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Over $120 Million Insurance In Force JotefiattieA INSURANCE COMPANY P. 0. Box 8098 Houston, Texas Oil, Gas Industry Clobbers Daniel’s Gas Bill AUSTIN Like Daniel before the lions, Price’s $20 million natural gas bill went into the arena of the House revenue and tax committee this week, was roundly chewed over by hostile legislators, and came out somewhat shredded by a series of oratorical gladiators for the oil and gas companies. Sponsored by Rep. George Hinson \(“I have not lost faith in the revenue and tax committee of this legislature, I have not lost tax on gas severance beneficiaries was assaulted by lawyers representing Mid-Continent Oil and Gas Assn., Phillips Petroleum Co., Natural Gas Pipeline Company of America, Aluminum Company of America, Warren Petroleum Company, the Goliad Corporation, and Lone Star Gas Company and was defended by a spokesman for the Texas Farm Bureau. The Farm Bureau man, C. H. Devaney, was in turn subjected to rigorous questioning by Reps. Frates Seeligson on San Antonio, Pete Matthews of Yoakum, George Cook of Odessa, Sam Bass of Freeport, and J. Edgar Wilson of Amarillo. The tax committee at week’s end reported out favorably its first measure, the “bookkeeping bill” making $15 million available to help retire the current deficit. Other parts of the Governor’s deficit programthe franchise tax and the unclaimed bank accounts billremained in sub-committee. Hinson’s bill, aimed at collecting taxes from long line gas transmission companies selling to outof-state customers, was attacked as “vague, inconsistant, indefinite” and “probably unconstitutional.” Big Guns Fire F. L. Kuykendall, lawyer for Lone Star Gas, said it was “not good statesmanship, not good economic thinking to impose a 43 percent additional tax on Texas companies just to get the 53 percent of the gas that is exported.” He said Lone Star Transmission Company made only $2.8 million profit in 1958 on a $97 million investment. When committee member Joe Ed Winfree speculated that earnings of a Lone Star subsidiary might not accurately reflect Lone Star’s profit picture and asked for specific statistics on the parent company’s 1958 earnings, Kuykendall said he didn’t have that information. The gas lawyer said Hinson’s bill was “a tax on the taking of gas and at the moment that gas is taken it is moving in interstate commerce and you can’t do that, its unconstitutional.” The bill provides that the “first purchaser” of gas severed from the ground, defined as the “severance beneficiary,” is subject to the three percent of market value tax. The measure is a variation of the 1951 “gas gathering” tax that was passed by the legislature but later declared unconstitutional as a tax on interstate commerce. Kuykendall said the bill was “all dressed up, but it’s wishful thinking when you think the interstate pipelines will pay this tax.” He offered two suggestions, that the bill be made to apply strictly to producers, or that a clause be inserted that if the tax was not c _onstitutionally found to apply to pipeline companies, it should not apply to anybody. As written, the measure specifies the tax be paid by producers if “for any reason” the severance beneficiary , cannot be taxed under its provisions. Mid Continent Oil and Gas Assn., the trade organization serving as spokesman for the major oil companies, sent its general counsel and kingpin Austin lob THE TEXAS OBSERVER Page 2 March 21, 1959 byist, Andrew Howsley, to testify against the bill. Citing figures that the industry paid $198 million in state taxes in 1958 in production, franchise, property, well servicing, and regulatory taxes, Howsley said “we of the oil and gas industry cannot be anything but proud of our industrial citizenship and the record we have made in contributing to the cost of good government in Texas.” Howsley emphasized the current recession in the Texas oil industry, “a sad plight,” and said the tax bill “is another attempt to hit the same group of Texas taxpayers who have been supporting a big part of this state government for many, many years.” In support of his measure, Hinson said “I can prove there are a number of companies who do not pay one single dime of tax under these dedicated gas contracts.” Supporting Hinson, Farm Bu representing principally the big gas companies, is trying to convince the legislature and the public that ‘ability to pay’ should no longer guide Texas in its taxing policies. The issue is clearly drawn as to whether new taxes will be levied on the cost of living in accordance with the ‘broad-based’ . theory of the corporation lobbyists, or upon the ‘ability to pay’ items I have recommended such as