Date September 1937
Author George (?) Haas
Title Tax Revision Studies: Excise Taxes
Description Staff memo, Division of Tax Research, Treasury Department
Location Box 63; Tax Reform Programs and Studies; Records of the Office of Tax Analysis/Division of Tax Research; General Records of the Department of the Treasury, Record Group 56; National Archives, College Park, MD.
Table of Contents
Revenue Revision Studies, 1937 -- Excise Taxes

Summary of Findings and Recommendations

A. Introduction
B. Historical Background
C. Existing Excise Taxes
D. The Economics of Excise Taxes
E. Analysis of the Individual Taxes

I. The Automotive Group

     (1) Gasoline sales
     (2) Gasoline produced from natural gas
     (3) Sale of crude petroleum
     (4) Refining of crude petroleum
     (5) Automobile and auto truck chassis and bodies and
     (6) Accessories for automobiles, trucks and motorcycles
     (7) Tires and inner tubes
     (8) Sale or use of lubricating oil
     (9) Imports of crude petroleum, gasoline, refined petroleum,
         and products
     (10) Transportation of crude petroleum by pipe line

II. The Group of Admissions Taxes

     (11) Amounts paid for admission to any place
     (12) Tickets of admission sold at places other than the ticket
          office of the theater, etc.
     (13) Excess admission charges made by proprietors, managers, or
          employees of theaters, etc.
     (14) Use or lease of seats or boxes in opera houses, etc.
     (15) Admissions to night clubs, etc.

III. The Group of Documentary Stamp Taxes

     (16) Sales or transfers of stock and similar interests
     (17) Issues of bonds
     (18) Transfers of bonds
     (19) Issues of capital stock
     (20) Passage tickets
     (21) Foreign insurance policies
     (22) Deeds of conveyance
     (23) Sales of produce for future delivery
     (24) Playing cards
     (25) Documentary stamps sold by post offices
     (26) Silver bullion transfers

IV. Other Taxes

     (27) Brewers' wort and malt products
     (28) Imports of coal and coke
     (29) Lumber
     (30) Copper and copper concentrates
     (31) Imports of certain oils, etc.
     (32) Toilet preparations
     (33) Furs
     (34) Radio parts
     (35) Mechanical refrigerators and certain components thereof
     (36) Sporting goods
     (37) Firearms, shells and cartridges
     (38) Cameras
     (39) Matches
     (40) Chewing gum
     (41) Electrical energy
     (42) Telephone, telegraph, cable and radio messages, etc.
     (43) Use of safe deposit boxes
     (44) Dues and initiation fees
     (45) Pistols and revolvers
     (46) Processing of certain oils
     (47) Regulatory taxes

V. Conclusion

F. Possible Sources of New Revenue

     General Considerations

          (a) Taxes on tractors and trailers
          (b) Radio station tax
          (c) Tax on wagers on horse and dog races

G. Excises Not Considered for Revision: Liquor, tobacco and

Appendix "A": "Reports of the Miscellaneous Tax Unit upon the
              History and Application of Various Miscellaneous

TO       Mr. Magill
FROM     Mr. Haas

Summary Of Findings And Recommendations

The accompanying memorandum examines in some detail the place of excise taxes (other than those imposed on liquor, tobacco and oleomargarine) in the immediate and more distant Federal tax structure. The more significant of the conclusions are as follows:

(1) Excise taxes have been enacted during practically every critical period in Federal fiscal history and their utilization during the last depression involves no innovation.

(2) During the past five years excise taxes have played a significant but declining role in the Federal Government's tax revenues and, with the increased yield of direct taxes, their relative importance is certain to decline further.

(3) Generally speaking, excise taxes other than those imposed for regulatory purposes are less desirable than progressive direct taxes and, so far as possible, should be replaced by a system of direct taxes. Other considerations, however, point to the desirability of retaining some measure of indirect taxation in the permanent tax structure.

(4) The retention of excise taxes is necessitated by the fact that the broadening of direct taxes to reach the smallest of income groups is not feasible or economically justifiable. Excise taxes, therefore, may justly be assigned a permanent place in the tax structure, viewed as supplements to the income tax and designed in part to bolster depression revenues but more particularly to supplant direct taxes on the lower income groups.

(5) The case for the permanent inclusion of excise taxes in the tax structure is further strengthened by considerations of revenue stability. During periods of depression individuals in the higher income groups frequently have a minimum or no taxable income and are thus freed of income tax liability, producing wide fluctuations in income tax collections, rendering the stabilizing qualities of indirect taxes indispensable.

