MEMO TO THE DIRECTOR FROM JOHN S. WARNER

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01676R003100220017-8
• Release Decision: RIPPUB
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• Document Page Count: 12
• Document Creation Date: December 12, 2016
• Document Release Date: August 27, 2002
• Sequence Number: 17
• Publication Date: May 23, 1962
• Content Type: MF

Approved For Release 2002/09/04: CIA-RDP80601676R003100220017-8
IMEMORANDUM FOR: THE DIRECTOR
Executive Registry
Attached for information is an insertion
in the Congressional Record by Senator Pell
of the 19 May editorial in the New York Times
recommending a watch dog committee to keep
tab on CIA. Pell expresses the hope that
hearings will be held soon on S. J. Res. 77,
which is Senator McCarth Vs bill for a Joint
Committee.
FORM NO. 10 REPLACES FORM 10-101
1 AUG 54 WHICH MAY BE USED.
( 4 7
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opinion of Senator Bvitn, neither individuals
nor nations can spend themselves out of
debt.
This, to New Frontiersmen, is old stuff
and outmoded. President Kennedy in a
speech in Milwaukee over the'weekend called
it a do-nothing policy. The President has
called on Congress for great additional
Federal expenditures and for great additional
powers, which mean still greater Federal ex-
penditures. These are the problems which
confront Congress on the eve of an election,
The argument of the administration is that
its policies will lead to ever-expanding busi-
ness, national production, and increasing
Federal revenue. The administration is on a
treadmill, apparently unwilling to slow down
or get off. The question is, How long can
this kind of thing continue?
SEES DOUBLE PERIL
Senator BYRD said the American people
face two dangers to the value of the dollar?
one from the domestic deficit of the Federal
budget, and the other from the foreign
deficit in our international balance of pay-
ments. "There was a $4 billion deficit (in
our Federal budget) last year, there will be
a $7 billion to $10 billion deficit this year,
and there will be another deficit of $3 bil-
lion to $5 billion in the coming fiscal year,"
he continued. "The statutory Federal debt
limit has been raised twice in the last 11
months: A third request is pending, and I
shall oppose it. The (national) debt is ap-
proximately $300 billion. The administra-
tion estimates that its spending will raise
it close to $308 billion in the coming year."
The Virginia Senator said the country is
told by the administration the fiscal situ-
ation will be all right if the Federal budget
is balanced over a cycle of years, and that
this will be possible if the Federal Govern-
ment will spend enough to raise the na-
tional production high enough to produce
the necessary revenue.
"This is evil fiction," Senator BYRD de-
clared. "It never has worked; it is not
working now. * * * A prudent government
would balance its budget by stopping non-
essential expenditures. This is not being
done. The hard fact is that continuing
deficits ultimately end in bankruptcy. When
a nation goes bankrupt, its assets are not
taken over and sold to satisfy its debts. Its
money becomes worthless; its economy dis-
integrates; its form of government falls and
changes."
THE MAIN ISSUES
The big question is: Will the people pay
attention to the warnings of Senator BYRD,
in the face of the big promises and the big
spending of President Kennedy? Further,
will Congress pay attention and be more re-
strained when it comes to handling the ad-
ministration's demands?
Senator BYRD told the Senate that no
President in the history of the United States
has asked rgxecutive power such as is em-
bodied in two proposals which Mr. Kennedy
has before Congress today. Under one,
which is pending in the Senate now, the
President could spend public funds without
appropriation. Under the other, he could cut
taxes by Executive order. The first is con-
tained in a $2.5 billion public works bill
which authorizes the President, when he
believes it wise, to spend money which has
been appropriated by Congress for other pur-
poses. The second is a tax proposal, giving
him authority to cut income taxes when he
believes it wise to stimulate buying power.
"Both proposals," Senator BYRD insisted,
"would undermine the Constitution which
prohibits expenditures except in 'conse-
quence of appropriations made by law,' and
fixes the taxing power of the Government
in the legislative branch. The President
says he wants these powers for use in un-
employment relief. Where is the emergency
justifying such grants of power? * * * Is
it a plan to speed up spending?" Senator
BYRD declared that Congress could be called
into session in any emergency, or remain in
constant session, rather than place more
power in the hands of the Executive.
"Use of the Federal whiplash on a seg-
ment of the Nation's industry in recent
weeks shocked the country, but it should
have surprised no one at this late date. The
increasing dominance of the executive
branch in the Federal Government is com-
bined with the usurpation of power in a
continuing line of decisions by the Warren
Court."
THE TRADE EXPANSION ACT OF 1962
Mr. HARTKE. Mr. President, I rise
today to express my deep concern over
the President's proposed Trade Expan-
sion Act of 1962. Indiana has a vital
stake in any action which would affect
trade, for 6 percent of Indiana's workers
are completely dependent on exports for
their living. The majority of these em-
ployees are engaged in manufacturing.
It is generally believed that Indiana is
primarily an agric.ultural State, but as
a matter of fact 62 percent of Indiana
is urban. Manufacturing is the leading
economic activity in Indiana and the
largest ,source of employment for the
State's labor force. There are several
industrial areas in Indiana. Many of
our large cities, such as Indianapolis,
Gary, Fort Wayne, Evansville, South
Bend, Terre Haute, Elkhart, and East
Chicago, are great industrial centers.
