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SACRAMENTO, CALIF., May 25, 1938. Hon. FRANK BUCK,
Member of Congress, Washington, D. C.: Referring increased internal revenue tax 25 cents per gallon on distilled spirits we feel that unless same applies to floor stocks in hands of retailers and wholesalers with possible exemption of 500 gallons that chaos will result in merchandising.
McKESSON KIRK GEARY Co.,
Wholesale druggists. W. F. GEARY, President.
STATEMENT OF FELIX V. GOLDSBOROUGH, PRESIDENT AND
GENERAL MANAGER, RECORDS & GOLDSBOROUGH, BALTIMORE, MD.
Mr. CULLEN. Kindly give your name and whom you represent.
Mr. GOLDSBOROUGH. Felix v. Goldsborough. Mr. Chairman, I am president of Records & Goldsborough, Baltimore, Md.
Mr. CULLEN. Now, Mr. Goldsborough, how much time do you want?
Mr. GOLDSBOROUGH. Just time enough to make a brief statement to the committee, and I will not take over 5 or 6 minutes.
Mr. Knutson. Are you a distributor or distiller?
Mr. GOLDSBOROUGH. Our firm, founded by my father, has been in business continuously since 1885, with the exception of the prohibition years, 1919 to 1934, and I have been associated with it during the greater part of that time.
We are independent rectifiers and by that I mean we are not connected in anywise with any distiller, except as customers.
It may interest you to know that a rectifier blends whiskies together or with neutral spirits and bottles them for his trade. He also manufactures cordials, liqueurs, and specialties such as cocktails, highballs, and so forth. He is not a basic producer in the sense of distilling either whisky or neutral spirits. He is dependent upon the distiller for those base products.
For your further information I should say that the independent rectifier is interested primarily in those distillers who do nothing but manufacture or distill and who do not, like some of the larger distilling units, compete with the rectifier in the consumer market. The independent rectifier has no definite tie-up with any distiller, but on the other hand seeks his basic supplies, whisky and neutral spirits, on the open market. He is thus in position to select his whiskies and neutral spirits wherever he may find them.
I appear before you gentlemen, not only for my own house but on behalf of many other independent rectifiers who are in identically the same position as myself. We are of necessity interested in the passage of House Joint Resolution No. 683, which, as you gentlemen know, provides a floor tax of 25 cents per proof-gallon on all stocks of distilled spirits, except brandy, held on July 1, 1938, by the retailer, wholesaler, rectifier, and distiller. Floor stocks, you no doubt understand, gentlemen, mean those distilled spirits that have been tax-paid and withdrawn from internal-revenue bonded warehouses and are in possession of the retailer, wholesaler, rectifier, and distiller, as inventories.
Our reasons, gentlemen, for urging you to put a tax on floor stocks, effective July 1, 1938, are simple and practical. We cannot engage in a race of tax payment and withdrawals of spirits prior to the effective date of the Revenue Act of 1938, that is July 1, of this year. We do not have the money to tax-pay and withdraw spirits in excess of our usual and customary inventories.
Certainly, we cannot compete with our wealthier competitors, the larger distilling units of the industry, all of whom will undoubtedly taxpay and withdraw huge quantities of spirits while the tax is $2 per gallon in anticipation of the day, July 1, when it will become $2.25 per proof gallon.
Should the Congress fail to prove for a tax on floor stocks held as of July 1, I very greatly fear for the life of the small fellow in this industry. By the small fellow” I mean rectifiers like myself, and it may interest you to know there are some 350 of us in business throughout this country serving our customers and trade.
Our floor stocks—that is, raw material--on an average last us but from 30 to 60 days. The distiller's stocks are limited only as his plant is limited in output. If no tax is put on floor stocks you will find us taxpaying and withdrawing, before July 1, as many gallons of whisky as our pocketbooks enable us to do; but remember, gentlemen, our resources are limited. On he other hand you will find the wealthier distillers, who are able to afford it, withdrawing millions of gallons of whisky prior to July 1, 1938. That whisky will be withdrawn at the present $2 rate and in far greater quantities than I or my associates can taxpay and withdraw it, at the present $2 rate. All of which means that as soon as our limited inventories are exhausted, we then meet in the open market the vast inventories that have been withdrawn at the present rate, but we will meet them at the disad
dvantage of an additional tax of 25 cents per proof gallon or 75 cents per case This condition will spell the death knell of a great number of the smaller fellows in the industry because in a vast majority of instances 75 cents per case represents more than the profit therein.