(6) Present and anticipated near-future revenue requirements preclude the immediate wholesale elimination of excise taxes. Governmental functions initiated or expanded by the Federal Government during the recent depression, bid fair to remain permanent and burdensome features of the budget for some time, thus raising revenue requirements above pre-depression levels and necessitating some recourse to excise taxation.

(7) While excise taxes cannot be dispensed with, it must be conceded that the present system of excise taxation is deficient in that it contains a number of individual taxes which are inequitable in their incidence, complex in administration, and conflicting with other governmental imposts, without being substantial revenue producers. The system also contains other taxes, regulatory in character, which have outlived their usefulness. In consequence, the existing tax structure could be markedly improved by the elimination of the least desirable excises.

(8) The required revision of the existing excise tax structure should be governed by consideration of (a) productivity, (b) incidence, (c) equity, (d) ease of administration, (e) effect upon economic enterprise, and (f) effect upon State and local taxation, in the light of present and probable future revenue needs.

(9) On the basis of these considerations, repeal of certain of the excise taxes, ranked in three successive groups, is recommended as follows:

Excise taxes recommended for repeal

Item     Tax                                   Fiscal year 1936
                                         Collections       Number of

         Group I

      (1) Regulatory taxes no
          longer required

1        (a) Brewer's wort                $1,008,273.85           40
2        (b) Gasoline produced or             38,751.80          406
             refined from natural gas
3        (c) Sale of crude petroleum         563,766.88          694
4        (d) Refining of crude               561,235.89          400

      (2) Taxes on commodities
          in common use

5        (a) Toilet preparations           4,823,967.94       6,1006
             (the 5 percent tax)
         (b) Cameras                         577,925.70           50
7        (c) Chewing gum                     807,279.40           40
8        (d) Furs                          3,321,057.14        2,100
9        (e) Radio parts                   5,075,270.82          300
10       (f) Automobile accessories        7,110,188.33        2,600

      (3) Import taxes (more properly
          to be treated under the
          tariff Laws)

11       (a) Imports of certain            1,500,000.00 /*/      /1/
             oils, etc.
12       (b) Imports of copper,            5,684,000.00 /*/      /1/
             coal, and lumber
13       (c) Imports of crude              7,281,000.00 /*/      /1/
             petroleum, etc.

         Total                            38,352,717.75       12,730

         Group II
         (Recommended for repeal
         subsequent to Group I)

14       (a) Processing of certain        27,691,080.79          340
15       (b) Mechanical refrigerators      7,939,063.75          100
16       (c) Matches                       7,106,359.21           50
17       (d) Sporting goods                5,531,122.72        1,200
18       (e) Auto trucks, etc.             7,000,000.00 /*/   950/2/
19       (f) Firearms, shells and          2,494,574.54          100
20       (g) Safe deposit boxes            1,997,409.57       10,600

         Total                            59,759.610.58       13,340

         Group III
         (Recommended for repeal
         subsequent to Groups
         I and II)

21       (a) Electrical energy            33,575,179.25        2,400
22       (b) Telephone, telegraph,        21,098,347.65          460
             cable and radio
             messages, etc.
23       (c) Lubricating oils             27,102,831.57          455

         Total                            81,776,358.47        3,315

         Grand total                     $79,888,686.80       29,385

                         FOOTNOTES TO TABLE

     /*/ Approximated.

     /1/ Not available.

     /2/ Includes manufacturers of other automobile chassis, etc.

                          END OF FOOTNOTES

(10) The existing tax structure could be further improved both in productivity and equity by amending statutory provisions covering certain of the excise taxes, as follows:

(a) Tax on stock sales or transfers -- to replace the present tax by changing the base and imposing a 1/4 of 1 percent tax determined on the value of the transaction.

(b) The 10 percent tax on toilet preparations -- to include those who prepare or package toilet preparations in the form in which they are to be sold to the consumer for consumption or use.

(c) Tax on ticket brokers -- to limit present 10 percent rate to excess charges not exceeding 75 cents, and to increase such rate to 25 percent on excess charges over 75 cents.

(d) Tax on admissions and dues -- to extend the liability for the tax to anyone responsible for the collection of the tax but fails to do so, whether wilfully or otherwise.

(e) Tax on admissions to night clubs -- to increase rate to a flat 2 percent of total admission charges.

(f) Tax on sporting goods -- pending its repeal, to define more clearly articles liable to the tax.

(g) Tax on radio parts -- pending its repeal, to be revised so as to apply only to completed radio sets, with provision for allowance of tax-free sales of parts.

(11) The regulatory taxes (other than those listed in Group 1 on the preceding page -- "Regulatory taxes no longer required"), the documentary stamp taxes, the admissions taxes and the taxes on dues and initiation fees should be retained in the permanent tax structure.

