Mr. RAINEY. In fact, it would not be necessary to put that much on it, would it? Mr. KEITH. It would be necessary simply to label it "mixed flour." Mr. RAINEY. Suppose it is labeled according to the requirements of the country to which it is to go; would that be sufficient? Mr. KEITH. I should say it would. Mr. RAINEY. Under the law as it now stands? Mr. KEITH. As it now stands. We would have no concern in the Internal Revenue Department with whatever laws might be in force in the country to which it is exported. That would be a matter for the pure food people of the Department of Agriculture to look after. Mr. RAINEY. Yes; that is true. But from your knowledge of this law. Mr. KEITH (interposing). That would meet all requirements. Mr. RAINEY. That would meet all requirements if it were labeled according to the requirements of the country to which it was going? Mr. KEITH. Yes. Mr. RAINEY. And no percentages need be stated unless it is required by the country in which it is to be sold? Mr. KEITH. Yes, sir. Mr. RAINEY. In fact, they would not have to put "mixed flour" on unless the law of the country in which it was sold required it, would they? Mr. KEITH. Yes; they would have to mark it, even for export, as "mixed flour." Mr. RAINEY. Under the bill we are considering, if a package is intended for export it would be necessary, would it not, to put on a label under this bill similar to the label I have indicated in this second exhibit, to which I have called your attention? Mr. KEITH. Yes, sir. That is the way I would construe this bill. Mr. RAINEY. That is, the purchaser of flour would be advised as to the contents of the package from America? Mr. KEITH. Yes, sir. Mr. RAINEY. And he is not now advised unless he makes some chemical investigation? Mr. KEITH. We require on the shipping container the words "mixed flour," but further than that there is no requirement. Mr. RAINEY. But to find out how much corn flour or how much corn starch is contained in the flour when it gets over there he has to investigate that himself by chemical investigation? Mr. KEITH. Yes, sir. Mr. RAINEY. This label would advise the foreign purchaser of this flour, as well as the domestic purchaser, just exactly the percentages of ingredients that have gone into the package, would it not? Mr. KEITH. Yes, sir. Mr. DIXON. Do you understand that this law was enacted for the purpose of raising revenue? Mr. KEITH. I understand that was the purpose. It was a part of the Spanish War revenue act. Mr. DIXON. I know it was a part of that act; but do you understand that that was the plain purpose of the enactment of that provision? Mr. KEITH. So far as we are concerned, in the Internal-Revenue Bureau of the Treasury Department, when we get a measure of this kind we go upon the assumption that it was primarily a revenue measure. Mr. DIXON. You say the expense of collecting this revenue exceeds the amount of receipts? Mr. KEITH. Yes, sir. Mr. DIXON. How about the pure food and drugs act? What expense are you put to in the enforcement of that act? Mr. KEITH. What bill is that? Mr. DIXON. The pure-food law. Mr. KEITH. We do not have the pure-food law under our jurisdiction. Mr. DIXON. Do you know anything about the expense of enforcing it? Mr. KEITH. No, sir; I could not speak as to that. Mr. DIXON. Now, then, as to these exports of mixed flour. Have there been any exportations since the enactment of this law? Mr. KEITH. There was some exported in the fiscal year 1899, immediately following its enactment, and thereafter there was none exported until the beginning of the European war. Last year they did start exportation under this law, but the exports were nominal, as shown by the figures in this table which I have presented. Mr. DIXON. You say the proportion of this corn and wheat or any other ingredient of flour is not stated upon the package for export? Mr. KEITH. No, sir; it is not required. They state the ingredients of the mixed flour, but they do not have to state the proportions, nor do they have to state the ingredients in their order-in any particular order of preponderance. Mr. RAINEY. How many manufacturers were engaged in this business-that is, the mixed flour business at the time the mixed-flour law was passed? Mr. KEITH. Why, I could not say as to how many were engaged at the time it was passed; but the first year following its enactment only 94 qualified. Mr. FORDNEY. That is, after the