CHAIRMAN WHITE: No tax on the general public. The credit of the province has been pledged for the money necessary to carry on the enterprise.

MR. R. R. NICHOL of Winnipeg: I wonder if the conference would care to hear a few words in regard to hydro power in Manitoba. I refer particularly to the City of Winnipeg. I can answer a number of questions which have been raised.

Originally we had electric power from the street railway. We were paying twenty cents per kilowatt hour for light service. The citizens in general began to agitate for the municipal scheme. The railway dropped its rates to twelve cents per kilowatt in the hope of killing the scheme. The fathers of the scheme indicated they could supply power for three cents per kilowatt hour, and one cent per kilowatt hour for domestic use, such as cooking. They originally issued bonds for three millions of dollars, and then subsequently issued one million dollars for further developments. The last inventory showed that the city hydro power scheme to have assets of seven million. The city never paid a dollar nor the taxpayers a dollar toward the power scheme from the inception. The first year or two it lost money. They could not supply the power starting out at three cents for light. There are not, as in the case of Ontario, any surcharges, such as floor space, or meter charges. The rate of three cents per kilowatt hour is subject to ten per cent discount for prompt payment, and the one cent for power for electric stoves is subject to ten per cent discount. The only restriction is a minimum of one dollar on power and fifty cents on light per month. We have found in Manitoba that the power scheme has worked out, as I have stated, with an original expenditure of three millions of dollars and in addition an expenditure of one million, or a total expenditure of four millions. Today our power development plant, together with the money they have spent out of earnings in extending it, is valued at some seven millions of dollars.

MR. PHILIP ZOERCHER of Indiana: Who manages the plant?

MR. NICHOL: The city has a man appointed at the head of it who takes direct charge.

MR. ZOERCHER: How often do you change city administration? MR. NICHOL: The man who was put into the power plant is still there, but our council is appointed each year.

MR. ZOERCHER: What I am trying to get at is: The way we have it in this country, every time we elect new city officers the management of the city municipal plant is part of the spoils of office.

MR. NICHOL: That does not happen up there in the City of

Winnipeg, in particular, and in other cities in general as well. All municipal officials are run from year to year, and it is simply a question of their service, and they have gone further than that by adopting the policy of advancing those who are coming up with it. We had a recent change there in our power scheme. Our chief engineer went with another company, which is developing a big power scheme at Winnipeg for the sale of power, and the man who was in charge of the plant of the power scheme was put in his place. They have adopted generally all through the cities the system of advancing those next in line.

MR. WHITE: Then there is no franchise tax paid by the municipal corporation for the privilege of using it?

MR. NICHOL: No, there is not.

MR. WHITE: And no tax?

MR. NICHOL Not upon the municipality.

MR. WHITE: So what they gain in one way they lose in another. CHAIRMAN WHITE: I must apologize for precipitating this discussion. It is really outside of taxation matters. I did not realize when I started it that I was probably starting something that would be hard to stop.

MR. H. S. VAN ALSTINE of Iowa: I should like to ask one more question of the gentleman of Winnipeg, and that is whether their power for generating electricity is from water or coal.

CHAIRMAN WHITE: Hydro.

MR. ZOERCHER: I want to make one statement as touching upon the questions I asked. About twenty years ago I was a leader in my own community to bring about municipal ownership of a water I had the same dream my plant. I was acting in good faith.

neighbor here has now; that when we are going to do it ourselves we are going to finally relieve the citizens from paying any taxes, and pay all the expenses from the earnings of the water plant and light plant. In Indiana, you know, every four years we have new city administration, and we burned up two or three electric systems. Since then the state board of tax commissioners has been given some power over bond issues, and the last time they wanted to have one, to put in a new electric system there, after they burned up two or three, we put in a provision granting them the right to issue the bonds, provided that the city council would appoint a committee of five business men and let them manage the water plant thereafter. The public service commission had to give its consent also, and one of the commissioners had that in his finding, but he made the statement that he did not intend to say that they might not take those five business men from within the coun

cil, and then of course they hurriedly and immediately picked them from the council. When we heard of it—I think I went down there because they needed some more money, and it was my home town and I could talk to those fellows pretty straight-I told them that if they did not appoint a committee of business men to advise with them, and then let the men who were appointed alone, so far as our board was concerned they would never get any help or aid from us. The new man they appointed they said was qualified, and I said to him, the only question ought to be, as long as you give the city good service, you remain on the job, and when administrations come and go, you ought to stay there. Whenever we can do that in the United States, whenever we can operate publicly owned utilities in the way that you (Nichol) can, and keep the politicians from sticking his hands into it, you can do it all right here; otherwise you cannot. (Applause)

CHAIRMAN WHITE: I was very much interested in Mr. Armson's paper this morning, and in the figures he gave us regarding the increase of taxation in Minnesota. It occurred to me at the time, and at other times in thinking the matter over, that it is not entirely a matter of increased expenditure. You have got to look at it from the other angle; that the matter is a question of the decreased purchasing value of the dollar. Mr. Armson put it in practically the same way, working it from the other side, that wages and material are higher. It is also that the dollar is lower; and I think if you estimated your expenditure this year or last year in wheat or barrels of flour, that you would find it was three times as great as it was five years ago. The widening governmental activity, of course, is something that you gentlemen of the tax commissions have very little to do with. That is a matter for the legislature, and I don't suppose you are in a position to curb them except by advice and whatever means you can use.