(12) In the event of pressing revenue needs, the scope of excise taxation could conceivably be extended to numerous commodities and services not now taxed. However, the taxable items which have greatest revenue producing potentialities consist of commodities and services which are everyday necessities to the masses of the population. Taxes imposed upon them would fall most heavily on segments of the population possessing the least economic ability. Notwithstanding the herein contained recommendation for decreasing reliance upon excise taxation, sight should not be lost of the possibilities of continuing to derive the same amount of excise revenue in a more desirable manner than is accomplished by utilization of some of the excise taxes now in effect. For this reason, if the loss of revenue inherent in the repeal of those excises enumerated in Group I should have to be recouped through other indirect taxes, the list of excise taxes could be extended to include tractors and trailers, radio stations, and wagers on horse and dog races.

(13) No detailed consideration is given in this memorandum to the revision of the liquor, tobacco, and oleomargarine excises. The retention of the taxes on liquor and tobacco are indicated because of their well established and significant position in the Federal tax structure. The tax on oleomargarine is of a regulatory nature and is predicated on non-fiscal considerations of a character which for the present were not evaluated.

TO       Mr. Magill
FROM     Mr. Haas
Subject: Tax Revision Studies, 1937 - Excise Taxes

A. Introduction

The taxes herein considered constitute that group of taxes generally denominated as excises. In the revenue law, (Titles IV and V of the Revenue Act of 1932) they are classified as manufacturers' excise taxes, documentary stamp taxes, and miscellaneous excise taxes. With the exception of the levies imposed on liquor, tobacco and oleomargarine, the discussion embraces all of the excise taxes in effect at the present time. This group of levies accounted for approximately $538,000,000, or 15.6 percent of internal revenue collections in the fiscal year 1936.

Specifically, the problem involved is the desirability of retaining in their present form, or in a modified form, some or all of these taxes in (1) the permanent and (2) the more immediate Federal tax structure, viewed in the light of economic principles and in the light of the Federal Government's revenue needs. Accordingly, the examination of each of these levies takes cognizance of (a) productivity, (b) incidence, (c) equity, (d) ease of administration, (e) effect upon economic enterprise and (f) effect upon State and local taxation.

B. Historical Background

At the outset it should be noted that the existing excise taxes, though mostly depression additions, represent no departure in federal taxation practice. The history of excise taxation in the United States is largely the history of emergency Federal financing. Excise taxes have been collected almost without exception during every critical period in American Federal finance. They were employed in 1791, in 1812, in 1862, in 1898, and in 1914. Their introduction in 1932 was thus in conformity with well-established precedent.

In the first experiment with excise taxation conducted by Alexander Hamilton, taxes were imposed on liquor, tobacco, snuff carriages, sales at auction, and on various legal instruments. These imposts, enacted on March 3, 1791, yielded approximately $520,000 by 1799. Three years later, with the end of the Federalist administration, they were repealed.

Excise taxes were adopted for a second time during the War of 1812. The articles taxed included carriages, sugar, liquors, legal instruments, bank notes, bonds, sales at auction, and retail sales license taxes on wines and liquors. Their yield reached a maximum of $5,000,000 in 1816. With the coming of postwar prosperity in 1817 all these taxes were repealed.

The third use of excise taxes was provoked by Civil War revenue needs. The levies imposed by the Act of 1862 included license taxes on trades, taxes on malt and distilled liquors, various levies (virtually turn-over taxes) on manufactures, and products. Subsequent laws broadened the scope of the Act, the most comprehensive being the Act of 1864. Some rate increases were made in 1865 contributing to the $236,000,000 collected from these sources (exclusive of income and inheritance taxes) during 1866. In the next four years, however, the system was gradually contracted. By 1870, the most burdensome taxes were withdrawn and by 1873 all, with the exception of the taxes on liquor and tobacco, were discontinued.

The war with Spain was the next occasion for the expansion of the internal taxes and for advances in rates. In 1898 nearly all rates on liquor and tobacco were doubled, and special taxes were imposed on bankers, brokers, proprietors of theaters, and other places of amusement. Stamp taxes were imposed on issues and sales of corporation securities, bank checks, bills of exchange, telephone and telegraph messages, insurance policies and other instruments, patent medicines, toilet articles, chewing gum and wine. In 1902, with the passing of the emergency, all of these taxes were repealed.

The fifth large scale enactment of excise taxes is attributable to the World War. The Act of October 22, 1914, increased the rates on beer and wine and levied special taxes on bankers, brokers, theaters and other amusement places, tobacco manufacturers and tobacco dealers. A series of stamp taxes was applied to various documents as well as cosmetic and toilet goods. Subsequent revenue acts added taxes on transportation and other facilities of commerce, admissions and dues, and on a long list of articles of general consumption. Collections reached a peak in 1920 with a total in excess of $80,000,000. After the War, most of these taxes were abolished, excepting those designed for regulatory purposes and those imposed on tobacco, admissions, distilled spirits and other alcoholic beverages.

