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Mr. COBB. Well, this will not do that. This will not have the effect of increasing the total beyond the amount that we think we will be able to make in 1935 and carry out the program under the act.
Mr. KLEBERG. What would it be should you include all farmers, tenants, and share-croppers?
Mr. COBB. Probably 12 or 15, maybe 14 or 15 million bales would be produced.
Mr. KLEBERG. That is the point I wanted to develop.
Mr. GILCHRIST. Mr. Chairman.
The CHAIRMAN. Mr. Gilchrist has a question, Mr. Cobb.
Mr. GILCHRIST. Mr. Cobb, I have been impressed with the statement of the chairman and Mr. Doxey and of Mr. Fulmer, with respect to these exemptions, both as to the administrative feature involved and the result which you say you are trying to obtain.
What is your objection? I do not as yet appreciate the objection that you have raised or the Department has toward giving the tenant farmer or the share-cropper the same exemption that the small farmer might have under your regulation?
Mr. CоBв. The objection is that if we extended it to that degree this automatically will have the effect of producing many more bales of cotton than would be produced otherwise, and it will automatically have the effect of drawing an enormous quantity of cotton away from other producers.
Mr. GILCHRIST. All right. Let that be understood, but if the purpose of the program is to help the small producer, the fellow who does not have much production now, why do you not help the smaller one, the man who has the smaller crop?
Mr. COBB. Well, we believe that this two bales to the farm proposal is as far as we can go and at the same time maintain a position that will have the effect of maintaining prices, and, after all, the thing that is going to help the producers in the Cotton Belt is the maintaining of prices at a point that will make it desirable and, we hope, profitable to produce cotton.
When we go beyond that point we are going to run into the problem of producing more cotton than is required and break down the price structure and everybody, all of them, will suffer alike.
Mr. Gilchrist. If the purpose is to raise the price, or to keep the price from going down too much why, of course, we should not raise too much cotton. But, is there not some arrangement that can be made that will help the small man and still not produce too much cotton, and if not, why not?
Mr. COBB. As I explained a while ago, the average plantation upon which the tenant farmer resides already has a good base history.
Mr. GILCHRIST. A what?
Mr. COBB. A good base history, because it has been producing cotton on a large percentage of the land over a long period of time. Because of that fact they have been given a good allotment under the Bankhead Act, as will be the case, normally. Now, to include all and add them to this particular group that we have been talking about here this morning would result in too much cotton if administratively possible.
Mr. GILCHRIST. Well, I am not convinced about your statement; I do not see, in the last analysis, why it could not be made applicable
to both classes. I do not think the answer is given, in your statement, to that proposition.
Mr. Cовв. That is the point, however.
The CHAIRMAN. I do not think the answer is satisfactory either, Mr. Gilchrist. We have one or two other matters, however, we would like to touch on.
Mr. GILCHRIST. Yes.
Mr. BOILEAU. I have one other question.
The CHAIRMAN. Mr. Boileau.
Mr. BOILEAU. Under the existing law have you authority to make regulations that would exempt the share-cropper and the tenant?
Mr. COBB. I am going to ask Mr. Hiss to answer that.
Mr. Hiss. I should say to the same extent, Mr. Boileau, as is provided for the other.
Mr. BOILEAU. In other words, you could, the share-cropper, and the tenant?
Mr. Hiss. Yes.
Mr. DoXEY. I want to ask a question on that.
The CHAIRMAN. Yes.
Mr. DOXEY. In regard to the answer you just made to Mr. Boileau, that you could exempt the share-cropper and the tenant under your interpretation of the Bankhead bill. Will you point out the authority that you have that would permit you to make any exemption at all?
Mr. Hiss. You mean the provision that Mr. Cobb has been speaking about?
Mr. DoXEY. Yes.
The CHAIRMAN. Have you finished, Mr. Boileau?
Mr. BOILEAU. I have finished; yes.
