The second phase of our work, for the adjustment of these taxes, represents an effort to answer the questions: Why are these taxes what they are? Why have they gone up? For what purposes have the expenditures been made in the various parts of the country that have caused this economic burden upon farm real estate to be what it is?

The third phase of our work in this has to do with means of reducing taxes. We are cooperating with a number of States on this, just a few. We have, for instance, cooperated with the State of Louisiana and have available a State bulletin on farm taxes in that State. That is part one of a contemplated series of three reports. We are assisting in similar undertaking in Montana and elsewhere.

Now we believe that in order to help solve this problem, research agencies should make available factual information not only on how severe the burden is or why it has come to be what it is, but also where the possibilities are for a reduction in those burdens. We can not tell the people of a State or county that you should not have the schools you have or the roads you have. It is inherent in our basic form of democratic institutions and local and State rights, that the people themselves should determine that through their channels of expres sion. But we do believe that our research should make available information on what economies may be effected.

For instance, we have been cooperating with the Wisconsin experiment station in studies on savings that may be made by the combination of certain rural counties in northern Wisconsin; what savings can be made by certain reorganizations in the services and functions of those counties, and counties in the southern part of the State.

We often hear, "Oh, if you will only consolidate counties or rearrange this or that, you will save half of your taxes." But could we?

We are endeavoring, in a small way, to determine what the possibilities are and have hardly more than made a start in that direction. So, summing up, we believe our function is to determine what has been the increase in taxes, and what some of the economic effects of that increase are. Mr. Olsen has spoken of tax delinquencies, tax sales, the reversion of lands to public_ownership by reason of there being no buyers for tax certificates, and so on. Those are in the class

of economic consequences of severe taxes on the property. Secondly, our information will show, we believe, that there is a relation between the fiscal policies that have been followed in the several States and the burdens that have piled up on farm real estate. Now, we believe that can be shown and some of it will be almost self-evident upon an inspection of the State figures here.

Thirdly, we want to know where economies can be effected without serious injury to public services in these communities. We recognize that State problems are so closely tied up with this that we are cooperating with the States in these studies-not as extensively as we should like or as they want us to, but we are cooperating with them in the local situation here and there.

COSTS COMPARISONS OF FEDERAL, STATE, AND LOCAL GOVERNMENTS

Mr. BUCHANAN. Have you any figures on the combined tax burdens of the States, cities and towns and other local taxing units of the State any figures showing a comparison of their total and the total of the Federal tax burden, to show which is the greater?

Mr. ENGLUND. We could very readily give that, I think.

Mr. SANDLIN. The subcommittee you spoke of a while ago has just gotten out a statement which gives that in detail.

Mr. ENGLUND. I shall be glad, Mr. Chairman, to insert at this point a brief statement:

COST OF GOVERNMENT

The increase between 1913 and 1930.-In 1930 the combined cost of Federal, State, and local government amounted to nearly 13 billion dollars, or more than four times the prewar cost. The average cost for every man, woman and child in the United States in 1930 was $104. Of this amount $28 is attributable to the Federal Government, $18 to State governments and $58 to local governments. Stated differently, the disbursements by Federal government account for 27 per cent of the cost of all government, State government 17 per cent and local government 56 per cent.

Between 1913 and 1930, Federal costs increased 404 per cent in large part on account of the World War; and the cost of State government for the United States as a whole increased from $380,000,000 to $2,170,000,000, an increase of 471 per cent. During the same period the cost of local government increased 286 per cent. Because of the increase in population, per capita costs increased somewhat less than total costs; that for all government being 246 per cent, Federal 296 per cent; State 348 per cent and local 207 per cent (See Table 1). The total increase in the cost of government between 1913 and 1930 was $9,829,000,000. Of this total increase the Federal government was

responsible for 28 per cent, State governments, 18 per cent; and local governments, 54 per cent.

Much of the increased costs are for capital outlays. In 1913, for example, 12.7 per cent of the cost of State governments was for capital outlay; but in 1930, 34.4 per cent was for this purpose. Comparable figures for local government and for the Federal Government are not available.

Figures showing the trend of gross governmental expenditures (including debt redemption) are shown in Table 2. The table is a reproduction of Table 1, page 17 of the 1929-30 edition of "Cost of Government in the United States" by the National Industrial Conference Board.

TABLE 1.-Cost of Federal, State, and local government; United States, 1913

The phrase "cost of government" refers to what the United States Bureau of the Census calls "governmental-cost payments." These include payments for operation and maintenance, outlays, expenses of public-service enterprises, and interest. They do not include payments for debt redemption.

Post-office costs are not included.

It was not possible to eliminate payments for debt redemption by local government in 1913, nor was there a reliable estimate available for 1930. The figure given for 1930 is the one estimated by the National Industrial Conference Board for 1929. Of a gross cost of $7,126,000,000, $406,000,000 were for debt redemption. Payments for debt redemption are not included in Federal and State costs.

The total cost for all government includes no duplication due to Federal and State aids. Federal aid to States is included in Federal costs but deducted from State costs. State aid to local government is included in State costs but deducted from local costs.

Sources of data: Annual Report of the Secretary of the Treasury, 1913, p. 14, 1930, p. 9. United States Bureau of the Census; Wealth, Debt and Taxation, 1913, Vol. II, p. 40. United States Bureau of the Census; Financial Statistics of States, 1930. National Industrial Conference Board, Cost of Government in the United States, 1929-30, Table 1, p. 17.

