
32.5
90.2
sh .7

1935
1336
1937
19.3s

1939

I9U0
191+1
I9U2
19U
19W
I9 I5
131+6

19^7

15.3
10.2

Í.9

■ ■;• - 1 .6
*■*

1 .1

- 1*4
-2 .6
-1 .6 '

2.3

l .h

6 .1

2 .^

- l .l

1*9
2.3
3*7
3 *3 -

3.4
4*5
5*4

1 .0

h .o
h,6' .

h.6
6 .1
7 *7■
M
-3.3

.9
1*3

3.3
11.4
6.3
13 .0
17*29 *3'

210.6
213*1
203.7
229*16

5*7
9.1
24.6
27.3

9.0

5*7
3 *2*
2.0*

*9

2.3

4.0

2*3
3*1
3*5

-7*1
' I 2 .h

10.7

17.9

- 1 .0

\k

2*3
3*9
1,4

- 1 .2
- 2 ,0
-1 .2

5*3

3*7
-•7

Seasonally adjusted annual rates

13*6

191*7
•197*0
-207.5
213.6,

22*3
2 7 .0
30, h

19^7:
I
II
III
v IT ••••

2 2 1,0
226*9

26 ¿1

229^4
7 2ho*9

27*0
- Z9*%

23*2

7*2

3.7

3*9'

9.3
1 )*3
- 9*-6
10 .h
i2^h

Treasury Department

Source;

......6 .h

5.6

3*2
1,3
1.3

. 11
in
IT

Note;

7*3
3*6
1. 7- ^

90 .h
ióo*5
i ¿ 5.3
■
0 9 VS
192.6

- ,19^6 ;
1

Gross private. domestic investment
;
New . . ; Producers1j Changes i n .
Tota.1 » construo- ; durable: ; ■ “
business
; eauipment : inventories

.9*1
11*5
13*2
15.7

2*3
2e0
h .9
5.4

1.6
17*9

iz*k
13.3

-1#7
-I .3
March 1 , I 9HS

Figures are rounded and will not necessarily add to totals.
tT.S. Department of Commerce,

“ 21.:-.
SXtìIBXO? 5

Gross private domestic investment, total apd major components
as percentages of gross national product, 1919-1947
Year or
quarter

:
• Gross private domestic investment
. Gross
.New
Producers1.*• Change in
» national
» Total * construc­
durable i business
. product
tion
eouipment • inventori*

1919 '

10 0 *Op

1920
1921
1922
192 ?.

100*0
100*0
100*0
100*0

192 U *
1925 ;
1926
1927
19 2 3 ^

100*0
100.0
100.0
100.0
100.0 .

1929.
1930

100*0
?\ 100*0

1932
1933.

100.0
100.0
100,0

3-93^7
1935
1936 '
1937
193 s

100,0
100*0
100*0
100.0
100*0

1939
19 U0
19 Ul
19^2
19 U3

100,0
100.0
100.0
100.0
100*0
#

1931

19^
19%

' 100.0
.

19^6
19%

15 *3^
IS «2
10.6
12.9
16.9
13*1

4*Syc>
. 5.6

6*^

4*l^j

6 .1

6*0
7.8

6 *5 ^

4.6
4.4
5 .^

.7

%

%4

16 .5
16*7

9.3
9*3
9.7

15*0

9.6

1 3 .7

S*7

154
1 1 .2

6 .1

7.0

K j

5*1

5.2
5*5
5*1
5 .^

6 .1

7*5

1 .5
2 .3

2*9
2*0

5.4
4 *2 .
34
34.

•M
S *6

2.2
2,6

4 ,7 .

10 .1
12.6
7^

3.3

3.H
4.1
3.9
k .h

9*9

3.1
- 1 .3
1*7
1*5

« ,4
1*5
wJ

-1.9
- 2.9
- 1 .7
1*3

5«5

1.2

6*0

2.5

^*7

- 1.2

54

.u

6 »1
6 .1
2.9
2.0

2.^5
mJ

13 oO

4.6

13.7
5.3
2.4

4.5
2*0
1*0

2*7

. 1 ,1

*+•3

6 .1
7*3

-o3

5*1

*7

100.0
100.0
100,0

1 2 .1
12*1

,
l *5
. 4.2
^♦7

100*0

11*5

5*3

2.5
3.4

3.1
.9

- .6
-<»9

- .6

Annual average '

1919-19^1

Continued

242
22

EXHIBIT 5 - Concluded
Gross private domestic investment* total and major components
as percentages of gross, national product, 1919-195-7

Year or
quarter

.4
*
*
Gross private.
. Gro s s è
♦
.»
New
. national
•
: Total : construc­
. product
tion

domestic investment
J Producers ’' Change- in
* durable
i business
: equipment ; inventories

Seasonally adjusted annual rates

19*161
I
II
III
17

100 *0$
100*0
100.0
100*0

9.7$
H O
13.0
13*9

100.0
100.0
100*0
100.0

li . 5
lloS
12.4

3.8iS
Í.U

1 .2$
1.0

^*3

5.8
6.4
7*2

Kz

7.9

-• 6

8.0

-*7

2.4
2o5

19 U7 :
I
II
III
IV

12 *8

7*
5 .1

Treasury Department

Note:
Source:

• -7

7«8

March i t 19 I4-S

Figures are rounded and will not necessarily add to totals.
TT.S, Department of Commerce*

23 -

EXHIBIT 6
Humber of operating business firms, 1939-w,^7

Year or quarter i f

:

Humber of operating .firms

1939
19 H0
19 Hi
19 H2

3 ,316,700
3 ,298,200
3,398,000
3,155,700

19^3
in
IV

2 ,S60,600
2 ,835,600

I
II
III
IV

2 ,8H8,700

19HH
2,879,900

2 ,923,500
2 ,96H ,800

191+5
I
II
III
IV

3,012,900
3,065,600
3 ,13 H,i o o
3 ,22H ,100

I
II
III
IV

3 ,369,100

19 H 6
3,H9l+,700
3 ,595,300
3 ,657,800

19 H7
I
II 2 /
III
____________ IV b l _ _
Treasury Department
ij

2/
3/
5/

3,73i,l+oo
3,783,600

3/
3.871.1+00

March 1, I 9H8
Annual figures are as of September 30 of the indicated year;
quarterly figures are as of the end of the Quarter,
Preliminary,
Not available•
Estimated.

Source:

U. S, Department of Commerce

i;'~-

•

.EXHIBIT .7
Table 1'
Comparison of amounts and effective rates -ef individual iiic^mé tax under present flaw, 1/ t h e H e u s e bill (H.R. 479°) > ai*d ibe $4°

per capita tax credit, for selected amounts cf net incene under $5/000
Single person 2/ - No dependents
Decrease in
amounts ©f
tax compared
House ’ ^40
with present law
bill r*per
$40 per
House
(H*R*‘capita
capita
bill
479O) * tax
tax
(H«Ro
.3/ [credit 4790) ; credit

’Effective rates

.Amounts cf tax

Net income i
House $40
before
per
bill
Present
Present
personal
(II*Re capita
law
law
exemption
tax
4790)
credit
y
o
o
700
800
9OO
9684/

$ 19
38
57

$

0
13
27
40

0
0
$ 17
36
49

89

49

1,000
1,200
1,500
2,000
2,500

95
133
190
285
380

53
80
120
213
289

3,000
3,500
4,000
4,500
5,000

485
589
694
798
922

371, 445
454. 549 .
538 ....654
C22
758.
727
882.

55
93
„150
245
340

3*2$
5*4
7*1
8.4
9°2
9*5
rui
12.7
14»3
15*2

e ...; 0
1*9%
0
3*3 h 2*1%
4*4 * 4 *®
■5.1 • 5.1

$19
38
40
40
40

' 5*3
Go7
8*0
:
lo»6
'll*6

5*5
7*8
10.0
12.3
13*6

42
53
70
:: 72
91

40
40
40
40
40

12»4
13.J
13*5
13.8

14.8
154
1 6 ,3
16*8

114
135
155
176

14»5 . 1.
7 *6

194

40
40
40
40
40

16*2
16.8
17-3
17=7
.18=4

$ 19
25
30
36
40

'

. Decrease in
effective rates
compared with
present law
House :$40 per
bill : capita
tax
(H.R. :
..4290.L :credit
3 *2%
3«5
3.8
4.0
4.1

'3 *2%
5*4
5»o
4*4
4*1

4.2

4*0

4*4
4*7
3*6
3.6

'3*3
2.7
2*0
i.€

3.8
3.8

i*3
1.1
1»0

3*9 3*9
3*9

1 Tax decrease as
: a percentage
: of present
:tax liability
tHc'use :$40 per
: bill : capita
:(H»R«* : tax
:479°) =credit
100*0%
65*0
53»3
47*5
.45*0
44«.0
40*0
37.0
25*3
24*0

. 23.5
22*8
•22*4
22.1
*9
.8 ■
21.1

Tax decrease as a
percentage of net
.income after present
:-tax liability
House
: $40 per
bill
: capita
tax
(H.R. :
4790) = credit
3.3%

100*0%
100.0
70.2

3*7
4.1
4*4
4*5

52.3
47*5
42*1
30.1
21.1
14*0
10.5 '
8.3
6C8
5*8
5»o

4*6
5»o
5*4
4*2
4.3
4*5
4*6
4*/
4.8
4-8

4*3

4*4
3*7
3*1
2*3
1*9
1*6.
1*4
1»2
1.1
1*0

March 1 # 19^8

Treasury Department
1 / Internal Revenue Code, as amended "by the Revenue Act of 1945*
'»
‘v
'
2/ Single persons obtain no benefit under the i.noeme—splitting prevision of H.R* 4?9®*
Assumes taxpayer is not entitled to the special exemption for either the aged ©r the blind*
¿|/ Point at which the tax under
H*ft> 4?9&
is the same as the tax under the $40 per capita tax credit*

•

3-3#
5*7
5*4
4*9
4*6

•

EXHIBIT 7
Table 2
Comparison of amounts hnd effective rates of individual income tax under present law, 1/ the House bill (h .R. 4790), and the $40
per capita tax credit, for selected amounts of net income under $5,000
' Married .person 2/ - No dependents
Decrease in
amounts sf
tax compared
$40
House $40
with present law
per
bill per
House
Present
$40 per
capita
(H.Ro capita bill
law
capita
tax
4790) tax
(H.R.
tax
credit.
credit
y
4790) credit

Amounts of tax
Net -income
before
pers-onal
exemption

^Heuse
„
.‘ bill
Presents,
1
(H.R.
law
:V
.4790)
; y

1 ......
$ 1,200
1,500
1,600
1,700
1, 800
1,900
1/937 ÿ
2,000
2>500
. 3,000
3,500
4,000
4,500
5,000

$ 38
95
114 .
•
133
152
171
170
190
285
380 •485
589
• 694.
.798

.
$ 40
53
67
80
93
98
106
173
239
326
426
: 502
578

0
$ 15
34
53
n

91
98
110
205
300
405
509

Effective rates

3 *2#
6.3
7 .1
7 .8
8.4
9*0
9*2
9*5
11.4
12.7
13.8

14*7
15.4
614
718 ■- 16.0

0
0
2.7$ 1.05g
3.3 2.1
3*9 3-1
4.4: 4 .0
4.8 .

4*9
5.1. 5*1 5*3 5*5 •
6.9 8.2
8.0 10.0
9*3
10.6
11.1
11.6

il-6
12.7
13.6
14*4

$ 38
55
61
É7
72
78
80
84
112
141
159
163
192
220

$ 38
80
80
80
80
80
80
80 :
80
80
80
80
80
*80

Decrease in
effective rates
compared with
present law
House .$40 per
bill
capita
(H.R. ; tax
4790) ;oredit
3 *2#

3*2#

3*7
3.8

5 *3 :
5*o

3*9
4.0

4*7
4.4

4.1

4.2
4.1
4.0
3*2 .
2.7

4 *1 .
4.2
4*5
4*7
4*5
4 »i
4*3
4»4

2.3
2.0
1.8
. 1.6

Tax deorease as
a percentage
of present
tax liabilitv
House .$40 per
bill ; cap ita
(H.R. • tax
4790) :oredit
100.0#
5800
53*3
50.0
47*5

4*4

46,8
44.9
42.I
28.1
21.1

4*5
4.6
4.6
5-1
5*4

16.5
13.6
11.5
' 10.0

5*3
4*8
5.0
5*2

45.6

39*3
37.0,

Treasury Department
y

2/
3/

3*3#

100.0#
84*2
70.2
6o*2
52.6

44*9
44.0

32*7
27.7
27.7
27*6

Tax decrease as a
percentage ef net
income after present
tax liabilitv
House . • $40 per
bill ;
capita
(HeR. ;
tax
credit
4790) :

Internal Revenue Cede, as amended by the Revenue Act of 1945*
Assumes only one spouse has income.
Assumes taxpayer is not entitled to the special exemption far either the aged er the blind.
Point at which the tax under H*R. 4790 is the same as the tax under the $40 per capita tax Credit.

3*9
4.1
4.2

3 *3#
5*7
5*4
5*1 .
4 *9.'
4*6
4.5'
4*4
306
3 *1 .
2.7
2.3
2f.l
1*9

"

...

March-ls

„-W »?

.

' .

-- '

EXHIBIT

7

Table 3
Comparison of amounts and effeotive rates of individual income tax under present law, 1/ the JHcuse bill (EUR, 479^)> and the $40
per capita tax oredit, for selected amounts of net income under $5,000
.Married person 2/ — Tw© dependents
imounts of tax
Net Income
before
personal
exemption

Present
law

House
hill
(H.R.
4790)
y

$ 2,400
2,800
3,000
3,500
3,600

$ 76
152
190
285

0

Decrease in
Decrease in
. effective rates
amount s cf
tax compared
oempared with
with present law
present law

Effeotive rates

! $40
: per
:capita
5 tax
:credit

^Hcuse
: bill
Present :(H.R.
law
:4790)
: 3/
3/2%

0

5*4
6.3
8.1
8.4

1.9%
2 .7
4*2

304

« 53
80
I46
l60

0
0
$ 30
125
144

3,700
3,800
3»874 4 /
3,900
4,000

323
342356
36I
380

173
186
196
200
213

163
l82
196
201
220

9 .3
9*5

* 4*7
4*9
5*1
5*1
5*3

4,500
5,000

485
589

286
386

.3 25
429

10.8
■11.8

7-7

8 ,7
9.0
9.2

.4*4

6.4

: $40
:per
$40 per
:capita House
bill
capita
: tax
tax
:credit (H.R.
4790)
credit

House
bill
(H.R,
4790)

:
:
:
:

$40 per
capita
tax
ere dit

Tax decrease as Tax decrease as a
a percentage ' percentage of net
of present
inocme after present
tax liability
tax liability
House i$40 per
bill :capita
(H.R. : tax
: credit
m o )

0 $ 76
0
99
1.0%
110
3.6
139
4.0
144

$ 76
152
l60
l60
l60

3*2%

3-2%

3-5
3*7
4.0
4.0

5*4
5*3
4*6

100,0%
65,0
58.0
46.7

4*4

5*5

150
156
160
162
167

l60
l60
l60
l60
l60

4*1
4*1
4.1
4.1
4.2

4.3
4*2
4*1
4*1
4.0

7*2
8.6

199
203

160
l60

4*4
4*1

3.6
3>2

4*4
4.8
5*1
5.2

House
bill
(H.R.
4790)

Qj

$40 per
capita
tax
credit

3-32
3*7
3*9
4*3
4*4

3*3*
5*7
5*7
5.0

47*5

100.C%
100.0
84.2
56.1 .
52.6

46.5
45.6

49*5
46.8

4*4
4 *5.
.4*5
4.6
4.6

4*7
4.6
4*5
4*5
4*4

4*9
4*6

4.0
3.6

44*9 ' •• 44*9
44.7
44*3
42.1
44*0
41.0
34*5

33*o
27.2

4*9

March 1 , lÿ+8

Treasury Department
1/
2/
3/

:
:
:
;

Internal Revenue Code, as amended by the Revenue Act ©f 1945»
Assumes only one spouse has income.
Assumes taxpayer is not entitled to the speoial exemption for either the aged or the blind.
Point at which the tax under H.R. 4790 is the same as the tax under the $40 per capita tax credit.

H

I

r

v

>

;

EXHIBIT g
Table 1
Comparison' of amounts and effective rates of individual income tax under present law 1/
...
and under the $Uû per capita tax credit
.• ;

•
Amounts
Net income :
before •-« : ...
Nresçpt
personal
exemption : M
la y
•
♦
$ 700
> goo
1,000
1,200
1,500
2,000
2.500
3,000

;'
.

• Decrease in
Decrease in * Tax decrease
o f ta x
*
E ffe c t iv e ra te s
.* amounts o f
e f f e c t iv e *
as a p ercen t­
•tax
compared
ra te s comnared‘ age of? pre sent
j—
$Uü....
' Ff esse
ent ' “ . - per_ -c a p ita--- *with present ''w ith'present '■*
* per capi ta !
tax l i a b i l i t y
* law
aw
[ ta x c r e d it
] ’ta x credi t 1
law,
f.
■
**'

$'38
.5 7
.9 5
153
190
285
' JSO
U85

/
;

' 0
$■17
’ 55
; 95
150
'2U5
3U0
ÙU5

U ,000
69U
65U
......... 5,000.
922
882
.. |,0Ó0-. v, ,
1,129
1,169'
8,000 ; ; -4:1,720
; 1,^80
■10 ,'000 ■
4: : ' • ? , 3U7
■
"
2,-307:
• 15,000
•■Uv230
: 4,270
• r2 0 ,000 •.
6,6^5-; '
; 6,608:
'25,000'........ •‘ -9 ,3 6 2 — 0 , 3-22 ,
50,000
25,097
25.137
75,000
43,477
43.437
100,000
■
63,501
63,541
250,000
191,732
1

ft §|

Footnotes on next page.

Single person - No dependents"

1

v

'

0
2 .1 #
• 5*5
7. g
10.0
12.3
■13.6
lU .S

V

12.7
14.3
15.2
I6 .2

17.3
18. U
IQ..5
; • 2Ì .5
.2 3 .5 .
.........28,5
' * 33.2
c
37.4
: 5O.3
:
88.0

1

:Us

76.7

$ 38
Ho
Uo
Uo

'

5 .4 $
7.1
9 .5
11.1

16.3
17.6
18.8 ;
• 21.0

•

r.........

; U*0
Ho
Uo
Uo
Uo
Ho
h o .....lé
U0 ■

: ...
.

5-4 f
5 .0 .
U .o
3. 3 ,

2 .7 •
2.0.
1-6 V;
, ; 1.3 é

Kf

V|

r>■••: |-,

.

21.1
1U.0
10.5

3-1
2.3
1 .9
1.6

5 'g
4 .3
3 .4
2.3
1.7
.9
. .6 .u

1 .2
1 .0
.8
.6

-

1.0
. 8’ *

:•
..... L ........ . ..........
; "’*3 - .
:

Uo
'
A n i 23U ’ '
' ■ - .3 *
"
Uo
' 28.2
Uo V '
: • >2
3 7 .0 ;
Uo
.2
. 37.3
Uo'■ ;'".l
5P .2
*........H o ...H i
H é é .....1
57. Q
*
Uo
.
63.5
>
*«
Uo
76.7

Continued

V

100.0#'
7O.2
Ha. 1
30.1

$i

*

. V-ft-’-4

-- •
•
s:
■
■

------------- -----ax decrease
as a percent­
age o f net
income a fte r
present ta x
l i a b i l i t y .__

.2
.1
.1
*

5 .7 #
5 -U
U.U
3-7

.8
.u
.3
*3
.2
.1
.1
.1

,
ro
‘

ExaoiM £
Table 1 - concluded
Comparison of amounts and effective ratés of individual income tax under present law l/
and under the $H0' per capita tax credit
•
Single person - No dependents

Nat income
before
personal
exemption

$. 350,000
500,000
750;000
1,000,000

Present
law..

l

$Ho.

:

;

‘ per capita *
* tax credit

$ 2 7 s,22?
H07,897
62^,022
8H o ,ilf 7

:Decrease in ï Decrease in Tax decrease tTax .decrease
. ^as a percenti amounts of !
effective
as a percent- ;&ge of net
:tax compared.rates compared
1
$Hp
•income after
resent l per Cgpita :with' presentt wi th present
tax
liability
^present
tax
law
*
law
^•aw
* tax credit »
T •?«"hi T i +

Effective rates

Amounts of ,tax

$ 278,182
U07,857
623,q82
gUo,i07

.p

/

79 5
.

.

81.6
83.2

8H.0

$

79 5
.

$

81.6

83.2
gH.O

Treasury Department
if

$ Ho
Ho
Ho
. Ho

*
*

*

•.1$

*

*

»

*

*

ro-

*

•*

March I* 19^8

InternalRevenue Code, as amended by the Revenue Act of IQU5 . .

* Dess'-than .05 percent.

r\>
4*»
cn

00

EXHIBIT g
Table 2
Comparison of amounts and effective rates of individual Income tax under present law \ j
and under the $90 per capita tax credit
Married person 2 j -

Present
law

$ i>oo

$

1,500
2,000

2,500
3,000
U,000
5 ,ooo

6,000
g ,000

:
;

76

•

10,000
15,000
20,000
25,000
50,000
75,000 .
100,000

$Uo
per capita
tax credit

$ 15
110

380

539

300
509

798

718

1,577
2,185
>*,ol+7

6,3911
9,082

2U J Q 5
H 3 ,OQ2
63 ,12s

Tax decrease
Decrease in. Decrease in
Tax decrease . as a percenteffactivé
amounts of .
a.s a, p t u u c i u / “ j age of net
rates compared age of present; income after
;
$Uo
tax
compared,
Present
[per capita with present, with present
tax liability : present tax
law
[tax credit
!daw
law
liability
0
1.0$
5*5
8.2

0

95
1Q0
285

1 ,0%

205

965

1,H97

2,105
3.967
6 ,311+
9,002
2*1,715
> 3,012
63 ,0U 8

6.3
9.5
ll>
12*7
1U.7
l6.0
17>
19.7
21.9

27*0
32.0

■

10.0
12.7
ik .U

16 .1
18.7

2 1.1
26 .U
31.6
36 .O

36,3
U 9 .6

H q>

57.5

57.3

63.1

63 .O
Continued

Eootnotes on next page.

dependents

Effective rates

Amount s of tax

Het incomeî
"before i
personal i
exemption î

Ho

5-

$76

H

80
80
80

5.3

80
80
80
80

2.7
2.0

80
80
80
80
80
80
80

80

v'

5.755

100.0$
gU . 2

U .O

42.1

3.2

28.1

5.7
H>
3.6

21.1

1 .6
1-3

7-7

1 .6 ,

-1.0

5,1
3.7

1 .2
1 .0
.7

.

2.0

.>

1.3

*3

•

.2
.1
.1

.2
.1

9

VD

3.1
2.3
1.9

13.6
1 Ò .0

.8
.6

.

.6
■

,v5.

•3
•3
.2

..
•

EXHIBIT.8
Table 2 - concluded
Comparison of amounts and effective rates of individual income tax under present law 1 /
and under the $1*0 per capita tax credit
Married person 2/ - No dependents

Amounts of tax
Net income
before
personal
exemption

$ 250,000

350,000
500,000
750,000
1 ,000,000

*

$Uo
Present ;
per
capita,
law
:
tax credit^
$ 1 Q 1 ,3U0
277,790
1*07 ,1*65

$ 191,260
277,710

623,590
339J15

Tax decrease
Decrease in Tax decrease’,
Decrease in
as a percent­
effective
amounts of
as a percent­
age of net
rates compared
tax
compared
$
1*0
age of present income after
Present
!per ca.psita with present with present tax liability
law
present tax
law
law
!tax credit
liability
Effective rates

76.5 $

76 .5 #'

623,510

79
8I .5
«3.1

79.3
gi. 5
g3.i

839.635

gl*.0

gi*.o

Uo7,3«5

go

*
*
*
*

*
*
*
*

go

*

*

$ go
go
go

Treasury Department
i f Internal Revenue Code, as amended by the Revenue Act of 19^5«

2/ Assumes only one spouse has income.
*

Less than .05 percent.

&

.1

j

a
a
*

March 1, lÿ +8

L

0

..

EXHIBIT g
Table J
Comparison of amounts and effective rates of individual income tax under present law i f
and under the $Uo per capita tax credit
Married person 2/ - Tyo dependents

Net'income
"before'
personal
exemption

Amounts of tax
Present
•per.
5U0
j
present *
capi’i
ta
law: : tax credit

2;500

$ .95.

2,800

; 152

3 ,000

190

4.000

380
589
798

; 5,000

6.000
8.000

1,292
1,862

10,000

. 15,000
.20 ,000
2 5 , 0.00

50,000
75,000
100,000
250.000
350.000

3,639

0
' 0.
$ 30
•220
, k2$
: 638
1 ,1 3 2
1 ,7 0 2

■5,890

3,^79
'5,730

.8,522

8 ,3 6 2

2

k , 111

U2,3?3

62,301
190,475
276,925

Effective rates
--- ------•w ^
Present
per capita
law
tax credit
3. 8 $
5.U
6.3
9*5

0
0
IvO*
• 5.5 •
,

1 1 .8
1 3 .3
I d, 2

8„6
1 0 .6
lk .2
1 7 .0

18.6

2U.3

•
29.5 :
3^.1
Ug.2 .
56 . k

23,951
*+2,16 3
6 2 , 11+1

6 2 .3

190,315
276,765

76,2
7Q. l

* Decrease in
’ amounts of
‘tax compared
*^ith present

.

