but it would place all minor lots of prescription alcohol in this beverage class, and I think it should be amended as to that phrase, "beverage purposes", to completely clear the pharmaceutical manufacturers of any fear of being imposed upon by higher-priced material, and not being given a completely clear market.

On the Copeland amendment, superficially this would seem to be a good thing for the distiller, and would save a lot of capital invested, and the price would probably be reduced to the consumer, but I discussed the matter at some length with Mr. Greenhut, and listened carefully to what I considered a careful study of this matter, and I have the following comments:

In the first place this amendment would seek to destroy the revenue system in effect for 75 years, analogous to every revenue system in every State which collects excise taxes on liquor, and which is a modification of the English system, and they have, I think, the best system of any state.

The question of bonds is what concerns me right away. There are 225,000 retail outlets, and presumably a bond must be executed on each one. If we estimate the bond would be anywhere from 1 to 2 thousand dollars, we see that the final principal sum would run to about 4 billion dollars.

In addition this amendment would not even relieve the distiller or wholesaler from his bond liability, which could only be discharged, as the amendment is worded, after the goods were sold to the customer he might have.

We know just enough about the troubles of the retailer, and mind you, we are not dealing so much with the package store because that is not a problem at all, he is pretty clean, and I am not saying the others are not clean, but here is the problem that would be met with most of the retailers:

Most of our retailers are hotel and restaurant men and so-called combination men, and it does seem to me a very grave thing to impose on hotel and restaurant keepers the duties of keeping these numerous records, keeping up the bonds, going to the collector's office every day, when there are 36,000 of them in New York City alone, and many of them are very small businessmen, with a very limited amount of capital.

On further examination, it seems to us that the exactions to be made of the retailer would be most unreasonable, and we believe the whole surety situation is unsound. We believe the premiums to be paid on the $400,000,000 of bonds is unreasonable.

When it is all said and done, from what my experience has been, we have had in the Treasury Department before and during prohibition, a system which has been satisfactory, and I cannot conceive a commissioner of internal revenue taking the responsibility for the collection of liquor taxes, a very difficult commodity to handle, with 225,000 outlets.

Personally I would not assume any responsibility to the President or Congress for the collection of the taxes without an Army of men. As much as I appreciate the very good features of this, and I believe Senator Copeland conceived the idea very honestly and conscientiously, that this is a tendency to increase the revenue and decrease the prices, but I doubt its practicability.

41765-pt. 3-86- 6

While it would relieve the distillers-no doubt they could do business on less capital-yet I do not think it would be a very good thing for the Government.

Senator BARKLEY. Thank you, Dr. Doran.

We will hear Mr. Curtes.

STATEMENT OF MICHAEL CURTES, NEW YORK, N. Y., REPRESENTING NATIONAL RETAIL LIQUOR PACKAGE STORES ASSOCIATION

Senator BARKLEY. On whose behalf do you appear?

Mr. CURTES. On my own behalf, and on behalf of the National Association of Retail Package Stores.

Senator KING. That is off-sale stores?

Mr. CURTES. Yes, sir. I have a package store of my own in New York. I was trying to understand the proposition stated by Mr. Greenhut in explaining Senator Copeland's amendment. I was trying to understand how I would go about keeping the books and records.

I was trying to understand where I was going to get all of the money to hire the extra bookkeeper and to pay for bonds to carry out the regulations that would be laid down if this amendment was passed.

I was trying to understand how I would figure out, if I had one or two customers in the store, how much taxes I am to collect for that particular bill, for selling that particular bottle.

I was trying to understand how I would figure out from a mathematical viewpoint where I would start.

Some bottles come into our store for retail purposes that are 12-ounce bottles, some 16-ounce, and some 2312-ounce bottles, and I was trying to figure out how we would come to an understanding whereby the consumers would not feel they were being cheated.

If this amendment were passed, I know that the consumer would feel that the Government is allowing illicit and illegitimate and very unhealthy liquor to reach their stomachs. According to the amendment, if a bottle of liquor is in my store, all I have to do is to put a stamp on it for the tax, and sell it to the customer. The consumer then begins to worry as to whether or not I bought that from a legitimate distiller or whether I bought it from a bootlegger, the consumer knowing, no matter where it came from, that the law is covered when I put the tax stamp on the bottle.