The CHAIRMAN. I want to go into that legal side of it just a moment, too. Before doing that, I told the committee the other day that I had a letter from the Department furnishing information given by the Internal Revenue Bureau's report of the amount collected as ginning tax. I have it here and I would like to put it in the record.. This is dated January 11. It is something over a month old, but the cotton year had largely passed when this was made up. They show collections of $35,022.99.
They had collected, in the pool, $9,553,786.71.
I will not take the time to read the whole letter, but it is estimated at this time, the date of this letter, that the pool will sell in excess of 700,000 bales of certificates.
Mr. BOILEAU. Do you have the amount that the pool paid out?
The CHAIRMAN. Well, they said it was estimated that the pool will sell in excess of 700,000 bales of certificates which will leave something less than 500,000 bales unsold.
Mr. MARSHALL. May I ask you a question, Mr. Chairman?
Mr. MARSHALL. The question I would like to ask you is, your interpretation of what that means: Is the $35,000 all that the Government is actually going to get out of it?
The CHAIRMAN. The Government actually collects?
Mr. MARSHALL. Yes. The question is what is the Government going to get; do I understand that the $35,000 is about all?
The CHAIRMAN. Well, there is nothing from this year's tax outside of this fund. There is a doubt as to whether they could use this fund. The Bankhead bill provides that all funds collected may be used for the payment of administrative expenses, and refunds of taxes, and some other privileges which may be granted to the Secretary.
Mr. MARSHALL. What I am getting at is this: Am I to understand, from your statement as contained in that letter, that the only return that is going to reach the Government, all the Government will get out of it for the past year, is the $35,000?
The CHAIRMAN. $35,000; I assume probably it will reach $50,000; but it is a minor amount.
Mr. TOBEY. What can they use that for?
The CHAIRMAN. They can buy these certificates. I think the last was about $20, was it not?
Mr. Hiss. About that.
The CHAIRMAN. The tax has been $28 to $30, so they buy the certificates, naturally, wherever they can, instead of paying the tax, and then transfer the certificates purchased for the tax.
Mr. Cовв. That figure will run about $92,000, Mr. Chairman.
The CHAIRMAN. As I said, this letter is dated January 11, and probably it covers the period of returns somewhat previous to Christmas and perhaps the figure does not cover collections that have been made for some time.
Mr. Cobb says that it will be about $92,000 instead of $50,000. I would like to have permission to insert this letter in the record. However, I would like to have the figures brought down to date, Mr. Cobb, when the final statement is inserted.
Mr. COBB. I will be glad to do that.
The CHAIRMAN. As of the latest date available.
Cotton-ginning tax, July 1, 1934, to Feb. 1, 1935.
(This data has been secured from the Internal Revenue Bureau and shows the total collection of cotton-ginning tax between July 1, 1934, and Feb. 1, 1935, to be $229,671.75.)
(The letter above referred to is printed in the record, as follows:)
Hon. MARVIN JONES,
UNITED STATES DEPARTMENT OF AGRICULTURE,
House of Representatives.
DEAR MR. JONES: In accordance with your recent request for information with respect to the operation of the national surplus tax-exemption certificate pool I have obtained the following details from the cotton section:
At the close of business on January 7, $13,560,694.73, representing 339,017,350 pounds of cotton, had been received in Washington from sales of certificates from the pool. Certificates have been surrendered from 17 States-Illinois and Kentucky being the only two which have not surrendered certificates. Sales have been made in 18 States-Kansas being the only State which has not purchased any surplus certificates. It is estimated at this time that the pool will sell in excess of 700,000 bales of certificates, which will leave something less than 500,000 bales unsold.
The Bureau of Internal Revenue reports that up to and including November 30, 1934, $35,022.99 had been collected as ginning tax. Their December report will not be available until January 20. As a basis of comparison I have obtained
the amount of money received by the pool as of December 1, 1934. This is tabled below:
Amount of money received in the pool as of Dec. 1, 1934–
Pounds of cotton represented-.
