Evening Star Newspaper, January 31, 1932, Page 103

THE SUNDAY STAR, WASHINGTON, D. C, JANUARY 31, 1932—PART EIGHT GASOLINE BOOTLEGGING HELD A NEW PROFITABLE RACKET| Methods of States in Collecting Gas Taxes: As you leave New York to you c ed to pay fc kee; Holland Said to Be Responsible for Dishonest Road to Fortune. | lina, the rate is 6 and remains at that level through South Carolina and Georgia. When he finally arrives in Florida, he is rewarded with a 7-cent tax for his pains. Now then, of course, you ask how this racket is worked. After allf the tax on gasoline in Illinois is only three cents a gallon and a man will never get very rich evading that. You will soon see that the sums which can be ke this a singularly attractive for an up-and-racketeering ung man The gasoline tax is imposed by the tates, though some cities also try their at it and this tendency is grow- The tax is, of course, paid by the who uses gasoline in his auto- He pays it to the gasoline station. Sometimes the filling dvertises its gasoline at the lly names the Thus in Oklahoma it is not un- imon to see signs reading, “Gaso- 5 cents and we must have another nts for Gov. Bill’—Bill being no onage than the famous “Alfal- am,” who stopped oil produc- ate with the militia. Most mercly add the tax rice which they charge for gas you buy a gal- nd over from 2 ate. start trip to the F Coast r automobile Tunnel 2 This is & D of the tunn can ride Don't Be D not decc Government Methods. Now then how does the Government this tax? In some States the re- asoline filling station pays it over to the tax collector. Every month or every three or four months he must make a report to the tax atherer of the number of gallons he as sold and send his check along for t This was the universal way Now, however, most States tax from the distributor or 1ever makes the first sale The distributor adds > charged the filling e filling-station man col- e consumer. With this are prep to have ket in_moti let us take the States of Illinois ana. which adj h other. are plenty of refine in In- A distributor with a tank truck Indiana and buys a tank load ons. When he is, or ily he would have to pay 4 cents tax to the distributor. But he makes a declaration that the gaso- ir export—that is, sale in an- te—which automatically re- d the c Unseen Toll Gates, eled m A Rapid Yield. of a risir rate In 1921 to $5.382,000. Two vea Two 3 358,000 nother 000,000, Last v were $305. were $495.00( e tenden as you move larly Sout South to Florida along a rising cury In New York the tax is 2 cents hen he gets over to Jersey, it is 3. In Penn- sylvania he finds it 3, but runs into a When | He then drives the nois. There he sells > station. In Illinois the ach gallon. He fon man into his that the gas paying taxes ation man can sell ie tax from his cus- nd put it into his pocket ar however, the two—filling- n man and bootlegger—can split ax between them on some basis idered to be fair between gentle- Neither Indiana nor Illinois gets tax. And. what is more serious, f ling the gas, t has an advantage of 3 cents its competitors, can undersell them t commit a crime against the dealer t goes on O'Sullivan, _executive 2 Code Com- hour of ar s may along the dark roads from East ucks haul as 500 gallons of gasoline. Is r that most of the gaso- id enter Shreveport after dark between 9 pm. and 4 am.? The rea- son given for this is that traffic is| lighter during the night and because | the trucks are needed for local dis- | tribution during the daytime. But it is a very strange thing that these same | trucks which enter Shreveport under cover of the darkness full of gasoline go out again the next day back to Texas through the vy day traffic | they are supposed to be local distribution. The truth matter is that these trucks pe the inspectors, to Shreveport paying ta ither Texas or a. has demoralized the honest industry of the State.” Boats Used. In Pennsylvania the racket is carried on in places by water. The Delaware ver runs befween Pennsylvania and New Jersey. The racketeer buys a | beatload of gasoline in Pennsylvania | “for export to New Jersey.” Thus no| tax is paid. His boat—minus_the | warning flag which it should fly—floats up or down the Delaware, ostensibly bound for some New Jersey port. But| 2 when needed in the how Manager RICHARD J. MURPHY. Many innovations of the annual auto exhibit are due to Dick Murphy, as he is known to his assoclate Pennsylvania port .at night and un- loading its gasoline and thus escaping a 3-cent tax on each of 10,000 gallons— a tidy sum of $300. The bootlegger does not always buy his gasoline “for export.” There is in this & certain risk of detection by the tax inspectors who in some places patrol the roads. And so in some places they buy the gasoline in States where the tax is low and sell it in States where the tax is high. For instance, the tax in Missouri is 2 cents. But the State is surrounded by States with higher rates—Iowa with 3 cents, Illinois with 3 cents, Nebraska with 4 cents, Kansas with 3, Oklahoma with 5, Kentucky with 5 Tennessee with 6 and Arkansas with The bootlegger can buy a wagonful of gasoline in Missouri, pay the 2-cent tax on it and then cart it unobserved into Arkansas, where he sells it to the retailer without reporting to the State authorities. Thus he makes 4 cents on each gallon in taxes. And, of course. he may pocket it all or split it with the retailer In some