The consumer today has all of the confidence in the world in the bottle of liquor that I sell or that I show, and in most cases they are

women.

That will give you an idea, Mr. Senator, what the amendment would do in our particular part of the country, while at this time the consumers have the greatest amount of respect and confidence in our type of stores, and they have no fear.

Senator BARKLEY. Your argument is emphasizing the fact that all of these women buy it for medicinal purposes.

Mr. CURTES. No; they don't buy it for medicinal purposes; I beg to differ. They buy it for cocktail parties and bridge parties. I know the consumer today has no fear as to the quality of the liquor I sell them.

Senator KING. Do you think the purchasers have the same confidence in all parts of the country that they have in you?

Mr. CURTES. In retail package stores throughout the country they have the same confidence.

Reports submitted to the Governor of New York by ex-Commissioner Mulrooney stated that in the past year and a half there was not one violation under the retail package store law in New York, and he was proud to say that was a good example of true enforcement and a good example of the system as set up by the State of New York.

We have no such thing as bootleg merchandise in our stores; and I feel bad to have a man come in here to back up some idea he has, and in order to carry it out, he throws at you that old bugaboo of bottleggers and tells you about the package store in New York and the amount of bootleg liquor on the shelves; then along comes the law-enforcement officer and the United States Treasury and tell you that there has not been one violation in the past year and a half. Whom must we believe? Must we believe the man who tells you that to back up his theory or the man who tells you the facts? Senator CAPPER. You say there is no bootlegging going on? Mr. CURTES. I say there is no bootleg merchandise carried or sold in the retail package stores throughout the country, knowingly, by :the owner.

Senator CAPPER. How about outside of the package stores?

Mr. CURTES. I claim the amount of bootleg merchandise that is sold through licensed outlets throughout the country is no negligible it is not worthwhile talking about.

I also can purchase that $7.50 case of whisky the gentleman talks about, but I have to go into some back alley where nobody is around to have the transaction, which would never come from a licensed dealer. The licensed dealer is proud of his franchise and will not jeopardize it by making a few dollars on some shady transaction. Senator CAPPER. To what extent is there bootlegging that is not licensed?

Mr. CURTES. I cannot answer that question.
Senator BARKLEY. It is all unlicensed.

Mr. CURTES. I understand your question, Senator.

Senator BARKLEY. How much of the traffic is bootlegging?

Mr. CURTES. I could not answer that by trying to give you a false impression I had made a survey on the bootlegging, in the same way the statement of this gentleman was made, because he cannot prove to me how much investigation he made and how many investigators he had that he could prove how much bootlegging there was in the country. If he could do it, the Government would have him right away.

Senator BARKLEY. If he could do that he would be valuable to the Government.

Mr. CURTES. He would be so valuable they would take him before he could leave the room.

In closing, I want to say that retailers, whether hotel owners, package-store owners, or any other member of the industry, feel we would not be able to carry out without a law whereby we would have to keep up the books and records that are required by this act.

Senator BAILEY. Dr. Doran spoke of the sale of whisky made from petroleum; do you think there is any likelihood of the American people buying that sort of whisky if they found out it was made from petroleum?

Mr. CURTES. Facing the consumer, as I do, about 16 hours a day, I would say he would be afraid to buy it, because he would feel he was buying himself a physic.

Senator KING. Are there any other witnesses who want to be heard, because the committee is going to close this hearing in a few minutes? Mr. WALLACK. I would like to be heard.

Senator KING. Please come forward and give your name.

STATEMENT OF NATHAN N. WALLACK, PRESIDENT OF THE LIQUOR DEALERS ASSOCIATION, STAR LIQUOR CO., WASHINGTON, D. C.

Mr. WALLACK. Senator Copeland, I believe, made the statement that the dealers in the District of Columbia placed all of the stamps on the bottles, but that is incorrect; the stamps are not placed on them by the retailer but are placed on there by the jobber before we get them in our store.

He also made the statement our liquor board by the A. B. C. Board was earning a very small amount of money, but we find that the District of Columbia system of running may appear negligible to some people. We know the A. B. C. Board has asked the Commissioners and the police department for help because it is difficult for them to inspect all of the stores, and we know that the police department have two inspectors and a crew of eight men going around examining the stores, and for that they are appropriating money from the police fund.

