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the District of Columbia, with a population of over 900,000. I ave made some estimates as to what we would receive in the way f returns if it were predicated on residence rather than domicile, nd 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

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tax in these 17 States to pay the full assessment in the District Columbia, and being what you might call an old practitioner here in t 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 representatives from some of the States who happen to have been in the Distrie on some business come down and ask me whether certain persons froe 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 Yorả. 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 receive 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 Ner 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.

Mr. 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. They 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 ere or not. Do they not have to show in court that they have paid ixes in some other State before they are exempt here?

Mr. DENT. The court will determine it on the question of domicile nly. Mr. KLEIN. Simply on that? Mr. DENT. Yes. If they say they are here temporarily and intend o 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 against.

Mr. KLEIN. 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 ever go 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 live here.

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 l'espect.

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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Then we will put the income tax law in the discussion on the same basis as we find it in every other State in the Union that has a tax law, and the reciprocal arrangements within the law for an incometax law to come.

Do we have an income-tax law in Vermont, Senator?
Senator FLANDERS. We have, and I pay it.

Mr. Bates. You pay it. We would not expect him to pay it in the District, because he is sort of a new arrival here.

Mr. Smith, a question on Virginia : You have reciprocal arrangements in Virginia, do you not?

Mr. SMITH. I do not know about the reciprocal arrangements, but I am like the Senator, I pay the Virginia income tax.

Mr. Chairman, to talk about the agenda of these hearings for a moment, if you do not mind. It seems to me we are discussing here a very technical question that should be made the subject of a special hearing at a special time when we can get into all of the details of what is the technical question. And I am wondering if you could not so arrange your agenda so that we would take up these various phases of taxation when we get to the bill?

Mr. Bites. Yes; when we get to the bill.

Mr. Smith. Because this discussion this morning, while it is informative, still, does not go into the deep questions that are going to be involved when you work this thing out.

I am very familiar with the difficulties that you are laboring under here, and something should be done about it, but Mr. Bates, you indicated a while ago, that when you get to the floor of the House, you have many considerations other than the consideration of what the District is going to get out of it in the way of taxes.

You have a lot of questions raised.

I remember when we had this question up on the floor, 2 or 3 years ago, this question was raised of a man who might come here, a lawyer, to argue a case before the Supreme Court of the United States, and make a big fee. Under the proposed law, he would be taxed for a fee that he made when he came here from California to argue a case before the Supreme Court.

Those methods have to be worked out in language with the utmost refinement.

Mr. DENT. It is an involved question.

Mr. KLEIN. I think this point is certainly paramount. Provided that these people pay taxes somewhere, whether it is in the District or in their own State; the situation I object to is that some people do not pay any taxes because they manage to float from one place to the other.

Mr. BATEs. We got on this tangent on your question of the interest, that Mr. Dent called our attention to, that from the sources of income tax, we apparently are not able to get many people to pay taxes who ought to pay them.

You proceed, Mr. Dent. You spoke about the personal property, the real property income, and then your income taxes.

Mr. DENT. I did not intend to get into the technical discussions of the income tax, but merely to show that there were such a few people living in the District of Columbia who were paying taxes, that was all.

Mr. BATEs. How many, actually, pay taxes, roughly, that is, on income?

Mr. DENT. Oh, 88,000.

Mr. BATEs. Eighty-eight thousand. Then we will proceed to the income source at 1940. That is when we first introduced the income tax. I well recall it, because I introduced it myself.

It brought in that year, $2,275,000, and in 1946, $9,221,000.
Have you any figures on 1947?

Mr. Dent. No, sir. I think we have just about reached the peak, Mr. Bates.

Mr. BATEs. Now, is there anything else you wish to say?

Mr. DENT. I do not believe there will be a substantial increase in income taxes in the future.

Mr. Bates. Is there anything else you wish to say to the committee?

Mr. DENT. I think that is about all I have at the moment, Mr. Chairman.

Mr. BATES. Are there any other questions to be asked by any members of the committee?

If not, thank you, Mr. Dent.
Who is the next witness that we have to appear here this morning?
Mr. DENT. Thank you.

Mr. BATEs. We will now hear from the Chief of the Fire Department.

STATEMENT OF CLEMENT MURPHY, CHIEF, FIRE DEPARTMENT,

DISTRICT OF COLUMBIA, ACCOMPANIED BY HOWARD W. BOWIE,
ASSISTANT TO THE EXECUTIVE OFFICER, FIRE DEPARTMENT,
DISTRICT OF COLUMBIA

Mr. MURPHY. Appropriations for the Fire Department have had an increase for 1947 over 1937 of 41.7 percent. These are included in a table prepared here for the committee, indicating in detail by item, and the reasons for the increases.

And in some of those years, there have been decreases.
Approximately 97 percent of the total increase has been for salaries.

Mr. Bates. Will you give that figure in 1937, Chief? Have you it before you, the total expenditures in the Fire Department that year, and then the estimate?

Mr. MURPHY. Yes, sir.
Mr. BATES. I have them here from the Auditor's Office.
Total expenditures for the Fire Department, 1937, $2,474,120.
Mr. MURPHY. That is correct.

Mr. BATEs. The estimate for this year, 1948, $3,631,000; is that right? Mr. MURPHY. That is right.

Mr. Bates. And 97 percent of that increase is due, you say, to personal services?

Mr. MURPHY. Pardon me, Mr. Bates. I think the last figure you named is for the fiscal year 1948.

Mr. BATEs. That is right; 1948. I mean the budget of this year. That is what I had in mind.

Mr. MURPHY. Yes, sir.

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