Now, before calling upon Mr. Hallanan, of West Virginia, if there is anybody who wishes to ask a question regarding the paper read by Mr. Donley, the meeting will be open a few minutes for that purpose.

(No response)

CHAIRMAN WHITE: Mr. William S. Hallanan, State Tax Commissioner of West Virginia.

WILLIAM S. HALLANAN of West Virginia: Mr. Chairman, and ladies and gentlemen of the National Tax Association: After having had the privilege at the Bretton Woods conference last year of outlining the fundamental principles of the West Virginia sales tax, I felt that my duty had been done. However, I appreciated, not so much as a personal compliment, but rather as an indication of the general interest felt by taxing men and taxing authorities

in the subject of indirect taxation, that a resumé of the experience and of the results of the first year of West Virginia's administration of the unique and distinctive principle of indirect taxation, popularly known as the sales tax, would be of interest. I say that I felt I had done my part last year, and in responding to the invitation of the distinguished secretary of this conference, I felt somewhat in the position, as I heard related the other night at a banquet, of the president of the Bethlehem Steel Corporation, Mr. Charles M. Schwab. He told a story of how he had started right outside of Pittsburgh to erect a monumental stock farm, and the word went out over the countryside that Charley Schwab was going to buy up all the cows in the neighborhood, and around from near and far they came, friends of his boyhood days, each one with a favorite brand of cow. Finally one Sunday morning he was sitting on his porch and one of his school-day chums came down the road and had an old cow with a rope around her neck, and he said, "Charley, come out here, I would like to see you." Mr. Schwab went out in response. The fellow said, "Mr. Schwab, I understand you want to buy a cow." Said he, "I want to buy a number of cows, Jerry; what kind of a cow have you got?" "I don't know very much about her." "Well," said Mr. Schwab, "I want to get some pretty good cows on this stock farm of mine; how much milk does she give?" "Well, Mr. Schwab, I cannot tell you very much about that; I don't know how much milk she really gives." "Well, what do you know about her pedigree?" "Well, I don't know very much about her pedigree, Charley; she is just a pretty good old cow." "Can't you tell me anything about this cow? Don't you know how much milk she gives?" "No, honest, I cannot tell you very much about her. I can tell you this, she is a damn good-natured old cow, and if she has got any milk she will give it to you."

WEST VIRGINIA SALES TAX

A YEAR'S ADMINISTRATIVE EXPERIENCE

WALTER S. HALLANAN

State Tax Commissioner of West Virginia

After having had the privilege at the Bretton Woods conference last year of presenting to you the fundamental principles underlying the West Virginia sales tax, which had just been made effective, I did not anticipate the honor of being given a place on this year's program. However, I accept this opportunity which has been extended, as indicating the general interest felt in the experience we have had in West Virginia during the first year's administration of our novel and distinctive species of indirect taxation, so quite apart from the lines which have been followed by

many of the other states in the seeking out of new sources of

revenue.

While I desire to confine my remarks to the practical working of the West Virginia gross sales tax law, a law, as you know, enacted by our 1921 session of the legislature and which imposes a tax for the privilege of engaging in business or practicing a profession in our state-and therefore, perhaps, more accurately labeled "Business-Profession Privilege Tax "-I may be excused if, at the outset, I make only a brief reference to the proposed federal sales tax in comparison.

A distinction is to be drawn between a sales tax as proposed for federal tax purposes and the state sales tax, such as has been levied in West Virginia. A federal sales tax applied nationally would reach and affect the marketing of articles, goods and commodities in every city, town and village of the country, without regard to state lines. In the working of a national sales tax there would be no interstate inhibitions to interfere with the incidence of the tax. All sales made, either between citizens of one state or between citizens of more than one state, would be subject to it. The consequence of this universal application would be to place every producer, every merchant and every manufacturer on a strict basis of equality so far as the tax is concerned, in their respective markets. The Ohio merchant would add exactly the same tax to the sales price of his goods as the West Virginia or Pennsylvania merchant; the Pennsylvania manufacturer would be subject to exactly the same tax on the sale of his manufactured article as the Virginia or West Virginia manufacturer. The product shipped by a West Virginia manufacturer to the New York market would reach that market with exactly the same tax added as that applied by his Pennsylvania competitor. The consequence of the evenness in the distribution of the tax burden, as between manufacturers in different localities would be to neutralize the tax as a selling factor. The manufacturer would simply pass the tax on to the consumer. The West Virginia coal producer, shipping his products to New England, Chicago and the Northwest markets, reached by the lakes, would be under no obligation to absorb the sales tax because the coal produced by the competing coal fields of Pennsylvania and Ohio and other states would reach the same markets with the same tax burden added. The consumer in each state would pay the tax.

But when a state legislature applies the sales tax principle to its producing, manufacturing and selling industries, a different state of affairs is found to exist in the application of the tax. The taxpayer may pass the tax on or he may absorb it, or he may absorb only a part of it. The West Virginia manufacturer, shipping his goods to competing markets, likely finds himself absorbing the tax