Mr. MURRAY. Is there an excise tax on oil used after it is imported into the United States?

Mr. WIGGINS. There is a 15-cent-a-pound tax on oleo that is imported.

Mr. MURRAY. The import duty has been reduced from 14 to 7 cents within the last few weeks. In addition, there is a 15-cent-perpound excise or internal tax on oleo made from imported oils. Now, I would like to know how we are going to have byproducts of the dairy industry if people do not eat butter. No one has ever answered that question yet. They speak of the wonders of skim milk. Some people would have you believe it is better than whole milk. How are you going to have byproducts of skim milk if you do not the butter that goes along with it, unless you have a skim-milk cow.

Here is a letter from the Department that came in Saturday. It is the same old story. There is a part that tells about the milk sugar that is being imported. Here is one that says the casein market has gone to pieces in this country due to Argentine imports.

Two and a half million pounds of casein are on the way from the Argentine. We are going down hill fast enough in this dairy industry without doing anything at this time to pull the rug out from under them any more. I am very much disappointed in my good friend to

think that after he has been with the bankers all over the United States for so many years, now is the hour when we must say good-bye. That is all, Mr. Chairman.

Mr. WIGGINS. I would like to add, Mr. Murray, if I may, that nothing I have said is intended in any way to be against the interests of dairy farmers. I am speaking from a tax standpoint and from the right of the consumer to make his free choice.

Mr. PACE. Mr. Chairman.

The CHAIRMAN. Mr. Pace.

Mr. PACE. Mr. Wiggins, the substance of the Treasury's position in this matter, I assume, is in your statement that these taxes on margarine distort the competitive position of two domestic industries. Do we not have in this country a quite similar situation with regard to the cotton industry? That situation is that through the years there has grown up a competing domestic industry, the manufacture of synthetic fibers, which, according to the last figures I recall on the rayon synthetic fiber, the production equals that of about three million bales of cotton. Would there not be as much justification for the Congress to seek protection for the cotton industry by imposing a tax on synthetic fibers as there is in the dairy industry imposing a tax on margarine?

Mr. WIGGINS. It would seem to me, Mr. Pace, that the principle is largely the same.

Mr. PACE. The cases are comparable.

Mr. WIGGINS. To a great extent they are comparable.

Mr. PACE. And they are particularly of interest here because on the one hand cottonseed oil, which is one of the principal ingredients in margarine, is burdened, its use is restricted to an extent by the imposition of the margarine tax, while on the other hand the synthetic fiber has become highly competitive with cotton. So on the one hand you have a tax that burdens the cotton grower on account of the commodity he produces and on the other, of course, none of us have

suggested the advisability or the wisdom of seeking to protect the cotton industry by imposing a tax on synthetic production.

Mr. WIGGINS. I think I could say that the Treasury would be opposed to the imposition of a tax.

Mr. PACE. For the very same reasons?

Mr. WIGGINS. For the same reasons.

Mr. PACE. Do you feel, though, to be consistent, that if the Congress is going to protect the dairy industry with a tax on margarine, it should protect the cotton industry with a tax on synthetic fibers?

Mr. WIGGINS. That is a little bit out of my field as Under Secretary of the Treasury. Privately, I could talk at length along that line and generally agree with your conclusions.

The CHAIRMAN. Mr. Wiggins, it seems to me while there may be an analogy between rayon and oleomargarine, there is this distinction, that olemargarine is a product which is made in imitation of butter and sold as a direct substitute for butter and made to resemble butter as nearly as can be done. I have never understood that the manufacturer of rayon made any attempt to produce a rayon that could be mistaken for cotton. In fact, I think their contention is that they are producing a product which is superior to cotton for many purposes. There is that essential difference there, that rayon is not made in imitation of cotton nor for the purpose of substituting it for cotton under the theory that it was being purchased as cotton. You admit the validity of that distinction, do you not?

Mr. WIGGINS. Mr. Chairman, I think the synthetics are put up in many forms to take the place of competitive fibers. There are a great many types of synthetic fabrics that are quite similar to wool and many of them have the characteristics of cotton or are mixed with cotton, so that competitively there is a very sharp competition, certainly from the standpoint of the consumer's dollar, between the various products.

The CHAIRMAN. I agree with you on that. However, the manufacturers of rayon do not attempt to imitate cotton as far as appearance and structure and that sort of thing are concerned to the extent that the manufacturers of oleomargarine have attempted to imitate butter. Is that a fair statement?

