In retrospect, it is not easy to say what the ideal distribution of, and organization for, the economic background aspects of tax research during the war period would have been. The actual solutions of the problem adopted during the war were largely in the nature of makeshifts composed of such elements as a clear recognition of the problem and a desire to avoid duplication in solving it, combined with the necessity of recognizing vested interests, of finding qualified personnel, and, at some stage, of processing the economic background data with the tax policy objective in mind.

C. Field Work

In drawing up the Division's research program, the question arose of whether or not to carry on field work, especially during the war. Not to include field investigation as part of the research program would involve the risk of losing touch with some of the taxpayer compliance problems raised by the wartime tax laws. Yet, to carry out field work on the scale needed to be helpful in connection with most research problems would require either (1) a considerably larger appropriation of funds than the Division, on the average, was granted during the war years or (2) diversion of funds from research in Washington to research in the field. By and large, the array of problems which could be studied and analyzed adequately without recourse to the field, combined with the centralization in Washington of the bulk of the statistical raw material of taxation, assigned field work a low priority in the Division's scheme of research. Only in a few selected instances were the needs so great and the benefits to be derived from field work so substantial that the Division found it advisable to send its personnel out into the field.

The immense broadening of the individual income tax during the war presented several occasions calling for field work. As it became increasingly apparent in 1942 that more convenient tax payment methods had to be provided for the millions of taxpayers newly brought in the Federal income tax system, and that the income tax had to be made more quickly responsive to the increase in income and purchasing power, a system of current collection-at-source loomed up as the logical answer. It was realized that, should Congress adopt a withholding system, millions of employers would be brought in as collection agents for the Government and tens of millions of employees would be subject to withholding. Here was a problem which could not be solved fully using only the sources available at Washington. To develop a withholding system which would be adapted to employer payroll and accounting methods required a thorough knowledge of those methods.

After considerable discussion, it was decided in July, 1942 to send "teams" of Tax Research and Internal Revenue representatives into key industrial sections of the country to get a clear picture of payroll systems, to become acquainted with employer's problems in withholdings, to get suggestions on the withholding proposals, and to sample opinions of both employers and employees with respect to withholding. Both in terms of the knowledge gained and the valuable suggestions received for modifying the Treasury proposals for withholding, and in terms of the spirit of cooperation which was promoted by the consultations with employers (upon whom the greater burden of the system would rest), the project was judged to be highly successful. The Treasury staff was able to be of greater assistance to Congress, and a more realistic and workable withholding system resulted.

This experience raised the question whether similar projects, on a greater and smaller scale, would have resulted in more readily acceptable legislation on other phases of taxation. To be sure, occasional trips were made by the directing personnel of the Division to aid in the drafting of realistic proposals. Furthermore, field tests were made of tentative income tax return forms drawn up by the staffs of the Division of Tax Research and the Bureau of Internal Revenue; these tests were conducted by the National Opinion Research Center of Denver. With these few exceptions, however, the financial resources of the Division were thought to be insufficient to justify further field activity. The greatest return per dollar of investment in research was in general judged to be in the area of studies not involving field work.

D. Distribution Of Materials Prepared By The Division

Among the vexing minor problems that confronted the Division during the war was whether or not to make selected studies and memoranda available for distribution, and, if so, what studies to select and how to distribute them.

1. Pros And Cons

Although the Division functioned principally as a fact-finding and analytical group for the purpose of aiding the Administration and Congress in formulating and revising tax laws, the general public also made considerable demands on the Division for various types of information. Public requests for information generally fell into four categories: (1) specific requests for particular items of information; (2) general requests for "all the information available" on a particular tax problem; (3) requests for copies of studies which the correspondent "had heard" the Division had made, or which he felt the Division was likely to have made; and (4) requests for comments on particular proposals submitted by the correspondent.

Inevitably, as the volume of such request became heavy, especially during periods of active consideration of wartime tax legislation, the question arose of how to handle the inquiries without drawing an undue share of the Division's resources away from its main stream functions -- basic tax research. The solution the Division gradually evolved was threefold: (1) to draw up "form paragraphs" to answer the most frequently raised questions; (2) to mimeograph certain tables showing statistical information most frequently requested; and (3) to reproduce certain of the Division's fact-finding and analytical studies to send out in response both to specific requests for such materials and to more general inquiries for information on the tax fields covered by such studies. In this respect, the decision to reproduce certain materials and make them available for distribution was a matter of operating economy and efficiency.

