C. The problem of geographical areas as related to governmental functions, field administration, and metropolitan communities;

D. The gradual encroachment upon our Federal system of current and impending developments in the fiscal relations of the Federal Government with the States, and of the States with their political subdivisions;

(2) to submit its final report and recommendations to the President and the Congress on the subjects indicated above, and suggest plans and procedures for carrying these recommendations into effect, not later than February 1, 1953.

SEC. 4. (a) The Commission may, in carrying out this Act, hold such hearings and take such testimony, sit and act at such times and places as it deems advisable. Any member of the Commission may administer oaths or affirmations to witnesses appearing before the Commission. The Commission may delegate the powers conferred by this subsection to any member or to a group of members of the Commission.

(b) The Commission is authorized to secure from any department, agency, or independent instrumentality of the executive branch of the Government any information it deems necessary to carry out its functions under this Act; and each such department, agency, or instrumentality, is authorized and directed to furnish such information to the Commission, upon request made by the chairman or vice chairman.

(c) The Commission shall have power to appoint and fix the compensation of a Director of Research and all other necessary personnel without regard to the civil-service laws, and without reference to political affiliations, solely on the ground of fitness to perform the duties of their office.

SEC. 5. (a) Members of the Commission, other than those to whom subsections (b) and (c) of section 2 are applicable, and within the provisions of subsection (c) of section 5, shall receive compensation at the rate of $50 per day for each day they are engaged in the performance of their duties as members of the Commission, and shall be reimbursed for travel, subsistence, and other necessary expenses incurred by them in the performance of their duties as members of the Commission. (b) Members of the Commission who are Members of Congress shall serve without compensation in addition to that received for their services as Members of Congress; but shall be reimbursed for travel, subsistence, and other necessary expenses incurred by them in the performance of their duties as members of the Commission.

(c) Each member of the Commission from the executive branch of the Government shall receive, in addition to the compensation for duties performed in the executive branch, $50 per day for each day he is engaged in the performance of his duties as a member of the Commission: Provided, however, That his total aggregate annual salary shall not exceed $12,500; and shall be reimbursed for travel, subsistence, and other necessary expenses incurred in the performance of his duties as a member of the Commission.

SEC. 6. There are authorized to be appropriated such sums as may be necessary to carry out the provisions of this Act.

SEC. 7. The Commission shall cease to exist at the end of the fiscal year during which its final report to the President and the Congress is made.

Mr. BONNER. The subcommittee will take under consideration at the present time H. R. 3683 introduced by Mr. Dawson of Illinois, who is chairman of the Committee on Expenditures in the Executive Departments.

The subcommittee is pleased to have the Governor of New Jersey, Hon. Alfred Driscoll, and the Governor of Wisconsin, Hon. Walter Kohler present. The subcommittee looks forward with anticipation and pleasure to having the Governor of Illinois, Hon. Adlai Stevenson

soon.

We will first hear from Governor Driscoll, of New Jersey.

STATEMENT OF HON. ALFRED, DRISCOLL, GOVERNor of NEW JERSEY

Governor DRISCOLL. Mr. Chairman, we are very happy to have this opportunity to appear before your subcommittee.

We represent State governments, local governments, including municipalities and county governments.

There are present in the room and collaborating with the committee of governors the following gentlemen, whom I would like to identify for the purpose of the record. It might be helpful, Mr. Chairman, as I call their names for them to stand, so that you will have an opportunity to look at them. They may not all be here, because they have other engagements.

Governor Kohler, of Wisconsin, is on my left.

And as you have indicated, Governor Stevenson, of Illinois, is expected.

In addition we have Mayor W. R. Hartsfield, of Atlanta, representing the American Municipal Association.

We have Mr. Fred A. Schuckman, representing the American Municipal Association.

We have Mr. John H. Witherspoon, the comptroller of Detroit, and a representative of the American Municipal Association.

We have associated with us Mr. Paul V. Betters, representing the United States Conference of Mayors.

Likewise associated with our committee is Mr. Charles F. Conlon, representing the Federation of Tax Administrators.

