Of the 11.3 million dollars, the sales tax is estimated to yield $5,250,000; the utility tax, $500,000; and the amusement tax, $750,000; a total of 62 million.

We oppose the sales tax and the utility tax, which is, in effect, part of the sales tax, on grounds already expressed. We also oppose the amusement tax for reasons we will state later. Even without these taxes, the estimated yield of other new taxes would be $4,800,000.

Thus, excluding the yield from the proposed sales, utility, and amusement taxes, estimated revenues for fiscal 1948 would be $72,100,000, or $4,100,000 below the budgeted revenue requirements of $76,200,000.

We strongly urge adoption by the Congress of a formula for Federal payments to the District similar to that embodied in S. 215. This formula, applied to revenue in fiscal 1947, would mean a Federal payment of $12,100,000 to the District in fiscal 1948, an increase in payment of $4,100,000.

S. 215 provides that the payment should be prorated to all of the various funds, excluding the trust funds. This would mean a payment to the general fund of approximately 10.1 million dollars, or 2.1 million more than the 8,000,000 payment in 1947. Earlier proposed legislation provided that the entire payment should be made to the general fund. We think that payment should be made in this

manner.

If the entire Federal contribution is applied to the general fund, it would be in complete balance without the proposed sales, utility or amusement taxes. Parenthetically, we are, of course, glad to see that the Commissioners have seen the light on this situation, and they have abandoned the utility and amusement taxes, and we think that they should abandon the sales tax.

Senator CAIN. Just to keep the record straight, they have not abandoned those taxes; they have not seen fit to fight for them. Mr. GORDON. Yes.

If only the proportionate share, 2.1 million dollars, is paid to the general fund, there would be a deficit in fiscal 1948 of 2,000,000 in the general fund. This deficit would be more than made up by the increased yield of 3.4 million dollars from individual income taxes in accordance with the increased rates that we are proposing later in this testimony.

Computing new taxes, excluding sales, utility and amusement, on a full-year basis, and with the Federal payment provided in S. 215, all applied to the general fund, total general fund revenue on a fullyear basis would be nearly $80,000,000. With the increased individual income taxes we propose, total revenue would be $84,000,000, or 7,000,000 above the general fund budget for 1948.

We do not believe that the 77.2 million dollar budget for 1948 is adequate. It has skimped on many essential public services, notably education, health, recreation, and public welfare.

We urge that expenditures for these items be increased to the extent possible in 1948, and substantially expanded subsequently when a new revenue program for the District is in full operation. Nothing is so important as adequate pay for the teachers of our children, a

model educational plant, and sufficient funds to care for the sick and needy of our community.

No, the District is not in a desperate situation. Without the sales or utility tax, and even without the amusement tax, it is capable of providing the kind of community services we require and of which we might be proud in the capital of the United States.

Our arguments to this point can be summarized as follows: The general sales tax is socially unjust; it has an adverse effect upon our economy by reducing mass purchasing power; it is a tax of desperation, and the District is in a favorable, not unfavorable position. In our opinion, these are sufficient reasons why a general sales tax should not be enacted.

There are in addition, however, other reasons why there should not be a sales tax for the District.

It is contended that the sales tax is designed to catch non-residents who now pay no taxes to the District. Our answer is that the proposed income tax will catch the majority of those nonresidents, who are nonresident only by virtue of the curious concept of domicile which exists in the present law.

In a small compact jurisdiction like the District, a sales tax would drive business from the District into Virginia with a consequent decline in revenue from corporate income taxes and taxes on business properties.

An attempt is made to stop the flight of business to surrounding areas by providing a compensating use tax in H. R. 2290. This tax provides that every resident of the District shall keep an itemized list of all purchases subject to the sales tax, made outside the District, to file a quarterly report, and to pay a tax on all such purchases in excess of twenty-five dollars each quarter. Such a law is simply an open invitation to lawbreaking. It cannot be enforced except on such conspicuous articles as automobiles, which must be registered in any case.

