|(46) Processing Of Certain Oils:
Section 602 1/2(a) of the Revenue Act of 1934 imposed a tax on the first domestic processing of certain oils and provided that all taxes collected with respect to coconut oil wholly of Philippine production or from materials wholly of Philippine growth were to be paid to the Philippine Treasury provided that they paid no subsidies to producers of coconut oil, etc. About $16 million of the $27 million reported as the total yield for 1936 went to the Treasury of the Philippine Islands.
The purpose of the tax is primarily to protect the interests of domestic producers of tallows and oils against certain foreign products and will continue until specifically repealed. It would appear that this end can more readily be accomplished through the use of the tariff rather than the tax law. Difficulty pursuant to the administration of the tax led to the amendment of the statute by Section 702 of the Revenue Act of 1936, which enumerated more clearly the items subject to tax. Sufficient experience with this amendment has not yet been had to show whether the difficulties have been overcome or have merely given way to new ones. In view of the administrative friction experienced with this tax, and the further fact that for 1936 the total yield to the Federal Government was less than one-half the amount collected, it is recommended that although this tax may be continued at present, eventual elimination is advisable.
(47) Regulatory Taxes:
Although a number of the taxes discussed in the preceding sections have effects which are somewhat regulatory, the following group of excises (excluding the tax on oleomargarine) may be said to be primarily regulatory in purpose:
(a) Tax on transfers of certain firearms and machine guns under the National Firearms Act, as amended:
(b) Cotton futures tax;
(c) Tax on narcotics;
(d) Tax on white phosphorous matches;
(e) Taxes on adulterated butter;
(f) Taxes on process or renovated butter, mixed flour, filled cheese;
(g) Tax on State bank notes.
These taxes were not levied with the avowed purpose of producing revenue, but rather to regulate or to prohibit the use of or traffic in the specified articles and transactions. During the year 1936, the yield from these taxes amounted to $575,645. In view of their regulatory character, it is recommended that all of these taxes be retained. (For details as to rates and collections from these taxes, see table page 7-a.)
The foregoing analysis of the individual manufacturers' excise, documentary stamp, and miscellaneous excise taxes is of necessity practical in character. Economists are in general agreement that from the point of theoretical considerations, indirect taxes other than those imposed for regulatory purposes or for the benefit of the taxed groups, suffer in comparison with direct taxes based on the principle of ability to pay. Revenue considerations, however, temper principles of equity. Thus, we find that indirect taxes occupied a significant role in the Federal fiscal system even during times of great prosperity and, furthermore, that they have in the past and continue at present to play a major role in the fiscal operations of most foreign governments as well.
Existing and probable near future conditions of the Federal finances preclude the possibility of the immediate repeal of all these taxes. Involving almost $600,000,000 per annum, their yield is at present indispensable. However, in view of the fact that the individual taxes in this group vary widely in productivity as well as in degree of inequity, the existing situation can be improved by the elimination of those taxes which are most inequitable and at the same time occupy only a minor position in the revenue structure. Furthermore, some of the regulatory taxes have outlived their usefulness.
To recapitulate the results of the foregoing analysis, it is concluded:
(1) That the taxes on
(a) Sale of brewer's wort and malt products,
(b) Gasoline produced from natural gas,
(c) Sale of crude petroleum, and
(d) Refining of crude petroleum,
be repealed because they are regulatory taxes no longer required;
(2) That the taxes on
(a) Toilet preparations (5 percent tax),
(c) Chewing gum,
(e) Radio parts, and
(f) Auto accessories,
be repealed because these commodities are in common use and/or because taxes on them are difficult to administer;
(3) That the taxes on imports of
(a) Certain oils,
(b) Coke and coal, lumber and copper, and
(c) Crude petroleum, etc.,
be repealed because they could more properly be treated under the tariff laws;
(4) That the taxes on
(a) Processing of certain oils,
(b) Mechanical refrigerators,
(d) Sporting goods,
(e) Automobile trucks, etc.,
(f) Firearms, shells and cartridges, and
(g) Safe deposit boxes
be held in abeyance, to be repealed after the elimination of the taxes enumerated in Sections (1), (2), and (3) above, and when Federal fiscal considerations render such action possible;
(5) That the taxes on
(a) Electrical energy,
(b) Telephone, telegraph, cable and radio messages, etc., and
(c) Lubricating oils
be repealed only after the elimination of the taxes enumerated in Sections (1) - (4) inclusive, above, and when their revenue yield is no longer required; and finally,
(a) The regulatory taxes,
(b) The documentary stamp taxes,
(c) The admissions taxes, and
(d) The taxes on dues and initiation fees,
be retained in the permanent tax structure.
