n8  Internal  Revenue  Tax  on  Alcohol.  {AmMi?c£X.rm° 
skilled  workmen,  and  great  consuming  power,  the  production  of  all 
kinds  of  articles  in  the  manufacture  of  which  alcohol  is  a  necessary 
material,  would,  under  conditions  as  favorable  as  those  of  foreign 
countries,  be  increased  ten-fold. 
While  an  untaxed  denaturized  alcohol  law  would  thus  greatly 
benefit  our  manufacturers,  farmers,  and  workers  generally,  there  is 
a  most  important  class  of  industries  which  would  receive  no  advan- 
tage from  it.  These  are  the  industries  requiring  pure  ethyl  alcohol 
for  manufacturing  such  products  as  flavoring  extracts,  pharmaceuti- 
cals, drugs,  perfumery  and  various  other  articles.  To  meet  the  re- 
quirements of  these  industries  for  cheaper  alcohol  it  is  proposed  to 
reduce  the  tax  on  distilled  spirits  to  70  cents  per  proof  gallon,  which 
would  effect  a  reduction  of  about  75  cents  per  gallon  in  the  cost  of 
commercial  alcohol.  This  would  give  the  manufacturers  pure  grain 
alcohol  at  a  reasonable  price,  and  would  greatly  stimulate  the  con- 
sumption of  all  kinds  of  articles  in  which  it  is  used. 
To  compensate  for  any  loss  of  revenue  that  might  result  from  the 
reduction  in  the  tax  rate  it  is  proposed  to  levy  an  additional  tax  of 
.40  cents  per  proof  gallon  on  all  rectified,  compounded  or  blended 
spirits.  This  would  yield  an  annual  revenue  of  $3,000,000  or 
$35,000,000,  which  would  all  be  paid  by  the  users  of  distilled  spirits 
~as  a  beverage. 
A  precedent  for  the  imposition  of  this  additional  tax  is  found  in 
our  revenue  laws  for  the  Philippines,  which  provide  for  a  special 
tax  on  all  rectified  or  blended  distilled  liquors.  It  is  also  instructive 
to  note  that  provision  has  been  made  by  these  laws  for  a  very  low 
tax  rate  on  denaturized  alcohol  for  industrial  purposes.  . 
H.  R.  9051,  the  third  measure  to  which  I  have  referred,  is  one  of 
particular  interest  to  our  export  trade.  While  alcohol  in  the  origi- 
nal tax-paid  packages  may  be  exported  free  of  tax,  no  provision  is 
made  for  refunding  the  internal  revenue  tax  on  alcohol  exported  as 
a  component  part  of  manufactured  articles.  Since  all  other  com- 
mercial countries  give  their  manufacturers  tax-free  alcohol  for  the 
export  trade,  the  failure  of  our  laws  to  make  a  similar  provision  has 
effectually  prevented  our  manufacturers  from  competing  in  these 
lines  with  their  foreign  rivals  or  the  world's  trade.  The  enactment 
of  the  Lovering  Bill  would  open  up  to  our  manufacturers  of  all 
kinds  of  articles  in  which  alcohol  is  a  material  new  and  valuable 
markets,  and  enable  them  to  secure  their  fair  share  of  the  world's 
trade. 
