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OFFICE OF THE SECRETARY

SALARIES, DIVISION OF TAX RESEARCH

Senator CORDON. There will be placed in the record at this time the classification schedule and justification for the item "Salaries, Division of Tax Research."

(The schedule and justification is as follows:)

Standard classification schedule

01 Personal services:

Estimate, 1948.

Estimate, 1949.

Amount recommended by House-

Increase (+) or decrease (−), 1949 estimate compared with
1948

Increase (+) or decrease (-), bill compared with estimate_

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1 This amount represents an allotment of the Division of Research and Statistics that was transferred to the appropriation, "Administering the public debt."

TREASURY DEPARTMENT

DIVISION OF TAX RESEARCH SALARIES

(Estimate 1949, $141,400; 1948 act, $200,000)1

1 $141,400 was assigned to this division from the combined appropriation of $200,000 for the Division of Tax Research and Research and Statistics.

(House hearings, pt. 1, p. 99)

(House bill, p. 3, line 14)

Page 3, line 14, strike out "$110,000" and insert in lieu thereof "$141,400❞—the estimate.

House report

"Despite a reduction of personnel in the Division of Tax Research for 1949, the budget proposes no offsetting reduction in funds. The committee has reduced the estimate of 141,400 to $110,000 to compensate for the proposed smaller number of employees. This appropriation should not be utilized to pay for work performed for foreign governments unless such is authorized by law."

Justification

The budget for 1949 shows the following with respect to average number and salary of personnel for the Division of Tax Research, for fiscal years 1947, 1948, and 1949:

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While there is a slight reduction in personnel in 1949 as compared with 1948, the division did experience a substantial reduction in personnel from 1947 to 1948 as the result of an appropriation cut for the fiscal year 1948. The reduction in number of employees, to adjust to this situation, was not completed until early in fiscal year 1948. The estimated average number of employees for 1949

is substantially the same as for 1948; the difference of 1.2 (31.8 for 1948, 30.6 for 1949), is the result of no funds being requested to cover the cost of withingrade promotions in fiscal year 1949.

The House bill calls for a reduction of 22 percent in the appropriation for 1949. If this becomes effective, the division would have available for 1949 nearly 50 percent less than was available in fiscal year 1947.

The reduction in the appropriation would curtail various categories of work and impair the efficiency of the reduced personnel. It would be extremely difcult to eliminate or reduce some aspects of the division's work. Most of this work is imposed by requirements over which the division has no control. It depends upon the requirements of the secretary in preparing and formulating tax suggestions to the Congress, upon the requests of congressional committees and executive agencies of the Government; the need for preparing reports on legislative bills, providing information and services to individual Members of the Congress and taxpayers; and handling correspondence on tax matters. This work load is largely inflexible. It can be curtailed only by reducing the adequacy of service, which has already been necessary to some extent even in connection with congressional requests. A further reduction in the appropriation in addition to that sustained in 1948 would seriously affect the ability of the division to assist the secretary and the congressional committees in connection with their work on tax legislation.

As a result of the reduced appropriation for 1948 the division has been unable to complete a substantial portion of the basic studies relating to the postwar revision of the tax system. Several members of the congressional tax committees have evidenced a marked interest in these studies and have indicated a desire that the Treasury expedite certain phases of the studies. So far the Treasury has completed and transmitted to the congressional tax committees 16 basic studies relating to postwar tax revision. About 15 additional studies remain in various stages of completion, some of which will be completed in the fiscal year 1948. While striving to complete the most urgently needed studies, the division is faced with the problem of carrying on the necessary work arising from current tax legislation and its usual service functions.