2 3 .2

28.7
33. U
97*9
56.2*
62 ; 1
7 6 .1

79.1
‘Continued

Footnotes

on next page

law

$

95
152
160
160

160
160
■160
160
160
160
16b
160
160
160
160
160

Decreease inj Tax decrease îTpx decrease
effective ,as a oereent'. as a percentrates compared*ase~cf Present * •
H
with
-nrpqpnt *tax
*aSe i0t
PPt
with present
i ap
iiisent
t y £income after
present tax
law
3.H
5*k

5*3
*+.0
3.0
2.7
2 .0

1.6
1 .1

.8
,.6
*3 ‘ i v
■.2
.2
.1
*

100.0$100.0
8*+.2
1+2.1
27.2
20.1
12. k
<8,6
k,k
2*7

1.9
.•u.
*3
.1:
.1

k.,0%
5*7
5*7
k-k
3 .6
3 .1

2.U
. 2.0
ilM
1 .1
1 .0

.6

S

. .u
«2

»
uo
M

EXHIBIT 8
Table 3 ~ concluded
Comparison- of amounts and effective rates of individual income tax under present law \ ]
,
and.under the $U0 per capita tax creditMarried person 2/- Two dependents

•'?* .
9t

Ret income:
beforë
personal :
exemptlok'

■
-J
Amounts of tax

.

Present * p er capita’
^aw
*tax
credit*»
♦
•
♦

$ 500,000

$ Ho 6 ,6oo

$ Uo6 ,HHo

750,000
1 ,000,000

622,725
833,850

622,565
838,690

Treasury Department

Effective rates
*
»
$Ho
Présent îper capita
law
*tax. credit
81.3f

83.0
83.9

"81.3#
•83 .O

83.9

: Tax. decrease
’ Decrease in* Decrease in * Tax decrease ias a.percentamounts of,
effective .as a percent- :age of net
[tax compared*rates compared, age of present:income after
[with presentIwith present . tax liability»present tax
1• . law
!law.
: liability
*
.
»
$ I60
l60
l60

m

l/ Internal Revenue Code, as amended "by the Revenue Act of 19^5*•
£/ Assumes, only one spouse.has income.
* JLess than #05 percent.’- *

*
*
*

-*

*

'. 2$

*
*

.1
.1

March l> 19^8

EXHIBIT 9
Table 1
Comparison of amounts and effective rates of individual income tax -under present law
and tinder the House b ill (H,R, 4-790)

1/

Single person 2/ - Ho dependents
»Tax decrease
»
D ecrease in
. E f f e c t i v e r a t e s » D ecrease in
o
f
t
a
x
imo
tints
Tax decrease '»as a p e r c e n tNet income;
e ffe c tiv e
♦
♦ StiliOUXL0O UX
as a p e rce n t­ : age o f n e t
b e fo re :
House b i l l îP re se n t ».House b i l l ;t a x compared r a t e s compared age o f p re se n t ' income a f t e r
p e rso n a l î P r e se n t •
w ith
. (H.R; 4790) «.with p re se n t
ta x l i a b i l i t y : p re se n t ta x
exem ption :
law
* ( H .E , ^790) * law
p re se n t law
•
1
3/
;
1 l i a b i l i t y ----•
li
»

$

19

0

57
95
133

$ 27
53
80

1 ,5 0 0
2,00 0
2 ,5 0 0
3,0 0 0

190
285
380

120
213
289

485

371

4,000

694

53 s

5,000
6 ,0 0 0

922
1 ,1 6 9
1 ,7 2 0

727
950
1,442
2 ,0 0 3

20,000

2,3^7
4,270
6,645

2 5 ,0 0 0

9*362

$ 6oo
SCO
1*000 .
. 1 ,2 0 0

8,000
10,000
15,000

3,723
5 ,3 5 6
3,2 9 6

3*2$
7 oi
9*5
1M
1 2 c7
i

4„3

1 5 .2
1 6 ,2

17*3
18.4
1 9 .5
2 1 .5
23*5

2So5
33.2
37^

0

§ 19

100*0$
5 2 .6

3.355
4 .1

44,0
39*3

4 .6
5*0

37*0

3°

5*3
6 »7

42
53

3*3
4 ,2
4 ,4

8 .0
1 0 .6
1 1 .6

70
72
»
n4

4*7
3*7
3*6

2 5 .3

5 .4
4*2

3*8

2 3 .5

4^
4*5

155

3 .8

219

3*9
3*7
3*5

22,4
21*1

3 •yb

1 2 ,4

13*5
14*5
1 5 .S
18.0
20*0
24*8
29*3
3 3 .2

194

277
344

547
790
l 0o66
Continued

■Footnotes on next page*

3 . 2$

3*5
3*7
3*9
4*2

¿4*0

1 8 ,7

l6*l
14*7
i2 *8
11*9

* 11*4

4*7
4,8
4,5
4.4
4*5
5*1
5*9
6*8

EXHIBIT 9

Table 1 —concluded
Comparison of amounts and effective rates of individual income tax under present law 1/
and under the House b ill (H.R. ^790)
Single person

- No dependents

Effective rates , Decrease in Decrease in
Net income: Amounts of tax
, amounts of
effective
before :
House
b
ill
.tax
compared
rates
compared
personal ; Present :
Present
(H.R.
1*790)
.Xtfith
present
with
law :
J790)
exemption:
law *
•
.
law
present law
1/
♦
$

50,000
75,0 00

100,000

$ 2 5 ,1 3 7
^3 .^ 7 7

63,5^1

25 0,00 0

191,772

350,000
500,000
750,000

**0 7 ,8 9 7

1 ,000,000

$ 2 2 ,^ 2
3 S , 9S0
57,032
17 2 , 1*37

50-356
513.0
6 3 .5
7 6 .7

*+5«0$

10 .6$

2 7 ,9 3 0
Ho,9^
62,5 60

S.O
S.2
8 .3

10.1
10.0
10.0

8^,172

S.H

10.0

62^,022

S3 .2

s4o , i ^7

755»97*1

SÎ+.0

75.6 '

Treasury Department

' 5<*3$

6 9 .0

57«0
71*5
73.*
7*-9

79*5

si.6

2 ,6 5 5

i*,i*97
6 , 50S
19,335

5 2 .0

2 5 0 , 2^2
366 , 91*9
56l,H 62

278,222

$

Tax decrease’
as a percent­
age of present
tax lia b ility

Tax decrease
as a percent­
age of net
income after
present tax
l i ab ili ty- _
1 0 ,7$

6 .0

1 0 .3

6*5

10.2
10.1

33 »2
39.0
*w.5
^9*7
52cl

7.7

\

_l/ Internal Revenue Code, as amended by the Revenue Act of 19^5 »
2/ Single persons obtain no benefit under the income-splitting provision of H.R. U790 *
Jj/ Assumes taxpayer is not entitled to the special exemption for either the aged or the blind-

1^,3
17 .9

March 1,

19^8

EXHIBIT 9
Table 2
Comparison of amounts and effective rates of individual income tax tinder present law 1/
and "under the House h i ll (H.R. *+790)
Married person

Zj

- Ho dependents

‘ Effective rates .Decrease in Decrease in
Amounts of tax
Wet income•
effective
. amounts of
••
before :
rates
compared
;tax
compared
House
h
ill
•Present: Souse h i ll
personal • Present î
with
•with
presentexemption î law ►(fl.fi. >+790 ) : law :(H.fi. ++790)
law
present law
à3/
'**
:
_ J ______ 2/_____ .
$

3-2^

0

$ 4o

6*3

190
285

106
173

9*5

1 1 .4

5*3

380

239
*+26

14*7

1 ,2 0 0
1 .5 0 0
2 ,0 0 0
2 ,5 0 0

? 38
95

5 ,0 0 0

4,000

589“
7?8
1,045

5,000
6 ,0 0 0
8 ,0 0 0
1 0 ,0 00
1 5 ,0 0 0
2 0 ,0 0 0
2 5 ,0 00
50,000
7 5 ,0 0 0

100,000

.
.

0

12*7

578
7*+2

. 16*0
17*4
19*7
21*9

6 , 39 ^

1,0 7 6
1 , 1+55
2 ,6 2 8
■ *+,006

9,082
25-,795
^3 .0 9 2
63,128

5.589
16,592
30,013
44,964

1,577

2 ,1 8 5

2 . 7$

55
84

?*6

SvO

i4 i

12*4

163
220
303

1 3 .5

501

14*5

73°
1,1+19

1 0 .6
1 1 .6

3 6 .3

22.4
33*2
4o .o

1+5.0

4,2
^*5

27.6

5.4
4.8
5*2

29*0

6 .1

6 *2
l.h

31 *s

* 7-3
9*3

9*5

3, *+93

13*9
l6 .4
17*5
18.1

18,164

44.0
39*3

3*3f
3*9
4.6
5*1 .

3 7 .0
27*7

1 2 ,0

8^203
13 , 07 ?

100 . 0$
5 8 .0

Î+.7
4.1
4.4
5*0

2 ,3 8 8

Continued
footnotes on next page.

3 . 2$

112

1 7 .5
2 0 .0

6 3 .1

38

6 ,9

27*0
3 2 .0

1+9.6
57-5

$

ïTax decrease
Tax decrease :as a percent—
as a percent­ î age of net
age of present ^income after
tax lia b ility : present tax'
: lia b ility

33.1*
3 5 .1
3 7 .3
3 8 .5
3 3 .1
3 0 . 1+

28.8

13*0
1 7 .5

2 1 .9

32.5
41.0
>+9.3

9
Table 2 - concluded
‘ EXHIBIT

’

Comparison „of amounts and effective rates of individual income tax under present law i f
;
■"'/
and under the House "bill (H*H. *+790)
“
'

Married person 2/ - No; dependents

Effective rates
Decrease in . Decrease in
Net incono:
of tax
^'amounts of ! effective
before ;
, :
Present: ^°"^s0
compared.rate's compared
personal : Present i ^ 011ss
law
*+790 ) ;wd.th present! . -With
exempt ion: law • : (E *jWj90 )
•/*
3/
# - law
! present law
3/
$■250,000 $
.

191 , ÿ40
350,000
277,790
500,000
*K)7 ,% 5*
75 0 , 0 0 0 / . 62 3 , 590 -

1 , 000,00 0

239,715

$

152,092
22 2 , 6o4

7 6 , 5e
/»

B#

3^» 87^
539,336

2 1 ,5
2 3 .1

735,393

g4.û

.

6 0 . 2/
6 5 .3
6 9 .O

" $ 39,242
. %,1S5

\ '.15.7e/
■ l4.1

6 2 ,5 91

71*9

24,203

73>

‘•105,216

.

1 2 .5
1 1 .2

io

.6

;Tax. decroase
Tax do-crease ?as a . per centas ;a percent- ** aSc -of net
age of present:ínco!?5G aftcr
tax lia b ility ¡prOscnt tax
’
i lia b ility
.

2 0 , 5<
¡0
1 7 .7

. 15.>+
. 1 3 .5
*.1 2 .6

treasury Department
if

6 6 .9 /
6 2 .1
6 7 .6
6 6 .6

U)

o\

6 6 ,0

March 1 , 19*+2

Internal Hevenue Code, as amendod by the- Hevcnue Act of 19^+5* ■‘

j / Assumes taxpayer is not entitled to tho special, exemption for either .the aged.or the blind.

rv>

EXHIBIT 9
Tat)le 3
Comparison of amounts and effective ratos of individual income tax under prosent law l/
and under the House b ill (H.R. U790 )
1"
Married person 2/

Two dependents

.Amounts of tax
Effective rates .Decrease in Decrease in
Net income:__________
amounts of
effective
"beforo :
House 1)111
House
"bill
tax
compared
rates compared
personal î Present (HéK« 1+790) Pro sont
(H.R. 1+790) with present
•with
ojpomptioni lawlaw
3/
3/
law
$

Zfkoo
3 >oqo

5*000
5 ,.ooo

..
.

S? 76
190
320
529

. ...

79 s
l y292

6 ,0 0 0
g ,000
1 0 ,0 0 0
15,000

3 .6 3 9

.2 0 ,0 0 0
2 5 , 000;

5 ,29 0
2 ,5 2 2

1 ,2 6 2

0
20
213
326

.

51+7
276
1 ,2 1 0
2 ,3 2 0

.

9*5

7 .7

13*3
16. 2.
1 2 .6

9 .1
10*9
1 2 .1

25.3

25*1*11
1+2 ,3 2 3

29 *5
3 4 .1

'100,000
6 2 ,3 0 1
. 250 , 000 ; . 1 9 0 ,5 7 5
350,000
. 2 7 6 ,9 2 5
500,000
406,600

5 ^ ,2 2 5
151*179
2 2 7,62 1
31+3 , 91+0

6 2 .3
7 6 .2

50,000

750,000

1,000,000

6 2 2,72 5
232,050

Treasury Department
footnotes on next page*

538,1+53
732.965

42.256 . 14.

79*1
2 1 .3
23*0
8 3 .9

55.2
6 0 .5
6 5 .1
6 2 .2
7 1 .2

73*3

5.2
5*3
6*5

251

5i6
652
.1 ,3 1 9

1 5 .5
1 2 .3
2 0 .2
32*0
3 9 *1 .

3 . 2$
M
4.2
5*1 ■

76
110
167
i 203

2*7$
5*3

1 1 .2

3 ,6 5 7
5 ,2 0 0
■15.3 36
291 # 6

75rOOO

$

0

$

.

■

'

2.233

2 , 125•
12 ,976
1 2 ,0 7 6
3 9 ,2 96
5 9 ,2 5 5
62,660

•25,272
10 5,22 5

3*9
4.6
5.6

31*5
3 2 .2

5.2

1 1 .2

37*9

1 3 .3
1 6 .2

39*0
3 3 .7
3 0 .7

12.1

2 9 .0

20 .6

' 15*7
14.0

17*2
1 5 .5

1 2 .5

11.2
1 0 .6

3 . 3$

57*9
45.0
3M

6 .2
2 .0
11.6

3 6 .2

1 7 .3

•

100 , 0 $«

35*0

2 .2

3 ,3 2 2

:Tax decrease
Tax decrease :as a percent”
as a percent- : age of net
age of present1income after
tax lia b ility :present tax
• xxauxxj.u.v

1

13.5.

12.6

15*2
2 0 .2
31*5

;;

39*7
5 7 .9
6 6 .0
6 7 .5
6 7 .1

66.2
65*7
March 1, 19^B~

EXHIBIT 9
, V;' ,/

•

Comparison of amounts

Table
and

'

3

~ concluded

effective rates of individual income tax under present law 1/
and under the House h ill (H»R0 ^790)

footnotes;
1/ Internal Revenue Code, as amended "by the Revenue Act of 19^5 ,
Hf Assumes, only one spouse has income *
3 / Assumes’ taxpayer is not entitled to- the special exemption for either the a^od or the hlincU

UO
GO

ro
o
01

EXHIBIT 10
Estimated number of taxable income recipients and their total individual income tax
under present law 1/ and under the $U0 per capita tax credit,
distributed by net income classes, in calendar year 19^8
(Assumi,ng personal income of $200 billion)
•

Rumbe r of income recipients
Net income
class
0$ooo)

Under1 2 3 ~
U -

1
23 .
&
5

Under 5
5
10
25
50
ìoo
250
500
1,000

io
25
50
- ioo
- ' 250
- 500
-1,000
and over

5 and over
Grand total

Taxable
under
present
law

i
Taxable
:
under the
;$1*0 per capita
: tax credit
(Numb er of income

5 ,8 3 2 .7
2 0 ,583-1
15,096.3
5 ,7 5 0 .1
2 ,5 1 2 .9
1*9,775.2

t. Made nontax—

: able by the
t $1*0 per capita
;
tax credit

Total tax 2/
Under
Under
‘
the $U0
present ]
per- capita
law
Ju0

recipients in thousands; money amounts in millions)

3 ,0 9 0 ,2
1 5 *7 0 0 .7
1 2 ,3 0 1.6
5 ,3 9 3 .0
2 ,^H7 .0

2,7^2.6

3 9 ,^3 2 -5

10,31*2.7

2 »29^ * 3
357.1
65,9

$ 79-7
2.057.7
3 ,1 0 9.3
1 .9 7 7 .7
1 ,3 1 1 ,6

$ 172.5

2 5 0.0

7*3

ll, 52U .3

8,536,5

2 ,9 8 3 .3

93.O

1,626.5
2 ,1*61*.1
2,lUU.2
1 ,8 7 3 .9

1,1*78,8
2, M-05 06
2,130.9
1,371*,!*

$ 252.I
3 .0 3 9 .6
1*,182.0"
2 ,1*89 .1*
1.561.6

1,1*63.2
60S.1
1U9.5
51. k

l fH63.2

1 0 ,3

IO.3
I.3

9 3 0 .0

979-2

321,8

•3

177*7

6 0 3 .1
IU9.5
51Ä

—

981*9
1,072.2
5II.7

iW.f

58.5

13-3
.8
.1
1 /

5M
30,6

33-3
15,9

m

1.8
.1+
.1
y

1.3
•3
.1
2,28l*.l

.1

I2D.9

321.7
177.7
l?h ,9

2 ,28 U .1

9 ,7 1 3 .1

9,U93.1

225.O

7*0

52,059.1*

1*1,716.6

21,2^2 09

1 8 ,0 2 9 ,6

3 ,2 1 3.2

100.0

10,31*2*7

1J Internal Revenue Code, as amended by the Revenue Act of 191*5 »
2/ Includes normal tax, surtax and alternative tax on net long-term capital gains„
3./ Dess than $50 thousand.
bf Less than .05 percent.
Figures are rounded and will not necessarily add to totals.

1

/

y
y
y

March 1 , 1943

Treasury Department

Note:

Decrease under the ¿¡>40
u e r .capita tax credit
« Percentage
Amount
îdistribution

-

ÜXHIBIT 11

Estimated number of taxable income recipients and their total individual income tax under present law l/
' and under the House, h ill (H.E, 47-90), distributed’ by net income classes,, in calendar year 1948
(Assuming personal income of $200 billion)
.

Number of income recipients

■_* *

Total tax 2/

\^

•

Net income
class
\ ($000)

Decrease under House b ill
: -Under- ..; •
* Taxable [ Taxable under *‘Made nontaxable * Under
(H,R, 479O)
¡present
* under, ; House b ill
Percentage
Amount
.♦
:
,
H
o
Ä
m
* present . (H.Ä. U790)
*(H.H.4?90) :
(H.E. 4790) «_ law
. _ distribution
: law
(Number of income recipients in thousands; money amounts in millions)
2.4$
$ 148.9
$ 2 5 2 .1 $' 10 3.2
3.93S.O
•
1,896.7
Under 1
5.632.7
20.3
3.039.6
1,770.1
1.269.5
17;66o .4
2,922.7
1 - 2
20,563.1
23.1
. 4;182.0 2,736.4 -» % 1.443.6
1 3 : 7 6 2 .8
' •
1,333.5
2 - 3
1 5 , 0 9 6 .3
821.6
13.2 : •
.
1
,
667.8
2,489.4
5',635.6
11 U.5
5.750.1
3 - v
458.6
1
,
10
3
.0
1 . 561.6
,7.3
2,495.9
17-0
2,512.9
4 -5
4,142.1
.
1
1
*
524.8
6,284.5
66.3
1
43(490.8
;
7,382.7
Under 5
^9 , 7 7 5 .2
.*—
1; 6 2 6.5
1,-133-0 •
'7>9
g
. 1,-463.2
1,463.2
4 9 3 .5 .
5-1 0
*
*
— k
2,464.1 1,825.4
10.2
. 6 3 8 .7
=608.1
60 S..1
10 - 25
446.4
2,144.2 1,697.6
‘ 7.1
25 - 50
• -149.5 v
*
:r- 1^9.5
% —
5.2
324.7
50 * 100
51.4
- 7 5164
1,-676.9 1 , 55 4.2
844.3
2.2
98O.O
10.3
ioo - 250
135.7
—.
10.3
.6
......... 35,2
3 2 1 .8 _ . 286; 6
... .250 - 5OO..
— ..
........ .1*3
...... ..... 1.1
—
17;4
160;3
......
.3
177:7
500 - 1 ,0 0 0 '•
- .3
.3
. .... '
,1 :
i ?4.,9_. . u p t . :::v
1U1--...... ________,
.....i ä : - .
1 000 and over2 , 102;9
-T * . ;
9,716;1 7,Pl'5i2
2,284.1
5 arid over-- 2,284.1'
: '3 3 .7
100 .O ...
;6;284.5 • ; ; 21,242 :.9 •14,997^9 'I ; 6 , 24 5 :0
Grand, total
5 2 , 0 5 9 .^'
4 5 , 7 7 4 .9
March -.1, 19^+S
Treasury Department
* <-• ' • ;
, .:
' .
..: A ;
....

l/

Internal Revenue Code,‘as* amended.-by the Revenue Act of 19^-5*

2./ - Includes- normal-tax, surtax and alternative tax on net long-term capital gains.
Note* Figures are rounded and w ill not necessarily add to totals.

ro

EXHIBIT 12
Estimated revenue loss from each individual income tax provision of the House h ill (H*R* *+790),
distributed by net income classes* in calendar year 19I+8
(Assuming personal income of $200 billion)
Uet
income
class
(à
.\r\r\r\)
\
\yUUU

Under 1
1 - 2
2- 3
4
l: 5
Under 5

* Tax decrease from
Total
'
•
decrease : Increase ¡Additional
in tax • the per Jexemption;
under ¡c a p it a 1 for
House billiexemption» persons
(H*R.1+790) 5 to $600 i over 65
♦
• ...
$ 1US.9
1 , 2 6 9 .5
1,1+1+5*6
821.61+58*6
l+^li+2.1

$

9 6 .5
5 2 2 .1

$

553-9

73-?
68*1+
18.0
233-3

264*3
131*2
1 , 56 7.9

2 .1
70*8

R
j —10
10 - 25
25 - 50
SO ~ 100
100 - 250
2 50 - 500
500 ..- 1 ,0 0 0
000. and oyer
5
over

1 1 .3
2 , 1 0 2 .9

---- --HC'l
176 .8

*9
•3
2/.
2/
2/
3 O.O

Grand total

6 , 21+5*0

1,744.7

268*3

'4 9 3 .5
6 3 3 .7

446.4
324.7
I 3 5 -7
35-2 ■
11A

2 7 .9
53 .3

20.1
8*1+
1L0O
f*
•
*2
.1

1 9 .2

7-^

2 .2

indi\
each individual
income tax provision of House b ill
*47QOl 1/
Allow
Reductions, of tentative
married t
normal tax and surtax
Special couples : Increase ; Total î
: $201.60;
provision to s p lit l
:. from- J...
■-plus
for the their
------ ; standard * a ll I 33'5cp $67
- 1 ^ . 5^ of
blind incomes : 4eauction.reduc»*:
• excess
______
» _______ î-tions •
¡•over $gl+Q
(in millions of dollars)-

$

2/
.1

*a .1
2/

—
;■

-3
2/
g
2/
2/

1/
2/

— ■
~ j r
-3

$

.5
5*3

-, 14.5..
2 O.3

•*—
$

2*1
2*1

$

4 4 . 3,
6 7 6 .5

$ 1+1+»3
3 4 9 .2

816.1 289*6
1+8 3 .5 118*7

. 292*8
2-,3 1 3 .2

32*2
831+.Ö

$ 3 2 7 .1
39.6
: ? ! »5
35-2
4 7 3 .4

6 8 .1
2 0 .9
2 .3

21+8*7

2.1+

1+.0

256*0
I 97 .I+

4r;1

_

5*6
-9
ol
733.2

91-7

172*8
89*3
29*4
16 *1+
11.2
1,021*2

803*5

93-8..

3 , 3 3 4 .4

6 9 .6
296 .I
22 I+.I+

11+2,2
4 4 .3

i
2/
2/
*2/

*^**'
....
—
'2*1+
3 3 6 .4

$ *2
1+86*9
293*3
183*3
9 6 3 .7

$ 1+2*1
1+2*1

17 2 ,8

. .r
VIM-‘■
'
—
—
i+.o T 2Ö.1+
4 7 7 .4 1 ,08l+*l

1/ The provisions are estimated consecutively, each individual loss depending on the cumulative effect
of the preceding provisions*
_2/ Less than $50 thousand. .
Figures are rounded and will not necessarily add to totals

.

121+.S
I I 7 -5
2-9 . 253-1
197,4
■Ljia 1
_

Treasury Department

Notej

__

89*3
29.Î
l6*l+
11*2
894*1+
9 3 6 .5

March 1*

19 I+8

r

EXHIBIT 13

Comparison of combined normal tax and surtax rates under present law 1/
and under the House b ill (H.R. 4790)

Surtax net income

‘ /

Combined normal tax and surtax rates
House bill
Fresent law
*
(H. B. U 79O)

H0 1

Exceeding

exceeding

$

a

1,000

$1,000
1»400 2/
2 ,000.
4,000

2/

1,400

2,000

)
)
)

20$

19 .00$

22

20.90
24.70

3U
38

28.50
32 .3O
36 .ÏO

i4,ooo

>*3

40,85

12,000
l4,000

;

16,000

16,000 ... IS , 000

^7

.

