In addition to this, H. R. 10660 proposes an additional increase of 5.8 percent in the form of a new Federal weight tax. I feel that with this terrific tax increase I have adequately shouldered my burden without the addition of the Federal license fee.

Therefore, I earnestly request this committee to eliminate the weight-tax provision from this bill as it is punitive, unjustified, and discriminatory-and in my case, approaches confiscation.

Thank you.

The CHAIRMAN. Thank you very much, Mr. Brothers.
Any questions?

The next witness is Mr. Lacey V. Murrow, of the American Automobile Association.

STATEMENT OF LACEY V. MURROW, HIGHWAY CONSULTANT, ACCOMPANIED BY K. B. RYKKEN, SPECIAL ASSISTANT TO THE EXECUTIVE VICE PRESIDENT, AMERICAN AUTOMOBILE ASSOCIATION

Mr. MURROW. Mr. Chairman and members of the committee, my name is Lacey V. Murrow, of Washington, D. C. I am consultant on highway matters to the American Automobile Association. Appearing with me is K. B. Rykken, special assistant to the executive vice president.

The American Automobile Association wishes to express its appreciation for the privilege of making a formal statement at this hearing. At the outset we would like to say that last year, when alternative proposals were being considered to finance an expanded Federal-aid highway program, the AAA strongly advocated pay-as-you-build financing as compared with revenue bond financing. Within the framework of the pay-as-you-build approach, our major concern has been, and still is, an equitable distribution of the taxload as between the different classes of highway users.

When the AAA appeared before the Ways and Means Committee of the House of Representatives early this year, it presented a tax structure which would have provided for a higher rate of taxation to be paid by large trucks than the tax rate to be paid by passenger cars and small trucks. This tax-rate differential was based upon a greater rate of tax on diesel fuel than on gasoline, and a greater rate of tax on tires and tubes used by large trucks than the rate of tax on similar items used by passenger cars and small trucks.

The AAA made those recommendations because it believes that equity in highway finance requires taxation of heavy trucks to be at a higher tax rate than the rate paid by passenger cars and light trucks. This view is supported by a number of objective studies and statements made by State legislative and executive agencies in recent years. Typical of these studies and statements which reveal that across-theboard taxes are no longer an adequate measure of highway use are those made in the States of California, Iowa, Ohio, Louisiana, Minnesota, and New York.

The fact that a tax rate differential as between classes of vehicles reflects equity in highway user finance is punctuated by enactments of the legislatures of all 48 States, which have adopted special tax devices under which heavy trucks pay more than would be obtained

from them under an across-the-board tax structure. These special devices include the following:

1. A greater rate of tax on diesel fuel than on gasoline. This differential, which conforms with the reduced costs and greater efficiency of diesel fuel, has been adopted in seven States, namely California, Iowa, Kansas, Mississippi, Montana, New York, and Texas. It has been recommended in other States, including Colorado, Michigan, Ohio, and Virginia.

2. A gross receipts tax on gross revenues derived from intrastate movements or property. This type of tax has been adopted in 12 States. They are Arizona, California, Indiana, Louisiana, Mississippi, Montana, New Mexico, North Carolina, Texas, Utah, Virginia, and West Virginia.

3. A highway compensation tax, with progressively increasing rates as vehicular weights increase. This tax exists in two States, Iowa and South Dakota.

4. An axle mile tax, which is in force in Alabama and Ohio.

5. A weight-distance tax, which has been adopted in seven States, namely, Colorado, Florida, Michigan, New York, Oregon, South Carolina, and Wyoming.

6. A progressive increase in the rate of the registration fee paid for trucks, truck-tractors, semitrailers, and trailers, as the weight of the vehicle increases. This method of increasing the rate of payment is used in practically all the States. Only five States and the District of Columbia do not use this method.

Although the matter before this committee, title II of H. R. 10660, which was adopted by the House of Representatives almost unanimously, does not provide the kind of tax rate differential originally recommended by the AAA, it does provide for a higher rate of taxation to be paid by trucks and buses having a gross weight of 26,000 pounds or more. That higher tax rate is in the form of a highway user tax of $1.50 per thousand pounds applicable to those vehicles. This proposal does not completely provide for an equitable tax distribution among various classes of highway users because it is limited to only approximately 700,000 of the largest trucks and buses, whereas equity would extend the base of the tax to include about 3,500,000 vehicles weighing 10,000 pounds and over.