Mr. WIGGINS. Well, I think it departs a little bit from my taxation approach, but my feeling is that they are two different products, that oleomargarine is not sold under any attempt to mislead the public that it is butter. It is sold on its own merit.

The CHAIRMAN. It is manufactured, however, so as to have the appearance of butter as nearly as can be done and it is true, is it not, that as far as colored oleomargarine is concerned it so nearly resembles butter that you nor I nor perhaps no one in this room could tell the two apart by looking at them?

Mr. WIGGINS. It is very difficult for most people to distinguish between good oleomargarine and good butter.

The CHAIRMAN. Are there any further questions?

Mr. ZIMMERMAN. I would like to ask a question.
The CHAIRMAN. Mr. Zimmerman.

Mr. ZIMMERMAN. When you speak of butter and margarine, as to color, I would just like to know whether butter is white or yellow? Mr. WIGGINS. I am not a dairy expert, Mr. Zimmerman, but I

understand that a great deal of butter is not yellow in its natural state and is colored yellow in order to meet the consumer's taste.

Mr. ZIMMERMAN. During the winter months on the farm we churned butter in the old-fashioned way, and I have churned many a pound of it. During the winter months it would be perfectly white. When spring would come and the cow got out and got some clover, it would turn yellow.

It just depends on what the cow eats as to what the color of the butter will be, and of course what you put into the margarine is going to have a lot to do with its color also, is it not?

Mr. WIGGINS. That is true. Some margarine is yellow when it is manufactured from certain products and, as I understand it, they are required to bleach it out white in order to escape the penalty tax.

Mr. ZIMMERMAN. I have one other question. When my friend, Mr. Andersen, speaks about the butter being yellow, that is just a figment of some man's imagination, is it not? In other words, he has just created that term because part of the time it is white and part of the time it is vellow.

Mr. GROSS. Will the gentleman yield?

Mr. ZIMMERMAN. Yes.

Mr. GROSS. It depends on the breed of cattle and the feed they eat. The yellow strains of cattle give yellow butter even in the winter.

Mr. ZIMMERMAN. You do not discriminate against all these cattle, do you?

Mr. GROSS. No; but I wanted to get the record straight that the feed has a very tremendous influence on the color as well as the breed and you also find the variation in the color of the yolks of eggs of chickens, depending on the feed they eat. The yellow in a chicken's egg is reflected in the color of her legs. We do not raise a row about the yolks of eggs.

Now, the coloring in butter has been resorted to in making a uniform product and not in deceiving anybody, but in making a uniform product due to the fact that at certain seasons of the year and certain breeds of cattle give a higher colored product.

Mr. ZIMMERMAN. I now yield to Mr. Abernethy.

Mr. ABERNETHY. In view of what the gentleman from Pennsylvania has said, I wondered if he would favor the imposition of Federal taxes, expecially such punitive taxes as are imposed on oleomargarine, on cows that give white butter in favor of those that give yellow butter? Mr. GROSS. There are no cows that give white butter. Holstein cows usually give a lighter butter than other breeds. The gentleman does not understand.

Mr. JOHNSON. Will the gentleman yield to me?

Mr. ZIMMERMAN. I want to get through my questioning.

The CHAIRMAN. Will the gentleman yield to the gentleman from Illinois?

Mr. ZIMMERMAN. Yes.

Mr. JOHNSON. I was a butter manufacturer for many years. I have churned many hundreds of thousands of pounds of butter. I have never yet seen a churn of butter that was not yellow.

Mr. ABERNETHY. Then why do they manufacture butter color? Mr. ZIMMERMAN. I wanted to ask one further question. I think

You spoke of taxes that were im-
What kind of a tax is that?

we can go into that a little later. posed upon margarine by States. Mr. WIGGINS. Table 1 of the four tables which I asked to have inserted in the record lists the taxes by the various States that have excise and license taxes on oleomargarine, both colored and uncolored.

The stars in the first column entitled, "Excise Tax, Colored," indicate that the sale of colored margarine is prohibited in those 23 States.

Mr. ZIMMERMAN. Yes. Now, I see that all these various States like Minnesota, from which my friend Mr. Anderson comes, and Wisconsin, from which my dear friend Mr. Murray comes, all prohibit the sale entirely. Is that right?

Mr. WIGGINS. Minnesota prohibits the sale of colored oleomargarine, period.

Mr. ZIMMERMAN. What about Wisconsin?

Mr. WIGGINS. Wisconsin does the same thing.

