Letter to the Secretary of Commerce on the Tax Benefits of the Shipping Industry.

[Released August 13, 1952. Dated August 11, 1952]

My dear Mr. Secretary:

As you know, the Congress passed in the closing days of the recent session S. 241 -- the so-called "Long-Range Shipping Bill" -- which I approved on July 17, 1952, and which is now P.L. 586, 82nd Congress. In approving this bill, I issued a statement expressing certain reservations with regard to its provisions. In particular, I pointed out that this legislation does not provide a balanced readjustment of the Merchant Marine Act of 1936, since it does not include any provisions to adjust existing tax benefits of the shipping industry.

The tax treatment accorded this industry under the Merchant Marine Act of 1936 has been the subject of recent studies by both the Treasury Department and the Department of Commerce. After considering these studies, I have indicated on several occasions my strong view that the tax benefits now enjoyed by the shipping industry are excessive in amount. I have further stated that tax concessions are in themselves a basically unsound means of assisting the maritime industry, and that they should be replaced as soon as possible with whatever form and amount of direct aid may actually be required to achieve our national objectives with regard to promotion of this industry.

I have received assurances from the chairmen of the legislative committees which handled S. 241 that the subject of maritime tax benefits will be considered promptly upon the convening of the next session of the Congress. I desire that the executive branch furnish the Congress with all further information needed to permit a complete correction of the present maritime tax situation. I am therefore asking the Secretary of the Treasury to bring his previous report on this subject up-to-date, and to include any new or altered factors which have a bearing on this problem. At the same time, I should like to have the Department of Commerce undertake a study to determine whether the complete elimination of present tax benefits would require any increase in direct subsidy for this industry.

Since tax benefits represent only one of the many forms of assistance now provided to the shipping industry, your study will necessarily involve a critical re-evaluation of the over-all scope of existing Federal aid, and of its relation to a sound promotional objective for this industry. It will of course be necessary to keep in mind the basic importance of maintaining an adequate maritime fleet for our national defense and foreign trade, and the need for keeping such a fleet modern and efficient through an orderly vessel replacement program. Equally important, however, is the general need for holding all Federal expenditures to their minimum essential level. This overriding need for economy requires a careful determination of the minimum amount of Federal financial aid that will assure a merchant fleet of adequate size and quality.

In particular, your study should take full account of whatever opportunities may exist for the industry itself to increase its operating efficiency and generally to improve its financial position. If changes in present Federal policies are needed to permit the industry to take maximum advantage of such opportunities, please include appropriate recommendations for that purpose in your study. Should you conclude, after considering all of these factors, that some increase in direct subsidy would be required with the elimination of existing tax benefits, I would wish to receive your recommendations as to the amount, and most suitable form, of such increased subsidy.

I am attaching for your information a copy of the letter which I am sending at this time to the Secretary of the Treasury. In order that these studies may provide the basis for prompt legislative recommendations to the new Congress, I am requesting that they be submitted to me by October 15, 1952.

Sincerely yours,

HARRY S. TRUMAN

[The Honorable Charles Sawyer, The Secretary of Commerce]