NEED FOR ADDITIONAL RESEARCH

There are many things we do not know and which statistics do not tell us. The data on record does reflect that small business is being squeezed from every direction. We have asked our witnesses to document the particular features of the tax system which affect the smaller firms in a disproportionate or discrim inatory way.

Our hearings in February demonstrated that all but the smallest of businesses are required to pay more in taxes in relation to their income than the biggest corporations in the country. It follows that a growing business generally must pay higher tax rates than its established competitors. The additional financial burden on smaller and independent companies stifles their ability to bring better products and services to consumers at lower prices. This kind of imbalance threatens to undermine the whole free enterprise system.

In the past, the tax writing committees have been able to devote too little time to these underlying economic issues. Small and independent business traditionally accounts for between 52 and 53 percent of the Nation's total private employment, 43 percent of the business product and about one-third of the gross national product. It has also been the predominant source of innovation, and a major source of capital accumulation, increased productivity, and competition at home and abroad. The American economy needs all these all the time, but especially now, as we attempt to work our way out of a recession where unemployment is running above 9 percent.

We hope to receive testimony on how new, small, and independent companies can help solve these problems if fledgling firms are treated equitably and the unfair burdens of the tax system and excessive paperwork are taken off their backs.

Therefore, we hope to fulfill an important role in exploring these matters and in making sound and responsible recommendations for improvement of the tax code in behalf of small business and the entire economy.

We are reaching out to include in our study the most modern and up-to-date computer techniques, and to avail our committees of the foremost academic tax law and economic talent in the country.

We expect to report periodically to the Senate as this study advances. Any persons interested in participating or learning more about this project may contact the Select Committee on Small Business, 424 Russell Senate Office Building. Washington, D.C., 224-5175.

I ask unanimous consent that a schedule of hearings be printed in the Record at this point.

There being no objection, the schedule was ordered to be printed in the Record, as follows:

[Hearings before Senate Select Committee on Small Business and Subcommittee on Financial Markets, Senate Finance Committee, June 17, 18 and 19, 1975, 9:30 a.m. daily, room 2221, DSOB]

WITNESS LIST

TUESDAY, JUNE 17

Employment, Taxes and Small Business: Professor Robert Eisner, Chairman. Department of Economics, Northwestern University; Charles Holt, Director, Unemployment and Inflation Research, Urban Institute.

Impact of Recession on Small and Large Business Profits and Prospects: John Lewis, Executive Vice President, National Small Business Association, accompanied by: Herbert Liebenson, Staff Vice President for Government Affairs, NSBA: and John Mendenhall, C.P.A. and Attorney.

WEDNESDAY, JUNE 18

Small Business Problems and Areas for Additional Research: Bruce Fielding, C.P.A., Secretary, Board of Directors, Dr. W. C. Dunkelberg, Consultant, National Federation of Independent Business; Dr. Edward Shils, Director, and William Zucker, Assistant Director, Entrepreneurial Center, Wharton School of Finance, University of Pennsylvania.

Specific Tax Reform Proposals and Further Research Projects:

Panel of Presidents of the Four Major Regional Small Business Organizations: Oliver O. Ward, Smaller Business Association of New England, John W. Hannon, Smaller Manufacturers Council of Pittsburgh, Edward H. Richard, Council of Smaller Enterprises, Bruno Mauer, Independent Business Association of Wisconsin.

THURSDAY, JUNE 19

Venture Capital and Its Significance to Innovation and Growth: Walter Stults, Executive Vice President, National Association of Small Business Investment Companies; Paul Bancroft, III, President, Bessemer Securities Corporation; Richard Hanschen, President, New Business Resources.

Tax and Capital Problems of Agriculture as Small Business: Gilbert C. Rohde, President, Wisconsin Farmers Union.

New Techniques of Revenues Estimating: Roland Bixler, President, J.B.T. Instruments, Inc., Chairman, Task Force on Small Business Tax Policy, National Association of Manufacturers; Cliff Massa, Director of Taxation, National Association of Manufacturers.

54-397 O-75-35

The National Milk Producers Federation is a nationwide farm commodity

organization representing dairy farmers and the dairy marketing cooperative associations they own and operate throughout the nation. The dairy cooperatives represented by the Federation represent the only nationwide expression of public policy issues directly affecting dairy farmers and their cooperatives.

Your committees are to be commended for calling these hearings on the problems related to capital needs of small businesses, including agriculture. Representing the nation's dairy farmers as we do our comments will be confined entirely to the agricultural problem.

In rural areas we often heard it said that "Farming is big business today." Implied in this remark is that the operation of a farm requires broad managerial skills commensurate with those found in businesses, including the handling of capital. In truth, however, farming is more comparable to small businesses, but this in itself is an evolution from farming as we knew it throughout much of the United States only a generation ago. Farming with "forty acres and a mule" is a thing of the past.

To understand the scope of the financial problem facing a farmer one has only to look at USDA statistics showing the dramatic growth in farm sizes and land values during the past fifteen years. They show:

Note that the average farmer has twice as much invested in his land and buildings today as he had five years ago. And this does not take into account his corresponding increases in investment in livestock and equipment.

For potential young dairy farmers the problem is even more difficult

than for the producers of most other commodities.

This is particularly true

of that vast majority of dairy farmers who, as a part of their operation, raise a considerable part of their own feed. In raising this feed they have the same escalating costs as farmers who produce field crops, for such input items as fertilizer and seed, along with the greatly increased cost of farm machinery. But in addition to this, they have the costs of producing pure and wholesome Seventy-eight percent of the milk now produced in the United States is designated as Grade A. To produce this requires meeting certain basic standards in the barns and yards which house the cattle, in the milk house in which the product is assembled and cooled, and in the stainless steel equipment which is needed for this purpose.

milk.

Because of this, dairy farming is not something which a young farmer can grow into. With these standards he cannot start out with a cow or two and gradually expand until he has an adequate-sized herd. Even at the start his operation must be big enough to carry his investment in the required capital items. Dairying is a labor-intensive type of farming. As such it has been highly receptive to replacing labor with equipment, which costs more money, but which in turn allows a family-farm operator to handle a larger sized herd, which also costs more money to establish.

As a result, dairy herd sizes have increased dramatically the past few years. U.S. Department of Agriculture in a recent publication titled, "Questions

and Answers on Federal Milk Marketing Orders" shows daily production per producer as follows: