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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. 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
ent tobacco markets to look after the Government's interest in the matter of collection of taxes?
Mr. THOMPSON. I understand they have. I do not know very definitely. We have no objection to the Government putting an employee to every gin if they want to do that to collect the tax.
Mr. COOLEY. The Government is paying the cost of administration of that bill, and, in this case the ginners are actually doing it at their own expense.
Mr. THOMPSON. Yes.
Mr. COOLEY. Have not the cotton farmers benefited materially from this Bankhead bill?
Mr. THOMPSON. That is an economic question that the best minds in the country differ on.
Mr. COOLEY. Is not your interest so definitely tied up with the interest of the cotton producers that you should be willing to cooperate with them?
Mr. THOMPSON. We are cooperating with the cotton producers to the best of our ability.
Mr. COOLEY. Now, as I understand it, there is some understanding between yourselves and the Department whereby the Department is considering the payment to you for that service. Mr. Cobb said they had a sympathetic feeling toward you in that regard.
Mr. THOMPSON. Yes.
Mr. COOLEY. From where is it proposed that that $5,000,000 should come?
Mr. THOMPSON. I declare I could not tell you where it will come from.
Mr. COOLEY. Mr. Cobb, could you answer that?
Mr. COBB. Out of taxes that might be collected and out of the moneys that would be made available to carry on the program as a whole.
Mr. COOLEY. That is money that should come from the cotton industry or from the taxpayers?
Mr. ČоBB. Some of it would come from the cotton producers who pay taxes at the gin. This would be the gin tax, taxes collected under the Bankhead Act.
Mr. COOLEY. Could that be paid to the ginners and still make the Bankhead bill self-supporting?
Mr. COBB. Now the Bankhead Act-the expense of conducting the Bankhead Act has come out of the revenues that were allotted to the cotton program as a whole.
Mr. COOLEY. I appreciate that. I mean could these ginners be paid and still charge that up to the Bankhead Act, and still have the Bankhead Act self-supporting?
Mr. COBB. That would depend on the amount of taxes collected and that would depend on the amount of cotton produced beyond the allotment.
Mr. COOLEY. What is your judgment on that?
Mr. COBB. I beg your pardon?
Mr. COOLEY. Do you believe that this could be paid-this service be paid for and still make the Bankhead Act self-supporting?
Mr. COBB. I do not want to hazard a guess on that.
Mr. COOLEY. When your Department was considering the payment to these ginneries for these services, you were not sure as to whether or not it would be charged to the taxpayers or charged to the producers of cotton? I mean the general taxpayers?
Mr. COвв. I do not know what you have in mind.
Mr. COOLEY. Would this extra $5,000,000-assuming that to be the figure would that be a charge upon the general taxpayers, or are there enough revenues coming in under the Bankhead Act to pay that out so that it will not come out of the General Treasury.
The CHAIRMAN. The way the laws are drafted, that could not come out of the General Treasury without special authorization.
Mr. COOLEY. I have no objection, so far as I am concerned, if this $5,000,000 can be paid indirectly by the cotton industry; but, if it is coming out of the general fund, that is a different proposition.
The CHAIRMAN. The general fund cannot be used, and they could not give consideration to that without special authority. The only consideration they could give would be to use some of the funds made available for this purpose either out of the cotton processing tax or the Bankhead tax.
Mr. COOLEY. If the Department makes a regulation providing for payment to these ginners, and if that causes the cost of the administration of the act to mount that much higher and not enough taxes are coming in from the processing tax, somebody will have to pay that, and I feel this committee is entitled to know as to whether or not that service is to be paid for by the cotton industry or by the general taxpayers.
Mr. ANDRESEN. It will be taken out of the returns to the producers in the end.
Mr. COOLEY. If there is enough money available under the operation of the Bankhead Act, that is true, but if this is going to increase the cost of administration to the point where there is not going to be sufficient return from the processing tax, then it will have to be paid for by the Treasury.
Mr. Cовв. We have not anticipated that it would run beyond our budget.
Mr. COOLEY. I did not get the answer.
Mr. Cовв. We have anticipated that this would be paid out of the revenue collected for conducting the cotton program as it is now collected.
Mr. MARSHALL. The question I wanted to ask is this: I am interested to know, if you can furnish them now-or do you know how much cotton has been sold on which there is a tax paid of the last year's crop, in order that we might know how much taxes were raised by the Bankhead bill?
Mr. COBB. Last year's experience would not be a criterion by any manner of means.
Mr. MARSHALL. Give us some idea. Can you furnish those figures?
Mr. COBB. The total allotment under the Bankhead Act last year was 10 million 500-pound bales or 10,460,000 standard 478-pound bales. Now then, the crop harvested last year approximated 9,731,000 bales.
Mr. MARSHALL. Is there no set of figures by which you can answer my question? Can you not answer it in simple words?
Mr. Cовв. I do not see how.
Mr. MARSHALL. There certainly is some record to show how much money was collected.
Mr. COBB. The Internal Revenue Bureau can answer you that. The CHAIRMAN. I know the Internal Revenue Bureau furnished me those figures about 30 days ago, the amount of money collected by the Bankhead tax and the number of certificates.
Mr. MARSHALL. Would that be available to the committee?
The CHAIRMAN. I would be glad to either make that available or ask Mr. Cobb to get the Internal Revenue Department to furnish it down to date, and then put it in the record.
Mr. HOPE. I would like to have Mr. Cobb finish the statement he started.
Mr. COBB. I can give the gentleman the figures of the amount of surplus certificates sold through the pool, but I cannot tell him what the taxes would be at any particular time.
The CHAIRMAN. I think up to about 30 days ago there were $35,000,000 collected in taxes.
Mr. COBB. You mean thousands of dollars not millions of dollars. But maybe I do not know what you have in mind.
The CHAIRMAN. Under the Bankhead Act-I better not hazard the statement, because it has been nearly 30 days since I looked at it; but the Internal Revenue Bureau reported to me, or their report showed, the number of bales on which a tax had been actually collected.
Mr. MARSHALL. That is what I am interested in.
The CHAIRMAN. Up to that time, and that was probably 30 days ago.
Mr. COBB. There was an excess of some 700,000 bales of certificates. Now, we set up a pool in Washington to handle those excess certificates and have sold approximately $16,000,000 worth of these excess certificates. I imagine that probably there was an almost equal amount of excess certificates sold within the counties that cleared through the county office. A certificate could be sold within the county but could not be sold beyond the county line. All certificates that were surplus in a county cleared through the national pool here. There were $16,000,000 worth of certificates cleared through the national pool, and we are now engaged in sending out checks covering the sale of those certificates to those who surrendered excess certificates to the national pool.
Mr. FULMER. As a matter of fact, that money goes back to the farmer.
Mr. COBB. That money goes directly back to the producers themselves. Now, then, with an excess of some 700,000 bales of certificates beyond the needs this year the Internal Revenue Bureau has collected some tax. Now, what that tax is I do not know.
Mr. MARSHALL. I am interested in how much cotton was sold over and above the exemption.
Mr. COBB. There was no cotton sold over and above the exemption. Mr. MARSHALL. Then, there would not be any tax.
Mr. CовB. There was some tax collected.
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