OLEOMARGARINE TAX REPEAL

WEDNESDAY, MARCH 10, 1948

HOUSE OF REPRESENTATIVES,
COMMITTEE ON AGRICULTURE,
Washington, D. C.

The CHAIRMAN. The committee will come to order.

Mr. ANDRESEN. Mr. Chairmar, due to the lateness of the hour yesterday and to expedite matters, I did not ask one question that I wanted to of those representing the American Soybean Association. If the president of that organization is here, I would like to ask him one question.

Mr. PACE. Mr. Chairman, we have some other witnesses who have not been on. We need every minute we have.

The CHAIRMAN. Let the Chair make this suggestion: I am wondering, if we can leave Mr. Andresen's question out of consideration for a moment, if it would not be possible for the committee to agree that there will not be any questions asked of the witnesses who are called this morning. If we take time to question them, it will not be possible to hear more than one or two witnesses. There are, on the Chair's list, 10 organizations who have asked to be heard and they are all organizations which represent a great many people. I think they should be heard. By giving them 5 or 10 minutes each, I think we can hear from all of them, but, of course, we cannot do it if it is desired to interrogate them at length. Most of these witnesses have come some distance for the sole purpose of testifying at these hearings. If there is no objection, the Chair would like to proceed in that way, with the understanding that before we begin Mr. Andresen may ask a question of the president of the American Soybean Association.

Mr. PACE. Mr. Chairman, I want to submit this request, that each of the witnesses on the list be granted 5 minutes without questions. The CHAIRMAN. I do not think we can do that because there are enough witnesses on the list altogether to take up a couple of hours with 5 minutes each. The Chair had in mind recognizing the ones who represent the larger organizations.

Mr. PACE. I confine my request to the nine organizations which represent the greatest number of people.

The CHAIRMAN. Let the Chair suggest that among themselves they have agreed on a little different arrangement of time than 5 minutes each.

Mr. FLANNAGAN. It is understood that the other representatives who are not given the opportunity to testify will have the right to file a statement?

The CHAIRMAN. Yes; all parties who are here and who have asked to be heard will be given the opportunity to file a statement if they are not heard.

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Mr. RIVERS. Mr. Chairman, may I ask what the ruling of the Chair was with respect to the proponents' time on this matter? I have in mind the Government witness, Mr. Wiggins, who testified Monday. It is my understanding that the Chair ruled that would not be taken out of the proponents' time because he was a Government witness.

The CHAIRMAN. The committee has not passed on that question at all. I think it is something that can be excluded from the proponents' time, but the committee will have to pass on that. I call the gentle-man's attention to the fact that the proponents had an hour yesterday after 12 o'clock. The day before they had over 30 minutes after 12: o'clock. I believe that that will make up for any possible time that you may contend you lost by reason of the time being taken by a Government witness who was, perhaps, one of the best witnesses for the proponents of the legislation.

Mr. RIVERS. I would not reflect on the Chair's fairness because the Chair has been eminently fair to all of us and I am sure he has demonstrated that throughout. May I ask one other question, sir?

Mr. GoFF. Mr. Chairman, may I say just one thing? I believe under the rules that a witness is supposed to submit a written statement, if possible, and than make a brief oral summary of his testimony. Could we not handle it that way here? All these witness who desire to can put in a written statement.

The CHAIRMAN. They can all put in a written statement and what the Chair proposes to do is to permit some of the witnesses, as far down the list as we can go, to appear briefly with the understanding that they will not be questioned because if we are going to question them with long interrogations, we cannot hear very many of them.

Mr. ANDRESEN. Mr. Chairman, I might say that we had an agreement that each side was to have 5 hours. The proponents of the legislation have now used 5 hours and 45 minutes, and I certainly have no disposition to want to preclude any of the testimony from the ones who are favoring these bills. To say that we will agree not to question any statement made by any witness, it seems to me, is precluding the membership of the committee on either side from finding out the background or the reason for some of the statements made.

Mr. PACE. That applies only for the next 48 minutes, as I understand it. We expect to question your witnesses just the same as you

questioned ours.

Mr. ANDRESEN. I will say to the gentleman, I will put up my time against the time that the gentleman from Georgia and the gentleman from Texas will use and count that in. If they are willing to confine their questions to the time that I use, I certainly will welcome that proposition.

Mr. ABERNETHY. The gentleman used 26 minutes yesterday crossexamining one witness.

Mr. ANDRESEN. But the gentleman started that. I did not start it. I was here at 10 o'clock ready to go.

The CHAIRMAN. Is there objection to the request that the Chair has made with reference to the procedure this morning?

Mr. ANDRESEN. I object for the time being and I think the Chair can proceed in the manner he has indicated, but I certainly do not want to be precluded from having the opportunity to cross-examine some of the witnesses.

