Processors' Revolt

When President Roosevelt impulsively followed up the Supreme Court's Schechter case decision by hinting that AAA might go the way of NRA, alert processing taxpayers began a scramble to the courts. By this week that scramble had become a stampede. Headed by Minneapolis' General Mills, Inc., world's biggest grain millers, and Manchester, N.H.'s Amoskeag Manufacturing Co., world's biggest cotton cloth manufacturers, no less than 117 potent processors had filed suits for recovery of taxes paid or for injunctions against collection of taxes due. With some $10,000,000 in taxes already involved, new suits were piling up at the rate of about five per day. Several Federal judges, notably Alabama's famed William Irwin ("Unconstitutional") Grubb, had granted the taxpayers' petitions.

Purpose of the suits was plain. AAAmendments, already passed by the House, were scheduled to reach the Senate floor this week. On the theory that processors regularly pass the taxes along to consumers, the Amendments would outlaw all suits for tax refunds even if the Supreme Court should declare AAA unconstitutional. Thus taxes paid previous to the Amendments' passage are supposedly down the hatch to stay. Only recourse for the processor was to hold out on his taxes, let the Government go into court and try to force a collection.

But the New Deal, determined to have its taxes whether they are constitutional or not, had no intention of letting rebels off so easily as that. Some Federal courts have granted temporary injunctions against tax collections only on condition that the disputed taxes be placed in their custody. Last week AAA Solicitor Seth Thomas declared that on passage of the AAAmendments all pending tax suits will be thrown out of court and all taxes in the court's custody will pass automatically to the Government.

Notable last week were two specific complaints against AAA. With the processing tax on hogs shooting up from an original 50-c- per cwt. to the present $2.25, Manhattan's Hygrade Food Products Corp. has paid $5,128,869 in processing taxes since November 1933. Petitioning last week for an injunction against collection of $1,771,177 more in taxes due, Hygrade declared that the tax now comprises 47% of its yearly operating cost, takes 21% of its revenue from the sale of meat products. Sales have plummeted because of resulting higher prices and Hygrade felt itself on the verge of destruction.

In 1932 tobacco was selling at 10-c- per lb. An AAA processing tax kited it to 21-c- per lb. That was the price agreed upon as giving tobacco-growers pre-War parity. In expounding the processing tax to Congress, Secretary Wallace had declared that "once pre-War parity is reached, the tax is completely removed." But tobacco is now selling at 27-c- per lb. and AAA is still levying its processing tax. Thus to the Senate Committee on Agriculture & Forestry last fortnight complained S. Clay Williams, board vice chairman of R. J. Reynolds Tobacco Co. (Camels), onetime chairman of NIRB.

Reminded of his earlier statements that AAA was strictly an emergency measure, Secretary Wallace weaseled: "This emergency may be very long. We have taken the position that the processing taxes are the farmers' tariff and that they must remain in effect so long as industrial tariffs remain. Foreign purchasing power must increase vastly before the emergency is over."

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