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SENATE

71ST CONGRESS 2d Session

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REPORT No. 1159

BRIDGE ACROSS ST. CLAIR RIVER AT OR NEAR PORT HURON, MICH.

JULY 2, 1930.-Ordered to be printed

Mr. VANDENBERG, from the Committee on Commerce, submitted the

following

REPORT

[To accompany S. 4769]

The Committee on Commerce, to whom was referred the bill (S. 4769) to amend an act entitled "An act creating the Great Lakes Bridge Commission and authorizing said commission and its successors to construct, maintain, and operate a bridge across the St. Clair River at or near Port Huron, Mich.," approved June 25, 1930, being Public Act No. 433 of the second session of the Seventy-first Congress, having considered the same, report favorably thereon and recommend that the bill do pass without amendment.

The bill has the approval of the Departments of War and Agriculture, as will appear by the annexed communications, which are made a part of this report.

WAR DEPARTMENT, July 2, 1930.

Respectfully returned to the chairman Committee on Commerce, United States

Senate.

So far as the interests committed to this department are concerned, I know of no objection to the favorable consideration of the accompanying bill (H. R. 13134, 71st Cong., 2d sess.) to amend an act entitled "An act creating the Great Lakes Bridge Commission and authorizing said commission and its successors to construct, maintain, and operate a bridge across the St. Clair River at or near Port Huron, Mich.," approved June 25, 1930, being Public Act No. 433 of the second session of the Seventy-first Congress. The bill has been amended by inserting thereon in red the date of approval of the act and its public number.

F. H. PAYNE, Acting Secretary of War.

Hon. HIRAM W. JOHNSON,

DEPARTMENT OF AGRICULTURE,
Washington, D. C., July 2, 1930.

Chairman Committee on Commerce, United States Senate.

DEAR SENATOR: Receipt is acknowledged of your letter of June 30, transmitting a copy of a bill (H. R. 13134) with request that the committee be furnished with such suggestions touching its merits and the propriety of its passage as the department might deem appropriate.

This bill would amend section 4 of the act approved June 25, 1930 (Public, No. 433, 71st Cong., 2d sess.), which created the Great Lakes Bridge Commission and authorized said commission, its successors and assigns, to construct, maintain, and operate a bridge across the St. Clair River, at or near Port Huron, Mich., by providing that bonds authorized to be issued thereunder may bear interest at not more than 7 per cent per annum and that such bonds, as well as the income derived therefrom, shall be exempt from all Federal, State, municipal, and local taxes. The law otherwise would remain unchanged. It seems to the department that interest at the rate of 6 per cent per annum should be adequate for bonds of this type. Otherwise the proposed amendment is without objection.

Sincerely,

R. W. DUNLAP, Acting Secretary.

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Mr. STEIWER, from the Committee on Claims, submitted the

following

REPORT

[To accompany S. J. Res. 201]

The Committee on Claims to whom was referred Senate Joint Resolution 201, having considered the same, report favorably thereon with the recommendation that the bill do pass without amendment.

An act of Congress approved July 1, 1862, and amended at various later dates, provided a tax against certain manufactured goods and raw materials. Under this law taxes were collected by the Federal Government from many citizens, partnerships, and corporations. in many of the States during the years of 1866, 1867, and 1868. is claimed that such taxes were levied in violation of the Federal Constitution for the reason that they were direct taxes and were not apportioned among the States according to the provisions of the Constitution.

It

The legislatures of many States, by legislative provisions, have authorized and directed their governors to propound to the United States a claim for moneys collected under the acts. Every State in the Nation, except three, has an interest in this matter.

The resolution provides that the United States consents that suits may be brought in the Supreme Court of the United States by any and every State which has passed, or which, within four years after the passage of this resolution, may pass an act directing the governor or other representative of the State to institute suit for these taxes, provided that the State shall, before suit is filed, make provision for the repayment of any money collected to the original taxpayers or their legal representative where their payment and ownership have been properly established, and also that provision shall be made for escheat to the State after a period of not less than two years from the time when collection shall have been made by the State, where the right of the original taxpayer has not been shown as provided; that

the Supreme Court may hear and determine the questions and render judgments; that the United States shall contest the claims solely upon the ground of the legality of said acts, all other defenses being waived; that if the acts under which the taxes were collected are declared to be unconstitutional, and the taxes are held to have been illegally collected, then the sole question to be determined by the court is the amounts of taxes collected in the respective States; and that no interest shall be allowed on any amount adjudged by the court to a State.

A similar resolution (S. J. Res. 92) was introduced in the Sixtyninth Congress. It was referred to a subcommittee, composed of Senators R. N. Stanfield, Guy D. Goff, and Thomas F. Bayard. A hearing was had and the subcommittee unanimously reported the resolution favorably to the full committee. After due consideration

the full committee unanimously voted to report the bill, with certain amendments, to the Senate. This was done. The present resolution is in the exact language of the former resolution as amended by the committee.

At the hearing referred to above, it was stated that 21 States, through legislative action, have authorized steps to be taken to obtain a refund of this money. Since that time three other States, to wit, California, Kentucky, and Missouri, have taken similar action. As a part of this report, we include extracts from the statements made at the hearing before the subcommittee during the Sixty-ninth Congress.

