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brought into this country replaces at the American selling prices liquor selling at $300 to $500. Gentlemen, this condition is serious, as thousands of passengers are arriving daily from foreign ports, and a large percentage of them are bringing in tremendous quantities of liquor. Along the Canadian border it is estimated that automobile tourists are making a business of it and bringing in cases of liquor, and many of them, I understand, make several trips a day. This is a tremendous loss of revenue to the Government and has so affected the sales of the retail stores in the large ports and border cities that every branch of the industry has presented resolutions to their Congressmen and Senators urging legislation be enacted to protect them against this menace. I understand that Congressman Celler already has a bill pending covering this particular problem, and it has the approval of the Treasury Department to the extent that a limitation be placed on all tourists where they be permitted to bring in 1 gallon of wine or liquor. While the industry would prefer to have this limited to 1 quart, they are ready to accept any reasonable measure of protection. I consider this problem of such importance that I recommend that the Ways and Means Committee include this part of Congressman Celler's bill now being considered so as to have more complete control over every possible emergency. It rightfully belongs in this bill that is now before you, and if included, we have at least this assurance, that it would surely become a law very quickly as part of your bill, whereas if it is permitted to remain in the separate bill being sponsored by Congressman Celler there is the danger that Celler's bill will not be enacted into a law in this session of Congress and the trade thus left at the merey of a deplorable and harmful condition. Gentlemen, you will have the appreciation of everyone in the liquor industry if you include the tourist limitation of liquor to 1 quart or 1 gallon in this bill, as it affects the business of every distillery, rectifier, importer, wholesaler, retailer, and hotel, and it presents a serious loss of revenue to the Treasury Department. This, gentlemen, is my greatest concern and recommendation in behalf of the entire liquor industry.
I again suggest that you study the new legislation that you are planning in regard as to how it will affect the retailer of liquor who is the small businessman. Gentlemen, the 25,000 retailers are doing a good job, and the package store is today the only outstanding new development in the present liquor control set-up that has met with unanimous public approval and has been highly recommended by the administrators of all liquor control boards of the States. Your new legislation should protect him against facing new conditions that may affect his business to the extent of even driving him out of business.
The CHAIRMAN. The next witness is Mr. Eugene Greenhut, chairman of the committee of the National Civic Federation of New York.
STATEMENT OF EUGENE GREENHUT, CHAIRMAN COMMITTEE
OF THE NATIONAL CIVIC FEDERATION OF NEW YORK
The CHAIRMAN. Please state your name, address, and the capacity in which you appear before the committee.
Mr. GREEN HUT. My name is Eugene Greenhut. I represent the National Civic Federation of New York.
Mr. Chairman and members of the committee, on the 5th of December 1933 the President in proclaiming repeal of the eighteenth amendment said :
The policy of the Government will be to see that the social and political evils that have existed in the preprohibition era shall not be revided nor permitted again to exist. We must remove forever from our midst the menace of the bootlegger and such others as would profit at the expense of good government, law, and order.
However, passage of the twenty-first amendment has not stamped out bootlegging; nor is the Federal Treasury receiving the estimated $300,000,000 of liquor-tax revenue which was annually to accrue from legal liquor sales; nor is the consumer enjoying a product of a
quality or at a price which would impel him to consider the repeal of the eighteenth amendment was a forward step from the consumers' standpoint. Such a situation was as evident a year ago as it is today. It demanded a survey of actual conditions by a wholly disinterested independency agency, and therefore, the executive council of the National Civic Federation was prompted to adopt the following resolution in June of 1934:
Whereas it has become apparent that our public welfare is menaced by a marked increase in bootlegging and racketeering with resulting losses to both Federal and State Governments in revenue from taxes : Be it
Resolved, That the executive council of the National Civic Federation authorize a comprehensive survey of present conditions with a view to ascertaining what, if any remedy of a practical nature may be recommended.
In compliance with that resolution an exhaustive Nation-wide survey was instigated. This survey cost considerable money and took practically a year to complete. It delved into every phase of the liquor problem and resulted in what is probably the greatest aggregation of accurate information and data yet assembled
on the American liquor problem as it exists today. Based upon this data and information the Federation presents an amendment to the bill which the committee now has under consideration, namely, H. R. 8539. It is our unqualified opinion that the adoption of this amendment will accomplish the following three objectives:
1. It will practically eliminate bootlegging, rum running, and all illicit traffic in liquor.
2. It will increase Federal and State income from liquor taxes by perhaps $200,000,000 annually because all taxes due on whatever liquor is consumed will be collected.
3. It will reduce the retail price of liquor to the consumer by from 25 to 40 percent without requiring that the present Federal $5 import duty or the $2 excise tax be reduced.