Certain other considerations also influenced Division personnel in deciding to distribute such materials. In certain areas of taxation where the factual and analytical information needed to arrive at an intelligent conclusion was not generally available, it contributed to a more informed public opinion to make studies in this area more broadly and readily available. It should be noted in this connection that these studies were designed to present facts hitherto unavailable and to give the pros and cons on questions under study rather than to "sell" a policy position. A further factor arguing for wider distribution was that the "publication" of materials, even in mimeographed form, had a decidedly favorable effect on staff morale. The sense of recognition as well as of service involved in the wider distribution of the research product appealed to professional pride and thus provided an additional incentive to high-level performance.

While the above considerations were favorable to reproduction and distribution of certain research products, not all factors were favorable to such a policy. Two points raised against it were: (1) the studies would inevitably carry implications of Treasury policy and thus enter a domain reserved to the top policy officials of the Treasury; (2) an undue expenditure of funds would be involved if the distribution became too large. With respect to the first objection, it was felt that facts and analyses generally carry some implications to those who use them, and that those implications are indeed the reason for compiling the facts and making the analyses. Further, the inferences drawn from the studies might be quite different according to the particular factors regarded as significant by the individuals using them. As to possible extravagance in distribution of materials, this abuse could be avoided by limiting distribution to specific requests for the material. In this way, while a considerable number of copies of a particular study might be requested, they would go only to those who had sufficient interest in the subject matter covered to take the time and trouble to make the request. The presumption would be that such people would make good use of the material. Furthermore, making selected Division studies available might forestall wasteful duplication by other persons or groups interested in the subjects covered.

2. Procedure

In connection with the Revenue Act of 1942, the volume of requests for information grow so heavy that it was found desirable to assign one person full time to the handling and management of correspondence matters. Prior to that time, responsibility for the management of the correspondence function had been diffused, except for a general check-up by one of the administrative assistants in the Division. Under the new system adopted in 1942, it was made the responsibility of one staff member (a CAF-7) to work over the incoming mail, handle ordinary requests for specific documents or data, prepare replies in cases which could be handled by the use of form paragraphs or very simple explanations, and route to the appropriate staff member the letters requiring a more detailed or analytical answer. The form paragraphs used in this work were developed by the correspondence clerk in conjunction with the various professional staff members. Since the requests for information were found to follow certain channels for the most part, these form paragraphs proved to be a very considerable economy.

In many instances, it was found that requests could be handled by sending copies of materials prepared by the Division of Tax Research in the form of studies or memoranda. In areas where the requests were sufficiently numerous, a few selected studies of a non-controversial nature were reproduced in mimeograph form for such distribution. Gradually, throughout 1942, 1943 and early 1944, a mounting number of requests were received, some for copies of specific Division studies, and others for any studies which might be made available by the Division. Insofar as speeches and articles were presented by members of the Division staff and by the Assistant Secretary in charge of taxation, many requests for these were also received -- often some time after the delivery of the speech or paper.

In response to those needs and requests, it was decided to set up a mailing list for materials made available by the Division of Tax Research. This was done on April 20, 1944, and names were added in response to further specific requests. By the end of 1946, the list had grown to 100 names. From time to time, this list was brought up to date by sending out questionnaires asking whether the individual desired to be retained on the list. As part of the mailing list procedure, the Division periodically put out a "list of materials available for distribution" which permitted interested individuals to list these items they wanted sent to them and to leave out those that were of no interest to them. Through the combination of (a) reproducing certain studies in mimeograph form, (b) setting up a mailing list for those who wanted all Division materials that became available, and (c) periodically preparing a list of available materials, the Division was able to answer the increased number of requests and make available a considerable amount of tax data and analysis at what was regarded to be the lowest possible cost.

In the process of reproducing the materials, the practice was followed, wherever possible, of assigning credit to those individuals who were responsible for the preparation of the materials. This served the morale purposes mentioned above and proved to be an effective stimulant to a high level of workmanship.