The subcommittee met, pursuant to call, at 12.30 o'clock p. m., in the committee room, Capitol, Senator Robert N. Stanfield, chairman.

Present: Senators Stanfield (presiding), Goff, and Bayard.

Also present: Hon. Hubert D. Stephens, a Senator from the State of Mississippi.

Senator STANFIELD (chairman). The committee will come to order. We will proceed, Senator Stephens. You have a statement that you want to make? Senator STEPHENS. Yes, Senator.

STATEMENT BY HON. HUBERT D. STEPHENS, A SENATOR FROM THE STATE OF MISSISSIPPI

The matter under consideration is Senate Joint Resolution 92. Briefly, this resolution provides that certain States-and that includes nearly every State in the Union-shall have the right to institute a suit for the recovery of money that was paid, as is believed, to the Government when the Government had no right to collect the money, as taxes.

In the years 1866, 1867, and 1868, there were some 200 articles of personal property that were subjected to an ad valorem tax by the Federal Government. Under this legislation there were about $200,000,000 collected from the various States. I believe that every State in the Union, save Oklahoma, North Dakota, and South Dakota, is interested. Many of the States, 21, have already, through legislative enactment, provided that certain constituted authorities of the State should proceed to do what could be done with reference to obtaining a refund of the tax.

Under this bill it is proposed that the Supreme Court of the United States shall have jurisdiction; that each State that has passed resolutions through its legislature or that may within four years pass such resolution-that each such State shall have the right to institute suits in the Supreme Court of the United States for the recovery of the money; that when the money is recovered, if such shall be the case, that the original taxpayers or their legal representatives may, upon proper proof, recover for themselves the amount due them; that after a certain period, if the original taxpayer or the legal representative has not made proper proof so as to entitle the refund of the money to the taxpayer, that the money shall escheat to the State.

My information is that the following States have directed duly constituted authorities to ask return by the Federal Government of this tax: Delaware, Florida, Georgia, Illinois, Indiana, Louisiana, Maine, Minnesota, Mississippi, Montana, New Hampshire, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Utah, Virginia, and West Virginia.

It is apparent from that statement that there is considerable interest in this matter, and this interest will grow in other States if it shall develop that there is any possibility of relief being had.

From a study of the Constitution and the decisions of the Supreme Court, it seems to me that this money was illegally collected. It was a direct tax. For a long time it was thought that that provision of the Constitution of the United States with reference to direct tax did not relate to personality; but under the decisions of the court it has been held that it does relate to personality. So I think there is no doubt but that this was an unconstitutional tax. It is quite true that it is an old matter. When claims are presented to the Senate it is frequently said, "This is an old matter; why fool with it?" If the Federal Government collected a tax that it had no right under the Constitution to collect, the question of time should not be considered. This bill provides that the question of time shall not be considered. In other words, the statute of limitations shall not be involved here. It provides [reading]:

"That the right of action to recover moneys alleged to have been illegally collected into the Federal Treasury as direct taxes during the years before mentioned is hereby vested in each State in which such direct taxes were paid, and which has passed or shall pass an act authorizing such suit to be brought as above provided.

"That the United States shall contest such claims solely upon the ground of the constitutionality of said tax, other defenses being hereby waived; and if the court shall decide that said taxes were illegally collected, the United States shall defend no further than for the purpose of determining the amounts of taxes collected in the respective States which may institute suit hereunder.

As I was saying, we ask that the question of time be not considered. We put the proposition upon this ground: That under our contention this tax was illegally and unconstitutionally levied, and, therefore, the moneys were illegally and unconstitutionally collected; collected from the States, or at least from individuals from the States. And, feeling as we do about it, we feel that this great Government should have respect for the rights of the States; should be entirely willing that the question should be submitted to the Supreme Court of the United States, and if it should develop there that the tax was an illegal and unconstitutional tax, that amends should be made to the original taxpayer as far as possible, and if not possible that it should be made to him, then the remainder shall escheat to the State, under the theory that these taxpayers were citizens of the individual States; that the highest right with reference to direct tax resided in the States themselves, and that by virtue of this unconstitutional collection of the tax moneys, the States themselves were burdened by having money taken from the States when the Federal Government had no right to do that thing.

From time to time there has been some discussion of this matter and it has been looked upon very largely as a matter in which the South was interested. It is very frequently referred to as a cotton tax. It is quite true that there was a tax on cotton. It is quite true that the Southern States are largely interested. the thing that I called attention to in the very outset shows that it is not a southern question by any means. The thing that I have in mind now is this:

But

First, that 45 States in the Union are interested; and, second, that if this money shall be refunded, a much larger sum will go into the Northern States than into the Southern States.

Third, as it was stated, it was not cotton alone that was involved. There were 200 separate and distinct articles, I believe, that were subject to taxation, and upon which taxes were collected.

So, for those three reasons that I have suggested it is not a southern proposition; it is not a local proposition; it is a national proposition. Of course, I should argue if it were simply a southern proposition, that the Federal Government should do entire justice to every State that is interested. But I am not here simply

Senator GOFF (interposing). If it were an illegal tax, a sectional question should not be advanced in any event.

Senator STEPHENS. No, sir; that is it exactly, and stated better than I could state it. It is not a sectional matter, as the Senator from West Virginia has said. But if it were only one State the principle would be the same. The thing

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