Mr. FOWLER. Does that pay-roll tax affect everybody, all the employees? Mr. MCKEE. It affects every State employee and every Federal employee, with no exemptions to anyone. Mr. FOWLER. No matter where they live. Mr. McKEE. If they are in the city of Philadelphia, on the pay roll of the Federal Government or the State, regardless of where they live, they are taxed. If, however, they live without the borders of the city of Philadelphia, and the money is earned in Philadelphia, it is taxed, but it is not taxed on the basis of present income tax here of waiting to file your return, as they are this month; it is withheld the same as the Ruml plan for the Federal Government by the employer himself, who becomes your agency. Mr. FOWLER. Pay-roll deductions? Mr. McKEE. Yes. Mr. BATES. The same has been in effect in Hawaii all during the war. Mr. McKEE. And I think if we study the Ruml plan there was nothing that met with such widespread approval. The first one or two months the taxpayer who had gotten through some other bills, it affected him materially; but after he got over the hump of those first 2 months, today it is the most pleasant plan in the world to deal with that the taxpayer has compared with those other years. Now, Congressman Horan has stated something about the fact that civic responsibility is lacking in Washington. To prove whether it is civic responsibility, I would say if the income-tax plan, the modification plan we submitted, was an accomplished fact, you would find more people willing to pay a modified tax, income tax, to the District, than they would any sales tax and these other multiplicity of taxes now before you. I have talked to many of them in all walks of life, and they all agree that it is fair, and they also recognize the fact that if a man, for instance, was in the $6,000 bracket, his income tax to the Government today would be about a thousand dollars. If the suggested 20-percent cut comes into effect, he is going to save $200. Now, under your present taxation in the District, he pays $35 income tax on this $6,000 of income. Under our plan he would pay $50, or $15 additional. You have one tax going off, saving him $200, of which you are now charging him only $15 more; and the two would never be felt in his pay roll, because he will actually have more in his envelope each pay day than he ever had before, and he will never notice it. Senator CAIN. During the time I was out of the room I wondered, Mr. McKee, whether you reflected on the fact that the Commissioners requested added dollars necessary for the proper administration of the city. Mr. McKEE. You mean requested in the budget if it is needed? Mr. McKEE. I might state that in the conclusion of this break-down or revision here, as I stated, the last paragraph [reading]: While we are creating a larger fund than our proposed budget, please bear in mind that the present budget before the Congress was pared down by the budget committee before it was submitted to Congress, and this reduced budget does not adequately take care of the needs of our school system, and we respectfully request that any additional sum obtained under this plan be definitely earmarked for our school system, our first line of offense in behalf of our future citizens, whose education is vital for the welfare of our city and Nation. Now, I honestly believe that the projects that the Commissioners have outlined to you are all vital and necessary. We have a period of time of adjustment right now, you might say, whereby the costs are greater than we would like to have them in these major undertakings. There is a ray of hope that that economic condition will adjust itself, as all economic conditions generally adjust themselves. If the President from the top started, and we can stop, the increased cost to the consumer, as these other types of taxation will do, then I believe we will be contributing to the welfare of the Nation. If not, and business continues to decline, as indications are now happening, and I might refer to you, from the State of Massachusetts, Mr. Bates, the Dow Jones theory of the stock market-a lot of people in the financial world swear by it; and if we all swore by that, we are definitely headed for a depression in the next 2 or 3 years, based on everything that is the aftermath of other wars; we do not want it. We know the serious implications of it, and the best plan of taxation in the businessman's mind is to those who earn the money to actually pay it, as has been demonstrated ably in the Federal income. For instance, in 1939, the receipts of the Federal Government were only five-billion-and-some-odd dollars. Yet here in the District, last year, the District of Columbia paid the Federal Government $500,000,000, one-tenth of the entire receipts in 1939. That is prosperity. We have got to have prosperity, and we have got to keep people working. If you do anything that imposes taxes to curtail business, the