Mr. ATKESON. The increase of direct tax on individuals as I have it for 1951 is $18,938,000,000, as compared with $18,668,000,000. Those are the figures.

I would assume, Mr. Chairman, that relatively small increase would primarily be due to an estimated increase in over-all personal income payments as between the two years 1949 and 1950.

Mr. GARY. Why, at the same time, wouldn't there be an increase in corporation taxes? It would have to come about through expanded prosperity. Why wouldn't the corporations get some benefit from that, and why would you estimate a decrease of a little over one-half billion dollars in the corporation taxes?

Mr. ATKESON. The corporation estimate in your budget is $10,518,000,000 for 1951, as compared with $11,175,000,000 in 1950. The direct taxes paid by corporations include both income and excess-profits taxes. As we are moving out of the excess-profits tax area, the total income and profit taxes on corporations is bound to slide off.

Mr. GARY. You did not have excess profits taxes in 1950.

Mr. ATKESON. We did not have those, true, but we are still collecting rather substantial amounts as excess-profits taxes.

Mr. GARY. Do these figures include deficiency assessments for prior years?

Mr. ATKESON. Yes, sir.

Mr. GARY. And you anticipate some falling off in your deficiency collections?

Mr. ATKESON. Very definitely.

ADDITIONAL INCOME TAX ON RAILROADS IN ALASKA

Payment of additional income tax on railroads in Alaska:

1949_.

1950

1951

Obligations by objects

13 Refunds, awards, and indemnities:

$4,500 8, 945 8,000

Mr. GARY. I notice that you requested $10,000 for that in 1950 and the Congress allowed $10,000.

You are requesting $8,000 for it this year.

Will you tell us briefly what that is?

60561-50-pt. 1- -14

Mr. EVANS. Sections 1300 and 1301 of the Internal Revenue Code provide that the Bureau of Internal Revenue shall collect 1 percent of the gross annual income of all railroad corporations doing business in Alaska, on the business done in Alaska. That tax is in addition to the normal income tax collected from such corporations, and the amount of this 1-percent tax is returned to the treasurer of Alaska, and made applicable to general Territorial purposes.

The Bureau is responsible for collecting this tax each year and depositing it into the Treasury. Subsequently, it goes back to the treasurer of Alaska.

Mr. GARY. You anticipate a decrease in taxes in Alaska for the next year, do you not?

Mr. EVANS. No, sir; not exactly that. Section 4 of the Permanent Appropriation Repeal Act provides that these collections shall be covered into the Treasury as miscellaneous receipts, and if the total receipts for any one fiscal year are greater than the amount appropriated for the payment of such receipts to the Territorial government concerned, such excess is authorized to be appropriated for the following

year.

So, we did not have enough money appropriated in 1949 to pay all collections made in the past few years. The $10,000 for 1950 was necessary to pay these back-year excess collections together with current collections. We are estimating that $8,000 will be required for this purpose in 1951. That figure is $2,000 less than was appropriated for 1950.

Mr. GARY. Since that amount is 1 percent of the gross annual income and is a fixed amount, is there any reason why this could not be made a permanent indefinite appropriation so that you could pay it each year without including it in your budget estimate?

Mr. EVANS. I believe such action would facilitate the payment of these funds to the Territory of Alaska. As I have said, if you do not have enough money appropriated for any year we have to withhold payment until the following year.

Mr. GARY. The amount is absolutely controlled. There is nothing you can do to change the amount, and there is nothing this committee can do.

Mr. EVANS. That is correct, sir.

Mr. GARY. So it would appear to me that the item might be made a permanent indefinite appropriation.

Mr. EVANS. Yes, sir.

Mr. GARY. Thank you, Mr. Commissioner.

We appreciate the very comprehensive statements and explanations which have been made by you and your staff here today.

Mr. SCHOENEMAN. Thank you. We appreciate the patience you have shown with us.

WEDNESDAY, JANUARY 11, 1950.

UNITED STATES COAST GUARD

WITNESSES

VICE ADM. MERLIN O'NEILL, COMMANDANT

CAPT. A. C. RICHMOND, CHIEF, PLANNING AND CONTROL STAFF

T. JACK GARY, JR., ACCOUNTING ADVISER

COMMANDER C. B. ARRINGTON, CHIEF, BUDGET DIVISION

COMMANDER P. E. TRIMBLE, ASSISTANT CHIEF, BUDGET DIVISION CAPT. R. L. BURKE, CHIEF, AVIATION DIVISION

CAPT. J. H. SKILLMAN (UNITED STATES NAVY), SUPPLY ADVISER COMMANDER C. L. HARDING, CHIEF, AERONAUTICAL ENGINEERING DIVISION

Mr. GARY. We will take up this morning the budget request of the United States Coast Guard.

WELCOME FOR NEW COMMANDANT

Admiral, we have heard with a great deal of pleasure of your recent appointment as commandant of the Coast Guard. Since this is your first appearance before the committee, as commandant, we extend to you our congratulations and a hearty welcome.

Admiral O'NEILL. Thank you, Mr. Chairman.

Mr. GARY. Admiral Farley was always very cooperative in working with this committee and we are certain you will be equally so. We are delighted to see you in command.

Admiral O'NEILL. Thank you. I hope I will be equal to Admiral Farley.

Mr. CANFIELD. Mr. Chairman, may I join in your hearty salute to the new skipper of the Coast Guard. I recall a presentation he had to make before this committee when Admiral Farley was in London some years ago. He did a most excellent job.