18,000

20,000

50
53

22,000
26,000
32,000
38,000

. Hates after
reductions

Sates after
5$ reduction

26

6,000
8,000
10,000
12,000

20,000
22,000
26,000
32,000

*
]

"30

6,000
8,000
10,000

4,000

Tentative
rates

13 .300$
20,000
15,200
16.720

-5.700$
+ 1.000
-3.800
-4.180

22.230
25.650

- 2.470
-25850
-3.230
- 3.610

29.070

32 .H9O
36.765 :

-

44.65
“+7.50
50.35

UO.185
42.750
^ 5.315

06 '

53.20

47.880

59

56 .O5

50.445
53.016

62
65

-

08.90
61 .75.

.■

Perc-entage'-point
decrease* ( - ) or
increase ( + ) in
rates Compared
with present l a w

55-575

-4.085'
-4.465

-^ .7 5 0 -5.035'
- 5.320
- 5.605
-5-890
- 6.175

Continued

footnotes on n^xt page.
......... R ...................

-x .¿./It ^siv, -

PO
cn
TO.

EXHIBIT 13 - Concluded
Comparison of combined normal tax and surtax rates under present law 1j
and under the House h ill (K.R. U79O)

Surtax net income
Exceeding

Hot
exceeding
0
0
0

Hi

<&-

38,000
HU,00 Q
50,000
60,000

Comhined normal tax and surtax rates
House b ill
Present law
(H. R.' U790)
Rates after
Tentative
’
Rates after
reductions
0g
x*0 civic -X0 Tl
69^

71.25
-7H.IQ

61.560
6U.125
66.690

•6 . 555$
-6 . 8H0
-7 .1 2 5
-7 IU1O

69-255

-7.695

65 *55$
68 . *40

5 0 ,0 00
60,000
7 0 ,0 0 0

72
75
72

7 0 ,0 0 0

80,000

7 6 .9 5

80,000
9 0 ,0 0 0
100,000

90 ,0 0 0
100,000
150,000

81
SU
27
89

150,000
200,000

200,000
over 3/

qo

and

Treasury Department

91

• Fereentage-point
; decrease (-) or
: increase (**•) in
• rates compared
: with present law

52.995$

71*820

-7 .9 2 0

82 .6 5

7*4.325

-8,265

8*4,55

7 6 .0 95

-8 . *455

8 5 .5 0
8 6 . *+5

76.9 50

-2V550

79.80

77*205

-8.6*45
March 1, 19*48

Internal Revenue Code, as amended by the Revenue Act of 19*45*
.
Designates notch area under the House h i l l . The exact upper limit of the notch area 18 * 1 »395* 3* '
Tax is subject to the following maximum effective rate limitations: under present law, 8 5 .5 percent;
3/
under the House h i l l , 77 percent.
,
1/
2/

EXHIBIT l4
Estimated number of taxable income recipients distributed by the various percentage reductions
provided under the House b ill (H. It* 4790).'» in calendar year 1946
(Assuming personal income of $200 billion-)

Surtax net income

$1,000

- ¡¡>1,000
-

0

1*395»S3 $200

.

- $200

:

-

279,17

|

-

g 4o

1 , 395. S3 - ' M o o

279.17

4,000 and over

g4o and over

Reductions of
actual present
law l/ tax

: ;

•30% -to.: 20$

$67
zkj,

;

: Humber of taxable
: income recipients
:

']

:

, -

1.7

45.S

. Total

l/

7.9

12.5

20/o

$20 1.60 plus lU ,5 <
?o'$159^60 plus 10$
of excess ever
of excess over «:
$S 4o $738 ./

Treasury Department

(millions)
23.7

.
0
t*v.

0

:
: Reductions ox
, ,
.
* ,
: tentative normal :
normal tax and surtax : tax-and
.
,
, „ t
surtax
m
,.
Tentative
, ,
, '

„

March 1, 19^-S

Internal Revenue Code, as amended by the Revenue Act of 19^5*

rv>
cm
GO

- 45

appendix -

Table of Contents
Page Ho

Table A

estimated number of taxable and n$ntaxable income
recipients, their income and individual income
tax under present law, in calendar year I 9 U S.....

Table B

.estimated number of taxable income recipients
under present law, their surtax net income and
combined normal tax and surtax, distributed by
surtax and net income brackets, in calendar
year 19^8 *....................... ..................................................................

47

-estimated number of taxable income recipients under
present law, their net income before exemptions,
surtax net income and total tax, distributed by
net income classes, in calendar year I 9 U8 ......... " . . .

48

Table 0

Table D

number of taxable individual and fiduciary returns,
tax and net income, 1913- 19^6 and estimated for
19147-19143

49

Chart I

CONSUMERS’ PRICE INDEX 1939 TO DATE
All Items, Food and Clothing
1935-39 =100
1939

1940

1941

1942

1943

1944

1945

1946

1947

Source:Bureau o f Labor S tatistics consumers'p ric e index fo r m oderate-incom e fam ilies in la rg e c itie s .

Office of the Secretary of the Treasury

1948

C h art 2

E F F E C T IV E R A T E S O F IN D IV ID U A L IN C O M E T A X
Present Law and House Bill (H .R .4 7 9 0 )
Married Person, No Dependents

Office of the Secretary of the Treasury

B-833

256
- 46 -

Table A
Estimated namber of taxable and nontaxable income recip ien ts,: their income and individual income tax under present.law, 1/
........
. in calendar, year 19^8
(Assuming personal income of. $200 billion)

*

•

••%

'
■j

1
Humber
* Total tax
: of income V ofAmount
income
; recipients (millions) *[ (millions)
: (thousands)

Total, a ll income recipients

.7 1,578

*Nontaxable income recipients

19,519

15,030 2/

. Taxable' income recipients-

52,059

132,912 2/

Subject to surtax

52.0 59

s6,ios

y

is , 603

Subject to normal tax

5 2 ,0 5 9 2 /. :■

s6,os5

y

2,45 3

Subject to alternative tax
■Treason Department

■

23
.

$147,932

2/

373 6/

$21,243

21,2^3

187 ‘

March X, l ÿ *

1/ Internal Eevenue Code/ as amended* by the Eevenue Act of I 9U5 .
2J Bet income before exemptions.
1/ The- number of persons, paying normal tax is estimated to be less
• than 500 smaller -than the number paying surtax. ............ ................
z/ Surtax net income.
5/ Normal tax net income.
§./ Net long-term capital gains subject to alternative tax.

Table B
Estimated number of taxable income recipients under present law* 1f
their surtax net income and combined normal tax and surtax*,» dis-~*
tributed by surtax net income brackets, in calendar year 1948
(Assuming personal income of $200 billion)
Surtax net inccme !
Taxatle iaco:ae
!
Surtax
: Combined normal
brackets
’ reolPie®ts cumulated
net income
: tax and surtax
(Snnn\
' : ^om highest bracket \ in .bracket‘
« in bracket 2/
—.■
■
■
■■ ■■'*’,---- L ------ ;
Number : Percent '• Amount i Percent"^Amount r Percent~
(Number of income recipients in thousands; money amounts in millions)
Under \2.
2 - 4
i.4 6
6 - S
8 - 10
10 - 12
12 - l4
\.14
l6
l 6 —IS
IS ~ 20
20 - 22
22 - 26
26 *- 32
32 - $
44

S ~ 50
44
50 - 60
bO - 70
70 - SO
SO - 90

90 ~ 100
100
150

- 1.50
- 200

Over 200

Grand total
Treasury Department

52 , 059 . 1*
11 , 1 9 0 .6
■2 , 3 5 2 .3
1 , 2 5 9 .3
9 2 6 .9
72 5.6
569 , 1*

%2,5
.■■> 3Spc5
?2£ a5
• 276o3
237 «3
176.4
120 d
92 .0

73*3

' 100.00
2 1 .3 0
If. S2

2,42
1.73
1*39
1 .0 9

.S9
.7^
.6 2

.53
.if6
•3*
*23

.IS
.llf

60.5
4o,2

.12
*02

27.7
19,3

.05
.04

10.7

.03
.02
.01

IU.3
If.2
2 .2

*

58 , 4 4 9 .4
1 0 , 499.6

3,175*1
2,046.5
1,592.1
1 ,,224.2
-994.9
533.5

325*9
94o*4

.6 2
»58
.9 6
1 .0 9

6 6 5 .0

.7 7

39K b

474.4
326.4
227.2
165*2
112.9
3^2.7

142.8
401. 4 .

523.2

. 514.2
441.9
1*06 . U
367 #!

1 .1 6

*95
.80

502. s

724.2

1.42

22 2.2
6 9 0 .2
502.2

1 1 , 1 0 5 .1
£ ,1 9 ^ 3

6 7 .8 8
1 2 .1 9
3 .6 9
2 . 3s
1 .2 5

■

52.72
10.1*2
3*72
2*77
2;^
2 .1 0

328*1
2 9 3 .8
2 6 7 .1

1*56

1*40
1.27

462*9
553*9

2*20
2 .6 3

410.6

.53

329.6
269.7
332.0

.46
*55
.33

1,95
1*57
1.28

.26

ljlf.8

.19

132.3

1 .61
1 .1 5
.33
.63

*If0

93.3
289*7

1*32

241.2

#14

•**7

*17
^7

3^7*0

1 .6 5

2 6 , 102. 4j/ÎO O *00

21,056,2

100.00

.53

122.1

, >

March 1 *

1^2

Internal Revenue Code, as amended by the Revenue Act of 1945 ,
—/ formal tax and surtax were obtained separately by applying the appropriate
rates to normal tax and surtax net. income. Since normal tax net income is
somewhat less than surtax net income, these amounts w ill differ slightly
^ Tesult G a in e d by applying the combined rates to surtax net income.
1V Excludes amounts subject to the alternative tax.
* less than s005 percent.
Note,

figures are rounded and w ill not necessarily add to to tals.

Table

C

E stim ated number o f ta x a b le income r e c ip ie n t s under p re se n t la w , 1J t h e ir net income
b e fo re exem p tio n s, su rta x n et income- and t o t a l t a x , d is t r ib u t e d by net income c l a s s e s ,
- - .' . .
in c a le n d a r year igUS ,
1

(Assuming;personal income of $2.00' b illio n ). * :
Net income
classes
($000)

’
"

Taxable income !
»; Net incorna before ; ';i
Surtax net income * ; Total tax-3 /
exemptions 2y
'
recipients
»
'percentage
Number * Percentage ' Amount * Percentage * Amount * Percentage Î- j.Amount ¡distribution
distribution'
distributiohï
distribution1
(Number of income recipients in thousands;; money amounts, in millions;)

1
5,«32-7
2
20,58311
1 5 , 0 9 6 .3
*: 3- ?
- U '. '- 5 , 7 5 0 .1
k 2,512,9
‘ 5. '
Under ' 5 1 -¡49, 7 7 5 .2
10. :
1 , 1+6 3 .2
510 6 0 8 .1
25
•50 ■
25
.0 )49 ,5 :
-5 1 . U ‘ , 50 -ï 100
100 25O '
10 *3
250 . - •5 OO- - - 1.3 .
5OO;- 1 ;,000
“ . ■■* y
1,000 ...and over
,1
2,28U*1
Over 5
Under
123 -

75*2/»r~>^L
11.2$ $■!+,228.1
,$ 1 , 3 2 7 .2
15,998.3
39; 6-, -. 3!•>ORO-, 8. : ■ , P3, \
: 20.0.
28.1
21,9^7.2
37,503.0 ,
1U.9
11%0
12,8U9 .5
19,753.27 ,Q08*,0‘
8.U
Û.g
11,102.9
103
;öi
|
.1
78.0
6
0 , 0 3 0 .2
95%?“
7 , 6 0 9 .0
2,8
7.1
sMl-ì
8,290.8
9,035.6
6.8
1.2
5,081.8
A
,830.2:
3.S
3 ■ «3 3,286.0
. v 2 .6 .
; -, „1 . . 3.-22-5
1.1
‘ 1,350.9.
• W:
1 , 145s. 5.
■380.5:
1*28.6 7 ■
.
.3 ■
' ■
■
,
2
2
6
,3
199 , 5.-.
■y
158.0
1 3 1 .2
;■ .1
j y
2 9 , 26 8.6
2 2 .0
2 6 , 0 7 8 ,2
W A

: 1 . 2$
. - 1%'5$ ■$ 252.1
' 1U.3
18*6
3 , 0 3 9 ,6
R
,182.0
.
1 0 .7
: - 25,5
2,^89.U .
■1 ^ .9 •
1 1 .7
1 , 561.6 ;
q.2'
7.**
1
1
,
52**.8
■
5/4-3
W
1 , 6 2 6 .5
8.8
7.7
2,^6U.i
1 1 .6
9.7
1 0 .1
2» l**1*. 2 ,
5.6
1,878.9
.
■
:
8.8
3.S
1,6
:s Q80.0 % - U.6
V' 32 I .8 ;
,*lf
1 .5
.8
.2
>>: 177.7 ■
.6
.2
• 12U.9
1
*
5
.7
3 0 .3
9,718.1;

86,108.U
Grand total
1 0 0 .0
100,0
100.0
52,O59 . H
132,911.7
Treasury Department
"• M
C
J . ..
1/ Internal Revenue Code, as amended, by’ the Revenue Act of 19^5. .
'.
.
2j Includes amounts subject to the alternative tax.
3/ Includes normal tax. surtax, and alternative tax on net long-term capital gains,
U/ Less than *05 percent.
‘ !
1
/

1 0 0 .0
;-21 , 2^2 .97
March 1* ig^g

Notei Figures are rounded and w ill not necessarily add to totals.
■\

., / >. , ■

•

j

m um h* *

.

rv>

cn

- ^9 Tabl<* I)
Number of taxable individual and fiduciary returns, tax and
net income, 1913—1946 and estimated for 1947—1948

Year

*

Number of
returns

*
1

Tax

*
e•

Net income

(in thousands of dollars)

*

1913
1914
1915
1916
1917

i/
362,970
2,707,234

1918
1919
1920
1921
1922

3,392,863
4,231,181
5,518,310
3,589,985
3,681,249

1923
1924
1925
1926
1927

4,270,121
4,489,698
2,501,166
2,470,990
2,440¿941

1928
1929
. 1930
1931
1932

2,523,063
. 2,458,049
2,037,645
1,525,546
1,936,095

1933
1934
1935
1936
1937

$28,2542/
41,046 2/
67,944
173,387
795,381 4/

• If
i/

1,127,722
1,269,630
1,075,054
719*387
861,057
661,666 6/
704,265
734,555
732,475
830,639

H
37
S/
$ 6,037,233
10,592,987 5/
| 13,892,776
17,691,620
20,228,959
13,409,685
15,043,514
17,497,383
19,468,724
17,471,219
17,422,633
18,090,065

1*164,254
1,001,938
476,715
246,127
329,962

21,031,634
20,493,491
13,692,584
9,297,018
7,919,588

1,747,740
1,795,920
2,110,890
2,861,108
3,371,443

374,120
511,400
657,439
1,214,017
1,141,569

7,372,660
8,343,558
■.10,034,106
14,218,854
15,264,162

1938
1939
1940
1941
1942

3,048,545
3,959,297
7,504,649
17,587,471
27,718,534

765,833
928,694
1,496,403
3,907,951
8,926,712

12,671,537
15,803,945
23,558,030
45,902,884
67,060,862

1943
1944 .
1945 prel.
1946
1947 9/
1948 9/

40,337,293
42,446,837
42,764,062
38,840,638 8/
44,000,000
46,000,000

Treasury Department
Footnotes on next page*

.

14,590,018 7/
16,347,479
17,225,983
17,400,000 9/
20,600,000
21,242,870
.

'

98,150,189

k
k

%

w

132,911,677
March 1, 19^3

5ff Table D -

258

concluded

Humber of taxable individual and fiduciary returns, tax and
net income, 1913-1946 and estimated for 1947-1948

Footnotes;
ly Hot available. The total number of taxable and nontaxable returns
filed were as follows; 1913, 357,598; 1914, 357,515; and 1915,
336,652*
2/ Receipts (including fines, penalties, additional assessments, etc*)
for the fiscal year ended June 30 immediately following, as shown
in Annual Reports of the Commissioner of Internal Revenue*
3/ Hot available*
4/ Includes war excess-profits taxes of $101,249,781 on individuals
and $103,887,984 on partnerships*
N
'
.
. ,
5/ Tax base for taxable returns with net incomes of $2,000 and over*
There were 1,591,518 taxable returns with net incomes of $2,000
and over, for which the tax amounted to $675,249,450,
6/ Amount after the 25-percent reduction provided by Section 1200(a),
Revenue Act of 1924n
Z l Excludes additions to liability under the Current Tax Payment Act
of 1943 amounting to $2,555,894,000.
§./ Obtained from Collectors1 Monthly Report to Commissioner of
Returns Filed,
9J Estimated*
Source;

Data for 1916-45 from ,rStatistics of Income,*1

TREASURY DEPARTMENT
Washington

FOR RELEASE, MORNING NEWSPAPERS
Tuesday, March 2 j 1946,_________

Press Service
No . S-644

The Secretary of the Treasury announced last evening that
the tenders for $ 1 ,100 ,000,000, or thereabouts, of 91 -day
Treasury bills to be dated March 4 and to mature June 3* 1948,
which were offered February 27, 1948, were opened at the Federal
Reserve Banks on March 1.
The details of this issue are as follows:
Total applied for »• $1,.632 ,292 ,000
Total accepted
- 1,101,402,000 (includes $42,975,000 entered
on a non-competitive basis and accepted in
full at the average price shown below)
Average price - 99*748 Equivalent rate of discount approx. 0.997$
per annum
Range of accepted competitive bids;
High - 99.756 Equiv. rate of discount approx. 0 .965$ per annum
Low - 99.747 'n
"
"
"
"
1.001$ "
"
(54 percent of the amount bid for at the low price was accepted)
Federal Reserve
District

Total
Applied for

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

$

2 1 ,336,000
1,441,798,000
12 ,810,000
14.293.000
2 ,632,000
5 ,108,000
6.645.000
5.525.000
21.575.000
6.342.000
37.297.000

16,346,000
957,440,000
5 ,050,000
12 .637.000
2.432.000
4.188.000
32.845.000
6 5 8 8 .0 0 0
5 0 1 9 ,0 0 0
20.968.000
6,342,000
31,547,000

$ 1 ,632 ,292,000

$1,101,402,000

56 .931.000

TOTAL

Total
Accepted
$

.
,

26Ü
TREASURY DEPARTMENT
Washington

FOR RELEASE, MORNING NEWSPAPERS,
Friday, February 27* 1948.

Press Service
• N o . S-645

Secretary of the Treasury Snyder announced today that
the freezing controls have been removed from blocked accounts
where the value of.the property in the accounts on February 1,
1948 was not more than $ 5 *000, and the accounts are held for
persons residing in any country except Germany, Japan,
Bulgaria, Hungary and Rumania.
Treasury Department officials pointed out that the
automatic release of the smaller accounts, the total value
of which Is relatively small, through today's issuance of
General License No. 97 will enable the European countries to
speed up action on the certification of the larger aocounts.
Concentration on these larger accounts will afford the greatest
assistance to countries likely to receive financial aid under
the European Recovery Program.
This action is in line with
Secretary Snyder's letter of February 2, 1948 to Senator
Vandenberg.

oOo

261
TREASURY DEPARTMENT
Washington

FOR RELEASE, MORNING NEWSPAPERS,
Monday, March 1, 1 9 4 8 . _______

Press Service
N o , S-646

Secretary of the Treasury Snyder today announced that
effective June 1, 1948 the Treasury Department will cease to
have jurisdiction of blocked foreign funds.
On that date, the
jurisdiction over the remaining blocked assets will be trans­
ferred from Foreign Funds Control in the Treasury Department
to the Office of Alien Property in the Department of Justice.
Attorney General Clark joined Secretary Snyder in urging that
persons whose assets may be unblocked under the certification
procedure provided by Treasury’s General License No. 95 avail
themselves of this procedure before June 1, 1948. After that
date, outstanding licenses authorizing withdrawals or changes
in the assets will become inoperative.
The Attorney General stated that immediately upon transfer
he will take a census of all assets remaining blocked.
In line
with this Government's decision to assist countries which re­
ceive financial aid under the European Recovery Program in
locating assets of their resident nationals held in the United
States, the information concerning the names and assets of such
nationals as disclosed by the new census will be given to the
governments of the appropriate countries.
In addition, the Attorney General stated that in order to
prevent the escape of enemy assets from this Government's con­
trol and to implement further this Government's objective to
assist countries which receive financial aid under the European
Recovery Program, the Office of Alien Property, immediately
after receipt of the census information, will begin to process
for vesting the assets remaining blocked and held in Swiss and
Liechtenstein accounts.
The vesting program'will also be applied
to uncertified assets held Indirectly through recipient countries
where the census information does not disclose the beneficial
owner. Assets, either before or after vesting, may be released
upon a showing of non-enemy interest.
In such cases, the
Office of Alien Property will consult with the government of the
country of which the alleged beneficial owner is a resident.
It was pointed out that claims for the return of property vested
in the Attorney General must be filed within two years after
the date of vesting.
Secretary Snyder added that Treasury, Justice and State
Department representatives are currently engaged In discussions
with representatives of the Swiss Government concerning certain
aspects of the program.
It was pointed out that Switzerland is
not a country which is to receive financial assistance under
the European Recovery Program.

262
2
The governments of the European Recovery Program countries
included in General License No. 95 are being requested to give '
their residents public notice of the action which will be taken
by the United States on June 1, 1948, and to urge their resi­
dents to apply to them immediately for the certification of their
assets held in the United States if the assets qualify for
certification.
Secretary Snyder suggested that persons in the
United States holding blocked assets of foreign nationals,
immediately inform such nationals of today's announcement.
Treasury officials started that this announcement in no way
affects its control over importation of securities specified on
the list attached as a part of General Ruling No. 5*

STATUTORY DEBT LIMITATION
AS OF FEBRUARY 29« 1948

263

March 4, 1948

Section 21 of the Second Liberty Bond A.ct, as amended, provides that th e fa c e
of obligations issued under authority of that Act, and the face amount o f
obligations guaranteed as to principal and interest by the United States (except
such guaranteed obligations as may be held by the Secretary of the Treasury), ’’shall
not exceed,in the aggregate $275,000,000,000 outstanding at any one time0 For
purposes of this section the current redemption value of any obligation issued on a
discount basis which is redeemable prior to maturity at the option of the holder
shall be considered as its face amounto”
amount

The following table shows the face amount of obligations outstanding and the
face amount which can s t i l l be issued under this limitation:

$275,000,000,000

Total face amount th a t may be outstan din g a t any one time
Outstanding -

Obligations issued under Second Liberty Bond Act,
Interest-bearing:
Treasury billsooooooooooooo $ 14,437,758,000
Certificate of indebtedness
18,919,577,000
16,701,561,600
Treasury notesooooooooooooo
Bonds
Treusury ooo©ooooooooooooo 117,862,832,750
Savings (cur rent re dempovalue) 52,792,527,129
319,360,000
DepOSit ary o c o o o o o s ^ u o o q o o
Armed Forced Leave •«©««»•
685, 976,650
Investment Series, o oc-ooo
969,920,000
Special Funds
Certificates of indebtedness
14.886 . 350.000
Treasury noteSo,.«-^?^^«
14.359.949.000
Total interest—bearingoo000co o o o o o o o o o o o o
Matured, interest-ceased 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Bearing no interest?
War savings stamps«0000000«
61,185,147
Excess profits tax refund bonds
10,949,404
Special notes of the United States:
Internat*1 Bank for Reconst0
and Development series
165,785,000
Internat’1 Monetary TUnd Series 1,278,000,000
Tot a l OOOOOOOOOOOOOOOOOOOOOOOOOQ 0000900000000000

Guaranteed obligations (not held by Treasury)
Inte rest—bearing
Debentures? F0HoA0ooo000000
27,925.636
Demand obligations: C0C,Coo
45,680^268
Matured, lnterest—ceaoedy 000000000000000000060

as amended:

$ 50,058,896,600

172,630,616 ,529
29,246,299,000
251,935,812,129
309,486,774

1 , 515, 919,551
253, 761, 218,454

73,605,904
5,235-.475
7.8,841,379

Grand t o t a l outstanding
O '$ o c o
o o c o o
253,840,059,833
Balance face amount o f o b lig a tio n s issu a b le under above a u th o rity
21,159,940.167
Reconcilement with Statement o f the Public Debt — February 29, 1948
(Daily Statement o f the United States Treasury, March 1, 1948)
Outstanding Total gross p u b lic de bb -, 0© 00 - 0o 00©©0oo o o« « ©o©©01?&0«/* c ■>0000000© 254, 604,511,219
Guaranteed o b lig a tio n s not owned by th e Treasury»
«... >.3„ a « ooo©©, .
78, 841,379
Total gross p u b lic debt and guaranteed o b l i g a t i o n s . . . «
j»«*.»«***» ^ 5^ ,683, 352,598
Deduct - other outstan din g p u b lic debt o b lig a tio n s
not su b ject to debt lim ita tio n © « o oo©a o ©ooc
« > • « . > « 843, 292, 765
' •teS, 840, 059,833
G C O O O O V> O O O

C O O O O O

264

TREASURY DEPARTMENT
Washington

FOR RELEASE, MORNING NEWSPAPERS,
Friday. March 5 ? 1948.

