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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. COвв. 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. Cовв. 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. Cовв. 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. COBB. 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.
The CHAIRMAN. If they could pay it at all, it could come out of any of these funds.
Mr. BOILEAU. This is merely a pool and there is no authority for the Government taking the $5,000,000 out of it.
Mr. COBB. No, sir; I do not think there would be.
The CHAIRMAN. I certainly think there would be if it is a part of the fund and you have authority to use that at all.
Mr. COBB. Yes, sir; but we could not pay this out except to those who surrendered certificates to the pool.
The CHAIRMAN. The expense this year would be infinitely less than last year.
Mr. BOILEAU. This last year, he says, they took in $90,000. The CHAIRMAN. I do not see any use in bothering with that. I think we should wait until we get those figures.
Mr. FULMER. I think this should be cleared up for the record. Moneys paid through that pool were the property of the farmers.
Mr. COBB. Private property.
Mr. FULMER. And, you could not use any of that money in reimbursing ginners or anybody else. The question asked by Mr. Marshall was as to whether you would be able to pay your expenses to the ginners out of the processing tax collected or whether you would call on the Treasury of the United States for an extra appropriation.
Mr. Cовв. We will not call on the United States Treasury. We propose to pay it out of the processing tax, and in my own judgment there is much opportunity to pay it out of the taxes to be collected under the Bankhead Act.
Mr. FULMER. That should settle that question.
The CHAIRMAN. I do not think there is any question at all that whatever administrative cost is incurred, if you have authority to pay it at all, you can pay it out of any of these funds, including the pool. That is a substitute for the tax, and whatever funds come in from any of this program, if you are authorized to pay the administrative cost out of funds, you could do it. I do not think you would be wise to do it. I think it would be better to do it the other way. But certainly you would have such authority.
Mr. BOILEAU. The $14,000,000 refers to and represents the farmers' own property.
The CHAIRMAN. Not any more than the processing tax does.
The CHAIRMAN. Yes; but his allotments are subject to the administrative costs.
I do not think as a matter of policy you would be justified but I do think you would have legal authority.
Mr. BOILEAU. The effect of that would be to penalize the unfortunate man who did not produce enough.
The CHAIRMAN. I do not agree with the policy, but I am talking about the legal authority. I think you could, if you had authority to do it at all, I think it would be unwise to do it. Wherever it is taken, it will be taken out of the fund that would ordinarily go to the farmers, and I think it ought to be left at as low a figure as is consistent with the reasonable and essential extra expense.
Mr. COBB. The ginners will cooperate with us in that, Mr. Chair
The CHAIRMAN. I think they will.
Mr. COBB. I would just like to say this further that-I intended to say it earlier that many of the expenses, as Mr. Doxey has indicated, and as Mr. Kleberg has indicated, will not recur this year because we will get things under way long before the ginning period begins and ginners will not have to hold this cotton under heavy insurance charges and many of the other expenses that they were put to this year would not arise again.
Mr. Hook. Do you think it will cost 50 cents a bale this year or not?
Mr. COBB. I do not think so.
Mr. FULMER. Is it not a fact that that pool money is private property and it would be impossible under the Bankhead Law, or any other law, to take part of that to reimburse anybody else?
FURTHER STATEMENT OF ALGER HISS, ATTORNEY, SOLICITOR'S OFFICE, DEPARTMENT OF AGRICULTURE
Mr. Hiss. I would like to explain it a little more fully than that. The act, in section 9-D, provides that any and all certificates of exemption may be transferred or assigned in whole or in part-that means by the farmer-in such manner as the Secretary of Agriculture may prescribe, and shall be issued with detachable coupons, and so forth.
The Secretary of Agriculture prescribed that they could not be assigned except through a pool at the minimum price of 4 cents.
If the Secretary of Agriculture could and should rule they could not be assigned at all, then the money that went to purchase certificates would have had to go in payment of taxes because the man who needed extra certificates could not have gotton them and would have had to pay taxes.
I fell, personally, as a matter of law, it would be very doubtful whether the Secretary could, under this language, which says they shall be transferred or assigned in such manner as he directs, say flatly they could not be assigned at all. Consequently, it would seem to me that once you allow assignment, then whatever is paid for that belongs to the man who holds the certificate.
The CHAIRMAN. Yes; but the law only permits them to be assigned under regulations issued by the Secretary of Agriculture.
Mr. HISS. That is correct.
The CHAIRMAN. And, the administrative costs come out of funds collected by this bill. That is a part of the administrative cost, and I think certainly if it is collected it would be, as a matter of law, entitled to be used for administrative costs in collecting and disbursing whatever is necessary in any funds that are collected. While it is private property, I think you will find, as you go into it, that any of these expenses can be paid out of any funds collected, any administrative expenses. I think it would be unwise to take them out of that particular fund, but I think if you will look over the act you will find undoubtedly that the administration costs can be paid out of any funds collected, out of the pool or otherwise. I agree it would not be wise to do it, but if you can pay these ginners at all, you can pay them out of these funds.
Well, gentlemen, we were discussing this the other day, and I do not know how long this committee wants to run on this subject. There are a number of Members of Congress who desire to be heard. Does the committee want to run indefinitely on this subject?
Mr. FULMER. I think it would be well to have Mr. Cobb come back and take his time, especially on the various bills pending. We have not had an opportunity to get his views, and I believe it would be helpful to us if we have to frame some legislation.
The CHAIRMAN. Mr. Cobb was unable to get here on time this morning, and I was out of the room when they took him off his feet, but I do not think he has talked much this morning and I expect Mr. Cobb better come back in the morning and we will meet here at 10:30 o'clock.
Mr. BOILEAU. I would like to suggest Mr. Cobb prepare in the form of suggested legislation such proposals as he desires in the event the committee decides to enact new legislation.
The CHAIRMAN. Have you looked over the various bills, Mr. Cobb, with the thought of which ones are more desirable as legislative matters?
Mr. Cовв. We have looked over them rather carefully, Mr. Chairman, and the only suggested amendment that I believe has not been covered in the testimony is that that would set up appeal boards. That question was not asked, and I forgot to cover it. The appeal boards have already been set up.
There was another question and that was the matter of the elections in the various counties and within the States, and that has already been taken care of as a matter of administrative policy, and we are electing the local committeemen.
The CHAIRMAN. Assuming the committee decided it wanted to pass legislation, have you looked over any of these bills with that thought in mind?
Mr. COBB. We have looked them all over and had them all briefed. The CHAIRMAN. You would not care to express an opinion as to the relative merits of the bills?
Mr. COBB. Well, some of the bills have to do with the processing tax and are entirely out of the field of discussion, as I understand it, but I believe that bills having definitely to do with the Bankhead Act have already been analyzed, and the questions you would ask naturally, I think, have been answered.
The CHAIRMAN. I am sure the committee, having gone this far into this matter, would be glad to have you here tomorrow morning.
Mr. COBB. I would be glad to come back.
The CHAIRMAN. We will try to avoid bringing other witnesses in while this witness is testifying. If he does not have the information we seek, and either agrees to get it later or have someone else appear later and give the testimony, it will save a good deal of time. I understand Mr. Thompson was called in. After this, let us, as much as possible, stay with the witness; otherwise we get too far afield and we do not get the information we really want.
Mr. BOILEAU. I want to request the chairman to ask the Department to prepare in the form of a bill such changes as they propose and such changes as they recommend, so that we can have it in the