ORGANIZATION AND OPERATION OF CONGRESS TUESDAY, JUNE 12, 1951 UNITED STATES SENATE, COMMITTEE ON EXPENDITURES IN The committee met, pursuant to adjournment, at 10:20 a. m., in room 357, Senate Office Building, Senator John L. McClellan (chairman) presiding. Present: Senators McClellan (chairman), Hoey, Moody, Schoeppel, and Dworshak. Also present: Walter L. Reynolds, chief clerk, and George B. Galloway, consultant. The CHAIRMAN. The committee will come to order. Senator Williams, come forward, please. The committee is glad to have you. You know the subject matter and the scope of these hearings. We welcome your suggestions and any statement you wish to make to us. STATEMENT OF HON. JOHN J. WILLIAMS, A UNITED STATES SENATOR FROM THE STATE OF DELAWARE Senator WILLIAMS. Mr. Chairman, I appreciate the opportunity to be here this morning. I am going to direct my remarks to that phase of the problem which gives special tax exemption to the Members of Congress. The CHAIRMAN. Speaking of the $2,500 tax exemption? Senator WILLIAMS. The $2,500 allowance for the Members of Congress and the $10,000 tax exemption for the Vice President and the Speaker of the House, and the $50,000 for the President. The CHAIRMAN. Yes. Senator WILLIAMS. I am appearing here this morning in opposition to any proposal which suggests that the President of the United States, the Vice President, the Speaker of the House of Representatives, or any Member of Congress, should have any special tax consideration other than those exemptions which are automatically extended to every other American taxpayer. It is not the amount of revenue involved in this case. It is more a matter of principle. Our country was established on the basis that we would recognize no privileged group, and extension or continuation of these special tax benefits to the top officials might well mark a departure from that principle. The President of the United States, Members of Congress, and other top officials of the executive branch of our Government are responsible for the fiscal affairs of our country. We, as policy makers, authorize the large expenditures which necessitate increased tax rates, amounting in some instances to near confiscation. President Truman has said that the people of our Nation must be taxed "until it hurts" in order that we may carry out our rearmament program. Now, in view of the fact that a tax increase does seem inevitable, I think the best way in which some of the sting from any prospective tax increase could be diminished would be first to convince the American people that we, as Members of Congress, as well as the President of the United States, are willing to pay our proportionate part of any tax increase. This can only be accomplished by repealing the present special $50,000 tax exemption extended to the President; the special $10,000 tax exemption extended to the Vice President and Speaker of the House; and, the special $2,500 tax exemption extended to each Member of Congress. These exemptions in each instance are in addition to the usual exemptions which all other taxpayers get. Senator SCHOEPPEL. Might I ask the distinguished Senator how many co-sponsors you have on your legislation as of the moment? Senator WILLIAMS. Thirty-four, I think it is, and the Senator from Kansas who is speaking is one of the co-sponsors. Thirty-four Members of the Senate joined in this proposal, S. 1290, recognizing it is a fact that the Congress should set the example, and that this exemption should be repealed. I think it is a healthy condition for our own good, and particularly for the good of the country, that we, as officials of the Government, should suffer along with other taxpayers. Therefore, I urgently suggest that, in any bill this committee might consider reporting, you eliminate all of those features which would extend special tax exemption either to the President, the Vice President, the Speaker of the House, Members of Congress, or any other official of this Government. This bill, which I have introduced and which is cosponsored by 34 other Members of the Senate, would transfer over as regular compensation those amounts which are now tax-exempt. In other words, the Members of Congress today are receiving $12,500 of taxable income, and $2,500 special which is tax-exempt, or a total of $15,000. This bill would make the full $15,000 in the form of salary and taxable. It would also, in the case of the President of the United States, who is receiving $100,000 taxable and $50,000 tax-exempt, make the full $150,000 taxable. The same thing is true with the Vice President and the Speaker of the House, who are receiving currently $30,000 taxable and $10,000 tax-exempt. It would make the full $40,000 salary and all taxable. Now, I think it should be that way because if we continue this policy and this principle there is no one who knows but in a few years later somebody may develop what he considers to be a good idea, of making all Government officials' salaries tax exempt, in which case we will have completed the cycle of setting aside a privileged group in this country. I think when any Member of Congress or the President of the United States tells the American people that they are going to be confronted with higher taxes in the administration of the war effort, that they should be speaking of sacrifices that "we" are going to make and not sacrifices that "you" are going to make, but "we" are partially tax-exempt. I do not think there should be any exemptions anywhere down the line. The CHAIRMAN. Are there any questions? Senator MOODY. I might say I think the Senator from Delaware is absolutely right. Senator WILLIAMS. I appreciate that. At the time this was passed I do not think the Members of Congress-and I do not say this in criticism of them-realized the full significance of what they were doing, because otherwise I cannot conceive of it as being voted in