held accountable to a penny and it takes a bookkeeper to keep track of it, as Mr. Cobb indicated.

Finally we got a permit permitting us to deliver that cotton in the yards to the nearest warehouse if we paid the drayage. There is one item of drayage amounting to $180 for delivering 1,000 bales 12 miles from a yard way out in the country to a warehouse to get it off the ground. We did not get that ruling until way late. That is as briefly as I can make the picture.

Mr. ANDRESEN. You make settlements with the farmer and you collect a tax from him, is that correct?

Mr. THOMPSON. The law says I am to collect off of him, that script, cash money equal to 5.67 cents per pound, or a lien payable to the United States Government based on 5.67 cents per pound. I am a tax collector for the Internal Revenue Bureau getting one of those three things or I have the cotton I gin.

Mr. ANDRESEN. What is the total tax you collect from the producer?

Mr. THOMPSON. The total tax of $28.85 per bale on 500 pounds of cotton.

Mr. ANDRESEN. You collect that from the farmers?

Mr. THOMPSON. On each bale, either in script, money, or liens.

Mr. ANDRESEN. The ginners want extra compensation to cover the cost of the bookkeepers and extra service that they render for the Government in connection with the administration of the Bankhead Act which they cannot pass back to the producer.

Mr. THOMPSON. That is right. These records cost lots of money. The bond premium costs money, and the help. We are doing our best to cooperate in making the thing a success. We have answered thousands of questions and wired him for interpretations for the farmers. We are contacting every farmer all over the State every day.

Mr. ANDRESEN. As I understand it, the processor also collects a tax.

Mr. THOMPSON. In the cotton mill; yes, sir. I do not know anything about that.

Mr. ANDRESEN. That is passed on to the consumers.

Mr. THOMPSON. Yes.

Mr. ANDRESEN. How do the farmers feel about the Bankhead act?

Mr. THOMPSON. Well, how would you feel? That is, if I am allowed to ask that.

Mr. ANDRESEN. I do not raise any cotton. I could tell you if I was a ginner or raising cotton, but I would like to have your reaction. You are representing them here.

Mr. THOMPSON. I will tell you, Mr. Andresen, I am vice president of the National Cotton Ginners' Conference, representing 14,000 ginners. Our president is sick, so he could not be here, and I am speaking in his stead. The ginners, of course, feel it is an unfair burden placed on them, making them Federal employees without pay and under bond. We know that once the picture is presented to the Department, Mr. Cobb having already told you how they view the problem, that they are in sympathy with us, and we know that once you see it you will realize we are rendering a service that

must be fendered. We are the only industry in America that contacts all of any of our particular group almost daily during those 3 months he mentioned.

Mr. FULMER. You are not concerned about the Bankhead act but about the extra expense.

Mr. THOMPSON. That is right.

Mr. FULMER. The tax collected at a cotton gin has nothing to do with the collecting of a tax from a manufacturer of cotton.

Mr. ANDRESEN. If the ginners were put to extra services because of any Federal law, then other institutions, processors who are in line with the ginners, who are put to extra work and extra compensation on account of the operation of any Federal law, should also receive consideration. Would not that be correct?

Mr. THOMPSON. I understood the internal-revenue collector at Dallas, in answer to that same question, to say that the processors and wheat millers and all were allowed to pass that expense on to the producer.

Mr. COBB. I think that is right.

Mr. THOMPSON. They are being considered because when the bills were passed they can add the extra cost into the finished product. The ginner does not finish any product, just fixes the commodities for the market. We do not deal with the price of the commodity. We take the seed out of it and give it back to him and charge him for taking the seed out of it.

Mr. ANDRESEN. There is competition in every line where they are engaged in processing. You have competition there. You should have a code establishing a minimum price for the ginning of cotton and then you would not have this difficulty. That is all.

Mr. KLEBERG. I hope you will ask Mr. Thompson one additional question, and that is as to how much travel expense they were put to in trying to conform to this Act, and a great many ginners had to go back and forth to different places at their own expense. I hope Mr. Thompson will make a complete statement on that.