first ones affected are mechanics that would be called in to fix business places up. The next thing is relatives coming in, wives and what not working in stores, replacing clerks, and that unemployment figure I gave you the other day, which is now up 360 some percent, will go further; when that goes up that money has to be raised and put onto the budget. The system, in our opinion, is wrong economically. Senator CAIN. Thank you, sir. Mr. McKEE. Thank you, and I want to express my appreciation for your kindness. Senator CAIN. We appreciate your testimony. Mr. McKEE. Thank you. Senator CAIN. Our next witness is Mr. Atherholtz. STATEMENT OF GORDON M. ATHERHOLTZ, REPRESENTING THE NORTHWEST COUNCIL OF CITIZENS ASSOCIATIONS, WASHINGTON, D. C. Mr. ATHERHOLTZ. I have asked for 20 minutes. Mr. BATES. Well, you had better hold yourself to 20 minutes. Mr. ATHERHOLTZ. I understand that, and I am sort of embarrassed in being put in ahead of the Commissioners. Senator CAIN. If you will give your name to the reporter, Mr. Atherholtz. Mr. ATHERHOLTZ. My name is Gordon M. Atherholtz, and I come here as a representative of the Northwest Council of Citizens Associations, that being a council of all the citizens' associations west of Rock Creek and north of Georgetown. Mr. BATES. You were the gentleman who was going away next week? Mr. ATHERHOLTZ. No, sir. I am not going away; I am expecting to be in the hospital to have some surgery performed by the time of your next meeting. Mr. BATES. You are the gentleman who spoke to us yesterday. Mr. ATHERHOLTZ. Yes. The first thing we would like to get at is to put our finger on the Federal contribution, because we cannot talk about what the District needs in the way of additional revenue until we have this additional source, prospective source disposed of. Senator CAIN. I think you are on solid agreement with all of us. Mr. ATHERHOLTZ. Thank you, sir. I have that sort of feeling, too. That is a matter that has not been viewed by Members of Congress sometimes—not only by Members of Congress but by members of the city, as a whole, in the light that it should have been. We can hark back to the testimony of one witness last week who made the statement here that he felt that this District of Columbia was attempting to raid the Public Treasury. We are against raiding any Public Treasury because it is our treasury, our taxpayers' money that is being raided, I mean the District of Columbia's money. The CHAIRMAN. Who made that asinine remark? Gentlemen, a view that has not been put forward for your consideration, I feel, by anybody who has come before you in any of the recent years, is that you gentlemen sit here-not here today-you sit in your respective Houses to pass tax laws for the United States, and you pass a Federal income tax law and Federal excise taxes, which apply equally for citizens of every State. You would not for a moment think of attempting to pass a law which taxed the people of Utah, Rhode Island, Georgia, on a different basis from any other State, and there is not one of you who would not be on your feet immediately, I am sure, if any proposal was made to do the same against your own State; and yet, we feel that the Congress does exactly that against the District of Columbia. We feel that the Congress passes Federal income-tax laws and their Federal excise-tax laws against all the citizens of the country equally. Then they sit separately to consider taxes on the District of Columbia, and the money to be appropriated by the Federal Government for its maintenance, the maintenance of the District of Columbia, and then we feel that they failed to provide Federal funds in an appropriate amount for covering the Federal activities, and that thereby, we in the District of Columbia, are taxed an additional Federal tax for the maintenance of Federal activities here. That, we submit, is absolutely unjust, and I am not sure there is one of you who would think for a moment of denying it. But that is exactly the situation. What have we? We have a present Federal appropriation of $8,000,000 in lieu of taxes last year on the $72,000,000 budget. If this S. 215 would pass, we would get maybe eleven or a little over eleven, on a budget of ninety-five or ninety-two million, whichever it has gotten to right now; I do not know. But we feel that the Federal Government, and the Congress, as the effective agent of the Government in this situation, that they are guilty of a comingling of funds. You have a fiduciary relationship to the District of Columbia as well as to the States and the Federal Government, and we feel that the District has been rather badly handled; that that $8,000,000 on a $72,000,000 budget, a matter of 16% percent, is entirely inadequate. We feel that a contribution-I do not like the word "contribution," it is a payment in lieu of taxes; we feel that a payment in lieu of taxes should be more in the neighborhood of twenty to