I do not mind so much with music. I have always questioned whether we ought to give a tax deduction to people who give to religion. It seemed to me it kind of discounts the faith a little bit. Mr. ASHTON. Thank you.

Mr. LILES. We will take whatever we can get.

Senator MCCARTHY. Cheerful, tax deductible or undeductible or

not.

Mr. LILES. Right.

Mr. WANGERIN. I think the symphony orchestra presidents try to have their hands in every pocket to underwrite the cause to which they are giving voluntarily of their time and effort.

Senator BENNETT. Mr. Chairman, I am glad to be here when my friend of long standing, Wendell Ashton, is here.

I appreciate the experience he and the Utah Symphony is going through. He did not tell you that in addition to the gifts that they have been receiving directly that they have been twisting out of citizens of the State of Utah, they are just now prepared to match a foundation gift of $1 million, or was it half a million?

Mr. ASHTON. No; is was $1 million.

Senator BENNETT. $1 million. So the citizens of Utah have raised $1 million for the symphony.

Mr. ASHTON. Not quite, Senator, but we are almost there. We are still accepting contributions. [Laughter.]

Senator BENNETT. So they would be damaged in two ways if the House text of this bill were to become law, and I am sure there are other symphonies which have the same experience.

Mr. WANGERIN. Yes, sir. About 20 cents on the dollar contributed annually to orchestras comes from foundations.

Senator BENNETT. When you are talking about the Washington radio and television programs and the Commission on Causes and Prevention of Violence, I thought you were going to say you wanted to substitute violins for violence. [Laughter.]

Senator MCCARTHY. I think you can get a good violin player if you have the money, but what do you do about French horn players? Mr. ASHTON. It is a little harder.

Senator MCCARTHY. That is harder, is it not? These fellows are all right. They are pretty good witnesses.

Senator BENNETT. Thank you very much.

The CHAIRMAN. Any further questions, gentlemen?

If not, thank you very much.

(Mr. Wangerin's prepared statement and a resolution received by the committee relative to the two preceding statements follow :)

STATEMENT OF RICHARD H. WANGERIN, PRESIDENT, AMERICAN SYMPHONY OR-
CHESTRA LEAGUE, ON BEHALF OF THE SYMPHONY ORCHESTRAS OF THE UNITED
STATES

Mr. Chairman and Members of the Senate Committee on Finance:
My name is Richard H. Wangerin. I appear before this Committee on behalf
of the nation's more than 1,400 symphony orchestras and in the capacity of
President of the American Symphony Orchestra League.

The League, chartered by the Congress, serves as the nonprofit, tax-exempt educational, service and research membership organization of the nation's symphony orchestras, and derives its basic support from dues paid by those organizations. The League's voting membership consists of nearly every one of the na

tion's leading symphony orchestras and hundreds of the lesser known symphony orchestras established in the smaller cities.

The League maintains permanent national offices with professional staff in Fairfax County, Virginia.

In presenting the case of the nation's symphony orchestras we are, in effect. presenting also the case of other performing arts organizations-the ballet con panies, the opera companies, the chamber music ensembles, the choral groups. The basic economies of all these groups are similar. They share common concern over the effects of certain provisions in the proposed legislation.

We know that the members of this Committee and of the Ways and Mears Committee, members of our Congress and of the Executive and Administrative branches of Government have no intention of deliberately causing hardships for the nation's cultural organizations, of curtailing the arts, or of reducing their financial support.

But what apparently is little understood is that many of the provisions under consideration for improving certain aspects of our tax structure will have disastrous side effects for symphony orchestras and all other organizations that depend on charitable contributions for a large part of their support.

