the bill introduced by Senators Bush and Keating be passed by Congress as soon as possible, and we respectfully urge the members of the Senate Finance Committee to report this bill out of committee as soon as possible so that it may be brought before the Senate and the House of Representatives for a vote during this session of the Congress. Respectfully submitted. PERMANENT STAINLESS STEEL, INC., July 27, 1959. Hon. HARRY F. BYRD, DEAR SIR: The Senate Finance Committee, of which you are a member, is at present considering a number of bills prohibiting States from imposing net income tax on income derived exclusively from interstate commerce. This letter is sent urging you to support legislation at the present session, limiting the taxing power of States in respect to net income taxes on receipts from interstate com merce. Some of the points of view in support of this relief legislation are as follows: The present situation makes taxation of more than 100 percent of income possible. Where corporations operate in many States a very considerable amount of company income will be paid out on State income taxes. These, of course, will be deductible from Federal income taxes, and this could in turn have a very considerable effect on Federal income tax results, making it necessary for the Federal Government to set up a compensatory increase. Compliance by corporations doing business in many States will become a terrific burden. A large proportion of the time of the auditors of such a company will be taken up handling auditors showing up from time to time from the various States. Some States now require, in the case of enforcement of use taxes, that the taxpayer pay the cost of auditing. This practice certainly can be expected in a new field of taxation. The theme of permitting taxation of interstate commerce by the State is a revolutionary trend in thinking: Up to now the United States has constituted one market. Taxation of interstate commerce will cause it to be a clutter of markets. The small businessman will be heavily affected and will be more and more forced to limit his taxable activities to one State. Thanking you for your favorable consideration for immediate action on any and all legislation designed to prevent this balkanization on American industry, we remain Sincerely yours, E. M. FREY, President. ELECTRONIC INDUSTRIES ASSOCIATION, Hon. HARRY F. BYRD, Chairman, Senate Finance Committee, DEAR SENATOR BYRD: On behalf of the Electronic Industries Association, the national trade association for the electronics industry, I respectfully urge early enactment of legislation along the lines set forth in S. 2213 (introduced by Senator Bush) and S. 2281 (introduced by Senator Saltonstall), which would clarify the authority of the States to impose income taxes on certain activities in interstate commerce. Legislation on this subject is necessary to avoid the costly and complex administrative burdens that are inevitable as the result of the recent Supreme Court decisions. Moreover, such legislation is of particular concern to small business which constitutes a majority of the membership of this association. It is our strong belief, therefore, that legislation to resolve this important issue is urgently needed in order to (1) Assure that interstate commerce will be fostered rather than impaired; (2) Preserve, as well as facilitate, the industrial growth of small business concerns which lack the capital to market their products in interstate commerce under the conditions established by the recent U.S. Supreme Court decisions; (3) Establish uniformity among the numerous States in the imposition of income taxes on interstate transactions; and (4) Eliminate the inevitable burdens which will result from multi-State taxation. It is not our purpose to challenge the rights of States to tax commerce within their respective jurisdictions. However, it is our firm belief that this legislation, if enacted, would permit the States to continue their tax programs for those activities where potential revenue is not outweighed by the foreseeable difficulties and costly administrative burdens that will be encountered in collection. Accordingly, the Electronic Industries Association requests early action on these bills in order to remove the extreme burdens that are bound to result as a result of the recent Supreme Court decisions. It is requested that this letter be made a part of the record of the proceedings in these hearings. Respectfully, D. R. HULL, President. (Whereupon, at 4:20 p.m., the committee adjourned, to reconvene at 10:15 a.m., Wednesday, July 22, 1959.) STATE TAXATION OF INTERSTATE COMMERCE WEDNESDAY, JULY 22, 1959 U.S. SENATE, COMMITTEE ON FINANCE, Washington, D.C. The committee met, pursuant to recess, at 10:15 a.m., in room 2221, New Senate Office Building, Senator Harry Flood Byrd (chairman) presiding. Present: Senators Byrd, Kerr, Frear, Long, Anderson, Gore, Talmadge, McCarthy, Williams, and Carlson. Also present: Elizabeth B. Springer, chief clerk. The CHAIRMAN. The committee will