ministrative authority to do this. We are examining the details and will be discussing them with the industry. It may be that if certain difficulties develop we might have to ask for legislation, but my present belief is that we could do this administratively. There would be a number of details that would have to be worked out because it does mean rather complex changes in the method of handling these matters, the method of guaranteeing that we do get payment and the like.

Senator LONG. Here is the thing I am thinking about, Mr. Surrey. This really is something which amounts to a manufacturers' excise tax, does it not?

Mr. SURREY. Yes, sir.

Senator LONG. Now with regard to all of the manufacturers' excise taxes, you tax the product at the time the manufacturer departs from title to it. And here is a concern that has traditionally paid a much higher percentage of tax than any other industry in the country, and to help relieve your own administrative burden we gave you a law so you can tax these people prior to the time they part title with their product. Insofar as the time from the moment they pay the tax until they part title to their product can be reduced there is equity and justice on their side in asking for such a reduction in time.

Mr. SURREY. Yes, and there is a difference here as the Senator points out between alcohol and tobacco in this respect.

Senator LONG. Any further questions?

Senator TALMADGE. Mr. Chairman, I have one question I would like to ask if I may.

Senator LONG. You will submit the memorandum?
Mr. SURREY. Yes.

(The information referred to follows:)

ALCOHOL AND TOBACCO TAX PAYMENT SYSTEM

Prior to June 1959, the taxes on alcoholic beverages and tobacco products, with certain minor variations, were paid through the purchase of stamps which had to be affixed to the products at the time of their withdrawal from the bonded premises. In June 1959, the payment system was changed to a semimonthly return system. Under this system, the tax is computed on withdrawals during two periods, the 9th through the 23d of a month, and the 24th through the 8th of the next month. Payment of the tax so computed is due a the end of the third working day after the end of a period, except that only 2 working days are allowed for payment for the period ending June 23 of each year. The present semimonthly system therefore requires taxes to be paid on the average of about 111⁄2 calendar days after withdrawal of the products.

The time elapsing between withdrawal of distilled spirits and cigarettes from bonded premises until the producers receive payment therefor from their customers varies between products and between manufacturers. The period is much longer in the case of distillers because they give much more generous credit terms than cigarette manufacturers. At the same time, there is a much greater diversity of credit terms between distillers than cigarete manufacurers. A rough average of the time of withdrawal until receipt of payments by manufacturers might be set at 30 days for cigarettes and 60 days for distilled spirits. At the fiscal 1966 level of revenue estimates, the tax on cigarettes for 30 days is $170 million and on distilled spirits for 60 days is $460 million.

Senator TALMADGE. Mr. Surrey, I notice no deduction was made whatever on trucks in the excise tax bill and I thought immediately of the small farmer, the small operator who uses a pickup truck not only for business purposes but as his family conveyance also.

It is my understanding that all of the tax on trucks was dedicated to the trust funds for highway purposes. How much is involved on pickup trucks?

Mr. SURREY. I would have to see, Senator. I am informed that right now the figures are not carried on that basis. In other words, we have only overall collections for the truck tax itself.

Senator LONG. Could you get us a breakdown on small trucks?

Mr. SURREY. I will inquire and see whether such a breakdown is possible.

Senator TALMADGE. Thank you.

(The following was later received for the record :)

The tax revenue arising from the 10-percent manufacturers' excise tax on trucks, buses, and trailers as it applies to pickup trucks depends on the definition of such trucks. Estimates have been made under two possible definitions:

(1) Defined as two-axle, four-tire trucks having a gross registered weight of up to 8,000 pounds, pickup trucks would account for 70 percent of all trucks and would provide an estimated 45 percent of the total tax revenue from the tax on trucks, buses, and trailers, or approximately $175 million.

(2) Defined as trucks with gross vehicle weight of 6,000 pounds or less, pickup trucks would account for about 60 percent of all trucks and would provide perhaps one-third of the total tax revenue or about $130 million.

Senator LONG. Thank you-Senator Dirksen?

Senator DIRKSEN. Mr. Surrey, I listened to Secretary Fowler's justification yesterday for the administration's position on the reduction in automobile excises as distinguished from the House bill. Now, the administration only goes up to 5 percent.

Mr. SURREY. Yes, sir.

Senator DIRKSEN. The House bill by January 1969 would take off the entire 10 percent?