V. Personnel

The staffing of an organization devoted to technical and analytical research in a specialized field like taxation raises questions such as the following: Should the professional personnel be primarily tax specialists or should the emphasis be put on competence in economics generally? How should the funds available for professional staff be distributed among the various professional grades? What contribution can consulting experts make and how should their services be woven in with those of the legal staff? These and other questions will be examined below, first with respect to the fulltime staff, both professional and nonprofessional, and then with respect to consultants.

A. Fulltime Staff

1. Professional Personnel

Recruiting and holding together a competent professional staff is the key to effective performance of the research function. In wartime, when the demands for economic research expanded enormously, and the sources of competent research personnel shrank, the staffing problem became particularly acute.

Fortunately, the Division had had several prewar years in which to develop certain general approaches and policies with respect to recruitment. Owing to the growing importance of the economic aspects of taxation in the late Thirties, the Division had adopted a policy of recruiting research personnel with broad talents in the field of economics, preferably with some specialization in the tax field, rather than personnel who were tax specialists but lacked a thorough economic background.

More than ever before, the war period required that each tax be analyzed not by itself, or merely in relation to other taxes, but rather as part of a coordinated government program of economic stabilization. Wherever possible, of course, economists with a specific knowledge of tax institutions were recruited. In cases where this tax background was lacking, however, it was found that such deficiencies could be made up more readily than deficiencies in general economic background. In assessing the Division's professional recruitment policy, one may safely say that it demonstrated the soundness of giving first emphasis to the applicant's equipment in economic analysis and second emphasis to his specific skills in the field of taxation.

Having determined the emphasis with respect to TYPE of personnel, the Division still had the problem of tapping the SOURCES of personnel meeting its specifications. In the prewar and early war period, the registers of the Civil Service Commission proved to be a generally adequate source of personnel. However, during the war period, the flexibility in personnel procedure which permitted the Division to participate more actively in the recruitment process proved to be not only desirable but necessary. By maintaining contacts with economists and experts in public finance, principally in the universities but also in other areas, the Division was able to learn of available personnel not listed on Civil Service registers. It is fair to say that the bulk of the Division's wartime recruitment -- all of which went through prescribed Civil Service procedure -- came from sources independently tapped by the Division itself. Especially in the higher professional grades, the Civil Service registers proved inadequate in turning up the kind of staff needed by the Division, and it was mainly a matter of finding the person and then seeing to it that he qualified under the competitive rules established by the Commission. In one or two instances, it was found desirable to visit several major universities in the Northeast to stimulate applications from the type of personnel needed for the Division's work. These trips proved profitable in stimulating both the immediate and the long-run flow of applications.

A further question concerned the balance among the various professional grades, i.e., how many economists in the "principal" category, how many "associate," how many "junior," etc. Although the optimum balance among the various grades fluctuated during the war period, depending on whether or not Congress was actively considering tax legislation, in general it was found that the tax research function required a large proportion of highly trained personnel capable of independent research. The range of problems proved to be so broad and the economic, equity, administrative, compliance, and revenue implications of each tax proposal so complex that the function tended to break into a large number of projects each of which required the intimate attention of a well-trained capable analyst. In other words, it was found by experience that the demands on the Division were so numerous and that each required such a high order of skill that heavy reliance had to be placed on individual initiative and responsibility. Some projects lent themselves to handling by junior personnel (P-3 and below) under the supervision of seniors (P-4 and above). But the majority of projects called for the close attention of a single qualified person and did not lend itself to parcelling out among several. The upshot of this characteristic of the Division's work was that the Division throughout the war period invested a large part of its funds in senior personnel, and that there was, in fact, a discernible trend toward greater reliance on senior personnel. (See Exhibit 3 giving a comparative picture of the professional personnel in the various grades from 1941 to 1946.)

This is not to say that junior professional personnel did not have their place in the research organization. On the contrary, a certain number of juniors were found to be indispensable for the effective functioning of the senior personnel. This was particularly true when many demands for specific data and "spot" memoranda were being made by the tax committee of Congress. In the high-pressure days of 1941 and 1942, when major revenue raising bills were under consideration a large portion of the time, it was good economy to have much of the reference and compiling work done by the junior staff. However, as the emphasis shifted more to the underlying analytical work needed to prepare the way for postwar tax revision, the need for junior staff slackened.