Mr. THOMPSON. That was a very large item. The Brownsville district is located 400 miles from the Austin internal-revenue office and the cotton was on the yard and we had to make numerous trips in connection with the matter, and we had telegraph and telephone expenses wiring for supplies and so on. If I ordered 500 tags and due to the drought cotton opened faster than it was supposed to have opened, opened prematurely, and the farmer brought me 518 bales, I was out of tags and I could get no more tags that first month until the end of the month, and my original application did not take that into consideration. The bond was posted for 500 tags, 1,000 tags, or 1,500, and so on, and those various things brought about a great deal of traveling expense that amounted to several cents per bale. Of course, if everything is ready and handled by mail and express, that expense will be largely eliminated except for these costs. Very few ginners will mail these in by registered mail. There would be $25,000 worth of certificates maybe in one lot, and he is under bond, and will not mail them 300 or 400 miles. He may have a cotton gin worth $25,000 and his bond is only $2,500, and his bond will pay up to that amount and his property has to cover the rest of it.

Mr. BOILEAU. The committee understands this expense is 59 cents a bale?

Mr. THOMPSON. That was the Texas average. I have the United States average. I would like to give you that. The United States average was 49.8 cents on some 1,600 gins that I have a report on. We will probably have some more tomorrow.

Mr. BOILEAU. Is not that really a service to the farmers that the farmers should pay for, that should be passed along, and should you not increase the charges that you make for ginning?

Mr. THOMPSON. No, sir.

Mr. BOILEAU. This entire Bankhead bill is not predicated on the theory of collecting taxes for the Treasury of the United States, but is merely a method of using the taxing power of the Government to render a service to that producer to enable him to get higher prices. The purpose is to assist the cotton farnters, and in view of that fact, do you not think that is a charge that should properly be placed on those who benefit from the act-namely, the producers? Mr. THOMPSON. No, sir.

Mr. BOILEAU. Is it not possible that you should pass that on to the farmers?

Mr. THOMPSON. Impossible.

Mr. BOILEAU. Could you not assume that to be just as much an item of expense as the cost of labor and machinery, and charge accordingly, especially in view of the fact that all ginners have that same expense?

Mr. THOMPSON. No, sir.

Mr. BOILEAU. Why not?

Mr. FULMER. The ginners are unable to pass anything to the farmers, whereas the wheat millers and the textile industries are thoroughly organized with bookkeeping and everything else and do pass it on.

Mr. BOILEAU. It could be considered just as much an expense and could be passed on in competition. In the competitive system, that should be taken into consideration and that could be passed on to those who benefited from the act-namely, the producers.

Do I understand you to say that during last year, for instance, you would have charged just as much for ginning as you did if you did not have that additional expense of collecting this tax?

Mr. THOMPSON. Yes, sir; we charge our regular rates.

Mr. BOILEAU. Would your rates have been any lower if you had not had this extra expense?

Mr. THOMPSON. No, sir.

Mr. BOILEAU. So that it cost you 59 cents-your cost was 59 centson every bale of cotton you ginned?

Mr. THOMPSON. That is right.

Mr. BOILEAU. And was there a wholesale bankruptcy among ginners during the last year?

Mr. THOMPSON. There is.

Mr. BOILEAU. Why do not the industry, just as a pure matter of economics and good business judgment, pass on that cost as an additional cost of doing business just as much as labor and machinery, and therefore charge a price to the farmers that will enable the ginners to at least break even?

Mr. THOMPSON. I am governed by my customers. If our standard price in that section is 30 cents and you buy an old and run-down gin and put it up across the street from me, and that cost you $4,000 to erect and I had a $30,000 plant giving good service, and you open up at 10 cents, my customers force me to 10 cents.

Mr. BOILEAU. Would not that competitive method cause you to reduce your price of 59 cents a bale if you did not have this additional cost?

Mr. THOMPSON. No, sir.

Mr. BOILEAU. Would not you have the same possibilities of competition if you did not have this standard fixed charge?

Mr. THOMPSON. We have no fixed charges. It is just a custom that has grown up throughout the South.

Mr. BOILEAU. If you did not have to pay that tax, why would not the small fellow go ahead and buy an old broken-down gin and start ginning this cotton and charge 59 cents a bale less than you fellows do now?

Mr. THOMPSON. They do.

Mr. BOILEAU. They do?

Mr. THOMPSON. I mentioned in my first talk we had cutthroat competition down as low as 20 cents.

