reason why the wholesale whisky dealers of the country should be relieved from the payment of this tax. Mr. Herman E. Cellarious, formerly a collector of internal revenue of the district of Ohio, speaking for the Clifton Springs Distilling Co., said, with reference to the present allowance for evaporation: * * The result of inadequate allowance for loss on distilled spirits is having a very serious effect on distillers and dealers who manufacture and handle large quantities of whisky. * It adds to the cost and has a depressing effect on whisky after it becomes 5 years old. And in consequence it has a depressing effect on the value of all whisky in bond. The enactment of this measure should not be delayed. (Hearings, 62d Cong., 2d sess., p. 21.) The contention, therefore, on the part of the wholesale whisky dealers and manufacturers is that the business would improve, more whisky would be consumed, and the value of the whisky in bonded warehouses would greatly increase in value if this bill should pass. If the whisky business is so good and the business is increasing so rapidly and the consumption is increasing so rapidly, and the figures submitted seem to establish these things beyond a doubt, I submit that the promoters of this legislation have not succeeded in making out their case. They are prospering as they never have before. They insist upon a measure which will bring to them more prosperity than ever and which will deduct a million dollars per year perhaps more than that-from the revenues of this Government. Of We are trying to find methods of levying taxes that will be the least oppressive-methods that will bear least upon the necessaries of life and hardest upon the luxuries. There is a growing impression in the country that whisky is not one of the necessaries of life. course we can do without this million dollars a year and we could place the amount so lost upon other things, upon clothing and blankets, sugar, medicines, farming implements, or something of the kind. If we relieve whisky from this burden we of course must collect the tax from other sources. So far as I am concerned it appears to me from my study of the matter that the better policy is to permit whisky to still pay this tax, inasmuch as the consumption is still increasing and the business is more profitable and growing still more profitable every year in the hands of those persons who are engaged in it. It is not contended that the price of whisky to the consumer will be any less if this bill becomes a law. The price over the bar will remain the same. The consumer gets no benefit from it. He will have no more money left after paying for his whisky than he would have if this bill did not become a law. It will benefit simply the wholesale dealers and no one else-not even the distiller, unless he also owns whisky in bonded warehouses. I have not heard that any wholesale whisky dealers in the country are losing money and I do not think they need this subsidy. The contention is that it has not been the policy of the Government for several years to tax something not in existence, and therefore additional allowances ought to be made for outage. It was the original policy of the Government to tax every gallon that went into a bonded warehouse. It might be better to return to that policy now and it is not now the policy to tax anything not in existence. Every gallon of whisky in a barrel is more valuable on account of the evaporation. The objectionable elements in the whisky as originally deposited disappear and the whisky remains; every gallon of it increases in value at the rate of 15 cents each year on account of the evaporation. The consumer of whisky tries to buy over the bar that kind of whisky which has been longest in bond-where the evaporation has been greatest. The purchaser of a gallon of whisky at retail buys it, not because the more objectionable elements are there, but because the more objectionable elements have evaporated and on that account he pays more for it and is willing to pay more for it. In order to mature whisky more quickly and be able to get it on the market earlier than they otherwise would, wholesale dealers in whisky about 1887 commenced to "roll" whisky and to heat warehouses. On account of the rolling of barrels of whisky the whisky was brought into contact with the dried portion of the staves in the upper part of the barrel-this part of the staves absorbs it more rapidly. The process of evaporation was also hurried by the heating of the