Mr. BATES. Imperative need.

General McCOACH. And imperative need, yes, sir. I think there has to be a balance between them.

Mr. BATES. Do I understand the Board of Trade has approved the program for capital expenditures for the budget of 1948?

General McCOACH. For $8,000,000.

Mr. BATES. They have not made any comment about 1949; they have not seen it.

General McCOACH. No, sir; they have not seen it.

Mr. BATES. Thank you. Pardon the interruption, General, but I wanted that question cleared up, if I could have it cleared up.

General McCOACH. To indicate the load which the local community is carrying, I refer you to the chart showing the increase in per capita revenues since 1922, which has resulted from increased costs and, up until this year, a continuous decrease in per capita revenue through the Federal payment.

In chart two, I also refer you to the chart which shows per capita revenue in Washington and 11 comparable cities.

In chart three, this chart was prepared by the Department of Financial Statistics of States and Cities of the Census Bureau for the Subcommittee on District of Columbia Appropriations of the Senate Committee on Appropriations, and printed in Senate Document No. 203, Seventy-ninth Congress, second session.

As you all know, it is practically impossible to arrive at any completely satisfactory basis of comparing municipal revenues or municipal expenditures. The Census Bureau acknowledges these difficulties, but holds that the comparison shown in this chart is as reasonable as methods and experience will permit.

We do not contend that Washington is taxed at the highest rate of any city in the United States. There is no reason why it should be. In fact, there are many reasons why it should not be, not the least of which is the general efficiency of our governmental structure. Suffice to say that in practically every other municipality, industry, which is usually the largest employer, provides a very significant portion of all tax receipts.

In Washington the amount of the Federal payment will in no way compare with the revenue which would be received from a private employer on the same scale.

Furthermore, we must always be cognizant of the fact that per capita revenue figures are arrived at through the simple process of dividing total revenues by total population.

Every other city in the United States has full freedom to devise its own means and methods of insuring that the greatest possible percentage of population pays some share of the tax bill.

It is an acknowledged fact that in the District of Columbia, because of the tax structure, such peculiarities as the fact that the income tax law is not applicable to thousands of residents who claim domicile elsewhere, the per capita revenue figures for this city, while only slightly above the average for the cities with which it is compared in the accompanying chart, must necessarily be interpreted as meaning that the permanent portion of our population is subject to quite a heavy tax burden.

Any additional taxes enacted at this time should not only provide the needed revenue bat should distribute the burden more equitably on all those participating in the benefits.

What, then, is a reasonable amount which can be set aside for capital improvements without injuring the economic stability of the community and hastening its decentralization into adjacent areas?

Again we turn to the past for guidance. The average amount appropriated for capital items in the District of Columbia general fund between the years 1920 and 1917 is $6,000,000 plus. To make allowance for increased costs, we believe that approximately $8,000,000 per year should be provided for capital improvements.

We do not know how much money will have to be spent on capital improvements during the next 2 years. Whatever it finally turns out to be can be financed in any one of three ways.

First, the program can be set up on the basis of spending $8,000,000 per year until completed; second, under existing conditions, we believe a special additional Federal payment can be justified; or, third, the Commissioners could secure authority for a loan which could easily be repaid over a reasonable period of time from the $8,000,000 which we recommend be made available annually for capital improvements. Such borrowing, however, should be rigidly controlled and limited to this specific purpose.

We, therefore, conclude that the revenue requirement for the fiscal year 1948 is $76,000,000, increasing to $81,000,000 for the fiscal year 1955.

The next chart, chart 4, shows general fund revenues of the District of Columbia. As in the case of appropriations, the figures through 1947 are official District of Columbia figures.

We estimate that revenue from local sources in the fiscal year 1948 will be $58,000,000, or roughly $1,000,000 more than the official District of Columbia estimates. We think collections during the fiscal year 1948 will favor our estimate. Even if they do not, we are justified in using the $58,000,000 figure in anticipation of the release to surplus of unobligated balances on June 30, 1947.

