(The amendments referred to are as follows:)

SUGGESTED AMENDMENTS TO TITLE IV-ESTATE TAX.

SEC. 402 (f) To the extent of the amount receivable by the executor as insurance under policies taken out by the decedent upon his own life in excess of the sum required to meet estate transfer, and inheritance taxes imposed by the United States or any State of the United States and payable by the executor or by the decedent's beneficiaries and any accrued and unpaid income taxes of the decedent, and to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his-own-life:

SEC. 403 (b) (3) Third paragraph. For the purpose of this title, stock in a domestic corporation owned and held by a nonresident decedent, and the amount receivable as insurance upon the life of a nonresident-decedent where the insurer-is-a-de mestie corporation, shall be deemed property within the United States, and any property of which the decedent has made a transfer or with respect to which he has created a trust, within the meaning of subdivision (c) of section 402, shall be deemed to be situated in the United States, if so situated either at the time of the transfer or the creation of the trust, or at the time of the decedent's death. The amount receivable as insurance upon the life of a nonresident decedent shall not be deemed property within the United States for the purpose of this title.

SUGGESTED AMENDMENTS TO TITLE II.-INCOME TAX.

SEC. 234. (1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered, and including rentals or other payments required to be made as a condition to the con tinued use or possession of property to which the corporation has not taken or is not taking title, or in which it has no equity, and a reasonable allowance for premiums paid for indemnity against the death of any person connected with a trade or business carried on by the taxpayer, by insurance on the whole life continuous level premium plan, or such other form of insurance as may be approved by the commissioner.

SEC. 214. (1) Amend same as above.

SEC. 215 (d) Strike this out.

SEC. 213. (b) (1) Strike out the words "to individual beneficiaries or to the estate of the insured."

TRANSPORTATION TAX.

STATEMENT OF S. H. MARX, ASSISTANT GENERAL COUNSEL AMERICAN RAILWAY EXPRESS CO., NEW YORK, N. Y.

Mr. MARX. We are not addressing ourselves to the sales tax at all. As you notice from the calendar, we speak of the tax on express transportation, and our purpose in coming to you is principally to have you give us the same treatment that you may accord to the transportation tax on freight and passengers and Pullman.

There have been a number of bills introduced on that subject, most of them in the House. I think there is only one in the Senatesome of them include the express, others do not. The one in the Senate, which was introduced on May 12 by Mr. Trammell, does repeal A, B, and C of section 500. Section 500 of the revenue law is the tax on transportation and other facilities and insurance; and paragraph A of that section levies a tax equivalent to 3 per cent upon the amount paid for transportation by freight. That is a straight 3 per cent tax, and is not so very difficult of computation.

The next paragraph, B, levies a tax of 1 per cent for each 20 cents or a fraction thereof upon express. You will note that that is a little more difficult of computation. It is almost a 5 per cent on the

amount paid. But inasmuch as it is 1 cent for each 20 or a fraction, then you have, maybe, a 22 cent charge, which makes 2 cents tax, and our experience is that the average is 5.51 per cent of our total collections; C levies a tax of 8 per cent straight upon the passenger fare paid on railroads; paragraph D levies 8 per cent upon the amounts paid for Pullman reservations; and paragraph E a tax of 8 per cent. straight upon pipe-line transportation, and so on through.

As I say, some of these bills expressly have stricken out A, C, and D, which is freight, passenger, and Pullman, omitting to strike out B, which is express.

We feel that the express tax should certainly be repealed if these others are, and we even feel that it should be repealed if the others are not, because the cost of collecting, I must say, almost equals the amount of the tax. We have no figures to prove that statement, and so I simply give you the reasons for our broad conclusion, and that is this: That the average express charge is small. You understand that express transportation deals with the small packages, packages which need fast and expeditious service. The freight is slow; express goes on passenger trains, and if you have a small package that you want to get some place in a hurry you go to the express company and ask them to hurry it there for you. The average charge on express shipments, including our carload business and everything else, is only $1.48 per shipment; the average tax on that is 7.8 cents.

