STATEMENT OF HON. JAMES P. WESBERRY, JR. GEORGIA STATE SENATOR February 8, 1963 Mr. WESBERRY. My name is James P. Wesberry, Jr. I am a certified public accountant and a partner in the firm of Waite & Wesberry with three offices in the Atlanta area and two in South Georgia. I am also a State senator representing the 37th senatorial district which includes the downtown business area of Atlanta, the center of the industrial South. My district is the crossroads of trade and commerce for the entire southeastern region of our Nation. Today I speak to you on behalf of the Georgia Junior Chamber of Commerce, the Georgia Chamber of Commerce, the Georgia Association of Broadcasters, the Savannah Chamber of Commerce, the Southern Brick & Tile Manufacturers Association, and the Southern Farm Equipment Manufacturers, Inc. In accordance with the committee request to combine testimony wherever possible, all of these organizations have asked me to present their combined views to you as regards the proposed changes in our Federal income tax structure. I have with me as a. guest, Mr. Drew Wigley, who is a member of the West End Georgia Jaycees. We are especially delighted that the President of the United States hasgiven the fullest possible recognition to the need for removing the impediments which have so long held back the economic growth of our Nation. The present income tax system is based on a "disincen­tive" tax rate structure. For too long it has contained our economy. We agree with the President that now is the time for action. We especially commend our Chief Executive for the wisdom of his action in placing top priority on tax rate reduction rather than upon structural reforms as expressed in his recent massage to the American Bankers Association. This committee, by following the President's lead can alleviate the complexity existent in the present tax package. The need for new capital is so great that structural reforms should be of secondary consideration. We urge that ali such reforms be deferred. WHAT CAPITAL MEANS The question of tax rate reduction is largely a. matter of two things--capital and jobs. The more capital available, the greater the opportunity for individuals who cannot benefit under our existing "disincentive" tax rate structure. The man without a job and with no income will not benefit directly from any kind of a tax cut. The private economy can, and will, provide jobs--if the rates in our current "disincentive" tax structure are properly reformed to release capital into our economy. In the South this would mean jobs for those southerners who daily are being displaced from the farm to our urban areas. We believe that the type of program proposed by two members of this kev committee, Congressmen Herlong and Baker, will do this. Until recent years Georgia was looked upon as a part of the "rural" South. All th1s has changed; however, and a current survey reveals that Georgia ranks fourth in the Nation in the number of new commercial and industrial firms established for a 7-year period. Georgia industry has more than doubled in recent years. This has been due in large measure to the flow of outside capital from other States into Georgia. Removal of the "disincentive" effects of our tax rate structure on business and individuals--particularly those who accumulate greater amounts of capital out of earned income--would make it possible for us to generate more capital within Georgia and be less dependent on other States for capital. Industrial progress in Georgia has meant that our State now ranks thirdin manufacturing among Southeastern States. Total manufacturing and mining employment has reached an all time high of nearly 345,000. We lead all States in the Nation in production of paper and board, tuffed textile products, and processed chicken. Our industrial growth has of course meant many new jobs in Georgia which have in turn provided a higher level of consumption. Had this situation been reversed initially with purchasing power substituted for capital these results would not have been possible. Despite our substantial progress, we are still confronted with the fact that we need more and better jobs in order that we can employ those seeking employment. We naturally want to retain all our young Georgians who, without opportunity would leave our State. A $23 million trade school program now under way to lend our labor force new skills, will introduce additional trained persons into the job market. We must retain our college graduates as well as those who take advantage of this program. We can do this if we have more capital in Georgia. It is when the true value of capital is made known, as has been our case in recent years, that there comes a realization of the insatiable demand for more and more capital in a growing economy. Having seen and been a part of this amazing transformation it is not at all difficult to visualize the significant achievements which would take place nationally if we reform our tax structure in a manner which will allow the release of capital which will, in turn, generate more and more and more capital. EXCESS CAPACITY AND CAPITAL In Georgia we are not confronted with the problem of idle plant and equipment which will be utilized only as additional purchasing power becomes available to people. In contrast to the administration's viewpoint that demand will take up excess capacity and thereby eventually necessitate additional capital investment, we find ourselves in the position of requiring additional amounts of capital now to provide the plant, equipment and jobs which will yield more economic benefits to the entire population. Here again