A survey of the clerical or administrative sections of the unit reveals a number requiring additional clerks. It is false economy to save on clerks at the expense of high-priced technical employees. While no definite figures can be submitted showing the economy involved in the utilization, wherever possible, of low-priced clerks in performing routine or semitechnical duties, yet it is apparent that whenever such employees can be utilized and thus permit the high-grade auditors to confine their efforts to work of the proper class, a distinct saving, even though intangible, results. The 600 additional auditors for the consolidated returns subdivision will necessitate 120 additional clerks to perform various routine operations in the preparing and assembling for audit of the returns. One hundred and twenty-five additional clerks will be necessary in the returns control section for duty in the assembling of claims and forwarding cases to the audit sections for audit. Lack of space and personnel at present retards the adjudication of these claims, as the returns control section could properly be characterized as the neck of the bottle in the progress of these claims to settlement. One hundred and thirty additional stenographers and typi-ts are needed in the stenographic section to keep the work there current and to meet the additional work resulting from the increase in production occasioned by the additional force and by the increase in production occasioned by the higher efficiency acquired by the auditing force. The stenographic se tion at present is behind in its work and this condition affects vitally the entire production of the unit. Eighty additional clerks will be required in the sorting section to handle the additional volume of work. There has been a material increase, estimated at 25 per cent, in returns of information returns filed. These returns must be sorted back to the individual to whom the money was paid and serve not only as a positive check upon the taxable income reported in his return, but also as a moral effect of the first magnitude upon the taxpayer. Figures show that the amount of unreported tax discovered by the system of handling returns of information exceeds many times the pay roll of this section. In addition to the work on returns of information the sorting section audits withholding returns and has also recently taken over the audit of withholding claims. One hundred additional clerks will be required in the statistical division to bring its work current and erable it to take off all required statistics from the returns before they reach the tles. This is a very important administrative measure and will result in a great saving of time in the audit sections as the withdrawal from the files of returns by the statistical division for analytical purposes necessarily interferes with the audit program. In addition to the above 30 clerks will be required in the field audit control section, 8 in the natural re-ources subdivision, and 7 in the amortization section, to take care of the additional work caused by the increase in the techincal personnel. It is the plan to recruit the additional clerical personnel at the rate of 200 per month for three months.

In the field service at the present date there are on hand uncompleted investigations covering approximately 400,000 tax years which represents about two year's work for the present personnel.

The CHAIRMAN. That is, 400,000 cases?

Mr. WEST. Yes. It may be that one case may cover four or five years.

The average production per year is at the rate of 100 tax years per audit, an increase of 33 per cent over the 75 of the previous year. To complete the work now in the field, if no more were/to be sent out, would necessitate 2,000 additional auditors producing at the normal rate beginning July 1, 1921. The estimate submitted is for 1,200 auditors, to be recruited at the rate of 100 per month, together with approximately 50 per month to replace auditors leaving the service. Past experience has demonstrated the impracticability of recruiting the field force at a rate in excess of 150 per month. The estimate of 240 clerks is based upon the present proportion of clerks to auditors of 1 to 5 in the field and will be recruited on that basis at the rate of 20 per month for 12 months. While, as in consolidated returns, the addition of these employees will not result in an immediate currency of the work, it will enable the unit to keep abreast of the stream and make some substantial progress toward currency.

The estimates for increased field travel and supply expenditures are based upon the increase in personnel and the added cost of training field employees in Washington before sending them to their respective divisions for duty,

The necessity of securing additional appropriation to take care of the items as outlined above can be most forcibly realized when it is understood that the additional employees and administrative measures thus provided for should result in an increase of at least 50 per cent over the amount of additional tax that would otherwise be

assessed. I have confined my requests for additional employees to the consolidated returns and natural resources subdivisions, the Amortization Section and the field service. These branches of the service have proven to be the most prolific revenue producing sources. The consolidated returns subdivision has for the past year assessed on an average of $20,136 a case. It is believed that in the 1918 returns, of which there are at least 9,000, additional tax to the amount of $200,000,000 will be disclosed. Unless we are supplied with an additional personnel it will be impossible to touch this revenue within the coming fiscal year. The average additional tax in the Amertization Section is $20,315 per case. There are approximately 1,500 cases to be handled, half of which the present personnel will not be able to complete during the present fiscal year. In the field service the average additional tax assessed per case is $1,144. The 400,000 tax years for investigation now in the field represent, on the basis of the average tax assessed per case, $457,600,000 in revenue due the Government. Of this amount the present personnel will be able to assess approximately half.

