Senator DIRKSEN. And the chances are it will be pressed on the committee and on the floor.

Secretary FoWLER. Yes, sir.

Senator DIRKSEN. Now one general question: What is the likelihood of when these excises go off that the States will put on increased excises because they are always scouring around for money?

Secretary FOWLER. I think that the prospect is quite likely that the States will select some of these excises and reimpose them at the State level. For example, the Advisory Commission on Intergovernmental Relations, in which Federal and State and local tax authorities meet to discuss mutual problems has informed us that they expect some of the States to impose a tax on deeds to replace the one that we would repeal because it ties into State and local real estate transactions.

There undoubtedly will be other areas that we can't really predict but it certainly is true that State and local tax authorities are, you might say, on the prowl for new sources of revenue and I would expect some of that to occur.

I don't believe it will be as major an exercise as one might fear because the general tendency seems to be to deal with the across-theboard type of taxes insofar as this particular type of tax is concerned and, except for a few specialized areas like the documentary stamp tax on deeds, I think the same reasons that cause the Congress to react very adversely to selective excises would cause State legislatures to feel the same way.

Senator DIRKSEN. One other question: Suppose this bill landed on the President's desk for signature, prior to the 1st of July, why shouldn't it become effective the day he signs it?

Secretary FOWLER. We do not wish to take the position in opposition to an amendment to that effect if the committee should be desirous of doing so. We had felt that the postponement of sales of excise taxed items, by and large, except for the ones specifically covered, are not going to be very serious. They are going to be postponements rather than cancellations or losses of business, but it is a marginal question, Senator Dirksen and I think would be for the judgment of the committee. The gross revenue costs would be about $50 million. Senator DIRKSEN. If Senator Smathers would give me his attention, going back for a moment to what he said about TV, my understanding is that it is not a question of diminished sales in May and June but rather that right now the distributors are calling up and canceling 5 carloads, 10 carloads, 15 carloads of television sets and just saying to the manufacturer "don't ship." So they are in a bind right now, and, of course, all we hope for is retroactivity in the bill or that it be signed as quickly as possible, if it got to the President's desk before the 1st of July.

Senator SMATHERS. I think it might be helpful for the record as long as this is an official document, this is Merchandiser Weekly, January 1965 issue and it shows apparently historically that the worst months for television sets, dryers, things of that type are May, June, and July.

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.

8.6 8.9 7.1

8.6 7.8

9.2 8.7

8.2 7.4

9.4 8.5 12.2 14.0

7.8 9.0 7.8

4.0 2.3

RIBICOFF. Will the Senator yield for a second there? nator from Illinois is absolutely correct.

Senator DIRKSEN. The electronics industry was in yesterday to tell me precisely what is happening at the present time.

Senator RIBICOFF. That is correct. What is happening is that no one wants to start fooling around with the refund on the floor tax and readjustments in bookkeeping. The whole distribution system of all major items have been put awry because of this and I think the Senator from Illinois is absolutely correct. It isn't just a question of the number of sales made but a question of the whole distribution process of American merchandising. I put in an amendment yesterday to make it effective as of the date of passage to alleviate one of the factors the Senator is talking about.

The CHAIRMAN. Senator Anderson.

Senator ANDERSON. In the first place, Mr. Secretary, when did the President make an announcement about the cut in excise taxes.

Secretary FowLER. His message occurred, I believe on May 17. On May 15 he made a statement to the public and the message came up on May 17.

Senator ANDERSON. Had he made any announcement previously about reduction, had there not been constant talk of reduction in excises?

Secretary FOWLER. There had been constant talk, I think, Senator Anderson, about excise tax action since the closing weeks of the action on the Revenue Act of 1964. And in the President's budget message in January he had said he would recommend an excise tax reduction in the magnitude of a billion seven hundred and fifty million.

Senator ANDERSON. Senator Smathers quoted the Wall Street Journal of yesterday and I would like to quote from page 4 of it. It says major retail sales rose sharply from 1964. It tells about Sears, Roebuck & Co., which said it had record sales both in May and in the first 4 months of the current fiscal year. They are up 11 10 percent in May. J. C. Penney sales are up $170,309,000 from $155 million a year ago, and Mr. Batten, the chairman, made that announcement. And then Gamble-Skogmo, Inc., said they are up from $37 million to $42 million, and this is the last line of the story, "last month's improvement Carl S. Raugust, said," and I quote direct from him—

occurred mainly in some of the lines, sporting goods and appliance departments headed by refrigerators, freezers, and color television sets.

Do you suppose he knows what he is doing?

Secretary FoWLER. I suppose he did.

Senator ANDERSON. Also if there was a reduction in sales of color television sets could it not be because of announcements that people are going to produce new tubes, and a reduction in price.

Secretary FowLER. Yes.

Senator ANDERSON. Also CBS is making some announcements for a color television program for next year, it has been very heavy. It would seem to me that people who know new sets are coming on the market at sharply reduced prices might wait to see what the sets cost as well as see if the tax is going to be repealed.

Secretary FOWLER. I think there are those factors which certainly enter into what is going on.

Senator HARTKE. Will the Senator yield?

Senator ANDERSON. Yes.

