tion of policing the country sufficiently close to establish the liability and ask for the money, and we lose a couple of millions of dollars every year just because we have not a sufficient number of field officers to go around and get the money which is waiting for us.

REDUCTION OF INTERNAL-REVENUE DISTRICTS.

[See also p. 62.]

Mr. JOHNSON. Mr. Cabell, the last legislative bill reduced the number of internal-revenue districts to 63. Have you been embarrassed by that reduction?

Mr. CABELL. Very greatly.

Mr. JOHNSON. I was hoping we could effect a still further reduction.

66

Mr. CABELL. Practically no saving has resulted from it, and a great inconvenience to the taxpayer has resulted, and also the requirement of a strong-arm policy on the part of the Government. If the Government were willing to stand the criticism and cause the taxpayer as much more inconvenience in cost as the money they collect, they could collect everything from Washington. You could just say: You must come here. We do not care for your inconvenience or the cost to you." The collector's offices are established primarily for the convenience of the taxpayer and secondarily for closer supervision of the work. Now, there is no question but that the abolition of those offices has cost the taxpayers many times what is the normal saving to the Government. It requires the taxpayers to take long trips to see about their plans for distilleries and breweries and the settlement of technical questions, where they have to personally confer with the collector, and incidentally we lose closer supervision of the service, and there is no question in my mind that the Government has lost by it and that the taxpayers have also greatly lost by it.

Mr. JOHNSON. Mr. Cabell, on page 112 is a table that is furnished under the requirements of the law by a statistician in your bureau or in whatever bureau of the Treasury Department has to furnish it, which neglects to give us the totals.

Mr. CABELL. The totals of the appropriations or the totals of expenditures?

Mr. JOHNSON. It gives the salaries and then the total salaries of the collectors and the total traveling expenses, but does not show what the balances are.

Mr. CABELL. For 1912 the total appropriation was $2,150,000. The total expenditures were $2,105,472.27. There was a balance of $44,527.73. The reason for that balance is that you have such criminal penalties for running over your allowance in even any one month that nobody is going to take any chances on that. For this year you gave us $2,100,000. We must leave a certain amount of that unallotted to put a buffer between the expenditures and going to jail, and you have got to leave about $50,000 for that. You see we have 63 districts and some 2,000 men paid from this appropriation, and we can not possibly estimate in advance what their traveling expenses, etc., are going to be. We can not possibly estimate in advance how many breweries are going to put in pipe lines, where the law requires us to assign an officer, and for the first time in the history of the

Internal Revenue Bureau we have appropriated down below the $10,000 reserve, and both our chief of the Accounts Division and the deputy commissioner in charge of this work have made me give an assurance that I will go to jail and not them. It is probably presumptuous in me, but I take the liberty of repeating what I have said before: You can not draw the line on appropriations for collecting money like you can on appropriations for spending money. In appropriations for spending money every dollar not appropriated is a dollar saved, but when you are collecting money the failure to spend a dollar may lose you $500.

Mr. GILLETT. What do you mean by that?

Mr. CABELL. Suppose you do not send a deputy to canvass a certain territory. Suppose you do not send a man to put a distillery under surveillance, where one can steal $500 a day, and suppose, in order to cut expenses, the collector directs a deputy, in making his monthly trip, that he need not canvass one county because it costs him $15 for livery, and suppose you lose $2,000 from that county in that period. I do not think any person could be familiar with the facts and not know that we lose at least 1 to 2 er cent of the tax a year, one-half of which is collectible if we had the men to go after it. One per cent of the internal-revenue tax is three million two hundred and twenty some thousand dollars.

Mr. GILLETT. You think you do now lose that much? How do you calculate that you lose 2 per cent?

Mr. CABELL. Just on the general principle of how close we canvass, and just figuring on where we put additional men into the field the returns that come from it. So that if you put more men in the field on the same ratio you would get more revenue.

Mr. GILLETT. They evade a certain amount of the tax.