Whether the Division was making the best possible use of junior staff and had struck the best balance between junior and senior staff was a question frequently raised during the war by the directing personnel of the Division. Either because of the nature of the work, already described, or perhaps in part because of the type of person generally attracted into research activities, emphasis on individual work was persistently strong. With a few significant exceptions, it followed that recruitment policies in the lower professional levels aimed at finding personnel who were potential senior staff material in the sense of being able to conduct independent analytical research. A few "permanent" P-1's and P-2's were retained on the staff for the routine professional work required as an aid to the senior staff, but in general the junior staff members were expected either to develop into senior staff members or to move out of the Division.

The indoctrination and training of new staff members was handled, not by any organized training system, but rather by the apprentice method. Owing to the diversity of backgrounds of the personnel recruited and to the diversity of their assignments within the Division, it was found most efficient to apprentice each new staff member to someone higher in the professional scale working in the tax research area to which the new member was assigned. Depending on the ability of the new member to conduct independent work, these periods of apprenticeship varied from a month upwards.

In the face of extremely strong competition during the war, coupled with the loss of a good many staff members to the armed services, the problem of stimulating maximum effort on the part of those remaining and of providing sufficient incentives to retain them on the staff were substantial. Among the measures taken to maintain morale and interest were the following: (1) a policy of granting promotions upon show of merit, and doing so wherever possible without the stimulus of a request or an alternative job opportunity in the case of the person in question; (2) the allocation of personnel to areas of their particular interests, and some rotation to avoid monotony (though the latter policy could not be carried out very extensively during the war); (3) the holding of occasional staff meetings (and bi-weekly staff luncheons after the Treasury cafeteria was opened) and of "seminar meetings" to which outstanding authorities in economics and public finance were invited for purposes of discussing significant problems bearing on taxation; (4) the practice, wherever possible, of bringing the staff member who did the research on a particular problem into the policy and recommendation conferences on that problem; (5) the maintenance of research standards and a level of critical review of research products which would lead to respect of the Division's work and products by economists and researchers generally; and (6) the policy of suggesting to staff members who did not measure up to these standards that they find positions outside of the Division. Although a number of competent people were lost to other agencies during the war, these were mostly in the lower professional grades. With but one exception, the losses incurred in the top staff (P-6 and above) during the war were directly connected with service in the armed forces.

2. Nonprofessional Personnel

Because of the technical nature of its work, the Division's requirements for secretarial, administrative, stenographic, and clerical (chiefly filing and statistical clerks) personnel were unusually exacting. The higher nonprofessional positions demanded an uncommon degree of understanding of difficult subject matter, and all of these positions involved the use of, and some familiarity with, a very technical vocabulary.

The Division was fortunate, despite considerable turnover in these areas, in being able to retain the continuous services of a group of key administrative, secretarial, and clerical personnel of high competence. No doubt, the average level of competence of the Division's nonprofessional staff fell materially during the war period. But by checker-board moves of the "core group" to the places at greatest usefulness -- and especially by strategic location of top-calibre personnel to supervise the work of the less competent and inexperienced employees -- the various staff services of the Division were fairly well maintained during the war.

In a few instances, reclassifications of key secretarial, clerical, and administrative positions were obtained, though the Division felt that the difficult nature of its work might well have justified more up-grading. These few reclassifications, combined with (a) a policy of promotion from within the Division ranks to fill the top positions, (b) the security offered by status in an "old-line" agency like the Treasury, and (c) an unusual sense of loyalty to the organization appeared to be the major factors serving to hold key personnel in the nonprofessional positions.

B. Use Of Consultants

The Division found it advisable during the war years to use the services of consulting experts both on specific and on general phases of taxation. This decision involved questions of exactly how to use these services, how much to use them in relation to the full-time services of the regular staff members, and what types of experts to employ.

First, it was clear that the regular professional staff of the Division, limited to twenty-six members at its peak, could not become expert in all phases of all taxes. Second, particularly with a specialized tax-by-tax set-up, it was found desirable to call upon consultants to fill in some of the economic background essential to the more detailed work on specific taxes and tax problems. Third, the leavening influence of outside counsel from persons not subject to the immediate pressures of Washington appeared to be worth seeking. Finally, several economists whom the Division had wanted to employ on a regular full-time basis were employed instead on a part-time consulting basis when this proved to be the only terms on which they could offer their services.