' P r e s s ’Service
No. S--648

The Secretary of the Treasury, by this public notice, invites
tenders for SI, 100 000,000, or thereabouts, of91-cl8y Treasury
bills for cash and in exchange for Treasury bills maturing
March 11, 1948, to be issued on a discount basis under competitive
and non-competitive bidding as hereinafter provided.
The bills
of this series will be dated March 11, 1948, and will mature .
June 10, .1948, when the face amount will be payable without
interest * They will be' issued in bearer form only, and in denom­
inations of $ 1 , 000, $ 5 ,000, $ 10 ,000, $ 100 ,000, $ 500,000 and
$1 ,000,000 (maturity value).:
v
*
Tenders will be received at Federal Reserve Banks and
Branches up to the closing hour, two o'clock p , m ., Eastern StanMondaY> March 8 , 1948* Tenders will not be received
at the Treasury Department, Washington. Each tender must be for
an even multiple of $ 1 ,000, and in the case of competitive tenders
tne price offered must be expressed on the basis of 100 with
ti}f1.three decimals, e. g., 9.
9 .925 . Fractions’may not
be used.
It is urged that tenders be made on the printed forms
S l ^ 0i’W^rded ln„ the special envelopes which will be supplied by
Federal Reserve Banks or Branches on application therefor.
K
Tend ef-s will be received without deposit from incorporated
anks and trust companies and from responsible and recognized
dealers in investment securities. 'Tenders from others must be
accompanied by payment of 2 percent of the face amount of
reasury ills applied for, unless the tenders are accompanied by
an express guaranty of payment by an incorporated bank or trust
company *
+v,ImS e^ iat?1i after the closing hour, tenders will be opened .
Federal. Reserve Banks and Branches, following which public
a ^ U? 06m?nt Y 111 be made by the Secretary of the Treasury of the
W » L a,
n ?.?ri 0e iange of a °cepted bids.
Those submitting
The s e ^ t ^ b % a+Z 1 Smd °f the aoceP tanoe or rejection thereof.
Secretary of the Treasury expressly reserves the right to
h l T = ^ ? r rf jeot any or a11 tenders, in whole or in part, and
r e s e r v a i ? V n any such fespect shall be final. Subject to these
J.1efYab:iohs,_non-competitive tenders for $200,000 or less withour stated price from any one bidder will be accepted in full at
S e t t o p J rl°e (in three decimals) of accepted competive bids,
nt °P ® c°ePted tenders in accordance with the bids must •
'
oe made or completed at the Federal Reserve Bank on March'll 1948
n?rrn°
immediately available funds or in a like
9 ’
ount of Treasury bills maturing March 11, 1948 . Cash and exchange

2 •tenders will receive equal treatment. Cash adjustments will be
made for differences between the par value of maturing bills
accepted in exchange and the issue price of .the. new bflls:,
/The income' derived from Treasury bills.,.: whether 'interes't 'or
gain from'the bale or other disposition of the bills, shall not
have any^exemption, as such, and loss from the sale o n other
disposition of Treasury bills shall not have any special treatment
.as. such,v.tinder' thé Internal .Revenue Code, •or laws .amendatory ôr • *
supplementary t h e r e t o T h e bills, shall be subject.to estate-,'inheritance/.gift or -other excise .taxes, whether J’ecleral or -'State,
but ;shall be/exempt from :all taxation now or hereafter imposed'
‘on -the. principal or 'interest thereof by any State., or any of .- •
the pos sessions-': of : the :United States,•or by any. local taxing' • '■
authority;.- :.For' purposes of. taxation .the amount of discount 'at -v
which- Treasury bills'are originally sold by- the/Unft.ed' States 2
shall he considered to be interest. Under Sections 42 and 117
(a) (1) of the Internal Revenue Code, as amended by. .Section.115
of the Revenue Act of 1941,. the amount of discount at which bills
issued- hereunder are sold shall -not;-.be considered rtp. .accrue. : * *
until such bills .shall be sold, redeemed or^'otherwise.:disposed
;
of, and such bills are excluded from consideration i p capital'
as sets. Accordingly, ‘the o'wner of Treasury "bills pother .than life
insurance companies) issued' hereunder, need include in his: income •
tax. return only the difference betyeen •the•price "paid "for such
bills, whether on original’issue.or on subsequent’ purchase/ and
the .amount .actually treceived either upon sale, or redemption 'at
maturity during 'the taxable year for which' the return is made, as
ordinary gain o r l o s s . s
... . . v
Treasury .Department; Circular No., 4l-8, a s ;amended, .-and this-notice., prescribe..the terms of the, Treasury,; bills', and. govern -the- ••
conditions of. their issue. .Copies of the circular may be :
obtained from any Federal Reserve BanlC'or Braheh,
''
■
•

oOo

265
TKjìASURX DiPAnOâüîJT
Washington
Press Service
No* S-649

FOR IivimüDIATh
Wednesday« March 10, 1948

The Bureau of Customs agnoun^ed today preliminary figures showing^
the imports for consumption of commodities on which quotas were prescribed
by the Philippine Trade Act of 1946, from January 1, 1948, to February
28., 1948, inclusive, as follows:

Products of
< Established Quota
Phillippine Islands i
Quantity

:
:

Unit of :
Quantity:

Gross

Buttons
Cigars

200,000,000

Number

Coconut Oil

448,000,000

Pound

Cordage

6,000,000

tt

Rice

1,040,000

it

1,904,000,000

15

6,500,000

It

Sugars, refined )
unrefined)
Tobacco

Imports as of
February 28, 1948

16,681
151,995
15,636,414
137,775
—
62,884,809
85,215

■

26G
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS
Wednesday, March 3, 1948..

Press Service
No. S-650

The total assets of national banks on December 3 1 , 1947
amounted to more than $ 88,OOCL 000,000, it was announced today by
Comptroller of the Currency Preston Delano*
The returns from the
call covered the 5,0 11 active national banks in the United Statesand possessions* The assets were $2,500,000,000, or nearly 3 per­
cent . m o r e than reported by the 5,019 national banks as of October
o, 1947, the date of the previous call, and $3,600,000,000, or
4 percent, more than reported by the 5,013 active banks as of
December 31, 1946 .
The deposits of national banks on December 3 1 , 19^7 were
$82,000,000,000, an increase of $ 2 ,500,000,000, or 3 percent
since October and an increase of $3,200,000,000, or 4 percent,
since December 1946.
Included in the recent deposit figures are
deposits of individuals, partnerships and corporations of
$48,079,00°,000, which increased $2,300,000,000, or 5 percent, in
the three month period, and time deposits of individuals, partnert ^ n ^ an ^ COVVOVation3 of $ 18 ,700,000,000, ¥hich lncreased
$38,000,000, or two-tenths percent. Deposits of the United States
Government of $900,000,000 were $718,000,000 less than in October*
deposits of States and political subdivisions of $4,726,000 000 4
showed an increase of $408,000,000, or more than 9 percent,'and
deposits of banks of $8,411,000,000 were $ 258 ,000,000, or 3 percent
October. Postal savings d e p o s i t were nearly
*
$3*800,000 and certified and cashiers' checks were $1,392,000,000.
Loans and discounts at the end of 1947 totalled $21,500 000 000
inr>^nC1>eaS?
000,000, or 7 percent, since October, and an
anrindLt^-ifi’i7 1 ’000^0*?^
24 percent> ln thG year. Commercial
? r 1 1 l0a? S °£ H i » « ! 000,000 were up 29 percent In the
year, loans on real estate of $4,860,000,000 were up 37 percent and
w h n l0+ £ S
indlvldualf of $3,129,000,000 were up 46 percent,
f armer
J
leans of $2,430,000,000, which included loans to
of
?
0®S t0 brokers and dealers and others for the purpose
7 ^ lnS °r
g
n
.
i
y
T
a
osecurities, and loans to banks, etc., counts
°f
Percent. The percentage of loans and discounts to total deposits on December 3 1 , 1947, was 26 11 in
comparison with 25.19 on October 6 , 1947 and 2 1 .90 on'December 3 1 ,

t i o o w J £ ! Si;nlf ? tS * 1 ™ ®

banks in United States Government obligaguaranteed obligations) on December 3 1 ,
s1nIpanS+ef ated $38,825,000,000, which is a decrease of 2 percent
°°£ol:>fr * “ <1 a decrease of 7 percent in the year.
Other
toeks and securities held of $ 5 ,185 ,000,000, including
°£
and political subdivisions of $ 3,029 000 000

X T « ;!« " ' “

ln 0 o M i” - lu t ” ” ”

e

°

» « ■

267

-

2

-

Cash of $1,168,000,000, reserves with Federal Reserve Banks
of $1 1 ,6 9 5 ,000 ,000 , .and'"balances with other banks (including
cash items in process of collection) of $9 ,2 1 3 ,000 ,000 , a total
of $2 2 ,0 7 6 ,000 ,000 , showed increases in the three and twelve
month periods of 9 percent and 10 percent, respectively.
The unimpaired capital stock of the banks at the end of 1947
was $1 ,7 8 0 ,000 ,000 , including $2 7 ,000,000 of preferred stock.
Surplus was $2,400,000,000, undivided profits $893,000,000, and
reserves $349,000,000, or a total of $3,642,000,000. Total
capital accounts of $5,421,000,000 were $2 9 2 ,0 0 0 more than in
October 1947, and $272,000,000 more than in December 1946.

3
Statement showing comparison of principal items of assets and lia b ilitie s of active national banks
as of December 31» 1947» October 6, 1947, and December 31* 1946.
(in thousands of dollars)
*
*«
*
: Increase or decrease\i Increase or decrease
:
Oct. 6,
Dec. 31 *
: Dec. 31» : since Oct. 6, 1947 : since Dec. 31,19*6
1946
:
1947
1947
Amount
rPercent ’ ¿.mount : Percent
*
Number of banks.............. ..
5,011
ASSETS
Commercial and industrial lo a n s ..... $11 , 061 , lug)
Loans on real e s t a t e .................
4,859,786)
Consumer loans to in d iv id u a ls ......
3,128,783)
A ll other loans, including overdrafts 2,1(30,470)
Total loans..........................................
21,480,457
U, . S. Government securities!
Direct obligations.................................
38 , 819 , 276 )
Obligations fu lly guaranteed..........
6,159)
Total TJ. S, s e c u r it ie s ..............
38 , 825,435
Obligations of States and politics,!
subdivisions................ ...... . ...
3 , 028,607
Other bonds, notes, and debentures..
2 , 00 0 ,0 9 4
Corporate stocks, including stocks
of Federal Deserve banks.. . . . . . . . .
155,830
Total securities.. . . . . . . . . . . . . . "’ "4 4 , 009,966
Total loans and s e c u r it ie s .....
65 ", 490,423
Currency and coin................................... ..
1,168,042
Reserve with Federal Reserve banks..
11,694,935
Balances with other b a n k s . . . . . . . . . . .
9,212,613
Total cash, balanceswith
other banks, including reserve
balances and cash items in
process of c o ll e c t i o n .........; .
22,075,590
Other a s s e t s .........................
880,987
Total assets.. . . . . . . . . . . . . . , . 88,447,000

n

5,019

-8

5,013

- .1 6

-2

-.04

($2,514,358
( 1 , 315,998
( 985,069
( -644,735
4,170,690

2 9 .4 2

($3 , 54 7 , 060 )
( 3,543,788)
( 2,143,714)
( 3,075,205)
17,309,76~

$1,399,411

6 .9 7

1,399,411

6 .9 7

(4 1 , 83 5 , 752 )
(
7,780)
4 i, 843,532

-796,832
-796,832

3 . 050,027
1 , 981,623

2,659.598
1,986,327

-21,420
18,471

155,952
44,809,869
64,890,915
1,038,572
11,256,403
7,921,634

153,359
46,642,816
63,952,583
1,094,721
10 , 636,570
8,335,876

-122
-799,903
599*508
129,470
432.532
1,290,979

20,2l6,609
879,852
85,987,376

20 , 067,167

1,858,981
1,135
2,459,624

$20,081,046
20,081,046“
39 . 622,267
39 . 622,267

830,513
84,850,263

/- ; :

.

-

i'-'

.

37.14
45.95
-20.97
24.09

(- 3 , 0 1 6,47 6 -7.21
-2.01 (
- 1,62 1 -20.84
-2.01 “ 3,018,097 -7*21'
-.70
.93

369,009
13.767

13 .8 7
.6 9

-.08
2,471 l „ 6 i
-1.79 -2,632,850 -5*64“
.92 1,537,840 2.4o
12.47
73.321 £ 7 0
3.90 1 , 058,365
9 .9 5
16. 30
876,737 10.52

9.20
.13
2,86

2,008,423 10,01
5 0 ,4 7 4
6.08
4.24
3 . 596,737

f
; J

ro
- \

.

CD
GO

- b Comparison of principal items of assets and liabilities of national banks - continued
(In thousands of dollars)
Dec,

31 »
191+7

LI .ABILITIES
Deposits of individuals, partner­
ships and corporations:
Demand......... . . . . . . . . . . . . . . . . . . . . . . $US,07 9,21 0
Time.......................... .......................... ........ 18,764,017
Deposits of U* S* G overnm en t........*
699,565
2,84l
Postal savings d e p o s i t s . . . . . . . . , . . . . *
Deposits of States and p o litical
subdivisions.. .............................................. *+.726.333
Deposits of banks*.....................................
s,i+n,i+73
Other deposits (certified and
cashiers* checks, e t c . ) . . .................. * 1,391,697
Total deposits*. . . . . . . . . . . . . . . . . 82,275,356
B ills payable, rediscounts and other
lia b ilitie s for borrowed money*....
*+5.135
Other l ia b ilit ie s ........................................
705,185
Total lia b ilit ie s , excluding
capital a c c o u n t s ..................... 8 3 , 025,676
CAPITAL ACCOUNTS
Capital stock:
Preferred.
27, *+*+0
Common stock*. *..............
* . . . . . . . . 1 , 752,326
Total...................... . . . . . . . . .
1,779,766
Surplus.
2,399,520
Undivided profit s . . . . . . . . . . . . . . . . . . . .
293,232
Reserves.. . . . . . » * » . • • * » * . . . . . . . . . . . . .
34S,806
total surplus, profits and
reserves.1. . . . . . . . . . . . . . . . . . . . . 3,6*+i ,558
Total capital accounts.. . . . . . . . . 5,*+21.32++
Tot 1 lia b ilitie s and capital
accounts.
................ * 88,447 ,0 0 0
Ratio of loans to total d e p o s its .....
26 . 11$
NOTE: Minus sign denotes decrease,

Oct. 6,
19U7

Dec. 3 1 »
1946

$*+5,778,32*+ $^5 , 522,709
is -725 ^69 "' 18 , 631,756
1,840*541
1 , 6 :17. '-ho
2,9kk
2,793

¡Increase or decrease:Increase or decrease
: since Oct. 6, 1947 : since Dec. 31. 1946
* Amount
:Percent* Amount
¡Percent

$2 , 300,886
36,320
- 717,695
48

5 .0 3
.2 0
-44* 38

1,72

732.261
- 91+0 ,9 5 6
-1 03

5.62
4.06
- 5I . I 2
- 3. 5O
i*+. 56
2 . 9*+

$2 , 556,501

*+,31S.,*+S*+
8 , 153 , 1*4 +

*+,125,722
8 , 170 , 92 *+

U0 7 , S*+9
258,329

9,44
3.17

600,611
240,549

1,124,122
79*720,044

l,355,2*+3
79,0*+9,S39

267,775
2*555*312

23*62
3*21

36,654
3 . 225.517

2.70
4.08

1*+3,S35

20,0*+7
630,578

-96,700
2,720

- 68*62
. 39

25.088

125.15

7*+,6o 7

11.63

80 , 566 -, 344^

79,700,464

2,1+59,332

3.05

3,325,212

*+.17

27.010
i,7*+S,*+53
1,775, *+63
2,3^1,737
963,569
3*10,243

*+1,789
1,71*+,832
' 1 , 756,621
2,275*664
765,556
331,736

1+30

3,873
"4,303
57,783
-70,357

1,59
.22
.24
2 . 1+7

-i*+,3*+9
37>*+9*+
23.1++5

3 , 61+5 ,5 6 9
5,1+21,032

3.393,178
5,l*+9,799

-4 ,o n

85,987,376
25.19^

84,850,263
21.90$

702 , 1+65

8 .5 6 3

292
2 , 1+5 9 , 62 *+

123.636

- 7 .3 0
2-52

107,67*+

-.11
.01

248,380

2*86

3 . 596,737

17,070

271.525

-34.34
2 .19
1.32
5.5-3 !
13.71
5* 15
7.32
5.27
4.24 I

rv>
C71

4^

TREASURY DEPARTMENT

2 70

Washington

Statement of tinder Secretary Wiggins before
the Committee on Agriculture,
House of Representatives
10:00 A . 1M., March 8, .1948

(OLEOMARGARINE TAXES)
I am glad to have this opportunity to present to your
Committee the views of the Treasury Department on the proposals
to modify or repeal the excise taxes and occupational taxes on
the manufacture and distribution of oleomargarine.
Federal taxes
The taxation of oleomargarine dates from 1886 and the
present schedule of rates from 1902 , Uncolored oleomargarine
is subject to a tax of 1/4 cent per pound and colored oleo­
margarine, 10 cents per pound.
Imported olegomargarine irrespec­
tive of color is taxed at the rate of 15 cents per pound.
In addition, manufacturers and distributors of oleomargarine
are required to pay annual occupational taxes, The manufacturers »
tax is $600, Wholesalers are subject to a $480 tax if they
distribute colored oleomargarine and to a $200 tax if they
distribute only uncolored products. For retailers of yellow
oleomargarine the tax is $48 and for retailers of uncolored
oleomargarine $6 ,
State taxes
In recent years there has been some reduction in State
taxation of oleomargarine through both legislative and judicial
action. However, the commodity Is still subject to excise taxes
in 19 States. The tax is particularly heavy in 7 States where
rates ranging from 5 to 15 cents are imposed on uncolored m a r ­
garine, regardless of the materials from which it is made.
In
the remaining 12 States, the exemption of margarine made of
domestic oils and fats, or with a specified minimum percentage
of animal fats, renders the tax Ineffective,
Colored margarine is taxed in 4 States at the rate of 10
cents a pound.
Three of these are States which also have
effective taxes on uncolored margarine. The manufacture and
sale of colored margarine is completely prohibited In 5 of the
States with effective taxes on uncolored margarine, as well as
in 18 other States.
S -651

2
License fees for the manufacture or sale of margarine are required in 14 States, Annual fees for manufacturers and whole­
salers vary from $1 to $ 1 ,000, and for retailers from 50 cents
to $400.
(Table 1, page f).
Field of Federal tax
The oleomargarine taxes have little revenue significance.
Collections for the current and the next fiscal year are estimated
at approximately $7 million. Actual collections during fiscal
year 19^7 were less than $6 million, which compared with approxi­
mately $5 million in 1946, Throughout the 1930's, total annual
collections from this item ranged around $2 million.
(Table 2,
page 9 .) Until the prosperous postwar years, virtually all of
this revenue was accounted for by uncolored oleomargarine; the
revenue from colored oleomargarine was unimportant.
More recently,
the use of colored oleomargarine has increased With the result
that currently it accounts for about 40 percent of total col­
lections .
Effects on industry
The legislative history of these taxes and the considerations
advanced in their defense during their long history indicate that
their purpose is to buttress the competitive position of the
dairy industry , by discouraging the consumption of a substitute
commodity. The testimony presented before this Committee by a
large number of witnesses in 1943 bears this out.
The effect of the Federal taxes concerns primarily the
competitive position of colored margarine and butter. The public
preference for yellow table fats makes colored margarine much
more competitive with butter than uncolored margarine,
The
improved coloring facilities supplied to consumers by manufac­
turers have not overcome public aversion to the purchase of
uncolored fats. For this reason, the oleomargarine tax issue
centers primarily upon the special rates applicable to the colored
product.
The taxes on uncolored oleomargarine have relatively
little effect on the competitive positions of the two industries-*
The competitive relationship between taxed colored oleo­
margarine and butter depends in part upon the differential in
the prices of the two commodities. During the prewar period
when the price differential between the two products was less
than 10 cents, the taxes on colored oleomargarine were an
important factor in maintaining public preference for butter*

"When butter prices increased at a more rapid rate than oleo­
margarine, increasing the differential to 40 cents and more, the
taxes on colored oleomargarine were less effective in protecting
the public preference for butter. .Tax-paid withdrawals of
colored oleomargarine increased from less than one million pounds
in the prewar.years to approximately 10 million pounds in 1944
and 21 million pounds in 1947. (Tables 3 and 4, pages 10-11).

nTA

2 72
r 3 The effect of the widened price differential on the competitive
position of the two products would have been appreciably greater
but for the fact that in 23 States the sale of colored oleo­
margarine is prohibited at any price.

The basic issue raised by the oleomargarine taxes is the
propriety and desirability of using the tax laws to affect the
relative position of competing industries, both of which use
domestic agricultural raw materials.
In the case of oleomargarine,
the taxing power is used as a punitive measure against one
industry to advance the interests of another.
In the process,
the public is deterred from the free exercise of its consumer
preferences. Without passing judgment on the relative merits
of the two products from the viewpoint of the public health,
matters upon which your Committee has had abundant expert testi­
mony, it is the view of the Treasury Department that the use of
the taxing power to distort the normal development of competing
industries and to deprive them of the full benefit of the free
enterprise system conflicts with the public interest, and in the
absence of compelling consideration, should be avoided.
Effect on use of resources
In general, the use of the taxing power to affect the compe­
titive position of industries interferes with the optimum
utilization of national resources.
The testimony of experts
before this and other Committees of Congress suggests that the
national diet would be improved if more of the table fat require­
ments were obtained from oleomargarine and if milk were diverted
to consumption in fluid form. The Treasury Department is not
qualified to appraise the validity of these assertions.
They
illustrate, however, that the punitive use of the taxing power
can result in the inefficient use of resources and support the
principle that the tax system should not be used for these ends,
except where the objective is clearly in the public interest.
Effect on consumers
Prom the viewpoint of the country as a whole, the principal
economic effect of these taxes is to impose direct and indirect
burdens on consumers and on distributors which in the aggregate
tend to fall with particular weight upon low Income groups.
The total tax burden represented by the excise taxes on
margarine Is In itself of relatively little moment because the
population consumes only small amounts of colored margarine.
Over 90 percent of margarine consumption consists of the uncolored
product, which is subject only to the nominal 1/4 cent tax per
pound. For those Individuals who. consume colored margarine,
the payment of a 10 cent per pound tax imposed on a basic type of
food constitutes a serious tax burden. While the occupational
taxes probably affect the retail price of the product, the tax
burden Imposed on consumers is small.
In 1947, Federal excise
and occupational tax collections equalled about one cent per pound
of margarine sold.

4
The tax burden, however, reflects only part of the cost
of these taxes to consumers.
The existence of the oleomargarine
taxes interferes with the availability of margarine in certain
areas and induces individuals who would otherwise buy margarine
to forego table fats or buy butter* "Where, for example, as a
result of the occupational taxes, consumers with equal pre­
ference for the two products are unable to procure 40-cent
margarine and are obliged to purchase 90-cent butter, the
burden of these taxes approximates the difference between the
selling price of these items.
It is clear that for several reasons the burden of these
taxes on consumers is not adequately measured by the Treas u r y ’s
tax collections. The taxes increase the cost of the product;
they interfere with the consumer’s freedom of choice in
satisfying personal wants; and they increase his living cost
by interfering with the consumption of less expensive f o o d s ,
While the imposition of these burdens through taxation is always
undesirable, it i§ especially objectionable at times when high
prices threaten the living standards of important groups in the
population.

Regulatory aspects
The legislative history of these taxes indicates that they
were first enacted to assist in preventing the fraudulent sale
of oleomargarine as butter.
The taxing power has on several
occasions been used for regulatory purposes. Taxes imposed on
the production or distribution of narcotics, white sulphur matches,
xirearms and national bank notes are examples.
In these cases
the taxing power supports the Government’s control over certain
activities in the public interest. However, in the case of oleo­
margarine, the need for regulation through the taxing power has
been affected by several developments in recent years.
The effectiveness of the Government’s administrative agencies
lor regulatory purposes has been developed and improved. For the
purpose of safeguarding -public health standards as affected by
interstate commerce, Congress specifically created the Pure Food
and Drug Administration.
In the meanwhile, the need for regulation has diminished as standards of business conduct improved.
This is the experience of the Bureau of Internal Revenue, In
view of these developments, it is believed that there is little
need for the continued use of the taxing power to prevent the
misrepresentation of oleomargarine.
However, if the Congress deems the continued use of the
taxing power for this purpose to be necessary, then such taxes
snould be imposed at nominal rates, sufficient only for regula­
tory purposes.
The oleomargarine tax structure in effect for
more than forty years goes far beyond these requirements.