The evidence already available clearly justifies a tax rate differential. A more precise determination as to such a differential is desirable. Hence the association endorses the provision in H. R. 10660 which directs the Secretary of Commerce to make an investigation of the proportionate shares of design, construction, and maintenance costs of Federal-aid highways which are attributable to various classes of vehicles using the highways; and to take into account other benefits, both direct and indirect, accruing to different classes of persons as the result of Federal-aid highways.

Progress reports on this study would be made in 1957 and 1958 and a final report on or before March 1, 1959. According to the report on H. R. 10660-House Report No. 2022, 84th Congress, 2d session, page 55——

the purpose of these studies is to make available to Congress information which it may use to determine what taxes should be imposed to assure to the extent practical an equitable distribution of the tax burden among the different

classes of persons using the Federal-aid highways or deriving benefits from these higways.

The AAA suggests that a final reporting date of March 1, 1959, may be overly optimistic. This observation is based on the prediction that the results of the American Association of State Highway Officials road test in Illinois, now in advanced planning stages only, may not be completed and its finding correlated with the results of other studies by that date. Subject to these comments, the AAA strongly endorses title II, H. R. 10660, as a definite step in the right direction. In making this endorsement AAA recognizes that title II of H. R. 10660 does not provide for funds:

1. To reimburse utilities for relocation of their facilities, presently located on highway rights-of-way.

2. To finance any extension of the Interstate System beyond the presently authorized 40,000 mile limitation.

The association is also opposed to reimbursement to any State for sections of the National System of Interstate Highways which already have been built, or are now being constructed to Interstate System standards, as toll roads or free roads.

Obviously, the foregoing features are matters of primary concern to the Public Works Committee; nevertheless they would affect financing and thus seem appropriately a matter of concern to the Finance Committee. In the absence of public hearings by the Senate Committee on Public Works in its consideration of H. R. 10660, the AAA wishes to record its vigorous opposition to the use of Federal funds to accomplish any of these proposals.

Thank you.

The CHAIRMAN. Thank you very much. Any questions?

The next witness is Mr. Guy W. Rutland, Jr., of Decatur, Ga. Senator GEORGE. Mr. Chairman, Mr. Rutland is a citizen of our State, of our largest city, and is recognized as a gentleman of character and standing. We are pleased to have him here before this

committee.

The CHAIRMAN. We are happy to have you.

STATEMENT OF GUY W. RUTLAND, JR., VICE PRESIDENT, MOTOR CONVOY, INC., ATLANTA, GA.

Mr. RUTLAND. Thank you. My name is Guy W. Rutland, Jr., and I am vice president of Motor Convoy, Inc., of Atlanta, Ga. Motor Convoy is a medium-sized common carrier operating over irregular routes in interstate commerce through the Southeastern States.

I am entirely aware of the fact that we do need a highway modernization program, and I am heartily in favor of the program. We certainly want to see it become a part of our Government financing here at this time. There are parts of the program already that we have been paying for through the years, as you are well aware of, in the way of excise taxes and other taxes that we pay on tires, tubes, motor fuel, and what not. But we have been accustomed to that. And we are sure that that more than pays our share of the way.

But in the past, all appropriations of these funds, as you are well aware, have not gone back to highway use. My first reaction to it, when I heard of the program, was that if we just put in there what

we are getting, we will pay for the program, and there wouldn't be any need for the additional taxes.

But I think all these things have been called to the attention of Congress, and they feel like, in order to have this highway modernization program, we will have to have new taxes.

I do welcome the fact that, as I understand it, you are to dedicate all the new taxes to highway use. But it seems only logical that we should dedicate all the taxes that come in to highway use, if they are being paid for that specific purpose.

If we were to do that, under the program that we are talking about, as suggested, and as the House passed it, you would take in over $55 billion during the life of the program. You only propose to put $38 billion back in the program, so we will have some $17 billion or $18 billion more than we are actually going to spend. And for that reason, it seems to me like we certainly ought to dedicate all the money that comes in for these things, these highway uses, and not just for the general funds, so that we could use it in any way we would like. Now, in our own firm during the last several years, we have had an operating ratio of 96. That means that 4 cents out of every dollar we take in is left after we have paid all of our taxes and other expenses, except Federal and State income taxes. That gets it down. to a very low factor. And our business is highly competitive. We can't raise our rates to make a normal income that we are entitled to, if we have additional taxes of 8 or 9 cents.