With respect to the question of WHO the consultants should be, the Division found it most profitable to employ as regular consultants mainly economists whose attention was devoted in large part to public finance. University faculty members with experience in taxation were the best source of such personnel. In addition, people in the financial world, in the accounting profession, and in business generally were either contacted in the field on particular problems as they arose or were asked to come to Washington on an expense basis for consultation. As a corps of Division "alumni" developed over the years, it was found that those who had had a period of service in the Division and then moved to other fields were among the most valuable consultants from the Division's point of view; they were able to advise from an outside vantage point, but could do so with an appreciation of the Division's specific problems which could be gained only by inside experience.

Consultants were used in a number of ways. First, one top consultant (who served as Acting Assistant Director during part of 1943) served as consultant to the Director, giving general advice on the research program and activities of the Division as well as specific consultation on the over-all economic aspects of tax policy. Another way in which consultants were used was to handle a specific project in a field in which they qualified as experts. Thus, one consultant was called upon in the summer of 1943 to analyze the methods of inventory valuation for corporate tax purposes; another, in the same year, to study the special income tax problems of farmers; a third, in 1945, to analyze the outlook for inflation or deflation in the immediate postwar period, and a fourth, in 1946, to analyze the price and income elasticities of certain major commodities and services subject to wartime excises.

A third use of consultants was to have a group of highly qualified economists come in once or twice a year to advise the Division on the general economic outlook and its implications for tax research. It may be noted in passing that the appraisals of the economic outlook which these experts gave the Division proved in general to be more accurate during the postwar transition period than those that were developed by the personnel in the Washington government agencies.

Fourth, in its work on postwar taxation in collaboration with the Staff of the Joint Committee on Internal Revenue Taxation, the Division had a large number of representatives of various organizations and interests come in to Washington to present the result of their studies in the field. This made available the experience and views of a very wide range of interests in business, finance, labor, and agriculture.

Fifth, on several problems involving technical questions of accounting or business procedure, the Division consulted with persons whose working knowledge of these fields enabled them to provide the required information. Sixth, the Division occasionally found it useful to submit one of its research manuscripts to a consultant either for general criticism and suggestions or for advice on certain phases of the analysis. Seventh, in a few limited instances, consultants were asked to prepare specific memoranda on an assigned subject in which they were expert.

By and large, the Division found the services of its consultants to be a valuable contribution to its research activities and output during the war. The consulting experts contributed experience, analyses, and time which would not have been available in any other way. Whether the contribution made by consulting experts could have been greater if they had been used differently or if greater use had been made of personnel from nonacademic fields is an open question. With respect to the latter point, the Division occasionally felt that it would be desirable to seek more extensive consultation from those who were employed and expert in business, financial and accounting pursuits. The major drawback in attempting to utilize the services of such persons was found to be that those whose experience and assistance made them valuable for this purpose generally were not available on any systematized basis at the salaries the Government was able to pay. In this area, interview had to substitute for extensive consultation.

FOOTNOTES

/1/ HOUSE REPORT No. 146, 76th Congress, 3rd Session, pp. 1-2.

/2/ The extent of this phase of the Division's activities is indicated by a confidential committee print of the House Ways and Means Committee entitled DATA ON PROPOSED REVENUE BILL OF 1942, containing, among other things, about 500 pages of material submitted to the Committee by the Treasury Department during the period, April 24-June 27, 1942.

/3/ Taxes were the subject of the first of the seven points: "To keep the cost of living from spiraling upward, we must tax heavily, and in that process keep personal and corporate profits at a reasonable rate, the word 'reasonable' being defined at a low level." NATIONAL ECONOMIC POLICY, message from the President of the United States, April 27, 1942, 77th Congress, 2nd Session, House Document No. 716, p. 3.

/4/ From an informal memorandum by the Director of Tax Research, 1938, Tax Research Files.

/5/ Page 20, Deficiency Appropriation Justification, 12-20-41, Division of Tax Research File No. BB-3/38.2.

/6/ "Organization and Management of the Division of Tax Research" (Mimeo. 15 pp.) in Tax Research Files.

