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of time, as there have been now, I can conceive of a large number of expenditures as being warranted which should be gotten out of borrowing so as to spread the burden.

Now, as to the sales tax, I want to point out that the sales tax is in effect a tax on income. In the great majority of cases it must be paid out of income for the great bulk of population whose income spent is substantially the same as income earned, and the tax on sales is, in effect, a tax on income earned.

The sales tax, therefore, differs from the income tax not primarily in its incidence; it is merely in the method of collection, in the exemptions, in the rate system. Instead of exempting, as the income tax does, the amounts considered necessary for subsistence, it exempts the amount in excess of subsistence, expenditures, not merely of necessary subsistence requirements, but of required subsistence expenditures; in other words, not money spent by the taxpayer, but money invested or saved is exempted.

It exempts also food, and medicine in the proposed bill. It exempts food and medicines and also exempts all but rent, which forms a necessarily large part of the expenditures of the individuals. However, that is not the entire amount; certainly, not over two-thirds, and the balance is just as essential to living as the amount that is exempted. It is notable also that the exemptions are not on the basis of necessary expenditures; they are on the basis of actual expenditures; the luxuries of the wealthy for food and medicines—we will assume there are no luxurious expenditures of medicines, but the luxurious expenditures for food and rent are exempted in the same measure as the meager expenditures of the poor.

It is obvious that in these features the sales tax ignores the principle of ability to pay. It is, as often pointed out, regressive rather

. progressive, and consequently, is the opposite in its effect upon the distribution of income, the distribution of the tax burden. It is the opposite of the income tax.

Now, substantially anything that can be done for sales tax could be done through the income tax by modifying the exemptions and modifying the rates. We could include in the income tax an exemption for savings; we could abolish the exemption of necessary living expenses; we could abolish the rates, the graduation of rates, and accept a flat rate, thus making it equivalent to the sales tax to the vast majority of people.

I submit that the things that we would not do, and I take it for granted that Congress would not take those matters in the income tax, the things that we would not do in our principal revenue-raising measure, the income tax-I guess I am jumping into the Federal field for the moment—but our principal revenue-raising measure, other than the property tax here in the District, I believe it is, the thing that we would not do in that tax, we should not do by adopting a different form of taxation.

The wrongs, if there are wrongs, are just as great when we impose them by means of a new and different tax, the sales tax, as they would be if we imposed them by means of the income tax, if we actually eliminated the exemption for living expenses, and imposed, provided instead, an exemption for excess income, savings.

I have some notes here which I would like to glance at for a second. I want to point out also that there is no magic in the method of collection of the sales tax or in the method of measurement that makes it possible to raise more money that way than can be raised by means of The income tax.

The measure of the money that can be raised is the amount of money that people can spare, the amount that can be drawn from the pocketbooks of the individuals without impairing their usefulness and without interferring with the economy.

Insofar as a tax like the sales tax reaches into the income necessary for subsistence it is a tax on production. Obviously, man is the principal productive machine. În order to be a productive machine he must have and he must get power and lubrication and shelter and protection from the elements, just as a mechanical machine, just as a metal machine, must have those same items of power and lubrication, and the like. If he does not get them he does not produce.

The tax on the necessary requirements of the human machine in the purely impersonal way, considering him in the impersonal way of a productive machine, the tax on his necessary requirements is of the same character as the tax on power and on lubrication and on other necessary requirements of productive machinery. It is a tax on production, and that tax on production is now proposed at a time when production is our greatest national requirement, our greatest national need.

It is not only a tax on production, but it is a tax on markets. The market afforded by the ultimate consumer for the goods that our economy produces is the essential, the most essential element in keeping that economy going. All other markets are incidental. The market for ultimate consumption is the vital, necessary thing, and when we increase the already rapidly rising prices, prices which, in the opinion of most economists have risen out of all reason at the present, and have reduced buying power unwisely, to increase those prices further by a sales tax is, we submit, an uneconomic, an unwise procedure.