Mr. BOILEAU. Is it not a matter of just economics and business if you increase the cost to all ginners 59 cents a bale, that that could be very easily passed along, just as well as any other item of cost unless your industry is so unorganized and there is so much unfair competition that you are bound to go broke under any circumstances?

Mr. KLEBERG. Might I interject that the statement I placed in the record is a very fair answer to the question. Certain sections of the State, due to their location, and so forth, and due to other physical defects operate under this law at a far greater cost than in other sections?

Mr. BOILEAU. Then we must admit that our entire theory of competition in business is all wrong, and it seems to me the ginners ought to get together and have an N. R. A. code.

Mr. CUMMINGS. Just one question: When this Bankhead bill passed Congress cotton was then about $30 a bale; it is worth about $60 now, is it not?

Mr. THOMPSON. Cotton was more than that when the Bankhead bill passed.

Mr. CUMMINGS. I mean the Agricultural Adjustment Act.

Mr. THOMPSON. Yes.

Mr. CUMMINGS. It is about double the price due to legislation in Congress.

Mr. THOMPSON. Yes.

Mr. CUMMINGS. If it was worth about $30 and it is worth $60 now, do you not think it looks kiddish to take the time of this committee and Congress fussing about 59 cents when you have a $30 increase?

Mr. THOMPSON. I do not think it looks a bit kiddish. I think when my Government makes me an internal-revenue collector under bond under an act passed by Congress, I am entitled to pay just the same as anybody else who works for the Government.

Mr. CUMMINGS. We increased the value from around $30 to $60, and here we are talking about 59 cents a bale.

Mr. THOMPSON. I am not the farmer; I am the ginner.

Mr. FULMER. For the benefit of the record, it ought to be stated that this expense of 50 cents or 60 cents was largely brought about because of this being a new bill and the delay in getting out regulations. After the experience of the past year, no doubt it will not cost half that amount.

Mr. THOMPSON. We cannot estimate the cost this year. Mr. Cobb will get that stuff out as soon as possible.

The CHAIRMAN. You understand, of course, that whatever is paid out of this will probably be paid out of the funds collected and, therefore, paid out of the funds that would otherwise go to the farmers; and I hope the ginners will be willing, notwithstanding what the expense was, to hold their figures as to the essential continuing cost to as low a basis as possible, in order that administration costs might be taken care of.

Mr. THOMPSON. We will do that, Mr. Jones. We are anxious to cooperate with the Department. Anything the farmer gets helps, and if we can reduce the costs to him it help him pay his other bills. Mr. Hook. Is there any reason why the ginners are not organized the same as the wheat men or the textile industry?

Mr. THOMPSON. Well, there are 14,000 ginners with small, individual plants erected from here to California. The flour mills are few and are large corporations, and the textile industry have large concerns, usually with efficient business management; and I may be out here, just a small farmer, with a little money, and I will decide to build a gin for me and my neighbors, and I cannot see organization, I cannot see cooperation like big business men can.

Mr. Hook. With 1,600 gins, you ought to be able to get them organized.

Mr. THOMPSON. Fourteen thousand gins.

Mr. Hook. Well, with 14,000 gins.

Mr. HOPE. Would it not be a little fairer to compare the cotton ginners in a little trading center with the man who operates a grain elevator and buys the farmers' grain?

Mr. THOMPSON. The threshing machines would be the best comparison.

Mr. HOPE. In comparison with the man who operates a big mill. Mr. MARSHALL. Just as a member of this committee, I would like to have some idea as to the amount of money involved in this proposition that you are here in behalf of. What is it going to cost somebody if you get the relief you are seeking; about what is the total bill?

Mr. THOMPSON. Well, basing it on the reports we have received, if that is a fair average, and I suppose it is, they cover all the States, and they are coming in by mail, based on that, the average cost at 49 cents a bale or 50 cents on a 10-million-bale production would be $5,000,000.

Mr. MARSHALL. Now, Mr. Chairman, for my information, it seems to me an item like this is big enough that if it is going to be taken care of other than from the benefited class, which would be the producer of cotton, it does not seem to me it ought to be taken care of as a matter of regulation, but by enactment of this Congress.

Mr. COOLEY. Is it not a fact that in the administration of the tobacco bill that the Government has provided for people in the differ