"PROPOSED FEDERAL GAS TAX INCREASE "For many years the New Jersey Farm Bureau has insisted that highway revenues be used for construction and maintenance of highways. "There have been Federal automotive excise taxes collected in excess of a billion dollars which have not been credited to the highway fund. Until and unless excise taxes as well as the gasoline tax are applied to highways we will oppose the imposition of an additional Federal gasoline tax." This was not a new policy for our organization. We have taken this stand for years on both a State basis and on a Federal basis. We feel it would be misleading to indicate that any additional tax going for highway construction would meet this objection. This would be unrealistic as long as any of the gasoline tax is being diverted. We strongly urge your committee to oppose any increase in the Federal gasoline tax. Very truly yours, WM. PERRY WATSON, Secretary. DAIRYMEN'S LEAGUE COOPERATIVE ASSOCIATION, INC., Hon. WILBUR D. MILLS, This proposed increase, which will affect the cooperative activities of this organization's farmers and fleet, will become a direct burden upon the farm income of some 20,000 members of this association in the States of New York, Pennsylvania, New Jersey, Massachusetts, and Vermont. The effect of these gasoline tax increases is too small to be reflected in the consumer price of milk and therefore must be borne or absorbed wholly by the farmer producer. The committee undoubtedly is aware of the fact that New York State and other States have recently increased their State taxes on gasoline. Eventually, these increases, if they continue, will show up in the finished consumer product which, in our case, is bottled fluid milk. Further price increases in bottled fluid milk will tend to damage and handicap the dairy producer and cause greater difficulty and hardship in the course of marketing dairy products. It, therefore, does not seem to be in the interest of national economy to further burden highway users with gasoline taxes in an effort to saddle such users with the entire cost of Federal highway-roadbuilding program, which program is in the general national interest and should be borne over a broader tax base. Respectfully submitted. BARRIE VREELAND, Hon. WILBUR D. MILLS, LIQUEFIED PETROLEUM GAS ASSOCIATION, INC., Chairman, House Ways and Means Committee, SIR: In connection with the Ways and Means Committee's present study of motor fuel tax law change, we invite the committee's attention to existing provisions of the law that are in immediate need of clarification. We suggest that the committee's present deliberations afford an opportunity to effect this clarification and eliminate existing confusion, both among taxpayers and within the Internal Revenue Service on the application of the Federal excise tax on special motor fuels, principally liquefied petroleum gas. The original Federal excise tax on special motor fuels imposes the 2-cent tax on use in a motor vehicle, motorboat, or airplane. Through Treasury Department interpretation, the term "motor vehicle" became defined as use in a vehicle designed to carry or support a load. Note that this interpretation would cover both on and off highway motor vehicle use. The law's use of the term "motor vehicle," coupled with the Treasury Department's interpretation, has created a most confusing situation. As an example, in an industrial plant fuel used in an industrial tractor that pulls or pushes a load is not taxable, while fuel used in an industrial forklift truck, a vehicle designed to carry or support a load, is taxable. Industrial plants using this equipment have great difficulty in recognizing this distinction and segregating fuel use. Similar situations appear in other offhighway use. Confusion also arises because of the natural tendency to relate the tax to highway vehicle fuel use. Diesel fuel, a similar motor fuel, handled under specific law, is subject to tax only when used in a highway vehicle. Parenthetically, this discrimination in taxation of special motor fuels used in the main for similar uses is added reason for correction. Illustrative of this last-mentioned area of confusion is the fact that, within recent months, two district Internal Revenue Service offices have advised industry and users, in response to inquiries, that this tax on liquefied petroleum gas only applied on use in a highway motor vehicle. Similar advice has been given at other times. We have heretofore outlined this problem in greater detail to the Forand subcommittee of the Ways and Means Committee in its study on technical changes required in the Federal excise taxes. A copy of our statement, together with a suggested corrective amendment submitted to that subcommittee, is enclosed. We respectfully request that this data be reviewed by the committee in its present deliberations and be made part of the record. In the course of consideration of the Highway