AUSTIN Almost a score of corporation representatives argued for a more favorable business climate, protested against a “dangerous trend” in Texas tax policies, and got in a few plugs for a general -sales tax in hearings this week before the House tax committee on Gov. Daniel’s franchise tax aimed at the major interstate corporations. Texas forests,” pays in franchise taxes “only a fraction of your total capital because most of your sales are out of state.” A small sawmill doing all its business in Texas is taxed on 100 percent of it capital, he argued. Asked by Rep. Tony Korioth his opinion on what kind of taxes his company should pay the state, Coombs replied, “Purely from the standpoint of attracting industry, I don’t think any are attractive.” He advised the committee to take into account not only the amount of franchise taxes paid by a company, but all other taxes as well. Raymond W. Hedges of the Odessa chamber of commerce also argued for a “better business climate” to attract new industries. “I think individual citizens in Texas aren’t paying their fair share of taxes,” he sad. Korioth expressed his opinion that when corporations come to the state “they create extra social needsfor more teachers, schools, roads, and welfare programs. It’s the growth of the state that’s created these problems,” he said. The fact that the legislature is now faced with mounting social problems would indicate that large corporations have not paid a fair share. Hedges vigorously disagreed. Curtis Cadenhead, representing Lone Star Steel, said a franchise tax increase “would be a deterrent to business. The sponsors said we should be ;interested in selling to the people-of Texas. But you can’t get rich merely selling to a family of twelve sitting around a table.” Eckhardt asked Cadenhead if he agreed that, in a competitive situation between larger and smaller companies in one industry, the fact that the franchise tax falls equally on both creates a definite tax inequity. “The franchise tax should only be a permit tax,” Cadenhead replied. “I agree,” Eckhardt said, “but as long as we’ve got thus tax, we should equalize the burden on the larger and smaller companies.” Stewart argued that an increase in the franchise tax would increase levies on companies with plants and payrolls in Texas and One who came to sae the movies but stayed to watch the demonstrators was Sen. Frank Owen III, who stood in front of the Paramount and watched the line. “This is a glorious day for a lot of misfits,” he told the Observer. “Sensible people pull themselves up. I came off a farm. I know.” He later told the United Press bureau chief, Pat Conway, tha.;; the demonstrations were “communist inspired.” Lt. Gov. Ben Ramsey parked across the street and watched for a while, at one point chatting with Root. When a reporter walked .up to Ramsey’s car, he drove away. James McLarty, manager of the Texas theater, and his assistant were polite, refusing to be drawn into an argument. One Negro girl said to McLarty, “If I live a perfect life and you live a favor corporations like U.S. Steel over Lone Star. Murray asked Cadenhead what tax he would propose to take the place of the franchise tax. “A broad based sales tax,” Cadenhead replied. “You are suggesting this as a substitute for the franchise tax?” Murray asked. “Why not?” Cadenhead said. “I heard two years ago, when I sat on the conference committee, that on taxes it’s a matter of business vs. the common people,” Murray said. “We ended up with corporations and big business carrying 25 percent of the tax load and the people 75 percent. All we hear you people telling us is you don’t want to pay any more on taxes.” “Business doesn’t mind at all paying its fair share,” Cadenhead argued. “They didn’t do it two years ago,” Murray responded. “I’m for you on a sales tax, but we’ve got to have something to go along with it.” Cadenhead said he agreed. Rep. Sam Collins said, “You stand there suggesting what the common people should pay. I want to know what business should pay. I think business is getting a lot out of Texas too.” E. E. Mathison of Rockwell Valves, Inc., said Texas tax policies were contributing to “a dangerous trend” for business. “I think we still have a pretty fair climate, but I urge you not to do anything to mess it up.” Dean Grossnickle of Dresser Industries said, “This tax doesn’t solve the state’s financial needs it’s only a small’portion of what you seek to raise.” Advocating a sales tax, he said “all citizens share the tax burden, the payee knows when he pays the taxes, and visitors to the state will increase revenues.” James T. Cox, representing Schlumberger Well Surveying Corp., stressed the jobs and the payroll his company creates in Texas. “We move around from state to state,” he said. “We don’t wait for taxes to be enacted. We move when we see a trend that points in only on direction.” He said that although his company derives only one-third of its income from Texas, it pays twothirds of its taxes here. “If you must raise taxes,” he advised, “impose one that raises revenue rather than one that attempts to enact social legislation through taxes.” A tax proposed to hit certain businesses “is a destructive, deterioriating thing.” perfect life, do you think you’ll get into heaven but I won’t?” McLarty said, “I don’t know,” and she went off smiling, “Well, think about it.” Among the chief morale builders with the demonstrators was Andy Schouvaloff, 27, vice-president of the UT Young Democrats, who alternated between leading rousing choruses of “We’ll send Bill Blakley C.O.D. to Stanleyville” \(to the tune of “Battle ing pictures of the attendants with a filmless camera, leaning into their faces and urging them to smile. Another leader was Gwen Jordan, 21, a senior at UT majoring in sociology. Whenever it was her turn to ask the attendants for a ticket, Gwen, a Negro, serenaded them either with impromptu ditties or with such songs as “It Could Happen to You.’ .’ Finally Rep. George Hinson of Mineola asked, “You said yOu’ve traveled in 30 states. You gave us a severe warning not to do anything tonight. Don’t you make the same type of speech in each state?” “No,” Cox replied, “some of them we got out of.” Hinson: “But don’t you go into every state and say, don’t chase us out with new taxes? Aren’t you peddling a little gloom and doom?” Cox: “Through my office I dish out $12 million a year. I don’t want to do it carelessly.” Later, in a bantering exchange over problems facing the legislature, Cox said, “We have a certain advantage over you. You have so many things to think of.” “I reckon that’s the reason you all are so far ahead of us,” Eckhardt replied. Cox contended, in concluding, “I’m convinced there’s no conceivable way to tax a corporation. You can assess a bill to a corporationbut it has to come from some customer, or stockholder.” Judge E. H. Foster of Phillips Petroleum warned that the franchise tax was only one of several proposed bills which would affect oil and gas. In 1959, he said, he had been asked whether he preferred a franchise tax or a corporate income tax. “We said we didn’t choose to have either one. But if we had to choose, if you want to talk about an equitable tax, we’d take the corporate income tax.” “That don’t mean you should gO out here and go hog wild, thou -et,” he added. “Mr. Murray says, where are you gonna get the money? I think that’s a good question,” Foster said. “All I say is, Mr. Murray, don’t look at me.” Asking for a fair tax, he said, “This tAx piles inequities on inequities. counsel with you, talk with you, but I’m not willing to lie down and roll over and take this tax bill.” In the rebuttal, Cannon argued, “These witnesses are begging the question when they talk about broad-based taxes. If you have a highway with chugholes, you can put a broad base of asphalt over it, but the chugholes remain. Those chugholes are the loopholes in the present franchise law. “We want to do two things retire the deficit and close the inequities. The whole legislature realizes we may have to pass a broad-based tax this timea sales tax, or payroll tax, or income tax -but let’s cure the inequities first.” W.M. the attendants were applauding her. Toward the end of the demonstration, four boys showed up with a placard that read on one side, PROTECT THE RIGHTS OF WHITESDEFEND SEGREGA-TION, and on the other side, “I DO NOT BELIEVE IN THE SO-CIAL OR POLITICAL EQUAL-ITY OF OUR TWO SEPARATE RACES” \(Abe Lincoln, 2nd Inaug. The boy carrying the sign identified himself as Austin Bray, 19, a history major at Southwestern University. Another identified himself as Stephen Spence, 19, a sophomore pre-law student at UT. The other two refused to give their names, one on the basis that “the last time my name got in print, Gov. Daniel demoted my father.” Bray told the demonstrators, “I suggest you face reality and not a bunch of idealistic theories.” Texas Cities Witness Protests AUSTIN The Lincoln’s Day stand-ins against segregated theaters Feb. 12, planned by Students for Direct Action at the University of Texas, were held not only in Austin, but also in Dallas, Houston, San Antonio, Shreveport, New York City, Chicago, and reportedly in other cities. In Houston, about 200 Negro and white students demonstrated at three downtown theaters. Eldrewey J. Stearnes, president of the Progressive Youth League, stated, “We are Americans. It is horrid to see foreigners allowed into the first-run theaters and not us.” Negroes and whites rotated in lines at two of the theaters; at a third, Negroes only formed the line, and tickets were sold in the street. Students participating came from Rice, the University of Houston, the University of St. Thomas, and several high schools. In San Antonio, 45 students demonstrated three hours in front of the Majestic downtown. Negroes were told to go to the entrance at the back of the theater on the other side of the block. The stand-inners were turned back about ten feet from the boxoffice. Father Sherrill Smith, a Catholic priest who sometimes represents the San Antonio archdiocesan policy in controversial matters, addressed the San Antonio group beforehand. “The matter of interracial justice is a matter for all Americans,” he said. “If I were a sudent, I would be marching with you.” Lone Castillo, chairman of dents for Civil Liberties, advised the San Antonio demonstrators to avoid arguments, conversation, jaywalking, and loitering, and told the girls not to wear jewelry or chew gum or smoke. In Dallas, one all-Negro group began standing-in against Elm Street theaters at 2 p.m., and an hour later an integrated group, apparently acting independently, joined them. Main targets were the Palace and Majestic. Many of the students in the second group came from Southern Methodist University. Thomas Hayden, editor of the Michigan Daily at the University of Michigan and a leader in U.S. student work, advised the Observer from New York City that about 100 students demonstrated against theaters in chains with segregated theaters on Times Square as part of the Lincoln Day activity. Hayden also said he had checked with Chicago and learned that another 100 students had demonstrated against theaters on the loop. Chandler Davidson, philosophy student from El Paso and director of Students for Direct Action at U.T., said he picked up news reports on radio from Shreveport, La., telling of 150 students, mostly from Centenary College there, standing-in Feb. 12 against downtown theaters. Reports also reached Austin of stand-ins Feb. 12 at San Francisco and Boston. Davidson and the other principal figure in S.D.A., Houston Wade, graduate genetics student from San Antonio, were considering forming a statewide student civil rights organization if theaters are not integrated in response to the demonstrations. R.D. THE TEXAS OBSERVER Page 3 Feb. 18, 1961 Carrying the bill for the governor, Reps. Franklin Spears of San Antonio and Joe Cannon of Mexia defended the measure, estimated in net $10 million annually, on grounds that the present franchise levy discriminates against Texas companies doing most of their business in the state. After hearing testimony into the late hours Wednesday, committee chairman Charles Ballman referred the bill to a subcommittee composed of Rep. Bill Pieratt, liberal from Giddings, Minton Murray, conservative from Harlingen, and Bob Eckhardt, liberal from Houston. The Observer is advised that the measure may reach the floor by the middle of the week. The subcommittee will also consider a substitute offered by Rep. Maco Stewart of Galveston. His bill would eliminate the present franchise tax and levy a corporate income tax of one percent for an estimated $115 million annually. The bill will affect “only the 7,000 corporations engaged in in . terstate business,” Spears said in stressing parts of Daniel’s tax message. “Under the present law some foreign corporations have property and operations in this state 100 times as large as some of your hometown, wholly-domestic companies and still pay less in franchise taxes than your own companies. They have a tax haven here which exists in no other state except Washington. “You’ll hear these witnesses say that people will move out of Texas if we pass this tax,” Spears said. “When you hear them bleed and cry that we’re ruining them, remember that Washington and Texas are the only two places that allow these interstate companies such a favorable franchise tax.” He cited a Texas A&M study that showed taxes behind ten other location factors in Texas industries: “It’s not our intent to discriminate against any business,” Cannon told the committee. “But as it is now, we are discriminating against our own companies and giving a tremendous advantage to the interstate corporations who are drawing our natural resources out of our state without paying their fair tax share.” Norman Coombs, tax authority
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