warehouse and the heating was done for that reason. The evaporation has been greater on account of these methods. The profits of wholesale whisky dealers have also been greater on account of heating warehouses and rolling barrels, and in this proposed legislation they are simply asking that their profits be still further augmented by allowing an additional outage on account of an additional evaporation made possible by these changes in their methods of increasing the value of their property. It would be impossible, in my judgment, to conceive of a demand more unreasonable than this. The position of the whisky men is this: White oak, out of which whisky barrels are made, can no longer be obtained from Northern States. The supply there is exhausted, and they are compelled to go to the Southern States for a supply. The white oak obtained from the Southern States is more porous, and therefore the evaporation is greater. They also ask to be relieved on account of the evaporation, which they thus for their own profit cause by rolling barrels and by heating warehouses. The above, in brief are the reasons given for the proposed legislation. There was also some testimony as to the size of the barrels. The barrels are larger now than they were prior to 1880, but it is not seriously contended by the representatives of the whisky interests that on this account they are entitled to this legislation. It occurs to me that this statement is not in harmony with their claim that it is more difficult to obtain good white oak now than formerly. If that were true it would appear to me that it would also be true that the staves would be shorter, the better portions of trees being used for barrels. The staves, however, are longer than ever. The report made by the committee, however, gives the increased size of the barrel as one reason for this additional allowance, and the statement is made on the second page of the report that the standard stave in 1880 was 33 inches in length. Now it is 35 inches in length. The barrel in 1880 held from 40 to 42 gallons, while the present barrels "have a capacity of from 46 to 48 gallons. The larger the barrel the greater the evaporating surface and consequently larger loss per barrel from evaporation." I do not understand this method of reasoning, and in fact the testimony before the Ways and Means Committee does not sustain this position. Mr. Watham, testifying before the Ways and Means Committee and speaking for the Kentucky Distilleries & Warehouse Co., of Louisville, Ky., said: I believe some of the gentlemen asked Mr. Sunstein this morning if the larger barrels, ranging from 42 to 48, made any difference in the percentage of loss. I do not think he understood the gentleman quite thoroughly. I will say that it does not. If anything, the larger the barrel the less the percentage. Of course, the evaporation will be greater but the percentage will not be greater. For instance, there will be more outage in a 49-gallon barrel than in a 42, but the percentage will not be greater. The difference in percentage in a small barrel and a large one is not perceptible. If there is any difference it would be in favor of the larger barrel. (Hearings, 61st Cong., 3d sess., p. 209.) * * * The evidence before the committee shows that Mr. Sunstein, upon whose mistake this finding of the committee is predicated, did not again appear before the committee. He accepted the correction made by Mr. Watham, who said that Mr. Sunstein did not understand the question of the committee. Mr. Watham's statement, of course, is correct. The percentage of loss would not be greater and could not be, but the report in this matter insists that on account of the larger size of the barrels the outage is greater, and therefore for that reason this additional allowance ought to be made. NORTHERN OAK NO LONGER USED. The committee also accept the statement of Mr. Wolfner, of the National Cooperage & Wooden Ware Co., of Peoria, Ill., as to the character of wood now used. Mr. Wolfner produced before the committee two pieces of oak. One piece he insisted grew in Mississippi and the other piece he stated was Indiana oak, and he called attention to what he claimed was an apparent difference in the two samples. He insisted that the texture of the northern oak was closer than the other. The effect of his testimony was to compare Mississippi oak with Indiana oak, and the impression conveyed was that we are compelled now to use Mississippi oak or oak at least from States as far