The CHAIRMAN. You recommended it? Mr. RALPH. Yes, sir. Last year you undertook to have that done on the floor of the House when the post-office bill was up, if you will recollect. My contract for printing postage stamps expires on the 31st of this month. I submitted to the Postmaster General a very much lower figure, which would practically save the Post-Office Department from $28,000 to $30,000 a year, and we ought to take credit for that for 1912. That will be an additional saving. I expect we shall be awarded the contract. There is a provision in one of the post-office appropriation bills which gives authority to the Postmaster General to renew this contract. The Postmaster General would prefer to have us carry that appropriation. The only advantage we would gain in carrying it would be that the profit now accruing from the postage-stamp contract would be directly appropriated by this committee; that is, absorbed in our expenditures without any authority from this committee. Mr. SMITH. Do you want this language restored in case they carry the appropriation in the other bill? The CHAIRMAN. Yes. OFFICE OF THE POSTMASTER GENERAL, Hon. JAMES A. TAWNEY, Chairman Committee on Appropriations, House of Representatives. MY DEAR SIR: Inclosed please find copy of letter written to-day to the chairman of the Committee on the Post Office and Post Roads, House of Representatives, with accompanying copy of letter dated October 18, 1910, from the Director of the Bureau of Engraving and Printing, in regard to the proposed transfer to that bureau of the appropriation for manufacture of adhesive postage stamps, special-delivery stamps, books of stamps, and for coiling of stamps. Yours, very truly, FRANK H. HITCHCOCK, Postmaster General. DECEMBER 9, 1910. Hon. J. W. WEEKS, Chairman Committee on the Post Office and Post Roads, House of Representatives. MY DEAR SIR: Inclosed please find copy of letter addressed to me October 18, 1910, by the Director of the Bureau of Engraving and Printing, suggesting that the appropriation for the manufacture of adhesive postage stamps, special-delivery stamps, books of stamps, and for coiling of stamps be made directly to that bureau instead of to the Post Office Department. The reasons for this suggestion are recited in the Director's letter. Postage stamps have been produced by the Bureau of Engraving and Printing since 1894. The act of Congress approved April 21, 1902, provides that the stamps may continue to be manufactured by that bureau under agreement between the Secretary of the Treasury and the Postmaster General, this being subject to the proviso of the act approved June 26, 1906, prohibiting the furnishing of stamps by any department of the Government at less than cost. The Bureau of Engraving and Printing has a costly equipment and a well-trained force devoted to the production of stamps, and the service rendered in the past 16 years has been satisfactory. As a matter of public policy all fiscal issues of the Government should be produced in Government plants rather than by contract. These considerations point to continued manufacture of postage stamps at the Bureau of Engraving and Printing. It is understood, too, that appropriations for manufacture of revenue stamps, currency, and bonds are made directly to the bureau. In a letter dated November 19, 1910, the Secretary of the Treasury says: "It is suggested that since this is a matter which would necessarily have to be decided by joint action of the Committee on Appropriations and the Committee on Post Offices and Post Roads, the Post Office Department should take the matter up by letter with these committees. If it should be decided after consideration by the committees mentioned that such a transfer is desirable for the best interests of the Government, this department will offer no objection to the transfer.” In view of the reasons advanced by the Director of the Bureau of Engraving and Printing and the concurrence of the Secretary of the Treasury, I recommend that the appropriation in question be transferred to the Bureau of Engraving and Printing. A copy of this letter will be sent to the chairman of the Committee on Appropriations, House of Representatives. Yours, very truly, [Copy.] Postmaster General. OCTOBER 18, 1910. Hon. FRANK H. HITCHCOCK, Postmaster General, Post Office Department. SIR: Referring to your letter of February 28, 1919, addressed to the Secretary of the Treasury, in which you stated that you were advised that the Comptroller of the Treasury has decided that the appropriations from which expenditures are made for work done by this bureau for other departments may not lawfully be reimbursed with payments received from such departments, but that these payments must be deposited to the credit of miscellaneous receipts and that this decision seriously embarrasses the bureau in connection with the manufacture of adhesive postage stamps, special-delivery stamps, and books of stamps for the Post Office Department, I have the honor to say that any embarrassment which might have arisen from the decision of the Comptroller was relieved during the fiscal year 1910 by the proviso contained in the deficiency act of August 5, 1909, allowing such reimbursements to be credited, when received, to the appropriations for this bureau during that year. Subsequently, the act of June 25, 1910, continued the above proviso during the fiscal year 1911. You further state in your letter of February 28, 1910, that the department favors the authorization to make