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 TAXPAYERS ASSOCIATION, AND 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: (1) A larger contribution from the Federal Government. (2) The exercise of rigid economy in the District Government. (3) New taxes which are almost inevitable. 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. Either 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 areas. 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. I think this is not a regressive tax as it is pointed out to be as there is so much exemption from the lower income groups. Therefore, in bringing out a tax program, what is necessary to balance the budget, we hope it will include a sales tax as No. 2 priority after broadening the base of the income tax because, frankly, we do not want to see the real estate and personal tax increased. Mr. BATES. Is that all, Mr. Lusk? Mr. Lusk. Yes, sir. Mr. BATES. Now, you have carefully examined this program, have you, of the District Commissioners, which is to be extended over a period of years, particularly the capital outlays? Because of that program it is felt that additional revenue will be required. Well, of course, if you are going to spend money, you have to raise money to meet those expenses. The purpose of these bills filed here is to raise that money. The important question, as I have said, many, many times during these hearings, is there a justification for these expenditures. What is your opinion of that? Mr. Lusk. Not for all of them, but you cannot run a city of 1,000,000 people on almost the same budget that we had when we had 663,000, plus the fact that living costs are up 40 percent. Mr. BATES. You and I understand that all right. We appreciate that. I am talking about from now on. These new tax bills are filed for the purpose of raising revenue through new sources to meet unusual expenditures, capital outlays, particularly. I am speaking only of that sense, not because of the increase in labor cost because that is already over the board. That is reflected in the 1946, 1947, and 1948 budget. But what have you to say about this projected program of public improvements which have been set up by the Commissioners for the purpose of carrying them out the next few years? That is the key to this situation, whether or not we need any or all of these revenues. Mr. LUSK. We need some capital improvements, a good many, not all of them. Some of them I think are a little grandiose. For example, I was shocked the other evening, and I do not get easily shocked, by the way, Mr. Chairman, when I found out this Dupont Circle underpass was going to cost $3,800,000 and practically all it does is to take people off N Street and M Street and P Street and put them on the circle. I wonder if a thing like that can be justified. That is just an example. Mr. BATES. That is in the program, Mr. Lusk, and I know the committee would be glad to get your point of view because, after all, we have to depend upon wide-awake citizens such as yourself to give us the benefit of their analysis of all these projected improvements in order to determine what we should do as Members of Congress who, fortunately or unfortunately, have the responsibility on our shoulders. This program of public improvements and raising taxes is not new to us, probably it is not new to you, but we appreciate your comment on it. Do you think that the Dupont Circle project ought to be taken out of the picture altogether? Mr. LUSK. I do not say that, but an amount equal to what was almost all our gasoline income a few years ago is going into that one thing. What does it answer? It does not solve the traffic problem at all. It at best is a palliative and everybody knows that anybody who rides through Dupont Circle ought to have his head examined. Mr. BATES. That is your opinion? Do you think it ought to be stricken from the bill and given no consideration at all in the developing of these revenues? Mr. LUSK. Mr. Chairman, I am prejudiced. I have a lot of good clients up that way, but they are against it. Mr. BATES. I am not asking your clients' opinion; I am asking for your opinion. Mr. LUSK. I was remarking about that influencing me. is a waste of money. Mr. BATES. A waste of money? Mr. Lusk. Yes; all right. What else is there in that program? I think it Wait a minute now. I just got hold of the budget the other day, the justification for it. It is 700 pages long, and I read it the other night until 5 o'clock. I got tired and went to bed. I have not finished it yet. I will have a complete report on the entire budget. I think we have too many grandiose ideas as to what are nice things to do. They are delightful and desirable and perhaps beneficial, but can we afford it? Mr. BATES.. That is what we are asking you. You ought not to ask us that question. Is there anything else you have to offer about this program? Mr. BATES. Yes. Mr. LUSK. I will have it to offer. I have not it this afternoon because I just came up here to talk about the sales tax. I want to stick to the subject. Mr. BATES. You approved every one of these bills raising new sources of revenue excepting one bill, and which one was that? Mr. LUSK. The amusement tax. Mr. BATES. That is only an inconsequential amount and the Commissioners themselves recommend that we forget about that. Mr. LUSK. Yes. Wait a minute, Mr. Chairman. All this is based upon the necessity of revenue. If we have to spend more money, I approve of the Commissioners' report in the priority in which it has been laid out. Mr. BATES. That is a point we are expressing. It is a question of new revenue to meet a project program of public improvements. That is the viewpoint we have to take up. Mr. LUSK. Do you not have to wait until Horan's committeee reports? Mr. BATES. No. I think they are waiting for us to see how much money we are going to give them to operate. Mr. LUSK. Wait a minute. Who is waiting for whom? |