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liable, and the Supreme Court says anybody that makes a contract is subject to the exercise of the entire remedy of the law.

Senator NORRIs. But I am thinking whether the purchaserSenator BANKHEAD (interposing). I think he might revoke it.

Senator NORRIS. He may not want to revoke it. It may cause him a lot of damage to revoke. I do not think it applies to one party more than another.

Mr. EZEKIEL. If I may comment on the question of the Senator, as an economist, not as a lawyer-I cannot pass on it from a legal standpoint—but from the economic side. Everyone else who is buying flour, say, has to pay a higher price caused by the imposition of the tax, so that even though the purchaser has to pay a tax which he had not anticipated at the time he made the contract, all of his competitors are paying a tax on the current basis and he is thereby able to protect himself in the price at which he sells the flour.

Senator NORRIS. It may be that a man way beyond him is going to hold him up. For instance, when he bought the flour he may have contracted to sell it after he bought it to a hundred different people, if he is a large dealer.

Mr. EZEKIEL. Existency contract section applies clear down the line.

Senator NORRIS. He could not make them pay him anything in addition to what they had agreed to pay.

Mr. EZEKIEL. I believe he could, under the section. It applies to any processor, jobber, or wholesaler. It goes right down the line.

Senator McGill. So far as the contract does not prohibit the collection of the tax; but does not that change the terms of the contract, the very fact that we impose the tax?

Senator BANKHEAD. It does not change it between the parties.

The CHAIRMAN. Why could not the law be made to read that it is applicable to such contracts as were made subsequent to the passage of the act?

Senator NORRIS. I suppose they want to make it impossible for a whole lot of fellows to make these contracts in anticipation of the law and in that way escape the tax. Is that the object of it?

Mr. EZEKIEL. The major object is to prevent injustice and the breaking down of true contracts that were made prior to that time. For example, suppose a cotton spinner had made a contract to deliver cloth and had hedged that contract by the purchase of futures, and then the tax came along and the amount of that tax was added to the purchase price which you had anticipated paying when you bought the cloth, this is so drawn as to protect the man who had in good faith entered into such a contract and to make necessary adjustments which the contracts would require. The entire wording is already in the Internal Revenue Act. It is based exactly on what has been done heretofore in the Internal Revenue Act when similar business was involved.

Senator NORRIS. In subsection (b) you say: Taxes payable by the vendee shall be paid to the vendor at the time the sale is consummated and shall be collected and paid to the United States by the vendor.

Why not have the vendee pay direct to the United States ?

Mr. EZEKIEL. That should be clear in the text. If the purchaser is willing to assume the payment of the tax, he simply pays the tax to the processor and the processor pays the tax to the United States in the usual manner; but in the few cases where the purchaser refuses to assume the payment of the tax, in those cases the processor does not have to advance the funds himself, but he merely so reports to the Bureau of Internal Revenue and leaves it in their hands. It relieves the processor of the necessity of advancing the funds for the tax where the purchaser is unwilling to assume the obligation.

The CHAIRMAN. What provision do you make if the tax is imposed-suppose the purchaser goes out to purchase his raw materials; suppose he does not have the capital to pay that additional price that the tax brings up; do you expect the R.F.C. to furnish him the money to meet that situation?

Mr. TUGWELL. He is made eligible to borrow, under section 5 of the Reconstruction Finance Act-just made eligible--the R.F.C. is not forced to do it, but he is just made eligible.

The CHAIRMAN. Well, I am thinking of this: Suppose a cotton manufacturer has committed himself to buy cotton, and he has now got to pay $10 or $15 a bale more for the cotton than he otherwise would have to pay, and that goes into effect immediately and with the condition of the times, unless he is given some opportunity to readjust his contracts, because the consumer has got to pay that thing, and, as I say, he has sold ahead; now he has got to pay more for his raw material and he has got to make contracts now at a higher price for his finished product to absorb the tax, and if he cannot get the money he will stop, just shut down his factory.

Mr. TUGWELL. That is the reason section (c) on page 18 was written.

The CHAIRMAN. Section (c) on page 18. I looked at that a minute ago. Mr. TUGWELL. Did you read the section above that, too? The CHAIRMAN. Yes. Mr. TUGWELL. The end of that says:

That the Secretary of the Treasury is authorized to permit postponement, for a period not exceeding 60 days, of the payment of taxes covered by any return under this act.