the first place. The fact that 34 Members of the Senate have recognized this by joining as cosponsors of this bill indicates they are willing to give up their tax exemption, and I feel very confident we can get that done. The CHAIRMAN. My recollection is, Senator Williams, at the time this reorganization bill was passed I made some remarks against that provision in the bill. I thought a salary increase was justified, but I did not favor the tax-exemption provision of it. I prepared some time ago, and it is on my desk-I have not introduced it because I was waiting for the tax bill to come over here-an amendment to the tax bill. I favor the repeal of that provision in the law affecting the Members of Congress. It probably should be extended to the higher officials you referred to, but I do believe this in all fairness to us: That if we are going to treat ourselves like business people are treated and others, I feel we should have a provision in the Revenue Act that would permit us to charge off legitimate expenses in connection with our service here. Businessmen can come to Washington and set up an establishment here to promote the interests of their business and charge off all of that as expense. A Member of Congress elected from a State like mine, and yours too, has to give up his home, and we spend all of our time here. We have to give up our homes in our State and come here and live under conditions that are rather expensive. There should be a right given to us to charge off legitimate expenses that are absolutely and indisputably associated with our service here. That is the honest way to do this, not just set up a fund as tax-exempt. Senator WILLIAMS. I think as far as the legitimate expenses are concerned that Members of Congress or the President have that compare with expenses that any businessman has, certainly they should have the same exemption. The CHAIRMAN. That is the point I make. Senator WILLIAMS. I think the Members of Congress are entitled to the same exemption as a businessman is entitled to, and no more; but I think they should have to keep an accurate record of their expenses and be able to itemize them in exactly the same manner as we ask every businessman to keep a record. It is a nuisance-yes. But a lot of the laws we pass are nuisances to the businessmen. If we had to keep a record of our expense accounts with our legitimate deductions and claim them in our tax returns, as any other taxpayer does, we would be more sympathetic toward the problems of the American taxpayers. The CHAIRMAN. The point I am making is that I think when that is done the actual deductions will exceed the $2,500 allowance we have, but it is difficult to explain and it is not the right approach to our problem. Senator WILLIAMS. It is my understanding that the Members of Congress today are already allowed the same deductions as businessI do not know of any provision in the law that says they would men. not be. The CHAIRMAN. That is not true, of course. Senator WILLIAMS. They should be, anyway. The CHAIRMAN. Because we maintain a home down-state, and we have to come here to Washington and maintain a home here and pay our living expenses here. For instance, we have an apartment or a house that we rent. Now, any businessman who comes to Washington to promote his business interests and incurs such expenses would be entitled to charge them off, whereas we are not. Senator WILLIAMS. Well this may be interpreted as having two homes. I am not able to say about that; but the point I am raising is that under no circumstances should any portion of our salary be set aside as tax-exempt. It is a bad principle. The CHAIRMAN. I agree, but a provision should be made that will give to us the same expense allowances as businessmen receive in the promotion of their business. Senator WILLIAMS. As far as the exemption of the President is concerned, of course he has a special expense account other than this item. This $50,000 exemption unquestionably is salary. The CHAIRMAN. He has a travel expense account. Senator WILLIAMS. He has a travel expense account, and then he has a $40,000 special expense account which he can report to the Bureau of the Budget and get credit for. Congress has never refused to increase that if it is justified; which I think is correct. However, I do not think we should plan on raising salaries or putting a part of my salary or any other official's salary in any special tax-exemption class. I certainly hope that the committee will give consideration in any bill you report to repealing that provision before it spreads any further in our system. Senator MOODY. In line with what the chairman said, Senator Williams, I should judge, having had recent experience, that there are few Members of Congress, if any, who are not serving here at a financial sacrifice. While it seems to me, as you say, that your principle cannot be questioned, I do think that Senator McClellan has made a very good suggestion. There are expenses that are incurred here which would be deductible according to your own yardstick if they were incurred by private citizens. I assume that you are trying to equalize the treatment of public servants and private citizens. Is that right? Senator WILLIAMS. As far as the Members of Congress serving at a sacrifice, of course, we all Senator MOODY. A financial sacrifice, I mean. Senator WILLIAMS. Of course, we are all conceited enough to think our services are worth a lot, but there has been no shortage of applicants for Members of Congress. Senator MOODY. Yes. I certainly agree. I am not saying that the people in Congress would not want to be here. Of course they want to be here. But I do think, from the standpoint of the financial end of the business, they are here at a sacrifice. Senator WILLIAMS. To a large extent the reason for the complaint that the salaries of the Members of Congress today and the top Gov |