We also estimate that revenues in succeeding years will increase at the rate of aout $750,000 per year under the present tax structure. If we assume that the $8,000,000 Federal payment is again a certainty for 1948, this will bring general fund receipts during the next fiscal year to $66,000,000, leaving a gap of $10,000,000 per year to be filled. In our opinion, any revenue program enacted at this time should be based on a yield of approximately this amount.

The Commissioners have recommended the enactment of a number of new taxes to make up the deficit. According to their estimates, all of these proposals, if passed, would yield $11,300,000 in 1948, and $17.750,000 in succeeding years.

We believe the yield of all the taxes the Commissioners have proposed will exceed their estimates by several million dollars. When the committee holds hearings on the tax bills, we will be prepared to submit the detail of our computations of yield.

Furthermore, the Commissioners' program, after approval by the Budget Bureau, does not include an increased Federal payment. How

ever, they have strongly recommended a more equitable payment by the United States and, if granted, this should be taken into considera⚫tion in any tax program enacted.

The Commissioners' program, if enacted in full, will, we believe. yield more than is needed, and this excess in fiscal years following 1948 will be quite large.

We believe that the tax program should be one that will yield about $10,000,000 in a full year and, if necessary, the balance in the public works investment fund should be used in whole or in part to make up for any shortage in yield in 1948. This can be accomplished in several ways by selecting from the entire program submitted by the Commissioners.

We propose the following programs:

Plan I. First and foremost, we recommend that the Federal Government's payment to the District be substantially increased. Our primary objective is to secure passage of the bill drawn by Senator O'Mahoney for fixing the annual payment by the Federal Government to the District of Columbia.

While we believe that a higher payment than would be received under the provisions of that bill can be justified, we feel that it is a reasonable, simple, and easily understandable method of determining the obligation of the United States, and that it should be enacted into law. For the fiscal year 1948, we have calculated receipts from that source to be an additional $4,000,000.

We are in complete agreement with the Commissioners' proposal to broaden the income tax to apply to all residents of the District, and to tax the net income of unincorporated business.

The adoption of these proposals would correct a grossly unfair discrimination in taxation which now exists. We estimate the annual, full-year yield from this source at approximately $3,000,000.

We also recommend passage of the Commissioners' proposed additional tax on alcoholic beverages, and assume that such a tax would yield $2,200,000 additional annually.

To make up the required $10,000,000 in 1948, we recommend that securities in the public works investment fund to the extent of $1,800,000 be sold.

We recognize that this is an economy-minded Congress, and that it may, therefore, be difficult to secure passage of the O'Mahoney bill, and an increased Federal payment, even though the bill has tremendous merit.

In the event, therefore, that this bill cannot pass, we submit for your consideration an alternate method of raising the required $10,000,000.

Plan 2: This plan includes the amendments to the income tax law and the increase in the tax on alcoholic beverages to which I referred in our first plan.

Then, we suggest the enactment of a 1 percent sales tax, and we believe that would bring in $5,000,000 the first year, and approximately $7,500,000 in succeeding years.

To make up the $10,000,000 in 1948, it would then be necessary to sell $800,000 of the securities in the public works investment fund.

All who have closely followed District of Columbia revenue matters before the Congress will recognize a reluctance on the part of our national legislators to extend income-tax coverage to those domiciled in the States. We deplore such an attitude, and hope that the Members of the Eightieth Congress will correct the gross inequities which now exist in our income-tax law.

However, in a practical vein, we must acknowledge the serious difficulties which may be encountered. We, therefore, suggest that in the event the Congress refuses to increase the Federal payment and fails to accept the proposals for removing the inequities in the incometax law, there is no alternative except the imposition of a 2 percent sales tax. We estimate the yield to be at least $12,000,000 per year.

In closing, I wish to briefly refer to the highway fund. We believe that one of the most serious problems facing Washington today is the threat of decentralization in the central business district.