Act of 1956, Congress corrected this situation insofar as the application of the tax under that act is involved. However, the basic and original Federal excise tax on special motor fuels presents the stated problem and we respectfully urge the Ways and Means Committee to utilize the opportunity now presented to take the necessary and justified action. Respectively yours, ARTHUR C. KREUTZER. STATEMENT SUBMITTED ON BEHALF OF LIQUEFIED PETROLEUM GAS ASSOCIATION, BY ARTHUR C. KREUTZER, CHICAGO, ILL. Mr. Chairman and gentlemen of the subcommittee, my name is Arthur C. Kreutzer. I am vice president and general counsel of the Liquefied Petroleum Gas Association, and I am making this statement on behalf of that association. The Liquefied Petroleum Gas Association is a national association, composed of the producers of liquefied petroleum gas, the manufacturers of the equipment and appliances utilizing liquefied petroleum gas, and the distributors and dealers thereof. The Liquefied Petroleum Gas Association has 2,450 member companies within the United States. It is estimated that this membership represents over 80 percent of the industry volume of business. This membership is predominantly at the distributor and dealer level. Approximately 70 percent of its membership is in this category. My purpose in speaking for the association is to point out to this committee the present discriminatory treatment accorded special motor fuels, of which liquefied petroleum gas is one, as compared with diesel fuel; to apprise you of the burdensome and impractical administrative application of the present tax on special motor fuels utilized in motor vehicles not used on the highway, and to recommend to this committee specific changes in the law. At the present time both diesel fuel and special motor fuels (including liquefied petroleum gas) are taxed at 3 cents a gallon when used in vehicles operating on the highway. In the case of motor vehicles (as defined by Internal Revenue Service) not used on the highway and in the case of motorboats and airplanes, liquefied petroleum gas and other special motor fuels are taxed at 2 cents a gallon, whereas diesel fuel is subject to no tax whatsoever. I want to emphasize that diesel fuel is not subject to tax while liquefied petroleum gas and other special motor fuels are taxed despite the fact that in most instances the vehicles involved are of exactly the same type and are put to identical uses, their only difference being that some use diesel fuel and others operate on liquefied petroleum gas. An industrial forklift truck is a good example of a nonhighway motor vehicle which in some instances is powered by liquefied petroleum gas and 44357-59- -31 in other instances is powered by diesel fuel. Under the terms of the present law there is no tax if diesel fuel is used, whereas, on the other hand, if a special motor fuel such as liquefied petroleum gas is used, the Government exacts a tax of 2 cents a gallon. On behalf of the Liquefied Petroleum Gas Association, I urge a change in the present law to remove the tax on liquefied petroleum gas and other special motor fuels used in nonhighway vehicles so as to accord equality of tax treatment between diesel fuel on the one hand, and liquefied petroleum gas and other special motor fuels on the other hand, at least with respect to motor vehicles other than motorboats or airplanes. Parenthetically, I would like to point out that the tax of 2 cents a gallon is also levied on special motor fuels when used in motorboats and airplanes; whereas there is no tax whatsoever on diesel fuel when used in motorboats and airplanes. The use of all special motor fuels in motorboats is de minimis. I understand, however, that some special motor fuels, although not liquefied petroleum gas, are used as fuel in jet airplanes. Since the use of liquefied petroleum gas itself in motorboats and airplanes is presently insignificant, the Liquefied Petroleum Gas Association has no direct interest or immediate concern about the tax treatment accorded liquefied petroleum gas and other special motor fuels in those uses. Equal treatment, of course, is the primary reason for removing the tax on special motor fuels when used in off-highway motor vehicles. However, there are also other reasons which strongly support such a change in the law. For one thing, the administration of the present law by the Internal Revenue Service has resulted in a complicated method of ascertaining which vehicles are motor vehicles and which vehicles are not motor vehicles. To appreciate the problem involved, we must remember that as to a special motor fuel used in off-highway vehicles, the 2-cents-a-gallon tax is not imposed on its use in vehicles generally but only on its use in motor vehicles. The present administrative practice of the Internal Revenue Service is to classify as a motor vehicle any vehicle upon which a load is imposed or carried and to