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The one great rule of composition is to speak the truth. Thoreau The Texas Observer We will serve no group or party but will hew hard to the truth as we find it and the right as we see it. An Independent-Liberal Weekly Newspaper A Window to the South Vol. 52 TEXAS, FEBRUARY 18, 1961 15c per copy No. 46 Governor Warns of Special Session Bankers Protest INDEPENDENTS ATTACK PRODUCTION TAX HIKE AUSTIN Gov. Price Daniel this week warned he may call a special session if the legislature does not pass his abandoned properties law, then appeared before the House revenue and tax committee to testify that he is pushing the measure “to prevent others from keeping something that’s not theirs.’ A large delegation of bankers from all over the state turned up for the hearing. They warned that the proposal would violate the law of contracts, damage the relationship of banker to depositor, and do injury to the prestige of the banking community. In a printed booklet distributed to legislators and bankers, the governor wrote: “In the present matter, honest and reasonable minds should be able to -agree on some suitable enactment. I hope it can be done at this regular session instead of requiring the call of a special session for this purpose. If we fail I would have no other alternative.” Rep. Charles Hughes of Sherman, veteran House liberal and main sponsor of the measure, told the Observer pressure from local bankers has been as strong as in 1959 and that a floor vote “would be very close.” Other legislators said they have been receiving numerous telegrams and phone calls. After hearing testimony, tax committee chairman Charles Ballman of Borger referred the measure to a favorable subcommittee composed of Reps. George Hinson, chairman; Ted Springer, Tony Korioth, Franklin Spears, and Sam Collins. The bill might reach the floor by the middle of the week. Daniel’s proposal, modified from last time, would put teeth in the present law by requiring those holding funds unclaimed for seven years or more to report them to the state treasurer. Names of the last known owners would be posted. The attorney general would file escheats suits to get the money for the state. “No one ever proposed this bill just to pick on the banks,” Daniel AUSTIN Rep. Virgil Edward Berry of San Antonio had the crowd, but some of the opponents of his horse racing amendment had potent arguments in a full-dress hearing this’ week. The gallery was packed to standing with guys and dolls, most of them wearing pro-racing ribbons supplied by Berry. As the six-hour session ground down toward the wire, the pro-Berry atmosphere dwindled and the white-maned gambler lost his usual studied blandness and discussed with two legislators who opposed him the possibility of their political extermination. Berry’s measure to allow local option racing in nine of the largest counties of Texas was de told the committee, “as might be inferred from the fact that banks in the past have been the main opposition.” The proposal also covers abandoned properties held by oil and gas, insurance, and savings and loan companies, he said. This measure, he said, “was :recommended by the American Bar Assn., the Commission on Uniform State Laws, and the Council on State Governments. About 36 states have enacted laws along this lineVirginia and California just recently.” Gov. Daniel According to the FBI, Daniel charged, over half of the embezzlement in the nation is done in dormant funds. “In addition to the $17 million subject to escheat, I conservatively estimate an additional $10 million would go to people now living who would be found by the procedure under this law,” he said. “I’ve done everything in my power to meet the objections of bankers two years ago to make this bill fairer to them.” “Some of my banker friends and I’ve fstill got a few banker friends left in this statetell me these dormant accounts are eaten up by service charges in the national banks.” Later the governor said he had “diligently tried to find out if banking interests in other states have been hurt by such a law.” He said the president of the Arizona bankers association had told him he could not see how bankerp could oppose such a measure. Hughes told the committee, “I’ve heard that this is going to make poor public relations for the banks. I doubt if it is going to :Dated before the constitutional amendments committee. Outstanding in the anti-racing group was Dr. Arthur A. Smith, vice president and economist of the First National Bank in Dallas. Berry had called eleven proracing witnesses, practically all of whom earn their living or participate in the sport, before Smith, who had to catch a plane, was allowed to break in. Break in he did with sledgehammer blows of argument which revived the hearing that, through the repetitious testimony of the previous witnesses, was fast dying. Said Smith: Gambling attracts people in the low-income brack “The tragedy of this measure is that it hits hardest those who are least able to pay,” John Davenport, counsel for Texas Independent Producers and Royalty Owners testified. “You’re going to hit hardest those small marginal op orators.” Davenport and other representatives of TIPRO and various oil and gas associations argued that under contract arrangements independents would ‘be saddled with almost all of the flat production levy. Hinson, who handled Daniel’s severance beneficiary tax aimed at the major pipelines in the House in 1959, said he had “a deep feeling about increasing the production tax. This is the fiist time I’ve ever supported such a measure. “Burt all this bill will do is raise the tax from seven to ten percent for one year. I wouldn’t be handling it if it were a permanent tax.” Hinson argued that the price of natural gas has increased since Gov. Allan Shivers’ production levy in 1955 and that a slight increase would do no great damage. Dedicated Reserves Late Friday night, after the Observer had gone to press, the committee also heard testimony on Rep. Bob Eckhardt’s tax on dedicated reserves, estimated to bring in $40 million annually. He is offering the bill in lieu of the Daniel-Hinson production