We contend that if you eliminate bootlegging, if you can collect the money which is due the Federal Government and the State governments on taxes, and if you reduce the price of liquor to the consumer, you will have actually solved the American liquor problem.
The legislative counsel of the Senate, at the request of Senator Copeland, prepared an amendment which I suggest should be put on page 3 between lines 5 and 6 of your present bill. This amendment provides as follows: (c) Title II of the Liquor Taxing Act of 1934 is amended to read as follows:
SEC. 201. (a) There shall be levied, collected, and paid upon all distilled spirits sold at retail a tax of $2 on each proof gallon or wine gallon when below proof and a proportionate tax at like rates on all fractional parts of such proof or wine gallon.
(6) No tax shall be in.posed upon any distiller or importer under paragraph (4) of subdivision (a) of section 600, as amended, of the Revenue Act of 1918 in respect to any distilled spirits taxable under this section.
“ Sec. 202. The internal-revenue tax imposed by the preceding section yon distilled spirits shall be collected from retailers who shall affix to every bottle or other container of distilled spirits at the time of its first retail sale or retail transfer unopened in a container for on or off-prenrise consumption, and to every bottle or other container of distilled spirits out of which any part of the con tents is removed for the purpose of retail sale, transfer, or use on or off the premises, before such container is opened, a stamp or stamps, indelibly canceled, denoting the quantity of distilled spirits contained therein and evidencing payment of all internal-revenue taxes imposed on such spirits, and in the case of imported spirits, of all customs duties imposed thereon.
SEC. 203. Any licensed retailer possessing or coming into possession of distilled spirits upon which all internal-revenue taxes and customs duties in posed by law shall have been paid, shall be entitled to purchase such stamps as are necessary for stamping the containers of distilled spirits in the manner required by the preceding section. Stamps for this purpose may be purchased by such retailer only fronr the collector of internal revenue for the revenue district in which the retailer's place or places of business for retail sales shall be located. Such retailer shall present satisfactory proof to such collector of internal refenue that such tax and customs duties on such distilled spirits have been paid. Such stamps shall be sold by the collectors to such retailer at a price of 1 cent for each stamp except that in the case of stamps for containers of less than one. half pint, the price shall be one-fourth of 1 cent for each stamp.
Mr. CULLEN. Mr. Chairman, I dislike to interrupt, but that suggests itself as a sort of a substitute bill that you have there.
Mr. GREENHUT. No, sir. The bill that you have there is a bill for revenue. We have watched the various bills which have been considered by this committee, because we claim that this amendment should be an amendment to any revenue bill which this committee has under consideration and which it proposes to enact into law.
Mr. CULLEN. Are you favoring the proposal in the bill before us now?
Mr. GREENHUT. I would say “yes." In other words, I am not particularly concerned with the bill as a regulation. We are concerned only with one basic principle, and that is this:
The present method of collecting liquor taxes creates a situation by which the overhead and the profit of the distiller, the wholesaler, and the retailer are pyramided and telescoped on the taxes which the Government is supposed to collect. In actuality the consumer pays about $1.90 for every dollar of tax which the Governinent receives by virtue of the pyramiding of the tax.
In other words, if a gallon of whisky costs 50 cents at the distillery, and 3 gallons are taken to be bottled into a case of liquor, the actual cost to the manufacturer on his books, the way he keeps his records, would be $1.50 for those 3 gallons. Immediately when he tax pays that merchandise he has an investment, as he figures it, of $4.50. If he charges himself $1.50 for bottling, he then has a $6 cost. He then sells that liquor to a wholesaler, who imposes a wholesaling percentage of 15 percent or thereabouts on that merchandise.
Mr. CULLEN. Mr. Chairman, the gentleman has not finished his statement. I ask that he have the privilege of putting that in the record. Is there much of your statement left there!
Mr. GREEN HUT. I would like to save the time of this committee by asking that the report of the National Civic Federation be put in the record.
The CHAIRMAN. How long is it?
Mr. GREEN HUT. It is a report which has probably about 2,000 words to it.
Mr. Hill. Mr. Chairman, personally it seems to me this matter that is suggested is not germane to this bill.
Mr. GREENHUT. Congressman, this bill is a revenue measure.
The CHAIRMAN. Would you furnish members of the committee copies of it?
Mr. GREENHUT. Yes, sir; I will be glad to, sir. I will furnish the members of the committee copies of the amendment and also copies of the report of the committee.
The CHAIRMAN. I think that would do just as well.
Thank you for your appearance and for the testimony you have given the committee.
The CHAIRMAN. Michael Flynn, representing the Labor National Committee for Modification and Repeal, will be the next witness.