exclude from the classification any vehicle which merely pushes or pulls a load. Since many operations involve vehicles of both classifications supplied from a common fuel source, the determination of how much fuel is used for a taxable purpose and how much for a nontaxable purpose frequently presents problems of substantial difficulty both to the Government and to the taxpayers. Such problems can be obviated by according liquefied petroleum gas and other special motor fuels the same tax treatment as is accorded diesel fuel. I am submitting for the subcommittee's consideration along with my statement a proposed change in the language of section 4041 of the Internal Revenue Code of 1954, which section levies the tax on diesel fuel and special motor fuels. This proposed amendment will result in uniform application of the tax to diesel fuel and to special motor fuels; it will eliminate discrimination in tax treatment of sellers and users of the fuels; and it will remove the administrative problems of classifying off-highway vehicles as motor vehicles or vehicles other than motor vehicles. PROPOSED LANGUAGE (b) SPECIAL MOTOR FUELS.-There is hereby imposed a tax of 3 cents a gallon upon diesel fuel, benzol, benzene, naphtha, liquefied petroleum gas, or any other liquid (other than kerosene, gas oil, or fuel oil, or any product taxable under section 4081) — (1) sold by any person to an owner, lessee, or other operator of a highway vehicle (A) which (at the time of such sale or use) is registered, or is required to be registered, for highway use under the laws of any State or foreign country, or (B) which, in the case of a highway vehicle owned by the United States, is used on the highway, for use as a fuel for the propulsion of such vehicle; or (2) used by any person as a fuel for the propulsion of a highway vehicle (A) which (at the time of such sale or use) is registered, or is required to be registered, for highway use under the laws of any State or foreign country or (B) which, in the case of a highway vehicle owned by the United States, is used on the highway, unless there was a taxable sale of such liquid under paragraph (1). STATEMENT TO COMMITTEE HEARING IN WASHINGTON, D.C., JULY 22, 1959, ON FINANCING THE HIGHWAY CONSTRUCTION FUND Hon. WILBUR D. MILLS, CITIZENS' NORTHWAY COMMITTEE, Chairman, Ways and Means Committee, House Office Building, Washington, D.C. DEAR MR. MILLS: The present furor about lack of funds for the interstate and defense highway program leads to the question whether present expenditures and future plans for construction are reasonable, or whether these have been diverted to purposes other than those originally planned. If events in New York State are typical of the administration of the highway program, hundreds of millions of dollars are being spent to duplicate facilities in locations unsuitable for defense purposes and not connecting industrial centers. Specifically, Interstate FAI 502 would duplicate facilities already provided by U.S. Route 9 for tourists. Plans for FAI 502 also shun the industrially attractive Champlain Valley, and are not in accord with the Bureau of Public Roads report "Highway Needs for Industrial Defense" which states the highway program should contribute to the "development of one of the most important assets in deterring aggression-industrial capacity." Attempts to get the Federal Bureau of Public Roads to intercede have shown them to be fully dependent on the New York State Department of Public Works for information, and the NYSDPW brushes aside the Champlain route. The facts show the alinement selected by the NYSDPW does not best meet the lawful purposes of the Interstate and Defense Highway System. In support of their plan to duplicate the existing tourist highway with an additional tourist highway, this department contends that the route they selected through the Adirondacks is less costly; that the traffic count through the mountains is heavier; and that the Champlain Valley route would siphon tourists into Vermont. We would like to comment briefly on each of these points. Regarding cost; the NYSDPW has made nothing more than a superficial surFederal gasoline tax. Believing that the trust fund originally set up is adequate built on this alinement to interstate standards for a cost difference of 10 percent; $114 million for their mountain route versus $125 million for the Champlain Valley route. About half of the cost difference is for structures over the more numerous highways and railroad crossings in the more populous valley. Length, and costs of land acquisition estimated for the two routes are acknowledged by the NYSDPW to be essentially equal. In view of the DPW's meager investigations, it seems incredible that they would place such importance on a 10 percent difference in preliminary estimates, particularly since one section near Glens Falls was recently contracted for at approximately 60 percent of