States the retailer still pays the gasoline tax directly to the Gov- This ens the way for 3 Thus filling station. He average of 500 gallons of That makes 3,500 gal- He makes a gross profit of 3 cents on each gallon, which is $105 for the week. From this he must pay his rent, light, help and take his losses. At the end of the week the best he can do by working about 14 hours a day is $35 clear profit for He is required under the law quarterly the gasoline taxes collects. And he is allowed ter the of the Now at nd inds he has sold 1 gasoline, on which he has collected 4 cents tax per gallon, $1.820. This is due the State gov- ernment himself he made $35 & week, or $455 for the 13 weeks sells an gasoline a day. lons a week. Easy Money. Being human, Mr. X can expected not to sit down quiet hours of the evening beside his pumps and ponder this fact—that out of his three menths' hard work he has made $455 for himself and $1.820 for the Government. It doesnt look fair to him. Now, however, he has to pay the tax. But he won't have to ttle ther eight weeks. In ake another $280 f illcollect $1,120 taxes—$2940 in taxes alto- gethy So, efore the expiration of the time making _settlement Mr. X closes up his gasoline station, disap- pears from the highway and is heard of no more. By doing this he pockets a profit of $3,675 instead of $735; $175 a week instead of $35 a week. Then in a few weeks or so Mr. X appears under another name as the owner of a gasoline station upon another high- way. Now, to end this sort of thing, the States are abandoning the collection of taxes from the retailers. Pennsyl- nia, for instance, changed over last r and thus finds she can watch 800 distributors better than she can 28,000 retail stations the racketeering. For the distributor can do the same thing as the retailer. He has learned that he can just simply get away with the failure to pay his taxes. Unusual Methods. It must be remembered that this is not like ordinary tax-dodging. In this case the taxes are paid by the con- sumers and the dealers actually collect them. If they do not pay them they are just that much ahead in actual cash. And in the case of distributors the tax runs into large figures. In Ohlo an oil company col- lected $39.979 in taxes. The tax of- removal. In Indiana a single company was found owing the State $125,000. In California the State is trying to get about $2,500,000 in taxes due it by some 28 oil companies. California distributors were allowed two and & half months after the quar- ter to settle for taxes. That gave them five and & half months in all to collect taxes. Running down the list of com- panies and the taxes they failed to pay, one sees a number of concerns which collected and pocketed sums well over $100,000 and at least one over $200,000. Now California has changed her law to require aonthly settlements. What else are we to expect when we make it pos- sible for unscrupulous men to make more money—two or three times more— by evading taxes than from the ordinary profits of their business? Other Evasions. Another method of evasion is to di- lute gasoline with various distillates which are tax free and thus cut the tax in half. The possibilities of this, where taxes are as high as 4, 5 or 6 cents, can easily be seen. Thus one great sales tax—for the gasoline tax is a sales tax—works. And the proposals for sales taxes on all sorts of merchandise are growing in popu- larity all over the country. If they leg gasoline and bootleg liquor, but also with bootleg bologna and bootleg spaghetti, bootleg bananas and bootleg boots. For every article that is sold in a store and is subject to taxes a special department of racketeering will spring up. And this Nation, already a little dazed and bewildered by the extent of racketeering which has overwhelmed it, will witness an orgy of tax graft and bootleg merchandising which will make our present era seem tame and angelic. It must not be supposed, however, that all the tax evasion comes from pro- fessional racketeers. A law like this opens the way for profits and savings to all users of gasoline. And, of course, in many cases these evasions can be practiced without doing anything wrong. The State, however, loses the tax just the same and the honest dealer who obeys the laws is the sufferer. One of the profound weaknesses in our present methods of regulating things is the penalties which we keep piling on the honest. Is it to be wondered that there are those who believe that the funda- mental honesty of our people is being undermined? Taxation on motor car owners now amounts to 24 per cent of the cost of the Federal Government, according to George E. Kenelpp, manager of the succeed we may prepare to see the|District of Columbia division of the | country flooded not merely with boot- ' American Automobile Association. VERSATILITY OF AUTO INDUSTRY DEPICTED Earns Recognition for the Great- est Manufacturing Efficiency. The versatility of the automobile in- | dustry In its manufacturing has alway | been " of great interest to the world, | according to E. F. Roberts, Packard manufacturing vice president. Many times the industry has awakened as- | tonishment by the manner in which it | has met new situations. It is now | giving a new exhibition of its ver- | satility. Business conditions throughout the year had to be met Wwith new economies | in manufacturing. 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