Efforts should be made to maintain markets, and to maintain the productive capacity of the principal producer, the human being, and for that reason, the graduated incomes tax, avoiding any burden on necessary living expenses, should be adhered to whenever additional revenues become necessary.

Now, my closing point-I have made it once, but I would like to repeat it—is that we should not be willing to impose by means of a different tax burdens that we would not impose by means of the income tax, and we should use, conversely, the income tax insofar as it is practicable to obtain the revenues that we need.

The sales tax is advocated partly because it will be payable by persons who have bodily residence in the District for the bulk of the year but now avoid its income tax. If that is a proper measure to take by means of a sales tax, it is a proper measure to take by means of an income tax; and I would suggest in lieu of the suggestion made a moment ago, that inasmuch as the general practice of the States is to impose I believe this does not hold in Massachusetts, but it is the commonest practice of the States--the income tax first on bodily residence, and not to defer that tax for any other ground.

I would suggest that in the peculiar circumstances that obtain here in the District, when our bodily residents are largely legally domiciled elsewhere, that the proper practice might be to have a tax, that is to say, not to waive the entire amount by reason of payment of an income tax in other jurisdictions, but to provide that we would waive the tax to the extent of 50 percent, providing the other jurisdiction would take corresponding action.

Obviously the tax money should go in the main to the place where the person enjoys the benefits of the taxes, not to the place he visits once a year to vote.

I happen to be one of those who have a purely fictitious residence in another State, having been a lifelong bodily resident of the District; I have a voting residence in another State, but I should be ashamed to avoid by reason of that other legal domicile the District tax, even though I do spend 1 or 2 months of the year in a summer camp in such State, and I have uniformly paid the District income tax in addition to any taxes imposed by my own State.

Mr. BATES. What State is that?

Mr. Woop. That is the State of Maine, which does not impose an income tax.

Mr. B ATEs. It does not impose an income tax.

Mr. Wood. Yes. Actually, they raise the money necessary to pay the State expenses by some means, and as a resident during part of the year in that State, I pay the taxes directly or indirectly that are necessary to run the government.

Mr. BATEs. Of course, you can retain your domicile up there without paying any tax whatever unless they have an intangible tax in the State of Maine.

Mr. Wood. Yes, sir.
Mr. Bates. Do you pay an intangible tax?
Mr. Wood. Yes.

Mr. Bares. Of course, under the provisions of the bill that I have in mind, I am certainly in accord with you where we have a condition of people living here 12 months of the year, and some of them even own their own homes, and it seems rather peculiar that they really do not have to pay the full share of the cost of the government, including that which everybody else has to pay.

Mr. Wood. This is the place where they get the benefits of taxation.

Mr. Bates. But here we are up against a situation where people apply their legal domicile, and the

Mr. Woon. Because they have no vote here. Mr. BATES. I say, that is one of the things that ought to be considered: it is one of the intangible things that ought to be considered in the determination of what the Federal contribution should be and ought to be; that is the sort of thing that is depriving the District of a large amount of revenue that ordinarily they would get by taxing income locally earned, and it is one of those things we just cannot get away from, you see, unless we double-tax those people.

Mr. Woon. Would it not be reasonable to say that we will remit one-half of the tax provided—

a

I have some notes here which I would like to glance at for a second. I want to point out also that there is no magic in the method of collection of the sales tax or in the method of measurement that makes it possible to raise more money that way than can be raised by means of The income tax.

The measure of the money that can be raised is the amount of money that people can spare, the amount that can be drawn from the pocketbooks of the individuals without impairing their usefulness and without interferring with the economy.

Insofar as a tax like the sales tax reaches into the income necessary for subsistence it is a tax on production. Obviously, man is the principal productive machine. În order to be a productive machine he must have and he must get power and lubrication and shelter and protection from the elements, just as a mechanical machine, just as a metal machine, must have those same items of power and lubrication, and the like. If he does not get them he does not produce.