C. Existing Excise Taxes

The need for Federal revenue during the last depression directed attention once more to excise taxes. As a result, in 1932, (Revenue Act of 1932, Titles IV and V) there was enacted a large group of manufacturers' excise and other miscellaneous taxes. These taxes, originally limited to one year were, with some exceptions, renewed in 1933, 1935, and 1937. Title IV covered a long list of commodities including lubricating oils, automobiles and parts, tires, furs, toilet goods, jewelry, radios, mechanical refrigerators, sporting goods, cameras, matches, candy, chewing gum, soft drinks, electrical energy, gasoline, and imports of coal, crude petroleum and products, lumber and copper. The miscellaneous group (Title V) included taxes on telegraph, telephone, cable and radio messages, admissions, issues and transfers of stocks and bonds, deeds, sales of produce for future delivery, transportation of oil by pipe line, safe deposit boxes, checks and boats. In 1934, 1935, and 1936, the list was enlarged by the addition of such items as crude petroleum, fire arms, silver bullion and specified oils and seeds. The taxes on checks, candy, soft drinks, jewelry and boats have been discontinued. All the rest, with exceptions of some designed for regulatory purposes, will either expire or revert to lower rates in 1939. Public Resolution No. 48, 75th Congress, approved June 29, 1937.

The three groups of excises generally classified as manufacturers' excise taxes, miscellaneous taxes and stamp taxes, with the exception of those imposed on oleomargarine, alcoholic beverages and tobacco, produced approximately $44,000,000, $391,000,000, $552,000,000, $490,000,000 and $538,000,000 during the fiscal years 1932, 1933, 1934, 1935, and 1936, respectively. (See Chart 1.) Their relative importance in all internal revenue rose from 2.8 per cent in 1932 to almost a quarter of the total in 1933 and 1934 but, partly as a result of a reduction in the tax rate on gasoline and in part because of the increase in the yield of direct taxes, declined to 17.7 percent in 1935 and 15.6 percent in 1936. Reference to Chart 2 will reveal that excise taxes have played a significant but declining role in the Federal Government's tax revenues during the past five years. Their relative importance is certain to decline further even without additional limiting legislation. With a continued rise in national income and property values and with the passage of sufficient time to make the 1935 estate rate increases fully operative, direct tax receipts bid well to dwarf collections from these miscellaneous sources. Furthermore, some of the more objectionable excise levies, as hereinafter indicated, are likely to be limited in scope if not wholly repealed. At all events the contrast drawn by Carl Shoup in 1934 /1/ to the effect that "from the revenue standpoint the Federal tax system in 1929-30 resembled that of England, whereas today it resembles that of one of the great indirect-taxing countries, France" is gradually losing its significance.

D. The Economics Of Excise Taxes

Accepted principles of taxation require that in so far as practicable and barring regulatory requirements or assessments for the benefit of special groups, a tax system be consistent with the ability to pay principle. The problem is readily resolved with respect to direct taxes. These are presumed to be borne by those on whom they are levied in the first instance and their burden is therefore distributable in accordance with predetermined standards of ability to pay. With respect to indirect taxes, however, the requirement is more complex and confusing. The tax is levied on a commodity, service or privilege. Where the incidence of that tax ultimately falls is not always clear or predictable.

In general, excise taxes involve an increase in the cost of production. Since the tax is an addition to the cost of producing the article, producers will seek to recompense themselves by corresponding price increases. Failing to do so, their profits will be curtailed and the production of the article will diminish. Some producers will remove their capital to untaxed industries. Production will be further curtailed by the elimination of the marginal producers. The imposition of the tax also has the effect of hindering the investment of new capital.

In general, it may be maintained that the shifting of the tax burden will be at a maximum in the case of those commodities for which there is a relatively inelastic demand, and the price of which is not set by monopolistic conditions. This broad category includes those commodities which are used by the vast majority of the people and by virtue of that circumstance are capable of producing the greatest amount of revenue. Since these are articles in common use, largely consumed by the lower income classes, most excise taxes are regressive in effect.

On the basis of a consideration of their incidence alone, it seems clear that excise taxes are less desirable than progressive direct taxes and, so far as possible, should be replaced by a system of direct taxes. The substitution of additional income taxation for excise tax revenue may be achieved by lowering exemptions, by increasing existing rates, or by both. The first of these would tend to place a burden upon those whose tax bill is now almost wholly confined to indirect taxes; the second would shift it from the low income group to those with higher incomes. Since, however, substantial lowering of exemptions to reach the smallest of incomes is not feasible or economically justifiable, it follows that, from a standpoint of incidence, the repeal of excise taxes cannot be counterbalanced merely by an increase in the income tax rates. Such an attempt will, of necessity, involve the shifting of the present tax burden from the shoulders of the poor to the middle classes and the well-to-do.

