It is unfortunate that now we face a curtailment of this highway program, which thus far has been highly successful, unless we find adequate funds for financing the program during the fiscal years 1960-62. Under section 209 (g) of the Highway Revenue Act of 1956, which is often referred to as the Byrd amendment, the full amounts authorized to be appropriated for the highway program cannot be apportioned to the States if the estimated revenues accruing to the highway trust fund will not be sufficient to defray required expenditures from the fund. The 1958 act suspended this provision for the 1959 and 1960 fiscal year apportionments in order that the interstate program could progress as scheduled. Primarily as a result of this action the highway trust fund will have an estimated deficit in the fiscal years 1960-62, and no apportionments for fiscal year 1961 may be made. For 1962 only $500 million can be apportioned. The problem that we face is that many of the States have already obligated a large share of the 1960 funds which have been allocated to them and unless allocations for 1961 are forthcoming many of these States will find it necessary to retrench their roadbuilding programs. In his statement before the House Appropriations Committee, Mr. Tallamy, the Federal Highway Administrator, presented information showing that as of March 31, 1959, 18 States were already using 1960 funds under the interstate program. For example, Ohio had used 98 percent of their allocated funds for 1960; California, 52 percent; Florida, 43 percent; and so on. My own State, New Mexico, has obligated 33 percent of its interstate apportionment for 1960. The same general situation exists under the primary, secondary, and urban programs, which are also financed by the highway trust fund. The immediate problem facing the Congress is determining how we can avoid the estimated deficits in the highway trust fund for fiscal years 1960-62. My primary purpose today, therefore, is to propose a solution to this problem. The proposals are simple. I will outline them. First of all, although the taxes imposed on commodities consumed or used by highway users make up the trust funds which finance the highway program, there are certain other highway user taxes which go into the general fund of the Treasury rather than earmarked for the highway program. I refer particularly to the 10-percent manufacturers' excise tax on passenger automobiles. The only part of the tax on automotive vehicles (which includes the taxation of passenger automobiles) that goes into the highway trust fund is 50 percent of the taxes collected on trucks, buses, and similar vehicles. In fiscal year 1958 the tax on automotive vehicles, parts, and accessories amounted to over $1.5 billion while the amount transferred to the trust fund (which represented the tax on trucks, and so forth) was only $110.5 million. The difference is quite a substantial amount, especially when we realize that the entire amount of taxes transferred (less refunds) in fiscal year 1958 represented only a little in excess of $2 billion. Second, on February 24, 1959, I introduced H.R. 4942 proposing an additional tax upon imports of petroleum with the proceeds to be deposited into the highway trust fund. Such legislation would provide the necessary finances for the trust fund as well as some measure of protection to the petroleum industry which has suffered a tremendous decrease in domestic exploration and development for the third consecutive year. In case of an emergency, our Nation will need all possible domestic sources of petroleum and I feel we must see that exploration continues at a high rate for the national welfare. Thus, enactment of this legislation would serve this twofold purpose. The receipts of the trust fund could be reinforced also by eliminating the preferential tax relief to dividend recipients and using the revenues which would result from full taxation of dividends for the highway program. If we are going to deprive the general fund of these revenues anyway, it would be far better to remove preferential treatment in favor of a few and use the revenues for purposes which will directly or indirectly benefit virtually everyone. I know of no recent official estiamte on how much revenue loss results from the provision which allows the dividend recipient to exclude the first $50 of dividends received ($100 on a joint return if the husband and wife each receive at least $50). However, I am certain that it exceeds the $46 million loss estimated for fiscal year 1955 when the provision was first enacted. The law also allows a tax credit equal to 4 percent of dividends received in excess of the excludable amount. According to the latest data published by the Internal Revenue Service, taxpayers who filed taxable returns were allowed tax credits amounting to $282 million in 1956. Taxpayers having incomes of over $25,000 received 58 percent of these tax credits, although they represented only 1 percent of taxable returns in that year. Taxpayers with other $100,000 represented only five one-hundredths of 1 percent of taxable returns in 1956, but received 20 percent of the tax credits in that year. My last proposal does not affect tax revenues but consists of borrowing through issuance of securities which would be paid off with trust fund tax receipts. Although proposals have been made to borrow from the general fund, I think it is preferable that borrowing be accomplished through the trust fund itself. Perhaps a Federal highway authority could be set up for a temporary period and issue short-term revenue bonds in the name