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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. I think it is a waste of money.

Mr. BATES. A waste of money?
Mr. LUSK. Yes; all right.
What else is there in that program?

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. Thev 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

BATEs,
us that question.

Is there anything else you have to offer about this program?
Mr. LUSK. Do you mean expending all this money?
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?

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Mr. Bates. You have the Appropriations Committee considering the present fiscal year's requirements.

Mr. LUSK. Yes, sir.

Mr. BATEs. And the amount of money they can spend for the next fiscal year, 1948–49, will depend upon the amount of revenue they

, can raise and it is very obvious within the present sources of revenue on which they can levy taxes or raise revenue, it will be inadequate to meet the budgetary requirement of 1948–49.

Therefore, that committee will necessarily have to wait until some disposition is made of these bills to authorize the raising of new revenue through new sources in order to meet the deficits of the present revenues on the 1948-49 budget. Is that clear?

Mr. Lusk. Yes; that is clear, but, of course, the Commissioners have to make up that deficit.

Mr. Bates. Through real-estate taxes and personal taxes.
Do you approve of that then?
Mr. Lusk. That happens to be the law.

Mr. BATES. I know it is the law. You are reaching out for some alternative, and your alternative is everyone of these taxes but one, the amusement tax.

Mr. Lusk. I still think there is confusion here, Mr. Chairman.

I do not know who is going to act first, you or the Appropriations Subcommittee. I really do not, because I have inquired about it and I thought they were going to wait.

Mr. Bares. They are waiting to see what money can be raised to meet the obligations of the 1948-49 fiscal year.

Mr. Lusk. Yes.

Mr. BATEs. They know the present sources unless they increase the real-estate tax substantially, will be inadequate to meet the 1948–49 requirement.

Therefore, they are waiting to see what we are going to do relative to the authorization of new sources.

That straightens everything out, does it not?
Mr. LUSK. I think I am straight on that; yes.

Mr. Bares. Mr. Lusk, do you have anything to offer this committee? We are making an honest effort to see what ought to be done. I have asked the Commissioners for the full schedule of the budgetary requirements over a period of the next 5 years, a full schedule of all the capital expenditures they would like to make, giving priorities to the projects, in the year they want to stop them, and try to gear the available revenues under the present laws to that program, having in mind of course a natural increase in valuations which increases revenue, along with these new sources to see whether or not any or all of them can be omitted.

I do not see how all of them can be omitted. We have to select some of them, no matter how modified the program of permanent construction may be.

It is only because of what the Commissioners tell us are the requirements for the next few years that they are coming in here and asking us for new sources of revenue that in themselves will raise $17,000,000 or $19,000,000 a year in excess of the revenues they are now raising

The question is whether or not the expenditures they are making under that kind of program in the opinion of people who are well informed in the District are justified and that is why I am asking you whether or not that program they have laid out over the next few years, in your opinion, is a justified program and wholly meets the needs of the District.

Mr. LUSK. It fully meets the needs of the District. It is a question again of, can we afford it?

Like every other city we are behind in things that we need.
Are you referring now to General Young's plan?

Mr. Bares. Everything-General Young's, Captain Whitehurst's, school buildings, school construction, water systems.

Mr. Lusk. General Young has everything in his program.

Mr. BATEs. But he has spread it over a period of years. He does not intend to do it all tomorrow. It is spread over a period of years.

Mr. LUSK. About 10 or 20 years.

Mr. BATES. I think he goes even beyond 20 years. I think it is practically a 50-year program so far as District developments are concerned.

Altogether you are facing here, Mr. Lusk, the same problem being faced in large cities of the country where they have so-called growing pains or are expanding the services, extending the city streets, renovating the highways, constructing underpasses, bridges, aqueducts, and every other type of improvement you can think of.

Instead of borrowing money here, you are trying to raise it by current revenues, trying to pay for it with revenues as you go along. but programing it over a period of years so that none of it will rest too heavily on the taxpayers of a particular year.

Mr. Lusk. If we are going to do it over a period of years, I think General Young's recommendations, in fact I am quite certain because I was chairman of his committee on the program, that perhaps the Government should lend us the money with no interest or at a very low rate of interest.

I am very much opposed to the District government borrowing any money.

Mr. BATEs. This is not contemplated at all, borrowing money except for water.

Mr. Lusk. It takes an act of Congress before we can borrow any money, which is very fortunate. But at the same time we are so far behind, we need these things right now, that perhaps borrowing is the only solution by which we can get them.

Otherwise, we will have a tremendous tax burden here for the next 10 years. People like myself will have to pay for it and our children will get it for nothing.

Mr. Bates. I think your children and mine will have their burden also. They will have them in their years the same as you and I have them today.

Mr. Lusk. Let me add, Mr. Chairman, as I say, I am going over the budget right now and I will have a considerable series of recommendations, but this afternoon I only came up here to talk about this sales tax.

Mr. Bates. You get that projected program that the Commissioners have prepared for me and that will give you a pretty complete story in brief set-up, in statistical form, showing what the program is, and you have to make up your mind. It is without any reading matter attached to it at all.

Figures, they say, do not lie, but you can use your own judgment as to that and determine in your own mind whether that kind of program that they have projected pretty well into the next 20 years is a program that is well justified by the needs of the District.

Mr. Lusk. Did you say you did not have to read anything?

I have that program and it is that high in my desk. I turned it over to my pastor to read.

Mr. BATES. I asked them to reduce it to figures for me.
Mr. Lusk. Thank you, Mr. Chairman.

Mr. BATES. We will now listen to Mrs. Gertrude Evans, executive secretary, Washington Industrial Union Council, CIO, Washington, D. C.

STATEMENT OF MRS. GERTRUDE EVANS, EXECUTIVE SECRETARY,

WASHINGTON INDUSTRIAL UNION COUNCIL, CIO, WASHINGTON, D. C.

Mrs. Evans. I am executive secretary of the Washington Industrial Union Council. I am replacing Mr. Fitz who is chairman of our special tax committee and is an expert.

I do not claim to be an expert on taxes, but I have a statement here from the Washington CIO Industrial Union Council.

The people of the District of Columbia have neither local selfgovernment nor representatives in Congress. We hope, therefore, that the members of this committee will regard themselves as the District's elected officials, responsive to the wishes of the majority of the people. We believe you will find that most residents are opposed to the tax program recommended by the District Commissioners.

The Washington Industrial Union Council, CIO, representing 30,000 organized workers in the District of Columbia, is opposed to the major part of the Commissioners' tax program, principally because it rests heavily on retail sales taxes—a general sales tax and a number of selective sales taxes. The use of these is particularly undesirable because, as we shall show, there are other, better sources of revenue which can and should be used. Of approximately 19 million dollars which the original program would produce in a full year, about 15.5 million dollars would come from sales taxes.

A general sales tax, as you know, is highly regressive. It hits heavily at the low-income families which spend all of their income. To such families the sales tax may mean less food or less clothing or less medical care. It has essentially the same effect as a wage cut.

The higher income families usually save a significant proportion of their incomes, and to them the sales tax means merely a reduction in savings. Their consumption standards are likely to remain unaffected by the tax.

Moreover, there is a technical reason why the lowest income groups are burdened most heavily by a sales tax. Many of their purchases are in small amounts, amounts less than $1, and the tax on such purchases is likely to be a good deal higher than the nominal rate of 2 percent.

I do not think I will read this. We have gone into the question of people with higher income going into Virginia. We have now the Maryland sales tax, we have also felt that a good many people that

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