Up to this time our wide streets and avenues and progressive work by the Highway Department have enabled traffic to move with comparative freedom in and out of the downtown business district.

New automobiles are becoming more plentiful, and we may expect a substantial increase in the number of vehicles using our streets. It is essential that there be no delay in the construction of facilities which will permit mass transportation and private vehicles to enter and leave the central area with reasonable facility.

If these projects are delayed, and if provision is not made for shorttime parkers, we will most certainly undergo the same experience that most other large cities are already going through, namely, a shifting of business establishments to outlying areas, with a resultant loss in municipal revenues through that movement, and through a depreciation in central business district property values. We, therefore, recommend that the proposed 1-cent increase per gallon in the gasoline tax, and the increase in the inspection fee from 50 cents to $1 be approved.

We recommend, further, that the legislation raising the gasoline tax contain a provision that whenever estimated balances and receipts in the highway fund are in excess of $2,000,000 greater than the estimated expenditures, the Commissioners would be required to reduce the tax to 3 cents, and that whenever the balance falls below $1,000,000 they be authorized to again increase the tax to 4 cents. Senator CAIN. Thank you, General.

I personally have no questions at this moment.

Mr. BATES. Mr. Chairman, may I say at the outset that General McCoach is a former resident District engineer for many years, and we are certainly happy to see you back here in the role of a private citizen, and to have the benefit of your training and know-how in the business of municipal government, and it is very heartening to know that, and I know we all appreciate it up here, because it is upon information such as yours, and others who are well informed, which can be given us that we can proceed, because it acts as a guiding light for us to follow.

I was particularly interested in what you said about the estimated revenues from all these taxes being far in excess of what you consider

ever, they have strongly recommended a more equitable payment by the United States and, if granted, this should be taken into consideration in any tax program enacted.

The Commissioners' program, if enacted in full, will, we believe. yield more than is needed, and this excess in fiscal years following 1946 will be quite large.

We believe that the tax program should be one that will yield about $10,000,000 in a full year and, if necessary, the balance in the public works investment fund should be used in whole or in part to make up for any shortage in yield in 1948. This can be accomplished in sev eral ways by selecting from the entire program submitted by the Commissioners.

We propose the following programs:

Plan I. First and foremost, we recommend that the Federal Government's payment to the District be substantially increased. Our primary objective is to secure passage of the bill drawn by Senator O'Mahoney for fixing the annual payment by the Federal Govern ment to the District of Columbia.

While we believe that a higher payment than would be received under the provisions of that bill can be justified, we feel that it is a reasonable, simple, and easily understandable method of determining the obligation of the United States, and that it should be enacted into law. For the fiscal year 1948, we have calculated receipts from that source to be an additional $4,000,000.

We are in complete agreement with the Commissioners' proposal to broaden the income tax to apply to all residents of the District, and to tax the net income of unincorporated business.

The adoption of these proposals would correct a grossly unfair discrimination in taxation which now exists. We estimate the annual, full-year yield from this source at approximately $3,000,000.

We also recommend passage of the Commissioners' proposed additional tax on alcoholic beverages, and assume that such a tax would yield $2,200,000 additional annually.

To make up the required $10,000,000 in 1948, we recommend that securities in the public works investment fund to the extent of $1,800000 be sold.

We recognize that this is an economy-minded Congress, and that it may, therefore, be difficult to secure passage of the O'Mahoney bill. and an increased Federal payment, even though the bill has tremendous merit.

In the event, therefore, that this bill cannot pass, we submit for your consideration an alternate method of raising the required $10,000,000.

Plan 2: This plan includes the amendments to the income tax law and the increase in the tax on alcoholic beverages to which I referred in our first plan.

Then, we suggest the enactment of a 1 percent sales tax, and we believe that would bring in $5,000,000 the first year, and approximately $7,500,000 in succeeding years.

To make up the $10,000,000 in 1948, it would then be necessary to sell $800,000 of the securities in the public works investment fund.