come to order. The first witness is Mr. Paul Mickey, of the National Association of Motor Bus Operators. Will you take a seat, sir, and proceed? STATEMENT OF PAUL F. MICKEY, NATIONAL ASSOCIATION OF MOTOR BUS OPERATORS Mr. MICKEY. Mr. Chairman, and members of the committee, my name is Paul F. Mickey. I am a member of the firm of Steptoe & Johnson, and I appear on behalf of the National Association of Motor Bus Operators. The National Association of Motor Bus Operators is the national trade association which serves as spokesman for over 700 intercity motorbus carriers who provide transportation service for passengers, package express, first-class pouch mail and newspapers. The members of the association serve practically all major cities and towns in the Nation and carry passengers to and from almost any point on an estimated 250,000 miles of highways. For some 40,000 communities, intercity buses are the only means of public transportation, and this number is increasing as rail passenger service continues to be reduced or abandoned. About two-thirds of all interstate bus carriers within the jurisdiction of the Interstate Commerce Commission are small businesses within that Commission's definition of small business. It is clear that the service of the intercity buslines is a major and essential part of the Nation's public transportation system, particularly as affecting the lower income groups. Nevertheless, these carriers as a whole have been experiencing increasing financial difficulties, primarily as a result of the increased use of private automobiles. The seriousness of the situation may be illustrated by the fact that in New York State alone 73 communities have been deprived of all or a sub 181 stantial part of their bus service since 1951, as a result of the fact that 103 companies supplying such service are no longer in business. In the struggle to maintain their operations the members of this association have found duplicate State taxation a major financial problem. Consequently, we regard the subject of State taxation of interstate commerce which is before this committee today as of vital importance to public transportation, just as it is to other forms of commerce among the States. But the problem transcends the scope of the specific legislation before this committee and the scope of the Supreme Court decisions which generated those proposals. The decisions which have been principally referred to in previous discussion are those involving Northwestern States Portland Cement Co. and Stockham Valves & Fittings, Inc., both of which concerned only net income taxes. Our members and most other interstate businesses are subject not merely to State net income taxes, but to State sales, use, gross receipts, property, and franchise taxes as well. This fact is noted by the report concerning multistate taxation of income from interstate commerce by the Select Committee on Small Business (S. Rept. 453). Any legislation which is confined solely to net income taxes only scratches the surface of the problem. Moreover, the burdens upon interstate business resulting from the multiplicity, the duplication, and the lack of uniformity in the laws of the various States, which is also noted by the report I have just mentioned, require legislation that is not confined to the definition of marginal interstate activity where no tax is deemed appropriate but which also reaches situations where some properly apportioned State tax may concededly be levied. For example, as a partial solution to the problem of duplicate taxation, we in this industry have long urged the acceptance by the States of a uniform system of apportioning State income, license, and fuel taxes, according to the proportion of total vehicle miles traveled within each State-a solution which was suggested by several Supreme Court opinions. Many States have acceded, but a great many have not. Some carriers pay income taxes in one State on an apportioned income which is as much as 280 percent of the income which would be subject to tax by that State upon a mileage basis. Interstate carriers are frequently required to pay State registration fees on all vehicles in as many as 10 or a dozen States, at the full rates applicable to intrastate buses, despite the fact that any one of the interstate vehicles uses the highways of a given State for only a fraction of its total operating time. În a number of instances carriers are required to pay State sales taxes on motor fuel purchased in one State and a use tax on the same fuel in another State upon whose highways it is consumed. To correct this type of inequity there is a basic need for uniform legislation which apportions to the taxing State a fair share of the total State taxes exacted from any interstate enterprise. In the past, there have been literally hundreds of decisions by Federal and State courts involving the application of apportionment formulas and there are a number of Supreme Court opinions which recognize frankly that these decisions are hopelessly confused and conflicting. |