These tremendous centers of industry
are a powerful source of economic
strength for Indiana and for the Nation.
In 1960 Indiana ranked 10th in the Na-
tion in the export of manufactured prod-
ucts with a total export value of $483.6
million. This $483.6 million was 3 per-
cent of the Nation's total exports. The
same year over 300 Indiana firms ex-
ported more than $25,000 in manufac-
tured goods. These firms employed
310,259 Hoosiers or 52 percent of Indi-
ana's total working force, in manufac-
turing.
It is evident, Mr. President, that the
future of Indiana's exports of manufac-
turing is of great importance to the rest
of the Nation; similarly the future of
America's exports in manufacturing will
have a terrific impact on Indiana's man-
ufacturers. At present the United States
exports more merchandise than it im-
ports. In 1961 the surplus was $5 billion.
As you know, this surplus is essential
to the national securitk of America be-
cause it helps us pay for our military
and economic aid and for other national
commitments abroad.
In spite of a favorable balance of
trade, however, the United States has
been experiencing a deficit in its inter-
national accounts. Settlement of this
deficit has led to an outflow of U.S. gold
and dollars. To stem this outflow, it
is essential that we increase our exports,
thereby further increasing our trade sur-
plus and helping us to pay our interna-
tional commitments without having to
use gold.
Trade also strengthens the United
States and her allies against the eco-
nomic warfare of the members of the
Communist bloc. Thus, efforts which
will increase international commerce
May 21
will also create a more prosperous
America and a stronger free world.
The farmers of Indiana, too, have a
paramount interest in the future of
American exports. Five hundred and
ninety dollars of the annual income of
each Indiana farmworker comes from
the sale of farm products abroad. Sales
to foreign agricultural markets bring
$150 million to Indiana's total agricul-
tural income. Mr. President, the farm-
ers of Indiana and of our Nation as a
whole would be adversely affected if,
with all our present surplus, we should
suddenly lose our export markets.
In the 1960 to 1961 crop year, In-
diana's share of the U.S. total exports
of agricultural products was $149.3 mil-
lion; 15,700 Hoosier farmworkers, or
7.2 percent of all the workers on In-
diana farms, were producing for export.
Sixty million acres of American crop-
land-1 out of every 6 acres harvested?.
product for export. American agricul-
tural products are being exported at a
record high of $5 billion annually. U.S.
farmers need these exports as an im-
portant source of income. Foreign con-
sumers need our exports as a significant
source of food and clothing.
In the more prosperous countries of
the world incomes are using, and there
exists an excellent opportunity for
America to sell larger quantities of farm
products, provided such countries main-
tain liberal trade policies that will permit
U.S. agricultural commodities to enter
and compete on equal terms with those
of other suppliers. In the less prosper-
ous countries American farm products
obtained under such programs as food
for peace are helping these countries in
their economic development and simul-
taneously are increasing -U.S. prospects
for future commercial sales to them.
I am certain, Mr. President, that my
colleagues are as eager as I that the
farmers and manufacturers of our great
Nation be allowed to continue to pros-
per from favorable trade conditions.
The opportunity to insure these favor-
able conditions will soon be before the
Senate. I sincerely trust that my dis-
tinguished colleagues will act in their
wisdom to guarantee for America the
continued prosperity and economic ex-
pansion through trade.
PROPOSED JOINT COMMITTEE71
INTELLIGENCE
Mr. FELL. Mr. President, I ask un-
animous consent to have printed in the
RECORD the excellent editorial in the
New York Times of May 19, 1962, ad-
vocating the creation of a watchdog
Joint Congressional Committee on Intel-
ligence which would keep tabs on the
CIA. We heard several months ago
about the importance of separating in-
telligence collection from operation.
Apparently, in spite of the Cuban fiasco
and all we heard following it, these con-
tradictory activities continue under the
same roof.
1 I also hope that hearings on Senate
Joint Resolution 77 will be held soon in
order that this whole problem of a
watchdog committee may be more fully
investigated and that the Senate may be
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1962 CONGRESSI L CO ?
Thailand had referred to this pact in a joint
statement on March 6. The key portion of
this statement gave U.S. assurances that
this country regarded defense of Thailand
as an obligation of the United States to that
country, as well as a matter for action by
SEATO.
An administration official said the addi-
tional elements consisted of 1,800 marines
who will be landed at the Bangkok naval
base at 10 a.m. 'Washington time tomorrow.
its said they are, being moved in by units
of the 7th Fleet.
Kennedy said the ,sending of additional
U.S. forces to Thailand was considered de-
sirable "because of recent attacks in Laos by
Communist forces, and, the subsequent
movement of Communist Military units to-
ward the border of Thailand.\'?
The Pr?dent called a threat to Thailand
a matter of grave concern to his country.
But he said he wished to emhhasize that
the dispatch of U.S. forces to the\southeast
Asian nation is "a defensive act cal the part
of the United States" and comple con-
sistent with provisions of the Uni Na-
tions
tions Charter which recognizes that na ons
have an inherent right to take collec ve
measures for self-defense.
Kennedy said that he had directed tha
the United Nations be notified of the actions
this country is taking. He said, too, that
"we are in consultation with SEATO govern-
ments on the situation."
Kennedy's announcement followed one in
Bangkok by Premier Sarit Thanarat that
Thailand and the United States had agreed
to the stationing of U.S. troops in Thailand.
?