natural gas, corporation franchises, liquor, and cigars. The Texas tradition has always been to levy taxes in accordance with ability to pay, a cardinal principle of fair and just taxation . Our state has never employed an income tax or general sales tax. This is one of our greatest attractions for new industry and new residents. Only one other state. Nebraska, can boast of such a favorable tax climate for both business and human beings, and I am this is one of our greatest attraction to Nebraska alone. Gross income taxes or general sales taxes by any other names are just as objectionable as if properly designated for what they are. The Blanchard. gross receipts tax on all individuals, businesses. clubs, and co-ops is in effect a gross income tax. It is so listed by the Texas Tax Study Commission. Although only 1/2 of 1% of the gross receipts, this could mean a tax on net income as high as 5 or 10% for those industries and businesses which operate on a small margin of profit. The Roberts-Strickland gross receipts tax on retail sales provides that it shall be collected from the purchasers. Clearly it is a general sales tax under another name, and would make every retailer in Texas a tax collector for the state. How any person who professes to be against an income tax or general sales tax can be for either of these bills is beyond my comprehension I am confident that the authors of these new bills a n d the speaker of the House will never support them when they realize the full meaning , and effect upon the nine million people of Texas. ‘As of This Date As of this date I do not criticize any legislator who has been misled by the ‘broad-base’ propaganda. The term sounds ‘fair, but it was coined by selfish interests who thought it could lead the way to a general sales tax, which is actually a gross income tax on every person. who spends all he makes each month. reau spokesman Devaney said his organization had voted to endorse a sales tax three years ago, but after appointing a tax study committee and hearing its report, the farmers reversed themselves and tuned down a sales tax by a three to one margin, favoring a natural resources tax instead. After completing his brief remarks, Devaney ‘ran into a storm of committee questions. ‘Take That’ Rep. Cook of Odessa asked him, “You boys are pretty well organized, aren’t you? Do you know this legislature has spent more time listening to your organization’s views than it has on anything else? I understand you fellows resoluted about waste in government. Can you tell us where we can cut down on waste? “I’ll try,” replied Devaney. “And how about cutting down on farm wages,” rejoined Cook, Their true ‘broad-base’ objective is to get a general sales tax, under that or some other name. saddled upon the pocketbooks of the housewives, salaried people, wage , earners, old age pensioners, and others who spend all they have and all they borrow to meet the cost of living. A ‘thinly spread’ tax would not be missed by the 40,000 corporations whic’h netted over $2.5 billion from their Texas business last year, but it would be a hard blow to the majority of the families of this State whose gross earnings average less than $340 per month. ‘Broad-base’ and ‘thinly spread’ taxes reduce everyone’s purchasing power, and family budgets already are hard to meet. -It is manifestly unfair to tax a man in proportion to the children he must support. A general sales tax, by whatever name, hits even the unemployed and the 225,000 old age pensioners, many of whom receive less than $60 per month. Should all these people be taxed in the same proportion as Phillips Petroleum, which made over $90 million last year and which is OAgriculture Cmsr. John. White, charged by two exemployees with alleged violations of the election code by accepting gifts from workers, testified before the Austin grand jury. He told reporters he has not received gifts from employees since 1954, when he was given a new car. “I prohibited -gifts after that,” he said. He criticized publicity of the current charges against him. ONAACP in 150-member con vention, in Houston resolved to get out more Negro voters and heard U. Simpson Tate, Dallas, urge a “broader concept of the word desegregation” involving not only schools but “commerce, all public facilities, recreation, health, public housing …jobs and opportunties.” putting aside the microphone and ending the exchange. Rep. Bass also toyed with the waste in government theme as Reps. Seeligson and Matthews queried Devaney on the Farm Bureau’s opposition to sales taxes. After Devaney was excused, a long parade of oil and gas spokesmen appeared against the bill. B. M. Britain, representing the Natural Gas