the supplemental requested appropriation of $2,603,814 for this year creates a total of $13,594,490 for this activity.

If we create more unemployment the present requested appropriation for that purpose of nearly $12,000,000 might be found nearer sixteen-million-or-more dollars.

Remember, the combined estimate for our police and fire departments is only $9,846,000, and our public schools is only $19,495,400. Every citizen feels that none of those three items can be cut any lower, but if we wreck the economy of the city and have to pay out more for public welfare, where will this money come from? say advisedly that these are not idle words.

We

The report of the District of Columbia Unemployment Compensation Board for 1946 has this to say, and I will leave a copy of that with you:

The total number of checks issued during the past year was 100,030, amounting to $1,708,337. This represents an increase of 386.3 percent over the total of 20,570 payments made during the preceding year, and it also constituted a 369.4 increase, percent increase, over the $363,907 that was expended in 1945.

Payment for total unemployment accounted for 98.3 percent of the checks issued, while 1.7 percent was for part-total and partial unemployment.

The amount paid out monthly averaged $142,361, and varied from $89,932 in January to $163,735 in December, 3 months ago.

Approximately 9,013 individuals received unemployment compensation in 1946, as compared with 2,152 individuals in 1945. It is estimated that the number of individuals receiving benefits was about 4 percent of the total number of workers in covered employment. About 80 cents was paid out for each dollar of contribution received, leaving only 20 cents for a cushion.

Collections of contributions levied on District employers of one or more persons amounted to $2,125,959 in 1946. This represents an increase of $431,520 over 1945; 16,770 employers contributed in 1946 as compared with 15,650 employers in 1945.

The rise in 1946 over 1945 was due to an increase in the number of employers reporting; namely, 1,120 more, and higher wages in certain business establishments.

Taxable wages paid to covered workers in 1946 totaled $403,595,227. This amount represents the aggregate pay roll of 212,005 workers, for an average income of $1,937, and contrasts with 1945 when $332,663,127 was paid to only 189,101 workers, a gain in 1946 of 22,904 workers and $70,932,100.

Remember, the total receipts are based on the first $3,000 of earned income only. It does not apply to those over $3,000.

Nor do these figures include Federal or city employees, employees of charitable, educational, scientific, and other organizations, nor does it include a person engaged in business for himself, whether it is a professional man or a storekeeper.

For more factual matter we refer you to that report enclosed herewith.

Senator CAIN. We have that, sir.

Mr. McKEE. The businessmen of Washington recognize that unemployment retards business; they recognize that taxing consumer goods affects business.

They want business to be good, and they want that business to stay in Washington. Any decline in business of one type affects business of all types; a high level of employment creates taxes from all sources, particularly income taxes.

Thriving business spends money both within and without their premises, creating employment for labor, for repair, maintenance and remodeling of their places of business.

When business declines, this type of expenditure also declines; when a spoke is taken out of the wheel, recessions set in, and if more spokes are taken out, then we have a depression.

If you permit any locality to become unhealthy, others soon catch the germ and the entire Nation becomes sick.

Our Nation has gone through such a period which is well known to all of us, and if it occurs again, we fear for the ensuing results therefrom.

Since the hearings before the Commissioners of the District of Columbia last September, the Federation of Business Men's Associations has had this problem before them.

Merely to enumerate specific objections to the proposed sales tax, and in order not to become redundant and repetitious, we merely list the objections in the following general terms:

1. Sales taxes are definitely retrogressive.

2. Sales taxes definitely curtail business (especially when the area is as small as Washington, and the borders of other States are within a 30-minute drive.

3. Sales taxes are absolutely unnecessary.

As to an increased gasoline tax, we object specifically because:

1. Estimated income will not become available due to decline in gallonages that would ensue.

2. A large percentage of the money is to be used for long-term capital improvements, and this is basically unsound.

3. Loss to dependent businesses when reduction in registration occurs, together with a lesser use of existing vehicles.

We could go into minute details as to our opposition against all the proposed taxes, with the exceptions of the Federal loan, water fund and miscellaneous receipts from water, aggregating $4,516,739.

Senator CAIN. Let me stop you, if I may. Do I understand that the last-mentioned items are the ones that have your approval? Mr. McKEE. That is right.