The accompanying table reveals in summary form the revenue significance of those taxes whose repeal is considered worthy of immediate or subsequent consideration.
Excise taxes recommended for repeal Item Tax Fiscal year 1936 Collections Number of taxpayers Group I (1) Regulatory taxes no longer required 1 (a) Brewer's wort $1,008,273.85 40 2 (b) Gasoline produced 38,751.80 406 or refined from natural gas 3 (c) Sale of crude 563,766.88 694 petroleum 4 (d) Refining of crude 561,235.89 400 petroleum (2) Taxes on commodities in common use 5 (a) Toilet preparations 4,823,967.94 6,1006 (the 5 percent tax) (b) Cameras 577,925.70 50 7 (c) Chewing gum 807,279.40 40 8 (d) Furs 3,321,057.14 2,100 9 (e) Radio parts 5,075,270.82 300 10 (f) Automobile 7,110,188.33 2,600 accessories (3) Import taxes (more properly to be treated under the tarrif Laws) 11 (a) Imports of certain 1,500,000.00 /*/ /1/ oils, etc. 12 (b) Imports of copper, 5,684,000.00 /*/ /1/ coal, and lumber 13 (c) Imports of crude 7,281,000.00 /*/ /1/ petroleum, etc. Total 38,352,717.75 12,730 Group II (Recommended for repeal subsequent to Group I) 14 (a) Processing of 27,691,080.79 340 certain oils 15 (b) Mechanical 7,939,063.75 100 refrigerators 16 (c) Matches 7,106,359.21 50 17 (d) Sporting goods 5,531,122.72 1,200 18 (e) Auto trucks, etc. 7,000,000.00 /*/ 950 /2/ 19 (f) Firearms, shells 2,494,574.54 100 and cartridges 20 (g) Safe deposit boxes 1,997,409.57 10,600 Total 59,759.610.58 13,340 Group III (Recommended for repeal subsequent to Groups I and II) 21 (a) Electrical energy 33,575,179.25 2,400 22 (b) Telephone, telegraph, 21,098,347.65 460 cable and radio messages, etc. 23 (c) Lubricating oils 27,102,831.57 455 Total 81,776,358.47 3,315 Grand total $79,888,686.80 29,385 FOOTNOTES TO TABLE /*/ Approximated. /2/ Not available. /2/ Includes manufacturers of other automobile chassis, etc. END OF FOOTNOTES
Collectively, the 13 taxes recommended for immediate repeal represent an annual revenue of approximately $38,000,000; the 7 taxes recommended for subsequent repeal represent an additional $60,000,000 of annual revenue; finally, the three taxes, whose repeal should be postponed until such a time as fiscal conditions require, involve an annual revenue of approximately $82,000,000.
The other excise taxes now in effect might well be continued in their present form or with such amendments as have previously been recommended. It does not follow, however, that they qualify for inclusion in the permanent tax structure. That condition, as the foregoing analysis indicated, is fulfilled by only four groups of excises:
(1) Regulatory taxes;
(2) Documentary stamp taxes;
(3) Admissions taxes; and
(4) Taxes on dues and initiation fees.