Presumably, if personal income taxes could be extended downward to reach lowest income groups, the principle of ability to pay could find satisfactory application. Practical considerations, however, conspire to render that goal unattainable. Some reductions in income tax exemptions could be effected, to be sure, but the process is not likely to be carried to a stage where it will extend the operation of the ability to pay principle to the lowest strata of the self-supporting population. In view of that fact, the abolition of all indirect taxes would be tantamount to the removal of all tax burden from the lowest income groups and, incidentally, some from the higher income groups insofar as they continue to consume previously taxed commodities. The latter is particularly significant during periods of depression when individuals in the so-called "higher income groups" enjoy no taxable income and are thus freed of income tax liability.

The indicated undesirability of excise tax elimination, together with its accompanying destructive effect upon revenue stability needs no demonstration. In consequence, excise taxes may be viewed as supplements to the income tax, designed in part to bolster depression revenue and supplant income taxes on the lower income groups. This procedure is not likely to lead to serious inequities. Consumption in the lower income groups is virtually identical with income. Barring investments in insurance policies, savings are practically nonexistent. Under such circumstances, a system of excise taxation wide in scope and fairly uniform in severity which aims to impose a burden proportional to the volume of consumption and by the same token proportional to the volume of income is desirable.

For these reasons there is no economic defense for eliminating excise taxes summarily, but rather there is justification for inquiring into each of them with a view to ascertaining their relative merits. In the light of the desirability of achieving a tax structure consistent with the ability theory, it seems advisable to first analyze the types of commodities which are taxed, according to the income levels of their users.

In general, as indicated in Carl Shoup's previously cited memorandum, excise taxes fall into four broad categories:

(1) Taxes on articles that are used almost exclusively by the wealthy (leases of boxes, dues, admissions to night clubs, etc.).

(2) Taxes on articles in use by the middle classes to a considerable degree as well as by the wealthy (admissions, cameras, refrigerators, etc.).

(3) Taxes on articles in general use by all classes save the very poorest (toilet articles, playing cards, etc.).

(4) Taxes on necessities used by all classes (matches, soap, etc.).

Because of its limited application, the first of these groups cannot yield very much revenue. From point of view of productivity, attention therefore must be directed toward the other three groups. On the other hand, considerations of equity point to selection on another basis and suggest that the articles segregated for taxation should include first, luxuries, and second, those commodities whose consumption it is desired to regulate. However, the elimination of all excises except those levied on the aforementioned two types of articles would involve the loss of the greatest part of the $581,000,000 revenue derived from manufacturers' excise, miscellaneous and stamp taxes during the calendar year 1936. Under present circumstances a procedure involving so great a loss of revenue is not deemed advisable. Instead piecemeal revision suggests itself.

The considerations governing such revision are several. Thus, in the case of any specific tax it is important to inquire into the administrative problems surrounding it. This is particularly true of excise taxes because of the number and diversity of commodities and services taxed. No categorical answer can be given as to whether they are administratively desirable. Some present practically no administrative problems. Such is the case with the tax on gasoline sales where 1,100 returns represent over 177 million dollars in revenue, or about $161,000 per return, with practically no evidence of evasion or avoidance. At the other extreme may be mentioned the tax on furs yielding a little over $3,000,000, paid by some 2,100 taxpayers, and causing constant investigation and litigation.

Cognizance must also be taken of the possible conflict of these Federal taxes with other Federal taxes and especially with various State and local taxes. Federal-State fiscal relations have reached a regrettable point of incoordination. During the past 25 years both the Federal tax system and those of the several States have evolved haphazardly without regard for one another. Friction with reference to the division of tax sources and governmental functions and with respect to the taxation of each other's instrumentalities have strained Federal-State fiscal relations. The contributions of recent Federal excise taxation in this connection are especially important, for, while the States are prepared to recognize that the integration of such important matters as income taxation and governmental functions is hard to resolve, they are less charitably inclined with respect to the recent Federal taxes on individual commodities which, they claim, react upon general and selected State sales taxes but have secondary revenue significance to the Federal Government.

