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THE INDIA RUBBER WORLD 



.June 1. 1917. 



The Rubber Association of America. 



THE Rubber Association of America, Inc., has been particu- 

 larly active the past month, and a gratifying increase in 

 membership is noted. Perhaps the most important work 

 was that of the Legislative Committee at a hearing before the 

 Senate Finance Committee at Wasliington, when an amendment 

 was proposed to the war tax legislation now pending. The sug- 

 gested amendment and the argument are given below in full. 

 A verdict in favor of the Association has been rendered in the 

 Blitz case. The Foreign Trade Division has elected officers and 

 chosen committees. A Tire Manufacturers' Division has been 

 organized. The Arbitration Committee is planning for practical 

 work. A war clause has been adopted to apply to orders and con- 

 tracts, and the Enlistment Committee is actively engaged in the 

 work for which it is appointed. The details of these proceed- 

 ings and activities are given below. 



THK LEGISLATIVE COMMITTEE AND THE WAR TAX. 

 On May 5 the Legislative Committee of The Rubber Associa- 

 tion of America, Inc., together with Martin W. Littleton, special 

 counsel, appeared before the Senate Finance Committee at Wash- 

 ington. D. C, in opposition to the proposed tax on crude rubber. 

 The suggested amendment and the memorandum brief that were 

 filed with the Committee to supplement the oral arguments are 

 as follows : 



Suggested amendment by which the rubber industry will be 

 made" to yield $30,000,000 in taxes annually. 



TITLE VI. WAR TAX ON MANUFACTURES. 

 Section 600. That there shall be levied, assessed, collected 

 and paid : 



(a) Upon all manufactured rubber articles containing in whole 

 or in part crude rubber or reclaimed rubber sold by the manu- 

 facturer, producer or importer, a tax of 5 per centum of the 

 price for which so sold; provided, that in cases where there 

 are contracts in existence for the delivery of such manufactured 

 articles at the time this act becomes a law, the manufacturer, 

 producer or importer shall add to the price for which such arti- 

 cle is contracted to be sold, 5 per centum of such contract price, 

 and shall collect and make monthly returns of the same as pro- 

 vided for in Section 601 of this Act; provided further, that no 

 such tax shall be levied, assessed or collected upon manufac- 

 tured rubber articles destined for exportation. 

 MEMORANDUM BRIEF. 

 In the matter of the consideration of House Bill 4,280, with 

 particular reference to title 6, section 600, and also with refer- 

 ence to title 10, section 1,000. „ . . , 

 PoiXT I.— By the provisions of Section 1,000 it is proposed 

 that a tax of I'O per cent ad valorem shall be collected upon all 

 articles not now dutiable by law. 



By the provisions of Section 600 of tlie bill, it is proposed to 

 levy and collect a tax upon all automobiles, motorcycle or bi- 

 cycle tires sold by the manufacturer, producer or importer 

 equivalent to 5 per cent of the price for which so sold. Crude 

 rubber not now being dutiable by law, will be subjected to a 10 

 per cent ad valorem tax, when imported, and as 60 per cent of 

 the crude rubber imported goes into automobile, motorcycle or 

 bicycle tires, that per cent will be again subjected to a tax upon 

 the' manufactured article of 5 per cent when sold by the manu- 

 facturer. |)roducer or importer. This emphasizes a classical ex- 

 ample of double taxation upon 60 per cent of the rubber used 

 in the rubber industry. 