twenty-five million dollars. Mr. BATES. May I ask a question at that point, if you will pardon the interruption? Mr. ATHERHOLTZ. Yes, sir. Mr. BATES. "In lieu of taxes," that is your statement. Mr. ATHERHOLTZ. That is my understanding of that-of what it is. Mr. BATES. Suppose that we assumed that all property owned by the Government was assessed and taxed on the same basis of all other properties, the private properties, that would meet your objection if we paid taxes on those properties; is that right? Mr. ATHERHOLTZ. If you paid real-estate taxes, if you paid personalproperty taxes, and the other taxes that are assessed against the residents of the District of Columbia; yes, exactly that. Mr. BATES. You say personal-property taxes. What do you mean by personal-property taxes, in the sense that you would apply that, say, to the Federal Government? This chair and this table? Mr. ATHERHOLTZ. The same as the furniture in my office and in my house, and books and so forth there, exactly. Mr. BATES. You know what the assessed property, the value of the property of the Federal property in the District is at the present time, real property? Mr. ATHERHOLTZ. If that has been made beyond the real-estate tax, I do not, and I figure on real-estate taxes it is not clear in my mind or fresh in my mind, I am sorry. Mr. BATES. We assessed, we applied the same present rate of $1.75 to the present real-estate values in the District, and assessed Federal properties on the basis that the present assessors have assessed them, and instead of 20 million you would only get 12 million. Mr. ATHERHOLTZ. All right. Then, we have Mr. BATES. Your only hope of increasing that from twelve million to your twenty-five would be through personal-property assessments. Mr. ATHERHOLTZ. Mr. Bates, you have brought out a very good argument and point for me, I think, because you say on the basis of a real-estate tax alone we would get 12 million. At present the realestate taxes come to and comprise 28 percent of the tax money received by the District of Columbia, so if we multiply that 12 million by the 3 or 4 that you have to multiply this 28 percent by to get up to our total tax income, there you are talking about $4,000,000, you see. Mr. BATES. I am only talking about the assessed value of Federal property in the District and applying the local-tax rate to it will give you $12,000,000. Mr. ATHERHOLTZ. Yes. Mr. BATES. And you think the Federal Government ought to pay twenty-five? Mr. ATHERHOLTZ. Yes, because I think they are overlooking a tremendous amount there. Mr. BATES. You mentioned the payment in lieu of taxes, and that is the only reason I put that forward. Mr. ATHERHOLTZ. Well, there is more than one tax. I certainly do not mean a Federal payment in lieu of property tax exclusively. I do not most emphatically. I cannot emphasize that too strongly. We pay a lot more than real-estate taxes here, and this is the very statement that has been presented here by our budget officer showing the income and outgo of the District of Columbia, and of the total taxes we get, only 28 percent comes from real estate. Mr. BATES. I think if you would examine it a little closer you would find 44 percent of it, I think, comes from real property. Mr. ATHERHOLTZ. I suspect that the same table before you Mr. FOWLER. I think 28 percent is the amount we get from real estate. Mr. BATES. Of the whole revenue? Mr. FOWLER. Of the whole thing. Mr. ATHERHOLTZ. Where the money comes from, and here the dif ferent things are considered. Mr. BATES. I had a statement from the Bureau of the Census. Mr. FOWLER. He is just talking about the general fund, I presume. Mr. ATHERHOLTZ. This includes your general fund, water fund. and highway fund, apparently. Let us see, District balance sheet presented by Walter L. Fowler at congressional hearings on proposed new tax structure for Washington, published March 18. Mr. BATES. My suggested 44 percent includes all types of personal property. Mr. FOWLER. I think that may be so, with all the other personal property. Mr. ATHERHOLTZ. May I just run down a few of the major items? Besides this $27,000,000 real estate, the next largest item, which is in the arrangement, at least, but not the next largest in fact, is the Federal payment of $8,000,000; gasoline tax of $4,350,000, which we do not get from the Federal Government; individual income tax, a little under $4,000,000; sales, amusement, cigarettes, alcoholic beverages now bring in $2,800,000; corporation-income tax; water rates; and so forth. So, if your 28 percent of the part of the taxpayers' money is based on real estate, why, we figure that the payments of the Federal Government for their part of the District of Columbia should be on the same basis. Now, we do not se how the present comingling of funds and responsibilities-we cannot for the lives of us see how you are ever going to have any fairness in the matter until there is a separate |