From the Honolulu Advertiser, May 15,
1962]
SCHOFIELD'S WOLFHOUNDS ONCE AGAIN AT
THE FRONT
(By Scott Stone)
When the United States decided to leave
the 27th Infantry in Thailand because of the
Laos crisis, it put one of the most colorful
units in the entire Army back in its accus-
tomed place?at the front.
From Siberia, where the "Wolfhounds"
picked up their nickname, to the steaming
Jungles of southeast Asia, neither geography
nor climate nor mission have unduly dis-
turbed the 61-year-old unit.
In 1918 the United States and several
other nations sent troops to Siberia to fight
the Bolsheviks. During its 2 years there
the 27th was likened to the Russian borzoi?
Wolfhound?so gentle to friends, so vicious
toward enemies.
The name caught on, became the first
nickname to be made an official part of the
unit designation. They also picked up a
motto: "Nee Aspera Terrent," meaning "Nor
hardships do they fear."
in 1941 the 27th helped prepare the de-
fenses of Oahu, then went off to combat in
Guacialcanal, northern Solomons, and in
Luzon, winning decorations and adding to'
their reputation.
After the war, in Japan, the Wolfhounds
invaded Holy Name Orphanage and opened
their hearts to the children. To date the
men have donated nearly a third of A mil-
lion dollars to keep the orphanage' going
and the children content. ,
A sightless youngster at the /orphanage
once wrote the Wolfhounds, "I feel so sorry
for the other children who have only one
father, I have so many." /
When bards of Communist troops raced
across Korea's 38th Parallel in June 1960,
the Wolfhounds got ready for action again
and in July the Wolfhounds were engaged in
the professional soldier's occupation. Out-
numbered butsnever outfought, the Wolf-
hounds c,arne out of the bitter Korean right-
ing with four Distinguished Unit Citations
from the United States and four Presidential
Unit Citations from the Republic of Korea.
The unit took part in 10 campaigns in
Korea, then returned to Schofield Barracks
and was reorganized into a battle group
under the Army's pentomic structure of five
battle groups within a division.
As part of the Schofield-based 25th In-
fantry Division, the Wolfhounds have spent
their time in Hawaii in jungle and guerrilla
warfare training. The present commander nan WALTER, because I want to be SCCur-
of the unit is much-decorated Col. William I.e.
A McKean 42, of Jacksonville, Fla.
Honolulu Advertiser, May 15
1962]
'tiring the fiscal years 1953 to 1961 the
Jtal number of quota immigrants was
44,281. Of the 1,471,906 nonquota ar-
ivals in the same period, 1,173,911 quali-
ed under provisions of the 1952 code
md 297,995 were admitted under special
2gislation. I am grateful to Congress-
[From the
KEEP SWAMP, CITY URGED
Prompt action to acquire Kawainui
Swamp for future park development is "im-
perative," says the League of Women Voters
of Honolulu.
The league reiterated its support of the
proposed 8awainui regional park in a let-
ter to councilmen. Who are debating whether
to buy the 740-acre property or release it
for subdivision development.
A decision is expected at the council's May
29 meeting when a resolution authorizing
the administration to apply for Federal as-
sistance will be presented.
The league said:
"A vital facet of good planning is the
preservation of open, green areas. Good
punning will make provision for the ace/
qu ition of open areas before, not after,
deve opment has taken piece."
Thi,, letter cited Kawainui Swamp's
strategic location mauka of Kailua between
the approaches to the Pali anci?,,Wilson
tunnels.
"This site is uniquely suited tei the de-
velopment lef inland water lecreational
proshaing an additional tourist at-
traction," it said.
The league inset argued that since Oahu's
housing emergency has passed, the council
should feel no obligation to clear the way
for the proposed Trousdale Construction
Co. subdivision.
"Subdividers have, already committed
themselves for more property than present
demands require," councinnen were told.
The windward palm chaptek,of the league
is one of the dozen Kailua dtganizations
which have joined in arranging, a public
meeting to rally support for the nark idea.
The meeting will be held at 7:304oinor-
row at Kenna High School.
ONE OF EVERY FIVE RESIDENTS OB\
TH UNiTED STATES IS OF FOR-
EIGN STOCK
Mr. SALTONSTALL. Mr. Presi-
dent, recently I made a brief statement
an the Senate floor regarding the need
for updating our immigration laws. The
main purport of my remarks was that the
1960 rather than the 1920 census should
be utilized in determining national quo-
tas and that new quotas should be sub-
stituted for those presently prescribed.
I said that?
Of the 2,5 million immigrants to this coun-
try during the 1950's, only 1 million were ad-
mitted under the provisions of the 1952
Immigration Act. The majority, 1.5 million,
were nonquota entering by means of special
supplementary legislation of the Congress.
Congressman WALTER called to my at-
tention the fact that this statement un-
fortunately conveys the improper im-
pression that all nonquota immigration
has occurred under special legislation
rather than under the provisions of the
1952 basic immigration code. I agree
that such is not the case. Factually,
According to the 1960 census figures,
ne out of every five residents of the
Inited States is either foreign born or
tative born of rniXed foreign and native
mrentage. The slightly more than 34
million persona in the Census Bureau's
?reign stock ,category include nearly 10
million foreign born and more than 24
nillion of ative birth, with at least one
iarent barn abroad. This means that
many ci) these American citizens still
lave relatives or members of their own
amities abroad whom they are anxious
o have join them in the United States.
l-fmlying on the 1920 rather than the 1960
,ensus as the basis for determining na-
Aonal quotas adds to the difficulty of
diese people in getting their relatives and
members of their own families on the
mote lista of the countries. This is par-
Acularly true of Italy and Greece. Con-
3equently, I believe that the 1960 census
Mould be made the basis of determining
miota,s rather than one which is 40 years
There are, of course, other amend-
ments of the law that may be properly
promoted, but in my opinion if the latest
census figures were used it would be
much fairer to American citizens of cer-
tain nationalities who are seeking to be
reunited with their loved ones.