south as Mississippi, and therefore the outage was greater on account of the fact that the texture of the northern oak is closer than the southern oak. (Hearings, 2d sess. 62d Cong., p. 49.) No tests were ever made, so far as appears from the hearings. If northern oak is of closer texture than southern oak, and therefore the evaporation is not so great, it would be a very simple matter indeed to make proper tests in order to demonstrate this fact. As a matter of fact, there is no difference at all in the texture of northern and southern oak. There is a difference in texture between oak grown on high ground and oak grown under other conditions of moisture, and some northern oaks may be of closer texture than others. The same is true of southern oaks. In reply to my inquiry upon this subject our Forest Service sent me the following letter, which is of much more value on this subject than the opinion of this gentleman. I quote the letter in full. UNITED STATES DEPARTMENT OF AGRICULTURE, FOREST SERVICE, Washington, April 9, 1912. Hon. HENRY T. RAINEY, House of Representatives. DEAR SIR: Your letter of April 1 is received. The Forest Service has no later printed publication concerning tight cooperage than Forest Products No. 6 for 1910 which, I presume, is the circular you now have. No wood except that of the white-oak group has proved satisfactory for bourbon, wine or other alcoholic beverages dependent upon the action of the wood to improve their quality. Manufacturers of cooperage stock demanding high-grade oak are having increasing difficulty to secure the raw material required in the quantities desired. It is imperative that the lumber for cooperage stock be of superior quality and for this reason competition is keen between the manufacturers of cooperage "lumber and other products, since there is included in this competition the grade of timber suited for quartered-oak lumber and veneer. The result is that the cooperage stock manufacturer is often found ahead of the lumbermen penetrating remote parts of the forest where the exploitation for saw logs can not be carried on profitably. So far as I know, there is no general difference in texture between white oak grown in the Ohio River States and that grown in the more southern States which can not be due to local causes. The value of white-oak wood for this purpose is, of course, affected by the texture of the wood resulting from very slow growth-that is, the larger the annual rings the better is the wood. The rate of growth is largely determined by local soil, moisture, and forest conditions. The Forest Service has made no experiments to determine the absorbing capacity of white oak grown under different conditions. Most of the oak for cooperage stock of the bourbon class is now cut in Arkansas, Mississippi, Kentucky, and Tennessee. Under separate cover I am sending you Forest Service Bulletin 102, entitled "The Identification of Important North American Oak Woods," which discusses the microscopic structure of the oaks and may prove useful to you in connection with this subject. Very truly, yours, A. F. POTTER, Associate Forester. The Census Bureau also issues bulletins each year on forest products, and they each year issue a bulletin on the subject of "Tight Cooperage Stock." The bulletin for 1910 shows that in that year Arkansas led in stave production. Mississippi did not produce over one-third as many staves in that year as Arkansas. In 1910 Kentucky and Arkansas produced nearly all the Bourbon staves used in this country. The amount produced in Mississippi was negligible, and Louisiana produced very few Bourbon staves. Bourbon staves are the kind used in the manufacture of whisky barrels. The same conditions prevail with reference to the stave business in other recent years. Indiana produced in 1909 and 1910 no Bourbon staves at all. Therefore this particular witness produced before the committee a stave which he claimed was made in Indiana, which furnishes no Bourbon staves at all, and compared it with a stave produced in Mississippi, where there is comparatively no production at all of Bourbon staves, and upon this testimony the committee assigned as one reason for this legislation the alleged fact that we are compelled now to go for Bourbon staves to a section which can not produce oak of the proper texture. Under the evidence easily obtainable I submit that this statement in the report of the committee is not sustained in any particular and can not be assigned as a valid reason