We

The CHAIRMAN. The first witness will be Mr. William Rhea Blake, executive vice president, National Cotton Council of America. will be glad to hear from you for 5 minutes, Mr. Blake.

STATEMENT OF WILLIAM RHEA BLAKE, EXECUTIVE VICE PRESIDENT, NATIONAL COTTON COUNCIL OF AMERICA

Mr. BLAKE. Thank you, sir.

Mr. Chairman and gentlemen of the committee, my name is William Rhea Blake and I am executive vice president of the Cotton Council. of America. Our organization embraces the six branches of the raw cotton industry, extending from Virginia to California throughout the 18 cotton-producing States. Like most of the other organizations that have appeared here and want to appear here this morning, we, of course, have prepared our statement.

Mr. Chairman, I would like to say that this statement contains. the answer to, I think, practically every question that has been raised by the committee during these hearings up until now with respect to the very vital interest which the cotton industry has in this question.

For that reason, I would like to urge the members of the committee who have asked these questions to read this statement.

There is a second point that I would like to comment on briefly. We have before the committee quite a few bills on this subject. Generally, however, they fall into three categories:

One, you have your outright repeal bill that would remove the taxes, license fees, regulations and what-have-you, on all margarine, regardless of whether it is made from domestic fats and oils or from imported fats and oils. Of course, most of the bills fall in that category.

Then you have another type of bill that would remove these taxes, regulations, and so forth, completely, but remove them only on the margarine that was made from domestically produced fats and oils.

Then you have Mr. Corbett's bill, which would simply reduce the taxes and license fees on yellow margarine to the same level as those that apply on white margarine and that would apply only on the domestic fat margarines.

Now, the position of our organization, which is not fully elaborated in this statement with respect to these particular things because they have come up since these hearings started, is that we are not opposed to any bill that is before this committee. As a matter of fact, we are strongly for any and all of these bills that are before this committee. We feel that this whole conglomeration of margarine taxes is a rotten mess that ought to be cleaned up and we do not think there are any other considerations that ought to enter into the matter when it comes to the complete repeal of all of these laws.

In saying that, I do not mean to imply in any way that we are in disagreement with the soybean people in their interest in a domestic fats bill. As a matter of fact, we heartily subscribe to their position and that is our preference, that the taxes be removed on margarines made from domestically produced fats and oils. I think our reasons. for that are obvious. Mr. Pace mentioned it yesterday. Of course, the cotton farmer is no more interested than is the soybean farmer in having imported fats and oils come in and shove him out of his markets in this country.

With respect to the Corbett bill, we feel that if that is the only thing we can get, frankly, gentlemen, we would much rather have it than nothing at all. We still do not think it is as effective or would be nearly as good as the outright repeal. Mr. Corbett himself made that statement when he introduced his bill yesterday. Our preference is the outright repeal with regard to the domestic fats. Howeyer, we would be glad to have any of these other bills rather than to have no bill at all.

Thank you.

Mr. ANDERSEN. Mr. Blake, I just want to make sure in my own mind that you favor all of the bills. Are you for the Corbett bill? Mr. BLAKE. That is right. We are for all of the bills, anything to get rid of these taxes.

(The complete statement of Mr. Blake is as follows:)

TESTIMONY OF WILLIAM RHEA BLAKE, EXECUTIVE VICE PRESIDENT, National COTTON COUNCIL OF AMERICA, BEFORE THE COMMITTEE ON AGRICULTURE, UNITED STATES HOUSE OF REPRESENTATIVES

Mr. Chairman and gentlemen of the committee, my name is William Rhea Blake. I am executive vice president of the National Cotton Council of America. This organization represents all six branches of the raw cotton industry, extending throughout the 18 cotton-producing States from Virginia to California. It includes the cotton farmers, ginners, warehousemen, merchants, spinners, and the cottonseed crushers.

The National Cotton Council was organized 10 years ago to give the whole industry a better voice in matters concerning the markets for cotton, cottonseed, and the products thereof. One of the 10 original objectives, which were written into the bylaws of the council when it was established, to remove from our statute books the laws designed to handicap and crush the development of margarine, a wholesome food product made chiefly from oil seeds grown by our cotton farmers and other farmers of America.

The entire industry was and is unanimous in the conviction that these taxes are a drain on the income of farmers and on the health of the Nation, and that they cripple productive enterprise in a thoroughly un-American way. Year after year the council's delegate members from all 6 industry groups and from all 18 cotton-producing States have unanimously renewed their determination to fight these taxes until they are off our statute books. We believe that now, at last, the real nature of these taxes is so well understood by the American people, and that public resentment over them has become so strong, that they cannot be tolerated any longer.

You will undoubtedly hear from a number of other producer and consumer groups who have dedicated themselves to the overthrow of the margarine taxes. Under the circumstances, I will confine my brief remarks largely to the special problem of the cotton industry, which I represent.