FATEFUL F-Ffr,LOW TRAVELERS
Mr. WILLIAMS of Delaware. Mr.
President, I ask unanimous consent to
have printed in the RECORD an article
as written on May 15, 1962, by Mr. Gould
Lincoln, entitled "Fateful Fellow
Travelers." In his article Mr. Lincoln
Pays a well-deserved tribute to the Sen-
ator from Virginia [Mr. BYRD] with re-
spect to his attempt to preserve some de-
gree of fiscal sanity at the national level
and his continued fight against an over-
concentration of bureaucratic power.
T re being no objection, the article
was o ered to be printed in the RECORD,
as follow:
FAKEFUL FELLOW TRAVELERS
'tHy Gould Lincoln)
Big spending by the Kennedy administra-
tion is a fellow traveler of its big power
grab. Senator Iikeny F. BYRD, of Virginia,
9
chairman of the important Senate Finance
Committee which ha les all tax legislation
and also of the Joint 6mmittee on Reduc-
tion of Nonessential Federal Expenditures,
has tackled both issues iitaspeeches to the
Senate and to the Delaware Bankers As-
sociation. In his opinion, if the adminis-
tration does not change its financial and
governmental policies, the Ameridasn people
are in danger of great inflation, devaluation
of the dollar, and indeed, of drastic changes
in their Government and freedom, such as
has followed in the footsteps of unsound
financing in other nations. Americans are
not encouraged to tighten their belts but to
spend more. And the Federal Government
sets the spending pace for them. In the
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able to have the opportunity to arrive at
an informed judgment concerning it.
There being no objection, the editorial
was ordered to be printed in the RECORD,
as follows:
SEQUEL TO THE POWERS CASE
John A. McCone, vigorous new director of
the Central Intelligence, Agency, has been
demonstrating as head of CIA the strong
leadership and quick comprehension which
all those who knew him had anticipated.
Yet there are, inevitably, carryovers from
the past which still leave disquieting
memories. One of these is the case of Fran-
cis Gary Powers, the pilot of the U-2 high-
flying plane lost over Soviet Russia in 1960.
The carefully staged and well-greased ar-
rangements for Powers' public appearance
before the Senate Armed Services Commit-
tee a few weeks ago did little to allay the
doubts raised by the inept handling at the
time of the U-2 incident.
Questions are still being asked, and the
lessons of the U-2 which should have been
underscored after Powers' return remain
hazy and confused. The questions are many
and publicly unanswered: What were Pow-
ers' orders about the destruction of his
plane? Why did the Government launch a
cock-and-bull cover story when the U-2 dis-
appeared? Was Powers really ordered to
cooperate with his captors? Is it the Gov-
ernment's belief that the U-2 was actually
damaged by a Soviet rocket? And so on.
The lessons, which should have been
sharply drawn by the Senate hearing, have
been fuzzed up and forgotten. But they are
plain enough.
The first is that the qualifications pos-
sessed by a competent technician, no matter
how expert, are not alone sufficient for a
job of such risks and importance as that
of Powers.
The second lesson is that high pay is not
an adequate motivational reward for the
kind of risks Powers and his comrades took.
A man will die for his country and for the
belief in what he is doing, but money can-
not purchase this emotional resolve.
The third lesson is that the CIA should
have been better prepared for what did hap-
pen than our heavy-handed fumbling at the
time indicated. It is quite true that the
CIA was not alone in its mistakes. Govern-
ment bureaucracy, crossed purposes, and
some poor judgment contributed to making
a bad situation worse. But the CIA has had
in the past too much of a history of free
wheeling.
Congressional control is even more im-
portant for a secret intelligence agency
than it is for the military. That control has
been too loose in the past. There is one
ready way to remedy it?the creation of a
watchdog committee of both houses of Con-
gress?a Joint Congressional Committee on
Intelligence, which could monitor CIA op-
tions just as the Joint Committee on
Intelligence,
Atomic Energy watches over the AEC.
TAX BILL?OPPOSITION TO WITH-
HOLDING TAX ON INTEREST AND
DIVIDENDS
Mr. BYRD of Virginia. Mr. President,
I have prepared a statement relating to
the tax bill?HR. 10650?which is now
under consideration by the Senate Fi-
nance Committee. I ask unanimous con-
sent to have this statement printed in
the body of the RECORD as a part of my
remarks at this time.
There being no objection, the state-
ment was ordered to be printed in the
RECORD, as follows:
STATEMENT Or SENATOR BYRD Ow VIRGINIA
I have the honor of being chairman of the
Senate Finance Committee. In this position
I usually refrain from announcing my posi-
tion on legislation pending in the committee
until the committee has acted. I am now
constrained by current circumstances and
long experience with Federal tax legislation
to make this statement at this time; and I
do so in my own right as an individual Sena-
tor from Virginia.
