Sommer, Hugo. H., professor of dairy industry, University of Wis- 402 Strauss, Anna Lord, president, League of Women Voters_ Strayer, George M., secretary, American Soybean Association__. Taylor, Tyre, general counsel, National Association of Retail Grocers__ Truitt, Paul, president, National Association of Margarine Manu- Twyman, Robert J., Ninth District of Illinois, Chicago, Ill. 120 126 156 Wiggins, Hon. A. Lee M., Under Secretary of the Treasury- 5 127 OLEOMARGARINE TAX REPEAL MONDAY, MARCH 8, 1948 HOUSE OF REPRESENTATIVES, The CHAIRMAN. The Committee will come to order. Before we proceed, the Chair wants to make this announcement: I know the committee will all very much regret to learn that Mrs. N. E. Dodd, the wife of the Under-Secretary of Agriculture, passed away Saturday evening. The funeral services will be held this afternoon at the Hines Funeral Home, 2901 Fourteenth Street NW. I am sure that in view of the high respect all members of this committee have for Mr. Dodd that they all regret to learn this sad news. Mr. ANDRESEN. Mr. Chairman, may I inquire as to the division of time between the proponents for oleomargarine and those in opposition? The CHAIRMAN. The Chair has advised sides that the time will be divided equally. or a total of 10 hours, so it will be divided 5 know who we will charge Mr. Wiggins to. going to say. the spokesmen for both We have 5 days assigned, hours to a side. I do not I do not know what he is Mr. MURRAY. Charge him to oleo. The CHAIRMAN. We will work that out. As far as Government witnesses as such are concerned, we will take that from the total time. Of course, the committee may find it necessary to run past 12 o'clock or possibly have an afternoon session if we can get permission to do so, but we want to try to confine the testimony to 10 hours if it is possible. That is all we can definitely count on in any event. Mr. ANDRESEN. Then, Mr. Chairman, when the proponents of the legislation have occupied 5 hours of the committee's time, that will mean the end of their time? The CHAIRMAN. Why do we not leave it this way: If we do take more than 5 hours for the proponents, we will give an equal amount of time to the opposition. What I am thinking of is that we ought to close the hearing, as far as the proponents are concerned, at 11 o'clock on Wednesday. They may have occupied more than 5 hours up to that time, if we run past 12 o'clock on either day, but if they have, then the opposition will have an equal amount of time. Is there any objection on the part of any members of the committee to that arrangement? (The following was submitted:) Hon. CLIFFORD R. HOPE, Chairman, Committee on Agriculture, DEPARTMENT OF AGRICULTURE, House of Representatives. DEAR MR. HOPE: In response to your request of February 9 for a report on H. R. 5284, there is attached for the consideration of your committee a factual analysis of the ecnonomic effects of the bill. 1 The prevailing taxes upon oleomargarine are a part of the permanent law enacted by Congress a number of years ago. In view of the increasing quantities of domestic oils used in oleomargarine, the desirable substantial increase in the use of milk as fluid milk and for ice cream and the increasing dependence on oleomargarine it appears desirable that the situation be surveyed by the Congress and a determination made as to whether, as a matter of public policy, changes should be made in these laws. The Bureau of the Budget advises that it has no objection to the submission of this report. Sincerely, CHARLES F. BRANNAN, ECONOMIC EFFECTS OF H. R. 5284 H. R. 5284 is a bill to repeal section 3301 and part I of subchapter A of chapter 27 of title 26 of the United States Code, except in their application to oleomargarine containing any fat or oil of foreign origin. Section 2301 of the code levies an excise tax of one quarter cent per pound on manufacturers' sales of oleomargarine except that the tax is at the rate of 10 cents per pound on oleomargarine which is yellow in color. Part I of subchapter A of chapter 27 of the code establishes a special annual tax of $600 on manufacturers of oleomargarine, and special annual taxes of $480 and $200 on wholesalers of colored and uncolored oleomargarine, respectively, and $48 and $6 on retailers of colored and uncolored oleomargarine, respectively. The repeal of section_2301 would take effect the day after enactment of the act; the repeal of part I of subchapter A of chapter 27 would become effective July 1, 1948. During the period between the day after enactment of the proposed act and July 1, 1948, H. R. 5284 provides that wholesale and retail dealers who vend no oleomargarine except uncolored oleomargarine shall pay the presently effective special taxes of $200 and $6, respectively, but no specific provision is made as to whether wholesalers and retailers of colored oleomargarine shall pay any special taxes during this period. Clarification on this point would seem to be advisable. Manufacturers apparently continue during the interim period to be subject to payment of the $600 annual tax. In 1937-41, 77 percent of the fat used in oleomargarine was of domestic origin, consisting chiefly of cottonseed, soybean, and oleo oils. Another 18 percent was coconut oil, largely of Philippine origin. The remaining 5 percent consisted mostly of babassu oil, which is of Brazilian origin. In the first 10 months of 1947 domestic oils comprised 96 percent of the total fat used in oleomargarine. Coconut oil accounted for the other 4 percent. Over one-third of the margarine made from coconut oil in the first 10 months of 1947 was for export. Most vegetable oils of foreign origin are subject under present legislation 2 to Federal taxes of 3 cents per pound, or more, as a result of import duties, excise taxes on imports, taxes on the first domestic processing, or a combination of these. The principal exception among oils suitable for use in oleomargarine is babassu oil, which is bound free of duty, excise on imports, and domestic processing tax by the trade agreement with Brazil. The manufacturers' excise tax of 10 cents per pound on colored oleomargarine