this tax would be against the expressed will of the people of the District. During the period of the depression many States adopted a sales tax in order to prevent complete bankruptcy. A preponderant majority of those States did not have an income tax. Many of these States have since exchanged their sales tax for an income tax. The State of Maryland has in the last few days adopted a sales tax. The constitution of Maryland prohibits progressive income taxes. In the District we do have a progressive income tax. From the standpoint of justice and sound economy the income tax is the best source of revenue.

In the opinion of the Washington Central Labor Union there are sources of revenue other than the sales tax which would not only be preferable in every way, but also would produce the required level of

revenue.

The first of these is the Federal contribution. In the fiscal years 1925 to 1930, the Federal contribution was $9,000,000 per year, and amounted to 26.1 percent of the general fund.

In the current year the Federal contribution is $8,000,000, and amounts to 11.5 percent of the general fund. As the amount of Government property and Government functions have increased greatly since 1930, it should follow that the Federal Government's contribution should bear a proportionate increase. The portion of the water supply being used by the Federal Government without charge is a great burden on the District.

Foreign governments have increased their tax-exempt holdings in the District. The cost of providing school facilities without tuition for children from neighboring States without charge is another expense borne by this small area of the District of Columbia as a concomitant of being the seat of government.

A fixed formula similar to that embodied in S. 215, should be passed by the Eightieth Congress. If enacted, it will mean a payment of $12,100,000 in 1948, or an increase in payment of $4,100,000. Considering the services rendered, we believe the formula should be so designed that the total contribution for 1948 should total a minimum of $14,000,000.

The income tax is the second most important source of revenue your committee should consider.

The present law suffers from poor enforcement. Although only 85,000 District returns were filed last year, over 125,000 Federal returns were filed in 1939, when the Federal exemptions were the same as the present District law.

With present advances in income and growth in population, the number of returns should be above 160,000.

All employees in the District, including the Federal Government, should be required to file with the District Government a copy of their pay rolls on a quarterly, semiannual or annual basis. Such a procedure would make the job of apprehending the chiselers much simpler.

The District Board of Commissioners is to be congratulated on its espousal of a change in the residence requirements for income-tax purposes.

The tricky concept of domicile as presently interpreted is grossly unjust to the other taxpayers of the District. If those who are domiciled here on the last day of the taxable year and those who main

tain a place of abode in the District for more than 7 months of the taxable year, whether domiciled here or not, are required to pay District of Columbia income taxes, there will be a great increase in revenues from this source.

As to the income taxes proposed by the Commissioners, we believe that the exemptions are too low, and the graduations in the higher brackets not sufficient to obtain an adequate return for the District from this source.

We would propose an exemption for a married couple of $3,000 with $600 for each dependent.

We recommend for your consideration the following schedule:

Taxable income of the first $1,500, a tax rate of 12 percent; for $1,500 to $4,500, 2 percent; for $4,500 to $10,000 taxable income, levy 22 percent; for people earning $10,000 and over taxable income, 3 percent.

These increases would make the District of Columbia income tax more nearly equal to the Virginia tax. With a change to residence basis, an increase in rate, and of great importance, a thorough collection of the District of Columbia income tax, estimates as to yield should be revised upward from the stated $7,050,000 of Budget Officer Fowler. In examining other sources of revenue it should be noted relative to the property tax that there has not been a reassessment survey of all taxable properties since 1936. Entire neighborhoods have sprung up in various sections of the city. Movements of business to different sections of the city and various other phenomena have caused radical changes in the time value of property. Much needed revenue is going uncollected for lack. of a current reassessment.

The Washington Central Labor Union is opposed to excise taxes in any form. The National Tax Committee of the American Federation of Labor has characterized such taxes as nuisance taxes. They are simply variations of the sales tax.

Thousands of members of the unions affiliated with the Central Labor Union are employed in industries whose continued prosperity may be seriously threatened by the imposition of tax increases on beer, wine, liquor, cigarettes, and amusements. Musicians, bartenders, waiters and waitresses, truck drivers, cooks, and many other workers. believe their jobs will be jeopardized.