Senator HARTKE. I know one of the major manufacturers in television happens to be in my home State and they have indicated their sales are 75 percent below their budget forecast since May. They now have an unmanageable accumulation of inventory and are running out of space to store these items. Even the loss of income tax alone on the same items may be forever gone if we do not have a date which is set. You are talking about May, and Sears, Roebuck. Many of the Sears, Roebuck items are not taxable. You are not taking the income tax loss factor into account. The fact is we have a growing economy. Senator ANDERSON. What do you mean they are not taxable.

Senator HARTKE. Most of the items in the Sears, Roebuck catalog are not subject to the excise tax.

Senator ANDERSON. I just hope you take a look at the new Sears, Roebuck catalog. Many of them are taxable. Gamble-Skogmo are up to $40 million per month which is pretty substantial and its president said it was in color television sets. I read a moment ago, Carl Raugust, and I quote directly from him

occurred mainly in some of the lines sporting goods and appliance departments headed by refrigerators, freezers, and color television sets.

If a man is smart enough to be president of a company he is smart enough to know what the company is doing. These things always come up when it happens. I have a sheaf of telegrams that the country is going to pieces if we don't do it today. But I do hope the committee takes its time and takes a good look at it.

Secretary FOWLER. Historically, Senator Anderson, it might be noted here on this point that the last time there was a substantial excise tax reduction they were not made retroactive.

Senator ANDERSON. There is a publication that deals with tax treatment put out by Prentice-Hall which has an article in this last issue or so that the excise tax repeal brings and unexpected windfall on installment sales. Dealers and merchants who make taxable sales on installments on furs, jewelry, luggage, and other items subject to the excise taxes scheduled to go off on July 1 are going to be sitting pretty when the proposed excise tax repeal becomes a reality. The reason is installments. Would the Department object to an amendment which would try to make sure there was no windfall on installment sales? Secretary FoWLER. No, Senator.

Senator ANDERSON. I want others who have not asked any questions to ask questions.

That is all.

The CHAIRMAN. Senator Bennett.

Senator BENNETT. Mr. Chairman, it is 12 o'clock. How long are we going to continue?

The CHAIRMAN. What is the pleasure of the committee?

Secretary FOWLER. Mr. Chairman, I might say for the information of the committee I am currently scheduled to appear in the morning at 10 before the Senate Banking and Currency Committee of which Senator Bennett is a member to deal with the proposed coinage program, and I am available to this committee this afternoon or any time thereafter, Thursday, Friday, whatever the necessity may be, but I do have that preexisting engagement.

Senator WILLIAMS. Mr. Surrey could come tomorrow, could he not. Secretary FOWLER. Yes, indeed.

Senator ANDERSON. Mr. Chairman, I hoped we could finish it this morning.

The CHAIRMAN. We can continue for a while. Several Senators have engagements at 12:30.

Senator BENNETT. Mr. Chairman, I will try to be short.

Earlier in your testimony you talked about your projections on a trend line, and then under questioning you indicated that you thought we might approach a balanced budget in 1967 or 1968. Can you or some member of your staff supply the committee with these trend lines on which you are basing those judgments so that we can see the picture of how these lines are going to come together.

Secretary FowWLER. Well, the trend lines I had in mind, Senator, for the increase in gross national product and in the revenue, are those that are familiar to you and they are implicit in the so-called economic indicators prepared and issued monthly by the Joint Economic Committee. The trend line on the budget deficit is covered in my statement showing that a projected deficit of $12 billion in fiscal 1964 worked out at about an $8.2 billion figure. From a projected deficit in January for fiscal 1965 of $6.3 billion we now see that it will be at least as low as $4.4 billion and perhaps lower when the final returns are in, and for the fiscal 1965, even taking into account this excise tax action, that deficit will be slightly less than the currently projected one for 1965; namely, $4.3 billion.

Senator BENNETT. I am interested in your projections into 1967 and 1968, particularly in view of the new programs that we are passing in the Congress with tremendous price tags over the next few years, the idea that we can absorb them and come to a balanced budget possibly would appear impossible.

Secretary FOWLER. I did not imply any judgment about the future expenditure programs except to say that we do not know now what expenditures in fiscal 1967 will be. But this potential revenue gain in the figure on the so-called trend line was four and a half billion dollars, and leaves considerable room for providing such increased expenditures as might be needed by growing population and still achieving reduction in the budgetary deficit. That is as close as I can come. I wouldn't attempt to predict what the expenditure level will be, as I said in answer to a previous question, I just don't feel I am in a position to forecast what the actions of the Congress will be, or what the Presidential proposals would be for fiscal 1967.

Senator BENNETT. Then, you can't be very firm in a prediction we can balance the budget in 1967 or 1968.

Secretary FOWLER. I can be reasonably firm in saying I think we can, providing the economy continues to expand the way it has been expanding. This is a very different prediction from saying we will. I would certainly hope we will and I would expect we will and I would certainly be one of those who is pressing for action in that direction so long as it seems to be consistent with the general economic policy for maintaining our ongoing expansion.

Senator BENNETT. Of course, I realize you have no responsibility for the appropriations that Congress makes and for the new programs on which-which require the making of these appropriations, and I think it is impossible to forecast. Secretary FOWLER. That is right.