These conclusions, it may be observed, are to some extent at variance with the findings of Dr. Shoup, as indicated in his memorandum to the Secretary. Writing three years ago, Shoup anticipated the passing of "the emergency" in the not too distant future and therefore centered his discussion upon excise taxes as a group, concluding that they should be repealed when their yield can be dispensed with. It now appears, however, that the bulk of the excise tax revenue will be required for some time and therefore in the above discussion emphasis was placed on selection; on the elimination of the least desirable taxes and the temporary retention of all others. In this manner inequity can be minimized.
F. Possible Sources Of New Revenue
The number of commodities and services which might be subjected to excise taxation is very large. The economic analysis, as developed in the preceding sections (Sections B, C and D), has shown excise taxation to be, on the whole, a secondary source of revenue, and wherever possible is to be contracted in favor of direct taxes. To the extent, however, that excise taxes are to be retained in the tax structure, either as a bolster to revenue or as a device for reaching those in the lower income brackets who cannot, for administrative and other reasons, be taxed by means of direct taxes, certain other sources might be advantageously examined to determine the possibilities of attaining the same ends in a more desirable manner than is accomplished by utilization of some of the excise taxes in effect at the present time.
Certain articles are capable of producing large amounts of revenue because of their wide use. Such articles are tea, coffee, sugar, salt, thread and twine, confectionary, boots and shoes. These, however, are daily necessities to the masses of the population and taxes thereon would fall most heavily on those with the least economic ability. Other taxes such as gasoline and crude petroleum taxes at increased rates, a tax on checks and a tax on transportation charges, also have important revenue potentialities.
Transportation taxes have represented important factors in the revenue receipts of foreign countries, particularly England and France. In the United States, as may be seen from the following table, such taxes have yielded as much as $263 million in one year (1921). The larger half of this revenue was realized from the tax on transportation of freight.
Yield of Transportation Taxes 1918-1922 (In millions of dollars)
Seats, Fiscal Passenger berths, year Freight Express traffic etc. Total 1918 30.0 6.5 24.3 2.2 63.0 1919 116.4 14.3 77.8 5.9 214.3 1920 130.8 17.6 98.8 6.1 253.3 1921 140.0 17.1 97.5 8.5 263.1 1922 85.3 12.5 58.0 6.0 161.8 Source: Annual Reports of the Commissioner of Internal Revenue.
Because of the factors of incidence, conflict with other taxes, and regressive effect inherent in taxes on these commodities or services, it is not believed desirable to consider them unless a need for revenue not otherwise attainable should force the matter.
On the whole, if it is desired to impose other excises either to compensate for the loss pursuant to the repeal of those excise taxes herein recommended for elimination, or to obtain additional revenue, taxes on the following items may achieve these ends with a minimum of inequity:
(a) Taxes on tractors and trailers;
(b) Tax on radio broadcasting stations;
(c) Tax on horse and dog race wagers.
It may be in point to mention that, in the analysis of these potential sources of excise tax revenue, the same criteria which were relied upon in the preceding section of this discussion, namely, productivity, incidence, ease of administration, effect upon economic enterprise, and effect upon other Federal and State and local taxes, were considered.
(a) Taxes On Tractors And Trailers
At the present time there are in effect Federal excise taxes on passenger automobiles and trucks, but tractors and trailers do not fall within the statutory definition of either automobiles or trucks. A distinction has been made by the Bureau (S. T. 722; C. B. June 1934, p. 376) between trucks (taxable), the prime purpose of which is to carry a lead, and tractors (non-taxable), the prime purpose of which is to draw or pull a load. As a result of this differentiation, automotive chassis of the short wheel base type intended to draw trailers are classed as tractors and are not taxed.
Although the tax on trucks generally is not considered a wholly desirable one (see pp. 10-11 supra), there seems to be no justification for this differentiation between types. It has caused a good deal of confusion within the industry, especially with respect to manufacturers of both the chassis with short wheel bases and chassis with regular wheel bases. Accordingly, it is recommended that the statute be amended to include therein tractors, excepting those not adaptable or not permitted for use on the highways. This would leave tax-exempt all tractors used on farms and in construction work.