enactment of the law? Mr. KEITH. Yes, sir; that was the first year under the operation. of the law. There were only 94 who qualified. Mr. RAINEY. And in subsequent years how many? Mr. KEITH. Well, 100 in 1900; then, taking the years in their order, 96, 42, 33, 18, 14, 28, 31, 24, 22, 18, 20, 14, 22, 20, 35. Last year there were more than for a number of years past. Mr. RAINEY. This statute law has not helped any to build up that industry, then? Mr. KEITH. Apparently not. Mr. RAINEY. What class of manufacturers is engaged in this business? Mr. KEITH. Manufacturers who prepare special brands or special mixtures for certain culinary purposes, such as pancake flour, selfrising, and flapjack flour. Mr. RAINEY. How about the so-called health flours? Mr. KEITH. A few of those come within the scope of the law. Mr. KEITH. And pay this tax. Mr. RAINEY. In enforcing the law, collecting a tax of this character, under your rules and the revenue laws, what sort of restrictions are placed upon the sale, either wholesale or retail, by those who handle this flour? Mr. KEITH. There is not any restriction upon the dealers except they must sell it in the packages marked and put up by the manufacturers. There is no special tax imposed upon the dealers, therefore there is no definition of dealers, and so far as we are concerned a man may wholesale it or retail it either. He may break the package, as long as he sells it from the original package. He might break a barrel and sell out of it and the law does not say how he should make the sale, whether he should brand it or not, because there is nothing in the law that refers to dealers. Mr. RAINEY. What about the destruction of the stamps by the dealers, destruction of empties? Mr. KEITH. After the packages are emptied they have to destroy the stamps. As to the containers, he could use them for another purpose, but he could not reuse them for packing mixed flour. Mr. RAINEY. In that respect it is just like the cigar tax? Mr. KEITH. Yes. Mr. RAINEY. Or the whisky tax? Mr. KEITH. Yes, sir; the bottled in bond whisky. Mr. RAINEY. The effect of this tax has been to carry over to this product the same sort of restrictions which govern the sale of whisky and cigars? Mr. KEITH. In so far as the revenue features are concerned; yes, sir. Mr. RAINEY. And so far as the containers and stamps are concerned? Mr. KEITH. The destruction of the stamps on the packages; yes, sir. Mr. RAINEY. And what have you to say as to records that are necessary to be kept? Mr. KEITH. The manufacturers keep the records. No one else comes within the scope of the law, and therefore we have no other records to make. Mr. RAINEY. That is also true of whisky. There are the same requirements with reference to the sale of whisky? Mr. KEITH. Yes, sir. Mr. RAINEY. I presume dealers get the same impression concerning the stamps on this mixed flour that they have about the stamps required on cigars and whisky, and that has a tendency to keep the business down and to destroy it? Mr. KEITH. There has been complaint of the restrictions and burdens of the regulation interfering with this particular business that I have referred to; that is, the pancake and self-rising flour manufacturers. They complain about the regulations and burdens imposed upon them. Mr. HELVERING. Mr. Keith, you have been in the department during the whole life of this law? Mr. KEITH. No; I came in in 1900; January, 1900. Mr. HELVERING. That was before the amendments to the law? Mr. HELVERING. Then you know the history, as to why this law has been retained, do you not? Mr. KEITH. Only so far as I have read the hearings and heard others speak, and of course that is not knowledge, that is hearsay. We assume that it was a revenue measure primarily. That is the view I have taken of it, as it was part of that revenue act. Mr. HELVERING. I know, but all of the revenue acts having been repealed, then, as a matter of fact, this remains as a regulatory act, does it not? Mr. KEITH. We never considered it as regulatory, except incidentally. The fact that it remained we just considered as practically an oversight, due to certain reasons which Congress alone knew, and they desired to retain it. We did not go into that phase of it. Mr. MOORE. What were those reasons, apart from the revenue features? Mr. KEITH. I say those reasons, as far as we are concerned, are reasons which actuated Congress to leave in force this part