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on sweet wine. The State of Ohio has recently reduced its rate from 10 cents on dry and $1 upon sweet wine to 7 cents a gallon on dry and 10 cents a gallon on sweet wine. The State of Texas, profiting by the extremely low rate of 2 cents per gallon upon wines in California and the tremendous sales thereof under this low rate thereby bringing in more revenue than with high rates, has recently adopted legislation providing a tax of 2 cents a gallon on dry and 5 cents a gallon on sweet wines. The State of Maryland in that time has reduced its tax from $1.10 a gallon to 20 cents per gallon on sweet wine, having no tax on dry wine. Indiana has reduced State rate from 50 cents to 25 cents a gallon on all wine. Texas has just followed California with a rate of 2 cents on dry and 5 cents on sweet wines. North Carolina and Georgia have no tax on wines.
The present Federal taxes upon still wines, dry and sweet, are 10 cents per gallon on dry and 20 cents per gallon on sweet. Prior to 1916, there were no taxes on wines. The War Tax Act of 1916 laid a tax of 10 cents on sweet and 4 cents upon dry wines. This was increased in 1917 to 20 cents and 8 cents and reduced in 1928 to 10 cents and 4 cents.
Senator KING. When was the first Federal tax imposed on wines! Mr. DE VRIEB. During 1916, Senator KING. It was passed in 1916 as a war measure? Mr. DE VRIES. Yes, sir. The present rate was enacted in 1934, of 20 cents on sweet and 10 cents on dry wine, higher than any war-tax rate on wines. In conjunction with State taxes in most of the States, these taxes are much greater than the prices at which millions of gallons of wine, dry and sweet, can be purchased in California today, and, in many cases, higher than California wines delivered in New York, freight paid. Millions of gallons of sound potable dry wines are being sold in California today at 11 cents per gallon, sweet wines at 28 cents per gallon naked at the winery. These are not cost prices. These are not profit prices. These are liquidation prices often to pay production taxes laid upon wines or to preserve these great properties, their long-suffering owners and feed the mouths of theirs and pay wages to their workmen. These are liquidation prices.
Open your eastern markets to this splendid health-giving product by reducing taxes and removing idle restrictions, and these conditions will be relieved and the arteries of national commerce commence to throb with activity. Lower rates of taxes mean more revenues and greater commerce.
Chief among the measures sponsored by the Wine Institute and before this committee for consideration is H. R. 191. That act cuts the higher-than-war-time tax rate in half and establishes rates on a parity with the rates established by States wherein wine is a subject of considerable commerce and not embargo or excessive tax rates.
Senator King. That bill passed the House?
It was unanimously reported by the Ways and Means Committee of the House and unanimously passed by the House. It is supported by all the considerations mentioned. I leave its detailed statement and further supporting arguments to Congressman Buck, its author, who is here.
Senator King. Did the provisions of the bill as passed in the House meet the approval of you and Mr. Buck?
Mr. DE VRIES. Yes; the full approval.
In passing, I wish to say while this bill seeks to harmonize State and Federal rates at 10 cents tax on 'sweet and 5 cents on dry wines, I vision the day of more ample State and Federal revenues, when as prior to 1916 the Government will recognize wine as a food, dietetic and life-giving substance which should not be taxed. So the District of Columbia views today as to sweet wines. So many Southern States have already enacted. I pass to other matters before the committee in which the Wine Institute is deeply interested. The officials of the Institute have gone over the several bills and proposed amendments and made recommendations in writing which, with the permission of the committee, I will make a part of my statement. There are some of these upon which I wish to briefly comment at the present time.
Senator KING. Just one question. There is an amendment here offered by Senator Johnson. Does that relate to H. R. 191?
Mr. DĚ VRIES. H. R. 9185, and the wine provisions.
Mr. DE VRIES. Very briefly, and I will take up first H. R. 9185, if it may please the committee, and the few sections therein to which I wished to call special attention.
As I have heretofore stated, Mr. Chairman, the several recommendations made by the Wine Institute will be set out in detail in proposed amendments. They have already, in the main, been submitted to the Treasury authorities, and we will, with the permission of the committee, go over them with those representatives and add notes and make it a part of this statement.