Similarly associated with us is Mr. Keith L. Seegmiller, representing the National Association of County Officials.

We are pleased to have with us this afternoon, also, Mr. Frank Bane, the executive director of the Council of State Governments, and Mr. Theodore Driscoll, likewise a member of the staff of the Council of State Governments.

In addition, the following governors are members of the committee that I have the honor to be chairman of, Governor Byrnes, Governor Williams, Governor Pyle.

Mr. BONNER. Will you give their States, too, Please?

Governor DRISCOLL. Governor Pyle of Arizona, Governor McGrath of Arkansas, Governor Williams, of course, is the Governor of Michigan, and Governor Byrnes (South Carolina), I think you all know by virtue of your long association with him.

At the outset, I would like to state that all of us who have been studying this problem, including the representatives of our municipal governments, our counties, and our States, recognize that we are considering a very complex and difficult problem. We believe there are certain fundamental issues that can best be considered and, ultimately, we hope solved by the creation of a commission provided with technical staffs and empowered to engage in the necessary research work.

We believe that such commission, in the long run, will establish a pattern or guide which would be of inestimable help at all levels of government who are interested in promoting the economy of government and rendering a better service to our taxpayers.

This is, as the chairman and members of the committee know, a new subject.

A good many bills and resolutions have been introduced from time to time. And the governors' Conference has gone on record on the subject over a number of years.

We likewise are aware of the fact that Congress is faced with many heavy burdens.

The proposed Federal budget for the fiscal year 1953 calls for a total expenditure of $85,000,000,000. Of this amount, $72,000,000,000, or approximately 85 percent will, undoubtedly, be dedicated to the needs of our national and international security programs, our interest on the national debt, and commitments for veterans' services and benefits.

The sums required to finance expenditures of this magnitude will, undoubtedly, involve sacrificial drains on every man, woman, and child in the country.

The size of this budget, particularly when it is taken in conjunction with the size of our State and local budgets, makes it imperative that all levels of government seek to achie every possible saving to the taxpayers.

The size of these budgets limits and limits severely the revenue sources available for the vital services which must be performed by State and local governments. The total expenses of State and local governments have, as we all know, increased greatly; in fact, doubled in the past 6 years as these areas of government have felt the impact of inflation and have attempted to meet the ever-increasing needs in the field of education, highways, welfare, and public health-needs, I might say, occasioned by our rapidly increasing population and our rapidly expanding industrial economy.

The allocation of adequate sources of revenue among the various levels of government is an essential condition for the maintenance of a strong Federal system of government.

The experience of history indicates that when a unit of government loses power to raise a substantial portion of its own revenue to finance its activities, its power and influence decline and another area of government takes over and operates the services and functions.

Federal, State, and local governments in recent years have hunted diligently for new tax sources. They have expanded their taxes on incomes, gasoline, tobacco, amusements, alcoholic beverages, stock transfers, inheritances, gifts, and in numerous other fields, until today duplicating and overlapping taxes by all levels of government confuse and plague the American taxpayer.

The ill effects of excessive duplication and overlapping are well known and may be summarized as follows:

1. They result in an undue concentration of tax charges on a narrow range of economic activity. They may distort the whole pattern of investment and employment.

2. They limit the degree to which local governments have freedom in securing revenue sources to meet their individual needs.

3. They increase the cost of administration of collecting the taxes. 4. They reduce efficiency of the services rendered by government, by virtue of the divided responsibility and the division of administration.

5. They irritate and annoy the taxpayer who is already heavily burdened by the obligation to pay other taxes, levied by other levels of government.

In a number of instances in recent years our taxpayers have been called upon to face doubled, indeed tripled, tax-reporting systems.

The problems of competition for tax sources, combined with the consequences of duplicating and overlapping taxes, have led to growing pressures to do something about this issue.

In recent years Federal, State, and local organizations have been working on the problem.

Today it seems to me the need is more urgent, more acute than ever before.