If a greater Federal contribution is not forthcoming, and if the increased income taxes on a residence basis with a more thorough system of collections, plus the increased revenues that should be forthcoming from a reassessment of property should prove inadequate to meet the need, then we suggest that the Congress increase the tax rate on income-producing property in the District.

We propose this tax only as a last resort, but believe that it is infinitely preferable to a sales tax in any form, including the very regressive sales tax on public-utility bills.

Historically the lottery has had considerable use as a method for raising revenue. In the Washington Central Labor Union there has been a great deal of discussion about its applicability to the District fiscal problem.

We mention it for consideration by your committee, but at the present time do not endorse it.

Senator CAIN. Thank you. It is a very full statement.

I have just one question. You mentioned at the outset that you were anxious to have the District, as I understood it, spend more money for health and educational facilities and requirements. What do you have in mind about that?

Mr. TURNER. We have not any specific amounts, merely that there have been complaints that have come from all over the city about the fact that those particular fields of education, health, and public welfare have been cut to the bare minimum, and there is a feeling that perhaps some of the money in the highway fund instead of being allocated

Senator CAIN. You should look to the general fund.

Mr. TURNER. That would not increase the budget, but we have made our criticism on the collection of taxes at the present time. We feel that more money should be allocated to the collection of taxes, and the employers should make a quarterly or semiannual report to the District government as to the incomes of their employees in order that there may be a better check of people who are not paying that. Senator CAIN. I wonder if either on or off the record you would care to say anything further about the lottery. It would be quite all right with me, for example, if you cared to make any statements off the record.

Mr. TURNER. Off the record.

Senator CAIN. You brought up an interesting subject, but

you have not done anything with it, and we would like to know if you have any thinking behind the suggestion.

Mr. TURNER. I would like to tell you off the record.

Senator CAIN. Mr. Turner, Mr. Bates would like to ask you a question.

Mr. BATES. Mr. Turner, have you any suggestions to the committee as to any possible criticism that there is of the administration of the District government, other than the one criticism you had here about the efficiency of the tax-collection system.

Mr. TURNER. Yes; I had that criticism. I feel they should have more funds in that particular part of the function of government. I know it is the fault of the people who are administering the taxcollection procedure, but it may be the fault of not having enough money, and I have also said in regard to the matter of reassessment, I think that 11 years is too long to go in a city where you have had a dynamic change.

Mr. BATES. Well, of course, all through the war period when we had an inflated situation, that was not really the time to start a revaluation of any community, but, of course, you are familiar with the fact that the assessors this year have revalued the whole community and, as a result, I think, have added about $180,000,000 to the value of the properties here.

Mr. TURNER. Twenty-percent increase, which we favor very much. Mr. BATES. I do not know whether it is a flat 20 percent, but in some instances it is. I think that applies probably to residential property.

Mr. TURNER. Yes, sir.

Mr. BATES. But I think the new values will bring in about $180,000,000 of increased taxable valuations.

Mr. TURNER. Yes, sir.

Mr. BATES. And I do not know what that revenue will mean. But have you any criticism of the efficiency of the department other than that?

Mr. TURNER. No, sir.

Mr. BATES. I think it might be a good suggestion that both the testimony of Mr. Turner and Mr. Keller be made part of the testimony of the day following the hearings, of the tax bills, so that we will have a sequence of opinion.

Senator CAIN. Yes.

Mr. TURNER. Thank you.

Mr. BATES. Now, the next witness on this list this morning is Mrs. Gertrude Parks, of the Federation of Women's Clubs. Is Mrs. Parks here this morning?

Mrs. WRIGHT. She was to appear with me, and unfortunately she thought that she was to be informed; she is on her way here and if you would not mind

Mr. BATES. Then, Mrs. Wright, we will hear from you.

Mrs. WRIGHT. Would you rather hear from Mr. Press, and let me wait until she comes?

Mr. BATES. Very well.

Mrs. WRIGHT. Thank you.

Mr. BATES. All right, we will hear from Mr. Press, of the Washington Board of Trade.

STATEMENT OF WILLIAM H. PRESS, EXECUTIVE SECRETARY, WASHINGTON BOARD OF TRADE, WASHINGTON, D. C.

Mr. PRESS. I am William H. Press, and I am executive secretary of the Washington Board of Trade.