Attention is drawn to possible difficulty with this definition for tax exemption since the requirements of the several States as to the type of vehicle permitted on highways vary, and an effort should be made to set up definite standards as a means of surmounting the difficulty.
The increasing importance of trailers for passenger use suggests their consideration as proper objects for excise taxation. Accurate production figures are unavailable but estimates made by the Automotive Daily News placed 1936 production at about 35,000 units, having a value of about $19,000,000. For 1937, it is estimated that production will reach 100,000 units having a value of about $55,000,000. At the 3 percent tax rate applicable to passenger automobiles, the yield would be about $1,650,000. While accurate information as to the effects a tax of this type would have on trailer sales is not at hand, it is not believed that such a tax would affect sales unduly.
The only State and local taxes levied on trailers at present are personal property taxes and registration fees. A Federal tax on trailers would not, therefore, add to the existing conflict between Federal and State and local jurisdiction with respect to the levying of automotive taxes.
In view of these considerations, it is believed that it would be desirable to amend the tax on automobiles to include trailers in the definition thereof.
(b) Radio Station Tax
A plan has been proposed by George Henry Payne of the Federal Communications Commission to tax radio broadcasting stations on the basis of the amount of power used. The rates suggested are: Stations using 1,000 watts or less, $1.00 a watt; stations using from 1,000 to 10,000 watts, $2.00 a watt; and stations using more than 10,000 watts, $3.00 a watt. It is estimated that this tax would yield $6,000,000 or more in annual revenue. An analysis of wattage used by major broadcasting stations shows that 32 stations are licensed to use 50,000 watts. If this proposal were enacted into law, they would each pay a Federal tax of $150,000. One station, WLW of Cincinnati, is licensed to use 500,000 watts; its tax would, therefore, be quite high.
It should be noted that the radio broadcasting industry in this country is largely in the hands of three large networks, viz., Columbia Broadcasting System, National Broadcasting Company, and Mutual Broadcasting System. Aside from payments which would be made by the several smaller broadcasting companies, the bulk of the revenue would come from stations controlled by these three systems.
The total gross revenue for last year of the broadcasting business was $107,000,000. If a tax such as the one suggested were made effective, it would be tantamount to a 5 percent tax on gross revenue. This may be termed somewhat excessive. It should further be noted that such a tax could probably be shifted to the users of the broadcasting facilities who would in turn add it to their advertising costs and ultimately to the price of the articles sold to consumers. The cost of advertising is already a large item in many instances in the prices of articles, and any tax which would further an increase in such costs is not to be encouraged.
It is believed that while the basis of the tax is sound and has economic Justification, it should be inaugurated, experimentally, at rates as follows:
1,000 watts or less -- 50 cents a watt 1,000 watts to 10,000 watts -- $1.00 a watt More than 10,000 watts -- $1.50 a watt
(c) Tax On Wagers On Horse And Dog Races
At the present time the only tax levied by the Federal Government on horse and dog races is the general tax applicable to all admissions. Taxes on wagers have been preempted by the States. The Federal Government does reach the gains from wagers through its income tax law. In addition, the Federal Government could also tax race bets and thereby obtain substantial revenue.
Twenty-three States authorize horse racing with pari-mutuel wagering and impose taxes thereon. Taxes on horse race bets are a large item in the revenue system of many European countries. France realizes some $40,000,000 annually from such a tax; England, on the basis of the short period when such a tax was in effect, estimated its yield on a per annum basis at about $30,000,000, and Spain and Germany also find this field of taxation extremely lucrative.
The imposition of a tax on racing wagers might necessitate, to some extent, Federal recognition of racing activities. However, it is well to bear in mind that the Federal Government already recognizes these activities by making admissions to race meetings subject to tax and, as pointed out previously by subjecting gains derived from gambling to income taxation.