We operate in the State, and in figuring what it would cost us under this proposed bill, it will be about $35,000 more. Last year we made approximately $100,000 profit before income taxes.

Take that $35,000 out that we are talking about-and that does not include this tax we are talking about for Federal license taxyou see, it is over a third of our profit that we made before income taxes.

Now, if we were to add this other in, it would just get so close, it seems to me, that you couldn't operate with any idea of being able to weather any slight depressive season such as you have in our business as a matter of fact, we are having it right now, because of some slow-down in the sale of motor vehicles.

The bill that came out of the House, originally introduced in the House, as I understand it, just put taxes on gasoline and diesel fuel and tires, additional taxes, and increased the excise rate on our trucks up to 10 percent, and incidentally froze it where it can't go back next year as it is on passenger cars.

Those things, though, were at least on a proportional basis.

And we just feel that, for those reasons, that equal rates applying to all is the fair approach to the problem.

I can definitely assure you that in my opinion, having studied it for a number of years, I know that the matter of taxes we pay because of our higher priced vehicles and our less gasoline mileage is certainly more than our share of it.

If we were to put this license tax on that we are talking about, although my vehicles are of lighter weight, not the lightest, but in the medium class, it would cost about $8,000, making approximately 40 percent of our profit before taxes to be paid into this additional fund.

Now, as you are well aware, since the beginning of motor vehicle taxation, the States have put license tags on trucks. In my State I pay about $500 for a tag. That is to help finance this program. And I think you gentlemen must realize that as our States match these funds, they are also going to have to have more money to get up their 10 percent.

Ând consequently, I feel sure that we are going to be called on again in my own State that just raised its gasoline tax in the last session to try to meet some of our highway costs-I feel that we are actually going to have to move into it again.

If you will remember, during the early years of World War II, the Government did put on a Federal tax, we had stamps on our windshields. And it proved, I think, very unsatisfactory to administer the thing. I don't think it was satisfactory for the income it brought in. And it was a temporary thing, and was abandoned very shortly thereafter. If anyone wiped your windshield off, you might lose it, and you would be subject to a fine.

If your windshield broke, you had to get another sticker to put on. And it was certainly a problem.

So we especially urge that the Federal Government not move into this matter of a highway tag on our vehicles. We are more than paying our share the other way in the taxes suggested in the bill you have before you, H. R. 10660.

But apart from this basic consideration, in our own particular operation, our typical unit weighs 13,000 pounds. Our load can vary from 4 jeeps at 9,600 pounds total weight of the jeeps up to about 15,200, which is the weight of a combination truck and pickup, into a load.

All of our trucks have to be able to handle those loads.

So you see that our combinations of weight will run from about 23,000 to about 28,000. Even though the great majority of our loads are less than 26,000, we would have to license them all, because when we go out at a shipper's request, he is likely to divert that unit and pick up something else which would be of a larger size to come back.

So we believe that certainly on this basis it would be most unfair for us to have to license all of our vehicles. Actually, our vehicles, having a lighter gross weight, would be paying taxes that would be prohibitive. We would have to pay the special tax on each of the units, and most of them would not be able to hold over 26,000 pounds. But our business is not unusual. It is typical of a lot of other truckowners in other fields who find that if a Federal license law is enacted, we will find ourselves pretty well hamstrung on the flexibility of our operation, which is the key to our success.

I appreciate you gentlemen giving me the time to appear. I would like to offer this statement to you, but basically it contains what I have said. I will be happy to answer any questions.

The CHAIRMAN. Without objection, the statement will be inserted in the record.

(The prepared statement of Guy W. Rutland, Jr., is as follows:)

Mr. Chairman, gentlemen of the committee, my name is Guy W. Rutland, Jr., I am vice president of Motor Convoy, Inc., of Atlanta, Ga. Motor Convoy is a medium-sized common carrier operating over irregular routes in interstate commerce through the Southeastern States. We transport new and used automobiles and trucks via the truck-a-way method.