ANUARY 11, 1947. m s. Letters to The Times of : f Damage to Cooperatives a consumer cooperative is in no sense a profit, being a part of the original Mr. Nelson RepMes Series of Articles Criticized as Not price returned to the purchaser and put back in the same pocket out of Desire Expressed for Maintenance of Giving Full Picture which he originally took it. Second, Private Enterprise System it is not an exclusive feature of coop- To THE EDITOR OF THE New YORK TIMES: eratives, but a device employed also by To THE EDITOR OF THE NEW YORK Traces The series of weekly articles by God- mutual insurance companies in making This note does not pretend to an- frey N. Nelson on Cooperatives and refunds to policy holders, and similar swer Mr. Tichenor's letter. The irony Taxes which has been appearing in THE TIMES does a disservice to the to the refunds occasionally made by of his letter is that I have been accused profit business, on which, of course, no by both sides to the controversy of true picture, as well as giving aid and income tax is ever paid. unfairly stating their case. comfort to an organization which Rep- The NTEA urged the House Small It is coincidental, moreover, that I resentative Wright Patman declared in Business Committee to make a thor- am an active member of both the sub- Congress to be an "unscrupulous" en- ough check into this so-called exemp- committee and main committee of the emy to "an honorable and extremely tion of cooperatives. After a year of Commerce and Industry Association, democratic segment of our economy." study and hearings in all parts of the whose report is favorably commented Time and again, Mr. Nelson appears United States, where representatives of upon in the foregoing letter. The to place credence upon the statistics the NTEA naturally spoke their piece, writer of the letter overlooks the fact, or views of the National Tax Equality the House committee came to this however, that Congressional study and Association, whose efforts for the past unanimous conclusion: action is recommended in the report. three years have been devoted almost "It does not appear to be reasonable It should be noted that the "baby" exclusively to the task of destroying or equitable to attempt to levy a tax I am accused of having sat upon does cooperatives. Yet never to my knowl- on a cooperative for income which does an annual business of billions of dol- edge has Mr. Nelson questioned the not belong to it, nor to levy a tax for lars-"some baby." I am accused of suitability of relying upon that source. which it has no funds to pay. The failing to differentiate between differ- As an apparent gesture to impartial- levy of a receipts tax on such a coop- ent kinds of cooperatives. Please note ity, Mr. Nelson sometimes quotes coop- erative would probably raise constitu- qualifications for exemption of coop- erative sources, but his idea of a fifty- tional objections. Such a tax would eratives in my article of Nov. 17, 1946. fifty deal is like a certain butcher's have to be levied against all types of Does Mr. Tichenor expect me to name recipe for hamburger: one horse, one organizations which have income which, the cooperatives? Suffice it here to rabbit. by virtue of their charter, does not be- quote briefly from some of my articles An incautious reader of Mr. Nelson long to them as an entity, but which to which Mr. Tichenor takes exception: might get these impressions: belongs in the non-profit sense to their June 2, 1946 "Unquestionably there Cooperatives are all of the same type. members. Such a tax would seriously is a legitimate need of cooperative Cooperatives are big (menacing) affect schools, churches, charitable and business ventures, such as those made business. scientific organizations, and many so- up of farmers and livestock growers. All cooperatives are exempt from all cial clubs which have comparable ad- Their existence inures largely to the taxes. vantages of tax exemption." public good." Patronage refunds enable coopera- That is the view in Great Britain, Nov. 3, 1946-"Except for a special tives to get a special exemption from Canada, Sweden, and wherever the privilege enjoyed by cooperatives by the payment of income taxes and there- question of patronage refunds has ever way of taxation, there should be no fore a special advantage in competition arisen. objection to this form of organization. with other forms of business. Equality for All Taxpayers It is, in fact, as old as the present Cooperatives want preferential treat- 5. Mr. Nelson does less than full jus- income-tax law itself. The exempting ment. tice by failing to point out that farm of agricultural organizations dates back It is true that Mr. Nelson appears cooperatives stress desirability of equal to the Sixteenth Constitutional Amend- always judicious, never malicious. At treatment for all taxpayers and, ment, adopted in 1913. The main argu- his kindest, he seems to be looking the through the National Association of ment against cooperatives is to be other way when he sits upon the baby. Cooperatives, last November requested found in the fact that other forms of But see how he gives the impressions Treasury officials to revise tax regula- business organizations are placed at a noted above: tions in line with recommendations of competitive