Mr. STEINBERG. It could have been anything. We have in our ranks at the present time doctors, lawyers, and so on, until we have quite a cross-current of all types of business and professions. Mr. CULLEN. How much more time will you need?

men.

Mr. STEINBERG. I do not want to take up too much time, gentleI have given you as much of the picture as I could. I feel that for the protection of the small man, the retailer, the wholesaler, the distiller, I feel that you ought to pass this floor tax. No harm can come from it.

Mr. Buck. Mr. Steinberg, I want to express my appreciation for your clearing up this question of the amount of stock that is held on hand by the average retail package dealer. I think your estimate is probably more nearly correct than we have previously had.

Mr. STEINBERG. Mr. Buck, if I may say this, at one time we took an inventory of a certain section of the Borough of Queens in New York, canvassed pretty nearly every store for our own information, and we find that figure almost correct, as nearly correct as possible.

Mr. Buck. Then the suggestion that has been made to me that the exemption under this House joint resolution that we are considering of 500 gallons would take care of practically every retail package store? Mr. STEINBERG. It would be perfect.

Mr. Buck. Now, may I ask you whether this National Retail Package Stores Association-apparently it covers the country? Mr. STEINBERG. There are only about 16 States affiliated with our organization.

Mr. Buck. And does that include stores such as the large department stores that maintain wine and liquor departments?

Mr. STEINBERG. It does not, sir. They have their own organization. In the city of New York there are about 16 stores that have their own little organization. Those are composed of the department stores and the cut-rate stores as an individual group, against 1,200 that are existing in metropolitan New York.

Mr. Buck. Are there 1,200 members in your organization?

Mr. STEINBERG. We have in New York, in the metropolitan section that takes in Westchester and Long Island Sound-1,200 retail licenses, out of which approximately close to 1,000 are affiliated with our organization.

Mr. Buck. What has been the experience of your organization with the distillers? Have you made any approaches to them, as to whether they would or would not protect the retailers in connection. with any possible increases on floor taxes?

Mr. STEINBERG. We have, but we approached it in a different way. We did not approach it collectively. We approached them in the proper way. Every distiller has his own say-so, and we did not go to them all and say they must all agree to something, because I did not think that was proper procedure. Some of them expressed themselves as a matter of fact, I understand most of them are ready now to issue the new price list, effective as of July 1.

Mr. Buck. You believe, however, that the distiller wants to keep your organization or stores in existence?

Mr. STEINBERG. Yes.

Mr. Buck. And for that reason is there any belief in the minds of your members that the distillers would, when they have to depend on you for your sales-would not endeavor to protect you?

Mr. STEINBERG. I cannot see how they would do otherwise, because, after all, we are the ultimate salesman for them, and the health of their institutions depends upon the condition of ours, and if they put us out of business, all they do is lose a lot of customers who might drag down the wholesaler with them. And I cannot conceive of any sound businessman having that in mind.

Mr. KNUTSON. Mr. Steinberg, why should the retail package dealers in Massachusetts oppose this tax, while a similar organization in New York is in favor of it?

Mr. STEINBERG. Mr. Knutson, might I say that I qualified in the beginning by saying that Massachusetts had not declared itself opposed to it except a small faction, and for that reason I ask the right to bring forward Mr. Patterson, who is head of that organization in Massachusetts, and who will qualify the number of retailers represented by the opposition and the number of retailers represented by those for it, and if it meets with your approval, Mr. Chairman, I would like about 1 minute for Mr. Patterson.

Mr. CULLEN. We will hear Mr. Patterson for a short statement.

Mr. McCORMACK. If this 500-gallon exemption were put in there, the tax question would not be involved then, would it? As a matter of fact, the distillers would absorb the tax, would they not?

Mr. STEINBERG. As long as it does not affect us-I mean if we are not penalized, we would not care if they did absorb it.

Mr. McCORMACK. But if there was an exemption?

Mr. STEINBERG. If there was, and the distillers desired to assume the tax, we would be happy, because we do not want to disturb the market.

Mr. McCORMACK. Then the consumer would get the benefit of the lower price paid for that liquor?

Mr. STEINBERG. And no damage would be done to the retailer. Mr. McCORMACK. During the period before you and the others similarly situated, selling to the consumer, could purchase new stock under the new tax?

Mr. STEINBERG. We would be most happy if the exemption were in and the distillers had to absorb it. We would be happy because we feel that the lower the prices, the healthier the position we will be in. Mr. McCORMACK. If there was some such exemption it would be a practical way of meeting the present situation?