A tax levied on pari-mutuel wagers would be quite feasible to administer and not subject to avoidance or evasion. It necessitates merely the computation and deduction of a definite percentage of the total amount wagered on each race.
The tax would be classed as one having regulatory purpose and, generally speaking, would not constitute an undue burden on those subject to its levy. A rate of 5 percent on total wagers is recommended.
G. Exercise Not Considered For Revision: Liquor, Tobacco And Oleomargarine
Liquor and Tobacco:
The decision to exclude from present detailed consideration, the liquor and tobacco excises is prompted by the recognition of their well-established and significant position in the Federal tax structures. Together with customs, they constituted the mainstay of the Federal Government's revenues until the income and death taxes became permanent features of the tax structure almost a quarter of a century ago. As early as 1913 these items contributed $300,000,000 or 87.1 percent, of the $344,000,000 collected from all internal revenue sources.
Table A: Tobacco and liquor excise receipts compared with total internal revenue collections for fiscal years 1913, 1926-1938
(In millions of dollars)
Total liquor and tobacco as a percentage Total Total of total liquor and internal internal Year Liquor Tobacco tobacco revenue revenue 1913 $223.3 $ 76.8 $300.1 $344.4 87.1% 1926 26.5 370.7 397.2 2,836.0 14.0 1927 21.2 376.2 397.4 2,865.7 13.9 1928 15.3 396.5 411.8 2,790.5 14.8 1929 12.8 434.4 447.2 2,939.1 15.2 1930 11.7 450.3 462.0 3,040.1 15.2 1931 10.4 444.3 454.7 2,428.2 18.7 1932 8.7 398.6 407.3 1,557.7 26.1 1933 43.2 402.7 445.9 1,619.8 27.5 1934 258.9 425.2 684.1 2,672.2 25.6 1935 411.0 459.2 870.2 3,229.4 26.4 1936 505.5 501.2 1,006.7 3,520.2 28.6 1937 594.2 552.2 1,146.4 4,653.2 24.6 1938 (est.) 643.7 569.3 1,213.0 6,243.0 19.4
The ratification of the prohibition amendment and the growing yield of direct taxes relegated liquor and tobacco revenues to a relatively less significant position during the Twenties. Thus, in the fiscal year 1927, when these sources yielded almost $400,000,000, their relative importance in total internal revenue amounted to only 13.9 percent. Absolute collections were higher, because tobacco taxes increased sufficiently during the interim to compensate for the loss of liquor revenue following prohibition. The taxation of tobacco was in fact so thoroughly imbedded in the American system that when taxes were being generally reduced the tobacco excises, with the exception of cigars, were kept stable. Simultaneously, tobacco consumption increased and the consumer's preference shifted from low-taxed to high-taxed products -- cigarettes.
The subsequent repeal of the Eighteenth Amendment and the marked contraction of direct taxes during the recent depression conspired to return to these well-established revenue sources their important relative position as well. Reference to Table A will reveal that the yield of these sources rose from the $400,000,000 level in 1927 to $455,000,000 in 1931 and, after a decline to $407,000,000 in 1932, has steadily increased. Collections during the last three fiscal years amounted to $870,000,000, $1,007,000,000 and $1,146,000,000, respectively, and for the current fiscal year are expected to exceed $1,200,000,000. In relative significance they increased from 13.9 percent of total internal revenue in 1927 to 18.7 percent in 1931 and 24.6 percent in 1937. In addition, liquor and tobacco contribute also to customs revenues. Thus, in 1935 these two commodities accounted for $61,000,000, or 17.8 percent, of the $343,000,000 collected from customs. Corresponding data for the other years are presented in Table B.
