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Mr. DENT. Which year are you referring to now, sir? Mr. BATES. 1937, June 30. Mr. DENT. $649,000,000. Mr. BATEs. Now, the same figure is $711,916,000, June 30, 1947. Mr. DENT. Yes, sir. Mr. BATEs. What percent increase was that? Mr. DENT. I do not have that, Mr. Bates. I will be glad to work hose percentages out for you. Mr. BATEs. It was increased $62,000,000. Mr. DENT. That is correct; about 10 percent. Mr. Bates. Now, then I think at the same point in the record, you might put in the tax that would be assessed on that property as of June 30, 1937, at the present prevailing rate, $9,739,956 if you assessed at the local rate, and the same figure would be $12,458,543 on June 30, 1947, at the prevailing rate of $1.75?

Mr. Dent. That is right.

Senator FLANDERS. May I inquire whether, Mr. Chairman, the valuations are on the same basis for public property and private property?

Mr. DENT. Yes, sir. I might say this, Senator, that for ordinary Government buildings they are. In the case of this Capitol Building right here we have nothing to compare it with.

Senator FLANDERS. Anywhere in the world.
Mr. DENT. You can put any valuation on this building. What it is,
I do not know.

Mr. BATEs. These values embrace not only the land that the Government has taken out of direct tax properties, out of tax rolls, but also embraces the estimated values of the buildings that were placed on those lands subsequent to the Government's taking the property over; Mr. Dent. Well, of course, yes; if the buildings still remain as they

Mr. BATEs. Well, let us take the situation where the Government acquired a lot, a certain parcel of land, in the so-called, let us call it, Slum area, if you wish, or depressed area of the city, tore down a lot of buildings, erected a $25,000,000 building.

Do these figures relate to the old assessed values at the time the Government acquired the property, or do they relate to the improveMr. DENT. They relate to the existing conditions at the time that

assessment was changed from private ownership to public. In other words, if the Government condemned a whole square of houses We would simply transfer that existing valuation as taxed to a private individual, over to Federal; if the buildings were torn down those buildings would be eliminated and the land would be shown. When the Government built a new building on it, then we would put a new building on it against the Government on the same basis that we would put it on if it was a private office building:

Mr. Bates. So every building built by the Government since 1937 is listed there as to what would be considered the fair value.

Mr. Dent. As if it was owned privately.
Mr. Bates. How do you arrive, for instance, at let us take the

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Mr. DENT. Cubical content.
Mr. BATES. Is that in this list?
Mr. DENT. Yes, sir.
Mr. BATEs. How would you arrive at that!
Mr. Dent. The first thing we would do is get the actual cost.
Mr. BATES. What is that?

Mr. DENT. Actual cost of the building, which we do in all cases. office buildings and what not, and then we put on the same cubical factor that we put on a comparable building.

Of course, when you get into some of the monumental structures built by the Federal Government, you necessarily have a high cubic factor, higher than you would have in an ordinary office building on account of its monumental nature.

Mr. BATEs. Now, all these frame buildings that have been built during the war on the Mall and Independence Avenue and other areas, barracks; are they all within the assessment?

Mr. DENT. Yes, sir.
Mr. BATEs. That is all. You can proceed, Mr. Dent, if you wish.

Mr. Dent. Now, going back to 1940, the first year that we had the individual income tax, we received $1,319,000 revenue from that source. That has gradually increased until the last fiscal year, 1946, we now realize $3,947,000 from that. The personal property tax in 1940 gave us a revenue of $1,485,946; that tax was increased to $3,472,000; that is exclusive of the personal property tax on motor vehicles, which averages around a million dollars a year, and there is very little change in that from time to time.

Now, inheritance and estate tax laws have been in effect since the same time, and that yield fluctuates and is very difficult to estimate because it depends on how many persons die and what the value of the estate is. That runs usually anywhere from a million to a million and a half.

Now, the corporation income tax, we received $956,000 from that for the first year, but that is not a fair figure because some of the corporations were on a fiscal-year basis, and we did not realize the full extent of that tax until the following year, 1941. But after that first year it was a little over $2,000,000, and that tax has gone up to $5,274,000, a considerable increase.