Governmental requirements are usually in excess of available revenue. This is truer today than it has been ever before. The recent depression witnessed the expansion of many Government services begun during previous depressions and the initiation of an even greater quantity of new services. These bid fair to remain permanent features of the Federal budget. In view of that fact, there is little prospect for revenue abundance in the near future, and while the conclusion of Carl Shoup to the effect that

"In general, taxes discussed in this memorandum should be retained only in an emergency. Few, if any, of them are suitable for use as permanent elements in the fiscal system."

should be endorsed, that endorsement must be tempered by a recognition of the time element which may be involved in the passing of the "emergency." Pending the passage of that "emergency," a wholesale and immediate discarding of all excise taxes would be ill advised. Instead, present attention should be directed to piece-meal revision, to the elimination or modification of those taxes which are least desirable. In that manner inequity can be markedly reduced without a serious impairment of revenue.

Some attention should also be devoted to the possibility of imposing excise taxes upon commodities and services not now taxed with a view of either supplementing or supplanting present revenues.

To recapitulate, the selection of the various excises for retention or repeal must of necessity be governed by the five considerations heretofore discussed, namely, (1) productivity, (2) incidence, (3) ease of administration, (4) effect upon economic enterprise, and (5) effect upon other Federal and upon State and local taxes. Accordingly, in the following section each of these excise taxes are examined in the light of the above enumerated considerations.

The accompanying table presents the items taxed, together with the rates and yields for the fiscal year 1936, and estimated yields for the fiscal years 1937 and 1938.

For more detailed discussion of each of the taxes, see APPENDIX A, being "Reports of the Miscellaneous Tax Unit upon the History and Application of Various Miscellaneous Taxes" prepared by the Bureau of Internal Revenue at the request of the Division of Research and Statistics and submitted on November 5, 1936. There are contained therein detailed analyses of the statutory background, revenue yield, economic basis, conflict and administration of the several taxes. The studies are primarily factual, emphasizing the historical background of the respective taxes, their yields, the number of taxpayers concerned, methods of avoidance utilized and the administrative problems encountered. On the basis of these analyses, a series of recommendations were offered. These recommendations together with the Bureau's experience with these taxes were reconsidered in the light of the economic analyses in the present memorandum, the final findings being the conclusions cited on pages 27-30 below.

Attention is called to the order of the analysis. Where possible, taxes on similar commodities or services, e.g., automotive, admissions, documentary stamps, are treated together. In all other cases an attempt has been made to treat the individual taxes in the order of their appearance in the law.

E. Analysis of the Individual Taxes

1. The Automotive Group:

From the point of view of productivity, the most important group of excises are those imposed indirectly upon the operation and directly upon the manufacture, production, importation or sale of motor vehicles and automotive products. Eleven in number, the yield of these levies during 1936 ranged from $39,000 in the case of the tax imposed upon gasoline recovered from natural gas to $177,000,000 from the tax imposed on gasoline sales.

Federal Automotive Tax Collections Fiscal Year 1936

Taxes/1/                                 (In thousands of dollars)

Gasoline, sales /2/                              $177,340
Gasoline, recovered from natural gas /3/               39

Total                                            $177,379 /4/

Automobiles and motorcycles                       $48,201
Trucks, etc.                                        7,000
Automobile accessories, etc.                        7,110
Tires and tubes                                    32,208

Total                                             $94,519

Lubricating oil, sales/2/                         $27,103

Total                                             $27,103/5/

Crude petroleum, sales/3/                            $564
Crude petroleum, processing or refining/3/            561
Crude petroleum, etc., imports /2/                  7,165
Crude petroleum, transportation of,
  by pipe line/2/                                   9,794

Total                                             $18,087

Grand total                                      $317,088

                         FOOTNOTES TO TABLE

     /1/ Unless otherwise noted the tax will lapse on July 31, 1939.

     /2/ Lapses on June 30, 1939.

     /3/ Continues until specifically repealed.

     /4/ Exclusive of tax on import of gasoline.

     /5/ Exclusive of tax on import of lubricating oil.

                          END OF FOOTNOTES

Manufacturers' Excise, Miscellaneous and Documentary Stamp Taxes, Rates, Collections for the Fiscal Year 1936 and Estimated Collections for the Fiscal Years 1937 and 1938


            Tax               Present rate of tax

Gasoline                    1 cents per gallon
Automobile and motorcycle   3% of selling price
Electrical energy           3% of selling price
Tires and tubes             2 cents and 4 cents per pound,
Lubricating oil             4 cents per gallon
Toilet preparations         5-10% of selling price
                                according to type of
Mechanical refrigerators    5% of selling price
Automobile parts or         2% of selling price
Automobile trucks           2% of selling price
Matches                     2 cents per M., 2 cents per M.,
                                5 cents per M.
Sporting goods              10% of selling price
Radio sets, etc.             5% of selling price
Articles made of fur         3% of selling price
Firearms, shells, etc.        10% of selling price
Brewers'' wort and malt       15 cents per gallon, 3 cents per
 syrup                           pound
Chewing gum                   2% of selling price
Cameras and lenses            10% of selling price


