Evening star., 1935-07-16
PROCESSING TAX
HELD SALES LEVY
Adverse Court Decision May
End Benefits Exclusive
to Farmers.
BY DAVID LAWRENCE.

Is, the publc opinion loNldy IiioV o"eNV
to be more aroused at this misuse OF
the taxing power than over any other
article of the Federal Constitution
NAV be said to be passively indifferent.
But the Federal courts are full ol
cases and some Monday afternoon
when the Supreme Court hands down
an opinion, the whole country will
suddenly become aware OF what these
processing taxes mean, and the ad-
verse decision-for it seems certain to
come-will cause far more OF furry
than did the N R. A. decision in the
poultry case.
What are processing taxes? 1t Is
a safe bet that four out of five persons
who have read the phrase have never
sought to find out but have taken IT
for granted that it is just like any
other tax on an article like cigarettes
or beverages.
Big Difference.
But there's difference. The taxes
we have known for generations are
levied on the finished article and are
used to support the whole Govern
ment. The processing taxes" are
imposed on a farm article when II
leaves the producer to go into the first
step of processing or transformation
on its Journey from producer to mid
dleman and finally to distributor.
The money collected goes to the farm
ers only and is not used to meet gen.
era1 exOPOSeS of Government,
The processing taxes run something
like this: Wheat, 80 cents bGShel;
cotton, 4.2 cents per pound; hogs, 2.25
cents a pound; corn, 5 cents bushel;
tobacco, about cents a pound, vary
ing with the types; sugar, lucent a
pound, and so on.
Who fixes the taxes? Congress? Not
at all. The Secretary of Agriculture
does it. The formula he applies is
prescribed by Congress and uses the
period from 1910 to 1914 as the basis
of calculations. Let us take wheat for
example
If the wheat price in the open mar
ket was 80 cents bushel and price
of S1l0 was found to be needed SO as
to give the wheat grower the same
purchasing power In terms of clothing
or industrial goods as he enjoyed in
pre-war years. then the tax would be
set at 80 cents buShel. The Govern
ment pays the farmer this sum. His
prices are supposed to rise because
less wheat is produced when acreage
Is restricted.
The theory that a bushel of wheat
should buy the same amount of goods
as it did in the four years between
1910 and 1914 is called giving the
farmers pre-war parity"
Can Tax Above Parity.
But the whole set-up is rather loose.
A tax can be levied for only one year
at time. If prices reach the desired
level during that time there is no obi
cation on the Secretary of Agriculture
to reduce the tax before the next year
starts. Nor can he be prevented from
continuing the taxes even If prices go
above parity. This is what has stirred
up the tobacco industry where the
prices given the tobacco grower are
above parity already. In the case of
wheat the miller pays the processing
tax and passes it on to the next in
line as an extra cost and finally the
consumer pays it in higher prices for
bread. The packers pay the process
ing taxes on hogs and the refinerS pay
the sugar tax.
1t Is hard to tell who in the end
really pays the tax between the first
professor and the consumer and in
other cases it is passed on wholly to
the consumer in the form Of higher
prices.
Sometimes the high price scause
resistance on the part of buyers and
there are less products moved to mar
tket. But it would take extensive re-
search into the whole problem Of
marketing to find out just what dam
age the processing taxes have done
to all those who handle farm prod
ucts and to the consumers.
Money Rents Idle Land.
The revenues are used by the A. A.
A. to rent" a part of farmers
land. The theory is that the Gov
eminent assumes control of certain
number of acres, formerly planted in
wheat or cotton or corn, as the case
may be- The check goes on condition
that planting is held within the limit
set by the Government. This control
is an essential feature OF the plan
to prevent overproduction.
Back of the whole idea is the belief
that If production is restricted there
will be no glut on the market and
hence the price will stay up. The
conception has been used by indus
trialists and. indeed. many of them
wanted the N. r. A. just to enable
them to limit production and keep
their prices at an artificial level.
The problem of administering the
s"rental and benefit" payments is
colossal. Some payments, for in
stance, are being made this year to
wheat farmers in the Northwest who
make no acreage reduction at all, but
who have promised to rent their
acres next year for money given them
this year.
Also with respect to hogs, farmers
couldn't raise a full crop If they
wanted to do so, because there isn't
enough feed. But they get benefit"
checks just the same.
Like a Sales Tax.
The A. A. A. insists the farmers get
all these benefits, just as the manu-
facturers get tariff, and that, while
the consumer is penalized, it is not
too severe. But like the old flexible
tariff, of which some member Of the
tariff commission said. "it was like
an elbow that hexed only one way" so
might it be said of processing taxes
they are never reduced or removed
when once they are imposed.
Processing taxes are really sales
tax of about 81 q year on every man,
woman and child in the Nation. They
force city people to pay farmers for
the privilege Of enjoying higher
priced food. They finance an in
crease In the cost of living.