PURPOSES HEARINGS BEFORE THE COMMITTEE ON FINANCE SIXTY-FIFTH CONGRESS SECOND SESSION ON H. R. 12863 TO PROVIDE REVENUE, AND FOR OTHER PURPOSES Printed for the use of the Committee on Finance WASHINGTON 1918 TO PROVIDE REVENUE FOR WAR PURPOSES. FRIDAY, SEPTEMBER 6, 1918. UNITED STATES SENATE, The committee met, pursuant to call, at 10 o'clock a. m. in the committee room, Senate Office Building, Senator F. M. Simmons presiding. Present: Senators Simmons (chairman), Williams, Smith, Thomas, Gore, Jones, Nugent, Penrose, Lodge, McCumber, Smoot, Townsend, and Dillingham. The committee proceeded to the consideration of the bill (H. R. 11283) "to provide revenue and for other purposes." The CHAIRMAN. Gentlemen of the committee, we have a majority here, and the committee is ready to proceed with hearings. It is proper that I should state that, of course, it is understood that the bill has not yet been acted upon by the House, and we have not jurisdiction of the bill. But in order to facilitate its consideration we have decided to have hearings while the House is considering the bill, so that as soon as it comes over and is reported to the Senate and referred to the committee we may proceed with the consideration of the bill. Senator SMOOT. As the bill may be reported. The CHAIRMAN. As the bill may be reported. We are simply assuming for the present that the House will pass the bill as it has been reported to it by the Ways and Means Committee. Senator LODGE. Substantially. The CHAIRMAN. Substantially; yes. It is also proper that I should state that the committee decided, in ordering these hearings, that we would give at least a week's hearing-not more than 10 days-and in order that the hearings may be concluded within that limited period of time the committee decided to ask the several industries which may wish to make statements to the committee to select some representative of the industry to present their case orally, with the understanding that any briefs that the representatives of the industry may wish to file can be filed and printed along with the oral hearing. MAIL-ORDER HOUSES. Senator SMOOT. I will say to the chairman that I asked the gentle man representing the mail-order houses if he would not be here this morning to begin at once, and he said that he desired to leave as quickly as possible, so I told him he would be heard the first thing this morning, so I ask that Mr. Eiswald be heard first. The CHAIRMAN. You may proceed, Mr. Eiswald. 3 STATEMENT OF MR. G. H. EISWALD, PRESIDENT OF THE CHARLES WILLIAM STORES (INC.), NEW YORK. Mr. EISWALD. The statement I will make to the committee is submitted by the following: J. I. Zook, treasurer, Montgomery Ward & Co., Chicago. S. G. Rosenbaum, president, the National Cloak & Suit Co., New York. W. R. Heath, vice president, the Larkin Co., of Buffalo. G. H. Eiswald, president, the Charles William Stores, New York. Milton Cone, president, the Spotless Co., Richmond, Va. These gentlemen represent their respective corporations, and in addition the majority of the so-called mail-order houses of the United States. Our subject is a tax of 1 per cent on sales by mail, proposed in the revenue bill now under consideration by the Senate Finance Committee, to wit [reading]: SEC. 1005. That on and after January first, nineteen hundred and nineteen, every person, any part of whose business consists of the retailing of merchandise through or upon orders received by mail, shall pay annually a special excise tax equivalent to one per centum of the gross amount in excess of $100,000 received by such person from such retail sales during the preceding year ending June thirtieth. The necessity for revenue by the Government is recognized, and every just and fair method of producing it will meet with our hearty approval and assistance. We offer no objection to a tax of 1 per cent on sales as a tax, pro vided it is levied on all sales, irrespective of the way in which they are made. Such a tax is just, moderate, easy of determination and collection, and, if applied to all sales, would yield enormous revenue. If applied to sales by mail only it would yield at the most a relatively small amount. In passing, we wish to direct your attention without further comment to the ambiguity of the section under consideration. Senator PENROSE. Did you present these views to the Ways and Means Committee? Mr. EISWALD. Substantially, Senator. Senator PENROSE. And they overruled your objections? Mr. EISWALD. The Ways and Means Committee appointed a subcommittee to hear our case, and the subcommittee, consisting of five members, reported unanimously in favor of reconsideration of this clause. But the Ways and Means Committee as a whole, I am told, overruled the recommendation of their subcommittee. The language of this bill is open to various interpretations, entirely irreconcilable with justice and inviting controversy and litigation, and possibly leading to great difficulty of administration. It is apparent that the great bulk of the revenue received by the Government from this source will be from so-called mail-order houses and those large retail establishments who invite orders by mail. We list herewith all of the retail mail-order houses in the United States of which we have any knowledge, and have placed opposite their names the amount of business which they did for the calendar year ending December 31, 1917. In the case of those houses marked (a) the figures are taken from official reports which are a matter of public record. In the case of those houses marked (b) the figures are from information given us by the respective chief executives of the houses in question. In the case of those markd (3) the figures are generously estimated. (a) Sears, Roebuck & Co., Chicago, Ill__ (c) Larkin Co., Buffalo, N. Y. (b) Charles William Stores, New York.. (b) Bellas Hess & Co., New York__‒‒ $165, 807, 608 73, 512, 645 27, 649, 537 20, 000, 000 19, 533, 000 (c) Hartman Furniture & Carpet Co., Chicago.. (c) Spiegel-May-Stern Co., Chicago, Ill (c) The Catalogue House (Phillipsborn), Chicago, Ill. (c) M. W. Savage Factories, Minneapolis__. (c) The Wm. Galloway Co., Waterloo, Iowa.. (b) Standard Mail Order Co., New York__ (c) Straus & Schram, Chicago, Ill (c) Pacific Coast Mail Order Co., Los Angeles, Cal (c) Chicago Mail Order Co., Chicago, Ill. (b) Perry Dame & Co., New York. (e) Cussins & Fearn, Columbus, Ohio_ (b) Spotless Co., Richmond, Va_ (c) Harris Bros., Chicago, Ill (c) Crofts & Reid, Chicago, Ill__ (c) Hamilton Garment Co., New York___. (c) Knickerbocker Mail Order Co., New York___. Total. 12, 000, 000 8, 000, 000 6, 000, 000 5,500,000 5, 000, 000 4, 000, 000 4, 000, 000 3, 000, 000 3, 000, 000 1,750,000 1,514, 000 750,000 600, 000 500, 000 500, 000 250,000 250,000 363, 117, 276 In addition to these houses there are a number of department and specialty stores who do more than $100,000 of business by mail. These concerns, such as Marshall Field & Co., Chicago, Ill. The Boston Store, Chicago, Ill. Franklin Simon & Co., New York. B. Altman & Co., New York. Jordan Marsh & Co., Boston, Mass. and others, are not generally known as mail-order houses and only a small percentage of their business is done by mail. Also there are some houses, such as seed distributors, nurserymen, and manufacturers of wire fences, stock foods, bicycles, windmills, household ranges, kitchen utensils, agricultural implements, etc., who sell their specialties at retail by mail. It is estimated that the total mail order sales of all the classes of business mentioned in this and the preceding paragraph are not in excess of $50,000,000 or $60,000,000. It will be seen from the foregoing figures that the total mail-order business of the United States is very likely not in excess of $425,000,000. Therefore, a tax of 1 per cent on sales would not yield more than $4,250,000 of annual revenue. This sum we consider a generous maximum, and furthermore, this tax would so reduce the profits of business houses that the excess-profits tax which many of them pay would also be reduced. In some of the larger houses it is figured that their net payment on tax would be reduced by 20 per cent as શ result of the |