Under the recruiting plan for additional field auditors an average of 650 auditors would be on duty during the year which would, on a basis of the past rate of tax assessed per case, result in an assessment of additional tax of $74,362,000. This latter amount, of course, is over and above the amount of revenue to be secured by the present force. In both the local and field services the net result in revenue to the Government through the assessment of additional tax, which would otherwise not be disclosed this year, if the necessary additional appropriation is granted, would be approximately $200,000,000.

The amount of money involved in the above expenditures, approximately $6,000,000, I believe to be necessary to the proper conduct of the income-tax unit for the present fiscal year. I am sure its expenditure will result in a manifold return on each dollar. The CHAIRMAN. You estimate that you will disclose this year $200,000,000?

Mr. WEST. Yes, sir. On the basis of the report of the income tax unit, $200,000,000 additional tax would be collected in a 12-month period if the additional force is provided. The present force will bring in this fiscal year as additional income tax approximately $230,000,000.

The CHAIRMAN. Altogether, as I listened to your reading of the figures, you will have $750,000,000?

Mr. WEST. $457,000,000 represents the estimated additional tax to be secured from the 400,000 tax year cases now in the field for investigation. Of this amount the present personnel can recommend for assessment only about one-half."

The CHAIRMAN. Plus $200,000,000?

Mr. WEST. $457,000,000 would represent the total.

The CHAIRMAN. It is $457,000,000 plus $77,000,000?

Mr. WEST. It will take double the present force to collect and assess the $457,000,000 in a 12-month period. The service average shows that there would be assessed and collected in a 12-month period about $74,000,000 due to the work of 650 income tax field auditors.

The CHAIRMAN. Which is $544,000,000.

Mr. WEST. The above is the argument put up by the income tax unit for the increase of their field organization.

STATUTE OF LIMITATIONS AGAINST 1917 CASES.

The CHAIRMAN. Is the statute of limitations running against these cases?

Mr. WEST. The statute of limitations has run against the 1917

cases.

The CHAIRMAN. What do you do when you make an assessment in a case of that kind?

Mr. WEST. We can not make the assessment unless we get a waiver from the taxpayer.

Mr. BLAIR. In most of the cases we have waivers.

The CHAIRMAN. Could you not sue for the taxes without a waiver? Mr. WEST. You can always sue for the taxes.

The CHAIRMAN. There is no limitation upon the right of recovery by suit?

Mr. WEST. No, sir.

The CHAIRMAN. They do not want suits brought against them. Mr. BLAIR. And we do not want to sue.

ADDITIONAL COLLECTIONS THROUGH INCREASE OF FORCE.

(See p. 460.)

The CHAIRMAN. You are asking for $2,630,000, and if you are allowed this $2,630,000, you anticipate receiving $200,000,000 in

taxes!

Mr. WEST. Not on the basis of the actual $2,630,000 but on the recruitment plan of taking on 100 field auditors per month and 50 bureau auditors per month for a 12-month period.

The CHAIRMAN. Does that $200,000,000 include the $25,000,000 per month you were going to collect?

Mr. WEST. This is in addition to that. This represents an additional force to the 2,036 agents we have in the field now.

Mr. BYRNS. Do I understand that this $2,630,000 would be used in order to employ an additional force on the 1917 and 1918 taxes?

Mr. WEST. Not specifically, but this is to carry on all the investigations. For instance, we may take up a 1917 case and carry it on down to the 1920 tax valuation.

Mr. BYRNS. When they take it up, they go on through with it? Mr. WEST. Not invariably, but they try to do it.

Mr. BYRNS. One of the most serious criticisms I have heard is in regard to the delay in making these assessments. Of course, the business man does not want to be held up for three or four years without knowing what his taxes are. That makes it doubly important, not only from the standpoint of the United States Government, which needs the revenues, but also from the standpoint of the business man who is interested in having his case disposed of. Is it to be understood that if this estimate is allowed it will enable you to close up the work for all those years?

Mr. CHATTERTON. We investigate 100 tax years per man per annum. We had 2,036 men on September 30, not including 35 agents in charge of divisions.

Mr. KELLEY. This would provide for how many more?

Mr. WEST. Eight hundred are asked for in this estimate, but I doubt very much whether they could take 800 on now, because that was figured from November 1, with a recruitment of 100 per month. It is up to the income tax organization to determine whether they can assimilate that many. It would be a little in excess of 100 per month if they did.

The CHAIRMAN. Does this $200,000,000 represent the annual rate at which you expect to collect?

Mr. WEST. That is the annual rate, as the memorandum from the Income Tax Unit shows.

The CHAIRMAN. That would be added to the $25,000,000 per month. that you have already collected?

Mr. WEST. Yes, sir. You could not get $200,000,000 this year with 800 men if you put them on now, because it will take 45 days of training to get them ready and into harness. This is figured on the basis of 12 months.

Mr. BLAIR. If we could begin with this work now, or begin with the recruitment at once, we would be in fine shape to begin to clean up this back work.