Mr. STEINBERG. At any rate, it would not involve a great deal of difficulty. A small storekeeper might lose a few dollars. But it would practically clear up the_picture.

Mr. McCORMACK. Suppose I buy a barrel of whisky and I let it lie; is there any loss in that whisky?

Mr. STEINBERG. Well, we are not permitted to sell to dealers in barrels. There is a certain amount of shrinkage, but it would not be a great deal in a 6-month period. I mean the evaporation would not be so much in the 6-month period if we, for instance, buy 2-year whisky, a certain amount of evaporation has already set in, and the shrinkage there would be nominal. The saving to the person who withdraws the whisky would be far in excess of the loss by shrinkage.

Mr. McCORMACK. Would the shrinkage over a 2-year period be substantial?

Mr. STEINBERG. It would be of substantial, but it is overcome by the increase in the value of the merchandise, so there is no loss. The

longer you let whisky lie in the barrel, the more its value. So, if there is a shrinkage, that is computed in the sale of the whisky, and there is no loss whatsoever.

Mr. Buck. What is the Carlisle allowance now for shinkage?

Mr. STEINBERG. I am not qualified to say, because we are not permitted to deal in barrels. We are only permitted to deal in bottles. Mr. Buck. Can you tell us what the Carlisle allowance is now for shrinkage, Mr. Berkshire?

Mr. BERKSHIRE. It runs a gallon for the first 6 months, and 2 gallons at the end of 12 months. That table is in the last hearings. Mr. Buck. That is per barrel?

Mr. BERKSHIRE. That is on a barrel; yes.

Mr. Buck. Fifty gallons. So, at the end of 8 years they would have in the neighborhood of 40 gallons or less.

Mr. BERKSHIRE. I could give you those figures exactly, but I am afraid I do not have them here.

Mr. Buck. In 2 years it would be about 2 gallons?

Mr. BERKSHIRE. About 4 gallons.

Mr. Buck. That is what you would lose.

Mr. DINGELL. Mr. Steinberg, you are president of the National Retail Package Stores Association?

Mr. STEINBERG. Correct.

Mr. DINGELL. Is that a voluntary association?

Mr. STEINBERG. It is, sir.

Mr. DINGELL. Nation-wide?

Mr. STEINBERG. We have at the present time 16 States affiliated with the organization.

Mr. DINGELL. We might possibly term it a chain-store system? Mr. STEINBERG. No, sir; our program is definitely opposed to chain stores. There are no interlocking stores whatsoever.

Mr. DINGELL. How do you make your purchases? Do you purchase your supplies through a central organization in New York? Mr. STEINBERG. No, sir.

Mr. DINGELL. At bulk price and give the benefit of that bulk price to your association members?

Mr. STEINBERG. If I bought through a central group I would be out of business in 5 minutes, because the administrator would take my license away.

Mr. DINGELL. Each association member buys for himself, individually, independently?

Mr. STEINBERG. Absolutely.

Mr. DINGELL. With no connection with the national association? Mr. STEINBERG. We are not permitted to go into the chain-store business.

Mr. DINGELL. What is the purpose, then, of your association?

Mr. STEINBERG. Well, sir, we must know that our business is always in a precarious position, and that there is no telling of a feeling in a particular State or community against us.

Mr. DINGELL. For mutual protection?

Mr. STEINBERG. That is correct. Going beyond that, we have adopted certain policies that we apply to our industry as far as possible.

Mr. DINGELL. In other words, ethical standards?

Mr. STEINBERG. Yes, sir. I believe the authorities throughout the country will vouch for our character and standards. We try to cooperate with the authorities in every shape, manner, and form.

Mr. DINGELL. In other words, the committee might logically assume that, aside from the mutual protection feature of your voluntary association, it is also the basic purpose of your association to establish ethical standards, so as to protect your business?

Mr. STEINBERG. That is correct, sir.

Mr. FULLER. Which would you prefer as better for the retail merchant, a 500-gallon exemption or a provision that all liquor that is taken out of the warehouse hereafter shall pay the 25 cents?

Mr. STEINBERG. Mr. Fuller, I believe the exemption would be. better, for this reason: We have, as I said before, the large operators who store a great deal of merchandise in advance. They do that, and I qualify because I know that in the various price wars, when we have tried to find out the source of their supply, we have found that they have warehouses in other parts of the city from which they draw. Mr. FULLER. Have they laid in a supply in anticipation of the 25cent tax?