/7/ Further details regarding the change may be found in Exhibit 1c, a chart showing the revised organization.

/8/ Subcommittee of the House Committee on Appropriations, HEARINGS, TREASURY DEPARTMENT APPROPRIATION BILL FOR 1944, Washington, 1943, pp. 457-8.

/9/ Robert L. Doughton, "Taxation and Postwar Economy," PROCEEDINGS OF THE NATIONAL TAX ASSOCIATION, 1944, p. 194.

/10/ Subcommittee of the House Committee on Appropriations, HEARINGS, TREASURY DEPARTMENT APPROPRIATION BILL FOR 1947, Washington, 1946, p. 179.

END OF FOOTNOTES

EXHIBIT 1a DIVISION OF TAX RESEARCH

EXHIBIT 1b DIVISION OF TAX RESEARCH ORGANIZATION CHART

EXHIBIT 1c DIVISION OF TAX RESEARCH ORGANIZATION CHART

EXHIBIT 1d OFFICE OF THE SECRETARY -- TREASURY DEPARTMENT DIVISION OF TAX RESEARCH July 1, 1946

EXHIBIT 2

The Executive Director and
  Chief Examiner
United States Civil Service Commission
Washington, D. C.

                                   Attention: Mr. Dirks

Dear Sir:

Re: RECLASSIFICATION OF DIVISION OF TAX RESEARCH DIRECTING PERSONNEL

In recognition of the broadening in recent years of the functions of the Division of Tax Research, the broadened authority and responsibility of its Director (who was appointed an Assistant to the Secretary in December 1944), and the consequent changes in the organization of the Division's work, it is proposed that the following classification changes be made:

1. That four existing positions be canceled: two Assistant Directors (P-7) and two Principal Economic Analysts (P-6).

2. That four new positions be substituted: one Associate Director (P-8) and three Assistant Directors (P-7).

In support of this proposal, the following documents are attached:

1. Classification sheets for the proposed positions, with attached "Position description and field classification sheets" (Treasury Personnel Form B) for each of the proposed positions.

2. Two charts showing the organization of the Division of Tax Research as of July 1, 1945 (present) and as of February 15, 1946 (proposed).

3. A description of the functions of the Division of Tax Research.

4. A document entitled "Check List of Legislative Matters in Connection with the 1946 Tax Bill" to illustrate the subject matter of the Division's work.

In addition to the above material, it may be helpful to describe briefly the changes which have occurred in the duties of, and relationships among, the Director of Tax Research (Assistant to the Secretary), the Associate Director (proposed), and the three Assistant Directors (proposed). The two outstanding features of the changes which have taken place are (1) the broadening of the Director's role, especially with his appointment late in 1944 to the position of Assistant to the Secretary with the function of tax adviser to the Secretary, and the consequent enlargement of the functions and responsibility of the Associate Director (proposed); and (2) the reorganization of the operations of the Division along tax-by-tax lines in a manner designed to facilitate more clear-cut lines of authority and a more efficient performance of the Division's research functions.

With respect to the first change, it is to be noted that the Director of Tax Research until December 1, 1944 was charged primarily with research responsibilities, reporting and making recommendations to the Secretary largely through his Tax Adviser (the last previous incombent of this position having been Mr. Randolph Paul).

Effective December 1, 1944, however, the Secretary appointed the Director, Mr. Roy Blough, an Assistant to the Secretary, transferring to him the function of tax adviser which had previously been handled as a separate position. Treasury Order No. 54, dated November 29, 1944, included the following directive:

"The Director of Tax Research will report direct to the Secretary and will be in general charge of Treasury tax policy and its formulation. He will have the duty of preparing for the Secretary tax programs, tax statements, and tax information. He will continue as in the past to work with Congressional tax committees and to speak for the Treasury in the day by day work of such committees in the absence of the General Counsel."

The Director has found his time increasingly occupied with advisory, consultative and liaison responsibilities, so much so that he has had to delegate a growing part of the planning and management of the Division's research operations to an associate. The major part of the Director's time is now devoted to such activities as (1) work with and for the Secretary in the development of the Department's tax program; (2) assistance to the Secretary in presenting the Treasury's tax program in Congress; (3) handling the day-to-day liaison with the Congressional tax committees; (4) conferring with the chief officials of other Government agencies in the tax field, as well as with representatives of private organizations; and (5) appraising for the Secretary the tax views of other Government agencies, private organizations, and the public.

