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at Pennsylvania Avenue and Madison Place; annex No. 2, at Fourteenth and B Streets; the Interior Building, at Eighteenth and F Streets; and Building C, at Sixth and B Streets SW. In Building C are also housed the sales-tax unit; the capital stock, estate, and child-labor tax divisions, and the tobacco and miscellaneous divisions. The prohibition unit occupies the Hooe Building, 1330 F Street; the solicitor's office, accounts unit, and the committee on appeals and review are located in the Interior Building; the stamp division is in the Auditors' Building, at Fourteenth and E Streets SW.; and the commissioner's offices, special intelligence unit, the supervisor of collectors' offices, the division of suppiles and equipment, and the appointment division are in the Treasury Building:

The public is greatly inconvenienced by the decentralized housing of the bureau. A taxpayer is often required to visit three or four different buildings to get information upon a single question. There is much criticism from taxpayers thus inconvenienced.

It should also be noted that effective administrative control is impossible under such decentralized conditions. The various units and divisions of the bureau are so closely related that the heads of these units and divisions and other supervisory officials must consult frequently and at short notice. Under the present housing conditions administrative intercourse and control are seriously impeded and hampered, and a vast amount of duplication of effort, to say nothing of expensive and exasperating delay, necessarily results. It has been carefully estimated that with suitable quarters provided the efficiency of the bureau would be so increased that at least 25 per cent more work could be accomplished with the present expenditures and the consequent savings would equal in less than two years the cost of an adequate, well-planned, permanent, fireproof structure.

That does not take into consideration the inflammability of the buildings at Fourteenth and B and Sixth and B Streets, wherein valuable records are stored which could not be replaced.

Mr. Blair. We have had a practical demonstration of the decreased efficiency. We moved the natural resourses subdivision into the Interior Department Building, with additional room, and Mr. Fay, with the same force, is now getting fully 25 per cent more production.

The CHAIRMAN. There is ample room in that building, it seems to me. I was up there not long since, in one or two offices, and it seemed to me that they were just wandering around, and in that space you could put a lot more people without crowding those in there.

Mr. Blair. Was that in the Interior Department Building?
The CHAIRMAN. Yes, sir; in the offices occupied by your bureau.
Mr. WEST. When was that?

The CHAIRMAN. Not over four weeks ago. I happened to be there and to walk through.

Mr. West. They have made some rearrangement just recently. I doubt whether the transfer had been made then. The third floor on the front is to be occupied by the Board of Appeals and Review. Perhaps, you looked into that. I went down there for the first time three or four days ago, and it looks as if it were not occupied, but that is where they have the hearings.

Mr. BLAIR. All of those rooms are conference rooms; there are 10 rooms there.

DURATION OF WORK.

The CHAIRMAN. Getting away from that, let me ask you this question. Your request for this appropriation contemplates the employment of a large additional number of men to bring the back work up to date. How long do you think that these men, at the peak, would have to be continued in the service?

Mr. BLAIR. As of 1923 I think we can begin to reduce the force.

The CHAIRMAN. You think that you can get your work pretty well current during 1923 ?

Mr. BLAIR. Yes, sir.
The CHAIRMAN. At any rate, it would not go up higher after 1923?
Mr. BLAIR. That is my opinion.

The CHAIRMAN. After you have the work current, has anybody thought out a plan for the systematic reduction of the force that would be required to be made to keep the work current?

Mr. CHATTERTON. We have not gone that far. We realize that we will have to work that out.

Mr. KELLEY. That will depend somewhat on the legislation ?

Mr. Blair. That is just what I was going to say. You might change the law so as to materially reduce the force.

Mr. KELLEY. When you get rid of the excess-profits tax, that will help?

Mr. BLAIR. It will. We will not feel it the first year, because we have the old returns; but when that is through, then there will be a big reduction.

EFFECT OF NEW REVENUE LEGISLATION ON WORK.

The CHAIRMAN. Have you thought as to whether there would be less work under the reduced revenues provided in the new act than is required now? It is presumed that the new act will raise about $750,000,000 a year less than the present act. How will that affect the work?