Section 318, page 31, is a provision which permits the Secretary of the Treasury to authorize the amelioration of wine by the wine maker and the fortification of wine, without supervision by any officer of the United States, whenever he determines that such authorization may be made without danger to the revenue.
It is the law at the present time that amelioration of wine shall be under the supervision of a Treasury official. The Wine Institute, I may say briefly, suggests that that provision be stricken out for the reason that the Wine Institute is in favor of the production of wines up to standard, not above standard, and of the very highest quality, and they welcome supervision of Government officials in their production.
Senator King. I do not quite understand your objection.
Mr. DE VRIES. The objection is, Mr. Chairman, that this withdrawal of the supervision of Treasury officials over the amelioration of wine, which means the addition of certain things to it and the development of it, the fermentation of it, and so forth, the Wine Institute welcomes such supervision in all of its operations.
Senator KING. Do you contend that the Treasury would not suffer if section 318 were repealed ?
Mr. DE VRIES. No; it would not suffer a loss in all probability, but we are looking to the quality of wine produced, and that it comes up to standard and does not go beyond the standard.
Senator BARKLEY. At the present time they are not permitted to ameliorate wine except under the supervision of the Treasury?
Mr. DE VRIES. That is right. Senator BARKLEY. And this provision will permit that to be done without the supervision of the Treasury?
Mr. DE VRIES. It will. The Wine Institute is not against the relaxation of some of these things but oppose those that go to the quality of wine.
Senator BARKLEY. Do you know whether that provision was put in there at the reqeust of anybody?
Mr. DE VRIES. I could not say, Senator.
My next suggestion is with reference to section 610, as this provision of the bill, as stated by Mr. Hester, has been incorporated in the F. A. A. Act.
The next suggestion is on page 41 and running over through Senator KING. That is section 330 of the bill, but that deals with section 610 of the Revenue Act.
Mr. DE VRIES. That is true, that refers to section 610 of the Revenue Act.
The statement of Mr. Hester was that this provision is now a law as a part of the F. A. A. Act. While that is true the provision in the É. A. A. Act does not reduce the tax upon fortifying wines. The provision of this section of this bill reduces the tax upon fruit spirits used in fortifying wine from 20 to 10 cents per gallon. The provision that was carried into the F. A. A. Act does not carry that reduction, and that reduction is one of the important parts of the program of the Wine Institute, to reduce taxes upon wine, and this bill has passed the House unanimously.
Senator King. What is your proposition with respect to section 610_A as found on page 41, the matter to which you are just addressing yourself?
Mr. DE VRIES. I have nothing to state about that particular section. I am addressing myself now to section 331, page 43, and that part thereof found upon page 44. That provision is one of those carried into the F. A. A. Act, the purpose of which probably was, if we are to judge from the face of the act, to include in these provisions citrus wine. At the same time, the provision found in this bill is not the same as the provision found in the F. A. A. Act in the important part to the wine industry, that this provision reduces the tax on fortified wine from 20 to 10 cents a gallon, whereas that in the F. A. A. Act carries it as 20 cents a gallon.
Senator King. Then, there is an incongruity in the two.
Senator King. What suggestion of an amendment do you have on that?
Mr. DE VRIES. I will have to submit an amendment on that, and I will submit it to the committee, reducing this tax from 20 cents to 10 cents.
The next suggestion relates to section 333, pages 46 and 47. That also is carried over into the F. A. A. Act.
Senator KING. You mean section 3255 is now found in the F. A. A. Act.
Mr. DE VRIES. The F. A. A. Act. That is what Mr. Hester stated and, of course, that is true.
The Wine Institute takes exception to (b) and (c) thereof. The Wine Institute particularly excepts to subdivision (c) on the top of
Within the wine industry there are some 60 or 70 distillers who are making grape brandy. In competition therewith would come the brandy made under this section (c), which can be made solely from grape pumice by adding a little water and sugar. That would come in competition with our grape brandy and we would like to have that provision stricken out or, if there are others who want to make this kind and class of spirits, permit them to do it; but add an amendment that such spirits shall not be used in fortifying grape wine or be sold as grape brandy. I will submit an amendment as to that.