I shall oppose administration proposals in
the pending tax bill to withhold 20 percent
in personal income taxes on interest and
dividends, and to give a 7- or 8-percent tax
credit to segments of business for invbstment
in new machinery and equipment.
I have reached this firm position with re-
spect to these two provisions in the bill after
fullest consideration of views expressed by
witnesses in exhaustive hearings, and those
set forth in thousands of communications
from the general public.
I have given closest possible study to state-
ments in behalf of the administration's rec-
ommendations, including those by the Presi-
dent in his press conference of May 9 and
those made by the Secretary of the Treasury
before the Finance Committee and elsewhere.
In addition, I have called on my own ex-
perience, and knowledge of existing author-
ity and facilities which had better be fully
employed to curb tax evasion and revise de-
preciation credit before we resort to the
withholding and tax credit legislation now
proposed.
Members of Congress have been placed
under tremendous pressure by representa-
tives of the administration pressing for en-
actment of these proposals, and by citizens
throughout the Nation overwhelmingly urg-
ing their rejection.
The hearings on the bill?which started
April 2 and-continued until May 11?have
now been concluded. And at this point,
under circumstances outlined, I am making
this statement at this length to state my
individual position with respect to the with-
holding and tax credit provisions in the bill,
and describe in some detail the considera-
tion leading to them.
Generally, the reasons for the conclusions
I have reached may be summarized in a
measure, and this I have attempted to do.
But in view of the extraordinary interest
demonstrated with respect to these two pro-
posals, I shall include also additional detail
for further consideration if it is desired by
those who may be interested in this legis-
lation.
I oppose enactment of the withholding
proposal at this time for numerous reasons
including:
1. Withholding taxes on interest and div-
idends cannot be compared with withhold-
ing taxes on salaries and wages; its admin-
istration would be terribly complex, if not
impracticable and unworkable.
2. It would, by its inherent deficiencies,
overtax people for extended periods, and im-
pose hardship or inconvenience not only on
taxpaying citizens but also on institutions
and businesses used by the Government to
collect the taxes.
3. Respect for our tax system must be
maintained. It is necessarily complex
enough. Unnecessary confusion must be
avoided. The agitating characteristics of
this proposal are already clear from public
reaction. Tax evasion cannot be condoned,
but this withholding proposal should be en-
acted only as a last resort.
4. An alternative is available, and it should
first be given full trial. The Internal Reve-
nue Service is now assigning numbers to
taxpayers to eliminate identification diffi-
culties, and at the same time It is installing
computers to show currently what taxpayers
owe the Government and vice versa. This
combination should and will provide infor-
mation for effective curtailment of tax
evasion.
When the so-called identifying numbers
bill was presented to the Senate by the
Senator from Virginia and passed late on
the night that Congress adjourned last Sep-
tember, Treasury officials advised me that
the following statement could be made with
accuracy on the floor of the Senate:
"This would be the biggest loophole closing
bill in history; that it would increase Fed-
eral revenue by $5 billion; and that when
used in the computers, those avoiding taxes
could be identified and compelled to pay."
In response to questions during his testi-
mony on the pending bill, the Secretary of
the Treasury Douglas Dillon, on May 10,
confirmed the fact that:
"With identifying numbers and the com-
puter systems, the Internal Revenue Service
could obtain information necessary to levy
proper taxes on interest and dividends, and
with that information the Government's
remaining job was to collect the taxes. Sec-
retary Dillon's only substantial reservation
was that additional agents Would be needed."
I am convinced that in the interest of
good government the numbers-computer
systems should be thoroughly tried before
we resort to the administration's plan for
withholding taxes on interest and dividends,
which is certain to be accompanied by wide-
spread confusion and considerable hardship.
If there is need to have more complete
reporting?by banks and businesses?of in-
formation on income from interest and divi-
dends, and heavier penalties for tax avoid-
ance in these areas, I shall offer amendments
providing for both.
Under terms of the pending bill, this with-
holding provision would not be effective un-
til January 1, 1963. The complexities in-
volved make it doubtful as to whether this
withholding plan could be put into opera-
tion before 1964. The Secretary of the Treas-
ury has testified that the numbers-computer
systems would be in full operation during
1965-66; and in my judgment, if the effort
were made, they could be in effective opera-
tion by 1964.
If, after reasonable trial in full operation,
it is found that the numbers-computer sys-
tems do not close the loophole through which
taxes on interest and dividends are being
evaded, avoided or overlooked, withholding
can be adopted. But the numbers-computer
systems should have a thorough trial.
I oppose enactment of the tax credit pro-
posal in the pending bill also for numerous
reasons, including the facts that:
1. It is wrong in principle. It is in the
nature of a Government payment before
the fact instead of a credit for an accom-
plished fact.
2. It is a subsidy in the nature of a wind-
fall to be given to businesses which comply
with a Government policy.
3. It is discriminatory in its application
among various businesses, even among those
similar in kind. Incentive is a stated pur-
pose of the proposal, but it would be retro-
active to last January 1, and it is difficult to
understand how the provisions would be an
incentive for investments made before it is
enacted. It would be a bonanza for certain
corporations which could reach $600 million.
4. An alternative is available. The Gov-
ernment has the authority, and belatedly is
now taking action to modernize Internal
Revenue regulations to provide realistic
depreciation credit for plant and equipment.