of the highway trust fund. These borrowed funds could be used to offset the temporary deficits between revenues and expenditures of the trust fund, and the bonds could be retired later during the program when revenues are in excess of expenditures. I have attempted today to provide a brief setting to the financing problem of our highway building program, the need for the program, and what we stand to lose if we curtail the program at this time. I have also offered four proposals whereby we can overcome our temporary problem of financing the program. It is my earnest desire that the committee give full consideration to these proposals because a large segment of our economy, including my own State of New Mexico, depends on the continuance of the program at the same rate as it has progressed thus far. An irreparable loss can be suffered from inaction on this needed legislation. Thank you. The CHAIRMAN. Thank you, Mr. Morris, for coming to us and giving us your views on this subject. Mr. MORRIS. Thank you, Mr. Chairman. The CHAIRMAN. We will now hear from our colleague, the Honorable George E. Shipley, from the State of Illinois. We are happy to welcome you, Mr. Shipley. STATEMENT OF REPRESENTATIVE GEORGE E. SHIPLEY, OF ILLINOIS Mr. SHIPLEY. Mr. Chairman, I want to thank you for this opportunity to appear before you this morning in opposition to an increase in the Federal gasoline tax. The administration has proposed a 12-cent increase in Federal taxes on gasoline, which represents an increase of 50 percent, making the total Federal excise tax 412 cents per gallon, as the only method of continuing the vital interstate and defense highway construction program. The Federal-Aid Highway Act of 1956 provided for establishment of a highway trust fund to finance the construction program. Highways were to be built through user taxes deposited to the trust fund so the program would be paid for by the end of the construction period. I am firmly convinced that there are alternatives in handling the current difficulties in connection with the trust fund and that adding to the burden carried by the American motorist is the worst possibel solution. Should the interstate and defense highway construction be brought to a halt because Congress does not levy increased taxes on gasoline, the responsibility for losses incurred by stopping the program must clearly rest with the President and his administration. An economic factor involved in consideration of a gasoline tax increase is that about 88 percent of the foreign motorcar purchases made by Americans are because of gasoline economy. Increase in cost of gasoline will tend to increase the trend to foreign car purchases with loss of manufacturing in American industry. An increase in gasoline taxes, making automotive fuel more costly, would also discourage highway travel, and adversely affect many small businesses dependent on serving the motoring public. The reduced gasoline consumption resulting from increased cost would reduce State revenues and further impair adequate financing of highway requirements by the States. The existing gasoline tax is far out of line with taxes on comparable products, amounting to 38 percent, whereas luxury taxes are about one-fourth as much. Increase in gasoline taxes and consequent higher cost of motor vehicle fuel would add to the cost of nearly every consumer item. Particularly important would be the increase in the cost of moving farm products from farm to market since nearly all of them move by truck. Taxes on gasoline and oil, plus other excise taxes levied on motor vehicles, tires, parts, et cetera, constitute a heavy toll on the driving public. A further inequity of these taxes is that a very considerable portion of the revenues are diverted to uses other than for highways. Excise revenues from passenger automobiles alone are over $1.2 billion annually. The motoring public is not getting what it pays for in gasoline and oil taxes, and diversion of these moneys forces them to pay more than their share of General Government expenses. The tax increase would be unnecessary if the 42 percent of the Federal excise diverted were deposited to the highway fund. In the past 2 years $2.9 billion Federal highway-use tax revenue has been diverted from highways to other uses. In the next 12 years an estimated $14.5 billion will be diverted unless the practice is discontinued. A total of $3.3 billion revenue was collected in these taxes in 1958 and $1.2 billion diverted to other than highway use. Federal aid to highways was provided on the basis that an adequate highway system is necessary for the national and civil defense, and for the general well-being of the economy. Approximately half the automobiles are owned by families with less than a $5,000 annual income. Most of these automobiles are a necessity, without which it would not be possible to get to and from work, and also fill other vital transportation needs. I also call your attention to the fact that the highway trust fund, set up under the act, has been obligated to pay for two large programs which were not a part of the planned program, about $2 billion for construction committed prior to the act of 1956, and to pay for the antirecession measure of the 1958 act. Highway users will pay excise taxes totaling some $74 billion over the life of the highway program and only part of these funds are now allocated to the highway trust fund. No further burden should be placed on the highway users who are already financing the program. I repeat, increasing the tax on gasoline is not the only solution to the problem of financing