STATEMENT OF MICHAEL J. FLYNN, REPRESENTING THE LABOR
NATIONAL COMMITTEE FOR MODIFICATION AND REPEAL
Mr. FLYNN. Mr. Chairman and members of the committee, my name is M. J. Flynn, representing the Labor National Committee for Modification and Repeal. Labor is opposed to the change in regulations proposed in subsection (f) of section 4, authorizing the distribution of liquor in bulk.
Labor's National Committee for Modification and Repeal was created by unanimous vote of the executive council of the American Federation of Labor. The officers, headed by Matthew Woll, were also selected by unanimous vote of the executive council.
On June 19, Mr. Woll sent to your committee the following telegram. It was sent to Robert L. Doughton, the chairman of the committee:
We respectfully petition your committee not to favor any change in the present Treasury regulations concerning shipment of distilled spirits and which have been in force ever since the repeal of the eighteenth amendment. We are opposed to the change of shipping distilled spirits in bulk whether in barrels, casks, or kegs. The proposed change can only benefit a few and do destructive harm to labor and likewise bring back undesirable conditions and experiences in existence before prohibition and which to a great extent were responsible for the adoption of the eighteenth amendment. We urge your cooperation and will appreciate your support and that of your associate members.
MATTHEW WOLL, Chairman Labor National Committee for Modification and Repeal. Labor was one of the pioneers in the fight to eliminate the farce we know as “ prohibition."
prohibition.” Labor stands for moderation and temperance. Labor prefers to encourage the use of domestic wines and beers rather than whisky. However, we realize that people desire whisky and we believe they should have it. We believe, however, that when people buy whisky they should have every assurance the Government can give them that they are getting what they pay for.
We are opposed to subsection (f) of section 4, as written, believing that if the present regulations are relaxed people will soon find that they are consuming bootleg whisky, but paying for properly distilled whisky. We know that even now some unscrupulous distributors of whisky are selling bootleg liquor, including some hotels.
Even though this is true, there is no good reason why Congress should, by law, provide virtually a steady market for bootleg liquors.
We believe the authorization to distribute liquor in bulk will mean that the consumers will suffer through their involuntary consumption of an inferior grade of liquor; secondly, that the conditions which so disgusted the American people that prohibition was written into our Constitution will soon return, and, third, that employment of labor at decent wages and under decent working conditions will be greatly reduced.
At the hearing last night the assertion was made that this change would help the cooperage industry. Presumably, it was meant to
imply that it would help those employed in the production of whisky barrels.
No one will question the wages paid to those employed in the production of printed matter or the bottles used under the present regulations. In addition, we can point to the fact that in almost all cases the printed matter and the bottles, used under the present regulations, are produced by workers who receive a minimum of from 75 cents to $1 per hour. Also, they are organized.
Those employed in these cooperage shops which supply barrels to the largest whisky distillers are paid miserable wages and are denied the
right of organization. In addition, it may interest the committee to know that some of these cooperage shops are financed and controlled, if not owned, by the same whisky distillers.
The conditions in the cooperage industry to which I refer are set forth by the president of the Cooper's International Union in a report under date of June 14 which, in part, reads as follows:
All through the N. R. A. period, these two companies worked their employees 60 hours straight time at a starvation rate of wages. These companies control different plants throughout the South and West. In Monroe, La., they are paying their help 1242 cents per hour.
Another company is financed indirectly by the Schenley Products Co. This company in Louisville also works its employees 10 hours a day and at a starvation rate of wages.
Speaking of another concern where similar conditions apply, it cites the Hiram Walker Distillery Co.
At the hearing last night reference was made to the possible cost of bottles and printed matter used under the present regulations.
I do not know the cost of the bottles and the printed matter, but I do know that anyone can purchase any number of liquid products from any grocery store in the city, such as catsup or vinegar, in bottles with labels, etc., at a total cost of 5 cents per bottle.
These bottled goods I refer to are labeled and capped. Many of them are comparable to a 16-ounce or pint bottle, and we presume that the contents are of some value; that the producers, the wholesalers, and the retailers make a profit on their distribution and sale.
This being true, surely the cost of bottles and printed matter, used in bottling and in the sale and distribution of liquors under the present regulations of the Alcohol Control Administration, cannot affect the cost of liquor sold the consumers.
In closing, may we suggest that the present regulations are accepted in every State in the Union. There is no loud outcry that has been heard from the public, those who pay the bills, asking for this change.
A change such as is herein proposed will naturally mean that each legislative body, each regulatory body, will soon be deluged with proposals the bulk distribution of liquors be either permitted or prohibited. This means a renewal of the old wet and dry fight. Surely, such a condition is not beneficial to any of those engaged in or dependent for their employment upon the liquor industry.
We have emerged from a prohibition status only a few years.
We hope that legislation will not be enacted which will renew that fight until at least the present generation can be acquainted with our new conditions.