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one room to another, walking up and downstairs, attending to her personal needs since she isn't actually working at these moments—though remember she cannot properly execute her work without these activities-you would say I was unjust. The Federal Government would —
I do just that, pay taxes exclusive of the streets, the alleys, the sewers. The Federal Government, if it persists in neglecting its obligation is using the District as slave labor.
If the Overton-O'Mahoney formula was fairly rated it would find that the obligation is in the neighborhood of 20 to 25 million.
Remember that if the matter is realistically and truthfully faced there is no possible interpretation except that the sum is in return for the municipal services rendered.
The underlying American principle advocated by the Office of the Secretary of the Treasury and the Administration, in other words by the Federal Government itself, toward a proposed tax has been "that it should be based on ability to pay”—not "How can I get the other fellow to pay more than I do?")* "I sell liquor, so let's tax the cigar store.” Therefore we approve a realistically graded income tax, along the lines laid down by the Commissioners, and that this tax be levied on every resident of the District residing here for 7 months out of the year, that this tax be rigidly enforced. We recommend a Federal payment for services rendered to its buildings and to its employees. We would approve some raise on property tax, particularly on those income-producing properties that have not had rent controls. A license fee for businesses such as restaurants and hotels; that is relative to business capacity, not as it is now, a flat fee that is not even adequate to cover cost of city inspection.
Under no conditions would we support a sales tax. We believe with our own United States Government that the sales tax is not based on the ability to pay, that it deprives the small-income groups of a larger relative percent of their earnings than the larger income groups, that it is a regressive tax since it reduces purchasing power; and we would like to add that for the District in particular it would be a costly tax to administer because of the burden of educating the public, business
, and tax-enforcement officers, auditors, and when all this is finally done, Washington is too small an area to justify the trouble. But as we said a short time back, it does not measure up to the American standard of a fair tax and therefore under no circumstances would we endorse it.
In conclusion, with the means above indicated, it is and always would be entirely unnecessary.
There is one point in the revenue proposals we have forgotten: How do we get the poor sucker from out of town! This is so embarrassing
? as to make one want to forget it.
If the citizens of this entire Nation have paid their Federal taxes and in turn the Federal Government pays its District taxes the city of Washington will be well and efficiently run and so beautiful that everyone who cares to may visit his Capital without fear that the local government is crouching ready to fleece him, much as a barker at a circus expounds the glories of his enterprise and then sends his pal the pickpocket through the crowd for a little extra.
To us, such an attitude is almost immoral. The tourist and the outof-towner spend money in our local businesses thus; the city gains from their visit as much as it may expect is its due.
Thank you very much.
STATEMENT OF MRS. GERALDINE RHODES, DISTRICT CHAPTER,
NATIONAL ASSOCIATION OF COLORED WOMEN'S CLUBS, WASHINGTON, D. C.
Mrs. RHODES. I am Geraldine Rhodes, District Chapter of the National Association of Colored Women's Clubs.
We have 28 clubs, and 600 members in the District of Columbia. It is a national organization, with organizations throughout the country and Mexico. Mr. BATES. What is the membership here?
Mrs. RHODES. It is 600 in the 28 clubs here, and the national headquarters is here at 114 O Street, Northwest.
We disapprove of the sales tax because it works an undue hardship on the lower-income group, in our group, but specifically because some of them receive their income in such small amounts, some weekly and some daily.
We feel that that group would have to do more shopping. If you want to buy one pair of hose, 35 cents this week, you could not buy three pair, and all of his money is spent in that way.
Then we figure with the carfare he has to pay, and you know the relief burden now is very heavy and they have cut relief on the very low income group:
Then we would have a time in trying to educate our people how to spend their money to the best advantage, their money is so small.
Everything they have is spent, where in the high-income group only a portion of it is spent. A person making $200, $300, or $100 a month, he can buy in large quantities. You take a man who is making a small amount of money, all his money goes, but that is not true in the higherincome group. We feel again this would also inflate prices which are already inflated. As a group, we recommend this committee look into the cafeteria, the lunchroom, and the night-club situation in Washington, as far as tax is concerned. We understand that the tax on one is the same as others, and there I think that is unjust, because you take a joint where a person is not making very much, say $15, take a swanky night club, why, $15 for them is unfair. We think this committee should look into raising the higher revenue for the licenses and the like.
I thank you for the time, because I think everything has been l'ecommended that you could do, but we do feel you should think of this lower-income group before putting a sales tax on the District of Columbia.
Mr. BATEs. Thank you, Mrs. Rhodes.
STATEMENT OF RUFUS S. LUSK, WASHINGTON TAXPAYERS
ASSOCIATION, WASHINGTON, D. C. (A statement presented to the committee by Mr. Lusk prior to testifying is as follows:)
EXTRACTS FROM THE REMARKS OF RUFUS S. LUSK, PRESIDENT, WASHINGTON TAX
PAYERS ASSOCIATION, ANI) A MEMBER OF THE COMMISSIONERS' COMMITTEE TO STUDY THE TAX STRUCTURE FOR THE DISTRICT OF COLUMBIA
The heart of the Commissioners' tax program is the sales tax. Cut it out and there is little left.
There are three things before us :
Either the District of Columbia has a sales tax or there will be a greatly increased tax rate on real estate and personal property ; perhaps $2.50 a hundred of assessed valuation. It is one or the other. There is no choice.
It is only by a sales tax that the District can collect from all who should pay taxes, such as those who live outside the District and earn their living in Washington and the millions of visitors who flock here every year.