the appropriation for this bureau reimbursable from the amounts pid by the Post Office Department for postage stamps, but if this can not be done the Post Office Department would not object to the transfer of the appropriation for the manufacture of postage stamps from the postal-service appropriation bill to the bill covering appropriations for the work of this bureau. In my opinion the transfer of the appropriation for the manufacture of postage stamps from the act making appropriations for the service of the Post Office Department to this bureau is most desirable. I have felt for a long time that the amount of work could be reduced and considerable time thereby saved if this appropriation were made directly by Congress as a part of the appropriation for this bureau. The printing of postage stamps has been done in this bureau about 16 years, and during that time bills have had to be rendered at stated intervals to the Post Office Department covering the furnishing of stamps to postmasters throughout the country, and in the last month of each fiscal year it has been necessary to obtain settlement of the bill for that month for use in paying employees. This has entailed great inconvenience to the various accounting offices through which the bill passed and to this bureau and caused anxiety from fear that through some inadvertence or delay the funds might not be made available in time and the Government be placed in the position of having failed to pay its employees on the stated pay day. I would respectfully suggest, therefore, the advisability of calling the attention of Congress to the desirability of having the appropriation for the manufacture of postage stamps made directly to the bureau, when submitting your estimates of appropriation for the next fiscal year, and I shall, when appearing before the Committee on Appropriations of the House of Representatives at its next session, call the attention of this committee to this matter, and urge upon it the necessity for including in the bureau appropriations the amount estimated by you to furnish postage stamps for the Post Office Department. When the last post-office appropriation bill was up for discussion, Mr. Tawney, chairman of the Committee on Appropriations of the House of Representatives, made an effort on the floor to have the item included in the bill for printing adhesive postage stamps, etc., stricken from the bill with a view to having it transferred to the appropriations for this bureau, but without success. It may be well to add, in connection with this matter, that if the appropriation for printing postage stamps, etc., be transferred to the appropriations for this bureau, as suggested, this will necessarily reduce the amount of the deficit in the postal revenues to the extent of the amount appropriated for this work. Respectfully, J. E. RALPH, Director. FRIDAY, January 20, 1911. INTERNAL REVENUE. STATEMENT OF MR. ROYAL E. CABELL, COMMISSIONER. PAPER FOR INTERNAL-REVENUE STAMPS. Mr. SMITH. The first item in which you are interested is "Paper for internal-revenue stamps," for which you make an estimate of $80,000, and for which you received $76,000 last year and $90,000 the year before. You state in the note that this is due to the natural growth of the business. Is it not a fact that the size of the stamps is being reduced so that there could be a very large actual growth of business and still be a shrinkage in this appropriation? Mr. CABELL. Yes, sir; increased business and increased cost of paper more than take up the saving from reducing size of stamps, and also the last tariff act increased the denominations of tobacco stamps and certain others, and consequently we have to carry a very much larger stock. You will also note that there is quite a considerable decrease from the appropriation of two years ago, but we had to ask for and were given $10,000 additional last year. Mr. SMITH. Yes, sir. This includes, I suppose, the stamps on cigars. What has been the reduction in percentage in the amount of paper consumed in cigars tamps? Mr. CABELL. On some classes it has been reduced 333 per cent; on others it could not be reduced at all. Mr. SMITH. On cigar stamps? Mr. CABELL. Yes, sir. It depends on the size and shape of the box. The law requires that the stamps shall seal the container in which the cigars are placed, and therefore in certain kinds of boxes and containers it is impossible to reduce the size of the stamps and comply with the statute requiring us to seal them. Mr. SMITH. The increased number of denominations might require a slight increase in the supply, but not in the consumption? Mr. CABELL. Not an increase in the amount of consumption, but sometimes it requires more stamps. Mr. SMITH. What were the receipts for the year 1910 from stamp taxes? Mr. CABELL. $141,000,000, in round numbers, on distilled spirits, the payment of all of which is evidenced by stamps; $59,000,000 on beer, the payment of all of which is evidenced by stamps; $58,000,000 on tobacco, the payment of all of which is evidenced by stamps; and something less than $750,000 on oleomargarine, the payment of all of which is evidenced by stamps. In regard to that question, if I may go back to the need for more stamps, under the recent legislation permitting samples to be sent out and smaller packages of tobacco, in which an enormous business has been done; the manufacturers can now send five cigars, eights, tens, thirteens, and various numbers, and they can send out the same number of