a recognition of what capital means to our economy has led to active efforts m the attraction of new industries to our State. Indicative of this situation has been our recently enacted legislation broadening the operation of our State Department of Industry and Trade. In addition, sone 150 Georgia communities have industrial development organizations seeking new industries. The only thing lacking is the additional capital necessary to our economic growth. Our more favorable economic climate and our zeal to attract new industry naturally result in the transfer of some business operations from other States tu Georgia. This situation indicates that under current economic conditions there is inadequate capital to satisfy the economic needs of all the States. Should the present tax rate stn1cture be reformed in order to provide for the release of significant amounts of capital as provided m the Herlong-Baker bills, each State would have a greater inherent capacity to be more economically sufficient? The release of such capital would make possible the modernization of obsolete plants and equipment in sorne States and the expansion needed in others. Even more important such capital would mean the creation of businesses that cannot presently come into being due to lack of capital. It is this latter area which provides the home­grown industries which are the basis for sustaining and expanding the future economic potential of each State. EFFECT ON STATE AND LOCAL GOVERNHENT We believe that additions to capital in the State of Georgia would mean a great deal to our cities, counties, and State in terms of a greatly improved economic base. High level economic growth will enhance the ability of local and State governments to more adequately meet their own needs. It is completely consistent with our governmental system to allow each unit of government to stand on 1ts own two feet--just as individuals and businesses are expected to do under our free enterprise system. We are strong believers in local government in Georgia. We believe that the best government is that government which 1s closest to home. An improved economic base will naturally strengthen our local government. At th1s very moment my fellow legislators in Georgia are debating the passage of the largest appropriations bill in our State's history. It calls for the spending of practically every penny of existing State surplus in addit1on to all expected revenue during the next 2 years. To permit Georgia to progress without a tax increase at the State level, it is absolutely necessary that we immediately release the impediments on our economic growth which are included in our present "disincentive" Federal tax structure. A Federal tax reduction of the right sort now may make immediate State and local tax increases unnecessary in Georgia and throughout the country. The increased revenue resultant from economic growth would provide the services which progressive State and local governments must offer. By adding to the economic strength of our States and municipalities we would thereby reduce depend upon the Federal Government. Our Georgia State government is one of the few required by its constitution to be on a pay-as-you-go basis. We are proud of this. The Herlong-Baker proposals anticipate an ultimate balance between expenditures and revenues on a Federal level brought about by additional income resulting from a tax base enlarged as a consequence of a higher level of economic growth. I am sure you realize that as an elected official, like yourselves, I would not appear before you with these comments unless I felt that they were not only the views of those organizations which I represent, but were likewise shared by many of the citizens and voters in my senatorial district, in my county, in my city, and in my State. I strongly suspect that the v1ews of many of your constituents are similar to those of mine. Thank you. The CHAIRMAN. Senator, we thank you sir, for bringing this statement in representation of the views of the organizations which you described to us. Are there any questions of Senator Wesberry? Mr. UTT. Mr. Chairman. The CHAIRMAN. Mr. Utt. Mr. UTI. Senator, I want to congratulate you for this statement. It is quite refreshing. I think you have come closer than any of the last hundred witnesses in putting your finger on the problem today. You hedged a little bit. You referred to capital a great deal but you did not refer to the capitalistic system which is the American way of life. The great conflict today, domestically and internationally, is a conflict between socialism and capitalism and we who built this Nation on a capitalistic system are beginning to apologize for it and making excuses for it and trying to put altru1sm above self-preservation. So I am glad tosee you have a paper here which recognizes the fact that capital structure is important m the creation of jobs. It is probably called the trickle-down theory but I adopt that. And adding purchasing power without broadening the creation of wealth does not solve any problems that we have. So, I want to congratulate you and the State of Georgia for adopting the liberty amendment. I do not know whether you voted for it or not, but I have sponsored it for years. I believe it is the only way in which the States are going to recapture from the centralized powerful Government the sovereignty which belongs to the State under the original Constitution. lt 1s a step in the right direction. I congratulate you for your statement and subscribe to it com- pletely. The CHAIRMAN. Are there any further questions? If not, we thank you, Senator. Mr. WESBERRY. Thank you.