«

-

5

-

Conclusion
In summary, it is the Treasury Department's view that the
present oleomargarine taxes distort the competitive position of
two domestic industries,
Interfere with the optimum utilisation
of national resources, and unnecessarily burden consumers far
in excess of the amount paid in taxes. Revenue considerations are
not involved.
I n many parts 0f the country, State imposed taxes on and
prohibitions against the use of oleomargarine are so far-reaching
that this item of food would continue to be unavailable to
consumers, even In the absence of Federally imposed taxes.
It is
the Treasury's view that the Federal taxes should nonetheless be
repealed. Such action would benefit consumers in the majority of
the States,
In the event, however, that the continued use of
the tax instrument is deemed to be necessary for regulatory
purposes, this end can be attained by the imposition of nominal
tax requirements without recourse to punitive tax measures

275
-

6

-

Tables
Page N o .

Table 1

Table 2

Table 3

Table 4

State oleomargarine excises and.license
fees, January 1, 19^8 .......... .

.
7

Collections from oleomargarine taxes,
fiscal years 193^-19^9 ......... ...... ..
Production and withdrawals of colored
and uncolored oleomargarine, fiscal
years 1
9
3
^
1
9
^
7

1

Number of taxpayers of special taxes on
manufacturers of and dealers- in oleo­
margarine, fiscal years 193^-19^7* ••••«

9

0

11

7

276

Table 1
State oleomargarine excises and license fees,
Janaary 1, 19^&

State

California
Colorado
Connecticut
Delaware
Florida
G-eorgia
Idaho
Illinois
Iowa
Kansas
Loai Siam
Maine

Excise tax
Annual license fees
:
: Containing
l
l Public
Manu:
Whole
Colored1 Ur
= f °re^ “
*Retailars * eating
: colored:matenals facturers : salers :
places
. *
: H
(In dollars)
(Gents per pound)
*
*
*

loj£ 2/

*
*
*
¥
V

New Kampshire
Nevi Jersey
New York
North Carolina
North Dakota
Ohio

*
sift
*

Utah
Vermont
Washington
Wisconsin
Wyoming

25

100

$2

50

$ 6

200

50

3

10
10

Maryland
Massachusetts
Michigan
Minnesota
Montana
Nebraska

Oregon
Pennsylvania
South Carolina
South Dakota
Tennessee
Texas

$50
25

$100

10/£

10
*

5fi

O.5O
10 2/

10
*
*
*
V

100

25

10

% ]

2#
10

75
5 it/

1
Uoo
1

2

2

2

75

5

y

10

10 2/
10

3OO

5
25

15

15

1,000
10 2/

treasury Department, Division of lax Research
footnotes on next page.

1
1,000

10
10

*
*
*
10

1

500

2 - 100

25

277
-

8

-

Table 1 - Concluded
State oleomargarine excises and license fees
January 1, 19*+8
Footnotes
* Manufacture or sale of colored margarine prohibited,
1/ Tax applies to oleomargarine (colored or uncolored) not made from
oils and fats (specifically named by the statute) that are largely
derived from domestic materials.
2/ Idaho also prohibits the manufacture or sale of colored margarine.
3/ Minnesota’ s tax applies to oleomargarine not containing a minimum,
percentage (65 $) of animal fats, as veil as that made of foreign
materials, Wyoming’ s tax applies only to vegetable oleomargarine
(containing 2 0 or less of animal fats).
The license is for 2 years.
8/ Tennessee1s tax applies to a ll colored margarine, regardless of
ingredients. Uncolored margarine is exempt i f made from domestic
oils and fa ts.

Table 2

Collections from oleomargarine taxes, fisca l years 193^19^9
(Thousands of dollars)
• Wholes?le dealers
Fiscal, . Colored, 1 Uncolored, : ManurRetail dealers
'
year , 1 10<f per ... 1 ~fk£ per : facturers, ï Colored, ' Nncolored, * Colored, : WncQlô]
* pound . pound
:
40
*200
: 5^8
:
o600
» . . ¿ t o ...... :
$ U-5
85

1934
1935
1936

1937
193 s
1939

1940
19Hl
19^2
19 U3
I 9U4
19^5
19^6
19^7

56
68
65

39
31
50
S7
23 S
1,081

. 2 ,2 1 9
1 , 8^2
2 ,1 3 2

19 ^2 (est.)
19 *+9 (est.)

1/
1/

$

603
898
916
968
1 ,0 3 3

822
759
851
889

1,088
1 ,19 0
1 ,3 5 6

1,191
1^41
1/
y

8

28
27
25
27
25
28
25
26

28
32
29
33

$

10
10
8
7
j
2
k

$ 198

5

283
284

2
1
k
20

26

54

3^

7**

1/
1/

1/
1/

209

2*+9

272
316
302

268
287
kl 2
386

$ 5
5

$ 5S7
81*+
9^8

3

1 ,0 0 7
1 ,0 2 1
1 , 01 ^
909
905
969
965

2

4
2
1

3

364

2
7
3^
131
16^
22k

1/
if

if
1/

357

1,317
1,33 0
1 ,2 9 8
1 , 60 ^

if

Total
1^76

2,0^9
2,20^
2>3^6
2 ,^ 6 6
2 ,2 1 0
2 , 01 ^
2 ,1 2 2
2 t2kk2 ,6 2 1

9+,0S^
5>503
1,932

I
CO

I

5,S-jb

7.000 2 /
7 .0 0 0 2 /

Treasury Depar tment, Division of Tax Research
Source*

Annual Reports of the Commissioner of Internal Revenue and The Budget of the TTnit
Government, fis c a l year

l/ Not available*
2/ Includes collections from taxes on adulterated butter»

r\o
—>j

CO

Table

3

Production and withdrawals of colored and uncolored oleomargarine *
fis c a l years 193^ 19^7

Piseal
year
1931*

1935
1936

1937
1932

2-939
1940
19U1
19^2
19^3
19H4
19U5
19U6
19^7

(Thousands of pounds)
1A
Colored
:
Tax-free
withdrawals
1
_
. Tax-paid
: Produced
Produced .* withdrawals.
. ,
, • For * For use of
*
export f United States *.
2,689
2,905
2,773
1,967

' 1,649
1,381
1,860
U,US 9

1^,828
116,970
135,003
72,686
66,^10
65,960

H63

etrsr
oU
O*

1,594

632

1,409

681

1,471

781

58k

-jbl

62^1-

200

838

355

156
6^9
1,265

527
673

302
Î27
667
2,10^
10,39s
21,2^3

17,913
21,126

2,939

1,55s

826

2,023

8,222
8,080

868

896
2,076
10,955
110,302
12R,902

^8,^40
^1,896
3 6 ,7 5 3

2^0,^98

■

*’
:
•.

24o,4lO
350,114

1/
1/

350,916
'368,96^
3^7,297
^13,755
331,592
301,858
339,W
353,977
431,49s

353,64s

— —

429,1+69

10

48^,792
576 , w

473,442
533,744
4si, 1+93
571,083

^ ,0 2 3
5^0,313

1 f—mm.

~

— --- *

Uncolored
: Tax-free wï thdrawals
lax Paia • por
»•
withdrawals.î export : For use of
United States

368,937
386,776
413,561
331,702
301,599
340,550

1/

—

.

—
—

--

<

1/
2
1

«—

7,17^
3,285
573

—

3

c
0f

1
M
O
1

87

ilk
1 ,6^5
700
5^7

Treasury Lepartmêht, I d'V ision .u l ’ Tax Research
Sour ce : Annual Reports of the Commissioner of Internal Revenue
1/ Less than 500 pounds.

no
CD

XI

280

n.

Table if

Number of taxpayers of special taxes on manufacturers of
and dealers in oleomargarine, fisca l years 193^ 19^7
Manu­
? Wholesale dealers
Fiscal I facturers, : Colored, 1 Tncoloredj
year f*
3200
$600
i 1LSifSO .

Retail dealers
Colored, ! Dhcolored,.
$1*3____ I
$6. „ ______

1934

^7

if

2,if07

79

10if,352

1935

^5

if

1.275

160

15 5 , 1*15

1936

if2

if

1 , 31*0

73

160,565

1937

ifl

if

1,^71

57

17^,591

193S

30

2

1 ,6 6 5

Gif

luif,2 lif

3

l,63S

30

173,727

1939
19^0

Ue

10

1.507

26

162,720

19ifl

if2

2

l,if 86

37

162,033

i$ifa

^5

2

l,if 22

3if

163.791

19^3

72

lif

1,731

133

132, Gif3

I9ifif

ifif

19^5

^7

19^6
19^7

1 , 962 ;

1 , 132 -

200 , 0 ifS

121

1,973

3,31*2

213,339

^5

125

1,09 3

3,901-

21*3 ,2 9 5

^7

176

2 , 2 Qi+.

5,102

265 , 931*

Treasury Department, Division of Tax Re'search
Sour ce; Annual Reports of the Commissioner of Internal Revenue«

281
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Tuesday, March 9, 1948.

Press Service
N o , S -652

The Secretary of.the Treasury announced last evening that
the tenders for $ 1 ,100 ,000,000, or thereabouts, of 9 1 -day
Treasury bills to be dated March 11 and to mature June 10, 1948,
which were offered March. 5 , 1 9 4 8 , were opened at the Federal
Reserve Banks on March 8 *
The details of this issue are as follows;
Total applied for - $1,798, 385 >000
Total accepted
- 1,101,030,000 (includes $44,730,-000 entered
on a non-competitive basis and accepted in
full at the average price shown below)'
Average price - 99 *748 Equivalent rate of discount approx.. 0.997$
per annum
Range of accepted competitive bids;
High - 99*756 Equiv.. rate of discount approx. 0 .965$ per annum
Low - 99.747
”
"
"
M
M
1,001$
"
"

(36 percent of the amount bid for at the low price was accepted)
Federal Reserve
District

Total
Applied for

Total
Accepted

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco

$

$

47,.836 ,000

13;,1 7 0 , 000
937,,2 1 0 , .000
9 :,2 4 5 , 000
29,,9 3 0 , 000
3.,0 9 4 , .000
5 ;,3 3 0 , 000
m ,7 5 8 , 000
£T, 1 1 9 , 000
3j, 845, .000
IT , ,.630, 000
5,,6 6 0 , .000
35, ,0 3 6 , ,000

$ 1 ,796 ,385,000

$ 1 , 101,-0 3 0 , 000

13,490,000

1 ,575,858,000

1 1 ,837,000
29.930.000

3.450.000

6 .610.000
62.449.000
6.375.000
5 3 2 0 .0 0 0
27 .570.000
5 ,660,000

.

TOTAL

0 O0

TREASURY DEPARTMENT
Washington

(The following address by Secretary Snyder at the
Founders * Day Banquet of Alpha Tau Omega, at the
Statler Hotel, Cleveland, ©hio, is scheduled for
delivery at 8:30 P.M,, E.S.T., Monday, March b,
19,4b,and, is for release at that time). J1

One of the most important objectives of the economic
foreign policy of the United States is the reestablishment of
that measure of economic equilibrium which is indispensable
to world peace *
In our own generation, we have witnessed the social and
financial disruption following two w a r s , Our purpose is to try
to cure as far as possible the economic causes of international
friction which could again ignite conflicts, and to guarantee
cur own security and prosperity through greater utilization of
our national and world resources,
The future course of events In Western Europe and the effect of these events upon world economic stability are in­
volved in the decision to be made by the Congress as to whether
this Government will institute and finance the proposed European
Recovery Program,,
In the nearly three years since the termination of
hostilities, Western Europe has made very real progress toward
overcoming the. devastating social and material consequences of
the war*
This progress Is mainly due to the determined efforts
of the peoples of that area to utilize their $w :n considerable
natural and human resources to the fullest possible extent,.
The United States has financially supported these efforts
In large measure., because we believe it essential to do so..
However, the monetary aid which we made available for
reconstruction and rehabilitation is now., or Is about to be,
exhausted’* At the same time, the progress of the recipient
countries toward recovery is far from complete., and they still
have before' them a hard-a^d bitter struggle against economic
d i s into grat i $ n .
The need for assistance is clear*,
first, in form of
relief to help tide Western Europe over its present food, short*
age; and second, in lending aid for the rebuilding and develop­
ing necessary to reconstructing the economic structure of Europe
and to Increase production to the point that grants will no
longer be necessary,

3-653

283
-

2

-

Against this background, sixteen countries of Europe met
last summer to formulate a common program looking toward
genuine eoonomic recovery within approximately four years.
Clearly, these countries cannot,.in their present war dis­
rupted state, achieve any measure of economic stability without
substantial outside assistance. And obviously, the primary
source of this outside aid must of necessity be the United States.
The Economic Cooperation Bill now pending before.the
Congress is a proposal to furnish the assistance required by
these countries to augment their common efforts in achieving
the goal of economic equilibrium.
The events of the last few weeks in Europe have reemphasized
the necessity of taking the most prompt action toward the
economic recovery of the countries of Western Europe; While
the Economic Cooperation Act of 19^-8 is an economic measure,
the tragedy that has befallen t h e .democratic form of government
of Czechoslovakia through subversive conquest gives the im­
portance of this act a graver and more solemn import,
. The threat to Finland further underscores the dire trend
of communism in endangering the freedom and security of the
peoples of the world. And since the importance of the decision
that faces the Congress is worldwide, it would be well to
discuss some of the financial aspects of the Program which
have a special interest to the American business community.
Before the war, the international trade of the countries
included in the European Recovery Program comprised roushlv
half of total world trade.
The United States profited greatly by this trade,
For
many years, we sold more goods to Western Europe than we bought
Western Europe made up this deficit by the export of its own
industrial products to other parts of the world.
This threecornered trade has been beneficial to all countries concerned.
While export^trade has never been as important to the
nited States as it is to many other countries, employment and
profits in many key occupations have been dependent in great
degree upon such trade.
The growing of cotton and tobacco,
tne production of dried fruits, the manufacture of automobiles
and automobile parts and of industrial and business equipment,
and the production of pharmaceuticals come readily to mind,
with the foreign exchange provided by its exports, the United
a es has purchased such metals as tin, tungsten and chromium,
tropical products such as coffee, tea and cocoa, and many of
the other commodities which are either essential to American
ndustry or important to the American consumer.

284
- 3 This interchange of goods has increased the employment of
American labor and the profits of American industry, and has
contributed to raising the standard of living of the United
States to the highest level that the world has yet seen.
It is a major purpose of the European Reoovery Program
to put Western Europe in a sound position where she can once
more pay her own way and provide her share of the goods which
keep world trade going. And most certainly, in the preparation
of the European Recovery Program, emphasis must continually
be given to the economic development of Western Europe as a
whole, as well as to the development of the separate countries.
Europe will be a positive factor in world prosperity.
If
we fail, it will become, at the very least, a chronically
depressed area and a permanent Impediment to world prosperity.
Our interests^-as well as those of Western Europe - - a n d
of the whole world -- are bound up in that restoration of inter­
national trade sought by the European Recovery Program.
When they assembled in Paris, the sixteen Western European
countries critically weighed their minimum recovery needs
from the Western Hemisphere and their anticipated dollar income
and resources.
In turn, the United States Government rigorously examined
this appraisal of requirements as against the available resources
of these countries.
The National Advisory Council on Inter­
national Monetary and Financial Problems advised the President
and the Congress that it believed the approach which had been
followed was sound and the $6,8 billion recommended for the first
fifteen months was needed to achieve the objectives of the
European Recovery Program.
The figure of $5.3 billion for the twelve months period
from April, 19^-8, through March, 19^9 ) agreed on by the Foreign
Relations Committee of the Senate, approximates the $6.8 billion
recommended by the President for the first fifteen months of
the Program.
I must strongly emphasize here, however, that in the final
determination, funds should be provided in sufficient amount,
and over a sufficient period, to make the Program a success.
In the event that the Economic Cooperation Bill is passed
by the Congress, the manner in which the proposed financial
assistance should be extended to Europe would be of extreme
importance.

- 4 After considering all the issues involved, the Executive
Branch concluded that assistance would he most appropriately
provided by a combination of grants, which would not be repaid,
and of loans, whieh would be repaid. Each country's ability
to repay in dollars should primarily determine whether assis­
tance should be given in the form of grants or l o a n s . The
nature of the aid, whether capital goods or consumers goods,
would be an additional factor in determining the type of
assistance which would have to be supplied.
Loans should normally be used for the financing of European
imports of capital equipment and of imports of raw materials
tp he used in connection with capital development.
Grants should be used for financing of imports of current
supplies and pf food, fuel and fertilizer and of raw materials
not used for capital development.
In the administration of the Recovery Program, the American
taxpayers1 interest must, ©f course, be safeguarded by obtain­
ing the maximum possible repayment in dollars. However, it
would be disastrous to extend the entire amount of assistance
pn a loan basis.
We must remember that the European countries have had to
incur large dollar obligations since the end of hostilities *
Ag.d, if the entire program we're placed on a loan basis, it would
be practically impossible for the recipient countries to earn
in dollars the additional annual charges of interest and
principal, even after trade and investments abroad return to
normal.
Cartainly no one wants to see repeated the wholesale de­
faults on foreign loans which took place in the early '30 ’s.
It would not be advantageous to the future of this country's
trade and private investment if these countries contracted
additional dollar debts beyond their capacities to repay.
Such
a result would largely defeat the purposes of the entire program.
At this time, it would be premature to approximate a final
breakdown for a suitable division of grants and loans.
The
estimate presented to the Congress that 20 to 40 percent of the
aid might be extended through loans is as far as one can now
safely go in predicting the probable division.
Business-like administration of the Program would require
that the Administrator have discretionary powers in such
determinations,
It is proposed thattthe loan program would be carried eut
through the agency of the Export-Import Bank, whqae broad loan
experience and machinery would be placed at the disposal of
the Administrator,

288
- 5 If the Administrator for Economic Cooperation decided,
after consulting the National Advisory Council, that it was
desirable to extend aid on a credit basis, he would allocate
the funds to the Export-Import Bank of Washington.
The Bank
in turn would make the loan as directed and on terms specified
by the Administrator in consulation with the NAC.
A very important aspect of the ERP Bill is the authoriza­
tion to the Administrator to expend funds for the procurement
of supplies outside of the United States.
This is the socalled offshore procurement authority.
Its primary purpose is
to relieve pressure upon goods and services in short supply in
the United States.
Large percentages of the requirements of grains, fats, and
oils, meat and other agricultural products can be secured only
in other countries of the Western Hemisphere.
Through such
procurement methods, it would be possible for these countries
to supply larger amounts of foods and materials to Europe than
they do now. At the same time, they would obtain greater dollar
exchange for their normal essential imports from the United States.
The Canadian and Latin American economies are clearly
dependent upon certain types of goods from this country.
In ad­
dition, many of our important industries have built up
remunerative export markets in the other countries of the Western
Hemisphere. Prom the long-run viewpoint, therefore, the off­
shore procurement authority is in the best interests of the
United States.
©f course, this authority would need to be exercised with
discretion.
The Government would not permit the use of dollars
for^purchases abroad when reasonably priced supplies were
available in the United States in excess of our domestic needs
or when prices charged by exporters abroad are unreasonable.
Another phase of the Bill which is of special interest to
ie American business community is the matter of guaranties .Inese are designed to remove the major existing deterrent to
American capital investment in Europe.
.
m

xt is extremely important that American business participate
the-Recovery Program by making new investments abroad.

American industrial concerns have been largely discouraged
ihom investing abroad because of the inability to convert
foreign currency earnings into dollars. While these concerns
are in a position to invest in such enterprises and are quite
prepared to assume the risks of operation, they are not willing
°
a ck&nce if unable to realize their earnings In terms
dollars.

287
- 6 For this reason, the Administration has proposed a
guaranty to cover the transfer risk.
In actual operation, it is anticipated that the transfer
guaranty would he extended after the Administrator and the
foreign government concerned agree that the project falls
within the purposes of the European Recovery Program.
It is not proposed to extend these guaranties to cover
normal business risks.
While we realize the problems involved in the reconstruc­
tion and recovery of Europe are', of tremendous scope, we are
encouraged by the definite and substantial progress made to
date in the Western European countries»
These countries seek through cooperative efforts to
prbiibte more effective utilization of their own European
resources . They have set Up a European clearing organization,
designed to avoid unnecessary payments of gold or dollars*
They have moved to transfer unemployed labor across national
boundaries to countries in need of additional manpower.
Determined efforts are also being made to effect more productive
allocations of bottleneck items such as metallurgical coke,
mining equipment, steel and internal transport. And, with
encouraging success, they have been exploring the possibilities
of regional customs unions.
The most advanced regional customs union is that of Belgium,
the Netherlands and Luxembourg, (the so-called Benelux), the
tariff provisions of which were placed in effect January 1, 19 ^ 8 ,
As a result of severe postwar maladjustments, free flow of
goods within the area is not yet possible. But it is hoped that
free interchange of goods can be accomplished within a year or
so, thus completing a long-range project which began during
the war years in London.
Economically speaking, the Benelux countries comprise a
great trading and industrial area despite their compactness ,
By uniting the steel, glass, cement and other industries of
Belgium and Luxembourg with the dairy products, horticulture
and colonial processing of the Netherlands, more efficient
utilization of manpower and material resources is anticipated,
Italy and France are also intensively examining the neces­
sary adjustments which must be made prior to a customs union.
Similar discussions are taking place among the Scandinavian
countries to the same end.

288
-

7

-

Another aspect of the plan on which much interest is
focused concerns the role of the local currency accounts in
the recovery program.
Through bilateral agreement with the
United States, each participating country would agree to set
up a special account to deposit the local currency equivalent
to the dollar cost of all goods supplied through grants-in-aid
made by the United States. Although title to the accounts
would remain with the foreign government.' concerned, expendi­
tures of these funds would be undertaken only in agreement with
the United States Government,
Title to the accounts would remain with the foreign
government concerned.
It has been suggested that the United
States should acquire title to the local currencies. This pos­
sibility was thoroughly explored by the Executive Branch and
rejected on the grounds that it would jeopardize' the purposes
of the Program.
By taking title to the accounts, the United
States Government would be acquiring powers within the internal
economic realm of another country that would be bound to be
irritating and prejudicial to good relations between the United
States and the recipient country. The United States would
inevitably share the responsibility -and receive the blame for
any results of the recipient Government's management of its
internal economic policy which were opposed by groups within
the country concerned. The United States, moreover, would be
involved in any criticism of the price policy followed or the
manner of distribution of the commodities, The important thing
about the local currency accounts is that they be used in a
constructive manner, and this, in the opinion of the Executive
Branch, can best be assured through an effective program of
joint control, with thé title to the accounts remaining with
the recipient countries.
An important and a very delicate issue is the matter of exchange rate adjustment. It has been advocated that an acrossthe-board exchange rate adjustment should be made a prerequisite
to any extension of aid under the European Recovery Program.
Because of the widespread circulation of this proposal, I would
like to outline for you the views of the National Advisory
Council on the subject.
The Council considers that it will be necessary for some
of the sixteen participating countries to-adjust their exchange
rates, It believes, however, that across-the-board devaluation
at this time is- neither feasible nor desirable.
For, while
dangers of exchange rates which overvalue currencies are well
understood, nevertheless, premature devaluation may have as
unfortunate economic and political consequences for a country
as would the prolonged maintenance of an overvalued rate.

289
-

8

-

Necessary revisions should take place as a part of develop­
ing programs of internal stabilization. •When, and if, in the
opinion of the United States Government, the exchange rates of
recipient countries are imposing an unjustifiable burden on
their balance of payments, they would be asked to consult with
the International Monetary Fund about revision.
Countries which
are not members of the Fund would be expected to consult with
the United States Government.
This procedure* would provide a means whereby appropriate
exchange rate adjustments would be undertaken wherever necessary*
No single phase of the Recovery Program has attracted more
attention in the American business and financial communities
than the relationship of the Program to this European monetary
stabilization problem.
Monetary instability is a paramount economic problem in
Europe today.
If the Recovery Program is to be successful,
prompt and adequate measures for monetary stabilization must be
taken by the European countries.
At the Paris meeting, the sixteen participating countries
undertook to apply any measures necessary to Internal stability*
It is realized that budgets will have to be brought into
balance rapidly., so that the expenses of government can be met
without increasing the public debt and without increasing
inflationary expenditures.
It'is clear that in most countries
modifications in tax structures and control of expenditures will
be absolutely necesse.ry.
As these steps are taken, the trend toward balanced budgets,
increased production, and steadying prices will all interact
to hasten stabilization.
The Economic Cooperation Bill provides that each country
receiving aid from the United States shall enter into a separate
agreement with this Government. This agreement will cover the
terms on which aid will be given.
Moreover, each country will be required to supply the
United States Government with full information about any
pertinent aspect of the Recovery Program and to give a report
on the Program to its own people. The United States will
of
course, retain the right to determine whether aid to any country
to "be continued if ouf* previous assistance has not been used
effectively.
We have a direct interest in assuring that the European aid
¥e propose to provide will make a maximum contribution toward
teaching economic stability.