It has been argued by proponents of the tax that it is easily collected, and at little expense. They probably mean little expense to the Government because a large part of the collection cost is shifted to business.

According to the study made by the United States Treasury, in response to Senate Resolution 160, entitled "Federal, State and Local Government Relations," the median cost-of-compliance for 91 corporations in connection with State general sales taxes was 3.7 percent. The Municipal Finance Officers' Association reports that collection costs by State governments range from 1.5 to 5 percent, with the most common cost 3 percent.

A sales tax would be imposed against the express will of the people of the District. In a recent poll by the Washington Post, 69 percent of the District residents opposed the sales tax. At the District Commissioners' tax hearings last September, substantially all organizations who testified were against it.

Recent enactment of a sales tax in Maryland has no force in consideration of such a tax for the District. Action of a bordering State does not change the fundamental issues here; they remain the same.

We have said that the sales tax is a tax of desperation. Perhaps, Maryland was desperate. The constitution of the State of Maryland forbids progressive income taxes which is why the Free State found it necessary to enact so pernicious a tax as the general sales tax.

No such prohibition exists in the District. Moreover, if the State of Maryland had not given a rebate on income taxes amounting to one-third, and in recent years one-half, during the period of higher incomes when other States were putting themselves in a sound financial position, Maryland would not have had to resort to a sales tax. The second bill on which we wish to testify is the District of Columbia Income Tax Act of 1947, H. R. 2282.

The Washington chapter of the Union for Democratic Action endorses H. R. 2282, but would like to see higher rates than those proposed in order to raise the level of services in the District.

A personal net income tax at graduated rates is the only tax approaching the ideal of payments based upon ability to pay, and should constitute a major element in a sound District tax system. As presently constituted, the District personal income tax law is unfair, inequitable and low in yield.

It is absurd that liability for such a key tax as the District individual income tax should turn upon an elusive common-law concept such as domicile, which is not subject to precise statutory definition. Domicile becomes a matter of intent to return to a previous place of residence, as evidenced by innumerable combinations of acts, associations, and attitudes. This is a flimsy basis for income taxation in a jurisdiction whose population is largely made up of persons with all varieties of real or fancied ties to their "homes" in the various States. There are now only 85,000 taxible returns being filed in the District, yet there are about 450,000 employees of Federal Government agencies and private business residing in the District limits. With such a basis for determining tax liability, enforcement and collection are made doubly difficult for an inadequate staff. Evasion and avoidance are widespread.

The proposed tax bill, H. R. 2282, would tax as "residents" those domiciled in the District on the last day of the taxable year, and those who maintain a place of abode in the District for more than 7 months of the taxable year, whether domiciled here or not. Residents would be taxed upon their entire net income, with a credit for taxes paid to other States on income derived within those States. Thousands of persons enjoy services provided by the District over extended periods of continuous residence without contributing their fair proportionate share of the cost.

Moreover, essentially all of these people make no direct tax payments to any other State or local government unless they happen to own real property in other taxing jurisdictions or elect to pay any small head or poll taxes which are levied.

There are 17 States, including some of the most populous, such as Ohio, Pennsylvania, Illinois, Indiana, and Michigan, which do not now levy individual income taxes. In the 31 States with individual income tax laws, tax liability depends generally upon maintenance

model educational plant, and sufficient funds to care for the sick and needy of our community.

No, the District is not in a desperate situation. Without the sales or utility tax, and even without the amusement tax, it is capable of providing the kind of community services we require and of which we might be proud in the capital of the United States.

Our arguments to this point can be summarized as follows: The general sales tax is socially unjust; it has an adverse effect upon our economy by reducing mass purchasing power; it is a tax of desperation, and the District is in a favorable, not unfavorable position. In our opinion, these are sufficient reasons why a general sales tax should not be enacted.

There are in addition, however, other reasons why there should not be a sales tax for the District.

It is contended that the sales tax is designed to catch non-residents who now pay no taxes to the District. Our answer is that the proposed income tax will catch the majority of those nonresidents, who are nonresident only by virtue of the curious concept of domicile which exists in the present law.