Cultural and arts organizations especially will be hard hit; they come at the tail end of philanthropic giving. People generally make contributions to sym phony orchestras only after they have given to their churches, their colleges. their hospitals, their community chests. Since this is so, we feel certain that symphony orchestras and other arts groups will bear even more than their aliquot share of the reduced giving that inevitably will result from passage H.R. 13270.

of

If the provisions of the House Bill that adversely affect charitable giving are adopted in toto and without substantial modification, we are convinced the ultimate result would be the demise of most of our symphony orchestras as we know them today. They inevitably would have to turn to government for direct subsidy. We have little hope that at this time government would give the massive support required to finance the orchestras and other arts groups in view of the already pressing and ever-growing demands upon government funds to meet basic human needs.

We believe that our symphony orchestras are a vital part of our national life. and we beseech you most earnestly to continue the Federal Government's present methods of stimulating private support of symphony orchestras and other cultural organizations through the incentives that the tax laws presently provide.

I. SYMPHONY ORCHESTRAS ARE VITAL TO THE TOTAL CULTURAL AND EDUCATIONAL LIFF OF THE AMERICAN PEOPLE AND THUS MERIT THE CONCERN OF THIS COMMITTEE Symphony orchestras are part and parcel of our modern nation that operates on the philosophy that the total citizenry should have equal opportunity to par take of the nation's total cultural activity. Gone are the days when great music, great art, great beauty were reserved for the enjoyment of only the

affluent.

Today, there are over 1,400 symphony orchestras in operation in the towns and cities of this nation; 382 of them exist in the home states of just the 17 members of this Committee.

The nation's orchestras exist in large and small cities. They present con certs in hundreds of other towns and cities many of which are too small to

maintain their own orchestras.

Altogether, the nation's symphony orchestras play approximately 11,000 symphony concerts a year (an average of over 30 concerts a day) to an estimated gross audience of at least 20 million men, women and children, plus a radio and TV audience of uncounted millions. The orchestras play approximately 3.00 concerts for school children each year and hundreds of free concerts in the nation's parks and civic auditoriums.

Over a third of a million persons are directly involved in the work of these orchestras including over 80,000 musicians who perform in them, and over 250.000 men and women who serve on the orchestras' volunteer governing boards and committees. Invariably, the top business, industrial, cultural, educational and religious leadership of each community is to be found on these boards and committees. Frequently, the top political, governmental and labor leadership also is represented.

The presence in a community of highly trained symphony musicians enables other sponsoring groups to organize local opera companies and chamber music groups. The presence of these musicians strengthens the teaching resources of the community and enriches the music of the churches.

The nation's 1,400 symphony orchestras provide the only significant employment for musicians in this country who study and train for a career in performance of so-called "serious" instrumental music. It is the orchestras that provide the motivation for millions of young people to engage in the study of music today.

Just as our libraries make available the world's literature to the total population, just as our museums make great art available to the people, the nation's symphony orchestras bring to life the world's great music for the enjoyment and cultural development of the citizens of their home cities.

This, then, is the role of the nation's symphony orchestras in the spiritual, cultural and educational lives of our people-a role that goes back 127 years to the founding of the nation's first symphony orchestra, now known as the New York Philharmonic.

Today, the citizens of every town and city of significant size undertake to establish and maintain their own symphony orchestra just as they support their town local libraries as part of the total cultural and educational facilities of their communities.

II. THE BASIC ECONOMIC STRUCTURE OF U.S. SYMPHONY ORCHESTRAS AND OTHER ARTS ORGANIZATIONS REQUIRES THE SUBSIDY OF CHARITABLE GIVING FOR THEIR VERY EXISTENCE

You well may ask why, if symphony orchestras are so treasured throughout the nation, if so many millions of people want to hear them play, if they serve educational needs of so many children-then why shoud their financial support have to be of such pressing concern to this Finance Committee?

The reason is very simple and is to be found in the basic economic structure of symphony orchestras. Such orchestras are comprised of large numbers of highly trained people-from 65 to over 100 musicians are required to play this music. This means that symphony orchestras are very expensive to operateso expensive that even the box office revenus from capacity audiences meets less than half the costs. The remaining costs must be met through some form of subsidy.