While we are on that subject, I would like to say we have proposed that that tax should be placed on unincorporated businesses. The corporations now pay 5 percent tax; unincorporated businesses may not pay any tax for the reason that, being unincorporated, the owners of the business may live in Maryland and Virginia, and therefore are not subject to the individual income tax; consequently, you have what I think is a very inequitable situation of two businesses, same kind, same block, one pays a 5 percent corporation tax and the other pays nothing, although they both receive the same services from the District of Columbia, and that is the reason we have proposed that the income tax law be amended to place a 5 percent tax on unincorporated businesses as well as corporations.

Now, the individual income tax, Mr. Bates, as you know, is predicated on domicile; that also, in my opinion, is inequitable. Originally, it was proposed in 1939 when that law was passed that it be based on residence. At the present tinie we receive about 88,000 returns

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in the District of Columbia, with a population of over 900,000. I have made some estimates as to what we would receive in the way of returns if it were predicated on residence rather than domicile, and we should, I believe, receive about 200,000 returns rather than 88,000.

Now, we have never won a case, a domicile case, in the court of appeals in the District of Columbia. It seems about all you have to do is to declare your intention to return to the place whence you came. Any number of persons living in the District have lived here for 20, 30 years, claim domicile back in their States, and we have attempted to tax them, and in practically every case we get licked in the courts.

I just thought I would call your attention to that because that is one of the reasons why we and the Commissioners have asked Congress to change the income-tax law to make it based on residence and on income earned in the District of Columbia by nonresidents. But there is a provision in there which would do away with inequities which may occur under that amendment, and that is those persons who do pay a tax in some other jurisdiction would be given credit for that tax.

Mr. BATES. What is called reciprocal arrangements. Mr. Dent. Yes, sir; providing the States give the same reciprocity to residents of the District of Columbia.

Mr. Bates. Yes. Now, the trouble is, and I appreciate that difficulty, and I think there is a good deal of merit in what you say, generally speaking, about any tax applying to all on the same basis. Now, in the 31 States that have an income tax, many of them have what they call reciprocal arrangements; that is to say, let us take New York as an illustration: People who work in New York and derive their income in New York, whose domicile, let us say, is in Massachusetts. New York State law, and the Massachusetts State law also, states that in this assessment of tax, credit must be given for taxes paid in the place of domicile.

Now, to make that point a little clearer. If he is domiciled in Massachusetts and works in New York, and his tax is $500 in Massachusetts, based on his total income, and then the tax in New York at the New York rate is, say, $500 on the same man for income earned within the State of New York, so much of the taxes he paid in Massachusetts would be deducted from the tax assessed in New York, so that in that case he would pay nothing to New York. Mr. DENT. I see.

Mr. Bates. The place of domicile would be given the credit that you want to set forth, and that is the thought you want to leave with this committee.

Mr. DENT. Yes, sir. Mr. Bates. The great difficulty here, and I think we ought to speak of it from a practical standpoint, is just how this income-tax structure, as we are now discussing it, assessing everybody on income earned within the District, but deducting or crediting in the tax bill that which was paid in the place of domicile, we have only 17 States that have no income tax system at all. So we are dealing with a problem in this District that in bringing the subject matter to Congress, at least, we are asking the people who pay no tax at all in the form of an income tax in these 17 States to pay the full assessment in the District of Columbia, and being what you might call an old practitioner here in the Congress, I know some of the difficulties that we are going to have it getting such a bill as that through, whether the bill is right or wrong.

Mr. DENT. I understand the situation.

Mr. Bates. I think there is a great deal of equity in what you say and I am for it if such a thing can be developed.

Mr. DENT. I might give you this thought: I have had representa tives from some of the States who happen to have been in the District on some business come down and ask me whether certain persons from back in their home State are paying District income taxes. I looked up the records and told them they had not, that they claimed domicile back in their State. They said, “Well, they do not pay us anything either," so you have that situation.