Express shipments, because they are small and because they are of value, must be given very special care and attention, and each requires a separate way bill, requires separate treatment in carrying it through the accounts, and the result is that there is a great deal of expense. In the first place, the package is taken in to the agent; he must compute 1 cent on every 20 cents or fraction thereof of the charge, and then he must enter that separately on all of his accounts. The tax is separate from the express charge and the valuation charge; if there is an extra value, that is charged for also. As I say, we have only $1.48 on which to pay all expenses, including the expense of computing, collecting, reporting, and paying that tax, and there is only 7.8 cents tax on the shipment. The railroads' average charge, I believe, is about $20, which you will see is a greater leeway for expense of those matters than the express company has.

The express company does business throughout the entire United States and has 28,000 agencies. This work is done at each and all of those agencies. The number of shipments handled by the company each day is 751,000, which you will note is only an average shipment for each agency of 27 per day. That is due to the fact that wherever there is a railroad station we have an agent at least who handles the express shipments. Each one of those 28,000 agencies must be properly equipped with the forms, etc., for computing, collecting, and reporting these taxes.

The amount of tax in a whole year is $17,550,000.

Senator CALDER. That is the amount paid for express?

Mr. MARX. That is the amount which we collect and pay over.
Senator CALDER. Your company?

Mr. MARX. There is only one company, except that May 1 the Southeastern Express Co. began doing business in the southeastern part of the United States. All the other States are covered by this

one company. As you will remember on account of the war the old companies were required to form themselves into one company by the Director General.

Senator CALDER. And they have never separated?

Mr. MARX. They have never separated.

Senator CALDER. Is it likely they will?

Mr. MARX. I do not think so, because the Interstate Commerce Commission, in accordance with the permission granted by Congress in the transportation act, authorized the one company to continue, and found that that was really the best way to give the best and cheapest service to the whole country. You can go into one express office and ship a package to any other part of the United States. You do not have to sit down and find out which company goes to that point or which can get there quickest. You simply take it in, and one company handles it over any railroad or line.

So that the one company at present, so far as we can see and, as I say, so far as the Interstate Commerce Commission could see, will continue indefinitely, except, as others may spring up, as one has already in the Southeast.

So these figures I have given do cover all business, as this other company was not in operation. Hence, the total amount involved in this is only $17,000,000. I say "only," because really in comparison to the other figures you are considering it is a small amount; for instance, the statement is made that the tax on freight is $300,000,000. So that our figure is really small compared to the big amounts that you are considering in the whole scheme.

As I say, the point I wish to impress upon you is the amount which the Government gets from this does not justify the trouble and expense of collecting, and when you consider also that one of the big questions right now is the reduction of rates in order to get business back on a normal basis, we believe that taking this tax off is going to be a very substantial help to the shipper, because not only do we have to collect and report it, etc., but the shipper also has the same burden. Of course, it is a tax which the shipper can deduct in his income-tax reports and other reports, and so he wants to carry that separately also. He has the computation of those things. So that altogether I really believe that the expense on the transportation business to the shipper and the company is equal to the tax collected.

By striking that tax off, you can to that extent reduce express rates and help that situation in that way.

Senator SIMMONS. What you want is simply a flat rate for the express companies, just like that given to the railroads, and you think it ought not to be any greater than that of the railroads?

Mr. MARX. You understand that at the present time there is the express rate which fixes the charge that the express company shall receive?

Senator SIMMONS. I understand that.

Mr. MARX. This tax is a tax upon that, and we should like to have the whole tax stricken off, and certainly it should be if the railroad tax is to be stricken off, because there is a relation between freight rates and express rates which should be maintained, and if you strike it off of the railroads it is going to bring the railroad rate up that much closer to the express-the express is generally higher-and

disturb that relation of express rates which should be maintained, because it helps to hold to the freight business which it should have and to the express business which should move by express and go on the passenger trains.

In order to collect this $17,000,000 yearly we handle 225,256,000 shipments, and, as I have stated, each one of those shipments must be separately handled in the collection of this tax. The agent computes it, collects it, and has to report it to his district accountant, who, in turn, carries it through to the general auditor, of which there are four, and they carry it through to the vice president who in turn reports it to the Government.

I have filed with your committee and have here two copies of the brief, to which are attached some of the forms which show the amount of work involved, and it shows marked on each form the separate space which is absolutely necessary for the purpose of carrying forward in our accounts and through the accounts to the point where we pay it to the Government-the war tax, as it is called-in addition to all other entries.

The express business, as I say, is a matter of great detail, as you can readily see from the 67 different kinds of blanks we have to use, and one or more columns must be added to each one of those blanks in order to have a space for the war tax [exhibiting forms and reports to the committee], and that involves a great deal of computation and many columns, and you can see by looking through that [indicating] how much work it really entails.

You can also see on some of these forms that we have had to leave out other information in order to put this war tax in, because it simply means another column, and on some of the forms it means three columns, and on the large one here [indicating] the war tax is entered four times on that sheet. In order not to make that sheet any larger, we had to cut out the column which previously had been used for valuation charges. These details are necessary, because the Interstate Commerce Commission fixes our rates on transportation. In addition to that, we have a valuation charge which is a kind of an insurance of value, and which is entirely separate from the transportation charge. So, all those figures must be kept separate in order to get at the actual revenue which accrues from the transportation itself, and that is valuable information which should be retained on these forms. But we had to strike it out of some of them in order to make room for this transportation tax.

If there is an overcharge or an undercharge, as there is not infrequently, the same procedure has to be gone through. We have to deduct or add this tax to whatever change may be made in the charge, and if it has been reported to the Government and paid to the Government, we have to then get our refund, and not only does the forwarding agent have to go through those computations, but also the receiving agent.

As I said, expedition is the principal feature about express service, and the computation and collection of this tax just simply adds one more straw to the things, minor though they may be, which go to help to upset things. If there is some dispute over the amount of the tax or some difficulty in computing it, it holds up the shipments and it delays the work of the office. It is simply one of those little

things which we should like very much to get rid of, and we feel it would be very helpful to the shipper also to be rid of it.

I think that gives you in a few words what our situation is and that we should like to have the whole tax taken off of express transportation.

The sales tax, as it stands now, is based on the sale of goods, wares, or merchandise. I have in the past seen some bills purporting to be sales-tax bills which were so broad that they might be construed to cover service of many kinds, including our service, and we should like to have that borne in mind in drafting a bill of that kind, that the language be not so broad that the tax be placed on our service, even though the other one be repealed.

INSURANCE TAX.

STATEMENT OF A. E. FORREST, VICE PRESIDENT AND GENERAL MANAGER NORTH AMERICAN ACCIDENT INSURANCE CO., CHICAGO, ILL.

Mr. FORREST. I represent what is known as Health and Accident Underwriters' Conference Committee, of about 90 companies engaged in a business commonly known as industrial health and accident insurance.

Senator MCCUMBER. Where is your residence?

Mr. FORREST. My residence is Chicago. It is a business devoted to writing insurance on workingmen principally, and I am sent here to ask for the repeal of section 503 of internal revenue law of 1917. Mr. Estes will present the brief in respect to all of the other sections, but I wish to speak particularly about the abuse, or rather the burden that has been put upon these companies dealing in what we call "bread and butter insurance," through one particular addition to section 503, which places a 20 per cent tax on the first premium of this insurance.

I will explain that the insurance is sold to workingmen in monthly installments; for instance, take a risk at $1 a month, we would insure him against sickness and accident. If he had to pay $12, or an annual premium, he could not pay it, because his pay comes in monthly or weekly installments.

Now, to place upon the first month's premium a 20 per cent tax deprives the insurance company of the ability to write the risks because of the expense. The 1 per cent spread over the entire year is not so burdensome, but the 20 per cent is impossible, and the result has been that the business, that has been an aid to the workingmen, has been decreased probably 50 per cent. The company which I represent and have represented for over 30 years has had its business of that character reduced to 50 per cent since this act went into effect.

Senator WALSH. The dollar premium would be 20 cents?

Mr. FORREST. A dollar premium would be 20 cents.

Senator WALSH. For a year?

Mr. FORREST. Yes, sir; 20 cents on $1, and no tax thereafter. But the life of this premium is short, and it makes it prohibitive.