When we appeared before Congressional committees in 1963 relative to tax proposals which at that time would affect symphony orchestras, we reported that the nation's orchestras were operating on a gross annual expenditure of $30 million, of which they could earn 55%, or $16 million, and that they were dependent on contributed income for the other 45%, or $14 million, of their annual operating costs.

In the intervening six years. population increases and greater demands for concerts for students have served to greatly expand the musical and educational public services required of orchestras. Musicians' salaries have spiralled upwards as have other basic operating costs.

Today, the United States symphony orchestras are operating on a gross annual expenditure of $85 million. They are earning approximately $41 million as compared to $16 million six years ago. Nevertheless, the current earnings represent only 48% of total costs as compared to an earning power of 55% of costs six years ago.

As a result of these changes, the nation's symphony orchestras must now develop $44 million a year in contributed income as compared to $14 million in

1963.

The worsening financial condition of the symphony orchestras is clearly indicated by these figures. The future looks even more bleak.

To understand the basic economics of the performing arts, it must be

remembered that:

1. Performances can be produced only through what might be termed "handwork" of each performer.

2. Each concert of a symphony orchestra, each performance of a ballet or opera company is an "original".

It still requires the same number of musicians to play the Beethoven Symphony No. 8 as it did when Beethoven wrote it in 1812. It still requires the same length

of time for the 80 to 100 musicians to learn, rehearse and perform that Beethoven Symphony.

There is no way in which orchestras can take advantage of mass production techniques and technological developments that have aided business in meeting rising operating costs through savings in net unit production costs.

In other words, orchestras face the same spiralling costs faced by all other enterprises, but orchestras cannot offset these costs through modern production methods. Due to continued inflation the need for subsidy with which to close this gap between earned income and total costs increases each year. So far, the private sector, encouraged by the Federal Government's tax incentives for giving has barely been able to keep up with symphony orchestras' needs for increased subsidy-thus, any lessening of these incentives would be disastrous.

In this country, financial subsidies for orchestras have come traditionally from voluntary contributions. In other countries, the subsidy comes directly to the orchestras from their governments.

Under a Ford Foundation grant, our organization has just completed a study of finances and operations of a number of orchestras abroad. The study was made by Howard Taubman, the distinguished critic and writer of the New York Times. The following is indicative of his findings:

(a) The Berlin Philharmonic, operating on an annual budget of $2 million. receives $1.5 million from its federal and city governments.

(b) The Amsterdam Concertgebouw, operating on $1.3 million annually, re ceives $900,000 from its governments.

(c) The Vienna Philharmonic, which serves also as the orchestra for the Vienna State Opera, receives all of its support from its government-an amount totalling $6 million annually for both the opera and the orchestra.

Mr. Taubman goes on to report that "there is little or no private support of orchestras abroad, by individuals or foundations or corporations. It may well be that major reason is that there are no provisions for tax deductions for contributors in most countries."

We want to point out that, today, it generally is conceded that the world's leading symphony orchestras are no longer to be found in Europe in spite of the extensive subsidy given by their governments. Today, the world's leading symphony orchestras are to be found in the United States.

The excellence of several of our American symphony orchestras is unsurpassed by those of any other nation, and there is no counterpart in any part of the world for the many competent symphony orchestras found in literally scores of Amer

ica's lesser known cities.

The results of our Government's traditional policy of tax incentives for chari table giving speak for themselves and commend not only the generosity of out people but the generosity of our Government.

Should this private support be reduced, the orchestras would have no choice but to seek aid directly from government sources, or to abandon their operations

and their music.

III. WHY ARE WE CONCERNED OVER H.R. 13270?

We are by no means opposed to this proposed legislation in its totality. As citizens, as representatives of responsible and distinguished civic organizations, we applaud the work of our elected representatives in trying to achieve equity and simplification of our tax laws, in trying to clarify provisions that lead to tax abuses, in strengthening certain filing requirements for private foundations and tax-exempt organizations so as to protect those that are conscientiously trying to do what is right and root out those that deliberately are trying to take advantage of enlightened legislation.