In a small compact jurisdiction like the District, a sales tax would drive business from the District into Virginia with a consequent decline in revenue from corporate income taxes and taxes on business properties.

An attempt is made to stop the flight of business to surrounding areas by providing a compensating use tax in H. R. 2290. This tax provides that every resident of the District shall keep an itemized list of all purchases subject to the sales tax, made outside the District, to file a quarterly report, and to pay a tax on all such purchases in excess of twenty-five dollars each quarter. Such a law is simply an open invitation to lawbreaking. It cannot be enforced except on such conspicuous articles as automobiles, which must be registered in any case.

It has been argued by proponents of the tax that it is easily collected, and at little expense. They probably mean little expense to the Government because a large part of the collection cost is shifted to business.

According to the study made by the United States Treasury, in response to Senate Resolution 160, entitled "Federal, State and Local Government Relations," the median cost-of-compliance for 91 corporations in connection with State general sales taxes was 3.7 percent. The Municipal Finance Officers' Association reports that collection costs by State governments range from 1.5 to 5 percent, with the most common cost 3 percent.

A sales tax would be imposed against the express will of the people of the District. In a recent poll by the Washington Post, 69 percent of the District residents opposed the sales tax. At the District Commissioners' tax hearings last September, substantially all organizations who testified were against it.

Recent enactment of a sales tax in Maryland has no force in consideration of such a tax for the District. Action of a bordering State does not change the fundamental issues here; they remain the same.

We have said that the sales tax is a tax of desperation. Perhaps, Maryland was desperate. The constitution of the State of Maryland forbids progressive income taxes which is why the Free State found it necessary to enact so pernicious a tax as the general sales tax.

No such prohibition exists in the District. Moreover, if the State of Maryland had not given a rebate on income taxes amounting to one-third, and in recent years one-half, during the period of higher incomes when other States were putting themselves in a sound financial position, Maryland would not have had to resort to a sales tax. The second bill on which we wish to testify is the District of Columbia Income Tax Act of 1947, H. R. 2282.

The Washington chapter of the Union for Democratic Action endorses H. R. 2282, but would like to see higher rates than those proposed in order to raise the level of services in the District.

A personal net income tax at graduated rates is the only tax approaching the ideal of payments based upon ability to pay, and should constitute a major element in a sound District tax system. As presently constituted, the District personal income tax law is unfair, inequitable and low in yield.

It is absurd that liability for such a key tax as the District individual income tax should turn upon an elusive common-law concept such as domicile, which is not subject to precise statutory definition. Domicile becomes a matter of intent to return to a previous place of residence, as evidenced by innumerable combinations of acts, associations, and attitudes. This is a flimsy basis for income taxation in a jurisdiction whose population is largely made up of persons with all varieties of real or fancied ties to their "homes" in the various States. There are now only 85,000 taxible returns being filed in the District, yet there are about 450,000 employees of Federal Government agencies and private business residing in the District limits. With such a basis for determining tax liability, enforcement and collection are made doubly difficult for an inadequate staff. Evasion and avoidance are widespread.

The proposed tax bill, H. R. 2282, would tax as "residents" those domiciled in the District on the last day of the taxable year, and those who maintain a place of abode in the District for more than 7 months of the taxable year, whether domiciled here or not. Residents would be taxed upon their entire net income, with a credit for taxes paid to other States on income derived within those States. Thousands of persons enjoy services provided by the District over extended periods of continuous residence without contributing their fair proportionate share of the cost.

Moreover, essentially all of these people make no direct tax payments to any other State or local government unless they happen to own real property in other taxing jurisdictions or elect to pay any small head or poll taxes which are levied.

There are 17 States, including some of the most populous, such as Ohio, Pennsylvania, Illinois, Indiana, and Michigan, which do not now levy individual income taxes. In the 31 States with individual income tax laws, tax liability depends generally upon maintenance