Collection of ginning tax by Bureau of Internal Revenue as of
$35, 022. 99
At this time it is only possible to give you an estimate on the poundage sold directly between producers. The individual counties have not submitted their reports and have indicated that it will not be possible for them to do so until around the end of March, after the ginning season. As an estimate that should be considered as meaning little the pool estimates that sales between producers might be around 50 percent of that poundage sold by the pool.
Selecting several counties at random from the few reports that have been received, this percentage is indicated:
$9,553, 786. 71 238, 842, 317
(3) Cotton harvested prior to the crop year 1934-35.
(4) Cotton having a staple of 11⁄2 inches in length or longer.
6,985, 000 8,767, 445
As this information becomes available, I will see that it is brought to the attention of your office.
FRANK A. BROWN, Administrative Assistant.
The CHAIRMAN. Now, I want to go into the legal phase of this thing a little bit, Mr. Hiss.
Mr. Hiss. Yes.
The CHAIRMAN. On what basis can this exemption be justified under the present act; what provision of the act would justify it?
Mr. Hiss. My statement, Mr. Chairman, may get me into the field covered by Mr. Cobb a little bit.
That will be taken care of under authority conferred by section 7 (a) (3). In other words, it would not be exempt as such. The exemptions as such are specified in section 4 (e):
No tax shall be imposed under this Act with respect to
(1) Cotton harvested by any publicly owned experimental station or agricultural laboratory.
(2) An amount of cotton harvested in any crop year from each farm equal to its allotment.
There will be no attempt
The CHAIRMAN. You say it is under subsection (3) on page 5? Mr. Hiss. That is right; subsection (3) of section 7 (a).
The CHAIRMAN. Section 7 (a)?
The CHAIRMAN. Near the top of the page?
Mr. Hiss. Such allotment to any farm shall be made upon application there for and be made by the Secretary based upon
such basis as the Secretary of Agriculture deems fair and just, and will apply to all farms to which the allotment is made under this paragraph uniformly, within the county, on the basis for classification adopted.
The CHAIRMAN. Now, conceding for the purpose of argument that provision might be carried out and that the exemptions may be made, you realize, of course, that in all matters we must make the tax uniform. Do you think that that provision would enable you to grant exemptions to one small farmer that are not granted to another small farmer? In other words, the individual farmer who owns his farm, and not to the little tenant or share cropper. If you are right in your contention that authorizes you to make that distinction, do you think that it would be legal if done under that provision, if it is subject to that interpretation?
Mr. Hiss. Mr. Chairman, it is my understanding of the requirement of uniformity in Federal taxation that wherever a reasonable classification in groups can be made those people can be treated differently from the people outside that classification; now my understanding is
The CHAIRMAN. I agree with you in that theory. But there must be a reasonable classification.
Mr. HISS. Yes.
The CHAIRMAN. And not an arbitrary or unreasonable one.
The CHAIRMAN. Now, do you believe it is a reasonable basis for classifying the small farmer who happens to be farming his own land and not include the fellow who, for the time being, perhaps for just 1 year or 2 years, is a rental farmer; is that a reasonable basis, in your opinion?
Mr. Hiss. In answering that question I will have to probably go into the field which is more nearly Mr. Cobb's territory, in attempting to explain, in my opinion, what would be involved in the question of fact as to what is a reasonable classification.
Administratively, it seems to me, that if the allotment is put on a personal basis you have got to consider the question of adminis
There will have to be the base history of the particular land the individual is farming, taking the past history. And if you have to go to the individual tenant, the difficulty is in arriving at the facts, on an individual basis, where that tenant has moved from one place to another.
On the individual basis each landowner can divide up his land so as to make, we will say, each tenant farmer fall within that particular exception.
The CHAIRMAN. I can see the difficulties that would arise. But I think that you overlook this basis or distinction: That you might take the whole thing to the landlord by saying to him. Here is a tenant; he will be allowed so much of the farm to be divided among the tenants. We will allow the exception for the two bales and make