Mr. CABELL. They evade and overlook it. Some of them unconsciously make returns that are in their own favor. Of course, we are a little suspicious of all returns of that kind. In the corporationtax work alone, for instance, as a result of 15 of our agents examining less than one-third of the country, they have actually turned into the Treasury in two years a million and a half dollars. Now, twothirds of the country is not touched and three years is the extreme limit in which you can correct any of those returns. I am satisfied there is a million and a half or two million dollars of corporation tax that has not been collected and never will be collected unless the force of agents on this work is increased.

Mr. GILLETT. But if you had had sufficient force you could have collected it?

Mr. CABILL. If we had 20 men more we could have turned in over a million dollars additional.

Mr. GILLETT. So our failure to appropriate enough has cost probably

Mr. CABELL (interposing). The failure to spend $100,000 has undoubtedly cost from a million and a half to two million dollars in cash. There is no question about that.

TRAVELING EXPENSES.

Mr. JOHNSON. Mr. Cabell, in the item we now have under consideration, the traveling expenses for the last fiscal year were

$228,000. You are asking for $247,000 for the next year. What is the increase based upon?

Some

Mr. CABELL. I am sorry I will have to plead ignorance to that. That can only be in the nature of a guess and nothing more. one who made up those figures has guessed how many miles the deputy collectors will travel on railroads, how many they will travel by horseback, how many they will travel by livery, and, so far as any practical computation is concerned, I do not think it is worth anything.

Mr. JOHNSON. I thought perhaps you had the traveling expenses for past years in your office and that you had noticed that with the growth of the service the annual increase in the traveling expenses had been about so much.

Mr. CABELL. That is simply an estimate. The records have never been kept in that way. Every field officer keeps a diary report in which every item of expenditure is entered, but heretofore it has never been called for and never tabulated. Each diary report is very carefully scrutinized by the collector, who approves it, and then it is sent to this office and given administrative approval item by item. When this table was gotten up, those diary reports were gone over as best they might be, but there is not much relation between traveling expenses for one year and another.

For instance, in Alaska you have got to travel up there on horseback, by boat, dog sled, or any other way. It is very difficult to calculate what will be the cost for traveling in advance. As a railroad goes through the country, you may be able to change from hack hire to railroad, and yet the result of the railroad going through may develop up the surrounding country so that you will have railroad fare and an increased livery fare for the same territory. It is a matter, in my judgment, in which, if an effort is made to give separate appropriations for separate articles, I think any administrative officer would have to increase his estimate 20 per cent unless the utmost freedom was given him to transfer accounts from one appropriation to the other. A matter of that kind is clearly, in my judgment—and I trust I will not seem presumptuous-a matter that must be covered by a lump appropriation, and the administrative officers who are appointed for that purpose must be given some discretion as to whether trips are going to be authorized or not, and, therefore, you can only guess what your expenses are going to be within reasonable limits. Here is an estimated increase of about 10 per cent. No man can tell whether it will be 10 per cent, 15 per cent, or 20 per cent, and if you held him down to 10 per cent you might lose any amount of

money.

Mr. GILLETT. How are you sure it will not be larger?

Mr. CABELL. You can not tell.

Mr. GILLETT. It is just a guess?

Mr. CABELL. Yes, sir; it is just a guess, and the figures of the year before have only some probative value and no determining value. Mr. GILLETT. You mean there is so much change and so much growth in the work?

Mr. CABELL. Yes, sir; and then it depends entirely, I might say, on the other appropriation as to how many men you are going to put in the field.

REDUCTION OF INTERNAL-REVENUE DISTRICTS.

[See also p. 59.]

Mr. JOHNSON. Mr. Cabell, I would like to ask you one other question about the reduction in the districts. They were reduced from 67 to 63. You think we can not reduce any more. What process was adopted in the reduction of the four?

Mr. CABELL. That was done by the President at the White House, and I could not tell you.

Mr. JOHNSON. It was done by Executive order?

Mr. CABELL. Yes, sir.

REVENUE AGENTS.

Mr. JOHNSON. On page 113 is the appropriation for 40 revenue agents. You have asked for just what the appropriation and the deficiency of last year amounted to.