Mr. SURREY. Yes, sir.

Senator DIRKSEN. Mr. Fowler rather emphasized the fact that it might be well to keep that additional 5-percent tax as against any possible recessive condition in business at some future time.

I thought he emphasized that over and above everything else. But it appears to me that you could not get rid of that additional 5 percent at some later time if the country was in a state of recession, first, because a recession connotes a reduction in volume of business and in production, and that means a corresponding decrease in corporate income tax. It would also mean a corresponding decrease in individual income tax and those are the two on which we rely most heavily.

We might then be confronted with the necessity of scrounging around for next taxes in order to keep the governmental machine going or we would have to resort to reduced spending, but there you fly in the face of a large group who are committed to the theory that when you are in a recession you should spend more rather than less, and you are confronted with still another situation and that means that if you continue to spend more your deficit position is going to be aggravated to that extent.

I would not, I could not see under those circumstances that you could ever persuade Congress to take over that additional 5 percent, and I am inclined to the belief that the House position is infinitely better than the administration position.

Have you some comment on that?

Mr. SURREY. I don't think, Senator, that Secretary Fowler rested the position just solely on that particular possibility. I think the

position of the administration rests on a number of matters, the principal one being that the elimination of a tax involving a billion dollars 3 or 4 years ahead is just simply looking too far ahead. One can have no idea now of what the economic situation will be that far ahead, and that there is no need for a Congress now to look that far ahead. Therefore, the tax should be retained so that future Congresses can in the light of knowledge that is much closer to the event, make a decision as to what to do with a billion dollars, and I think that is the basic position one should take.

With respect to the comment that Secretary Fowler made, that was in reply to questions asked him as to whether this be an appropriate tax to remove in time of recession. I suppose that that question would be asked from the viewpoint of a number of economists who might feel that rather than spend in a recession in order to swing the economy back on an upturn rather than a downturn, one might decide that there ought to be some reduction in taxes. As you know, there is one group of economists who think that is the proper approach as the country believes it is coming to a recession period.

I think that is what Secretary Fowler had in mind.

Senator DIRKSEN. I have not examined the House testimony and, therefore, I don't know to what extent the House committee heard from the economists who are particularly schooled in the economic factors involved in the motor industry.

But, Mr. Chairman, if I can have your attention for a moment, it would occur to me because of the large amount that we are dealing with so far as the excise tax reduction on passenger automobiles is concerned, that the committee could well afford to get a little more information on that subject, at least I would like to have a little more, before I would accede to the administration position, because we might find ourselves in a bind before we got through, and I wonder what your view is and that of the chairman.

Senator LONG. Well, I regret to say I was at the moment trying to get one point straight with Senator Anderson about a totally different matter that does not even involve this particular bill.

Senator DIRKSEN. I was just belaboring the difference between the administration and the House position on the reduction on automobiles, because the House takes it off entirely by January 1, 1969. I thought Mr. Fowler yesterday, in justifying the administration position, rather emphasized the need for keeping a little cushion as against the future, and he did mention the possibility, not the probability, of a recession. Well, in a recessive period I cannot imagine you would ever get that tax off, and speaking only for myself, I would rather go along with the House position than with the administration position unless I have more information on the subject and that is why I suggested that probably there ought to be a little more testimony from the automobile industry.

One may fairly suppose that having dealt a lifetime with that subject we would certainly have some special knowledge with respect to conditions of the impact of reduction over a period of time and leaving a 5-percent bobtail tax continue as against some future time. Senator LONG. Well, we were hoping to go into executive session on this bill today, and we were scheduled to do so. Of course, I have no objection to the automobile people bringing in all the information

they want to bring to us, and I will step out of the room and accept the memo that they want to bring us. But so far as delaying the bill, there is urgency in so many respects my hope would be, Senator, you could vote on it one way or the other now. It would still be in conference even if the administration position prevails, and it will still be subject to debate on the floor. And I must say that industryand I am one of their big admirers-is not poorly represented. It is well represented by very fine, able people who are well aware of everything that is to be said for the industry. They are well prepared, and while it would be fine to hear them, if we open it up, I am sure the Senator realizes that everybody who is paying an excise tax would like to be heard-even if only to make a gesture to justify the fee he is charging his clients back home-and I am afraid we would very much delay this bill.