tax. Eckhardt said he had drawn the bill to meet objections made by the Third Court of Criminal Appeals, which declared the severance beneficiary tax unconstitutional because it was a tax on inter-state commerce. The person who owns the gas well would be the “severance producer” and the person who contracts to take the gas away would be the “dedicated reserve producer.” The less a pipeline pays for gas, the more it would pay in taxes. Texas producers under the. Eckhardt plan would not be taxed. If the Eckhardt tax reaches the House floor, either singly or along with the straight production tax increase, the stage would be set for another battle similar to the 1959 severance beneficiary fight with a larger tax at issue than two years ago. Other Testimony In further defending the production levy increase, Hinson said there are 3,050 gas producers in the state, the 50 large producers produce 80 to 85 percent of natural gas in Texas, and revenue from the tax hike would be derived mostly from them. “This is the only tax bill I have in this direction,” Hinson said. “I don’t say I won’t support others.” William Abington, Fort Worth, general counsel for Texas MidContinent Oil and Gas Assn., said to pipelines as the proposed tax represents a 43 percent increase in present natural gas production taxes and would be an additional handicap to the state’s oil and gas industry. He branded as “inaccurate” Gov. Daniel’s claims that from one-half to seven-eighths of the increase could be passed on to the pipelines. He said the oil and gas industries were not separate and that in nearly all instances a gas tax was paid by an oil producing taxpayer. Oil and gas are paying “an excess of our fair share” in state taxes, he testified. John Hurd of Laredo. TIPRO president, argued that the 3000 smallest producers would feel the full impact of the measure. The large majority of producers, he said in describing the results of TIPRO queries, “must pay under all or most existing taxes or all increase that might occur.” A survey of 28 producers, he said showed that 64 percent have at least some contracts under which no production tax is passed on to the buyers, 68 percent pay more of the production tax than do the buyers, and 82 percent either pay more than the buyers or have at least some contracts with no pass-on provision. Bruce Puckett, representing West Central Texas Oil and Gas Association, said he opposed any further tax on oil and gas. J. W. Collins of Panhandle Producers and Royalty Owners Assn. and George Anderson Jr. of the North Texas Oil and Gas Assn. also testified against further taxes on oil and gas. Rep. Max Carriker of Roby asked Collins, “Is it a good measure of a business tax to be able to pass it on?” “I have heard it said this is one way to tax pipelines,” Collins said. “But the question of whether this tax can be passed on or not is not a big question. The oil and gas interests as a whole are being too disproportionately taxed.” “Then do you subscribe to the principle of ability to pay?” “Yes, I do,” Collins replied. Correction The Observer reported in a recent Political Intelligence column that Cong. Jim Wright’s Tarrant County chairman is Bill Brown, former Shivers supporter. Wright’s supporters in Tarrant County have informed us we were in error. Bill Brawn is not his county campaign manager. We regret the error. Stand-Ins In Austin Reach Peak AUSTIN More than 400 high-spirited white and Negro demonstrators walked the sidewalks in front of four theaters here for four hours on Lincoln’s birthday, once again seeking integration of the movies, and once again being denied. Elsewhere in Texas, demonstrations were conducted at theater houses in Dallas and San Antonio, part of a national series of sit-ins all having their impetus and beginnings in Austin. Mostly the demonstrators were of college age. Roger Shattuck of the Romance languages department and John Silber, philosophy professor, were among the few University of Texas faculty members who turned out. The Rev. Lee Freeman of the University Baptist Church was the only minister identified in the line. The demonstrations were conducted as usual: the pro-integrationist would ask the theater attendant if Negroes were being admitted. Sometimes the question would be more pointed, such as, “Do you still discriminate against Americans?” When he got his answerusually polite, always short the demonstrator would turn away and go to the end of the line to repeat the process and another demonstrator would step up to continue the gentle harassment. On the Drag, the Texas Theater, part of the Trans-Texas chain, and the Varsity, part of the Interstate chain, were hit. Downtown, the State and the Paramount, in Interstate, were subjected to the line-ups. There was no question about the effect on business. At the Texas, for example, there were seven patrons in the movie house when the demonstrations started at 2 p.m. Twenty-five minutes later two college-age boys bought tickets, and 15 minutes later two girls went in. If tempters wore thin occasionally, this was true not among the demonstrators but among some of the attendants and spectators. Charles Root, Austin manager for Interstate, told Mrs. Frances Rainwater and Mrs. Ethel Barrow they should “go back to Russia,” if they felt minorities are sometimes right and majorities wrong. This spat occurred on the sidewalk in front of the Varsity. Later Root told the Observer, “They have their rights and we have ours, I would try to explain our position to them by the hour, if I had time, but I don’t have time.” Root said the demonstrations aren’t hurting business. “People think this is a great show,” he said. “They come to see the demonstrators but stay to see the movies.” .Sharp Exchanges In Berry Hearing AUSTIN Texas independent oil and gas men stood adamant against Gov. Price Daniel’s proposed three percent temporary increase in natural gas production before the House tax committee Friday. The bill, introduced by veteran legislator George Hinson of Mineola and estimated to net $22.5 million as part of the emergency deficit-retiring program, was largely attacked on grounds that the levy could not be passed on the governor had said