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STATEMENT OF EDWARD A. O'NEAL, PRESIDENT, AMERICAN FARM BUREAU FEDERATION-Resumed

Mr. O'NEAL. Mr. Chairman, I would like to ask the committee to hear Mr. Short in the morning. He has a full statement, an exhaustive statement, as to this bill as we see it, and we would like to have that courtesy extended to him if it is possible. It is late in the afternoon now, and we do not have half of your membership here, and we consider this bill of such vital importance that we would very much like to be heard fully.

Mr. DOXEY. I would certainly like to comply with the gentleman's request. I do not know what the plans of the chairman are. I do not know what plans he has for in the morning. Did he tell you anything?

Mr. O'NEAL. We were to be heard this afternoon. We made the request that he hear Mr. Short and myself after Mr. Taber. Of course, Mr. Taber's testimony has taken up the afternoon. I am hoping that that courtesy will be extended to hear Mr. Short tomorrow morning.

Mr. DOXEY. As I understand your request you and Mr. Short, on behalf of your organization, want to testify in the morning?

Mr. O'NEAL. Yes, sir. I am afraid it is too late this afternoon. Mr. KLEBERG. I move, in order to facilitate matters, that Mr. O'Neal's request be acceded to, and that the committee hear Mr. Short in the morning.

Mr. HOPE. I second the motion.

Mr. DOXEY. Without objection it will be so ordered.

STATEMENT OF HON. JAMES F. O'CONNOR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MONTANA

Mr. O'CONNOR. Mr. Chairman and members of the committee: I heartily endorse the provisions of H. R. 8748. It, in a measure will assist in the solving of some of the farmer's problems. In considering this bill I think it well to bear in mind the percentage of the land owned by the Government as a result of foreclosures and the land owned by private lending agencies as a result of the same procedure and the number of families that have been forced from farms as a result of foreclosures.

Land owned by Government as result of foreclosures:

Land owned by the Federal land banks and Land Bank Commissioner total approximately 7,000,000 acres. This is about two-thirds of 1 percent (0.664 percent) of all land in farms.

As of December 31, 1939, the Federal land banks and Land Bank Commissioner held 35,426 farms, including sheriffs' certificates, and involving an investment of $155,331,130.

(Source of data: Bureau of Agricultural Economics, Farm Credit Administration.)

Land owned by private-lending agencies as result of foreclosures: Holdings of three principal groups of non-Federal lending agencies (lifeinsurance companies, joint stock land banks, and three State credit agencies) total about 21,000,000 acres. This is about 2.0 percent of all land in farms. (Source of data: Bureau of Agricultural Economics, Farm Credit Administration:)

Number of families forced from farms as result of foreclosures: Foreclosure data not helpful in that farmer foreclosed upon may become renter on the same or another farm.

There is a net migration, however, from farms to cities. Farm population estimates for January 1, 1939, show that more persons moved from farms to villages, towns, and cities, than moved to farms during 1938. It is estimated that 1,025,000 persons left farms and that 823,000 persons moved to farms.

The farmers in the past have been paying the highest rates of interest, at the same time offering as security for repayment of their loans and interest, the very best security we have in this country. The provisions with reference to reducing interest rates on land-bank and land-commissioner loans will be of particular benefit to the farm- · ers. This provision is covered in section 2A of the bill. Section 2 (b) also contains an excellent provision, providing that the interest rate of defaulted payments or on taxes, liens, judgments, or assessments, if not paid when due, shall bear 3 percent interest.

The provision for abolishing the requirement that borrowers purchase stock in their local farm association is indeed another splendid step for the Government to take. Many borrowers, to my personal knowledge objected to the purchase of stock, regarding such a purchase as a liability rather than an asset, as his shares were held as collateral security for the loans of other borrowers through his association. Such a provision necessarily penalizes borrowers who make good. The provision with reference to refinancing is likewise a needed one. Farmers will be furnished in one word more safe and certain credit, and are not so likely to lose their homes. Generally speaking, I may say that the chairman of the Agricultural Committee of the House and Senator Wheeler, of Montana, are indeed to be congratulated for introducing this bill and a like bill in the Senate. It will go a long way toward relieving the distress of the farmer.

It is not a complete answer however, to the farmer's problem. Some thought must be given by Congress later with reference to taxation. The farmer is made to bear an exceptionally heavy burden because the farmer must accept what he is offered for his productsnot what he asks for them-he stands by himself in being unable to budget his taxes. His taxes vary little from year to year although his income from the land is subject to wide fluctuation. Simply, the manufacturer, and even the wage earner, pay a percentage of their volume-whether it is manufactured goods or wages-as taxes. The manufacturer sets the price on the article he makes. He can include the tax in the price he sets as its selling price. The wage earner knows exactly how much he will pay. If the farmer could pay his taxes in bushels of wheat or bales of cotton, he could more nearly budget his taxes. But in years when wheat is selling at 50 cents a bushel, it takes twice as much to pay his taxes when it would in years when the price is $1 a bushel. The capacity of his land to produce more does not vary with prices received. As a result, there is a disparity not only in the price he receives, but in the taxes he pays as well.