But

The Treasury Department reports that "taking all of the proposed tax changes into account we estimate that there will be a revenue increase to the Treasury in the charitable contribution area in the neighborhood of $100 million". That is one reason we are concerned.

If this $100 million is channeled into tax revenues instead of to philanthropic | causes, then obviously something constructive must be done to offset this financial loss to philanthropic endeavors in this country.

We already have shown why it is necessary for symphony orchestras to depend on some sort of subsidy for half or more of their total financial support. The provisions of H.R. 13270 cut into the ability of every form of voluntary giving to continue to provide financial support of orchestras even at current levels.

A. Take the matter of contributions from individuals

Currently, symphony orchestras are receiving over half of their subsidy from contributions made by individuals.

Among the 382 orchestras operating at a total annual expenditure of $17 million in the home states of the members of the Committee, this form of support totals $4.5 million annually.

The proposals of H.R. 13270 would reduce affluent donors' financial ability to give away money as a result of repeal of the unlimited deduction, changed tax treatment of gifts of appreciated property, and gifts of use of property, and proposed changes in many aspects of the more sophisticated types of giving.

Under the Bill, gifts of appreciated property would be discriminated against in several important respects. The tax preference items included in the so-called "Limit on Tax Preferences" (LTP) and "Allocation of Deductions" (AOD) provisions include the appreciation in value of property contributed to charity. Inevitably, this would substantially decrease important "leadership gifts" which are usually in the form of appreciated securities or real estate. For this reason, we heartily support the Administration's recommendation to delete the appreciation element of charitable gifts from those provisions.

However, this still would leave charitable contributions as an item of deduction subject to allocation under the allocation of deductions provision. This would have the effect, we fear, of postponing many substantial gifts until the end of a year when the effects of the complex allocation provision could be finally determined, with the unfortunate result that many such gifts simply would not be made.

Moreover, gifts of appreciated property to public charities would remain subject to the present 30% limitation rather than counting toward the extra 20% to be allowed under the Bill for gifts of cash to "publicly supported" organizations. We see no reason for such discrimination against gifts of appreciated property.

Furthermore, gifts of appreciated tangible personal property and future interest gifts would be further discriminated against in that the donor would have to limit his deductions to his cost basis or include the appreciation element in his income. This change may or may not be justified if the property is normally held by the donor for sale to his customers in the ordinary course of his trade or business and thus would produce ordinary income when sold.

However, it certainly is not justified with respect to capital items which, if sold, would produce capital gains. To treat a gift of such items as a constructive sale overlooks the fact that the donor is not confined to a choice of selling or giving away the property but can hold on to it until his death and pass it on to his heirs without income tax consequences. It is obvious that the proposed treatment would discourage future gifts of such property to charity.

In the past for instance, symphony orchestras have been recipients of gifts of rare musical instruments such as a gift of a Stradivarius violin for use by the concertmaster. There is no reason to discriminate against such gifts vis-a-vis gifts of appreciated securities or real estate.

For these reasons we approve Treasury's position that gifts of tangible personal property should continue to be allowed the same preferential treatment as gifts of securities and real property would be afforded under the Bill. Similar treatment should be extended to gifts of future interest.

B. Take the matter of the increased standard deductions

There is no question that the process of itemizing contributions on individual tax returns and claiming deductions from personal income tax for those contributions provides a tax incentive for giving.

Eighty-eight per cent of the total number of gifts made to symphony orchestras' annual maintenance funds are in amounts of less than $100, averaging $37. These small gifts account for approximately 40% of the total annual contributed dollars received by symphony orchestras.

These percentages apply to symphony orchestras of all sizes-from the New York Philharmonic, Boston Symphony, and the Philadelphia Orchestra on down to obscure symphony orchestras in small towns.

Now comes the proposal to raise the standard deduction. The Ways and Means Committee report estimates that 34 million more taxpayers will use the standard deduction if these changes are enacted. Treasury estimates that at least 8 million more tax payers would use the standard deduction if their version of the proposed change were adopted.

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