the final estimate after survey and design were completed. Regarding traffic counts, the NYSDPW draws the absurd conclusion from traffic counts, that the Northway, FAI 502, should parallel modernized U.S. route 9 through the Adirondacks because drivers prefer it to obsolete State Route 22 in the Champlain Valley. This valley has no road comparable in quality to U.S. 9 through the Adirondacks, therefore traffic from Albany to Montreal has no choice and will go via U.S. Route 9. Thus, the traffic count comparison offered by the New York State DPW as favoring the mountain route offers no reasonable basis for a decision on location of the Northway. Regarding siphoning tourists into Vermont, the claim by the NYSDPW that tourists may escape to Vermont via the Champlain Valley route reveals the DPW's true reason for selecting the Adirondack route. The lawful purpose of FAI 502 is to connect New York State capital district with the Strategic Air Command at Plattsburgh and the Canadian border on a route that will best serve the people of the United States. As a practical matter, construction has proceeded to an extent that diversion of this highway through Vermont would be extravagant and add needless mileage. The Champlain Valley route for FAI 502 is superior to the Adirondack route on nearly every count. Three major advantages are: First, as a defense highway, the Champlain Valley Northway in conjunction with U.S. Route 9 would provide two separate major routes connecting Albany, the Strategic Air Command at Plattsburgh, and Montreal. However, the proposed Adirondack Northway would parallel U.S. Route 9 so closely that the two would in effect be only one route. Second, U.S. Weather Bureau records show the valley has definitely milder winter weather, with less snow and ice. This milder climate means safer, more dependable travel with less maintenance. Third, and most important, the Champlain Valley route will encourage industrial development of the valley. Some defense industries are already located there, including papermills and a large iron ore processing plant. However, the New York State Department of Commerce has pointed out that ***While the New York shore of Lake Champlain has many positive attrac tions for industry, one of its major drawbacks is remoteness from prime markets. Most of the industries interested in this region are light industries. They depend primarily on truck transportation to reach their markets. Lack of a high-speed highway servicing the shore area has kept several such industries from locating in the Champlain shore area. Most of the industries with which we have worked have located in other areas that provide quick and economic access to major metropolitan regions to the south." We believe that no additional road taxes should be levied on the citizens of the United States without closer safeguards on location of the highways in order to insure that original objectives for this multibillion dollar expenditure will be met, and that money is not wasted on parallel roads having limited seasonal use. Respectfully submitted. PHILIP W. HAM, Chairman, Citizens' Northway Committee. Hon. WILBUR D. MILLS, INTER-CITY SERVICE STATIONS ASSOCIATION, INC., Chairman, Ways and Means Committee, HONORABLE SIR: The proposed increase in Federal gasoline tax will impose further burdens upon the service station operators in New York City. Federal and State taxes in New York State are now 9 cents per gallon, or almost 36 percent of the wholesale price to the dealer. Since March 1, when the New York State tax was increased 2 cents per gallon, service station dealers in our city reported an imediate drop in business of approximately 10 percent. This represents a very substantial loss to us small businessmen. How great an additional loss in business can we look for if the Federal tax is again increased? We have as yet had no relief from losses which we suffer each year on the 3 cents in Federal gasoline tax we now pay, which arises through taxes uncollectible because of shrinkage, handling, evaporation, and bad debts. This will also be further aggravated should the tax be increased. We ask that our association be placed on record as opposed to any further increase in the Federal gasoline tax. Most respectfully yours, BENJAMIN SCHLEIER, President. GEORGIA ASSOCIATION OF PETROLEUM RETAILERS, INC., Chairman WILBUR D. MILLS, Committee on Ways and Means, House of Representatives, Washington, D.C. DEAR MR. MILLS: GAPR request that its protest on behalf of its 3,600 paid members of Georgia be officially recorded in the hearing scheduled for July 22 relative to any proposed increase in gasoline taxes. In accordance with letters from this association to all Georgia Members of the House of Representatives we request that the facts contained in a copy attached also be recorded in the minutes of the hearing on this subject. Respectfully, MILTON F. ALLEN, Executive Secretary. |