The CHAIRMAN. What page is that?
Mr. TUGWELL. Page 18.

The CHAIRMAN. “That the Secretary of the Treasury is authorized to permit postponement”—yes; I did not notice that.

Mr. EZEKIEL. As a matter of fact, Mr. Chairman, I am informed by the Bureau of Internal Revenue that their practice is to require a monthly statement, and then the payment of taxes at the end of the month on that statement, so that processor will have on an average 15 days anyway. This gives him an additional 60 days, which would give him in most cases time to receive payment. Then there is the further provision for a loan from the Reconstruction Finance Corporation.

Senator MURPHY. He would be assessed before collection.

Mr. TUGWELL. It would be based on monthly returns. That would give him enough time, possibly 60 days. Do you care to have the whole of that section 19 read, covering that collection of taxes? It is the usual revenue provision.

The CHAIRMAN. Now you have got section (c). I skipped that. Now, under (c) it provides:

In order that the payment of taxes under this act may not impose any immediate undue financial burden upon processors, any processor subject to such taxes shall be eligible for loans from the Reconstruction Finance Corporation under section 5 of the Reconstruction Finance Corporation Act.

That is that emergency feature of the Reconstruction Finance Corporation Act. That is left optional with them, I presume.

Senator NORRIS. They do not have to loan it.
Senator McGILL. We cannot afford to make it compulsory.

Mr. TUGWELL. I do not think you want to make it any stronger than that. Now the last section, section 20, has to do with compensating duties.

SEC. 20. (a) During any period for which a processing tax is in effect with respect to any commodity there shall be levied, assessed, collected and paid upon the importation, from any foreign country into the United States, of goods processed or manufactured wholly or in chief value from such commodity which, if domestically processed, would be subject to a processing tax, a duty equal to the amount of the tax which would be payable with respect to such domestic processing at the time of importation. Such duty shall be in addition to any other duty imposed by law.

The CHAIRMAN. That is very plain, that a Democratic administration is coming in and imposing a protective tariff. Very nice. [Laughter.]

Senator MCGILL. If you do not have it, they would flood our market here easily.

Senator Norris. These Democrats are just as good protectionists as anyone.

The CHAIRMAN. And they find it very necessary when it affects them.

Mr. TUGWELL. Mr. Chairman, you asked for a list of the farm organizations this morning. I brought it here this afternoon [handing a paper to the chairman).

The CHAIRMAN. Now, if it is agreeable to the committee, we will stand adjourned.

Senator McGILL. Just a minute. Is there a provision in this billthere should be at least—that if there is any part of it that is unconstitutional?

Mr. TUGWELL. Yes.

Senator McGILL. What about these salaries back here! Do you want to take that up and amend it?

The CHAIRMAN. We will meet again. This is just preliminary, to get a birdseye view of the bill. When the House passes it and then the amended form or the form in which it comes from the House, it will be referred then to this committee.

Senator MCGILL. I just want to make it clear that I want to do something to fix those salaries.

Mr. TUGWELL. May I speak about the salary business off the record ?

The CHAIRMAN. Yes; certainly.

Senator Pope. My thought would be to make that $10,000 for anyone and then the maximum number.

Senator NORRIS. If you raise that to $10,000, it seems to me you ought to limit the number.

Mr. TUGWELL. I would rather you would not do that, if you do not mind. I do not think we want too much discretion.

Senator POPE. Then limit the number.

Mr. TUGWELL. I would rather you would limit the number and let us have a little higher limit.

Senator NORRIS. Have you any other man in mind ?

Mr. TUGWELL. Yes; we will have to have a chairman and the head of every commodity group will have to be a very active man in the trade, and we will probably have 6 or 7 of those. We ought to have at least 8 or 9 people to whom we can, if we have to, pay as high as, we think, $13,000 a year. We have done some figuring on it, and we believe that that is kind of an odd figure, but we believe we can get anybody for that. We do not believe we can get them for $10,000.

Senator McGILL. And for those particular ones the expense would be a little over $100,000 ?

Mr. TUGWELL. Yes.
Senator McGILL. And how many others are going to be involved?
Mr. TUGWELL. That is all.