Mr. WEST. If the Income Tax Unit, according to their request, can not add to their force, or commence to add to their force now, the estimates for 1923, which is an increase over the present year, will not be of as much avail to them as it ordinarily would be, because they would start on July 1, and it would take them six months or more to get the force up to what they estimate.

The CHAIRMAN. The men must be trained?

Mr. WEST. Yes, sir

APPLICATION OF EXISTING APPROPRIATION.

The CHAIRMAN. How much of the $29,600,000 that was given to you in the annual appropriation for 1922 is being expended on back tax questions and how much on current work?

Mr. WEST. I think I can answer that in this way: The men are under the 35 agents in charge of divisions-and in order that you may understand that, it might be well to say that the country is divided into 35 divisions, and we have a man in charge of each one, each district taking in one or two collection districts. They have 2,036 agents and inspectors under them. The per annum rate of salary for 31 agents in charge, with four vacancies, is $135,900, and of the 2,036 agents and inspectors the salary rate is $5,428,790. The travel expense for that force is $807,000. For the salary and travel of the valuation engineers the rate is $11,300 for two. Then the bureau force paid from the war-revenue appropriation for the incometax unit consists of 5,036 employees, or that was the number on September 30, 1921, at a per annum rate of salary of $8,712,610. Then, for miscellaneous expenses, for rent, telephone service, equipment, stationery, printing and binding the rate is approximately $1,000,000. Those figures will give you the approximate amount spent for the entire income tax service, exclusive of the collector's organizations. The collectors' organizations are hard to determine, because the force there works on all kinds of taxes. Deputy collectors work on tobacco, oleomargarine, and sales taxes, etc., in addition to income-tax work. The total is slightly in excess of $16,000,000.

FUTURE APPROPRIATION REQUIREMENTS.

The CHAIRMAN. You are asking for $2,630,000, and I want to know what would be your annual rate of expenditure under the proposed appropriation? Would that be continued as an annual expenditure if you got it, or does this commit us to an annual appropriation on that basis?

Mr. WEST. I can say that we are submitting estimates for approximately $8,000,000 more for 1923, and, naturally, if this is allowed it would be charged against that, and, if it is not, we will be in excess of the per annum rate.

Mr. KELLEY. Under the new tax law as it will probably come through, the auditing will be very much simplified, will it not, in so far as finding the value of property is concerned?

Mr. WEST. There are certain administrative provisions in that law that will help considerably. It will help considerably in making determinations of the tax due.

Mr. KELLEY. What I was speaking of was the future. The chairman wanted to know whether this was to be the annual basis.

Mr. WEST. Our problem is to get current with the work. In other words, it is to get the 1917, 1918, 1919, and 1920 work cleaned up. If that is once done, I think it is safe to say that that force will not be anything like it is now.

Mr. KELLEY. I think that is what the chairman had in mind.

Mr. BLAIR. Our idea is to continue this force through 1923, and in the 1923 estimates which have been submitted we provide for that. In other words, we have based the 1923 estimates on the continuation of this force through that year.

The CHAIRMAN. That would bring your appropriation for 1923 to $37,000,000.

Mr. WEST. $38,000,000 is the estimate submitted to Gen. Dawes and the Secretary. This deficiency estimate will not make an annual basis of $38,000,000.

Mr. BYRNS. Do you expect to clean up the back work during 1923 ? Mr. CHATTERTON. That is what we hope to do. We are already pretty nearly up on the individual cases.

The CHAIRMAN. How about the individual cases, or how soon will you be current on them?

Mr. CHATTERTON. We are working on this year's cases right now, and we expect to finish them by the 15th of June next. On the 15th of June we expect to take up for audit the 1922 returns that were filed up to the 15th of March.

The CHAIRMAN. As a matter of fact, you have only about 9,000 consolidated section cases?

Mr. CHATTERTON. My statement deals only with individual cases. The CHAIRMAN. You have 9,000 consolidated section cases in which are included corporations with subsidiaries, and those are the cases that are unaudited?

Mr. CHATTERTON. Yes, sir.

The CHAIRMAN. You are asking for about 2,300 more people that would be employed on the 9,000 cases for 1917——

Mr. BLAIR (interposing). Not entirely on that. We have field agents and people of that kind.

The CHAIRMAN. How many consolidated section cases are there of corporations to be decided?

Mr. CHATTERTON. I can not give you the number of cases. I was formerly in the field service, and when I left the field service in June we had about 132,000 tax years for 1917 still in the field. Those were mostly corporation cases. That has been cut down since then by about six or seven thousand, or down to about 126,000.

REDUCTION OF ESTIMATE.

The CHAIRMAN. What we want to know particularly is whether, as a matter of fact, you can assimilate all the men you propose to recruit