In this connection, I wish to call the committee's attention to another outstanding inequity concerning taxation. That is, the amount of tax-exemption securities outstanding:

Amount of tax-exempt securities outstanding

1939 (June 30):
States, counties, cities, etc (wholly exempt)
Territories and insular possessions (wholly exempt).
Reconstruction Finance Corporation (partially exempt).
Federal Home Loan System (partially exempt)–
Federal Farm Loan System (wholly exempt) -

$15, 100, 000, 000

100, 000, 000 800, 000, 000 2, 800, 000, 000 1, 200, 000, 000

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This committee, of course, has nothing directly to do with relieving the situation created by these tax-exempt securities but all of these tax problems are tied in with the burden placed on the farmer and as we go along and as our Government becomes more complex and more expensive, the burden on the farmer increases accordingly. As an illustration, according to the latest statistics, we are advised that, in 1932 and 1933, it required the farmers to sell an average of 313 times as much produce to pay their taxes as they sold for the same purpose in 1913. This comes about because farm taxes mounted, while income of the farmer was sharply reduced. Illustrating, gross income per acre in 1932 was only 66 percent of that of 1913 as contrasted with real estate taxes per acre at 189 percent of 1913. In other words, taxes in 1932 were 89 percent above, while gross income per acre was 34 percent below the pre-war level.

Authority: House Document 406.

We must broaden, in some fashion, the base of taxation. I realize, of course, that the great burden is placed on the farmer by local taxation. However, the Federal Government is deeply interested in a just revision of State, local, and Federal taxes, to try to bring about a more equitable distribution of the burden of Government costs throughout. In broadening the base of taxation, we should include taxing the income from tax-exempt securities. This committee, composed as it is of able and learned members, should give some thought at an early date to the question of taxation. If some relief is not afforded to place the burden of taxation upon the taxpayers of this country in accordance with their ability to pay, the farmers' now disastrous condition will gradually become worse.

The farmer in the past has been actually eaten alive by the exorbitant rates of interest, exacted from him by loan sharks of all kinds and unconscionable commissions that had been charged him. The foregoing, together with the heavy burden of tax placed on him, coupled again with his low income, places him in a disastrous position and his future is really dark. It makes no difference which way he looks-it looks bad. This bill will answer to a certain extent the interest problem, the credit problem, and some of his other difficulties, but, of course, it will not answer the tax question. My own thought is that the question of tax cannot be answered unless we adopt either the cost-of-production theory, or proceed in some way on a plan of income tax based on the policy that we must pay our tax in accordance with our ability to pay. It might be suggested that the farmer stands out practically alone as having the kind of property, both real and personal, that the assessor can find. Hence, under the present system, he must pay or lose his home-and that is happening every day. I thank you.

(Thereupon, at 4:33 p. m., the committee adjourned to meet at 10 o'clock the following morning, Wednesday, April 3, 1940.)

FARM CREDIT LEGISLATION

WEDNESDAY, APRIL 3, 1940

HOUSE OF REPRESENTATIVES,
COMMITTEE ON AGRICULTURE,
Washington, D. C.

The committee met at 10 a. m., pursuant to adjournment, in the committee room, New House Office Building, Hon. Marvin Jones (chairman) presiding.

The CHAIRMAN. The committee will please come to order.
Mr. O'Neal, we will hear you.

STATEMENT OF EDWARD A. O'NEAL, PRESIDENT, AMERICAN FARM
BUREAU FEDERATION

Mr. O'NEAL. I just wish to make a brief statement. I wish to express appreciation to the committee for this opportunity to present the views of our organization relative to H. R. 8748. Because of the importance of this matter to farmers and in order to assist the committee in the consideration of these farm credit problems, I have asked Mr. R. E. Short, President of the Arkansas Farm Bureau Federation, one of our leading farm bureaus in the South, and a member of the board of directors of the American Farm Bureau Federation, to present a statement to this committee on behalf of the American Farm Bureau Federation. Mr. Short served as a member of a special national Committee on Rural Credit which I appointed last year which made a thorough study of the rural credit situation and farmers' credit problems. He is also a large farmer and a member of the board of directors of the St. Louis Federal Land Bank.

I might add to that, Mr. Chairman, that on that committee were farm leaders of long standing: Mr. Lincoln of the Ohio Farm Bureau; Mr. Jones, of the Minnesota Farm Bureau; Mr. George Wilson of the California Farm Bureau; and Mr. Arthur Packard, of the Vermont Farm Bureau.

Now, I would like in addition to that, when you are through with our witness, to present to the committee a letter. I think it is one of the finest letters on this credit situation on our own position, by Mr. Earl Smith, of the Illinois Association. I would like to have the privilege of reading that to the committee and I will appreciate having the opportunity of having Mr. Short to appear.

STATEMENT OF R. E. SHORT

Mr. SHORT. Mr. Chairman and gentlemen of the committee, I appear here today to present a statement on behalf of the American

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