In addition to the studies affecting the basic structure of the tax system, the division is now engaged in work on an extensive list of technical revisions of the tax laws in connection with the consideration of these matters by the congressional tax committees. The first installment of specific suggestions on such matters was submitted to the chairman of the Committee on Ways and Means on February 26, 1948. As indicated in the covering letter, additional lists will be prepared and submitted from time to time. The fact that few technical revisions have been made in the tax laws for several years leaves a large accumulation of problems pressing for action. On the basis of the present legislative outlook, it is likely that only a small proportion of these problems will be disposed of in the current fiscal year. Problems of this nature require detailed and painstaking work for this division in cooperation with the Office of the Tax Legislative Counsel and the Bureau of Internal Revenue. It would not be possible for a reduced staff to deal with these matters satisfactorily while carrying on the other work of the division.

Mr. WIGGINS. I can speak with some degree of personal interest and knowledge of the operations of this Division of the Treasury Depart

ment.

REVIEW OF APPROPRIATION

The appropriation for the Division of Tax Research and the funds available for 1947 was approximately $200,000. That was reduced in the appropriation last year to $141,400. It is now proposed to reduce it by $31,400, making the total reduction for the 2 years from $200,000 to $110,000.

Senator CORDON. Mr. Wiggins, at the time that you had the $200,000 appropriation, your efforts included the Division of Tax Research and research in statistics, did they not?

Mr. WIGGINS. No, sir; the $200,000 was for tax research only.
Senator CORDON. And for what year was that?

Mr. WIGGINS. That was our estimate for 1948; and the actual appropriation for 1947, as I recall, was $198,000.

REVIEW OF TAX STRUCTURE

I have come to the conclusion that there is an inadequate appreciation of the importance of the work of this particular small division of the Treasury. It is the only organization in Government that is studying the vast problems of taxation as research experts. We undertook a year or more ago a rather comprehensive reexamination of our entire tax structure, and set up some 30 projects for study. Due to the reduction last year of some $60,000, that work has been delayed and up to now we have completed only about half of those studies.

SERVICE TO MEMBERS OF CONGRESS AND PUBLIC

Now, I think it fair to say that a great deal of the work of that Division is used in replying to letters and inquiries from both the public and Members of Congress about taxes. There is a considerable flow of what you might call the routine tax matters.

TAX STUDIES

In addition to that, this is the only arm of the Treasury available to the Secretary for the study and consideration of the whole field of taxation. The Secretary has said on a number of occasions that he felt that our entire tax system needed complete revision for peacetime, that our present tax structure was designed for wartime, and my thought is also that many inequities have crept in.

Therefore, it seems highly important at this time for this work to be facilitated for consideration by the Treasury Department and by Congress at an early date of the whole question of our tax system. I need not and will not go into detail and will say to you gentlemen that we have the most complicated tax system ever devised by man; and if you had, as I have, day after day sat with the staff in attempting to work out some of the problems in some particular little segment and see the problems and considerations involved and the slow progress that is made in trying to arrive at an equitable and proper answer, you would have some appreciation of the magnitude of the job we have undertaken.

COMPLEXITY OF OUR ECONOMY

Senator CORDON. Mr. Wiggins, is our difficulty due to the fact that we have the most complex and intricate tax system ever devised by man, or that we have the most complex economy ever devised by man, to which any system we applied must result in complexity?

Mr. WIGGINS. I think you are perfectly correct in saying that and that has impressed me many times with the simple problem applied to the complexity of our economy that it produces inequitable results in one field when you are trying to get equitable results in another. You have put your finger on the real problem.

Now, just recently, for instance, as a result of our studies we have recommended to the Ways and Means Committee, 63 tax revisions on the technical level, and have for weeks been having conferences on the staff level at which I have been present in an effort to work out many of these difficult technical problems that irritate the taxpayer

and are headaches to the administration of the tax laws. We are hoping with the fine cooperation of the Committee on Ways and Means to be able to present Congress shortly a number of them; not all that we would like, but as many as physically possible with our limited staff to prepare.

Senator CORDON. I regret, Mr. Wiggins, that we do not have yet a report from our joint committee.

Mr. WIGGINS. I am coming to that a little bit later on the internalrevenue matter. I would like to discuss that in some detail at that time.

