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. Čовв. 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. COBB. 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. COBB. We have not anticipated that it would run beyond our budget. Mr. COOLEY. I did not get the answer. Mr. COBB. 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. COBB. 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. Cовв. 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. Cовв. There was some tax collected. 118908-35-SER D-— 4 Mr. MARSHALL. How could there be, if no farmer sold more than his exemption entitled him to sell? Then, there would not be any tax collected. Mr. COBB. There were thousands of farmers who sold more cotton than was covered by their exemption certificates, but there was a surplus of exemption certificates available to them that they could buy at a price less than the tax, and that could be used in lieu of the tax, and that is why this $14,000,000 worth of certificates cleared through the national pool here in spite of the fact that we had a surplus sufficient to cover 700,000 bales of cotton; yet producers have paid into the Federal Treasury thousands of dollars in taxes. We do not have the complete figures showing the amount. Mr. DOXEY. Many farmers did not produce their allotment? Mr. COBB. Even so, those farmers went ahead and paid the taxes. It might have been because the surplus certificates were not immediately available to them. Mr. DoXEY. The reason there were some farmers who had to pay a tax, and, on the other hand, there were those who produced less than the total Federal allotment, is because a good many farmers did not produce their individual allotment. Mr. COBB. There were thousands of farmers that did not produce their individual allotments; and there were hundreds of farmers, and maybe thousands of farmers, who could have gotten excess certificates but preferred, for some reason that we do not know, to go ahead and pay the tax rather than bother with buying excess certificates from some other man that had not produced his quota. Mr. MARSHALL. I guess I don't know anything about the Bankhead bill. I understood the farmer who raised more cotton than permitted, if he sold the excess he paid a tax. That is right, is it not? Mr. COBB. He may or he may not. Mr. MARSHALL. How does he keep from it? Mr. COBB. If you produced more cotton than your allotment and I have produced less cotton than my allotment Mr. MARSHALL (interposing). Can you trade with each other? Mr. COBB. I can sell you my excess certificates with which you can cover your excess baleage. Mr. MARSHALL. Then, the fellow that does not raise cotton gets something of value for not raising it, is that true? Mr. COBB. No; it does work out that way. A man would rather have the cotton than a tax-exemption certificate. Mr. MARSHALL. A farmer who did not raise as many bales as the Bankhead bill permitted him to raise, I suppose he would just sell the cotton he had. I did not know he was entitled to a tax-exemption certificate for that he did not raise. Mr. COBB. He is entitled to an allotment under the act and that allotment may be more or less than he will make in any year, depending on the weather and other factors that influence the yield per acre and the baleage he will make. Mr. FULMER. A farmer, for instance, has a 50-bale allotment and for some reason only produces 40 bales of cotton; that left him with 10 exemption certificates. Mr. MARSHALL. I see how it worked. Mr. BOILEAU. Did the Government get any of that money? Mr. COBB. Of course, the $90,000 that were paid into the Federal Treasury. Mr. BOILEAU. Where did that come from? Mr. COBB. From farmers who produced more cotton than their exemption certificates would cover, and who preferred to pay the taxes. Mr. BOILEAU. $90,000? Mr. COBB. Ninety some odd thousand dollars is the figure I have now, but which as stated is incomplete. Mr. DOXEY. Was there not some price on the exemption certificates handled through the pool? Mr. COBB. Yes. Mr. DoXEY. What was that price? Mr. COBB. Four cents a pound. Mr. BOILEAU. If we should pay $5,000,000 to the ginners, where would that money come from if only last year $90,000 was paid into the Treasury. Mr. COBB. Last year could not be used as a measuring stick at all. Mr. BOILEAU. Do you anticipate greater returns to the Treasury next year? Mr. COBB. Naturally, I think. Mr. MARSHALL. Where would it come from? Mr. COBB. Out of taxes paid by those who had excess baleage beyond their allotment. Mr. ANDRESEN. Up to $5,000,000? Mr. COBB. It might run several times that, Mr. Andresen. We have sold this year $14,000,000 worth of certificates through the pool here and probably an equal amount has been sold out in the States. Mr. BOILEAU. That does not come to the Treasury. Mr. COBB. No; it does not come to the Treasury, but it does indicate what a large amount of money would be collected under these taxes if the baleage produced approximates the allotment. Now then, this year's total allotment, or the total baleage that can be produced, will range around 11,000,000 bales. The CHAIRMAN. You could use those funds just the same to pay that with if authorized to do it? Mr. COBB. We are not so authorized under the act. The CHAIRMAN. It comes from the sale of those certificates. That would be a part of the fund. Mr. Cовв. That is right. Mr. BOILEAU. If we are going to have conditions anywhere near right where such production is concerned, the farmers will buy these from other farmers who misjudged the production and there will not be any revenue to the Government. The CHAIRMAN. These were sent to the pool, you understand. Mr. BOILEAU. By farmers who did not produce that amount of cotton. Is not that likely to happen again this year? The CHAIRMAN. Well, they collected $14,000,000 this year. The CHAIRMAN. They could take out of that fund, before it is sent back, of course, the operating expenses. Mr. BOILEAU. I did not understand they had that authority. |