  Crude petroleum, etc.       1/2 cents per gallon
  Coal, coke, etc.            10 cents per 100 pounds
  Copper and copper con-       3% ad valorem or 3/4 cents per
    centrates, etc.               pound, 3 cents per pound,
                                  4 cents per pound
Lumber                         $3 per M. feet
Paraffin and other
    petroleum wax products     1 cents per pound
Gasoline, lubricating          2 1/2 cents per gallon, 4 cents per
    oil                          gallon


            Tax                 Yield fiscal years (000)
                             1936        1937             1938
                                     (estimated)      (estimated)

Gasoline                      7,340     195,000          204,000
Automobile and motorcycle    48,201      55,900           58,200
Electrical energy            33,575      35,500           36,400
Tires and tubes              32,208      36,200           27,000
Lubricating oil              27,103      31,500           33,300
Toilet preparations          13,320      15,000           19,900
Mechanical refrigerators      7,939       9,800           11,100
Automobile parts or           7,110       8,900            9,300
Automobile trucks             7,000       8,100            8,100
Matches                       6,886       7,000            7,200
Sporting goods                5,531       7,520 /1/        8,050 /1/
Radio sets, etc.              5,075       7,000            7,800
Articles made of fur          3,321       6,000            7,000

Firearms, shells, etc.         2,495       3,000 /2/        3,300 /2/
Brewers'' wort and malt        1,008         900              900
Chewing gum                     807         900              960
Cameras and lenses              578           - /1/            - /1/

Subtotal                    379,479     428,320          448,510

  Crude petroleum, etc.       7,168   Not available  Not available
  Coal, coke, etc.            2,437         "                "
  Copper and copper           2,105         "                "
    concentrates, etc.
  Lumber                      1,142         "                "
  Paraffin and other            113         "                "
    petroleum wax products
  Gasoline, lubricating     Not available   "                "

   Subtotal                  12,695 /3/

   Total                    392,444 /3/ 428,320 /4/      448,510 /4/


      Tax                            Present rate of tax

Telephone, telegraph, radio,         10cents-20cents according to
cable facilities, leased             amount of charge, 5% of amount
wires                                charged, 10 cents per message,
                                     5% of amount charged

Admissions to any place              1cents for every 10cents

Excess admission charges             50% of excess
made by proprietors

Excess admission charges             10% of excess
sold at places other
than ticket office, etc.

Leases of boxes in                   10% of established price for
theatres, etc.                       which similar seats or boxes
                                     are sold

Admissions to roof                   1 1/2cents for each 10cents
gardens, etc.                        or fraction of admission charge

First domestic processing            3 cents per pound /5/
of coconut oil, sesame
oil, pals oil, pals kernel
oil and sunflower oil

Transportation of oil by             4% of transportation costs
pipe line

Club dues and initiation             10% of amount paid

Use of safe deposit boxes            10% of amount charged

    Crude petroleum:

Producers                            1/25 of 1cents per barrel

Refined or processed                 1/25 of 1cents per barrel
in United States

Gasoline refined or                  1/25 of 1 cents per barrel
recovered from natural gas


Importers or manufacturers           $500 per year

Dealers                              $200 per year

Pawnbrokers                          $300 per year

Transfer of firearms                 $200 per year

    Imports of:

Certain oils:

Whale oil (except sperm              3 cents per pound
oil), fish oil (except
cod oil, cod liver oil
and balibut liver oil),
marine animal oil, or
any combination of the
foregoing, etc.

Sunflower, repeseed,                 4 1/2 cents per pound
sesame, kapok, hempseed
and perilla oils, etc.

Empseed, perilla seed,               2 cents per pound
rapeseed, kapol seed,
sesame seed

Pistols and revolvers                10% of selling price


      Tax                            Yield fiscal years (000)
                                1936          1937         1938
                                           (estimated)   (estimated)

Telephone, telegraph,          21,098        24,000       25,400
radio cable facilities,
leased wires


Admissions to any             15,581)             )

Excess admission                  15)             )
charges made by

Excess admission                 117)             )
charges sold at
places other than                   )       19,700)       20,800
ticket office, etc.

Leases of boxes in                60)             )
theatres, etc.

Admissions to roof             1,339)             )
gardens, etc.