Senator McGill. You think you will not have anyone else on salary at all?

Mr. TUGWELL. Yes; but not any such salary as that.

Senator McGILL. I am trying to get at the expense. How much would be involved in the way of salaries, in your judgment?

Mr. TUGWELL. It is rather difficult to foresee, because you would have to have a good deal of preliminary work done in the way of organization. You see you have got to organize local committees, you have got to set up cooperation with the States, provided this is done on the rental and State cooperative plan-it might not be in some instances. Then you have got to have all these contacts made, you see, all the way up to Washington; then in Washington you have got to have your commodity chief, you have got to have a chairman, and you have got to have an adequate staff for them just as you would have to have a counsel and have people to do research work in prices, and so on. You would have to have a staff for these hearings, which we have provided for, and all that. I should say we would probably have 50 people here in Washington.

Senator POPE. So far as I am concerned, I would be in favor of putting a maximum limit, whatever we might agree upon, there instead of leaving it open to have 10 for whatever price might be paid. I think if we do not do that, it is going to hurt the bill. It certainly will. It is going to affect the carrying out of the law and public approval of it.

Senator NORRIS. Fix a limit as to the salary and not as to the number.

Senator POPE. Yes, I think we might do both, if they know about the number they will have.

Mr. TUGWELL. Do you not think it would look worse to have $13,000 in the act than it would to leave it open?

Senator Pope. No; I will be perfectly frank about it; I would not leave that open there to pay $50,000 or $75,000, depending upon the Secretary of Agriculture or anybody else. I would put it in there so that people would see what they are getting.

Mr. TUGWELL. That is perfectly all right with us.

Senator McGILL. I think it would be well for us to get as close an estimate as we can to how much the expenses are going to be involved in the administration of this law.

Mr. TUGWELL. It will be very difficult for us to give it to you inside of a week. We are working on it now, but you understand the difficulty of getting that.

Senator MCGILL. You want this thing passed before a week?

Mr. TUGWELL. I am afraid we cannot get it to you inside of that time, and a good deal depends, not on the Secretary and on me, but upon the big men we persuade to come and administer this.

Senator McGill. Senator Pope had the public psychology in mind, I think. How is it going to affect the people, the farmer? The reaction among the farmers to the Farm Board and the Grain Stabilization Corporation, a great deal of it was due to the enormous salaries that were paid and the expense involved in administering the law, and they were not making anything out of it.

Mr. EZEKIEL. If I might suggest, Senator, the Senator's suggestion could be incorporated by putting at the end of that section a general provision that in no case shall any salary paid under this act be in excess of $13,000.

Senator POPE. Yes; that would do it.

The CHAIRMAN. I would much prefer, if it was possible, to have a list of the officers that would be necessary, and to fix by statute their compensation.

Mr. TUGWELL. That might vary greatly from time to time, Senator, and from season to season. That would be a very great burden on the administration.

The CHAIRMAN. But I tell you it would be more satisfactory to the public.

Senator Norris. I think a $13,000 salary would be looked upon with a good deal of fear by the farmers of the country.

Senator POPE. I think so. I think it ought to be left at $10,000.

Senator Norris. If I were going to put a limit on it, I would not exceed $10,000, then I would like to put the number in, so that there could not be too many of them.

Senator MURPHY. $13,000, Senator, is $11,000 after the 15 percent deduction.

Senator NORRIS. Yes.

Senator BANKHEAD. I do not suppose the 15 percent applies to employees with that salary since the passage of that act.

Senator McGill. This law would be a later enactment, and I do not think it would apply.

Senator MURPHY. The way I look at it, we are putting tremendous responsibility on the Agricultural Department, tremendous responsibility. Now, I know Mr. Wallace personally. Mr. Wallace himself is a poor man, and I don't believe there is anybody in the United States more unselfish and more sincerely devoted to an effort to serve agriculture. I think there is not a man in the United States who has a better realization of the state of mind of the farmer and the distress that he is in, or would be more sensitive of the criticism of the salaries paid in his Department.

Mr. TUGWELL. I am sure that is true.

Senator MURPHY. I sincerely believe that has to do with the discussion Secretary Tugwell asked to keep off the record.

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