of the Spanish War revenue act. Mr. MOORE. Were they not to prevent adulteration under the pure-food law? Mr. KEITH. They might have been. Mr. MOORE. Was not that the fact? Mr. KEITH. I can not tell what the intentions of Congress were. Mr. MOORE. Were you in the department in 1898? Mr. KEITH. No, sir. Mr. MOORE. Do you know of a series of communications or letters from millers and others which had reference to mineral substances in flour? Mr. KEITH. Only by hearsay. Mr. MOORE. Mineral substances that were mixed with the flour? Mr. KEITH. I only know that by hearsay. Mr. HELVERING. You spoke about the expense. You said that the revenue collected would not meet the expense of one agent. Now, what part of the time of an agent in any district is consumed in enforcing this law? Mr. KEITH. As I stated, we could not separate the cost of the enforcement of any particular statute, because the same officers. throughout the country devote a portion of their time to the enforcement of every internal-revenue statute. I could not separate and say that it costs so much for this law. When I made that statement I had reference to the fact that this law provided for 20 revenue agents to be appointed, under the operation of this statute, and I think they appointed them all. Mr. HELVERING. This statute which provides the internal-revenue measure was strictly the internal-revenue measure, and not the mixed-flour law? Mr. KEITH. Yes. Mr. HELVERING. You say there are 35 manufacturers who qualified under this law for last year? Mr. KEITH. Yes. Mr. HELVERING. That is in all the United States? Mr. KEITH. The entire United States. Mr. HELVERING. How many agents have you in the United States? Mr. KEITH. I could not say. There are 40 regulars, and I do not know how many of the specials under other laws. Mr. HELVERING. There are somewhere about 60 revenue agents, are there not, with the regular agents in the regular territories and the special agents? Mr. KEITH. Yes-no; I would not like to make that statement. There are several agents that are appointed under the income-tax law. Mr. HELVERING. Well, to be perfectly correct, there are 41 regular agents? Mr. KEITH. Yes. Prior to the passage of this law there were 20 of them. Mr. HELVERING. And when you say "prior to the passage of this law," you do not mean the flour law itself? Mr. KEITH. Well, the Spanish War act; but this law carried the provision for 20 agents. Mr. HELVERING. Including all of the Spanish War revenue? Mr. KEITH. Of course I do not know whether that was the intention of Congress or not, whether it was to include all of the Spanish War revenue act. They also provided for additional deputies. Mr. HELVERING. What I am trying to get at is this, Mr. Keith, as a matter of fact, there is not an average of one man's business qualified under this act for each revenue agent of the United States, is there? Mr. KEITH. I do not quite catch that. Mr. HELVERING. You said there were 35 qualified manufacturers. Mr. KEITH. Yes, sir. Mr. HELVERING. Then there is less than one man for each revenue agent necessary to be examined? Mr. KEITH. You mean for each agent there would be only one manufacturer to examine? Mr. HELVERING. Yes; less than one. Mr. KEITH. Yes, sir. Mr. HELVERING. In connection with your statement that it did not provide revenue sufficient to pay one agent's salary, the fact of the matter is that it would take a very inconsiderable part of his time, would it not? Mr. KEITH. Well, but we have got to take into consideration the time of the 35, or the number of agents, and that is what I had reference to, the comparative amount of revenue with the total cost, the salary of an agent, if one agent handled it all. Mr. HELVERING. How many agents do you think you would be able to dispense with if this law was repealed-revenue agents? Mr. KEITH. I could not say as to that. As a matter of fact the same agents would have other duties to perform. Mr. HELVERING. As a matter of fact you would not be able to dispense with any, would you? Mr. KEITH. I could not state as to that. Mr. HELVERING. In your opinion you could not? Mr. KEITH. Well, I could not say. Mr. HELVERING. You are not making a sworn statement as to the fact, and you can state your opinion as an expert on this matter. Mr. KEITH. Well, we could use the services of those men on other lines with greater profit to the Government. Mr. HELVERING. That is, as a revenue measure? |