290
- 9 Without a doubt, the restoration of normal business con­
ditions in Western Europe will have a decided beneficial effect
upon our own economic environment.
The countries participating in the European Recovery
Program, together with the United States, comprise the major
industrialized area in the world.
The bulk of world trade has
always taken place among the more highly developed countries.
As the nations of the world have advanced in industrial
development, they have come to participate to a greater, rather
than to a lesser extent, in world trade.
This has resulted in a very material contribution to the
worldwide increase in living standards which has so characterized
the past century.
So, laying aside all social and humanitarian considerations —
to say nothing of the extremely important political considera­
tions which exist today -- commonsense dictates that America
participate in the financing of European rehabilitation.
Commonsense clearly indicates that the United States has
a vital financial and economic stake in the European Recovery
Program and it is, therefore, entitled to, and should have,
the wholehearted support of every one of our citizens.

$0o

291

TREASURY DEPARTMENT
Washington
FOR IMMEDIATE release.
•’ednesday. March 10.'1948

Press Service
No# S-654.

The Bureau of Customs announced today preliminary figures showing the
quantities of wheat and wheat flour entered, or withdrawn from, warehouse, for
consumption under the import quotas established in the President’ s proclamation
of May 28, 1941, as modified by the Presidentas proclamations of April 13, 1942,
and April 29, 1943, for the 12 months commencing May 29, 1947, as follows í

Wheat

Country
of
Origin

Wheat flour, semolina,
crushed or cracked
wheat, and similar
wheat products
Established s Imports
Quota
t May 29, 1947
rto. Febt 28. 19^
(Pounds)
(Pounds;
,

j

Established : Imports
Quota
:May 29, 1947, to
February 28. 1948
(Bushels)
(Bushels;

-- -----

-

,*

Canada
795,000
China
Hungary
Hong Kong
Japan
United Kingdom
100
Australia
Germany
100
Syria
100
New Zealand
Chile
Netherlands
100
Argentina
2,000
Italy
100
Cuba
France
1,000
Greece
Mexico
100
Panama
Uruguay
Poland and Danzig
Sweden
Yugoslavia
Norway
Canary Islands
Rumania
1,000
Guatemala
100
Brazil
100
Union of Soviet
Socialist Renublie s
100
Belgium
100
800,000

•

617

-

* *

-

-

—
_

—

—
—

—

. .

—

—
—
*

* *
mm

mm

mm
mmm

—

—
—

~

y »
—
—
' —

y

mm

—

—

—

—

_

—

•

3,815,000
24,000
13,000
13,000
8,000
75,000
1,000
5,000
5,000
1,000
1,000
1,000
14,000
2,000
12 000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1.000

5 ,6 0 0
y

1,600
—
—

mm

mm
tm
m
m
im
m
mmm
mm

A y

—
_
—
—
—
—

mm

9—

mm

9m

-

-

.

mm

mm

mm

mm

617

4 , 000 , 00b

■

1,309,4.77

-oOo-

« -

•

1

'

1 , 3 1 6 ,6 7 7

292
. TREASUHT DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Wednesday3 March 10, 194-8

Press Service
No# S-655

The Bureau of Customs announced today
the imports for consumption of commodities
for under the General Agreement on Tariffs
of the quota periods to February 28, 194-8,

Commodity

■
*
:

preliminary figures showing
within quota limitations provided .
and Trade, from the beginning
inclusive, as follows:
•

Established Quota
:
Period and Quantity :

Unit
: Imports as of
: February 28,
of
Quantity
1948

Whole milk, fresh
or sour

Calendar year

3,000,000

Gallon

1,497

Cream, fresh or sour

Calendar year

1 , 500,000

Gallon

258

Butter

3 months from
Jan. 1, 1948

30,000,000

Pound

Fish, fresh or frozen*
fille te d , etc*, cod*
haddock, hake* pollock 9
Calendar year
cusk, and rosefish
White or Irish
potatoes:
Certified seed
Other

32,660
| 1•'

CD
24,930,188

Pound

Quarter-year
quota fille d

12 months from 150*000,000
Sept* 15, 1947 60,000,000

Pound
Pound

107,583,002
49,614,439

(1)

The proviso to Item 717(b) limits the
imports for consumption at the quota
rate to 6,232,547 pounds during the
fir s t 3 months of the calendar year#

Due to a provision of the President’ s proclamation No* 2769 of
January 30, 1948, in which the entry of a specified quantity of Cuban f ille r
tobacco, unstemmed or stemmed (other than cigarette lea f tobacco) and scrap
tobacco affects the rate of duty on such tobacco from countries other than
Cuba, a record is maintained of imports from Cuba* 3*964*815 pounds of
such Cuban tobacco were imported for consumption during the period January 1
to February 28, 1948* inclusive*

TREASURY DEPARTMENT
Washington
for immediate release

Wednesday »,

March 10» 1948

293
Press Service
No. S-6 5 6

~1 -

The Bureau of Customs announced today that preliminary data on imports of
to the quotas established by the Presidents
as amended, for the period September 20,
1947, to. February 28, 1948, inclusive,, are as follows:
cotton and cotton waste chargeable
proclamation of September 5* 1939*

\

COTTON (other than linters)
(in pounds)
-

j
s:

Under 1-1/8» other
than rough or harsh
Country of
under 3/4"________
Origin.
:Established Imports Sept.
: Quota
20, 1947, to
___________________: : _________ Feb.28, 1948
Egypt and the
Anglo-Egyptian
Sudan.•
Peru.».*»»•••••»•
British India.. . .
China.
Mexico:. . ••••. . • •>
B ra z il,,.;.. .
Union of Soviet
Socialist Repub1res.*
Argentina,. v, •
Haiti.. . . . . . . . . . .
Ecuador... . . . . . . .
Honduras.,..............
Paraguay,, . . . . . . , .
Colombia.. . . . .
Iraq.. . . . . . . . . . . .
British East

783,816
247,952
2,003,483
1,370,791
8,883,259
. 618,723
475,124
5,203
237
9,333
752
871
124
195

247,952
19,852
8,883,259
618,723
249,068

1-1/8” or more Less than 3/4”
but less than harsh or rough 5/
1-11A 6 n 4 /________________________ __
Imports Sept.
Imports Sept. 20,
20, 1947, to
1947, to Feb. 28,
Feb.28, 1948
1948 ____________

43 , 574,472

1,903,999
—

24,003,577

177,949

2,240
Netherlands East
71,388
In d ie s ,,.,.
-•
Barbados/,* . . . . . .
Other British
21,321.
■West Indies l/ .
.Nigeria,. . . . . . . . . .
5,377
Other British
West Africa 2/,.».
16,004
Other French
689
Africa 3/,
Algeria and Tunisia _______ __________________ __________________________
___________________ 14.516,882
10»018,854 _ ^ 45,656,420
1/ Other than Barbados, Bermuda*.Jamaica, Trinidad, and Tobago*
2/ Other than Gold Coast and Nigeria.
3/ Other than Algeria,. Tunisia, and Madagascar^>
4/ Established Quota -45,656,420..
5/ Established Quota —70,000,000, .

24,003.577

294

- 2. COTTON WASTES
(In pounds)

COTTON CARD STRIPS, made from cotton having a staple of less than 1-3/16 inches,
in length, COMBER WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER
OR NOT MANUFACTURED OR OTHERWISE ADVANCED IN VALUE:' Provided, however, that
not more than 33-1/3 percent of the quotas shall be fille d by cotton wastes
other than comber wastes made from cottons of 1-3/16 inches or more in staple
length in the case of the following countries: United Kingdom, France,
Netherlands, Switzerland, Belgium, Germany,' and Italy:
Established :
Country of Origin : TOTA*, QUOTA ;
f
9

:

t

United. Kingdom« «
Canada*’«
• . .* . *
V

. . . .

* *.

..

.

British India.
Netherlands.
Switzerland.
Belgium'.
Japan*,'. . . . . . . . . . .
China.
E gypt............ . ..
Cuba. . . . .
Germany.
. . . • ,i
Italy. .............
Totals
. . . . . .

. . * . . . . .
. . . . .

.*

• ••

* * « ’. . . . . . . ♦

. .

Y . . . . . . . . . . . . .

, •

. . v

• . • , . .

.

..

•

m

»

m

Total imports
^Established:
Imports
Sept* 20, 1947/ i 33-1/3% of: Sept* 20, 1947
to Feb* 28,' 1948:Total Quota: to Feb.28, l/
1948

4,323,457
239,630
227,420
69, 627

19,703
70,818
63,627

68,240

44,388
38,559
341,535
17,322
8,135
6,544
76,329
21,263
5,482,509

1/ Included in total imports, column 2,

1,441,152

19,703

-

-

75>807
li
22,747
14,796
12,853

—
—

\

160,148

25,443
7,088
1,599,886

,

19,703

295
TREASURY DEPARTMENT
Washington

PGR IMMEDIATE RELEASE
Thursday, March 11, 19^8

'

Press-Service
No. S -657

Secretary Snyder announced today that beginning
March 22, banks which act as Government depositaries
for withheld taxes will be permitted to transfer such
taxes to their war loan accounts instead of remitting
them to the Federal Reserve Banks from day to day as
presently required.

These deposits will be subject to

call by the Treasury from war loan accounts from time
to time as funds are needed for Government disbursement.
This change in method of handling the remission of with­
held taxes will permit a more even flow of funds into the
Treasury.
Secretary Snyder said that banking institutions
would receive instructions from the Federal Reserve B a n k s .

o

Oq

TREASURY- DEPARTMENT
Washington

FOR RELEASE, MORNING NEWSPAPERS,
Friday, March •12, 1948.
..

. Press Service
No . S- 65'8 .

The Secretary of, the Treasury, by this public notice, .-in- •
vites tenders for $1,100,000,000, or thereabouts¿ of 91 -day
■l
Treasury bills, for cash and in., exchange •for Treasury bills
maturing Marbh 18, 1948, to be issued on .a discount basis under .
competitive and non-competitive bidding;as. hereinafter.provided.
The bills of this series will bé dated Mancír 18, 1948, and will :
mature June I7 , 1948, when'the face amount will be payable without
interest. They will.be :issued in bearer form only, and in
denominations of $1,000’, $5,000, $10,000,.$100,000, $ 500,000, ; I
and $1,000,000 (maturity value).
;
.
'
Tenders will, b e ’received at Federal Reserve, Banks and
Branches up to the closing hour, two o 1clock- p .m», Eastern ■ ;Standard time, Monday, March 15, 1948.
Tenders will not be re­
ceived at the Treasury Department, Washington. Each tender must
be for a n even multiple of $ 1 ,000, and in the case of competitive
tenders the price offered must be expressed on .the basis of 100 ,
with•not- more, than three decimals, e . g., 99 .925 . Fractions •
may not be used.
It is urged that' tenders be made on the printed
forms and forwarded in the special envelopes which ..will be sup-v
plied by Federal Reserve Banks or Branches on application
therefor. *
Tenders will be received without deposit from incorporated
banks and trust companies and -from responsible and recognized,
dealers in Investment securities.
Tenders from others must be
accompanied, -by..payment of 2 percent of the face amount of Treasury
bills applied for, unless the tenders are accompanied, by an
express, guaranty of payment by an incorporated bank or trust
company.
.
Immediately after the closing hour, tenders will be opened
at the Federal Reserve Banks and Branches, following which public
announcement will be made by the Secretary of the Treasury of
the amount and price range of accepted bids*
Those submitting
tenders will be advised of the acceptance or rejection thereof.
The Secretary of the Treasury expressly reserves the right to
accept or reject any or all tenders, in whole or in part, and his
action in any such respect shall be final.
Subject to these
reservations, non-competitive tenders for $ 200,000 or less with­
out stated price from any one bidder will be accepted in full at
the average price (in three decimals) of accepted competitive
bids. Settlement for accepted tenders in accordance with the bids
mUfo
made or completed at the Federal Reserve Bank on March 18,
1948, in cash or other immediately available funds or in a like

2
face amount of Treasury bills maturing March .18, 1948,
Cash
and exchange tenders will receive equal treatment. Cash ad-,
justments will be made for differences between the par v a l u e •
of maturing "bills accepted in exchange and- the issue-price of
the new b i l l s .
The income derived .from treasury bills, whether interest or
gain from the sale or other disposition of the bills, shall not
have any^exception, as such, and loss from the, sale or other
disposition of Treasury bills shall not have any special treatment, as such, under the Internal Revenue Code, or laws amenda­
tory or supplementary thereto.
The bills shall, be subject to
estate, inheritance, gift or other excise taxes, whether Federal
or State, but shall be exempt from all taxation now or hereafter
imposed on the principal of interest thereof by any State, or
any of the possessions of the United. States, or by any local
taxing authority. For purposes of taxation the amount of dis­
count at which Treasury bills are originally sold by the United
States shall be considered to be interest. Under Sections 42 and 117 (a) (l) of the Internal Revenue Code, as amended by
Section 115 of the Revenue Act of 1941, the amount of discount
at 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, the owner of Treasury bills (other
^^atnlife insurance companies) issued hereunder need include in,
his income tax return only the, difference between the-price
pa-id for such bills, whether on original issue or on subsequent
purchase, and the amount actually received either upon sale or
redemption at maturity during the taxable year for which the
return is made, as ordinary gain or l o s s .

Treasury Department C ir c u la r Uo, 4 l 8, as amended, apd th is
n o t i c e , p re scrib e the terms o f the Treasury b i l l s and govern
the co n d itio n s o f t h e ir i s s u e . Copies o f the c ir c u la r may be
obtained from any F ed eral Reserve Bank or B ranch.
0O 0

297

TREASURY DEPARTMENT
Washingtoii

FOR RELEASE, MORNING NEWSPAPERS
Monday, March 15, 1948._____ No. S -659

Press Service

During the month of February, 1948, market trans­
actions in direct and guaranteed securities of the
Government for Treasury investment and other accounts
resulted in net purchases of $177,355>550, Secretary
Snyder announced today.

0O0

298

TREASURY DEPARTMENT
Washington

FOR RELEASE, MORNING NEWSPAPERS,
Tuesday, March 16 , 1948..

Press-Service
No. S-660

The Secretary of the Treasury announced last evening that
the tenders for $1,100,000,000, or thereabouts, of 9 1 -O.ay
Treasury bills to be dated March 18 and to mature June 17, 1948,
which were offered March 12, 1948, were opened at the Fe^e^al
Reserve Banks on March 15,
The details of this issue are as follows:
Total applied for '- $1,935,041,000
Total accepted
- 1,107,232,000 (includes $43,282,000 entered
on a non-competitive basis and accepted
in full at the average price shown below)
Average price - 99,7-48 Equivalent rate of discount approx' 0 .996$
per annum
Range of accepted competitive bids*.
High - 99*756 E q u i v , rate of discount approx. 0 .965$ per annum
Low - 99*747
n
M
u
. M
"
1,001$ "
(26 percent of the amount bid for at the low price was accepted).
Federal Reserve
District

Total
Applied for

Boston
New York
,
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
S t . Louis
Minneapolis
Kansas City
Dallas
San Francisco

$

10 585,000
1,596 028,000
18 990,000
15 715,000
4 925,000 '
2 780,000
198 875,000
3 800,000
2
21
4
56

TOTAL.

305,000
040,000

Total
Accepted
$

6 ,515,000
889,026,000
6 ,262,000
8 ,315,000
4 ,851,000
2 ,632,000
1 4 1 ,581,000
3 ,349,000

360,000
538,000

1,935,000
16,278,000
4 ,360,000
22,128,000

$1,935, 941,000

$1,107,232,000

0 O0

299

U nited S t a t e s S a v in g s Bonds Issu ed and Redeemed Through F eb ru ary 27, 1948

(D o lla r amounts in m illio n s . - rounded and w i l l not n e c e s s a r ilv add to t o t a l s ’)
1Amount
Amount
j Amount O u t- | P e rce n t Redeemed
Issu ed 1/ , Redeemed.1/ i sta n d in g 2/ o f Am t. Issu ed
;
j
Series A-D:
!
S e rie s A -1935 ( m a t u r e d ) ...
i> 255
6 248
1 $
7
9 7 . 25 $
S e rie s A -1936 (m atu red ).'.'.
463
95.90
19
S e rie s G-1937 ( m a t u r e d ) ...
590
Ì
56
534
90.51
S e rie s 0 -19 38, *
a
.
673
249
37.00
3/424
S e rie s D -1939. . . . . . ¿a . . . . .
820
1,043
2 1 .3 8
223
S e r ie s D -1 9 4 0 .V *-.. . . . . . . . .
1,229
1 9 .6 1
241
989
S e rie s D- 1 9 4 1 . . . . . i
.
528 t ............ 94
17.80
434
i
T o ta l S e r ie s A-D
4,781
2 ,0 3 2
4 2 .5 0 ,
2,749.
-.■».W if ...
Series E:
S e rie s
S e rie s
S e rie s
S e rie s
S e r ie s
S e rie s
S e rie s
S e r ie s

E- 1 9 4 - 1 . . . . . . . . . . . . .
E-1942*.. * . . . . . . . . .
E-1943 * . . . . . . . . . . . .
E- 1944* . . . . . . . . . . . .
E - 1 9 4 5 . * * . ; ..............
E-1946.. . . . . . . . . . . .
E-1947* . * . * ..............
E-1948 (2 mos. ) . . . - .

1>479
6,690
10,939
12,791
9,952
4,3 69
4,C42
509

T o ta l S e r ie s E . . . . . . . . ,
bl
T o ta l S e r ie s A - E . . . . . .

50,771

19,345

3 1 ,4 2 6

55,552

21,377

34,176

Series F and
S e rie s F
S e rie s F
S e rie s F
S e r ie s F
S e rie s F
S e r ie s F
S e rie s F
S e rie s F

Gt
and
and
and
and
and
and
and
and

G-194-1.................
G-194-2.. . . . . .
G-1 9 4 -3 * ... . . .
G-1944.. . . . . .
G- 1 9 4 - 5 .' .. ....
G-154-6..
0 - 1 9 4 7 .." ,...'.
G-1940 (2 mos)

3-,697
3,147
2,994
2,588
404

T o ta l S e r ie s F and G . . .

„2 0 ,9 2 3

1,534
3,194
3 , 3 6 6

—

U n c la s s ifie d s a le s and
redemptions * • • . . . . . . , , . v . .
T o ta l A l l S e r ie s l j

356
2,4 57
4 ,7 45
5 ,6 6 5

.

1

j

4,219
1,316
587
*

7 6 -, 626

3 6 ,7 3

4 3 .3 8
44*29
42*39

6 ,1 9 4

7,126
5,733
3,053
3,455
...........509...........

2 1 2

1 , 3 2 2

515
553

2,679
2,813

469

3 , 2 2 8

3 0 . 1 2

1 4 .5 2

" ■11
'■

3 8 . 1 0

11-11
38.48

1 3 . 8 2

16.43
12.69
9 . 2 2

2 , 8 5 8

1 6 8

2 , 8 2 6

5 . 6 1

2,5 49
404

1 .5 1

18,677

10.73

39
-x2 , 2 4 6

t
23,751
-

.......... 23

..

52,875
.......
______ L

3 1 . 0 0

* Less than h50 0,000 .
1/ Includes accru ed d is c o u n t .
2j Current redem ption v a lu e s .
Includes matured bonds which have not been p resented f o r paym ent.
U In cludes S e r ie s A-C (m atured), and th e r e fo r e does n o t a; re e w ith t o t a l s
under in t e r e s t - b e a r in g deb t on P u b lic Debt Statem ent-.
O ffic e o f F i s c a l A s s is t a n t S e c r e t a r y
T reasu ry Department

"

1 6 , 1 2

2 9 0

128
151

2 4 .0 7

1,1 24
4,233

’

TREASURY DEPARTMENT
Washington

(The following address by Secretary Snyder before
the National Savings Bonds Conference at the Statler
Hotel, Washington, D. C., is scheduled for delivery
at 10:45 A, M,, E.S.T., Thursday, March lb, 1 ^ 6 ,
and is for release at that time.)
'

It is a real pleasure to welcome you and to tell you
once again how greatly we value and appreciate the splendid
cooperation and support which you folks are giving to our
Savings Bond Program,
We are here to consider ways of selling more b o n d s . The
primary reasons for our efforts to this end are to bring about
a broader distribution of public debt ownership, to enable the
Treasury to continue its policy of retiring inflationary bankheld debt to divert money from the inflationary spending stream
by creating greater individual savings habits, and to build up
economic security for the Nation and its people.
At our meeting last year, we discussed the evidence of
the serious price inflation in our economy, and we spoke of
the acute need for affirmative action to counteract this infla­
tion.
The conditions which prompted our intensified sales
promotion campaign last year are equally, if not more forcefully
persuasive today.
We have made definite progress, and I sincerely congratu­
late you upon your part in it. Nevertheless, we still have a
long way to go,
Economic conditions and prospects should determine, at any
given time, whether or not, and to what extent the public debt
should be reduced. When national income levels and business
activity are high, as now, debt reduction must be a foremost
consideration of national fiscal policy.
Since the first of March, 1946, we have reduced the public
debt some $26 billion by drawing down the Treasury cash balance
to peacetime levels and, during the past months, through the
ise of revenue surplus, Virtually all of this reduction has
been made in that part of the debt held by the banking system.
During this same period, we were able to retire approximately
$3 billion more of bank-held debt through the transfer of public
debt holdings from the banking system to non-bank investors.
And the sale of Savings Bonds to individuals has been an important
factor in enabling the Treasury to carry out this anti-inflationary
objective.

S- 6 6 1

301
* a =.
L&sfc month, the Government Borrowing Committee of the
American Bankers’ Association issued a booklet which contained
the following statement*
"Proper placement of the- national
debt has become as important as reduction of the debt."
This is sound thinking and indicates the kind of farsighted
support which the American Bankers’ Association and its members
have been giving the Savings Bond program and the policy of
retiring bank-held debt. All of you know that the ABA has
been holding regional conferences to implement its five-point
program against inflation and that the sale of more Savings
Bonds to more people is one of those five p o i n t s . Y o u will hear
much more about this program later.
In addition to the commercial banks, many savings banks and
investment bankers are giving the Bond program fine support.
Groups of commercial, savings and investment bankers and in­
surance executives meet at the Treasury from time to time to
talk over mutual problems with us.
In December, I invited leaders in business and industry to
form a National Industrial Advisory Committee for the Treasury.
As a result of the work they have already accomplished, there
has been an upswing in Payroll Savings and the number of firms
that have reinstated the Plan in the past three months.
Payroll
Savings is now available to at least 30 0 , 0 0 0 more wage and
salary earners than in November.
Today, 1 9 , 0 0 0 firms are making
this Plan available, and we estimate nearly 5l? million Americans
are now using it for automatic and regular savings through
Bonds.
We have a tremendous overall force behind the Security
Loan Drive, When the Savings Bonds Division of the Treasury
sought additional support for April, May and June, the response
was most enthusiastic. And, In view of this vast support,
I believe we can rightfully be optimistic about the success of
the Drive .
I want to mention some of the groups and organizations
who have been, and are being, especially active in our bond
program.
Last week, a committee of retailers from every state in the
Union met with us at the White House to organize for advertis­
ing and promoting the Security Loan.
Publishers are continuing the series of full-page ads
which they have been donating for more than a year.
The
Advertising Council of America and the advertising agencies
and their staffs are the task force for the preparation of the
effective Bond ads you see In magazines and newspapers.

302

3
Month after month, house organ editors promote Payroll
Savings in their publications with excellent results.

Leading advertisers and advertising agencies have organized
the National Advertising Advisory Committee*
Cartoonists and
'comic strip artists are arranging to give special aid to the
Security Loan.
The newspaper publishers and advertising managers
have pledged even greater support than they gave to any other of
our peacetime Bond promotions.
The radio networks, the indepen­
dent stations, the radio artists, and the motion picture industry,
give generously of their time and talent to the Savings Bond
Program.
Among others who deserve high commendation for their willing
cooperation, I am pleased to cite our educators who are teaching
our children the benefits of a more thrifty America through the
School Savings program; and our textbook publishers who are
also encouraging thrift habits in our children by including
Savings Bond material in school texts.
The American Federation of Labor, the Congress of Industrial
Organizations, the Railway Brotherhoods, and all other labor
organizations are backing the Payroll Savings Program and the
Security Loan with concrete action.
Another most effective group organized to help our state
and county Bond Committees is made up of the national agricultural
organizations -- namely, the Farm Bureau Federation, the Farmers'
Union, and the National Grange, as well as the field force of
the Departments of Agriculture, both national and state.
Their
help in drive after drive has been invaluable in reaching the
farm market for B o n d s .
As you know, farm families, in proportion to their numbers
and their ability, have been the best buyers of Savings Bonds
in the. Nation.
I want to commend also the members of the Savings Bonds
Division of the Treasury, some 380 workers -- just one fifth
of the wartime staff -- who serve and guide the volunteers who
sell around seven billion dollars worth of Bonds a year.
As we did in wartime, so must we in peacetime rely for the
major part of the Bond promotion and sales operation upon
volunteers in the state, county and city Savings Bonds committees
and those who work with .them..
In this connection I welcome
Committee for Savings Bonds which
These National organizations were
war bond program. At the request

the new National Organizations
was formed on March 5th.
a substantial force in the
of the Treasury, their national

303
officers are now asking local units and members to volunteer
for any service they can render to local Savings Bond committees
in the Security Loan.
I know this will prove of great assist­
ance to those of you who have the job of enlisting volunteers
for the D r i v e .
The success of the Security Loan and of the continuing
Savings Bond program depends upon these volunteer forces in
advertising, agriculture, banking, industry, labor, newspaper
and magazine publishing, motion picture, •radio, and other fields.
This huge volunteer organization is a heartening and
inspiring example of the citizens of a democracy working together
to one common purpose, The future welfare of our Nation depends
upon such community leadership and cooperation.
There are perhaps ten million Americans’who have served or
are serving now in the Bond program, and many of them have been
giving their services since 1941.
The Security Loan campaign
needs the services not only of the veteran volunteers but of
every citizen who can serve as a new volunteer.
‘Building security of the Nation and of the individual is
a most important function of the Savings Bonds program today.
The liquid savings of individuals (are now past the $200 billion
mark.
These savings)constitute a reservoir of buying, power'for
the future.
They are an essential means toward the stabilization
and expansion of our economy.
The Security Loan Campaign affords each of us the
opportunity to contribute not only to his own well-being, but
to that of the Nation as a whole.
The success of this drive is
of paramount importance, not only from the standpoint of its
immediate objectives, but from the standpoint of our future
individual and national security.

oOo

304
TREASURY DEPARTMENT
Washington

FOR IMMEDIATE RELEASE,
Thursday, March 18, 1948.