Mr. CABELL. Yes, sir; that is an appropriation we can not control, except as to the 40 agents and their expenses. The compensation of the agents is fixed at a maximum of $7 a day. The agents in charge of 23 divisions get $7 and those on accounts, and some engaged in important work receive the same, while the others get $6, and that is as near as we can control the expenditures from that appropriation. Congress requires that in every distillery certain officers shall be located. If a distillery is of a certain size one officer is located there, and his compensation is fixed by statute. If it increases above a fixed amount, we have to locate another officer there.

Mr. JOHNSON. In other words, it depends on the distilleries as to how much money it takes to operate that work?

Mr. CABELL. Yes, sir; the number of distilleries and the number of warehouses, rectifying establishments, and the volume of business, and so forth. We are going to have to ask for a deficiency this year. The output of distilleries is increasing by leaps and bounds, as you gentlemen may perhaps have noticed, and a new record is hung out every year, and consequently the expenditures from that appropriation will have to continually increase.

COLLECTION OF CORPORATION TAX.

[See also p. 333.]

Mr. JOHNSON. On page 115 is the item for the collection of the corporation tax. You asked for $172.000, and we gave you $150,000 for the current year. I believe you have already made your argument as to that.

Mr. CABELL. Yes, sir; there is a million and a half or two million dollars lying out loose waiting for us to go get it, and we have not the field force to do it.

Mr. JOHNSON. Will you let us have the roll of those clerks paid out of that appropriation?

Mr. CABELL. Both field and bureau?

Mr. JOHNSON. Yes, sir.

Mr. CABELL. Mr. Chairman, I really believe that the work of the Corporation Tax Division has sufficiently crystallized now to cover those people into statutory positions. They are identically of the same grade as every one else in the office, and you could make a

statutory provision for them without a separate appropriation. If a strict compliance with the original statute is required, it will take probably a dozen more clerks. For instance, there are fully a dozen people in the bureau who do some work on the corporation-tax work and some work on the general work. There are certain divisions that these reports, etc., have to go in that all reports go in, and if you are going to segregate corportion-tax work from the regular work you will have to create a new division almost as large as the old one, and for a great part of the time employees on such work would not have anything to do.

Mr. COURTS. There are two statutes on that subject, Mr. Chairman, one of them provides that moneys appropriated shall be applied only to the objects for which they are appropriated; and then there is another law which provides that the head of the department may alter the arrangement of the clerical force of his department, and under that division he can take one or a dozen men out of this office and send them to any other office he desires.

Mr. CABELL. Suppose it were to be held that a man doing corporation work could not do any other work?

Mr. COURTS. I do not see how that could be, in the light of that statute.

Mr. CABELL. Of course, that is what we are doing, but we have some uneasiness about it.

Mr. JOHNSON. I do not think that is in violation of the law, view of the law which the clerk has just quoted.

in

Mr. CABELL. I would recommend, if it is proper for me to do so, that the corporation-tax roll be made statutory and covered in the general appropriation for the bureau.

Mr. JOHNSON. Ordinarily we are very glad to do that. We are opposed to lump-sum appropriations where we can avoid making them.

Mr. CABELL. The whole internal-revenue force might be handled in that way, if allowances in lieu of subsistence could be given, but on account of the traveling expenses and the nature of the field service it would be pretty difficult to do that.

BUREAU OF ENGRAVING AND PRINTING.

STATEMENT OF MR. JOSEPH E. RALPH, DIRECTOR.

Mr. RALPH. Mr. Chairman, we are not asking for much this year. Last year I recommended a slight increase in the lower grades of clerks, and to compensate the committee for that increase I dropped two positions.

Mr. GILLETT. Was it an increase of force or of salary?

Mr. RALPH. An increase of salary of the lower grades of clerks. I dropped two clerks' positions, aggregating $1,480. You dropped the places, but you did not give the lower-grade clerks the increased salary. I am asking that six clerks be increased from $780 to $840. Mr. GILLETT. Is that the same recommendation you made last year? Mr. RALPH. Yes, sir. These clerks perform a high grade of clerical work. They are working on our pay rolls, cost work, and I should say the work is equal to that which the average $1,200 clerk in the departments performs. I want to say that as the volume of