Since that time, like yourself, I have had the pleasure of sailing under his command, and I know that he knows his stuff.

Incidentally, Admiral, my home is in Paterson, N. J., which was founded by Alexander Hamilton, who also founded the Coast Guard. That fact was recalled to our citizenry in Paterson when your chief, the peace time chief of the Guard, the Secretary of the Treasury, Mr. John M. Snyder, spoke there recently.

Admiral O'NEILL. Thank you very much, Mr. Canfield.

Mr. GARY. Admiral, would you like to make a general statement at this time?

Admiral O'NEILL. Yes, sir. I have a prepared statement, which I would like to read, with your permission.

Mr. GARY. We will be very glad to hear you at this time.

GENERAL STATEMENT

Admiral O'NEILL. Mr. Chairman, the Coast Guard request for 1951 comprises $137,850,000 for operating expenses; $28,979,000, for acqui

sition, construction, and improvement; $15,575,000 for retired pay; $4,100,000 for Reserve training, a total of $186,504,000.

This compares with $145,684,000 appropriated in the regular appropriation act for the current fiscal year.

Before discussing these appropriations in more detail, I should like to comment generally on several matters concerning the Coast Guard. As you are aware, Admiral J. F. Farley retired on December 31 as Commandant of the Coast Guard and I have been appointed to succeed him.

I should at this time like to pay tribue to the leadership and ability of my predecessor, who guided the service through difficult days from demobilization after a great national emergency to the present. As his assistant during that difficult period, I am familiar with the problems that confronted the Coast Guard and Admiral Farley during the last 4 years, and know the general policy and objectives that guided

our course.

Much was accomplished from 1946 to date, and much is yet to be accomplished. As Commandant of the Coast Guard I intend to carry forward the improvements already inaugurated.

AVIATION

From the standpoint of operations, the estimates under consideration present no increase in the facilities or personnel, except in one field; namely, aviation.

For the past several years the Coast Guard has been discharging its duties with a limited number of aircraft: 69 fixed-wing and 10 rotarywing aircraft, to be exact. This was not a number that anyone in the Coast Guard deemed adequate to discharge the day-to-day assistance calls on the service; nor was it adequate to meet the requirements imposed on the United States by the International Civil Aviation Organization.

It was the number which, in a balanced operational plan, the Coast Guard could afford to operate within the limit of funds and personnel available to it.

To some extent, the lack in the past on the part of the Coast Guard has in some areas been offset by the availability of facilities of the other armed services, even though these facilities were primarily stationed in those areas only for military purposes, and not for protection of civil aircraft and boats.

Now the withdrawal on the part of the armed services from certain regions is leaving these areas with little or no assistance protection even though the United States under ICAO has accepted the responsibility for providing such protection. The increase in operational strength included in the estimates is to partially meet this requirement

and need.

OCEAN STATIONS

There is no increase included for the ocean station program, but since the Coast Guard last appeared before this committee there has been some modification of the program. In fiscal year 1949, the Coast Guard, under funds appropriated for the purpose, gradually increased the number of ocean stations in operation to nine and one-half; seven and one-half in the Atlantic Ocean, and two in the Pacific.

This program took time to implement, and the last station did not go into operation until the end of the fiscal year, or last June.

At about the same time two things took place which forced a modification of the program. An international conference to study the ocean station requirements in the Atlantic Ocean reduced the over-all demand from 13 to 10, and the share of the United States from 71⁄2 to an eventual 513.

Also, it will be recalled that although our military personnel ceiling for fiscal year 1950 was identical with that of fiscal year 1949, the appropriation for pay and allowances was subjected to a cut of $1,195,000 below the amount required.

This necessitated a reduction in ceiling of 30 officers, 6 warrant officers, and 360 men.

Accordingly, this cut was applied against the ocean station program since it coincided with the decreased demand in the Atlantic, and one of the additional stations so recently occupied was abandoned as

an economy measure.

In the Pacific the Coast Guard had never had sufficient stations to meet the demand, so steps were taken to transfer other facilities released through the reduction of the Atlantic requirements to the Pacific, and at the present time the Coast Guard is manning three stations in that area between the Pacific coast and Hawaiian Islands.

This is only 50 percent of the Pacific requirement as established by the Air Coordinating Committee.

In the Atlantic we are presently manning five and two-thirds stations, and will probably continue to do so for the balance of the year. This additional third of a station above the new requirement puts an extra burden on the available ships, but is necessary to maintain uninterrupted operation on Station ABLE until the Netherlands has a vessel prepared to assume the station one-third of the time.

PUBLIC LAW 207

The authority for Coast Guard activities was clarified during the last session of Congress through the enactment of Public Law 207, which revised and recodified title 14, United States Code, which was the Coast Guard title. The passage of this law permits us to class another Ebasco recommendation; namely, that Congress give to the Coast Guard a concise mandate, as completed.

Obviously, that mandate must from time to time be amended to meet changing conditions, but it stands as the first clear, complete expression of Congress of the manifold duties of the Coast Guard and its responsibilities and authority.

IMPROVEMENT OF ACCOUNTING AND SUPPLY SYSTEMS

The improvement of the accounting and supply systems, the need for which was emphasized in the report of Ebasco Services, Inc., and by this committee has, with the able assistance of a special accounting staff, progressed materially during the past year. We have made progress in developing sound accounting procedures and installing a new system, with the expectation that it will be substantially completed early next fiscal year.