Press Service
W o . 3-662

Secretary Snyder today announced that the limitation
on Series E savings bonds is being raised from $5,000,
maturing value, to $10,000, maturity value, effective
for the calendar year 1948*

The limitation relates to

the amount of Series E bonds originally issued during
any one calendar year to any one person.

There is no

change in the manner in which holdings will be computed,
and the new provision simply doubles the amount that any
individual may hold.
The Secretary reached the decision to raise the
limitation

in advance of the start of the Security Loan

Drive which will open on April 15.

Full details regarding

the increase in limitation are contained in amendments to
the Series E offering circular and the Regulations
Governing Savings Bonds, which are being released today.

V

305
î
UNITED STATES SAVINGS BONDS - SERIES E

1948
First Amendment to
Department Circular No. 653
Second Revision, dated
August 31, 19^3*
as supplemented

TREASURY DEPARTMENT
OFFICE OF THE SECRETARY
Washington, March 18, 19^8

Fiscal Service
Bureau of the Public Debt

Pursuant to Section 22 (a) of the Second Liberty Bond Act,
as amended (55 S t a t . 7, 31 U.S.C, and Sup. 757c), Section XV,
paragraph 1, of Department Circular No. 653, Second Revision,
dated August 31, 19^3 (31 CFR 19^3 Supp,, 316), as supplemented,
is hereby amended to read as follows:
IV. LIMITATION ON HOLDINGS
1. The amount of bonds of Series E originally issued during
any one calendar year to any one person that may be held by that
person at any one time shall not exceed $5,000 (maturity value)
for each calendar year up to and including the calendar year
19*1-7 , and $10,000 (maturity value) for each calendar year
thereafter, computed in accordance with the provisions of the
regulations governing United States Savings Bonds,
If any person
at any time acquires savings bonds issued during any one calendar
year in excess of the prescribed amount, the amount of such excess
should immediately be surrendered for refund of the issue price.

JOHN W. SNYDER
Secretary of the Treasury

306

1
REGULATIONS GOVERNING SAVINGS BONDS

1948
Third Amendment to
Department Circular No. 530,
Sixth Revision, dated
February 13, 1945

TREASURY DEPARTMENT
OFFICE OF THE SECRETARY,
Washington, March 18, 194

Fiscal Service
Bureau of the Public Debt

To Owners of United States Savings Bonds and Others Concerned:
Pursuant to Section 22 (a) of the Second Liberty Bond Act,
as amended (55 S t a t . 7, 31 U.S.C. and Sup. 757c), Subpart C of
Department Circular No. 530, Sixth Revision, dated February 13,
1945 (31 CFR 1945 Supp,, 315) as amended, is hereby further
amended 1 / and revised to read as follows:
Subpart C - LIMITATION ON HOLDINGS
Sec. 315.8. Amount which may be h e l d .--As provided by
Section 22 of the Second Liberty Bond Act, as added February 4,
1935 (U.S.C. 1940 Ed., title 31, section 757c), and by regulations
prescribed by the Secretary of the Treasury pursuant to the
authority of that section, as amended by the Public Debt Act of
1941, 55 Stat. 7 , the amounts of savings bonds of the several
series issued during any one calendar year that may be held by any
one person at any one time are limited as follows:
(a) Series A, B, Q, and D .--$10,000 (maturity value) of
each series for each calendar year.
(b) Series E .--$ 5,000 (maturity■value) for each calendar
year up to and inc 1 uding the calendar year 1947, and $ 10,000
(maturity value) for each calendar year thereafter.
(c) Series F and G .- - $50,, 000 (issue price) for the calendar
year 1941, and $ 100 ,066" (issue price) for each calendar year
thereafter, of either series or of the combined aggregate of both,
except that, in the case of commercial banks authorized to acquire
such bonds in accordance with Section 315*5, the limitation shall
be such as may have been or may hereafter be provided specifically
in official circulars governing the offering of other Treasury
securities, but in no event in excess of $ 100,000 (issue price)
for any calendar year.

1/ This supersedes the Second Amendment which is hereby withdrawn
from^circulation. The Second Amendment was issued merely to
provide for the purchase of savings bonds of Series E outside
of the limitation under the conditions which are set forth in
Sec. 315.9 (d) (4) of this amendment.

307
2
Sec* 315.9. Calculation of A m o u n t .--In computing the
amount of savings bonds of any one series issued during any one
calendar year held by any one person at any one time for the
purpose of determining whether the amount is in excess of the
authorized limit as set forth in the next preceding section* the
following rules shall govern:
(a) the term "person" shall mean any legal entity* includ­
ing but not limited to an individual, a partnership* a corporation
(public or private), an unincorporated association or a trust
estate, and the holdings of each person, individually and in a
fiduciary capacity* shall be computed separately.
(b)
In the case of bonds of Series A, B* C, D, and E, the
computation shall be based upon maturity v a l u e s . In the case of
bonds of Series F* and G* the computation shall be based upon
issue prices.
(c)
Except as provided in subsection (d)* there must be
taken into account:
(l) all bonds originally issued to and
registered in the name of that person alone; (2 ) all bonds
originally issued to and registered in the name of that person as
coowner or reissued, at the request of the original owner, to add
the name of that person as coowner or to designate him as coowner
instead of as beneficiary under the provisions of this circular,
except that the amount of bonds of Series E held in coownership
form may be applied to the holdings of either of the coowners,
but will not be applied to both, or the amount may be apportioned
between them; and (3) all bonds acquired by him before March 1,
1941 , upon the death of another or the happening of any other
event.
(d)
There need not be taken into account:
(l) bonds of
which that person is merely the designated beneficiary; (2 ) those
in which his interest is only that of a beneficiary under a trust;
or (3 ) those to which he is entitled as surviving designated^
beneficiary upon the death of the registered owner* as an heir
or legatee of the deceased registered owner, or by virtue of the
termination of a trust or the happening of any other event, unless
he became entitled to any such bonds in his own right before
March 1, 1941; or (4) with respect to bonds of Series E, those
purchased with the proceeds of matured bonds of Series A and
Series 0-1938* where the Series A or Series C bonds were presented
by an individual (natural person in his own right) owner or co­
owner for that purpose and the Series E bonds are registered in
his name in any form of registration authorized for that series*
(e)
Nothing herein contained shall be construed to
invalidate any holdings within or, except as provided in subsection
(c) above* to validate any holdings in excess of* the authorised
limits, as computed under the regulations in force at the time
such holdings were acquired.

308
- 3 Sec. 315*10 Disposition of excess.--If any person at any
time acquires savings bonds issued during any one calendar
year in excess of the prescribed amount, the excess must be
immediately surrendered for refund of the purchase price, less
(in the' case of Series G bonds) any interest which may have been
paid thereon, or for such other adjustment as may be possible.

JOHN W. SNYDER
Secretary of the Treasury

1

309

TREASURY DEPARTMENT
WASHINGTON

Press Service
Nò. S-663

FOR RELEASE
Thursday, March 25, 1948

Secretary of the Treasury Snyder today made public prelimi­
nary statistics from corporation income tax returns and corporation
excess profits tax returns for 1945. filed through December 31.
1946. prepared under the direction of Coranissioner of Internal
Revenue George J. Schoeneman. The preliminary report. Statistics
of Income for 1945. Part 2. will be released at an early date.

SUMMARY DATA
The number of corporation income and declared value excessprofits tax returns for 1945. filed through December 31, 1946, is
452,700, of which 301,259 show net income of $22,165,385,218,
while 118,106 show deficit of $1,026,249,663, and 33,335 have no
income data (inactive corporations).
The income tax liability reported on these returns is
$4,181,693,604 and the declared value excess-profits tax is
$54,887,907, while an excess profits tax liability of
$6,556,529,033 is reported on 52,098 corporation excess profits
tax returns for the same period. Thus the total amount of
corporation income and excess profits taxes is $10,793,110,544,
representing a decrease of 27 percent as compared with the
total for 1944. The amounts of income tax and excess profits
tax liability do not take into account any credit claimed' for
income and profits taxes paid to a foreign country or United
States possession.
The 52,098 taxable corporation excess profits tax returns
for 1945 show excess profits net income of $14,165,549,528 and
adjusted excess profits net income of $8,368,072,530.

-

2

-

A comparison of the 1945 returns with the 1944 returns is provided
in the following summary*
Corporation returns,

l/

1945 and 1944*

Summary data

(Money figures in thousands of dollars)
1945
(prelimi­
nary)

1944
(complete)

Increase or
decrease (-)
Number or Per­
amount
cent

Income and declared value excess-profits tax returns
Total number of income and
declared value excess-profits
tax returns, Form 1120
Returns with net income* 2/
Number
Net income 2/
Tax liability*
Income tax 3/
Declared vaTue excessprofits tax
Excess profits tax 4 /
Total

452,700

301,259
22,165,385

446,796

5,904

1

288,904
12,355
27,123,741 -4,958,356

4
-18

4,181,694

4,353,620

-171,926

-4

54,888
6,556,529

98,668
-43,780
10,431,762 -3,875,233

-44
-37

10,793,111

14,884,050 -4,090,940

-27

Returns with no net income*2/
Number
Deficit 2/

118,106
1,026,250

123,563
819,260

-5,457
206,989

-4
25

Number of returns of inactive
corporations

33,335

34,329

-994

-3

52,098
14,165,550

55,912
-3,814
20,471,652 -6,306,102

-7
-31

8,368,073

12,935,510 -4,567,437
See above

-35

Excess pro fits tax returns
Taxable excess profits tax
returns, Form 1121*
Number
Excèss profits net income 5/
Adjusted excess profits neT
income 6/
Excess profits tax
For footnotes, see pp. 16-17

- 5 -

310

Allowance of the net operating loss deduction reduced the net
income for declared value excess-profits tax computation by $114,401*128
on 31,432 returns filed for 1945, as compared with $148,759,845 on
34,296 returns filed for 1944« See note 30, page 17«
RETURNS INCLUDED
The returns included in this
calendar year ending December 31,
the period July 1945 through June
greater portion of the accounting

release are those filed for the
1945, a fiscal year ending within
1946, and a part year with the
period in 1945*

The data are from corporation income and declared value excessprofits tax returns, Form 1120; life insurance company income tax
returns, Form 1120L; mutual insurance company income tax returns,
Form 1120M; and corporation excess profits tax returns, Form 1121,
Included for this purpose in addition to returns filed by domestic
corporations are the returns filed by foreign corporations engaged
in business within the United States, Amended returns and tentative
returns are not included. The complete report, Statistics of Income
for 1945, Part 2, will contain more detailed statistics from corpora­
tion income and declared value excess—profits tax returns and from
corporation excess profits tax returns, together with data from
personal holding company returns, Form 1120H,
The statistics are compiled from the returns as filed, prior to
revisions that may be made as a result of audit by the Bureau of
Internal Revenue and prior to changes which may result from carry­
backs, relief granted under section 722 of the Internal Revenue Code,
recamputation of amortization of emergency facilities, or from the
renegotiation of war contracts, after the returns were filed.
Changes resulting from the renegotiation of war contracts are recorded
as settlements are reached, however, and the effect of renegotiation
settlements reached to date with respect to the tax year 1945 will be
shown in a special tabulation to be included in the complete report,
Statistics of Income for 1945, Part 2,
CHANGES IN LAW AFFECTING CORPORATION RETURNS
The provisions of the Internal Revenue Code as amended by the
Revenue Act of 1943 continue in effect for the calendar year 1945, for
a fiscal year ending in the period July through November 1945, and for
a part year beginning and ending in 1945,
In the case of returns for fiscal years ending in the period
January through June 1946, and returns for part years ending in 1946
with the greater part of the accounting period falling in 1945, the tax
liability is affected by certain changes in law introduced by the

- 4 Revenue Act of 1945#

The most significant changes are as follows:

Income and Declared Value Excess-Profits Tax Returns, Form 1120
(l) There is a decrease in the surtax rates for 1946 as com­
pared with 1945, as shown below:
Size of surtax
net income
Not over $25,000
Over $25,000 but not over $50,000:
First $25,000
Next $25,000
Over $50,000:
First $25,000
Excess over $25,000

1946
rate

1945
rate

6

1 0

1 0

6
22

14
14

•

22
16
16

(2) Corporations filing returns for taxable years beginning
in 1945 and ending in 1946 are required to compute two tentative
taxes, one under the provisions applicable to 1945, the other under
the provisions applicable to 1946, and prorate each on the basis of
the number of days before January 1, 1946, and the number of days
after December 31, 1945, respectively. The prorated portions of the
two tentative taxes are then combined to determine the actual lia­
bility, which is the amount tabulated in this report. Amounts tabu­
lated from these returns for all items other than the tax liability
are the amounts used in computing the tentative tax for 1945 under
provisions of the Revenue Act of 1943.
(3) The capital stock tax is repealed, effective with respect
to taxable years ending after June 30, 1945; the declared value excessprofits tax is repealed, effective with respect to taxable years ending
after June 30, 1946.
Excess Profits Tax Returns, Form 1121
(1) The corporate excess profits tax is repealed, effective
January 1, 1946.
(2) For fiscal years beginning in 1945 and ending in 1946, the
excess profits tax is retained for the 1945 portion of the year through
the provision that the excess profits tax shall be an amount equal to
that portion of a tentative tax, computed under provisions of the
Revenue Act of 1943 and prorated on the basis of the number of days
before January 1, 1946.
(3) For taxable years beginning in 1946, the law retains the un­
used excess profits credit for the purpose of the two year carry-back
to 1944 and 1945. No excess profits tax returns are required to be

311

- 5 -

filed for such taxable years but the provisions of law relative to
the computation of excess profits credit continue in effect* There
is no unused excess profits credit for a taxable year beginning after
December 31, 1946.
CONSOLIDATED RETURNS OF AFFILIATED CORPORATIONS (FORM 1120)
For 1945 the number of consolidated returns for income tax purposes
is 1,412, of which 1,080 show net income amounting to $2,035,202,917,
while 329 show deficit of $149,595,065>and 3 have no income data
(inactive corporations)» The number of consolidated returns filed is
only 0,3 percent of all corporatibn returns* However, the net income re­
ported in consolidated returns is 9*2 percent of the net income of all
returns showing net income, and the income tax reported therein, amounting
to $485,059,717, is 11*6 percent of the income tax for all corporations.
The privilege pf filing a consolidated return for income tax
purposes (Form 1120) is granted to affiliated domestic corporations in
general upon the condition that the affiliated group make also a con­
solidated excess profits tax return for the taxable year* To qualify as
an affiliated group, the member corporations must meet certain require­
ments in respect to their connection through stock ownership with a
common parent corporation*
Data from the consolidated returns are shown as a separate tabu­
lation in table 1-A, pages 9 - 1 0 , and are combined with data from other
returns in the tabulations presented elsewhere in this release* The fol­
lowing summary shows, by industrial divisions, the number of consolidated
returns (Form 1120) and the number of subsidiaries included therein,for
both the years 1945 and 1944*
Consolidated corporation returns, 1945 and 1944, by industrial
divisions, showing number of consolidated returns and number
of subsidiaries

Industrial divisions

7/

All industrial divisions
Mining and quarrying
Manufac turing
Public utilities
Trade
Service
Finance, insurance, real estate,
and lessors of real property
Construction
Agriculture, forestry, and fishery
Nature of business not allocable
For footnotes, see pp* 16-17

Number of
consolidated
returns 8/
1945
1944

Number of
subsidi­
aries 9/
1945
1944

1,412
85
454
219
226
84

1,300

215
79

6,093
316
1,940
1,442
660
285

5,780
260
1,812
1,433
609
240

287
35
13
9

271
40
13

1,312
87
40

1,296

6 8

413
2 0 0

1

1 1

8 8

41
1

-

6

-

INDUSTRIAL GROUPS
The distribution of the corporation income and declared value
excess-profits tax returns for 1945 by major industrial groups for
returns with net income and returns with no net income is shown in
tables 1, 1-A, and 2, pages 7 - 1 2 , of this release. Tables 1 and
2 include all returns, while table 1-A includes only consolidated
returns•
The industrial classification is based on the business activity
reported on the return. When multiple businesses are reported on a
return, the classification is determined by the business activity
which accounts for the largest percentage of total receipts. There­
fore, the industrial groups do not reflect pure industry classifica­
tions.
It is important to note that the industrial classification
of a consolidated return is based on the predominant business of the
affiliated corporations for which the consolidated return is filed.
If it were possible to segregate the income of the subsidiary or
affiliated concerns, the data for such concerns might fall in indus­
trial divisions other than the ones in which they are here included.
In analyzing the data compiled from returns classified under the
major group "Insurance carriers, agents, etc.," it should be noted
that life insurance companies are required to include only interest,
dividends, and rents in gross income. Beginning 1942, life insurance
companies are allowed a "reserve and other policy liability credit"
equal to a flat proportion of investment income less tax-exempt inter­
est. This credit, which is deducted after arriving at net income and
is reported only on returns with net income, takes the place of the de­
ductions for reserve earnings, deferred dividends, and interest paid,
which formerly were allowed in computing net income.
For 1945 the credit ratio is .9539 and for normal tax purposes
the aggregate amount of reserve and other policy liability credit is
$1,141,239,298, of which $1,140,271,625 is reported on returns with
balance sheets. As an offset to this credit, adjustment for certain
non-life insurance reserves is reported in total amount of $6,784,957,
of which $6,772,506 is reported on returns with balance sheets. The
latter adjustment, which is made in order to include in the tax base
the interest received on non-life insurance reserves, applies only to
life insurance companies deriving a portion of their income from con­
tracts other than life insurance, annuities, or noncanoellable health
and accident insurance.
HISTORICAL SUMMARY
A historical summary for each of the years 1936-1945 is presented
in table 4, page 15.
In comparing the data throughout the ten-year
period, the various changes in law must be taken into consideration,
especially the discontinuance for 1934-1941 of the privilege of filing
consolidated returns for income tax purposes (except by railroad corpo­
rations and their .Related holding or leasing companies and, in 1940 and
1941, by Pan-American trade corporations) and the restoration of this
privilege beginning 1942.

Table 1. - Corporation income and declared value excess-profits tax returns, 1/ 1945, by major industrial groups, for returns with neti: icome and returns with no net incomes Number of
returns, total compiled receipts, net income or deficit, and dividends paid in cash and assets other than own stock; also, for returns with net incomes Total tax, income tax, declared
value excess-profits tax, excess profits tax, and adjusted excess profits net income

Major industrial groups 7/

All industrial groupa
Mining and quarrying
Metal mining
Anthracite mining
Bituminous coal, lignite, peat, etc»
Crude petroleum and natural gas production
Nonmetalllc mining and quarrying
Mining and quarrying not allocable
Manufacturing
Food and kindred products
Beverages
Tobacco manufactures
Cotton manufactures
Textile-mill products, except cotton
Apparel and products made from fabrics
Leather and products
Rubber products
Lumber and timber basic products
Furniture and finished lumber products
Paper and allied products
Printing and publishing industries
Chemicals and allied products
Petroleum and coal products
Stone, clay, and glass products
Iron, steel, and products
Monferrous metals and their products
Electrical machinery and equipment
Machinery, except transportation equipment and
electrical
Automobiles and equipment, except electrical
Transportation equipment, except automobiles
Other manufacturing
Manufacturing not allocable
Public utilities
Transportation
Communication
Other public utilities
Trade
Wholesale
Commission merchants
Other wholesalers
Retail
General merchandise
Food stores, including market milk dealers
Package liquor stores
Drug stores
Apparel and accessories
Furniture and house furnishings
Eating and drinking places
Automotive dealers
Filling stations
Hardware
Building materials, fuel, and ice
Other retail trade
Retail trade not. allocable
Trade not allocable

Total
number
of re­
turns 8/

Number
of
returns

452,700 301,259
5,694
9,144
1,626
205
85
155
915
1,695
1,722
3,559
743
1,384
24
727
61,680
82,189
7.081
9,059
2,772
2.082
178
219
766
852
3,141
3,678
6,460
7,797
1,769
2,108
561
475
1,607
2,436
3,102
5,999
2,126
1,848
10,537
8,021
4,414
6,476
482
511
1,952
2,875
5,068
6,719
1.853
2,518
1,345
1,942
4,536
6,587
646
1,157
4,119
3,050
21,138
14,133
5,856
5,149
124,442
56,763
5,494
51,269
72,955
5,455
5,699
1,749
4,212
10,412
4.976
9.976
8,171
1,792
2,199
7,109
7,237
3,988
14,724

501
739
2.853
I, 692
12,967
8,611
2,260
2,096
97,551
28,839
5,861
24,978
57,682
4,686
4,199
1,489
3,383
9,072
3,926
6,719
6,205
1,182

1,942
5,723
5,798
5,358
II,

(Money figures in thousands of dollars)
Returns wit'h net income 2/---------------Taxes
Adjusted
Income
Total
Declared
it?
excess
Total
tax ¿/
value
tax
icome 2/ profits
compiled
excessnet
receipts 10/
profits
income 11/

258,916,192
5,352,021
662,804
318,166
I,
699,821
316,873
6,757
133,388,785
18,505,256
4,272,186
2,224,005
2,781,939
4,806,155
5,862,214
2,142,515
5,299,988
1,522,905
1,869,506
3,510,239
3,744,193
9,559,336
9,617,216
2,201,259
17,079,571
3,861,582
6,702,501
9,287,682

165,385
299*656
79^265
10¡264
81^412
347,600
85^887
42*250
*578
,576,548
¡010*275
*418)l68
140*851
282*219
454^144
245*853
137*064
24S)l25
123^754
142*009
345^350
590)971
,059^701
*370^575
Z24)032
,290^452
*276*312
619^199
966¡618

184,623
1,956,981
,05l)356
16,754,426
*261*045
2,628,897
133)852
1,621,254
,133*908
19,662,749
¡459^879
II,
983,223
*703)925
2,719,947
970^104
4,959,579
,439)290
64,013,288
¡249)275
31,009,172
95)542
1,598,788
,153)732
29,410,385
¡922)222
27,982,207
*958)460
9,708,976
161*,626
5,883,869
8)l20
197,613
5o)796
909,769
273)824
3,427,728
77)920
885,787
74)l38
1,283,629
7l)779
1,303,111
14)592
234,238
16)lll
224,766
84¡061
1,411,606
9o)l47
1,503,424
4o)849
1,007,693
267)794
5,021,909
030

-------Excess
profits
tax 4/

8,308,874 10,793,111 4,181,694
86,528
38*,579
*118*,368
24,113
26,302
2,498
2,944
3,551
*895
24,545
35,613
13,578
24,481
31,296
8)494
10,266
21,374
13)050
179
*233
65
6,110,210 1,946,769
5,251,678
*556)137
222,852
*440)272
73,984
266,779
250*,495
49,317
60,181
13,268
41,634
180,479
175*,962
81,775
272)285
245¡737
41,710
139,133
127,516
28,371
77,374
62*,527
30,291
169,987
171,316
30,562
52,923
29)712
29,295
73,721
56)l51
69,596
197,707
168*,505
97,830
352)134
519¡227
225,502
562,368
413¡926
98,260
108,896
13)014
52,857
119)577
82¡084
212,072
787,473
724,556
58,469
143,928
110,205
90,272
395,338
378)694
168,430
599,375
547,453

54,888 6,556,529
31,495
345
2,136
54
596
10
10,975
92
6,737
78
10,997
111
54
(14)
29,955 4,153,486
329,345
3,960
179,757
2,038
10,843
20
138,350
495
189,055
1,475
95,735
1,688
48,339
664
139,161
555
22,357
205
43,864
562
127,746
365
252,442
1,862
535,617
1,249
10,521
115
66,192
529
3,967
571,435
84,450
1,009
304,267
798
437,820
3,125

22,232
161,874
45,681
24,122
719,647
520,061
131,917
267,669
628,978
232,811
17,641
215,170
534,639
1.41,620
35,063
1,861
9,591
42,330
18,710
14,092
16,881
2,880
3,658
19,696
18,690
9,586
61,528