Mr. Klein. Do you mean, Mr. Witness, that a resident of New York, say, employed by the Government in the District of Columbia, does not pay an income tax in the District here on the salary that he receives here on the basis of the fact that he pays it back home in New York?

Mr. DENT. It does not make any difference whether he pays it in New York or not. If he claims domicile in New York, and says it is his intent to return to New York at some future time, he is not considered to be domiciled in the District.

Mr. Klein. I can say definitely. Mr. Chairman. that the majority of the people who are here do not pay a tax in New York. I think it is unfair. Someone ought to get the tax.

Mr. BATES. That is right.

Mr. Klein. I pay a Federal income tax, and yet I pay a State income tax in New York on the salary I receive here. I think it is right that those people should be taxed.

Mr. DENT. Mr. Klein, I do not want to leave the impression that some of the persons living in the State do not pay an income tax. Undoubtedly lots of them do. Nr. Klein. I say a majority of them do not. Mr. DENT. That may be true.

Mr. BATEs. Following that suggestion of Mr. Klein's up, is there any way by which you can assess those who do not live in New York and claim residence or domicile in New York, and then let them prove that they pay a tax in New York?

Mr. DENT. We do that, Mr. Bates, all of the time, and because our rate is lower than New York most of them come across.

Mr. Bates. But he says if they do not come across.
Mr. Dent. If they do not, we make an assessment against them.

Mr. BATEs. He claims they do not pay tax here or in New York either.

Mr. DENT. Usually we make an assessment against them. Thev make an appeal to the Board of Tax Appeals. Sometimes we win and sometimes we lose.

Mr. Klein. Do they not have to show the Board of Tax Appeals that they are actually paying their taxes?

Mr. Dent. That is only one factor. Payment of a tax is one, and there are some others. Jurisdiction does not necessarily determine domicile.

Mr. KLEIN. I am talking about where you get to the point where ou are in court on the question of whether they should pay a tax lere or not. Do they not have to show in court that they have paid axes in some other State before they are exempt here?

Mr. DENT. The court will determine it on the question of domicile only. Nr. KLEIN. Simply on that?

Mr. DENT. Yes. If they say they are here temporarily and intend to return to New York, then they are not domiciled in the District.

Mr. KLEIN. Mr. Chairman, I think something ought to be done about that.

Mr. Bates. Of course, I do not follow his reasoning at all. Because, in New York, under the so-called reciprocal arrangements, unless the individual who is earning an income in New York can show that he has paid his tax in Massachusetts on the income earned in New York, he is subject to the New York income tax law. Mr. KLEIN. That is correct. Mr. Bates. Why should they not apply that here? Is there anything in your law that prevents you from assessing and collecting where they do not pay their taxes in New York or Massachusetts ? Mr. DENT. No. "We assess lots of them. Mr. Bates. Why do you not collect them?

Mr. DENT. We do collect lots of them, but lots of them get by without it.

Mr. BATEs. Who permits them to get by? Mr. Dent. Let me say this to you: You have got two or three hundred thousand Government employees. Well, we shall say that the salary is $3,000, and they have an exemption of $1,000, they have other deductions also, and may be married. Then they get $2.500.

We get the W-2 forms from the Government by the thousands. I have 39 employees in the Income Tax Division. The tax we would get from those individuals is so small that we would write back and forth and write back and forth and by the time we got through to collect the $3 or $4, it would not be worth it. That is what you are up

Mr. Kleix. I want to help the people in New York State, but I do not think they should get away with anything that anybody else does not.

After all, the people from New York bother the New York Congressmen and they get all of the service from the District here, and a great majority of them never go home. Of course, they claim they are domiciled there, but I do not believe that the majority of them

back to vote, even. Therefore, they are in a class where there is a loophole in this law. It should be changed. They do not pay their taxes in New York and they do not pay them here. They claim that they live in New York and in New York they claim that they

Mr. BATEs. We will tighten that law up, but we will have to depend upon you and the corporation counsel to advise us in that particular

The question of applying the law to the 17 States that have no income tax, we will try to work that out.

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