It must be obvious that a tax on floor stocks will avoid unusual withdrawals prior to July 1, because no advantage will be gained thereby.
In turn, a tax on floor stocks will prevent unusual and unsound overloading of inventories on the part of the rectifier, wholesaler, and retailer. Such a tax, therefore, will go far to perpetuate the present normal state of the industry. Failure to levy a tax on floor stocks means chaos.
I urge you in the interest of the small-business man, the independent rectifier, to remedy a potential condition that now exists, by lending your good offices in the passage of House Joint Resolution No. 683,
Mr. Coos ER. Mr. Chairman, there has been a quorum call for us to go to the floor of the House.
Mr. CULLEN. Yes, sir.
Mr. McCORMACK. Mr. Chairman, at this point, before we recess, I want to insert some telegrams in the record, as well as one letter. There is a telegram from Ben Burk, Inc., in favor of the bill; another telegram from the Western Massachusetts Wholesale Liquor Dealers Association, Louis Katz, president, in favor of the bill; another telegram from Matt Patterson, executive committee, Metropolitan Boston Retail Liquor Package Stores Association, in favor of the bill; a letter from S.S. Pierce Co., of Boston, in favor of the bill; and a telegram from Harry Boyer, president, United Liquor Package Dealers, in opposition to the bill.
Mr. CULLEN. Without objection, they may go in the record. (The documents referred to are as follows:)
May 12, 1938. Hon. John W. McCORMACK,
House of Representatives: Unless floor tax is passed in regard to new rise in liquor taxes, the industry will be placed in chaotic condition. No doubt my counsel, Fred Caskey, has informed you of this. Urgently request your support of resolution for floor tax.
Ben BURK, INC.,
May 18, 1938. Hon. John McCORMACK,
House of Representatives, Washington, D. C.: Western Massachusetts Wholesale Liquor Dealers Association is definitely in favor of floor tax for wholesalers and retailers. Urge you protect our interest.
WESTERN MASSACHUSETTS WHOLESALE LIQUOR DEALERS ASSOCIATION,
NEW YORK, N. Y.,
May 12, 1938. Congressman John A. McCORMACK, Ways and Means Committee,
House Office Building, Washington, D. C.: Metropolitan Boston Retail Liquor Package Stores Association firmly in favor of a floor tax. Very essential for welfare of industry.
Matt PATTERSON, Erecutive Committee.
S. S. PIERCE Co.,
Boston, May 23, 1938. Hon. John W. McCormACK, Ways and Means Committee, House of Representatives,
Washington, D. C. DEAR MR. McCORMACK: We strongly favor House Joint Resolution 683, which provides for a floor-tax assessment on stocks of alcoholic beverages on the date when the increased liquor tax becomes effective, and we desire to register our endorsement through this letter.
Although our company would be in as favorable a position as any member of the industry to take advantage of the failure to impose a floor tax, we are firmly of the opinion that we and all other members of the industry would lose far more in the chantic condition that would follow such a situation than we would profit by any temporary advantage which we might gain.
We believe that, since an increased tax on liquor is inevitable, the failure to imposed a floor tax would have serious, perhaps disastrous, results for two reasons:
First, if the increased liquor tax which is effective July 1 is not accompanied by a floor-tax assessment, wholesalers and retailers alike will be virtually forced to accumulate large stocks in anticipation of the increased tax. This will result in a condition in which the market will be glutted with merchandise. In effect, the Government would virtually force, in the liquor business, the condition in which business generally found itself at the time of the collapse of 1929. The danger of such a condition seem obvious.
Second, a general overstocking will place a crushing burden upon a credit situation which is already in a precarious situation. Marginal retailers and marginal wholesalers, to a greater or less degree, would be unable to survive. Every market throughout the industry would suffer by the forced liquidation of those marginal units and a chain of events might well be started that would seriously damage, not only the weaker, but also the stronger members of the industry.
We believe that those wholesalers and retailers are shortsighted who assume that they can profit by the chaotic conditions which will inevitably follow the failure to impose a floor tax. They may feel that somehow they are going to be able to get the jump on their competitors. They fail to realize, however, that substantially all members of the industry will endeavor to follow the same course with disastrous results to all.
We respectfully urge your committee to report favorably on House Joint Resolution 683. Respectfully yours,
WALWORTH PIERCE, President.