cigarettes. Mr. SMITH. What would be the tax on one cigar? Mr. CABELL. It is divided proportionately, according to the size of the cigar. Mr. SMITH. Take a normal size cigar, can we afford to allow them to send them out? What is the tax? Mr. CABELL. Three dollars a thousand, about one-third of 1 cent apiece. Mr. SMITH. Can you afford to transact the business, and make the stamps? Mr. CABELL. Yes, sir. Our total cost of collection is less than 2 cents on the dollar. There may be some isolated transactions, if they should be segregated, where the cost of the transaction might possibly be more than the rate, but you understand that in the sale of these stamps we sell them by the millions. The transactions so far as we are concerned are in millions of stamps. Mr. SMITH. Have you any idea of what a single stamp for a single cigar costs? Mr. CABELL. No; you can not figure down small enough to estimate it. Mr. SMITH. You think there is still a profit in the stamps? Mr. SMITH. I do not think the facts tend to show that, if you will pardon me. The fact that in the gross cigar business you make a profit would not prove that you could transact the business separately on each cigar to the extent of issuing a separate stamp. I am not seeking to ascertain whether the business in the aggregate pays, because, of course, we all know that it does, but whether or not you might not reduce the parcel so small that in the transaction you absolutely lose money. Mr. CABELL. If there happens to be an isolated transaction, absolutely so; but you understand that $80,000 is the cost of the entire amount of paper used. The cost at the Bureau of Engraving and Printing is something like $63,000 or $65,000 for handling all of the cigar business. Mr. Ralph would have to give you the exact figures, but that is what I am advised informally, making a total of $150,000 for the whole year. If we had to sell one stamp and had to have a man stand at a window, doubtless we would lose money, but we do not sell stamps that way. A man who is using these small packages for advertising purposes is likely to buy a million or five million or ten million or fifty million stamps. We deal in billions of stamps, you understand. Mr. SMITH. But that would not be true of the small dealer? Mr. SMITH. That is your experience? Mr. CABELL. Yes, sir. It is only the great concerns that do that for advertising purposes, etc. They are the users of the small odd packages. Mr. SMITH. It costs just as much to us, however, to print one stamp for one cigar as for a box of cigars? Mr. CABELL. Yes, sir; but if you were to ask a printer how much it cost to set a line of type in a newspaper, it would be very hard for him to figure it, and that is relatively about the same proposition. 73879-s c-11-10 Mr. SMITH. I realize that it is small in each individual case, but considerable in the aggregate. Mr. CABELL. Yes, sir. You gentlemen could repeal the law and we would be glad to stop it. Mr. SMITH. I do not know that we could repeal the law. I am inquiring now how it operates simply for information. If all cigars were sold in 100 boxes, that would give a little more net revenue than if sold in boxes of 25? Mr. CABELL. No, sir. Mr. SMITH. If you sold the same number of cigars? Mr. CABELL. No, sir. Mr. SMITH. How do you figure that? Mr. CABELL. There would be more refilling. Mr. SMITH. Frauds? Mr. CABELL. Yes, sir; which would more than counteract that, probably. I am speaking out of hand, but there is a vast proportion of cigars sold in boxes of 25 and 50. Mr. SMITH. Most of them, of course. Mr. CABELL. A comparatively small number in hundreds and a still smaller relative number below ten. The use of the small packages is generally for advertising purposes for a certain class of trade, and that does amount to a great deal in the aggregate. The cigars go out for advertising purposes, and by increasing the consumption of the larger boxes we get the revenue in that way. The cigar stamps are a small item. Mr. SMITH. They are not small in number? Mr. CABELL. Comparatively so. They are not expensive. They are printed, like a newpaper, by automatic printing presses, and counted automatically-handled at the minimum expense both in the bureau and in the department. Mr. SMITH. You at least agree with me, as I understand it, that this increase in the appropriation is made largely necessary by this change in the issuance of the smaller denominations of stamps? Mr. CABELL. Only incidentally. The last year we had to ask for a deficiency appropriation of $10,000 to purchase more paper. Mr. SMITH. Has the internal revenue increased? Mr. CABELL. We increased $43,000,000 last year and up to the present time we are $20,000,000 ahead of last year. Mr. SMITH. Is that principally on liquor? Mr. CABELL. Liquor, tobacco, beer, and the corporation tax, where we have collected $27,500,000. Mr. SMITH. Is that included in the $43,000,000? Mr. CABELL. $22,000,000 last year was on the ordinary receipts and the remainder on the corporation tax. Up to the present time we are $13,000,000 ahead on ordinary receipts and about $6,250,000a little more than that-on the corporation tax, making a total of $20,000,000. Mr. SMITH. What internal-revenue taxes are there besides the corporation tax which are not stamp taxes? Mr. CABELL. Practically nothing. Mr. SMITH. So that practically all your taxes are stamp taxes except that one? Mr. CABELL. Yes, sir. You have been referring to cigars. Now, a large increase has been in cigarettes. Then there has been a very |