As a result of the heavy drain of these responsibilities on the time and resources of the Director, the Associate Director (proposed) has increasingly been brought into -- and now shares fully in -- the planning and formulation of the Division's research program and has been made directly responsible for the actual execution of that program. Apart from serving jointly with the Director in the overall planning of the Division's activities, and, in the absence of the director, assuming the full duties and responsibilities of his position, the Associate Director (proposed) devotes his time primarily to the following functions: (1) the general management of the Division to insure the most efficient utilization of the research staff and other resources made available in the annual appropriation; (2) in conjunction with the Assistant Directors (proposed), making the necessary research assignments to carry out the Division research program; (3) assigning priorities of research projects in line with probable needs of the tax legislative program; (4) making the final review of research memoranda; (5) providing technical assistance to the Congressional tax committees as required; (6) making and maintaining contacts with the technical personnel of other divisions in the Department, of other Government agencies, of the staff of the Joint Committee on Internal Revenue Taxation, and of other organizations; and (7) programming conferences with consulting experts on selected research problems.

In view of the expanded duties of the Director of Tax Research, particularly those attendant upon his appointment to the position of Assistant to the Secretary in charge of tax matters, and in view of the consequent enlargement of the functions and responsibilities of his associate and alternate, (currently an Assistant Director,) it is my considered opinion that this position fully qualifies for the classification of Associate Director.

The new relationship which has developed between the Director and the Associate Director (proposed) over the past year or two has been accompanied by a change in the organization of the Division's research operations and a broadening of the authority and scope of the three Assistant Directors (proposed).

The research activities of the Division were previously carried on under the immediate supervision of two Assistant Directors. One of the Assistant Directors supervised the work of the Division in connection with the legislative program and was responsible for final technical review of the research products of the Division. The other Assistant Director supervised the research and administrative operations of the Division. He assisted in formulating research projects, allocated research tasks to the appropriate personnel and, aided by the senior personnel, reviewed research jobs in progress. In addition, he handled personnel matters, correspondence and other operational matters, and was responsible for the editorial phases of the Division's research products.

However, with the expanding responsibility of the Division and the new role of its Director and Associate Director (proposed), it was found that a reorganizing of the Division's research work along tax-by-tax lines would promote efficiency and clarify responsibility. Therefore, the Division was divided into three major operating sections, the Individual Income Tax Section, the Business Tax Section, and the Miscellaneous Tax Section, and each was put in charge of an Assistant Director (proposed). Each of the three Assistant Directors (proposed) was thus assigned responsibility for a major field or fields of taxation. That responsibility involves (1) the technical supervision of the research work of the section, including the determination of specific assignments, the advising of staff economists, the critical review of the completed work, and the authority to return work where necessary for further development along certain lines; (2) the preparation of analyses and the framing of policy recommendations for the purpose of aiding Treasury officials in formulating and executing tax policies in the particular fields of taxation covered; and (3) participation with the Director and Associate Director (proposed) in the development of the major aspects of the Treasury's tax program.

In view of the greatly enlarged responsibilities of the Heads of the Individual Income Tax, Business Tax, and Miscellaneous Tax Sections with respect to both the research and the policy operations of the Division, it is my considered opinion that these positions fully qualify for the classification of Assistant Director.

It would be appreciated if the Commission could give its attention at an early date to the classification changes with respect to the Division of Tax Research which have been outlined and explained in this letter.

Very truly yours,

Director of Personnel

EXHIBIT 3

               PROFESSIONAL EMPLOYEES -- BY GRADES /1/

                    June 30, 1941 - June 30, 1946

Grade              1941    1942    1943    1944    1945    1946

P-8                  1       1       1       1       1       2
  7                  1       2       2       2       1       3
  6                  2       4       3       4       6       4
  5                  -       4       3       4       3       5
  4                  2       3       4       3       2       2
  3                  4       5       3       3       3       4
  2                  1       3       4       3       3       3
  1                  3       4       4       4       3       1

     Total          14      26      24      24      22      24