These observations are expanded, and
others are set forth, in the following sec-
tions of this statement,
WITHHOLDING ON DIVIDENDS AND INTEREST
All taxpayers should bear their fair share
of the tax burden. Over the years we have
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searched for feasible means of withholding
on interest and dividends. I had hoped
the pending administration proposal would
meet the difficulties. This has not been
done, and I have concluded that the legis-
lation should not be adopted at this time.
My present view is attributable primarily
to two facts: First, the Treasury Department
has not come up with a workable system of
withholding. The proposal neither removes
the hardships for the small shareholder or
depositor who owes little or no tax, nor is it
a workable system for the banks and cor-
porations paying the interest and dividends.
Second, I am convinced that the Treasury
has not as; yet made full use of the new social
security numbering bill we pawed last year
nor automatic data processing, which is so
closely interrelated with the numbering bill.
.?es I point out, I believe that with an ex-
tension of the application of information
returns, there is a good possibility of col-
leeting the tax on the presently nonreported
dividends and interest without imposing the
burdens apparently inherent in a withhold-
ing system.
The President In his recent news confer-
el ice has said that this is not a new tax and,
of course, it is not?but it would be a new
way of collecting it. And unless refunds are
promptly made it could result in a tax in-
crease. The President said that it will not
take money unjustly from honest tax-
payers?but it will unless they have no tax
liability and file exemption certificates. (If
they have tax liability and can file quar-
terly refund claims, they are deprived of the
use of their own money for anywhere from
to 4 months.) He has said that it would
llOt create a mountain of red tape but I be-
lieve he will change his mind when the In-
ternal Revenue Service undertakes the job
of processing 8 million or more exemption
certificates and millions of quarterly refunds.
The President said it will not harm the
elderly, the widows and orphans and others
of low income?but these are the very groups
which owe little or no tax and must choose
between the exemption and refund provi-
. Even if they choose correctly, they
are likely to be deprived of the use of their
income for a time. Unfortunately, they are
likely also to be the ones who through lack
of information will not get back what the
Government justly owes them.
Impracticable or unworkable
Withholding on dividends and interest has
been represented to us as being a simple
twitem for both the taxpayer and the payor
id dividends or interest. We have been told
that the problems of the aged, the children,
:;11.1 the others who owe little or no tax have
i wen provided for, with the result that there
ere no hardships under the bill. We also
have been told that wage and salary earn-
ers are withheld upon and therefore why
timuldn't withholding also apply for those
who receive dividends and interest.
The very substantial opposition which in-
dividuals throughout the country have ex-
pressed to withholding on dividends- and in-
terest, through thousands upon thousands
,.-47 letters to their Congressmen and Senators,
eliould be ample evidence that there must be
onnething wrong with the administration
proposal. The testimony before the Senate
Finance Committee has convinced me that
hat is wrong with the proposal is that it
neither simple in operation nor free of
tabstantial hardship for broad groups of
ayers. I also am convinced that the aye-
ecu proposed contains many avoidance pos-
eibilities which have been glossed over by
be administration.
The exemption certificates provided under
the bill have been held out as being the
major means by which hardship is removed
under the bill. These exemption certificates,
however, may be filed only by those who
have no tax liability whatsoever. This means
that exemption certificates may be fila 1 by
most youngsters and also by the elderly
who had no tax liability. However, a -.any
others, both in the elderly category end
among younger people will be faced with
substantial hardship under the bill be dim
of overvvithholding on dividends and int rest.
Even those who can file exemption cer-
tificates, however, (unless they are nnder
age 18) must state under penalty of pet iury,
that they expect to owe no tax for the wax-
ing year. Won't many conscientious per-
sons who either in fact turn out to av e no
tax, or little tax, feel that they cannot den
such a statement before the year even eim-
rnences and therefore won't they effeet vely
be deprived of the use of the exerreeion
certificate?
For individuals expecting to have an - tax
liability, quarterly claims for refunds oust
be filed if they expect to have the car-
withheld amounts returned during the rear
in which the withholding occurs. Those aho
file these quarterly claims can expect a delay
of at least 3 or 4 weeks before they re eive
back the overwithheld amounts. and -nay
have to wait as much as 3 or 4 months le-fore
the withheld amounts are returned. This
deprives them of the use of these fun s as
living expenses or as sources of invest nent
during the interval. I believe it is this in eect
of the proposed witholding system ea hich
makes so many individuals consider that
withholding on dividends and interest in
effect constitutes a new tax.
This quarterly refund claim which -oust
be filed (or verified) by the individual 'our
times a year Is far from a simple calcule -ion.
The complexities of this are shown on nage
91 of the House committee report on this
tax bill. However, in addition to tk. 19
items listed in that calculation, the tax-
payer must list in detail the source of sach
separate amount of dividend or interes in-
come which he receives. Finally, he oust
also list all of the same material all ,ver
again in a tax return filed at the end a the
year, in order to receive his refund far the
fourth quarter. Although the taxpayer may
have to fill out the refund claim only nice
and then merely verify the figures sea to
him in the two subsequent quarters, fiat will
only be true if his dividend or Interele in-
come and other income remains exact as
anticipated. Otherwise, new calcula jns
must be made each quarter.