Senator DIRKSEN. Well, Mr. Chairman, I am not disposed to delay the bill. On the other hand, I do not want to see the committee make a blunder because of the amount of money that is involved here in that one particular tax, and besides there are going to be quite a number of amendments. I have got a whole sheaf here, and I suppose every member of the committee has got amendments that would be discussed.

Senator LONG. May I say to the distinguished minority leader of the Senate, I have an amendment or two myself, and my guess is if each of us brings up witnesses to support our amendments, we are going to be here for a week or two when this bill has a certain amount of urgency to it.

Suppose we decided with the administration and it proves to be in error. We could still correct that error next year or the year after that and it still would not make any difference so far as the tax collections are concerned. They would still get the same tax cut they are expecting now.

Frankly I doubt the wisdom of my voting for a billion dollar tax cut that would take place after my next election. The people might not agree with my decisions in that matter, and I ought to have a chance to explain the reduction of Federal revenues and increase in Federal deficit after my next election.

I somewhat doubt the wisdom of the Ways and Means Committee voting a tax cut to go into effect after their next election and their next election and their next election after that, and it seems to me that the next President ought to have an opportunity to recommend some tax cuts too, but that is just this Senator's view, and if he is voted down, he will cheerfully go along with the committee.

Senator DIRKSEN. Well, Mr. Chairman, let me disclaim any political motive. After all, I am going to be around here until 1968 or 1969 before the voters have another chance to either accept or reject my public service, and the record is quite clear, so I certainly have no political motive in mind.

But when you are dealing with a billion dollars in a tax cut on one particular item, I certainly do not want to move so fast that at some future time we may have to lament some blunder.

Now, the Senator from Florida is going to make an observation, and I would like to hear it.

Senator SMATHERS. The only observation I am going to make is that apparently after I questioned the Assistant Secretary yesterday as to why the Hosue recommended the reduction as it did, and did we not

need to have something held back in the event of a recession, presumably I suddenly became in the minds of the automobile people the proponent of the administration position because I want you to know that I have literally been inundated with telephone calls from automobile dealers in my State, some few from out of my State, who really made their position very clear which is that they liked the House bill and do not like the administration bill.

What I want to say is that I think that we know what their position is. They have certainly made it clear to me in the last 24 hours, as I think they probably have with every member of this committee.

I do not necessarily agree with them entirely, but on the other hand, I have got a whole ream of telegrams and information here which they have supplied.

Senator LONG. Some of my wires are coming in-Tom Jones, Ford; Bill Smith, General Motors; so and so, Chrysler-and just signing their company's name, if the company calls them, as well as theirs.

So I can understand how the people like to be heard in discussing this matter. And may I say to the companies-I am not trying to keep them from getting a tax reduction. I just pursue the Bob Kerr philosophy-we had not ought to do that now, let us wait for two or three elections before it takes place. But if the committee wants to go ahead and cut it all out, that is the committee's privilege if it wants to.

Senator DIRKSEN. Well just to keep the record straight, when they went before the Rules Committee of the House to get a rule on this bill, Howard Smith of Virginia, the chairman, asked Wilbur Mills whether the administration favored the House bill. Now, I read you from the notes of the Rules Committee:

Mr. Mills said, "Yes, they asked for all the cuts we made except the last five points of the automobile tax. However, they will go along with the committee bills."

Now, that is as clear as words can make it, and if that is the situation, then I think there is some clarification necessary here.

Senator LONG. Well, it seems to me it is just as clear as Irvin S. Cobb's story of old Bill Smith in the back of his barroom. He is the proprietor, and the bartender comes back and says, "Bill, old Bunk is out there, and he wants a beer on credit. Should I let him have the credit?" Bill says, "Has he had the beer?" The bartender said, "Yes." Bill replied, "Then give him the credit."

So what the Ways and Means Committee says here is "This is how it is going to have to be." If the administration is willing to go along with this rule, the administration says yes. Inasmuch as the beer has already been consumed, you might as well let him have the credit. Senator HARTKE. Mr. Chairman, could I ask Mr. Surrey a question? Senator LONG. Yes.

Senator HARTKE. What is the administration's position?

Mr. SURREY. The administration's position is very clear on this point as the Secretary stated yesterday. The administration believes that the President's recommendation that the tax reduction on automobiles at this time be held to five points is the proper and prudent course of action. There is time thereafter to deal with this question of a billion dollars. That is essentially the position that Senator Long has stated.