Mr. ZIMMERMAN. What tax is imposed on the sale of ordinary white margarine?

Mr. WIGGINS. In Wisconsin it is 15 cents a pound for uncolored margarine. Apparently there is no tax in Minnesota, no excise tax on the sale of uncolored margarine.

Mr. ZIMMERMAN. This is additional to the tax imposed by the Government, is it not?

Mr. WIGGINS. Additional tax; yes.

Mr. ZIMMERMAN. Oh, the margarine boys get it in the necks twice as much in these States, is that right, both by the Federal Government and the State Government?

Mr. WIGGINS. That is true, and in some 23 States the sale of colored oleomargarine is prohibited altogether.

Mr. ZIMMERMAN. I believe up in Wisconsin the boys would like to get rid of that tax as discriminatory and unjust. Do you know anything about that?

Mr. WIGGINS. I do not.

Mr. ZIMMERMAN. Do you know, Mr. Murray?

Mr. MURRAY. The gentleman who sat at the table at the dairy banquet with me said they were going to remove part of that State tax, but that is just one man's opinion and the legislature is not in session, so he had a right to make a statement if he wanted to. I still believe in States' rights.

Mr. ZIMMERMAN. You represent the dairy interests, do you not? Mr. MURRAY. No.

Mr. ZIMMERMAN. Do you not?

Mr. MURRAY. No.

Mr. ZIMMERMAN. Here is the third point: Who collects this Federal tax?

Mr. WIGGINS. The Bureau of Internal Revenue.

Mr. ZIMMERMAN. If a grocery man wants to handle margarine, colored or white, he has to make reports to the Government, does he not?

Mr. WIGGINS. That is correct. If either a wholesaler or retailer he has to file an application with the collector and pay the special Federal tax. Wholesalers have to keep specified records and make reports thereon.

Mr. ZIMMERMAN. I do not know whether you were before this committee about 3 years ago when this question was thoroughly explored, but a lot of people testified that they did not want to handle the product because of the inconvenience of making reports to the Government and being sure that they paid this Federal tax and rather than be bothered with that, they would not handle it at all and people could not get it. Do you know anything about that situation?

Mr. WIGGINS. I think practically a number of people do not handle it because of the trouble that they have with their reports.

Mr. ZIMMERMAN. Small people where they have little profit in handling a small amount of it, rather than to handle it at all and pay this tax, just refuse to handle it at all and it deprives the people of any chance to buy oleo in many communities.

Mr. WORLEY. Will the gentleman yield?

Mr. ZIMMERMAN. Yes.

Mr. WORLEY. Do you have any idea of how much it would cost in overhead to collect these taxes?

Mr. WIGGINS. That would be almost impossible to determine because it is handled by a division that handles other excise taxes. It would be difficult to allocate the cost of collecting this 6 or 7 million dollars a year.

Mr. ZIMMERMAN. The gentleman who was former president of the American Bankers Association is pretty closely related to rural life in South Carolina, is that not true?

Mr. WIGGINS. I am very proud to say it is.

Mr. ZIMMERMAN. In other words, that is the reputation that you have always had, of a very close relationship to the rural life of this country.

Now, I will ask you if it is a fact that the average country grocery man, the grocery man way down on the corner, who keeps books on his cuff, so to speak, and uses a lead pencil, is not going to keep an account of the tax of the little margarine buyers and make these reports to the Government, but he will stay out of the business of selling margarine rather than to go to that trouble, is that not right? Mr. WIGGINS. Some of them do.

Mr. ZIMMERMAN. A great many of them.

The CHAIRMAN. Mr. Fuller has a question.

Mr. FULLER. Mr. Wiggins, this is what you state: The taxes increase the cost of the product. They interfere with the consumer's freedom of choice in satisfying personal wants. How do you feel about the taxes on cigarettes from the standpoint of the smokers? Do those interfere with satisfying your taste?

Mr. WIGGINS. No; you can buy any brand you want with the same So far as the choice of brands, I do not think it interferes at all. Mr. FULLER. During your tenure of office, have you ever before appeared before any congressional committee and appealed or asked them to take off a Federal tax of any commodity?

Mr. WIGGINS. No excise tax, that I know of, in the 13 months that I have been here. We have not asked the removal of an excise tax until the present time.

Mr. FULLER. You have never before had the pleasure of appearing before a committee and begging them to take off a tax, is that correct? Mr. WIGGINS. That is correct, as far as I am concerned.

Mr. FULLER. But you feel that this time it is your duty and at the