Table B: Tobacco and liquor customs duties compared with total customs duties for calendar years 1926-1936
(In millions of dollars)
Total liquor and tobacco as a percentage Total Total of total Calendar liquor and customs customs year Liquor Tobacco tobacco duties duties 1926 $ .5 $38.1 $38.6 $579.4 6.7% 1927 .5 40.0 40.5 605.5 6.7 1928 .5 39.3 39.8 569.0 7.0 1929 .5 39.1 39.6 602.3 6.6 1930 .4 40.1 40.5 587.0 6.9 1931 .4 32.3 32.7 376.6 8.7 1932 .4 22.5 22.9 327.8 7.0 1933 7.4 21.5 28.9 250.8 11.5 1934 42.5 22.5 65.0 313.4 20.7 1935 39.0 22.0 61.0 343.4 17.8 1936 44.0 25.2 69.2 386.8 17.9
From the point of view of productivity the most important liquor excises are those imposed at the rate of $2 per proof or wine gallon on distilled spirits and at the rate of $5 per barrel on beer. Among the tobacco taxes, the major producer is the tax on small (standard) cigarettes now imposed at the rate of $3 per 1,000, or 6 cents per pack of 20 cigarettes. Cigarettes weighing more than 3 pounds per thousand are taxed at the rate of $7.20 per 1,000, and tobacco and snuff is taxed at the rate of 18 cents per pound. A detailed schedule of current liquor and tobacco excise rates are presented in Table C.
Reference should also be made to the fact that in addition to these Federal taxes, liquor and tobacco are also taxed by State governments. In 1936 States collected some $45,000,000 from tobacco and $265,000,000 from liquor taxes. These two items accounted for 12.2 percent of the $2,500,000,000 which the States collected from all taxes. Specifically, tobacco in some form is now taxed by 31 State governments; 21 of these levy taxes on cigarettes at rates ranging from 1 to 5 cents per pack, the most frequent rates being 2 and 3 cents. The State liquor tax systems are too heterogeneous to enable 'significant generalizations beyond the observation that 17 States operate liquor store monopolies, while of the remainder, 5 tax only beers and 26 tax distilled spirits and wines, as well as beers.
In seeking an explanation for this great reliance upon liquor and tobacco revenue, much emphasis must thus be placed upon their productivity. It appears, further, that these two commodities are generally regarded as luxuries and, not infrequently, as representing undesirable consumption habits which should be discouraged. To the extent that these represent luxury consumption, they are said to reflect, in a limited sense, ability to pay. On social grounds, the users of these commodities are deemed to consume something which is not to their interest. While the consensus with respect to the moral excellence of the individual in using liquor and tobacco consumption may have undergone a radical change with the passing of the years, the original selection of these items for taxation appears to have been greatly influenced by these considerations. In connection with an explanation of their continuance, however, practical considerations carry greater significance. Governmental revenue requirements have exhibited a steady upward trend and promise to continue doing so in the future with the result that governments are reluctant to relinquish important and well-established revenue sources.
Turning to considerations of economic theory, it appears that despite the fact that the Federal revenue system is designed to weigh the relative taxpaying capacities through the income tax, the gift tax, and the estate tax, the construction of required progressive rate scales in accord with the respective taxpaying capacities of individuals is rendered extremely difficult. Thus, in a certain sense, some excise taxes may be viewed as taxes which supplement the progressive income tax by taking a little more from the particular individual who finds himself able to dispose of part of his income on such commodities as are not too obviously essential for his well-being. In this respect, liquor and tobacco taxes appear to be more suitable than most other types of indirect taxes.