It should also be noted that the quarterly
refund provided by the bill, as passe- by
the House of Representatives, does not r bow
for all cases under which overwithhal ding
may arise. It does not, for example, a ,ake
any allowance for the $50 dividend exch eon
($100 exclusion on many joint returns) for
the 4-percent dividend credit, and fin the
excess of itemized deductions over a stall tard
deduction. Moreover, no quarterly refill d at
all may be filed by a single individual ;nth
more than $5,000 of gross income di' a
married couple with more than $10,(X- of
gross income.
While the exemption certificates and
quarterly refunds do not resolve the I .,rd-
ship problems for the shareholders ea de-
positor, they nevertheless will present a any
compliance problems for the corporate and
bank payers of the dividends and MO est.
The corporations and banks will hay to
maintain two files of stockholders Or de-
positors. In the case of stock, the con ra-
tion must also be prepared to shift ie
holdings back back and forth between thew two
files as it is purchased and sold or a ex-
emption certificates are issued. More ivae
special problems will arise where stag e is
sold just before a dividend date by son one
who has filed an exemption certlficat to
someone who has not, if the stock earth -ate
has not actually been delivered to the eor-
poration before the dividend date. 1k ,ore-
over, in order to use exemption certifl4ates
at all, the taxpayers will have to forego the
convenience of leaving stock in their brokers'
names.
Although not touched upon by the Treas-
ury Department in its explanation of with-
holding before the Finance Committee,
there also will be serious administrative
problems for the Internal Revenue Service as
a result of the use of exemption certificates
and quarterly refunds. These, if not policed
very closely by the service, can lead to sub-
stantial tax evasion. There is no assurance,
for example, that only those who reason-
ably expect no tax liability will file exemp-
tion certificates unless these certificates,
representing at least 8 million taxpayers, are
checked by the Internal Revenue Service.
Moreover, these will not be easy to check
because many of thcm will represent persons
not requited to file tax returns so there fre-
quently will be no returns to match them
against.
Similarly, since the individual when he
files a quarterly refund need submit no proof
of the receipt of dividend or interest pay-
ments, here too there is ample opportunity
for tax evasion and fraud as well as unin-
tentional mistakes. These also must be
checked in detail and compared with the
amount shown on final returns if the pur-
pose of the legislation is to be fully accom-
plished. In fact, it is entirely possible that
some taxpayers might file exemption certifi-
cates, file quarterly refund claims and still
claim refunds on their final returns at the
end, of the year, all with respect to the same
dividend or interest payment or with re-
spect to no dividend or interest payment at
all. While the Internal Revenue Service
through sample auditing may be able to con-
trol this form of tax evasion and uninten-
tional errors. I believe it will require no
small enforcement effort,
Another source of confusion under the
Treasury proposal le the so-called grossup
procedure the service intends to follow. We
are told that it is possible to do away with
the necessity of giving receipts to the in-
terest or dividend recipients under the pro-
posal because taxpayers can grossup their
dividends and interest on their tax returns.
Although the arithmetic of grossup may be
correct, it is likely to lead to many problems.
Taxpayers will almost certainly get mixed
up between the int wait and dividend pay-
ments which they are required to grossup
and those which they are not, with the re-
sult that this will constitute a substantial
source of errors on tax returns.
This omission of some forms of interest
from a withholding system not only will
lead to confusion cm the part of the tax-
payers as to how to treat interest on their
tax returns but will also create favored
categories of investment--those not subject
to withholding. Under the bill withholding
does not apply, for eidanple, to interest on
mortgages interest on debt held by indi-
viduals and interest; paid in the form of
discounts. This means that such forms of
investment will become more attractive
than other forms of investment which are
subject to withholding, such as bank ac-
count interest and Government bonds.
I have dealt here only with the problems
of withholding on dividends and interest
for individuals. Many more are involved
in setting up a withholding system for
dividend and luta est payments going to
corporations. This clearly is useless since
the withheld amounts are immediately re-
funded to the corporations without regard
to their tax liability. Similarly, problems
are raised in connection with the applica-
tion of the dividend and interest withhold-
ing system in the case of trusts, partnership
investment clubs, mutual funds, etc.
Comparison with wages and salaries
Much has been said to the effect that
wages and salaries are subject to withhold-
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87m CONGRESS
S
J? RES 77
1ST SESSION
IN THE SENATE OF THE 'UNITED STATES
APRIL 27, 1961
Mr. MCCARTHY (for himself, Mr. ANDERSON, Mr. MORSE, Mr. CLARK, Mr. Mr-
CALF, Mr. BURDICK, Mr. BARTLETT, Mr. MCNAMARA, Mr. HUMPHREY, Mr.
CARROLL, ,Mr. LONG of Missouri, Mr. MOSS, Mr. MCGEE, gr. TALMAD9E,
(..,Mr. HICKEY, Mr. CASE Of South Dakota, Mr. PELL,Mr. PROUTY; Mr. YOUNG
of Ohio, Mr. HART, and Mr. WILLIAMS of New Jersey) introduced.the fol-
lowing joint resolution; which was read twice and referred to the Coin-
mitte,e on Foreign Relations
JOINT RESOLUTION
To establish a Joint Committee on Foreign Information and
Intelligence.