Mr. WEST. It will not affect the work of the income tax unit very materially, because most of this is old work, but I took that up and have a memorandum in connection with it. It shows that in the field there will be a slight reduction on account of the transportation tax being repealed and certain of the sales taxes being placed on the manufacturer rather than on the retailer under section 900. We will not feel the effect for several months. I had a memorandum from the supervisor of the collectors' offices that was to the effect there would be a reduction of approximately 160 people in the field, based on the bill as it passed the Senate. However, if the estimate is approved for 300 deputies in the field and 50 in the office, the force in the collectors' offices will still be less than it was last spring. A radical cut was made then so as to keep within the appropriation, and it is now desired to get back to the normal number.

The CHAIRMAN. When you made that radical cut, did that affect the revenues in any way?

Mr. West. I have no doubt it did because the memorandum that I have from the supervisor shows that each individual deputy produced about $15,000 revenue. They keep an accurate tab and can tell just how much each man has reported.

The CHAIRMAN. Of course, he will produce according to the size of the schedules that he has to deal with ?

Mr. West. That is true; but if you follow that on the average, one man will get a good case and probably get a large return and the other one will work just as hard and get nothing to compare with it. This is on the average basis.

ADDITIONAL COLLECTIONS THROUGH INCREASE OF FORCE.

(See p. 452.) The CHAIRMAN. You feel pretty sure that if you get this additional money and are authorized to employ these additional men that the office force down here will be able to produce, I think you said, $113,000,000 a year; that is what you estimate your office force, and an additional $240,000,000 from the outside ?

Mr. WEST. I do not think there is a doubt that we can get two hundred and forty-odd million dollars with the force we have now.

The CHAIRMAN. And on top of that you figure $200,000,000 a year?

Mr. CHATTERTON. Yes, sir; on an annual basis, under the recruitment plan.

The CHAIRMAN. That would give you $557,000,000. Am I right about that?

Mr. WEST. What is the $113,000,000 ?
The CHAIRMAN. Your force here.
Mr. West. That is true; that is what we did during the last year.

The CHAIRMAN. I am talking about the annual rate. That would give $557,000,000 against $357,000,000 ?

Mr. CHATTERTON. No; that was for the field service only.

The CHAIRMAN. No. Two hundred and forty-odd million dollars. was for the field service.

Mr. WEST. That is correct.

REFUNDING TAXES ILLEGALLY COLLECTED. The CHAIRMAN. We have here a deficiency prior to July 1, 1920, $12,422,000, and then another one for 1921 of $10,635,000.

The CHAIRMAN. What is that all about?

Mr. WEST. When you figure the collections for 1920, as $5,400,000,000, and 1921, $4,595,000,000, the percentage for refunds is very insignificant.

The CHAIRMAX. These are all refunds. You have not had the money with which to make the refunds. You have only $12,000,000 for each one of these years?

Mr. West. Yes, sir. The condition is something like this. On February 24, 1919, the act provides that annual appropriations be made for refunding taxes illegally collected. So for 1921 we have $12,000,000 as a total appropriation.

The CHAIRMAN. You also had $12,000,000 in 1920 ?

Mr. West. No; we have $12,000,000 for 1922. Eight million dollars of that relates to claims arising prior to July 1, 1920. That means under the comptroller's ruling the refund is to be made from the appriation pertaining to the year the tax was fully paid.

The CHAIRMAN. How much of this $36,000,000 appropriated for 1920, 1921, and 1922 have you paid out?

Mr. West. We keep that by fiscal years.
The CHAIRMAN. Then give it to us that way.

Mr. West. From the appropriation for 1918 and prior years we paid approximately $7,500,000. During that time, however, we had the benefit of paying out of two permanent indefinite appropriations, 1919 and 1920. This is rather a mixed situation on account of these new appropriations, and the opinion of the Comptroller of the Treasury. We spent $7,925,000 out of the 1919 permanent and indefinite appropriation. We spent out of the permanent indefinite appropriation $10,560,000. Out of the 1921 we passed $2,700,000, not taking into account advances to field disbursing agents, made which would go as expenditures from the Treasury, making a total of approximately $28,700,000 as expended last fiscal year.

The CHAIRMAN. For those two years?

Mr. West. For expenditure, you might say, in 1921 alone, although it covers practically four appropriations.

The CHAIRMAN. 1919, 1920, and 1921 ?