Table C Liquor and Tobacco Excise Tax Rates As of August 26, 1937
Rate Title of Tax of Measure of Tax Tax LIQUOR Excise taxes: Liquor $ 2.00 per proof or wine gallon Beer 5.00 per barrel Still wine containing following percentages of absolute alcohol by volume: Not over 14% .05 per wine gallon 14% - 21% .10 per wine gallon 21% - 24% .20 per wine gallon over 24% 2.00 per wine gallon Artificially carbonated wine .0125 per half pint Liqueurs, cordials and similar .0125 per half pint compounds Champagne or sparkling wine .025 per half pint Brandies or wine spirits .10 per proof gallon withdrawn and used in fortification of wines Bay run or any article 2.00 per proof or wine containing alcohol imported gallon from Puerto Rico for consumption Perfume, imported, containing 2.00 per wine gallon distilled spirits TOBACCO Cigars: Not more than 3 lbs. per M $ .75 per M More then 3 lbs. per M retailing at: Not more than 5 cents each 2.00 per M 5 cents- 8 cents each 3.00 per M 5 cents - 15 cents each 5.00 per M 15 cents - 20 cents each 10.50 per M More than 20 cents each 13.50 per M Cigarettes: Not more than 3 lbs. per M 3.00 per M More than 3 lbs per M 7.20 per M Tobacco and snuff: .18 per lb. Cigarette papers: Pkg. of 25-50 sheets .005 per pck. Each additional 50 sheets or .005 per pck. fraction Cigarette tubes: .01 per 50
The final resting place of the burden imposed by tobacco and liquor taxes can be determined with greater precision than that for most of the other indirect taxes. Especially, is it difficult to ascertain the incidence of those indirect taxes which enter into the cost of doing business. Furthermore, the burden of liquor and tobacco taxes rests upon consumers who have at least a theoretical choice between abstaining from these commodities or using them at the expense of high taxes. To consider the replacement of liquor and tobacco taxes with excises which would burden the general public would thus be tantamount to lowering the standard of living of the low income classes irrespective of whether or not they had chosen to indulge in the highly taxed luxuries, liquor and tobacco. While the assumption underlying this analysis, that is, that liquor and tobacco do not constitute essentials for the maintenance of a decent standard of living, may be debated, its relative validity stands without dispute.
Assuming that the use of some excises cannot be avoided in the present and probable near future state of the Federal fiscal system, it may be maintained that so long as some reliance must be placed upon consumption taxes, heavy taxes upon few properly selected and widely used commodities are probably more equitable than lower taxes upon a large number of commodities.
In the light of the well-established and significant position of these excises in the Federal tax structure and, furthermore, in view of the necessity of retaining for a time even some of the less desirable miscellaneous excises, suggestions for the revision of the liquor and tobacco excises are not now undertaken.
The taxes on oleomargarine have been in effect uninterruptedly for half a century and in recent years have produced approximately $2,500,000 per annum. On fiscal grounds alone there appears to be no clear case for the retention of these levies. However, they were originally enacted and subsequently retained primarily for the purpose of protecting dairying and agriculture from the severe competition which would have prevailed had oleomargarine production remained unrestricted. The considerations which must govern the appraisal of these levies transcend economic grounds not at present discussed.
(See page 7 of this memorandum for comments on the phases of the Miscellaneous Tax Unit Reports, contained in the appendix.)
Reports Of The Miscellaneous Tax Unit Upon The History And Application Of Various Miscellaneous Taxes
November 5, 1936. MEMORANDUM FOR: Mr. George C. Haas, Director of Research and Statistics, Treasury Department.
Pursuant to the instructions of the Secretary, as given in a memorandum dated August 28, 1936, there is transmitted herewith, for use in the tax studies now being made by your office, reports with respect to the various taxes (other than the capital stock tax, estate tax, gift tax, and the taxes imposed under the Carriers' Taxing Act and Title VIII of the Social Security Act) administered by the Miscellaneous Tax Unit of the Bureau.
The reports have been prepared in accordance with the suggestions made by your office and set forth as to the respective taxes (1) the amount of revenue derived for the fiscal year ended June 30, 1936, (2) estimated yield for the fiscal year ending June 30, 1937, (3) the statutory background or a summarized history of the tax, (4) the economic basis, i.e., whether the tax is an excite or is regulatory in scope, the industry concerned, number of persons filing returns, etc., (5) inequities or conflicts in the subjects taxed, tax avoidances, etc., (6) administrative difficulties, and (7) a recommendation as to the continuance or reenactment of the tax with a suggestion of such amendments as are considered desirable. The reports have been grouped according to the Revenue Acts or statutes under which the several taxes are imposed beginning with the latest Revenue Act in point of time and so on down to the earliest taxing statute still in force. For convenience and quick reference in the use of this material, a table of contents and subject index have also been prepared.