Pipeline Co. of America, spoke out against “small organized opposition to the oil industry.” Britain said “Some fellows who have a little associ ation some place seek to inflame the people’s minds against cornpanies who export gas. The gas business is a hazardous business. Many unprofitable w ell s are drilled as well as dry holes. We have to pay a tax on unprofitable wells, too. It’s a gross income tax without a deduction, if you please. The gas business has already had it. Be as charitable as you can with us.” fighting so hard against my pro. posed increase in the corporation franchise tax? Some year in the distant future Texas may become so poor in natural resources that a general sales tax or income tax will be necessary, but this is not the year. This year over half of our natural gas is being transported to 35 other States and two foreign countries. and the total tax collected is less than we collect on cigarettes. Corporation profits and bank deposits are at an all time high This is no time to enact last resort taxes on a majority of our nine million people whose per capita income is only $1,791 per year. 7 7 Daniel’s letter to the tax committee the day of the hearing on his natural gas bill Monday afternoon began, “Believing that ability to pay is one of the cardinal principles and an important guide in the levying of taxes …” and advocated asking all the witnesses their companies’ gross receipts and profits in 1958. A lobbyist said he is going to mail the letter to every major political contributor if Daniel runs for a third term. OA newspaper reported in Houston that the Houston school board’s still undisclosed plan to desegregate includes an election, a survey among parents, a transfer policy, and discretionary assignment of students asking for transfers. OJudge Lloyd Davidson of the court of criminalappeals said that two upheld convictions threw “more constitutional guarantees” out the window, including the right to confront an accuser. One of the appellants alleged his court-appointed attorney was incompetent. OSen. Lyndon Johnson speaks at a fund-raising dinner in Abilene March 28, introducing Sen. Mike Monroney, Okla. Rep. Winfree, persistent inquirer all session into the oil and gas company earnings, asked Britain how much money his company made in 1958. “I don’t know,” said Britain. “How much would it cost your company in taxes under this bill?” asked Winfree. “I don’t know, Colonel, I didn’t come here to bother this committee with ‘statistics.” A long legal attack on the bill was delivered by W. H. Abington, lawyer for Texas Mid-Continent Oil and Gas Assn. He concluded “I cannot predict it will not be attacked as unconstitutional.” Hinson is scheduled to offer concluding arguments for the bill Monday, after which it will go automatically to a sub-committee. After six weeks of hearings, the committee has reported one bill out favorably, with amendments, and has not reported ten others on which it has held hearings. L.G. Carr, visibly upset during the day by the Governor’s hardly oblique attack on him, responded somewhat tamely on a TV interview that night. He is still for a broad-based tax, he said; he thought the Governor has done a good job, but “These insinuations are not true. A tax on business is not a sales tax although the consumer finally pays it.” If teachers are to get the pay raise they are asking for, he said, it will be necessary “to bring in new people” to tax. By Wednesday night, however, in Lubbock, Carr was ready to go further. Daniel’s tax plans were “inadequate to meet the needs of Texas,” the legislature will approve a “broad-based tax plan,” Daniel’s charges that such plans are gross income or sales taxes in disguise are, Carr said, “bull.” “The Governor is labeling everything not included in his own tax proposals as either a sales tax or income tax,” he said. “Texas needs to raise at least $150 million More revenue annually. Daniel’s proposals would raise no more than one third of that amount.” Speculation on the House floor concerned Carr’s political future. His 79 supporters among the representatives for his second term as speaker were at least half liberals; his encouraging a tax Daniel calls a sales tax has caused many of these supporters to start with surprise. Some members were comparing his position with that of Reuben Senterfitt, who, when speaker, opposed teachers’ pay raises, seemed assured of business support for governor, but was snubbed when the summertime came. On the other hand, others said that if he passes his kind of tax bill, he can tell voters he led in solving the state’s crisis. It is now fairly clear that the sales tax forces in. the House and Senate are prepared for a whop