CAMBRIDGE, Mass., May 21, 1938. Congressman John W. McCORMACK,
Washington, D. C.: As an association representing 300 retail liquor dealers located in 87 cities and towns in Massachusetts, we deire to go on record in opposition to floor-tax resolution on liquor, House Joint Resolution 683. Representatives of our organization will be present at the hearing before the Ways and Means Committee on Wednesday, May 25, 1938, to state the views of the members. May we inform you that anyone who has stated that Massachusetts liquor dealers are 100 percent in favor of the resolution is speaking without authority of the majority of dealers. UNITED LIQUOR PACKAGE DEALERS OF MASSACHUSETTS, INC.,
Harry Boyer, President.
Boston, Mass., May 19. Hon. John McCORMACK,
House Office Building: Please record the following wholesale liquor dealers of New England who are members of the Taste Masters Institute as in favor of a floor tax on distilled siprits as of July 1, 1938. Floor tax will protect small wholesaler who cannot finance large withdrawals of distilled spirits prior to tax becoming effective. Floor tax will equalize competition between large and small business, and result in tax burden being distributed equally among all dealers.
TASTE MASTERS, INSTITUTE: ADAMS MITCHELL OLD Customs HOUSE,
INC., Boston; COLEMAN & KEATING Co., Boston; DIAMOND
Mr. CULLEN. The committee stands in recess until 1:30 o'clock,
(Thereupon, at 12:15 p. m., the committee recessed until 1:30 p. m. of the same day.)
Upon the expiration of the recess, the hearing was resumed.
The Chair is now disposed to follow the calendar and call the names in the order in which they are printed in the calendar.
Mr. THOMPSON. Did the gentleman who represented the rectifier from Baltimore complete his statement?
Mr. CULLEN. Mr. Goldsborough?
STATEMENT OF M. J. GREEN, LOUISVILLE, KY.; EXECUTIVE
SECRETARY, KENTUCKY WHOLESALE LIQUOR DEALERS' ASSOCIATION
Mr. GREEN. Mr. Chairman
Mr. CULLEN. Will you kindly give your name to the reporter, and whom you represent?
Mr. GREEN. M. J. Green, 44 United States Trust Building, Louisville, Ky. I am executive secretary for the Kentucky Wholesale Liquor Dealers’ Association.
The line of argument advanced by the previous speakers has been so much in accord with the line of thought of my members that, out of respect for your time, I will be very brief.
I am authorized to speak on behalf of the Indiana Wholesale Liquor Dealers' Association, and I am also authorized by this telegram to speak on behalf of the Nebraska Wholesale Liquor Dealers' Association: M. J. GREEN, Willard Hotel:
In re House Joint Resolution 683 the Wholesale and Retail Liquor Dealers Association of Nebraska composing all of the licensed wholesale liquor dealers of Nebraska and approximately 600 licensed retailers in Nebraska unanimously approves the placing of a floor tax on all distilled spirits in order to eliminate any possible favoritism in price range, A uniform floor tax on all floor stocks will tend to maintain a uniform price to retailers and to the public and will assist in maintaining fair-trade prices under Nebraska Fair Trade Act. We urge that a tax be placed on all floor stocks simultaneously with the effective date of the increased tax on distilled spirits. THE WHOLESALE AND RETAIL LIQUOR DEALERS
AssociATION OF NEBRASKA, RICHARD KITCHEN, President.
EDWARDS STEBBINS, Secretary. That telegram was sent by those gentlemen to me, and received at the hotel.
As regards the members of the Kentucky Wholesale Liquor Dealers' Association, they feel very much concerned about the imposing of this floor tax. They feel that the floor tax should be imposed upon floor stocks. Along their line of thought, they believe that the floor tax, if it is placed on the floor stocks, places all of them on a parity. The men with heavy borrowing power, and those with greater facilities for obtaining money, would by that means handicap those of less capital.
There are some men in our organization of considerable means who could no doubt without any difficulty finance their floor stocks, but those gentlemen are inclined to have the same opinion of the men who are not so fortunate.
The city of Louisville has a great many chain stores of a national chain organization. They are not conspicuous for generosity in allowing any great amount of profits to competitors, and the advantage which they would have by being able to tax pay their whiskies would be a great one over the smaller stores in that community.
We therefore ask that the floor tax be placed upon the whisky.
There is a condition that pertains to Kentucky at this time, and that is that there is a license of $1,000 for the State, $500 for the city of Louisville, and the Federal license, of course, must be taken out on July 1. In addition to these taxes, the wholesale liquor dealers who tax pay whisky have a consumer's tax for the collection of which they are liable, and according to the law of the State of Kentucky, stamps