Senator BARKLEY. How many outlets are there in the District of Columbia?

Mr. WALLACK. Four hundred package stores.

Senator BARKLEY. How many retail stores are there altogether? Mr. WALLACK. You mean selling off sale and on sale also? Senator BARKLEY. Yes; altogether.

Mr. WALLACK. 1,800. A great many dealers in the District of Columbia are very anxious to sell their stores. Only last week six stores were advertised in the local newspapers for sale.

In most cases where arrests were made in the District of Columbia for liquor violations it was found that it was legitimate tax-paid merchandise, only it was sold after hours.

It would cause a stifling of most of the small dealers throughout the United States if this amendment should be adopted.

Senator KING. You mean the Copeland amendment?

Mr. WALLACK. Yes, sir. The good reputation most of the small liquor dealers bear now warrants the wholesaler in extending them credit; and if this new law is passed, it would mean an additional expense of the bond and an outlay of about $3,000, and that, of course, would drive all of the small dealers out of the business.

Senator BAILEY. What would be the expense of the bond?

Mr. WALLACK. I carry a stock of $40,000, and my bond would probably be rather high.

Senator BAILEY. Do you not have a bond to the District now?
Mr. WALLACK. Yes, sir.

Senator BAILEY. How much is that?

Mr. WALLACK. I think it is a very small amount.

Senator BARKLEY. Your bond now is obligating you to observe the law.

Mr. WALLACK. Yes; in case I am fined.

Senator BARKLEY. If this bond provided here was given, it would guarantee you would turn over to the Government all of the money you collected, and it would be a large amount, and a higher premium. Mr. WALLACK. Yes, sir.

Senator BAILEY. You could probably get a cash bond.

Mr. WALLACK. No; I would get it from the bonding company, if I could get it.

Senator BAILEY. This bond you have now, it is to secure payment of fines in case you are convicted?

Mr. WALLACK. Yes, sir.

Senator KING. Thank you. Will the next witness come forward?

STATEMENT OF W. M. KOCHENDERFER, HOTEL ASSOCIATION OF WASHINGTON, D. C.

Mr. KOCHENDERFER. Mr. Chairman, I would like to submit this statement on behalf of Mr. H. P. Somerville, representing the American Hotel Association legislative committee.

Senator KING. Is it in favor or opposed to this amendment?
Mr. KOCHENDERFER. Opposed to it.

Senator KING. You may proceed.

STATEMENT SUBMITTED BY H. P. SOMERVILLE, REPRESENTING THE HOTEL

ASSOCIATION

Representing the American Hotel Association, which comprises a membership of over 5,000 hotels in the United States, I wish to express our disapproval of the proposed amendment by Senator Copeland to revolutionize the method of collecting the internal revenue on distilled spirits in the United States.

Just what particular results would accrue to the benefit of the Federal Government or the ultimate consumer of alcoholic beverages is not apparent. Whereas a distillery invariably produces but a limited number of various kinds of spirits as to proof, etc., also a limited number of sizes, it is not difficult for that particular distillery to handle the payment for the necessary stamps, and to have sufficient stamps on hand to cover the various sizes and qualities of spirits that they manufacture. On the other hand, a retailer, such as hotels, would probably be compelled to carry hundreds of different-priced revenue stamps in order to cover the diversified merchandise that they must keep on their shelves. Placing the burden on the retailer would result in chaos, unnecessary additional expense in bookkeeping, etc., plus the enormous amount of money necessary for the Government to set up an inspection service adequate for the number of retail dealers throughout the country.

We strongly urge the rejection of this amendment and the continuation of the present system which is not alone practical and satisfactory at the present time, but was in like manner satisfactory for 75 years previous to the advent of prohibition.

STATEMENT OF MANUEL J. DAVIS, COUNSEL FOR THE NATIONAL ASSOCIATION OF RETAIL LIQUOR PACKAGE STORES

Mr. DAVIS. Mr. Chairman, there were assertions made as to the law of the District of Columbia by Mr. Greenhut which were unfounded and unbasic, and if the committee desires a brief submitted, I would be glad to submit a brief covering the point as to the placing of stamps, and also the amount of taxes.