Of the total national tax collections in 1950, over 70 percent came from sources which overlapped State taxes. Of total State tax collections in the same year almost 50 percent came from sources which overlapped national taxes.

These percentages will be considerably larger in 1952.

State and local governments are caught between the rapid increase in the cost of materials and personal services and the demand for tremendous funds by the National Government to cover vital military and foreign affairs expenditures. These developments have pressed the localities to look to the States increasingly to provide funds for services largely local in character.

The increase in State appropriations for aid to local governments since 1942 has been very significant. Expenditures for this purpose climbed from $1,800,000,000 in that year to, approximately, $4,000,000,000 in 1950, a rise of 135 percent, and these expenditures will be further increased during the current year.

State aid to local governments in 1950 amounted, approximately, to 37 percent of State revenues of all kinds, including Federal grants, but excluding unemployment compensation.

As the localities have looked to the States for their funds, the States under similar pressures very frequently have looked to the National Government for help.

In 1942 total aid received from the Federal Government by the States was $786,000,000. By 1950 the aid had more than doubled, reaching approximately, $2,000,000,000, and estimates for the current fiscal year place Federal grants to the States at approximately $3,000,000,000.

And so the States are increasingly providing the money to finance local activities, and the National Government is providing increasingly the money to finance State activities.

With money goes power. With power goes control. And with the ever-increasing control of the State over the locality and the National Government over the State, there is the increasing trend toward centralization which is a grave danger alike to local self-government and our federal system.

We cannot consider the tax and revenue problems of local, State, and Federal Governments without a comprehensive appraisal of the functions, the duties, and the responsibilities of the various levels of government. We believe that now is the time for such a comprehensive study and appraisal, both functional and financial.

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Our chief recommendation is, therefore, that the Congress establish, at the earliest possible time, a commission charged with the duty and responsibility of studying Federal, State, and local relationships and submitting an action program designed to strengthen the foundations of our American system, based to every extent possible upon local responsibility, local control, and local self-government.

We do not believe this job can be done in a month or even in a year. We are confronted with a fundamental issue almost as sentimental as the issue that confronted the founding fathers when they met in Philadelphia to establish our Federal Constitution.

Our present system of financing government in this country has grown over the years somewhat like Topsy, without too much rhyme or very much reason in many instances. We are engaged in chasing ourselves around a circle.

Each new need results in a level of government vainly striving to meet that need within its own limited resources and then looking to the level of government above it for help. And the level of government above it, in turn, looks to another level of government, and the level of government at the very top, in this instance, the National Government, must necessarily impose taxes upon the very people who would pay the tax in the first instance, had the service been financed locally where the citizens would have had a full opportunity to observe its operation and determine whether the service rendered met the needs of that community.

It is our hope that this subcommittee will consider the various bills that have been introduced, the resolutions. And we should like, also, respectfully to suggest that the committee may wish to consider S. 1146 which was passed by the Senate on July 23, 1951, and sent over, I believe, to the House, and then recalled. We have reason to believe that the bill may again be passed by the Senate. If that is the procedure, I mean. And that, ultimately, the bill will find its way to this subcommittee.

The purpose of S. 1146 is, I think, substantially the same purpose as that outlined in a number of other bills that are presently before the subcommittee.

I believe I can speak for the representatives of the Governors' Conference, the Council of State Governments, the United States Conference of Mayors, the American Municipal Association, the National Association of County Officials, the Federation of Tax Administrators when I say that the basic objective of S. 1146 has our wholehearted and emphatic support. By the same token, similar objectives expressed in the bills introduced in the House, I believe, would likewise have our support.

That concludes my preliminary statement.

Mr. BONNER. Of course, this subcommittee has to consider the legislation. I have been interested, and I am sure the committee has been interested in the presentation of the problems between the States and the Federal Governments that you have so ably made. However, we have to study the legislation. We have to consider the bill, may have to amend the bill.

We want your views on the legislation, on the bill itself.

You made reference to the Senate bill. Is the Senate bill practically the same as the bill that I have selected for consideration by this committee, House bill 3683?