467
ICO,379
485,483
3,142
107,377
1,081
52,972
606
825,619
2,343
477,244
2,124
183,786
74
145
164,589
15,034 1,258,377
437,767
5,489
596
28,685
409,082
5,093
8,052
757,165
475,658
1,834
52,707
673
610
101
16,762
261
1,826
112,613
394
16,248
21,606
441
10,108
562
4,568
49
171
2,055
14,137
812
23,415
549
6,699
379
63,445
1,493

127,053
622*,584
138,874
68*,568
98S,673
576)399
216*,702
192)572
1,638)766
*582)600
36,823
545) 778
973,903
608)158
68,166
840
21,061
147*,291
21,165
28,399
12,595
5)365
2,614
17,543
52,080
8,826
82)264

123,077
650,*99
154,139
77,700
1,547,608
'799,429
515,776
432,403
1,902,389
676,067
46,722
629,345
1,099,856
*619)115
88,444
2,572
26,615
156,768
55*,353
36,139
27,552
7,497
5,842
54,645
42,654
16,664
126,466

Returns

Dividends
paid in
cash and
assets
other than
own stock

5,888,730 118,106
3,602
146,522
643
51,052
65
6,454
629
26,461
1,587
44,483
520
17,846
160
225
2,751,876
17,432
1,647
259,804
509
75,833
52
65,483
58
59,264
438
80,987
1,166
25,976
290
26,999
92
39,168
728
58,482
23,446
815
239
77,119
2,036
101,558
1,772
368,606
346,497
131
818
61,052
1,458
296,485
587
103,921
526
143,640
1,656
189,012
20,266
292,015
49,828
26,445
1,186,689
545,184
555,255
486,250
550,601
193,029
22,078
170,951
320,358
168,509
36,906
217
8,098
32,949
15,246
10,271
8,564
3,785
2,114
16,469
12,192
7,258
37,215

with

Total
Number
compiled
of
returns receipts 10/

119
363
1,098
854
6,770
4,583
1,334
853
23,398
6,843
1,457
5,386
13,527
641
1,353
238
707
1,148
- 926
5,031
1,642
539
232
1,252
1,502
536
3,028

o net. incom<

--------

Dividends
paid in
Deficit Zj cash and
assets
other than
own stock

16,402,147
601,662
77,655
53,612
196,776
224,559
48,250
830
7,881,133
955,350
163,861
3,734
31,076
72,234
116,185
48,870
61,070
152,481
157,008
74,019
101,050
550,655
767,502
141,887
1,432,797
128,285
445,441
583,081

1,026,250
57,268
10,282
1,966
10,119
26,755
6,770
1,379
326,331
23,794
9,323
206
4,457
3,162
4,157
1,559
1,773
8,318
7,468
3,073
6,825
28,736
19,193
12,938
49,029
8,190
24,938
38,384

179,777
15,295
1,050
43
2,871
9,167
166
8
66,411
2,016
746
25
259
789
140
178
568
1,508
466
340
564
8,236
14,074
1,454
19,842
493
1,621
3,993

1,133,334
501,662
122,440
157,111
2,990,595
2,621,876
224,457
144,262
2,623,717
1,277,514
133,321
1,144,193
1,030,694
120,873
162,760
16,221
39,581
67,370
43,107
193,355
105,540
30,715
10,584
92,244
65,580
82,966
315,509

14,470
34,766
8,651
12,929
196,818
147,324
14,812
34,682
76,211
53,274
4,247
29,026
33,538
2,568
2,764
578
862
2,594
2,227
7,116
4,279
,
771
392
5,291
2,977
1,130
9,599

4,879
1,461
1,563
1,395
36,563
24,436
2,501
9,625
6,162
1,323
149
1,173
3,538
1,316
179

5
69
57
115
176
162
11
95
1,256
77
19
1,301

For footnotes, see pp. 16-17»

CO

ro

Table 1. — Corporation Income and declared value excess-profits tax returns, ¿/ 1945, by major industrial groups, for returns with net income and returns with no net incomet Number of
returns, total compiled receipts, net income or deficit, and dividends paid in cash and assets other than own stock; also, for returns with net incomet Total tax, income tax, declared
value excess-profits tax, excess profits tax, and adjusted excess profits net Income - Continued

Major industrial groups 7/ _ Continued

Service
Hotels and other lodging places
Personal service
Business service
Automotive repair services and garages
Miscellaneous repair services, band trades
Motion pictures
Amusement, except motion pictures
Other service, including schools
Service not allocable
Finance, insurance, real estate, and lessors of
real property
Finance
Banks and trust companies
Long-term credit agencies, mortgage companies.
except banks
Short-term credit agencies, except banks
Investment trusts and investment companies 12/
Other investment companies, including holding
companies 13/
Security and commodity-exchange brokers and dealers
Other finance companies
Finance not allocable
Insurance carriers, agents, etc.
Insurance carriers
Insurance agents, brokers, etc.
heal estate, including lessors of buildings
Lessors of real property, except buildings
Construction
Agriculture, forestiy, and fishery
Agriculture and services
Forestry
Fishery
Nature of business not allocable

For footnotes, see pp. 16-17.

Returns with net income 2/
Adjusted
Taxes
excess
Total
Income
Declared
profits
tax
tax ¿/
value
net
excessincome 11/
profits
tax

Total
number
of re­
turns 8/

Number
of
returns

Total
compiled
receipts 10/

Net
income 2/

57,904
4,381
8,246
7,098
3,080
1,530
4,122
4,570
4,845
232
141,627

22,977
3,129
5,679
4,080
1,982
961
3,167
1,881
2,003
95
88,806

5,274,712
1,004,424
821,874
1,041,843
49,033
104,609
1,606,617
340,816
288,117
17,579
9,752,271

648,697
111,990
59,553
85,589
10,487
7,363
273,440
74,957
26,902
1,616
3,756,042

233,932
35,259
11,712
25,687
1,359
2,328
102,548
45,593
8,759
687
74,574

316,519
53,262
23,375
39,899
5,479
3,187
136,675
43,822
11,998
821
666,793

131,970
25,533
13,466
18,981
2,286
1,561
53,325
11,695
5,049
275
602,980

2,248
552
275
248
90
30
279
618
169
7
3,174

182,500
27,197
9,634
20,671
1,102
1,795
83,071
31,509
6,780
540
60,638

32,695
13,484
3,048

23,838
12,276
1,696

4,143,285
2,820,291
29,008

1,753,569
1,008,291
8,038

23,865
13,284
62

406,514
295,960
2,089

386,726
284,099
2,031

1,242
769
19

19,547
11,092
38

3,536
3,627
1,884

2,522
2,656
1,388

212,016
324,528
442,862

56,840
259,444
320,597

2,707
155
1,216

21,112
16,568
38,695

18,899
15,378
37,655

59
68
49

1,312
1,499
4,405
7,876
2,070
5,806
94,136
6,820
12,801
6,528
5,964
284
280
17,027

991
655
1,854
5,529
1,626
3,903
55,955
3,484
7,811
3,865
3,568
145
152
1,906

208,608
58,130
48,041
3,523,949
3,310,697
213,251
1,859,364
205,674
2,458,850
893,856
847,807
16,297
29,753
139,661

58,059
26,553
15,749
1,476,097
1,446,284
29,813
423,177
103,199
146,070
149,892
142,890
2,559
4,442
15,283

3,297
1,962
1,183
12,353
8,810
3,542
27,424
10,952
42,036
41,613
39,626
35
1,955
2,022

17,699
10,671
4,722
86,157
75,887
10,270
131,643
42,479
62,154
65,727
60,779
724
2,224
5,362

14,921
8,991
5,750
75,659
68,590
7,270
108,465
53,130
28,480
32,848
31,473
690
685
3,492

209
25
45
157
39
119
1,699
76
1,042
631
613
6
12
115

Dividends
paid in
cash and
assets
other than
own stock

Returns with no net Income 2/
Dividends
paid in
Deficit 2/ cash and
assets
other than

Number
of
returns

Total
compiled
receipts 10/

12,130
1,105
2,274
2,548
993
528
767
1,844
1,978
93
45,005

597,319
91,747
136,190
115,559
32)584
17*571
63,754
56,700
77,606
5',629
1,092,671

47,002
8,859
5,432
5,829
1,607
l)l45
7,612
5*779
10,166
574
262,141

3,924
*443
116
262
2,703
37
50
94
202
17
47,781

798,858
278,755
1,938

7,344
818
1,232

91,291
40,449
4,853

67,584
12,734
8,374

28,268
1,924
1^015

2,153
123
990

25,068
214,875
258,383

937
814
451

14,358
3)642
7,102

2,558
6)l67
14,387

473
18,989
l)240

2,569
1,655
927
10,340
7,459
2,881
21,479
9,273
32,611
30)249
28,693
28
1,528
1,755

8,226
6,004
5,589
119,991
108,399
11)592
86,384
62'687
27,957
25,923
24)402
1,316
205
3,036

246
653
2,193
2)065
376
1,689
52,796
2)800
4,023
2,287
2)069
116
102
3,459

5,702
7,997
7,187
50S',009
468,556
36,455
464,073
52*298
488,965
99)516
95,951
2,233
3,332
26*569

1,553
ll] 416
10*394
29)363
27)l09
2*254
144*556
20*657
33)451
16*079
13]481
2)058
541
10,949

151
461
4,015
8)900
8)796
*104
9,518
l)096
1*514
1*661
1)592
67

Excess
profits
tax 4/

128,328
11,092
11,270
20,272
1,086
510
70,855.
9,839
3)181
224
1,067,800

2
2,466

for returns with net incomej

Total tax, income tax, declared value excess-profits tax, excess profits tax, and adjusted excess profits net inco
(Money figures in thousands of dollars)

Uajor industrial groups 7j

All industrial groups
1
2 Mining and quarrying
Metal mining
Anthracite mining
Bituminous coal, lignite, peat, etc«
Crude petroleum and natural gas production
6
Nonmetallic mining and quarrying
7
Mining and quarrying not allocable
8
9 Manufacturing
Food and kindred products
10
Beverages
11
Tobacco
manufactures
12
Cotton manufactures
15
Textile-mill
products, except cotton
14
Apparel and products made from fabrics
15
Leather and products
16
Rubber products
17
Lumber and timber basic products
18
Furniture and finished lumber products
19
Paper and allied products
20
Printing and publishing industries
Chemicals and allied products
Petroleum and coal products
23
Stone, clay, and glass products
24
Iron, steel, and products
25
Nonferrous metals and their products
26
Electrical machinery and equipment
27
Machinery, except transportation equipment
28
and electrical
Automobiles
and equipment, except
29
electrical
Transportation
equipment, except
30
automobiles
Other manufacturing
31
Manufacturing not allocable
32
33 Public utilities
Transportation
34
Communication
35
Other public utilities
36
57 Trade
Wholesale
38
Commission merchants
39
Other wholesalers
40
Retail
41
Qeneral merchandise
42
Food stores, including market milk
43
dealers
Package liquor stores
44
Drug stores
45
Apparel and accessories
46
Furniture and house furnishings
47
Eating and drinking places
48
Automotive dealers
49
Filling stations
50
Hardware
51
Building materials, fuel, and ice
52
Other retail trade
53
Retail trade not allocable
54
Trade not allocable
55
3
4

5

2
21
2

For footnotes, see pp«

16-17.

Ad
Total
ex
number of tomber 1lumber of 'fötal
let
pi
consoli­
..ncome 2/ ne
subsidi­ compiled
of
dated
returns aries 9/ receipts 10/
ir
returns 8/

1,412
85
8
9
25
34
8
1
454
40
18
1
6
22
10
5
5
21
10
11
36
41
26
20
49
18
19
33

1,080
58
5
7
17
23
6
_

363
31
13
1
6
18
8
5
5
14
8
10
32
33
21
15
38
12
14
29

5,151
- 227
27
56
74
54
16
—

1,715
216
23
2
10
44
15
8
45
22
11
21
120
128
262
25
222
89
97
67
11

8

29,702,047 î,035, 203
47,486
660,410
13,104
162,244
4,958
161,045
6,933
165,190
19,321
143,559
3,169
28,372
—
—
993,294
19,437,145
72,196
1,112,856
9,460
133,341
34
472
6,655
79,915
270,796
30,011
1,379
16,336
3,364
58,128
62,171
894,157
2,939
31,997
1,372
12,204
11,156
124,904
30,243
219,328
44,087
599,118
196,159
5,675,602
4,918
63,623
96,443
3,123,742
1,145,164
51,109
23,916
234,895
32,014
303,980
84,654

5,763

11/

Total

income

tax

a x 3/

íeclared
Sxcess
alue
xcess- profits
Jsrofits ;ax 4/
■/ax

382 987,047 185,060
530 15,630 14,277
4,210
4,220
«
1,416
1,416
2,665
2,686
21
5,917
5,152
860
835
1,390
650
—

•

504 485,490 336,432
,649 45,923 13,904
3,422
4,434
,227
12
12
1,857
3,530
,864
3,375
,690 20,715
366
689
384
1,656
1,064
850
6,536
,965 45,151
758
985
259
350
528
207
2,296
5,904
,427
8,374
,312 16,310
,069 22,392 12,932
50,814 50,771
1,158
2,658
,740
¡339 54,921 22,924
,196 18,989 16,389
6,741
9,257
,002
2,317
,863 22,033
893

1,488
31,576
2,599
2,402
19,436

225
18

IS

f
4
2
7
2
1
4
8
5
5
ii
6
5
4

149,595
4,340
91
109
•2,113
1,869
150
9
42,455
1,173
346

3,485
4,923

122

6,051
7,097
I,
3,638
46,427
503,021
14,150
179,028
19,195
13,640
5,351

167
232
55560
143
1,283
15,197
1,732
8,540
1,538
1,152
457

694

790

2

8,393

99

75,360

181,376

7

227,537

10,070

924
139
176
3
436 204,635
401 179,597
239
1
24,799
33
32,044
108
3,957
45
«
233
3,724
45
26,524
61
16,34C
31
4,535
22

1,244
6,495
272,714
129,344
909
142,461
26,837
9,450
101
9,349
17,189
6,546
5,562

4
48
32
1
15
34
12
4
8
19
“
2

2,33!
1,27!
1,91!
9!

1,162
442
2,582
306

1
2
1
3
i
3

289
634
3,480
2,582
1,125
1,341

158
427

2

1!

664
243
928
4,579

5,094,713

293,920

,071 149,757

29
122
1,200
541
33
626
596
205
6
199
358
111
54

38,981
118,239
6,153,613
4,444,444
32,176
1,676,992
2,469,411
599,400
9,178
590,222
1,822,084
473,039
1,028,317

4,883
9,102
748,016
475,309
5,727
266,980
102,355
26,828
811
26,017
72,511
36,840
17,710

,290
206
,186
,902
280
,004
L,739
1,997
278
1,719
1,781
’,659
5,337

2
16
5
15
8
1

3
60
9
65
14
1

871
97,375
29,275
115,249
8,455
107

48
6,018
2,793
5,857
789
5

í,901
1,492
2,245
114

14
3,678
1,820
3,332
295
1

14
1,342
543
1,410
196
1

8
6
2
16

22
12
7
33

28,256
33,025
8,115
47,928

778
1,471
202
3,017

33

300
618
28
1,986

298
600
27
422

1,369
2,432
3,524
3,704
381,522 176,251
277,611 97,613
2,119
2,359
101,352 76,520
56,154 24,002
8,251
12,253
215
448
8,036
11,805
41,914 15,329
5,921
22,291
4,977
9,537

(14)

(14)

1,56

198

242
175
4
65
64
16
5

11
45

23,154
685

10,866

23
88

5

-

126

1,961

-

1,672
17,532
322
571
58,690
222
177
3,601
7,907
9,445

2
52
3
1

28

1,871,296
69,605
1,157
1,504
43,376
21,715
1,785
70
1,085,618
21,325
19,222

230

15
11
171
202
8
61
192
85
6
79
91
15
13

19

1
8
1
20
105
3
1
7
29
15
45
15
420
(14)
115
279

942
89
3

2,025

18

10

-

—

247,544
31,947
1,003

329
27
3
2
8
11
2
1
91
9
5

74,167

19
11
219
134
9
76
226
97
10
87
110
15
15

18

—

992,952
26,689
11,201
2,440
2,197
9,016
1,836
—
609,829
18,324
2,264
993
8,345
195
369
9,493
1,457
351
1,798
7,604
19,259
214,566
1,007
68,018
46,943
14,378
4,560

2,719

25

18

2,201 499,786
1,308
45
11
(14)
18
4
735
30
555
1,514
72
10

Dividends
paid in
Total
cash and
Deficit 2/ assets
compiled
receipts 10/
other than
own stock

Paid in
umber
cash and
subsidi­
of
assets
returns aries 9/
other than
0wn stock

1,585

160

539,736
467,859
376
71,501
50,518
14,070
1,642
12,428
II,

85,081
56,353
98
28,650
1,455
751
31
700
408
870

726
8,290

20

1,439

101
50

22
8,908
966

1

7,941
575
24

24
13

583

17
316

CO

M

CO

Table 1-A. - Consolidated corporation income and declared value excess-profits tax returns, 1/ 1945, by major Industrial groups, for returns with net income and returns with
no net income) Number of returns, number of subsidiaries, total compiled receipts, net income or deficit, and dividends paid in cash and assets other than own stock; also,
for returns with net incomet Total tax, income tax, declared value excess-profits tax, excess profits tax, and adjusted excess profits net income — Continued

Major industrial groups 7/ Continued

56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86

Service
Hotels and other lodging places
Personal service
Business service
Automotive repair services and garages
Miscellaneous repair services, hand
trades
Motion pictures
Amusement, except motion pictures
Other service, including schools
Service not allocable
Finance, -insurance, real estate, and
lessors of real property
Finance
Banks and trust companies
Long-term credit agencies, mortgage
companies, except banks
Short-term credit agencies, except
Investment trusts and investment
companies 12/
Other investment companies, including
holding companies 13/
Security and commodity-exchange brokers
and dealers
Other finance companies
Finance not allocable
Insurance carriers, agents, etc.
Insurance carriers
Insurance agents, brokers, etc.
Real estate, including lessors of
buildings
Lessors of real property, except buildings
Construction
Agriculture, forestry, and fishery
Agriculture and services
Forestry
Fishery
Nature of business not allocable

For footnotes, see pp. 16-17,

Returns with net income 2/
Total
Adjusted
number of
excess
Number Number of Total
Net
consoli­
profits
of
subsidi­ compiled
income 2/
Total
dated
net
returns 8/ returns aries 9/ receipts 10/
income 11/ tax
84
21
5
8
3
1

69
18
5
6
5
1

226
58
5
30
9
1

117,817
21,201
603
5,167
2,237
314

14,236
2,638
27
368
46
11

3,977
447
•

24
12
10
287

21
9
6

64,188
22,622
3,485

7,168
3,726
252

1,734
1,796

193

62
52
9
•
1,083

645,774

91,149

1,522

73
21
S

54
18
«

555
100
-

199,781
72,376

55,241
20,907

6
6

20

16

585

47,653

10,609

7

5

21

20,569

1,258

12

8

26

55,572

5

5

10

10,028

1
4
30
22
8
166

1
1
21
15
6
110

2
11
61
49
12
448

18
35
13
IS
-

8
22
9
9

19
65
34
34

-

9

mm

-

-

3

5

Taxes
Declared
Excess
value
Income excess- profits
tax 3/ profits tax 4/
tax

6,650
935
6
120
IS
, 3

5,805
679
6
119
15
S

3,684
1,818
70

2,210
705
70

27
7

1,448
1,106

24,181

22,860

20

1,301

15,877
6,302

13,868
6,296

4
1

5
5

4,392

4,390

3

4,560

4

5

106

106

452

2

2

18,471

1,738

1,738

15,461

4

6

1,802

734

734

89

4,608
9,175
361,019
350,578
10,441
78,062

472
1,722
19,461
16,875
2,586
12,974

•
301
155
146
1,215

198
407
4,688
4,073
614
4,311

198
407
4,429
3,941
489
5, 2S7

751
15,693
12,596
5,097
2,102

3
9
7
2
56

6,912
73, 037
143,089
143,089

3,474
6,465
31,459
31,459
-

1,140
10,784
10,784

1,305
2,918
14,430
14,430

1,305
1,955
5,206
5,206

948
9,213
9,213

830
3,144
385
385

-

5

_

-

•
1,751

-

743

(14)

_
_
-

»

_

52
17
1
(14)

1
(14)
1
16
-

15
11
11

-

-

«.

•

L

271

271

(14)

with no net income Z/
Dividends
paid in
Total
cash and
compiled
Deficit 2/
assets
receipts 10/
other than
own stock

2,025
191
9
18
17
2

15
3

59
3

25,120
4,307

Z

8

2,901

no

1,248
'535
4

5
3
4

34
4
10

10,637
5,110
2¡166

1,306
486
549

51,326

92

229

95,118

10,834

2,041

32,700
11,389

19
3
3

24
4
4

2,134
1,388
450

1,326
693
74

1

22

-

_

167
(14)

2,530
81

14

64

498

3
42
40
2
152

65
71,485
71,268
217
21,088

25
1,868
1,856
12
4,922

8
13
4
4

11
22
6
6

411
23,460
402
402

2,718
2,645
61
61

5

6

1,718

193

1

;• .

mm

-

2,793
239

Returns
Dividends
paid in
Number Number of
cash and
or
subsidi­
assets
returns aries 9/
other than
own stock

-

«
258
132
125
1,038
-

_

_

1,005
1,003
854
184
21

«

58

Table 2. - Corporation Income and declared value excess-profits tax returns, 1 / 1945, by major industrial groups, for returns with
net income and returns with no net income: Dividends received on stock of domestic corporations and interest received 6n

Government obligations
- -

Major industrial groups Jj

All industrial groups
Mining and quarrying
Metal mining
Anthracite mining
Bituminous coal, lignite, peat, etc.
Crude petroleum and natural gas production
Nonmetallic mining and quarrying
Mining and quarrying not allocable
Manuf acturing
Food and kindred products
Beverages
Tobacco manufactures
Cotton manufactures
Textile-mill products, except cotton
Apparel and products made from fabrics
Leather and products
Rubber products
Lumber and timber basic products
Furniture and finished lumber products
Paper and allied products
Printing and publishing industries
Chemicals and allied products
Petroleum and coal products
Stone, clay, and glass products
Iron, steel, and products
Nonferrous metals and their products
Electrical machinery and equipment
Machinery, except transportation equipment and electrical
Automobiles and equipment, except electrical
Transportation equipment, except automobiles
Other manufacturing
Manufacturing not allocable
Public utilities
Transportation
Communication
Other public utilities
Trade
Wholesale
Commission merchants
Other wholesalers
Retail
General merchandise
Food stores, including market milk dealers
Package liquor stores
Drug stores
Apparel and accessories
Furniture and house furnishings
Eating and drinking places
Automotive dealers
Filling stations
Hardware
Building material», fuel, and ice
Other retail trade
Retail trade not allocable
Trade not allocable

For footnotes, see pp. 16-17,

-

Dividends
received
on stock
of domestic corpo—
rations 15/

1,387,847
20,792
7,974
111
3,241
8,272
1,194
(14)
351,657
20,644
3,621
3,827
6,218
5,600
1,711
1,569
1,530
2,709
1,527
7,698
14,211
83,393
94,240
3,285
27,598
13,640
18,425
10,162
1,063
24,562
3,285
1,337
315,222
69,967
176,997
68,257
47,674
24,887
7,388
17,499
19,733
10,158
1,168
9
1,012
5,088
634
429
647
246
108
931
775
528
8|û66

:wv»-yj a
yy
wivuuwimu va
p|
Returns with net income 2/
Interest received on Government obligations
(less amortis >ble bond premium i___
Subject to
declared
Wholly
value
Subject
Wholly
Total
taxable 16/ excess-*
to sur—
tax*
profits
tax
exempt 19/
tax and
only 18/
surtax 17/
1,978,735
6,551
3,376
520
1,337
899
613
5
122,519
7,425
2,235
380
2,253
4,530
1,756
1,546
2,572
1,858
1,795
4,314
6,135
9,851
8,468
3,291
21,595
4,115
5,736
12,045
28
16,390
2,605
1,600
35,685
22,192
5,127
8,366
28,482
9,797
825
8,972
16,808
8,483
1,932
16
527
1,961
1,125
461
614
108
US
709
577
582
1,877

1,475,113
5,822
3,193
295
1,156
672
522
5
105,076
5,947
1,876
176
2,060
4,317
1,560
1,426
2,515
1,664
1,430
3,675
4,572
8,597
6,580
2,772
19,504
3,933
4,U0
9,398
15
15,423
2,069
1,457
50,554
17,810
5,042
7,703
25,659
8,965
740
8,228
14,963
7,991
1,278
15
514
1,647
1,078
410
555
61
109
647
530
328
1,753

296,345
517
122
24
146
170
56
—
10,573
656
118
125
85
72
154
61
48
71
171
415
1,115
624
1,251
409
1,533
92
1,082
1,548
890
397
80
2,346
2,003
43
299
1,572
341
17
324
1,146
330
546
5
32
24
22
51
58
2
so
26
59
86

5,501
28
(14)
(14)
23
2
3
443
15
7
2
9
4
2
2
4
14
15
5
30
23
88
6
47
2
97
41
(14)
25
2
5
89
49
3
37
125
55
6
49
57
24
5
1
3
2
2
3
6
(14)
10
2