Senator CAIN. You are in opposition

Mr. McKEE. We are opposed to the sales tax, increases in the gasoline tax, increase in the liquor tax, cigarette tax, public utility, and all the

Senator CAIN. All the rest of the taxes.

Mr. McKEE. But the income from the others we are in favor, sir, of enactment.

We believe in the individual income tax, and the unincorporated business tax, as set out in H. R. 2282, but we desire to strengthen this by using the Philadelphia plan, with the exception that we would permit exemptions, whereas the Philadelphia plan does not grant exemptions.

On page 11 of H. R. 2282, we would strike out the words on lines 18 and 19, as follows:

unless such officers are domiciled within the District on the last day of the taxable year—

those words, and that follows these words here:

so that definite exemptions without limitations will apply to any elective officer of the Government of the United States or any officer of the executive branch of such Government whose appointment to the office held by him was by the President of the United States, and subject to confirmation by the courts of the United States and whose tenure of office is at the pleasure of the President of the United States.

On page 31, in reference to those appointees or elective officers, we do not believe that if they are domiciled here they should pay taxes, and that would apply to you gentlemen.

On page 31, line 24, we would reduce the figure $1,000 to $500. And also $500 for any dependents, whereas the figure now is $1,000 for any individual and $500 for any dependents, and we have revised the schedule on page 40 which gives the break-down. Also, on page 39, we recommend that lines 5 to 17 remain as is, which increases it up to 40 percent.

That instead of waiting for taxpayers to file their statements and pay these taxes, as is now commonly being done, that employers, by law of this act, would withhold three-fourths of 1 percent of all wages paid, and remit quarterly to the District on the same basis as social security and Federal income taxes are withheld and filed, as is now done.

This plan could be instituted July 1, 1947, with the first report filed in October 1947, so that a clear insight could be had as to its income-producing factors before the end of the year.

To go back to the report of the District Unemployment Board, this pay roll aggregated $403,595,228, for an average income of $1,937 for 212,005 workers.

If we placed them all as married, with the proposed exemption. of $1,000, which is liberal, that would leave per employee $937 to be taxed, so that we would have left for taxation 212,005 workers, times $937, creating a pay roll to be taxed of $198,548,685, which would create from this source alone $1,985,486.

Remember, no payments were made on incomes of over $3,000 on the foregoing figures.

To go further and properly place the other types of workers within the scope of this act not now reporting to the District Unemployment Compensation Board, we have to look at the revenue collections of the Federal Government from the citizens of the District of Columbia for the fiscal year ending June 30, 1946. Under the various break-downs, you will find withholding taxes amounted to $227,648,824.08. Remember that withholding is done after Federal exemptions, which rate of exemption is identical with that being proposed for the District of Columbia, so that the proper estimate of income would be figured on the basis of 1 percent of estimated actual earnings arrived at from withholding payments.

If we computed the withholding taxes on the basis that it embraced incomes of $5,000, or an average withholding tax to the Federal Government of $840, which is used to be more than fair in our calculations, this would indicate that 330,534 persons in the District of Columbia had wages withheld from them. Others, however, have claimed from Government statistics that we have over 350,000 employees here.

This then would constitute a pay roll of $1,652,607,000, and a 1-percent tax on this, without any exemption, as it has already been provided for at the time withholding was paid, would amount to $16,526,700.

Individual income-tax receipts, aside from withholding, amounted to $94,028,858.49, which we will say was 25 percent of earnings, which would create an income of $376,115,433.96, and a 1-percent tax on this would amount to $3,761,154.33.

Let us explore further as to our payments to the Federal Government. Corporations also paid the Federal Government $30,161,841.05. Miscellaneous internal revenue, including excess-profits tax, amounted to $91,892,816.33, and employment taxes, including carrier taxes, amounted to $16,205,660.62.

While the total on withholding and individual income taxes would bring in a total of $20,287,854.33, we have not estimated corporation taxes because this is already provided for in the schedule of anticipated income of the District, nor the taxes that would be collected from wage earners in the District of Columbia who reside in Maryland, Virginia, or elsewhere, because they report in those States rather than to the District of Columbia.

Nor have we made any allowances for those who earn over $5,000, those who would pay up to 3 percent, and not 1 percent.