Point II.— Bv the provisions of Section 1,000 of the House 

 Bill which makes dutiable every imported article now upon the 

 free list, the comprehensive and well balanced scheme for the 

 raising of war revenue is totallv deranged. The scheme of the 

 bill, manifest from its text and revealed in the debates, was the 

 imposition of a consumption tax and the imposition of income 

 and excess profit taxes as a sure and equitable method of rais- 

 ing the desired revenue. By this method $1,600,000,000 was pro- 

 vided for without interfering with existing tariff rates and with- 

 out disturbing the well considered free list. In order to raise 

 an additionaf $200,000,000 of revenue the entire group of tariff 

 schedules, along with the multiplied items of the free list, are 

 incorporated into the bill in Section 1,000. and a 10 per cent 



additional ad valorem tax fixed upon articles now dutiable by 

 law and a like 10 per cent upon articles not now dutiable by 

 law. Tlie unwisdom, inequality and unscientific character of this 

 levy of customs duty is frankly and forcibly recognized in the 

 report of Mr. Kitchin from the Committee on Ways and Means, 

 in which it is said : "Your committee realizes that this tax is 

 neither scientifically nor equitably adjusted, and recommends the 

 same only as a war tax." It has long been the liope of eminent 

 economists and public men that the time would arrive in this 

 country when the revenues of the Government could be increased 

 or diminished, as occasion required, witliout disturbing or up- 

 setting the industries of the country, and if the scheme of this 

 bill, which was designed to impose a tax at the point of con- 

 sumption, a tax at the point of the collection of income, and 

 at the point of the gathering in of tlie excess profits, had been 

 adhered to, while there would have been an additional burden • 

 to have been borne, it would not have precipitated a disturbance 

 at the very roots of all industry in the country by laying an 

 initial tax upon all non-dutiable importations and an additional 

 tax upon all dutiable importations. The committee has only to 

 consider a few items now made dutiable by Section 1,000 to as- 

 certain the far reaching effect of this proposed levy. The bag- 

 ging for cotton, copper ore, the fertilizer material, the hides of 

 cattle, the lumber and the wool, and the silk and the rubber. 

 These indicate the extent to which the tariff question is involved 

 in this legislation. Surely if the Ways and Means Committee 

 were able to provide for $1,600,000,000 of revenue without dis- 

 turbing the tariff schedules and without burdening the free list, 

 it ought not to be difficult, by a further extension of the excise 

 and excess profit tax, to provide this additional $200,000,000 

 and avoid the recognized inequalities of the customs levy pro- 

 vided by Section 1,000. 



Point III. — A tax of 10 per cent upon importations- of crude 

 rubber is the one tax which is most hurtful to the industry and 

 least fruitful of revenue, hurtful to tlie industry because of the 

 tendency it would have in curtailing importations. The market 

 price of first grade plantation rubber in London to-day is 37d. 

 or figured with exchange at $4.76;-2. equals .7346 per pound. 

 Charges to New York are to-day approximately 7 cents per 

 pound, which makes the rubber purchased in London cost 80 

 cents when landed here. Adding 10 per cent, the rubber would 

 cost, with the proposed duty, 88 cents, which is a high figure 

 when it is considered that the average for this grade of rubber 

 in 1915 was 6S!/> cents, and in 1916. 73 cents. In normal times 

 manufacturers, on an average, carried about three months' sup- 

 ply of rubber at the mills. To-dav .this reserve is cut to about 

 one month. The natural fear which arises from the proposal 

 to tax crude rubber is that at 88 cents per pound, manufactur- 

 ers will be inclined to take chances and will decline to increase 

 their stocks to a three months' basis, which it is believed in the 

 industry is essential to safety. Most of the rubber produced in 

 the world comes from the Federated Malay States and from 

 Brazil. The former country imposes an export tax of 714 per 

 cent, the latter of about 23 per cent. The policy of the British 

 Government, for economic reasons, is to divert as much of the 

 British-grown rubber as possible to London to be re-distributed 

 from that point. No export tax has as yet been placed by Great 

 Britain on shipments from the British Isles, but if, as a revenue 

 measure, the British Government should impose an export tax, 

 which is a strong probability, the economic position of America 

 would be possibly untenable. The rubber stock in the United 

 States at present presented in the day's supply is as follows : 



Stocks on hand at mills March 31, 1917 30 days 



Stocks in transit actually in L^nited States 17 days 



Stocks for which permits have been issued but 



which have not yet arrived in the L^. S 29 days 



Total in U.S. and permitted 76 days 



Another advantage of decided importance in having an ex- 

 cise upon the manufactured article as against a customs levy 

 on the imported crude article is that such excise tax would not 

 be imposed upon manufactured rubber articles destined for ex- 

 portation, and hence the industry would be able to contend in 

 the markets of the world with its competitors, without the bur- 

 den of this tax, whereas a tax upon importations of crude rub- 

 ber would fix an initial burden and create a continuing dis- 

 advantage which would accompany the article through all of 

 its forms of manufacturing and into the channels of exporta- 

 tion. 