the Interstate and Defense Highway program; it is the most undesirable solution at the present time. The CHAIRMAN. Thank you, Mr. Shipley, for coming to us and giving us your views on this subject. Mr. SHIPLEY. Thank you, Mr. Chairman. The CHAIRMAN. At this point I include in the record in accordance with the request of our colleague, the Honorable Howard W. Smith, of Virginia, a communication from Mr. Douglas E. Quarles, Jr., of Fredericksburg, Va. (The communication referred to follows:) Subject gasoline tax increase. Hon. HOWARD W. SMITH, QUARLES PETROLEUM, INC., Fredericksburg, Va., July 20, 1959. Representative of Virginia, House Office Building, Washington, D.C. DEAR SIR: My feeling is that we should not increase the Federal gasoline tax until the whole 3 cents tax is set aside for highway use only, and it is found to be insufficient. Should my small request go unheeded, then please provide that the provisions of the Harrison bill (H.R. 101) which changes the level of imposing tax to the wholesale distributor level be incorporated. Please have this letter put into the record of the hearings on the above subject. Very truly yours, DOUGLAS E. QUARLES, Jr., President. Mr. HERLONG. Mr. Chairman, I have received a communication from the J. H. Williams Oil Co., of Tampa, Fla., with respect to the subject of our hearings here today. I ask unanimous consent that this communication be made a part of the official record. The CHAIRMAN. Without objection, it is so ordered. (The communication referred to follows:) Congressman A. S. HERLONG, Jr., House Office Building, Washington, D.C. J. H. WILLIAMS OIL Co., INC., Tampa, Fla., July 21, 1959. DEAR SYD: I understand hearings are scheduled to begin on July 22, on increasing the Federal tax on gasoline and diesel fuels, with this additional revenue to provide the necessary financing of deficits in the Federal highway program. Those of us making our livelihood in the oil industry are extremely fearful of increased taxes on petroleum products, as we feel they are taxed to the fullest extent at the present time. It appears on the surface that in all levels of government, from city and county through the State and Federal, a constant effort is being made to increase taxes on the petroleum products to offset deficit spending. In 1957, it is very conservatively estimated, the tax burden on the petroleum industry and its products amounted to $6,700 million. This figure does not include many hidden taxes that could not be traced, nor does it include the individual income taxes and the many other taxes paid by members of our industry. The 1957 petroleumtax bill exceeded the total tax receipts of the Federal Government for any year up to World War II. The petroleum-tax bill for this particular year amounted to 72 percent of the price of crude oil at the well and, in addition, to 47 percent of the wholesale value of the finished petroleum products refined and processed in the United States. The Federal gasoline tax when totaled, at the present time, generates approximately 80 percent of the funds used to finance the national highway program. In addition thereto, the State governments lean heavily on their own gasoline taxes to supply the bulk of their highway funds. As a result, the national average combined State and Federal tax on a gallon of gasoline amounts to 80 percent of the refinery price, 54 percent of the tank-wagon price (wholesale) and 41 to 50 percent of the retail price. We believe, as outlined above, Federal taxes on gasoline and diesel fuel are at a maximum, but in the event an increase is imperative, we would appreciate your assisting in the provisions of the Harrison bill (H.R. 101), which would change the level of imposing the gasoline tax from the time of sale by the manufacture, to the time of sale by the wholesale distributor. We will appreciate your assistance in defeating the proposed legislation to increase present taxes on gasoline and diesel and would like to request that my letter be included in the record of the hearings on this issue. With highest personal regards, I remain, Very truly yours, (Signed) J. H. (The above communication was also received by the Honorable Spessard L. Holland, Senator from Florida, and the Honorable Paul G. Rogers, Congressman from the Sixth District of Florida, and forwarded for inclusion in the record. The Honorable Richard M. Simpson, of Pennsylvania, also received this communication from Congressman William C. Cramer, of Florida, for inclusion in the record.) Mr. CURTIS. Mr. Chairman. The CHAIRMAN. Mr. Curtis is recognized. Mr. CURTIS. I have received a statement on behalf of the Automobile Club of Missouri and its special highway committee. I have also received letters from Mr. Walter Hamburg of the Milton Oil Co., St. Louis, Mo., and from Mr. Jack Webster of the Webster Oil & Gas Co., Springfield, Mo. The import of these communications is in opposition to a proposed increase in the Federal excise on gasoline. I ask unanimous consent that these documents be included in the printed record of these hearings. The CHAIRMAN. Without objection it is so ordered. (The statements are as follows:) STATEMENT ON BEHALF OF THE AUTOMOBILE CLUB OF MISSOURI AND THE SPECIAL HIGHWAY COMMITTEE The Automobile Club of Missouri apreciates the opportunity to present its comments and recommendations to the House of Representatives Committee on Ways and Means in connection with the committee's hearings on the financial aspects of the national highway program. The Automobile Club of Missouri has given strong support to the prgoram as provided by the Federal Highway |