TABLE 2.-Combined gross governmental expenditures, fiscal years 1890 to 19291 [Computed by National Industrial Conference Board; amount in millions]

Data on Federal expenditures from annual reports of the United States Secretary of the Treasury; data on State expenditures from U. S. Bureau of the Census, Wealth, Debt, and Taxation" series and "Financial Statistics of States" series; for sources and method of obtaining local expenditures see Appendix A, p. 153.

Expenditures for the District of Columbia deducted from Federal total and included in local.

Mr. BUCHANAN. I see on this chart here that the total expenditures for all governments, in 1932 and 1933, is $15,000,000,000, and 30 per cent of that amount is for Federal expenditures, and 70 per cent for State and local Government costs. That means $11,000,000,000 for State and local Governments and $4,000,000,000 for the Federal Government, and of the $4,000,000,000 spent by the Federal Government, the amount spent for military and war debts-I suppose that includes the Veterans' Bureau-is $3,000,000,000.

Mr. SANDLIN. Seventy-two per cent.

Mr. BUCHANAN. And all other Federal Government costs were $1,000,000,000.

CAUSES OF INCREASED TAX BURDENS

Mr. SANDLIN. In your investigations, did not you find the principal reason for increase in this tax burden was due to increased taxes for roads and education? Is not that the principal reason?

Mr. ENGLUND. That is correct. We are not able to give a specific figure, but it is approximately correct, that, of the total increase in taxes on farm real estate since 1913, one-half is due to increased expenditures for education, and about one-fourth to increased expenditures for roads.

Mr. SANDLIN. About 75 per cent of the total increase, then, is for education and roads?

Mr. ENGLUND. That is approximately correct.

Mr. SANDLIN. I know that is true in my section.

Mr. HART. One of the things that brought about those high taxes was that they did all of this work on the inflation program-they carried out this program for increased roads and school buildings, during the period of high prices.

Mr. ENGLUND. That is a significant point. That is one of the items that has relation to the trend of tax burdens. For instance, the State of Virginia is on a "pay-as-you-go" basis in constructing roads. Some of the other States bonded themselves very heavily during the period of high prices and built roads when labor, building materials, and other costs were high and that helps to explain,am not saying it is the whole reason, but it helps to explain-why Virginia had the lowest tax in 1929, with relation to the value of farm property. At this point I am not defending one policy as against another, but merely explaining a fact.

Mr. SANDLIN. They did not buy so many things that have to be paid for in the future.

Mr. HART. This Government bribed them into it by offering them Federal money, so that the origin of it is right here.

Mr. ENGLUND. A period of inflation of prices and costs always brings with it a period of heavy overhead charges, heavy interest charges. That is one reason why it is tremendously important that the price level should not have such violent swings up and down, if there is any human way of accomplishing comparative stability.

Mr. JUMP. Do you not think, though, that those roads may form the basis for the automobile manufacturing industry and a very substantial basis for the oil and petroleum industry? In other words, where would those industries be, even in their present state, without roads? A large proportion of the population is dependent on

those two industries, at least. And in the automobile industry, I include everything that goes into the making of an automobile, from the raw materials to the labor in manufacture.

Mr. HART. The automobile industry, by being stimulated to the point it was, drew the population off of the farms and centered those fellows in cities to the point where now they are causing hunger marches and riots-and all as a result of overstimulation.

Mr. JUMP. Yes; it is all wrapped up in this present bog; I realize that; but in considering the place of an industry like the automobile industry in the permanent economic set-up in this country, have not we got to consider to what extent the road-building program is the basis on which it rests. Whether it is a good thing, or not, there it is. Mr. HART. It is true that it has had something to do with it. Mr. JUMP. The question whether it is a good thing or not is the question you are raising now?

Mr. HART. Yes.

Mr. JUMP. I am not the one to answer that.

Mr. HART. If we had gone somewhat on a "pay-as-you-go" basis, if we had not received this Federal money for building roads, we would have built them within our capacity and income and the rates would not have been inflated and they would have cost us less. The stimulation of the rapid building of roads, and the rapid development of the automobile industry, brought about inflation; they got to making money and everything was doubled up-stocks were split six ways and sold to the public.

Mr. ENGLUND. I think you will find, Mr. Hart, that the funds that go to match the Federal highway construction funds, are met not by the property tax, but by the tax on gasoline and by license fees. Mr. HART. That may be true; but we bonded ourselves for it, just the same; we are bonded up to the limit.

Mr. JUMP. But is not that to build another class of roads, more largely, than the primary main roads for which Federal aid and State funds, raised through the gasoline tax, are employed? Does not this bonded indebtedness rest more largely on the roads that are not primarily Federal-aid roads?

Mr. HART. That is not true in our State. The bonded indebtedness is largely for these Federal-aid roads. We borrowed money to match Federal funds and also have the gasoline tax. We are borrowing to-day; our governor, who will be "ex" on January 1, during his campaign, said he was for a "pay-as-you-go" basis, while, at the same time, he was negotiating for a loan from the War Construction Finance to take up some of this Federal money, some of this $132,000,000. He was trying to match Federal money by borrowing from the Reconstruction Finance Corporation.

Mr. SANDLIN. Maybe he has turned over a new leaf.

Mr. HART. He was talking about favoring a "pay-as-you-go" basis.

ADJUSTING FARM DEBTS THROUGH LENDING AGENCIES, ETC.

Mr. OLSEN. Now Mr. Englund, in his statement on taxes, pointed out the need of reducing them and indicated, I believe, some of the ways in which they might be reduced. That is a second type of reduction I had in mind in connection with this general approach of adjusting these other levels downward.