Resolved by the Senate and House of RepresentatiVes
of the United States of America in Congress assembled,
3 That (a) there is hereby established a joint Congressional
7 ,
4 committee to be known as the Joint Committee on Foreign
,
5 Information and Intelligence (referred to in this' joint res=
ointion as the "joint committee"), to be composed of seven
ISTeinbers oft the Senate appointed 'f;374:iliej.i:4;esidentlr4the
8 Senate, and seven Members of the House of ItepraeiVitiveS
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1 appointed by the Speaker of the House of Representatives.
2 In each instance not more than four Members shall be ap-
3 pointed from the same political party.
4 (b) Vacancies in the membership of the joint corn-
5 mittee shall not affect the power of the remaining members
6 to execute the functions of the joint committee, and shall be
7 filled in the same manner as in the case of the original
8 selection.
9 (c) The joint committee shall select a chairman and
10 a vice chairman from among its members? at the beginning of
U each Congress. The vice chairman shall act in the place
12 and stead of the chairman in the absence of the chairman.
13 The chairmanship shall alternate between the Senate and
14 the House of Representatives with each Congress, and the
15 chairman shall be selected by the members of the joint
16 committee from the House entitled to the chairmanship.
17 The vice chairman shall be selected in the same manner as
18 the chairman, except that the vice chairman shall be selected.
19 by the members of the joint committee from the House not
20 entitled to the chairmanship.
21 (d) The joint committee may appoint and fa the corn-
22 pensation of such experts, consultants, technicians, and deli-
23 cal and stenographic assistants as it deems necessary and
24 advisable.
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1 (e) The joint committee is authorized to utilize the
2 services, information, facilities, and personnel of the execa-
3 tive departments and establishments of the United States.
4 (f) The joint committee is authorized to classify inf or-
5 mation originating within the joint committee in accordance
6 with standards used generally by the executive branch of the
7 Federal Government for classifying restricted data or defense
8 information.
9 (g) The joint committee shall keep a complete record
10 of all committee actions, including a record of the votes on
11 any question on which a record vote is demanded. All
12 committee records, data, charts, and files shall be the prop-
13 of the joint committee and shall be kept in the offices of
14 the joint committee, or such other places as the joint corn-
15 mittee may direct, under such security safeguards as the joint
16 committee shall determine to be in the interest of national
17 security.
18 (h) The joint committee may make such rules respect-
19 ing its organization and procedures as it deems advisable,
20 but no measure or recommendation shall be reported from
21 the joint committee unless a majority of the members, thereof
22 assent.
23 SEci. 2. (a) The joint committee shall make continuing
24 studies of?
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(1) the activities of each information and intelli-
gence agency of the United States,
3 (2) the problems relating to the foreign informa,-
4 tion and intelligence programs, and
5 (3) the problems relating to the gathering of in-
6 formation and intelligence affecting the national
7 security, and its coordination and utilization by the
8 various departments, agencies, and instrumentalities of
9 the United States.
10 (b) Each information and intelligence agency of the
11 United States shall give to the joint committee such hi-
12 formation regarding its activities as the committee 'may
13 require.
14 (c) As used in this joint resolution, the tehn '"in-
15: formation and intelligence agency of the United Sates"i
1? means the United? States Information Agency, the Central
17 Intelligence Agency, and any unit within any of?tlie execu-
18 tive departments or agencies of the United States conduct-
19 ing foreign information or intelligence activities (including
20 any unit within the Departments of State, Defense, Army,
21 Navy, and Air Force, but not including the domestiO ?Pent,
22 tion of the Federal Bureau of Investigation) . ,
SEC. 3. All bills,a'esolutions, and:lother attef in tlfe'
24
Senate and House of Representatives relating ilrimarily t?
25
any information and intelligence agency of the United States
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1 or its activities shall 'be referred to the joint committee. The
2 members of the joint committee who are Members of the
3 Senate shall, from time to time, report to the Senate, and
4 the members of the joint committee who are Members of the
5 House of RepreSentatives shall, from time to time, report to
6 Workers 'Compensation Act when that Act was administered
7 the House by bill or otherwise, their recommendations with
8 respect .to matters within the jurisdiction of their respective
9 Houses which are-
10 (1) referred to the joint committee, or
11 (2) otherwise within the jurisdiction of the joiiit
12 committee.
13 (b) In carrying out its duties under this joint resolu-
11 tion, the joint committee, or any duly authorized subcom-
15 mittee thereof, is authorized to hold such hearings, to sit
16 and act at such times and places, to require, by subpena
17 or otherwise, the attendance of such witnesses and the pro-
18 duction of such books, papers, and documents, to administer
19 such oaths, to take such testimony, to procure such print-
20 ing and binding, and to make such expenditures as it deems
21 advisable. Subpenas may be issued over the signature of
22 the chairman of the joint committee, or by any member
23 designated by him, or by the joint committee, and may be
24 served by any person designated by such chairman or
25 member.
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1 !SW. 4. The expenses of the joint committee shall be
2 paid from the contingent fund of the Senate from funds ap-
3 propriated for the joint committee upon vouchers approved
4 by the chairman. The cost of stenographic services in re-
5 porting such hearings as the joint committee may hold shall
6 be paid in accordance with the established rules of the Sen-
7 ate. Members of the joint committee, and its employees and
8 consultants, while traveling on official business for the joint
9 committee, may receive either the per diem allowance au-
10 thorized to be paid to Members of Congress or its employees,
11 or their actual and necessary expenses if an itemized state-
12 ment of such expenses is attached to the voucher.
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110 9041.11111X100
cr)
caP
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