, The tax on the necessary requirements of the human machine in the purely impersonal way, considering him in the impersonal way of a productive machine, the tax on his necessary requirements is of the same character as the tax on power and on lubrication and on other necessary requirements of productive machinery. It is a tax on production, and that tax on production is now proposed at a time when production is our greatest national requirement, our greatest national need.

It is not only a tax on production, but it is a tax on markets. The market afforded by the ultimate consumer for the goods that our economy produces is the essential, the most essential element in keeping that economy going. All other markets are incidental. The market for ultimate consumption is the vital, necessary thing, and when we increase the already rapidly rising prices, prices which, in the opinion of most economists have risen out of all reason at the present, and have reduced buying power unwisely, to increase those prices further by a sales tax is, we submit, an uneconomic, an unwise procedure.

Efforts should be made to maintain markets, and to maintain the productive capacity of the principal producer, the human being, and for that reason, the graduated incomes tax, avoiding any burden on necessary living expenses, should be adhered to whenever additional revenues become necessary.

Now, my closing point-I have made it once, bụt I would like to repeat it-is that we should not be willing to impose by means of a different tax burdens that we would not impose by means of the income tax, and we should use, conversely, the income tax insofar as it is practicable to obtain the revenues that we need.

The sales tax is advocated partly because it will be payable by persons who have bodily residence in the District for the bulk of the year but now avoid its income tax. If that is a proper measure to take by means of a sales tax, it is a proper measure to take by means of an income tax; and I would suggest in lieu of the suggestion made a moment ago, that inasmuch as the general practice of the States is to impose I believe this does not hold in Massachusetts, but it is the commonest practice of the States—the income tax first on bodily residence, and not to defer that tax for any other ground.

I would suggest that in the peculiar circumstances that obtain here in the District, when our bodily residents are largely legally domiciled elsewhere, that the proper practice might be to have a tax, that is to say, not to waive the entire amount by reason of payment of an income tax in other jurisdictions, but to provide that we would waive the tax to the extent of 50 percent, providing the other jurisdiction would take corresponding action.

Obviously the tax money should go in the main to the place where the person enjoys the benefits of the taxes, not to the place he visits once a year to vote.

I happen to be one of those who have a purely fictitious residence in another State, having been a lifelong bodily resident of the District; I have a voting residence in another State, but I should be ashamed to avoid

by reason of that other legal domicile the District tax, even though I do spend 1 or 2 months of the year in a summer camp in such State, and I have uniformly paid the District income tax in addition to any taxes imposed by my own State. Mr. BATES. What State is that? Mr. Wood. That is the State of Maine, which does not impose an income tax. Mr. BATEs. It does not impose an income tax. Mr. Wood. Yes. Actually, they raise the money necessary to pay the State expenses by some means, and as a resident during part of the year in that State, I pay the taxes directly or indirectly that are necessary to run the government. Mr. Bates. Of course, you can retain your domicile up

there without paying any tax whatever unless they have an intangible tax in the State of Maine. Mr. Wood. Yes, sir. Mr. Bates. Do you pay an intangible tax? Mr. Wood. Yes. Mr. Bates. Of course, under the provisions of the bill that I have in mind, I am certainly in accord with you where we have a condition of people living here 12 months of the year, and some of them even own their own homes, and it seems rather peculiar that they really do not have to pay the full share of the cost of the government, including that which everybody else has to pay. Mr. Wood. This is the place where they get the benefits of taxation. Mr. Bates. But here we are up against a situation where people apply their legal domicile, and the

Mr. Woon. Because they have no vote here.
Mr. Bates. I say, that is one of the things that ought to be consider-

BATES , ed: it is one of the intangible things that ought to be considered in the determination of what the Federal contribution should be and ought to be; that is the sort of thing that is depriving the District of a large amount of revenue that ordinarily they would get by taxing income locally earned, and it is one of those things we just cannot get away from, you see, unless we double-tax those people.

Mr. Wood. Would it not be reasonable to say that we will remit one-half of the tax provided

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