I say, Mr. Chairman, out of my experience here with the Treasury for the past 14 months, in giving a great deal of time and effort to the subject of our tax structure and the problems and needs in view of current conditions and the probabilities ahead, that there is no more important fact for real scientific study confronting this Government, in my opinion, than the matter of taxation.

EFFECT OF REDUCTION

If you reduce this little Division down to $110,000, I say to you as a matter of deliberate judgment and conviction, there is no opportunity that it will be able to carry on to any extent the type and quantity and quality of work that is necessary to give Congress and the Treasury Department the information that is necessary for any revision of

our tax structure.

NEED FOR LOCATION OF TAX STAFF

Senator HAYDEN. It is what you might call strictly staff work that involves very large problems; is that right?

Mr. WIGGINS. That is right, sir. And I would plead with you with all the conviction that I have, the urgent necessity of maintaining this Division with the competency that is required for work of this character, and for enough staff in the diversified fields in which we tax, that they can perform the functions that it is assigned to perform; and, as I say, it is the only staff in Government that is doing this type of work, and if you do not have it here, you should have it somewhere else, and this is the proper place for it.

EXTRACT OF HOUSE REPORT

Senator CORDON. Mr. Wiggins, the House report has this language: Despite a reduction of personnel in the Division of Tax Research for 1949, the Budget proposes no offsetting reduction in funds.

The first question, of course, that poses is in your justification before the House.

Did you propose a reduction in the personnel in the Division of Tax Research, or did the House by its action require such a reduction?

NECESSARY REDUCTION IN PERSONNEL

Mr. WIGGINS. Mr. Chairman, we have reduced personnel because we did not have the money for more personned and because we could not retain some of the men in the Tax Research because of oppor

tunities they have had in private tax field, and we have lost many of our able men in that manner.

Senator CORDON. What is the extent of your reduction at this time over the first of 1948?

Mr. WIGGINS. From last year, the proposed reduction is $31,400.

POSITIONS ELIMINATED

Senator CORDON. What is the extent of your reduction in numbers of personnel.

Mr. WIGGINS. I would like Mr. Shere, Director of Tax Research, to give you that information.

Mr. SHERE. In the report before you, Mr. Chairman, there are these figures.

The number of positions in 1947 was 49; the number of positions estimated for 1948 was 41; and the number estimated for 1949 is 33. There is a reduction of 8 position as a result of the cut last year.

Senator CORDON. Your funds last year provided you with how many persons; that is the 1948 funds?

Mr. SHERE. Do you mean the 1948 funds, sir?

Senator CORDON. Yes.

Mr. SHERE. There were 41 positions estimated for 1948.

Senator CORDON. What do you mean by estimated? I understand what the word means but do you mean that when you presented your estimates to the Congress for an appropriation it was based on 41 persons?

Mr. SHERE. It was based on 49; the estimate request was 49, but there was a cut of 8, leaving 41.

Senator CORDON. Who cut the eight and why?

Mr. SHERE. There was a reduction of money of $60,700.

Senator CORDON. That is in the appropriation or in the Budget Bureau at the time it reduced your request; which?

Mr. SHERE. Our money for 1948 was reduced from the level of 1947 by $60,700.

Senator HAYDEN. By whom was it reduced?

Mr. SHERE. That was appropriation action.

Senator CORDON. Let us get away from that word "estimate" and let us get down to facts. You made an estimate to the Congress of your needs. Congress, as a fact, made an appropriation of money. That appropriation of money was reduced by $60,000 below your estimate of need; is that correct?

Mr. SHERE. That is correct, sir.

Senator CORDON. And as a result of a reduction in the appropriatable amount of $60,000, you were compelled to drop eight persons from your pay roll; is that right?

Mr. SHERE. That is right, sir, which left us 33 positions.

Senator CORDON. And that reduction left you 41 positions; is that right?

Mr. SHERE. No, sir; that left 33 positions.

Senator CORDON. That left 33 positions with which you have functioned for the fiscal year 1948; is that right? Mr. SHERE. That is right, sir.

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