(Signed) D. S. BLISS, Deputy Commissioner. APPROVED: (Signed) CHAS. T. RUSSELL, Acting Commissioner of Internal Revenue.
TABLE OF CONTENTS STATUTES REVENUE ACT OF 1934 SECTION MISCELLANEOUS AND SALES TAXES PAGE 602 1/2. Processing of certain oils 1 604. Sale of crude petroleum 4 605(a)(1). Refining or processing of crude petroleum 7 (2). Producing or recovering gasoline from natural gas 11 REVENUE ACT OF 1932 601(c)(1). Sale of lubricating oil 15 (2). Sale of brewer's weft and malt products 19 (3). Sale of grape concentrate 22 602. Sale of tires and inner tubes 25 603. Sale of toilet preparations, etc. 28 604. Sale of furs 33 605. Sale of jewelry 36 606(a). Sale of automobile truck chassis 40 and bodies, etc. (b). Sale of automobile chassis and bodies, etc. 40 (c). Sale of parts and accessories for 45 automobiles, etc. 607. Sale of components of radio receiving sets 48 608. Sale of mechanical refrigerators and certain 51 components thereof 609. Sale of sporting goods, etc. 53 610. Sale of firearms, shells, and cartridges 56 611. Sale of cameras 58 612. Sale of matches 60 613. Sale of candy 62 614. Sale of chewing gum 64 615(a)(1). Sale of cereal beverages 66 (2). Sale of unfermented grape juice 68 (3). Sale of unfermented fruit juices and carbonated 71 beverages (4). Sale of still drinks 74 (5). Sale of natural or artificial mineral or table 77 waters, etc. (6). Sale of finished or fountain syrups 79 (7). Sale of carbonic acid gas 81 616. Sale of electrical energy 83 617. Sale of gasoline 86 701. Charges for use of telegraph, telephone, radio, 90 and cable facilities 731. Transportation of crude petroleum, etc., by 93 pipe line 741. Charges for use of safe deposit boxes 97 751. Checks, drafts, or orders for the payment 98 of money 400. Sale or withdrawal of cigars and cigarettes 100 401. Sale or withdrawal of other tobacco products 100 402. Sale of cigarette papers and tubes 100 500(a)(1). Payments for admission to any place 103 (2). Sales of admissions by ticket brokers in 109 excess of established price (3). Sales of admissions by proprietors and 113 employees in excess of established price (4). Permanent use or lease of boxes or seats in 116 any place of amusement (5). Payments for admission to roof gardens, 120 cabarets, or similar entertainments 501. Payment of dues and initiation fees to social, 125 athletic, or sporting clubs, or organizations 600(2). Sale of pistols and revolvers 129 DOCUMENTARY STAMP TAXES Title VIII, Schedule A, Subdivision- 1 Issues of bonds of indebtedness by corporations 132 2 Issues of capital stock and similar interests 133 3 Sales or transfers of stock and similar interests 133 4 Sales of produce on exchanges for future delivery 134 5 Passage tickets 134 6 Playing cards 135 7 Foreign insurance policies 135 8 Deeds of conveyance 135 9 Transfers of corporate bonds of indebtedness 136 10 Transfers of interests in silver bullion 136 MISCELLANEOUS REGULATORY STATUTES National Firearms Act of 1934 139 United States Cotton Futures Act 149 (Act of August 11, 1916) Harrison Narcotic Law 140 (Act of December 17, 1914) Act of April 9, 1912 (white phosphorous matches) 149 Act of May 9, 1902 (adulterated butter) 143 Act of May 9, 1902. (process or renovated butter) 144 Act of June 13, 1898. (mixed flour) 145 Act of June 6, 1896. (filled cheese) 146 Act of August 2, 1886. (oleomargarine) 147 Act of February 8, 1875. (notes used for circulation) 149