First domestic                 27,691 /6/    11,300       11,200
processing of
coconut oil, sesame
oil, pals oil, pals
kernel oil and
sunflower oil

Transportation of              9,794         10,700       11,000
oil by pipe line

Club dues and                  6,091          6,700        7,400
initiation fees

Use of safe deposit            1,997          2,000        2,000

Crude petroleum:

Producers                       564)

Refined or processed            561)
in United States                   )          1,000        1,000

Gasoline refined or              39)
recovered from
natural gas


Importers or                       1            Not          Not
manufacturers                             available    available

Dealers                            4              "            "

Pawnbrokers                        - /2/          "            "

Transfer of firearms               1 /2/          "            "

Imports of:

Certain oils:

Whale oil (except                809               "            "
sperm oil), fish oil
(except cod oil, cod
liver oil and balibut
liver oil), marine
animal oil, or any
combination of the
foregoing, etc.

Sunflower, repeseed,            Not               "            "
sesame, kapok,            available
hempseed and perilla
oils, etc.

Empseed, perilla seed,                             "           "
rapeseed, kapol seed,
sesame seed

Pistols and revolvers            61               "            "

Total                        85,822 /8/      75,400 /9/    8,800 /9/


      Tax                            Present rate of tax

Transfer of capital stock            4 cents per $100 par or face
                                     value or fraction; or if
                                     without par or fave 4 cents per
                                     share. However, if selling
                                     price is $20 or over, whether
                                     with or without par of face
                                     value rate is 5 cents instead
                                     of 4 cents

Issues of capital stock              10 cents per $100 face value or
                                     if without face value:
                                     (a) if actual value is less
                                     than $100, 2 cents on each $20
                                     or fraction,
                                     (b) if actual value is over
                                     $100, 10 cents on each $100 or

Issues of bonds                      10 cents per $100 face value or
                                     fraction thereof

Transfer of bonds                    4 cents $100 face value

Deeds of conveyance                  Value: $100-$500, 50 cents,
                                     each additional $599 or
                                     fraction, 50 cents

Sale of produce for future           3 cents per $100 or fraction

Playing cards                        10 cents per pack containing
                                     not more than 54 cards

Silver bullion sales or              50% of amount by which selling
transfers                            price exceeds cost plus allowed

Passage tickets                      Costing $10-$30, $1
                                     "       $30-$60, $2
                                     "       more than $60, $5

Foreign insurance policies           3 cents per $1 or fraction of
                                     the premium charged


      Tax                         Yield fiscal years (000)
                              1936         1937          1938
                                        (estimated)    (estimated)

Transfer of capital        33,055        34,600         38,400

Issues of capital          28,163 /10/   34,000 /10/    37,000 /10/

Issues of bonds

Transfer of bonds

Deeds of conveyance

Sale of produce             2,344         4,000          3,000
for future delivery

Playing cards               4,144         4,400          4,500

Silver bullion sales          685           600            175
or transfers

Passage tickets                - /11/        - /11/         - /11/

Foreign insurance              - /11/        - /11/         - /11/

Total                     68,991        77,600         83,075

     Note: The following taxes are of a purely regulatory nature and
will continue until repealed: Narcotics (Harrison Narcotic Law, as
amended); adulterated butter (Act of May 9, 1902); process or
renovated butter (Act of May 9, 1902); mixed flour (Act of June 13,
1898); filled cheese matches (Act of April 9, 1912); cotton futures
(United States Cotton Futures Act, August 11, 1916); circulation of
State bank notes (Sections 19 and 20, Act of February 8, 1875);
firearms and machine gums (National Firearms Act, as amended). The
total yield of these taxes for the fiscal year 1936 was $2,779,499,
of which $2,203,804 was collected from the taxes on oleomargarine.

                         FOOTNOTES TO TABLE

     /1/ Includes estimated collections on cameras and lenses
because separate data are not available.

     /2/ Includes estimated collections on pistols and revolvers.

     /3/ Exclusive of collections on imports of gasoline and
lubricating oil.

     /4/ Exclusive of estimated collections on import taxes.

     /5/ 5 cents per pound if coconut oil was not produced wholly in
the Philippine Islands or any possession of the United States, or
was not wholly from materials grown or produced in such possessions
or was not imported before June 10, 1934, or was not purchased under
a bona fide contract entered into prior to April 26, 1934, or was
not produced from materials so produced.

     /6/ Includes $15,960,329 allocated to Philippine Islands trust
fund account.

     /7/ Collections amounted to $200 for transfer of firearms and
$300 from the special tax on pawnbrokers.

     /8/ Exclusive of collections on imports of sunflower, rapeseed,
sesame, kapok, hempseed and perilla oils, etc.

     /9/ Exclusive of estimated collections on firearms and import

     /10 Includes collections on passage tickets and foreign
insurance policies because separate data are not available.

     /11/ Note separately available.

     Source: Annual Report of the Commissioner of Internal Revenue
for 1936 and The Budget of the United States Government for the
fiscal year ending June 30, 1938.

                          END OF FOOTNOTES

(1) Gasoline Sales: