Evening star., 1942-02-26
Billion Saving Seen
In Bill 10 Abolish
Contract Taxes
Cochran Declares
Measure Also Would
Speed War Effort
BY GOULD LINCOLN.

Declaring that taxpayers would
,-be saved more than $1,000, ,000, 900
and the war program expedited by
the passage of his bill to exempt
payments on the Governments
soosr-plus-a -flxed-fee contracts from
local, municipal and State taxes,
Chairman Cochran of the House
Committee on Accounts today urged
the Ways and Means Committee to
take favorable action on the meas
ure.
The War and Navy Departments,
he said, have approved the proposed
legislation. The Treasury Depart
,ment, on the other hand, has with
held its approval.
THE Treasury Department takes
the position that taxation Of de-
fense activities is non-discrimina-
tory" Representative Cochran said.
at is my opinion that the depart
ment assumes this attitude because
it does not want to jeopardize the
position that it has taken for over
80 years in endeavoring to get Con-
gress to pass legislation that would
provide that the interest on State
and local securities be included in
Federal income tax returns; in fact
the Treasury Department so admits
in its report on the bill"
Cites Estimates.
Mr.. Cochran said that based on
estimates of total expenditures Of
$4,000, 900 ,000-for national defense
the Attorney General estimated
last summer that the exemptions
from local and State taxes asked in
Mr.. Cochran's bill would save the
Government S137;0O0,0O0 for the
fiscal year 1912 alone.
IT have been advised" he said,
''by the Army and Navy that it is
now estimated that the probable
savings will amount to over billion
dollars, since the expenditures will
be 10 times the amount on which
the Attorney General made his
estimate"
Mr.. Cochran pointed out that the
Supreme Court, in the Alabama
case, clearly indicated that it was
up to Congress to pass legislation If
immunity was to be granted from
sales and other taxes and in so
saying it can certainly be assumed
that the court felt that the Con-
gress had the power to grant such
immunity and make it retroactive.
The Army and Navy especially are
being harassed by States and in
some instances subdivisions of States
that demand compliance with their
tax laws.
Gives Hawaii as Example.
"Even Hawaii is causing the Army
and Navy a great deal of trouble.
Immediately after Pearl Harbor the
Government gave relief to the extent
of S30,000,000 to Hawaii. In Hawaii,
for example, at this time Army and
Navy officers are attempting to ad-
just and compromise tax claims
pressed with respect to Navy con-
tracts by the Territory. Acting under
their gross receipts tax statutes,
the Territory insists on collecting a
part of every dollar spent through
.cost-plus contractors in making the
islands impregnable against further
Japanese attack.
"If a Navy contractor spends a
million dollars in employing labor
and purchasing materials to per-
form work under the contract the
Navy must Immediately reimburse
him; then the Territory demands
$12,50O of this amount from the
contractor in taxes, and the Navy
must thereupon pay to the con-
tractor this additional sum exacted
by the Territory.
What is true of the Territory of
Hawaii is true also of many States
which have similar gross receipts
or gross income taxes"
Confusion Seen.
Mr.. Cochran insisted, however,
that as great as the financial bur-
den was because of the demand
for the payments of these taxes on
the Army and Navy contracts by the
States and cities, the administrative
burdens and confusion resulting
since the court decision in the
Alabama case have been just as
troublesome and have hampered
the defense program by delays. The
tax liability, he said, was not clear
and brought hesitation and inde-
cision.
Another matter" said Mr..
Cochran, that is causing consid-
cradle concern to the War and
Navy Departments is the action of
the telegraph companies who con-
tend that under this Alabama de-
cision the War and Navy Depart
ments are not entitled to Govern
ment rates and priorities on tele-
grams sent to expedite war produc-
ton under -plus-a-fee contracts
AS a result of this decision the
Navy Department filed a brief be-
fore the Federal Communications
Commission oSkipo for roIjaf