Mr. STEINBERG. But they have a large supply at all times, and if I have to sell from today on at an increased price, they would still have a great deal of edge on me, and I want to tell you a 2-month edge is sufficient to put a lot of dealers out of business.

Mr. FULLER. That does not answer the question at all. Now, you would have this 500-gallon exemption. Now, if we pass a law stating that when they buy from today on they have got to pay 25 cents a gallon more, you are protected to the extent of that 25 cents a gallon. They cannot go out and stock up against you right now, any more than they will be able to stock up against you after the 1st day of July, when this law levying this 25 cents will be in effect.

Mr. STEINBERG. Mr. Fuller, I might say this, that a great many of these cut-rate artists have anticipated to a certain extent this increase in tax, and nominally, or ordinarily, they carry a tremendous stock. They do it because they can go out and buy a great deal of merchandise at a differential which is open to me too, but I cannot take advantage of it because I do not have the cash. So they have that advantage. Mr. FULLER. All right, we will concede that they have bought it already; they have got it-which the Treasury report does not show very much of-we will concede that they have bought it; they are going to have it on hand, and the 25 cents is not going to affect it, but they cannot buy any more without putting the 25 cents on.

Mr. STEINBERG. The question is, how much time there will be between the time it is passed and the time it goes into effect.

Mr. FULLER. You can make it effective the last Monday in the month or the first Monday in the month or any time you choose.

Mr. STEINBERG. Well, I cannot qualify as an attorney, but I believe there would be plenty of room for argument. We do not want to get

hurt.

Mr. FULLER. I cannot understand your position.

Mr. LAMNECK. Would not this be the situation: With the exception of 500 gallons in the average in the present stock, while the big buyer might have 10,000 gallons, 100,000 gallons, he would only be exempt on 500 gallons, and he would be free on all the rest of it, would he not?

Mr. STEINBERG. He would be free if you did not put on a floor tax, but if you put on a floor tax, and exempt me as well as him, I am exempt from paying any tax, and yet he has got to pay the difference between 500 gallons and what he has, and he could not use that difference to hurt me.

Mr. LAMNECK. That is right.

Mr. CULLEN. Do you wish to incorporate the rest of your statement in the record?

Mr. STEINBERG. This is just some notes made during the discussion, Mr. Chairman.

Mr. McCORMACK. Let me ask you one question, Congressman O'Neal. While you are advocating this bill, you are not concerned with the exemption, the amount of exemption?

Mr. O'NEAL. No, I am not concerned beyond a reasonable exemption. I do not want any exemption that will completely take all the tax off. I am inclined to say that 500 gallons would not disturb it at all. Stopping chaos in the industry is what we are interested in.

Mr. KNUTSON. As I recall, it was testified to this morning that the withdrawals have increased about 30 percent since Congress adopted this 25 cent tax. Is it your information that there has been considerable withdrawals which would indicate that there are going to be future heavy withdrawals in anticipation of this tax being imposed?

Mr. STEINBERG. I feel that that is so, Mr. Knutson, and I think, if I am correctly informed, that it would kind of pick up in volume just as soon as the industry felt that there is no chance of passing this bill, they would pick up, and from then on really go to work and pre-tax pay as much as possible. They have held back with the hope that this bill might pass and they would not have to do it. So, in order not to be caught flat entirely, they began to do some sort of withdrawals, yet not so much as they would like to.

Mr. CULLEN. Mr. Steinberg, I understand that in my absence you stated that you would like to have Mr. Patterson address the committee?

Mr. STEINBERG. Yes; I do not believe it would take more than a minute. I would like to have you hear him for the reason that there is a delegation here from Massachusetts in opposition, and Mr. Patterson being the representative from Massachusetts, I would like to have you hear him for just about a minute.

Mr. CULLEN. Very well.

STATEMENT OF MATTHEW PATTERSON, EXECUTIVE DIRECTOR OF THE NATIONAL RETAIL PACKAGE LIQUOR STORES ASSOCIATION, AND CHAIRMAN OF THE EXECUTIVE COMMITTEE OF THE METROPOLITAN BOSTON PACKAGE STORES ASSOCIATION

Mr. PATTERSON. Mr. Chairman and gentlemen, several weeks ago I appeared before the Senate Finance Committee in opposition to the 25-cent tax. At that time also I brought out the fact that a floor tax would be very detrimental to us package store owners. I was very sincere in my remarks at the time, and figured and assured them that, due to conditions, we would be unable to pay a floor tax. had an idea at the time that the floor tax would have to be laid right on the line, but since then, knowing that we are going to be allowed several months to pay it, and looking into the different angles and

I