Wyoming County Assessors Association, telegram of Ford M. Welch, presi- York, Joe, Jr., president, Sheep & Goat Raisers Association, letter to Hon. ADDITIONAL INFORMATION Page 3079 3495 3575 Alabama public officials and educational leaders attending public hearings of the Finance Committee, Sept. 23 and 24, 1969. 3602 Amendment No. 139 of Senator Metcalf to H.R. 13270, re: farm losses. 2742 3086 "City Cowboys-Big Investors Round Up Tax Savings on Cattle 2853 3060 "To the Point-Will the Bison be a Healer of Man," by Russell Kirk. Executive communications regarding municipal bonds referred to the Committee on Finance. 3547 2993 Municipal bonds, listing of persons requesting opportunity to be heard at tax reform hearings who were not scheduled. 2990 Nebraska representatives to the Finance Committee hearing on H.R. 13270.. 3134 Oppenheimer Industries, Inc., document entitled "An Introduction to 2712 Prospectus of Black Watch Farms_ 2718 Spindletop Research, Inc., summary report entitled "The Impact of 2755 APPENDIX A Written testimony received by the committee expressing an interest in the subject of farm losses. 3489 APPENDIX B Written testimony received by the committee expressing an interest in the subject of cooperatives__ 3553 APPENDIX C Written testimony received by the committee expressing an interest in the subject of State and local bond interest... 3597 APPENDIX D Written testimony received by the committee expressing an interest in the subjects of limit on tax preferences (LTP) and allocation of deductions 3895 33-865-69-pt. 4 TAX REFORM ACT OF 1969 MONDAY, SEPTEMBER 22, 1969 U. S. SENATE, The committee met, pursuant to recess, at 10 a.m., in room 2221, New Senate Office Building, Senator Herman E. Talmadge presiding. Present: Senators Long (chairman), Anderson, Gore, Talmadge, Hartke, Harris, Byrd Jr. of Virginia, Williams of Delware, Curtis, Miller, Jordan of Idaho, and Fannin. Senator TALMADGE. The committee will come to order. This morning the subject before the committee is the tax treatment of farm losses and hobby farmers. We will also take testimony on the revisions proposed by the House tax reform bill in the taxation of cooperative enterprises and their patrons. Because we have an unusually long list of witnesses to hear today, I am going to urge that each witness make a special effort to avoid duplicating testimony that has already been given to the committee. I urge that witnesses summarize their statements as expeditiously as possible so that the work of the committee might move forward. Our first witness this morning is Mr. George Meany, president of the AFL-CIO. I might say for the record that Mr. Meany's testimony does not deal with farm losses. Indeed, his statement barely touches on the subject. Mr. Meany, we are happy to see you with us this morning. You may proceed as you see fit. STATEMENT OF GEORGE MEANY, PRESIDENT OF THE AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS; ACCOMPANIED BY ANDREW J. BIEMILLER, DIRECTOR OF THE DEPARTMENT OF LEGISLATION, AFL-CIO; AND NATHANIEL GOLDFINGER, DIRECTOR OF THE DEPARTMENT OF RESEARCH, AFL-CIO Mr. MEANY. Thank you. My name is George Meany and I am president of the American Federation of Labor and Congress of Industrial Organizations. The 13.5 million members of the unions of the AFL-CIO are, almost without exception, taxpayers. They pay their taxes regularly, payday after payday, through the payroll withholding program. They are loyal Americans; they appreciate the value of government, the services of government, the need for paying for government. They are willing to pay their fair share. But they are tired of having to pay the share of other Americans. Specifically, they are tired of paying the share of those Americans whose incomes are greater and whose taxes are lower-the "loophole set" in today's society. So it is on behalf of the largest organized group of taxpayers in America that the AFL-CIO appears here today as advocates of tax justice. We do not have tax justice today and we will not achieve it under the House bill. And the administration's proposals bear no resemblance at all to tax justice. The Federal tax system is rigged against those whose livelihood comes from the work they do. It is rigged in favor of those whose income results from investments. This unfair rigging results from the fact that a triple standard is applied to income taxed by the Federal Government. One standard applies to wages, salaries, and other forms of socalled ordinary income. This income is taxed in full and, for workers, the tax is regularly deducted from their paychecks. A second standard applies to income from stocks, real estate, and other so-called capital assets sold at a profit. Only half of such income is taxed. And under present law the tax can never be more than percent-even for those in the very top tax brackets. 