for this legislation. As to some other matters I think I can not do better than to quote from the hearings, and I quote from the hearings inasmuch as copies are completely exhausted and can not now be obtained. VALUE OF WHISKY INCREASES WITH AGE AT THE RATE OF 15 CENTS PER GALLON PER YEAR. Mr. HILL. Is 2-year-old whisky more valuable than 1-year-old, and 3-year-old more valuable than 2-year-old? Mr. WATHEN. Yes; it costs more per gallon, but it does not net the distiller any more. Mr. HILL. I mean, will the consumer get any more value? Mr. WATHEN. From the consumer's standpoint? Mr. HILL. Yes. Mr. WATHEN. It is far more valuable. One-year-old whisky is not potable. Mr. HILL. Supposing we say 1-year-old whisky is worth $1, what would 2-year-old whisky be worth? Mr. WATHEN. $1.15. Mr. HILL. And 3-year-old whisky? Mr. WATHEN. $1.50; and that class of whiskies would run along about 15 cents a year in advance. (Hearings, 61st Cong., 3d sess., p. 203.) BARRELS ARE NOW ROLLED AND WAREHOUSES ARE NOW HEATED TO INCREASE EVAPORATION, AND IN THIS WAY THE QUALITY OF THE WHISKY REMAINING in the barrel IS IMPROVED. Mr. LONGWORTH. I was speaking particularly of the defective material that you get now. Mr. CELLARIUS. Yes, sir. Well, that is what caused it. Mr. LONGWORTH. That is the principal cause? Mr. CELLARIUS. Yes, sir; and the heating of the warehouses. Mr. CELLARIUS. It does not go into the barrel; it disappears. Mr. CELLARIUSs. That is where the regauge is made after the barrel has lain in the warehouse seven years and the upper portion is perfectly dry, and you roll that barrel, and it absorbs the liquid by rolling it. Mr. RANDELL. You speak about the method of keeping the liquor. You say the system is to heat the warehouses and keep them the same temperature all the year? Mr. CELLARIUS. Yes, sir. Mr. RANDELL. Does that improve the character of the whisky? Mr. CELLARIUS. Yes, sir. Mr. RANDELL. In what way does it improve it? Mr. CELLARIUS. It matures. Mr. RANDELL. The evaporation is greater, is it not? Mr. CELLARIUS. Yes, sir; the evaporation is greater. Mr. RANDELL. The proof is greater? Mr. CELLARIUS. Yes, sir; still the increase in proof creates no loss, because the estimate is made on proof gallons and as it increases in proof there is no loss. (Hearings, 62d Cong., 2d sess., pp. 24 and 25.) Mr. RANDELL. The estimate, then, is not made on the actual measure? Mr. CELLARIUS. Not on the wine measure, but upon the proof gallons. Mr. LONGWORTH. Mr. Cellarius, on page 4 of the bill, line 4, there is this sentence, "but no allowance shall be made on casks or packages of less capacity than 20 gallons.' Is that the present law? Mr. CELLARIUS. Yes, sir; that is the present law. Mr. RAINEY. You say "storing" is a part of manufacture? Mr. CELLARIUS. Yes, sir. Did they Mr. RAINEY. In the manufactured whisky you recognize that now. recognize it before 1880 that "storing" was a part of the process of manufacture? Mr. CELLARIUS. I do not think they paid as much attention to the maturing of whiskies in 1880 as they have since that time. Mr. RAINEY. What is it that matures whisky—the evaporation? Mr. CELLARIUS. Well, I am not a practical distiller and I do not know that I can answer that question to your satisfaction, but I think Mr. Wathen, who is a practical distiller, could possibly enlighten you. Mr. WATHEN. I will speak on that later. Mr. RAINEY. One or two more questions. I want to ask you, if the whisky was inclosed in a metal or glass package or cask, whether there would be any evaporation? Mr. CELLARIUS. There would be no evaporation and no improvement. Mr. RAINEY. Therefore it would not improve? Mr. CELLARIUS. It would not. Mr. RAINEY. In time? Mr. CELLARIUS. It would not; no, sir. Mr. RAINEY. As the evaporation increases, the liquor contained in the package, what remains, increases in value, does it not? Mr. CELLARIUS. Yes, sir. Mr. RAINEY. At the rate of how much per year per gallon? Mr. CELLARIUS. I do not know as I could tell you. Mr. RAINEY. About 15 cents? Mr. CELLARIUS. I do not know. Mr. RAINEY. The statement which was made. How much whisky is deposited at the present time in bonded warehouses in the country? Mr. CELLARIUS. In round numbers, 250,000,000 gallons. Mr. RAINEY. Who owns the warehouses in which the whisky is stored? Mr. CELLARIUS. The distiller. Mr. RAINEY. Who owns the whisky that is stored in the warehouses? M. CELLARIUS. That is usually held by dealers. Whisky is usually sold as it is made and the warehouse receipts are sold. |