To understand how much this subject means to the people of the cotton States, it is first necessary to understand how completely these States depend upon cotton. There are hundreds of different fibers which serve the needs of mankind in clothing, household, and industrial uses. Those fibers include jute, hemp, sisal, linen, silk, nylon, and rayon. We live in a big world, with more than 2,000,000,000 people. Yet it can be conservatively stated that about one-fourth of all the fiber consumed in the entire world is produced on the cotton farms of the United States, in the States extending from Virginia to California. The concentration upon cotton in many of these States is astonishing to anyone who investigates it for the first time. Nearly one and a quarter million of our farms and more than five million of our farm people depend heavily on cotton for existence. In Mississippi, cotton and cottonseed provide about two-thirds of the entire cash farm income of the State. In eight Southern States, the farm income from cotton and cottonseed in recent years has averaged more than one-half of the total cash farm income from all crops combined and nearly two-fifths of the total cash farm income from all crop, livestock, and Government payments combined.

In all these States the farm income is a big part of the total income from every source, including trade, finance, transportation, and industry; and a major part of the income from all these other sources is based upon the handling of cotton.

Seldom do you find so big an area in which so much depends upon one farm crop. Cotton spells prosperity or depression in the South. Experience has taught us that prosperity in the South is impossible without prosperity in cotton, and that we can't have a prosperous nation, for any but brief periods, when there is depression in the South.

The income of cotton farmers is from the sale of two products, the cotton lint and the cottonseed. The greatest part is from the lint, but a very substantial part is from the seed. On an average, the seed brings about one-fifth as much income as the lint, but for millions of people that one-fifth is the margin between low income and starvation. The seed money holds a very special place in the economy of the Cotton Belt. To get the money to produce a crop, the cotton farmer is obliged to put it under mortgage, and when the crop is sold, the entire proceeds from the sale of the lint are used, more often than not, to pay expenses already incurred. The one part of the crop which is almost always left unencumbered in the hands of the man who grew it is the seed. By tradition and common business practice in the Cotton Belt, the seed money is almost never taken by the mortgage holder. The farmer relies on this money to carry him from the end of one crop to the beginning of another. It is usually this money that determines how much he can buy in the fall and winter months, how good a Christmas his family can have, and what, if anything, he can do toward providing himself and family with something more than the barest essentials with which to keep alive. The seed money creates the whole tone of business—it affects the whole outlook of the people—in a typical community of the Cotton Belt during the fall and winter months. For this reason the income from the seed has a significance out of proportion to its size, and there are few things about which the farmers and business people are more sensitive than the price of cottonseed. It has often been said that in the South the price of cottonseed is a hotter, more controversial subject, and a more explosive influence on the feelings of the people, than even the price of cotton.

What determines the price of cottonseed? The cottonseed oil mills divide the seed into four useful commodities-oil, meal, linters, and hulls-but in market value the oil is more important than the other three products combined. For the last completed crop year, oil provided about 55 percent of the market value of all four products. The oil, in turn, is consumed almost entirely as human food. The chief products of cottonseed oil are margarine, shortening, salad and cooking oil, mayonnaise and salad dressing. The two biggest uses are shortening and margarine. For the first 9 months of 1947, margarine alone took 32.5 percent of all the cottonseed oil consumed in this country, and was the biggest single use for the oil.

I hope that these figures make two points clear: First, that the price of cottonseed depends primarily upon the price of oil; and second, that the price of oil depends very heavily upon the market for margarine—so heavily that the margarine market can make it or break it.

To the cotton farmer, the cotton industry, and the whole Cotton Belt, the taxes on margarine stand today as a major issue of national policy. Few things are more important to this whole region. We think that every special tax on the manufacture and sale of this commodity should be removed without any further delay, and our feeling is based on five principal reasons:

First, these taxes rob us of our big opportunity to avoid or cushion any future set-back in the price of cottonseed by developing a new market. The production of edible oils from American farm products has been running nearly 50 percent ahead of the prewar rate. This greatly increased production is supported by an unprecedented demand arising from a world-wide shortage of fats and oils. However, as this shortage is filled and as the present high demand returns to more normal levels, it is perfectly clear that we are going to have to expand our domestic markets for edible oils or face a drastic decline in the price and in the production of these oils in this country. The millions of American farmers whose economic existence is at stake in this impending crisis demand that these antimargarine laws be removed and thereby permit them to open up the domestic margarine markets for their products.

Second, these taxes strangle one of our greatest opportunities to improve the whole economic situation of the cotton farmer in the years ahead. Cotton and cottonseed are produced together, and the farmer's situation depends on what he can get from both of them. The price that he can get for one affects the price that he can afford to take for the other.

We have to concern ourselves with the whole range of uses through which both the lint and the seed compete with other commodities for the consumer's dollar. In recent years the cotton industry has been placed under the severest