25 A third standard is applied to certain forms of income which never even appear on the tax form, such as the interest on State and local bonds, or the income that is washed out by phantom, nonexistent costs as oil depletion, fast depreciation writeoffs, and bookkeeping farm losses. This type of income completely escapes taxation. The wealthier you are, the greater are the opportunities to take advantage of these preferentially taxed or untaxed forms of income. This triple standard will not be ended through reforms that eliminate or curb some relatively obscure tax dodges affecting a handful of people. Nor will it be ended merely by ensuring that those of extreme wealth and ability-to-pay are called upon to make some contribution to the Federal Treasury. The now infamous 21 persons, for example, who paid no taxes at all on their incomes of $1 million and over, have become a symbol. And, I fear, too many have addressed themselves only to this symbol. Tax measures to insure that those with astronomically high incomes merely pay some taxes to the Federal Government falls far short of justice. Justice can only come when : The completely impoverished are removed from the tax rolls. There is a meaningful reduction in the relative tax burdens of lowand middle-income families. The loopholes of special tax privilege for wealthy families and businesses are eliminated. The single most costly loophole and the one that is the prime culprit. of unfairness is the capital gains loophole. This is not a loophole which applies only to a handful. It is not a loophole which reduces anyone's taxes to zero. And its effect on the tax structure does not give rise to tax evasion horror stories that can be dramatically illustrated through the media. Yet, because of the half tax on capital gains and the zero tax on such gains passed on at death, some $30-40 billion escapes the tax a n n I base, resulting in an annual Treasury revenue loss of over $10 billion. And it is a tax preference that says, in effect, the more wealth and income you have, the more opportunities you should be allowed to avoid a fair share of taxes. The AFL-CIO has continually pointed to this loophole as the major flaw in the tax system. The Treasury study published last February confirms this, saying that the special treatment accorded capital gains is the "most important factor in reducing the tax rates of those with high incomes." We see no justice to a tax provision which says that a married taxpayer with $8,000 in capital gains income should pay a tax of $354 while a married taxpayer, with the same amount of wage income, should pay $1,000. We also recommend taxation of the $15 billion in capital gains that is passed on annually to heirs without even being mentioned on the income-tax form. Under the House action, some of the capital gains loopholes would be trimmed. The House would eliminate the 25 percent maximum and would extend the holding period for long-term capital gains from 6 months to 1 year. Even with these improvements, capital gains would still remain as the prime factor in eroding the fairness of the tax structure, for unearned income would still be preferentially taxed. And, what is worse the administration has proposed to weaken even these modest reforms. If the tax structure is to meet America's standards of fair play, loophole closing must be broad-gaged and substantial. On April 1, 1969, before the House Ways and Means Committee, the AFL-CIO presented a program which we believe would achieve tax justice-a program which would generate some $15 to 17 billion in federal revenues from substantial loophole closing, provide relief to those of low and moderate and middle incomes, and allow some $8 to $10 billion to fully fund existing Federal programs geared to meeting domestic needs. Against that background, we think the House bill merits commendation, for: 1. The working poor are relieved of any Federal tax obligation. 2. The hard-working, tax-paying low- and middle-income Americans, who have been forced to bear far more than their just share of the tax burden, have been given a modicum of relief. 3. The single most inflationary pressure in the economy, the 7 percent investment credit to business, has been eliminated. 4. Some of the loopholes and gimmicks in the tax structure, designed to provide special, unfair tax bonanzas for the very wealthy, have been trimmed, although not eliminated. We urge the Senate to improve upon the House action and to reject all proposals, including those of the administration, which would move the tax structure still further away from America's standards of fair play. Specifically, we urge the Senate to: 1. Close the capital gains loophole, ending the major tax preference for unearned income. There cannot be tax justice as long as unearned income is half-taxed while earned income is taxed in full. |