Now, I will pass, Mr. Chairman, if I may, to the amendment proposed to 9185 by Senator Johnson as introduced in the Senate. These amendments were proposed by the Wine Institute, not in a definite shape, as the Wine Institute would have them enacted into a law. After having consulted the industry thereupon I will submit, if permitted by the committee, such substitutes therefor as the industry has determined it would like to have considered.
Senator King. That is to say, the industry does not fully approve of these amendments offered by Senator Johnson?
Mr. DE VRIES. Yes; as written. The first one (e), the industry approves. That provides that if the fortifying tax on brandy used in wines is reduced, that reduction should extend to those wines in bonded warehouses and wineries which have paid that tax to the extent of such reduction, for if we reduce the fortifying tax on new wines and they go into the market, old wines will be at a disadvantage to the extent they have paid the higher fortifying tax.
Senator King. Have you any idea as to the amount of revenue that would have to be rebated?
Mr. DE VRIES. I have not. I have no doubt the Treasury will have it and will submit it. It is something that will vary from time to time, and the figures that have been gathered some time ago would not now be valuable.
Senator King. Section (e) you approve?
The next, on page 2, section (f), is perhaps the most controverted subject matter in the wine industry today. There is a provision in the act of 1918, carried into the United States Code as 1300 (a) (1) which allows the householder to make for family use 200 gallons of wine not to be sold or delivered out of the home.
It is assumed that this provision is taken advantage of to the extent of more than 23,000,000 gallons of wine which finds its ways into consumption without the payment of any tax.
The result is that there is almost as much nontax-paid wine going into consumption in the United States today as tax-paid wine. Not only does the Government suffer this loss of revenue, but obviously that quality of wine which is made in the home and sold about to the neighbors is a very inferior quality and develops a wine taste which destroys the taste for tax-paid wines, which are more carefully made.
Senator King. Do you contend that under this provision permitting a family to manufacture 200 gallons, that it is disposed of to neighbors!
Mr. DE VRIES. Oh, indeed yes.
Senator King. Is there ample evidence to support that contention that there is no.considerable quantity of wine you have just referred to that is sold under this provision, in the market and to neighbors ?
Mr. DE VRIES. Undoubtedly. We can get some idea by the amount of grapes that are shipped through commerce to be made into wine in the home.
Of course, Mr. Chairman, to give the full picture to the committee, which it is our duty, there are many of our own people who are grape growers that do not sell the grapes to the wineries but ship them, and have been doing so for years, and they enter into this market. Therefore, the solution of this problem has not been an easy one, nor has the Wine Institute in its membership agreed upon itexcept that they are of the belief, insofar as it could be done, this restriction of this clause should be tightened up.
The only suggestion I have to make with reference thereto that I believe would be acceptable and pass both houses would be that there be a very severe penalty attached, a special penalty for the violation of that section, and I will submit such for the consideration of the committee.
Senator KING. Do you suggest that the maximum permit of 200 gallons for families should be reduced ?
Mr. DE VRIES. Personally I would, but the Institute has not so instructed me. I think if it was left to the Treasury we would have a very severe reduction.
Senator King. I believe the maximum consumption in the United States is 3 gallons per person; is that it?
Mr. DE VRIES. That is correct; yes; of tax-paid wines in California only; elsewhere less than one-half gallon.
Senator KING. It would seem then that to permit the manufacture by a family of 200 gallons obviously would contemplate that it would be wasted, sold, or given to neighbors?
Mr. DE VRIES. Yes, sir.
Senator KING. So that if we had a maximum of 40 or 50 gallons per person, such as the consumption in Italy or France, somewhere from 30 to 50, there ought to be a reduction from 200 gallons per family to a reasonable amount, unless you tax the amount in excess of that which is permitted to be used by the family.
Mr. DE VRIES. The difficulty of that is it would cost more to col. lect it than the tax would amount to.
Senator BARKLEY. This average consumption, whatever it is, is not the wine consumed in each person's home. If some family has manufactured 200 gallons under the present law it may be consumed by any number of people who come in as visitors into the home where it is made.