Mr. West. That is right if you include 1918 and prior years. We have to date passed on the control ledger $9,810,000 worth of claims payable from the $8,000,000 relating to 1920 and prior fiscal years. That is $1,800,000 more than is in the Treasury to pay. We had a little balance from the 1921 appropriation the first of this fiscal year but that amount is exhausted and we have no money to pay any 1921 claims. Claims are scheduled and paid from the appropriations relating to the years in which the tax was fully paid. Three appropriations are now involved, 1920 and prior years 1921 and 1922.

Mr. KELLEY. You could take any money collected from taxes and pay any legal refund?

Mr. WEST. In ordinary procedure it is different, because we take that money and it is deposited and becomes a part of the revenue. Refunds are made from appropriations.

Mr. KELLEY. It is an indefinite appropriation?

Mr. West. There are no indefinite appropriations now for refunding taxes illegally collected.

The CHAIRMAN. Could we simplify this by making an appropriation for the payment of claims in any one fiscal year available for the payment of claims the entire fiscal year instead of keeping it separate as you just described ?

Mr. WEST. I do not know. There is one trouble that comes up even in the plan of a permanent and indifinite appropriation, because you have so many claims coming up where they arose in 1919 and prior years.

The CHAIRMAN. Here is what I had in mind. Suppose for 1922 there was placed to your credit for the payment of claims for refund $10,000,000 and that you had that $10,000,000 available for the payment of claims of 1918, 1919, 1920, or any other year?

Mr. WEST. That would be fine.

The CHAIRMAN. Make it available for the payment of any incometax claims, I mean?

Mr. WEST. I should dislike to see that if it applies to the income tax alone.

The CHAIRMAN. These are all income-tax claims?
Mr. WEST. No sir.
The CHAIRMAN. What are they?
Mr. WEST. The great percentage relates to income tax refunds.
The CHAIRMAN. What about the others?

Mr. WEST. Tobacco and miscellaneous have an estimate for $12,000 for 1920 and prior years. Prohibition unit comes in for $200,000 for same time.

The CHAIRMAN. How would they come in for claims, as they do not take in any money?

Mr. West. Considerable tax is collected from nonbeverage alcohol; we collected approximately $82,000,000 from this source during the last fiscal year. The sales-tax unit estimates that their refund for this fiscal year, from the appropriation for 1920 and prior years, will aggregate $1,785,000, and the estimate of the estate-tax unit is $425,000.

The CHAIRMAN. A man that is paying an income tax by putting a stamp on a bottle of medicine, he would not make any claim?

Mr. WEST. That is a different matter, the redemption of a stamp. He could get his stamp redeemed if it had not been used.

The CHAIRMAN. Take a man who is selling hats and say that I walked into his store and bought a hat for $6 and he charged me a tax. If he reported that tax he would pay it and if he did not he would not.

Mr. West. No claim arises in the case you speak of, where the tax is on the buyer, and he has to pay it to the dealer. There are many people who make monthly returns on automobile accessories and automobiles; that tax is on the manufacturer.

The CHAIRMAN. They do not pay any tax on the sale ?
Mr. West. The tax is placed on the sale by the manufacturer.
The CHAIRMAN. Does he make the return before he makes the sale?

Mr. West. No; it is on the sale. When he makes the sale he makes return to the Government of the tax after the month closes.

The CHAIRMAN. If he sells on time and makes a loan, would he have a right to a rebate on that?

Mr. West. No, the tax applies when title passes.

The CHAIRMAN. He has paid the tax on the sale. If he does not collect the money from the person to whom sold, would that make any difference to the Treasury!

Mr. West. No. As a matter of fact, the collecting is outside of our province.

The CHAIRMAN. Suppose he sells $10,000 worth of automobile accessories to you and gives you 30 days' time in which to pay.

In the meantime you failed and in the meantime he had paid the tax to the Government, would he have a right to claim a refund?

Mr. WEST. No.

The CHAIRMAN. He charges up that loss against his profit anyway in the ordinary course of business?

Mr. West. I would say so. The sales tax applies to the individual sale.

The CHAIRMAN. I do not understand how a man with a sales tax can have a claim against the Government?

Mr. WEST. I can tell you several. For instance, most of these claims where the office has changed its ruling on the tax

The CHAIRMAN (interposing). You told us this morning that there were no changes in the rulings?

Mr. West. I can not say that as to the sales tax. When the sales tux first became a law, it was hard to interpret. There were many different rulings. One day it was held that a pencil with a metal

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