disadvantage. The privi- Under One Generic Name the House Small Business Committee. leges enjoyed by cooperatives have The NAC on earlier occasion expressed come about not so much by reason of 1. The lead of every story I have read lumps all cooperatives under one the same views as those held by Mr. a furtive process of development as by Nelson of the inequity of double taxa- a permissive expansion of the opera- generic name, and nearly all presum- ably income-tax exempt, viz: "Those tion, expressing opposition to corpora- tions of such organizations, disregard- who have an acquaintance with the tion taxes. Only a few days ago the ing the underlying principle of the law subject of exempting cooperatives from NAC gave wide circulation to the pam- of agency." "An phlet Mr. Nelson recommends, pub- Dec. 1, 1946-"It is common knowl- Federal income taxation lished by the Commerce and Industry edge that exempt agricultural organ- important contribution to the discus- sion of the liability of cooperative cor- Association of New York, with this izations are permitted to engage in a porations for Federal income taxes statement: variety of activities and still maintain *" "In point of revenue the income "NAC does not agree with all this a tax-exempt status; that such a cor- poration may own and operate one or tax is the mainstay of the Federal report says. We do, however, agree Treasury. Therefore when an exempt that it is an obviously fair-minded many subsidiary corporations for carry- or partly exempt form of business or- presentation of a sane attitude. If the ing on activities that could be per- ganization attains a volume of busi- American business world accepts the formed directly by the cooperative findings and recommendations of this without losing its exemption, and that ness of $12,000,000,000 a year, it must 'under certain conditions, federated be reckoned with report, present vicious attacks on co- Of course, when he gets farther operatives will cease." types of cooperatives may be declared down, Mr. Nelson does reveal that the Unfortunately, it is not likely that exempt by the Commissioner of In- "present vicious attacks" will cease ternal Revenue.'' exemptions refer to farm cooperatives, because the NTEA has shown no par- Dec. 15, 1946-" 'As a practical mat- and if he had chosen he could have been even more explicit by saying that ticular interest in reforms by coops ter, the question before us is whether of the 10,000 farm cooperatives only or any other organization which would a large segment of our national pro- about 5,000 qualify for exemption un- be fair but not hurtful to cooperatives. duction and distribution shall be al- lowed to escape State and Federal in- der the rigid requirements of doing Congressman Patman Quoted come taxes either wholly or partly." about 85 per cent of their business It is a shameful criticism of our free My interest in the subject of coop- among a membership composed of 85 press and its reluctance to deal in fair eratives stems solely from my desire to per cent farmers. But if in being play that an organization so huge as see that the private enterprise system blurred, cooperatives are slurred, that the NTEA should continue to flourish is maintained. I do not regard tax ex- is just fine from the NTEA's point of without a murmur of criticism except emption of competitive business as con- view. from a few small liberal papers. Con- ducive to this purpose. 2. When Mr. Nelson publishes a fig- gressman Patman, who headed the GODFREY N. NELSON. ure of $12,000,000,000 as the amount of committee studying cooperatives and New York, Jan. 9, 1947. business done by an "exempt or partly had close contact with the NTEA for exempt form of business" (Nov. 3), ac- about a year, declared in a speech on Indicating Hotel Fire Escapes cepts a prediction that "by 1950 the July 19 in Congress, which I have not To THE EDITOR OF THE NEW YORK TIMES: volume will reach $25,000,000,000" and seen quoted in any metropolitan paper: Every time I enter an out-of-town says "these figures refer to organiza- "Let us examine the credentials of hotel-and I do so about three times a tions operated on a cooperative basis, this small group of propagandists who week-and am shown to my room, I generally known as 'cooperatives, seek the death of the cooperative anxiously look down the long corridor which are afforded tax exemption un- movement. The president and in search of the sign "This is the near- der Section 101 (12) of the Internal most active leader is a prominent grain est way to the fire escape." I have yet Revenue Code," simple caution might dealer in Minneapolis, who, I am told, to find such a sign. have recommended a check-up of such is considerably irked by the competi- Many of the people I meet in hotels balloonlike statistics. On our most tive activities of the Farmers Union and trains speak of the great danger optimistic days, cooperative statis- Grain Terminal Association, a coopera- of hotel fires and the prospects of es- ticians have not been able to get a fig- tive operating in his part of the coun- caping unscathed, but no one seems to ure of more than $5,000,000,000 for the try." care to do anything about meeting the amount of retail business done by all The secretive organization of the problem