Washington is fortunate in that its real and personal taxes constitute only 50 percent of the total general fund revenue. In most cities the real-estate tax alone is 65 percent or more. This has resulted in blighted city central areas and a loss in revenue because real-estate taxes become uncollectible. We don't want that to happen here.
Our real property taxes compare favorably with nearby communities, such as Montgomery County and Arlington. However, despite this, building of homes is going from Washington as shown by the following table :
1 In 1940, 47 percent of all residential construction was in the District of Columbia. During 1946 it dropped to 24 percent. In January 1947 it was 16 percent. January 1946 it was 24 percent.
A high tax rate would drive more and more people out of the District of Columbia, and cut down our tax base and revenue.
There are two arguments made against a sales tax:
1. That it will drive business from the District of Columbia. Half of this argument has already been answered by Maryland adopting a sales tax. Virginia will probably follow suit.
2. The other argument is that the sales tax is regressive; that lower-income groups pay more than higher-income groups. This is not true.
The following table shows clearly that the lower-income groups pay less in proportion to their income in sales taxes than the higher-income groups, when rent, services, and food are exempt, as they would be under our proposed sales tax act:
Source: United States Department of Labor Bulletin No. 822, entitled "Family Spending and Saving in Wartime." Monthly Labor Review, January 1946, published by the United States Department of Labor, entitled "Expenditures and Savings of City Families in 1944."
Mr. Lusk. My name is Rufus S. Lusk; I represent the Washington Taxpayers Association, and the Building Owners and Managers Association.
I will confine my remarks, Mr. Chairman, to the sales tax, although I understand that all the taxes are under discussion here.
I was a member of the Commissioners' Committee to study the tax structure, and I voted in favor of the entire program with one exception, that I was opposed to the increase in the amusement taxes.
Otherwise, I went along with the majority of the committee.
Now, which of three things in front of us, Mr. Chairman-our budget is going to be increased and we must have new taxes, I think that is inevitable.
Anybody who says that we will get more money out of the Federal Government and at the same time cut down the budget enough so we will not need any new taxes is not realistic.
Now, to get to the sales tax: The heart of the Commissioners' and the committee's practice, and the program which the Commisioners have submitted to you, is the sales tax.
If that is cut out of it, there is almost nothing left. The amusement tax is, as I understand, to be disapproved by your committee, probably, and also there will be a narrowing of the base of the income tax, so therefore we come to the sales tax.
I have heard only two arguments against this tax, both of which have been advanced: First is, it will drive business outside of the District, and second is that the tax is regressive. That is, it hits the little fellow more than the big fellow.
As far as driving business out of the District is concerned, half of that argument has collapsed now that Maryland has enacted a sales tax, and in Virginia, there is considerable agitation for it, and it would appear that it is very likely there will be a sales tax in Virginia before too long.
The Fairfax County Board of Commissioners has already gone on record as favoring it, and Mr. Bates, about a year ago, I wrote to 10 of the largest merchants in New York, asking them if they would tell me what the effect of the New York City sales tax had been upon their business—not a single one answered my letter.
One referred it to their association there and they sent me some statistics which proved nothing, because in outlying towns, in some
instances business had gone down and in some instances it had gone up. In New York it decreased 3 percent.
In New Orleans, where they have a sales tax, it has not affected their business at all, and the merchants are not opposed to it.
The merchants there allow a percent of the amount of tax collected in payment for their services in collecting the tax.
Èither we have a sales tax here or we must have greatly increased property tax, perhaps $2, $2.25, or $2.75.
If that takes place, Washington will be in the same situation that most other cities are, where the average is 65 percent of the total revenue which comes from real-estate taxes. I attended a meeting in your State last September of the Government Real Estate Association. We were addressed by the comptroller of Boston, and he mentioned Washington as one of the few cities which did not collect too much of its revenue from real-estate taxes, and the universal opinion of those men from all over the country, about 300 of them, was that real estate is paying too much.
We hoped that it would stay about where it is, and unless there is a sales tax or a greatly increased contribution from the Federal Government, real-estate taxes will go up tremendously.
In that connection, Mr. Chairman, our taxes in the District of Columbia compare favorably, although a little higher, than in nearby
Before the war 47 percent of all residential building in Metropolitan Washington was in Washington, D. C.
Today it is about 16 percent. There is that difference. Before the war 47 percent of all residential building in Metropolitan Washington was in Washington, D. C. Today it is about 16 percent. There is that difference. Fifteen years ago 80 to 90 percent of all residential building in this area was in Washington, D. C.
It has gone down to where it is 16 or 20 now.
If that continues, more and more people will be going away from Washington and a higher real-estate rate will be a compelling reason for their being outside or renting outside the District of Columbia.
The other point I made was that the sales tax, despite all the statements that have been made, is not the regressive tax that it is said to be; do you have this statement, Mr. Chairman?
Mr. BATEs. Yes.
Mr. LUSK. On page 3 there, you will see a table which we prepared this morning on the percentage of income of different income groups that would not be subject to the sales tax as proposed here in the District of Columbia.
You will notice as the income goes up, the percentage of income that is exempt from taxation under the 2 percent or any other percent of tax goes down.
In the 1941 studies these figures are from the Bureau of Labor statistics, in the $3,000 to $4,000 bracket, 45 percent of the income would be exempt from taxation; in the $5,000 to $10,000 bracket, 34 percent would be exempt.
In the 1944 studies, we get down to lower groups, those making $1,500 to $2,000 of family income, 52 percent would be exempt; $5,000 and up, only 36 percent would be exempt.