was equivalent to 24 percent of the average retail price of oleomargarine in leading cities in the United States in December 1947 and to more than 50 percent of the retail price in prewar years. The rate. of one-quarter cent per pound paid on uncolored oleomargarine represented 0.6 percent of the retail price in December 1947 and slightly over 1 percent of the prewar retail price. Annual consumption of colored oleomargarine in the United States in 1942-46 averaged 0.1 pound per capita, compared with 3.4 pounds per capita of uncolored margarine. Repeal of the excise taxes on both colored and uncolored margarine made exclusively from fats and oils of domestic origin probably would result in a price for the colored product about the same as for the uncolored. Colored oleomargarine containing imported fat, however, presumably would sell at a price 10 cents per pound higher than that for oleomargarine containing domestic fats only. Uncolored oleomargarine containing imported fat apparently would be 1 Oleomargarine sold for export to a foreign country is exempted from the manufacturers' excise tax by sec. 2307 of the code. 2 For references to such legislation, see United States Tariff Rates on Agricultural Products published by the Bureau of Agricultural Economics, U. S. Department of Agriculture, August 1946, and Industry Report-Fats and Oils published by the Office of Domestic Commerce, U. S. Department of Commerce, January 1948. 0.25 cent per pound higher than the uncolored product made exclusively from domestic materials. The existence of competition between uncolored oleomargarine and butter is indicated by the fact that year-to-year changes in the consumption of butter are usually accompanied by changes in the opposite direction in the consumption of uncolored oleomargarine. No data are available for determining the degree of competition that might exist between butter and colored oleomargarine if prices of the latter were at about the same level as prices of uncolored margarine. From July 1940 to June 1945 the special tax on manufacturers of oleomargarine totaled $148,347, equivalent to about 0.006 cent per pound on 2,482,000,000 pounds of oleomargarine sold by manufacturers in that period. In the same 5 years, the special taxes on wholesalers and retailers of oleomargarine totaled $7,377,459, equivalent to about 0.34 cent per pound on 2,166,000,000 pounds of oleomargarine handled by wholesalers and retailers in the United States and Territories. This tax is equivalent to about 0.8 percent of the December 1947 retail price. Repeal of the special taxes on manufacturers, wholesalers, and retailers of oleomargarine containing only domestic fat would tend to lower the retail price of such oleomargarine slightly and the number of retail outlets handling such oleomargarine probably would increase. Provisional estimates published by the Bureau of Agricultural Economics in The National Food Situation for October-December 1947 indicates a supply of 11.5 pounds of butter per capita for United States civilians in 1947. This was about 5 pounds per capita less than the annual average of 1935-39. The supply of oleomargarine for United States civilians in 1947 amounted to about 5 pounds per capita, nearly 2 pounds more per capita than in 1935-39. In a survey of food consumption made in the spring of 1942, a larger consumption of oleomargarine was reported by families at low-income levels than by those at the higher levels. Households with incomes from $500 to $1,000 reported 88 percent more oleomargarine purchased than households with incomes from $2,000 to $3,000.3 Surveys of food consumption by urban families in September-October 1944 and February 1945 showed a larger consumption of oleomargarine by high-income families than by low-income families. During this period, however, red ration stamps were required for the purchase of butter, other food fats and oils, and most meats. The attached tables show domestic disappearance and average retail price of oleomargarine, 1919-47, and for recent years the relative importance of the principal fats and oils used in the manufacture of oleomargarine and the importance of oleomargarine as an outlet for these fats and oils. Oleomargarine: Percentage contributed by principal items to the weight of fats and oils used in manufacture, United States, 1937–46 Source: Bureau of Agricultural Economics. Computed from reports of the Bureau of Internal Revenue. 3 Table 27, p. 98, Family Food Consumption in the United States, Spring 1942, U. S. Deptartment of Agriculture Misc. Pub. No. 550. Families with incomes from zero to $499 annually purchased less oleomargarine than families with incomes from $500 to $1,999 but as much as or more than those with incomes of $2,000 or more. Production of specified fats and oils in the United States, and quantity used in the manufacture of oleomargarine as a percentage of production, average, 1937-41, 1946, and January to October 1947 Computed from reports of the Bureau of the Census, Bu reau of Internal Revenue, and United States Department of Agriculture. Oleomargarine, actual weight: Domestic disappearance, per person, and average retail prices, leading cities, United States, 1919-47 Source: Division of Statistical and Historical Research, Bureau of Agricultural Economics. Domestic disappearance, per person, computed from reports of Bureau of Internal Revenue and Bureau of the Census. Retail price, leading cities, from Bureau of Labor Statistics. Mr. ABERNETHY. Mr. Chairman, May I inquire to whom the testimony of the Treasury Department and other departments will be charged that appear before the committee? I The CHAIRMAN. The Chair stated a little while ago that he is unaware of what position these departments are going to take. think we will probably have to charge that to both sides. I do not think it would be fair to charge one side with the Government's testimony. I am sure that all the members of the committee are very happy to have with us again after quite an absence the Under Secretary of the Treasury, Mr. Lee Wiggins. We will be glad to hear from you at this time, Mr. Wiggins. |