These combined figures show that the people of the District of Columbia paid into the Federal Government, mind you, $509,938,000.57, an increase over the previous year of $94,809,585.21, or 22.8 percent from the citizens of Washington to the Federal Government. That is what we did in the District for the National Government. Yet, the incomes for the Nation as a whole that year declined 7.1 percent, from $43,800,387,575.90 to $40,672,096,997.88, so when we plead with you for more money for the District of Columbia, remember that we have contributed our fair share to the Federal funds that we are asking the money from.

Under H. R. 2282, for income purposes, you would receive, as estimated by officials of the District government, $5,900,000 from individuals, plus a new tax of $500,000 from unincorporated business, which would total only $6,400,000.

However, with a reduction in exemptions proposed in line with Federal exemptions, the said estimated income of $20,287,854.33 would be a part of the said $6,400,000, leaving nearly $14,000,000 of new-found revenue, less such credits as stated in sections 5 and 6 of title II of the act. The Federation of Business Men's Associations feels without a shadow of doubt that $10,000,000 additional revenue will be provided in the first year of its operations, and that this amount will be expanded in the years to come when a much larger revenue will be needed for the District of Columbia, by the same rate, as I will show you, sir.

In recommending the reduction of exemptions, it is specifically indicated that these exemptions should be lowered only on condition that

the Philadelphia plan will be embraced, and become a part of the H. R. 2282.

If the other types of taxes, as proposed, become law, then the reduced suggested exemptions would constitute double taxation, which is not proposed, and should not be resorted to.

The Federation of Business Men's Associations feels that if the committee will make inquiry of the Internal Revenue Department as to the number of individuals in the District of Columbia who filed income-tax returns, together with an estimated grouping of earnings in multiples of $500, it will definitely ascertain that the adoption of the Philadelphia plan will be the most feasible plan of taxation, bearing in mind that its cost of collection is only 2 percent of the revenue received.

I am leaving with the committee a copy of the Income Tax Regulations and Ordinances, together with an address delivered by Mr. W. Frank Marshall, receiver of taxes of the city of Philadelphia, before a special group meeting of the Municipal Finance Officers Association of the United States and Canada, at its 1946 conference in the Hotel John Marshall at Richmond, Va., on June 11, 1946, which address deals with the Philadelphia wage and net profits tax, commonly known as the Philadelphia city income tax. For the years 1940, 1941, and 1942, when it was first instituted, the tax was 112 percent, and since 1943 has been only 1 percent.

For the year 1946, at 1 percent, it brought in an income of $25,243,000 at a cost of less than 2 percent, whereas, in the year of 1942, the last year it was 12 percent, it brought in only $24,762,041.43. Those figures are all enunciated year by year.

In that pamphlet, there are 13 test cases cited therein testifying to its legality.

Cooperation has been received from the Governor of Pennsylvania in its collections from State employees, and a Presidential directive, issued annually toward the end of the year, through the Director of the Bureau of the Budget, to all Federal agencies, requiring them to cooperate with all State and municipal taxing authorities in the exchange of information, reads as follows:

It is the President's desire that the Federal Government cooperate with the States and other governmental units in the reciprocal exchange of information concerning taxable income of public officers and employees.

A special section of this directive reads:

Where any person employed by the Federal Government in the city of Philadelphia is also a resident of a State, such as Delaware or Maryland, in which compensation for personal services is subject to a State income tax an extra copy of Form W-2b, or Form 199 should be prepared in order to serve the city of Philadelphia as well as the State of residence. Where expense and labor can be saved by supplying the city of Philadelphia with lists containing the same information that would otherwise be supplied on Forms W-2b or copies of Form 1099, this procedure may be followed.

Mr. Marshall further states:

It seems fairly apparent on its face what would happen if the income tax were discontinued, or if it had never been adopted. Upwards of $20,000,000 would have to be raised by some other method. There are only two methods that seem logical; one would be a sales tax, and the other an increase in the tax on real estate. A sales tax would properly incur a bitter and determined resistance on the part of all businessmen. It is the most potent force for restricting the volume of business that I know of and the surest way of driving the metropolitar trade of a great border city like Philadelphia across State lines to avoid it.