Mr. Bates, I have a very brief statement, and I understand you are trying to get through with these hearings.

Mr. BATES. If you have anything to add of any real substance, we will make it a lengthy statement.

Mr. PRESS. Last Tuesday, April 8, 1947, General McCoach, chairman of the board of trade's municipal finance committee, presented our over-all views to this committee. He submitted details of the program which the board of trade recommends for raising the revenue which we believe is required. An alternate proposal made by General McCoach recommended passage of a sales tax in the event that our primary program was impossible of accomplishment. We desire to submit very brief comments respecting the sales tax.

In our judgment, a 2 percent sales tax in the District of Columbia would yield $12,000,000 to $15,000,000 a year, rather than the $9,000,000 estimated by the Commissioners.

This estimate of yield is based on the experience in New York and New Orleans, the only comparable jurisdictions in the United States. A statement explaining our method of arriving at this figure is submitted now for the record.

Mr. BATES. Very well.

(The statement referred to is as follows:)

ESTIMATION OF SALES-TAX YIELD FOR THE DISTRICT OF COLUMBIA

In order to make an adequate estimation of the yield to be expected, it was necessary to draw on the experience of fairly comparable cities. Accordingly, sales-tax yields for the year 1944 were taken from Where Cities Get Their Money

99538-47-51

(Municipal Finance Officers Association). New York City, with a tax of 1 percent, collected $36,963,989 in 1944 and New Orleans $5,357,000. Although these cities vary widely in population from the District of Columbia, their per capita retail sales is estimated to be much lower; yet, it is interesting to note that the yield of the sales tax per dollar in both cities is very close.

Per capita retail sales, 1944:

New York City-.

New Orleans_.

Sales-tax yield per dollar:

New York City (based on 2 percent).
New Orleans__

$646 602

0.016

.017

Yield per dollar was figured on the basis of the retail sales per 1944 in relationship to the sales-tax yield for the same year. Based on these two yields and sales management's estimate of retail sales for the District of Columbia, the estimated sales tax for Washington was estimated to be:

Based on New Orlean's tax.

Based on New York's tax

$15, 042, 535 14, 157, 680

OTHER METHOD OF COMPUTATION

Based on the population estimate of 860,000 for the District of Columbia and by applying a ratio of per capita retail sales to per capita sales tax for both New York and New Orleans, a lower estimate of yield was obtained, as follows:

Based on New York.
Based on New Orleans_.

$12, 332, 400 15, 265, 000

It should be borne in mind that although the New York City yield more closely approximates the probable yield in the District of Columbia, it cannot be considered entirely comparable. The New York tax exempts interstate commerce. However, it has been contended by various legal authorities that Congress, by enacting the District of Columbia sales tax, has the rightful power to tax property purchased in interstate commerce. This would, of course, make the yield in the District of Columbia considerably higher than the estimates.

New York City exemptions: (1) Food; (2) eyeg asses; (3) cigarettes, (4) fuel supplies, ships' equipment, ships' stores; (5) newspapers and periodicals; (6) sales to New York City or semiprivate institutions; (7) sales exempt by State or Federal institutions; (8) automobiles to veterans, material used in converting property into emergency shelter.

New Orleans exemptions: (1) Livestock, poultry, and other farm products direct from the producers; (2) used articles taken in trade; (3) utilities; (4) newspapers; (5) fertilizer and farm products.

Mr. PRESS. This estimate of a $12,000,000 to $15,000,000 yield is predicated on the assumption that the sales tax, if enacted in the District of Columbia, will not be overly burdened with exemptions. Experience in other jurisdictions has indicated that evasion and avoidance of the sales tax is made easier as exemptions are multiplied.

The board of trade is in general agreement with the proposal to exempt food for home consumption and medicines. We believe, however, that the proposed exemption of meals in restaurants up to $1.50 is too high, and that if meals are to be exempted, the maximum should be $1, the figure currently being used in New York.

The board of trade believes that public-utility bills should be exempt. It is suggested also that sales exempt from the act be those not over 15 cents. The bill provides that the Commissioners may exempt sales of 50 cents or less. Various District officials have been discussing the exemption of sales of 25 cents or less. We think that figure should be reduced to 15 cents, and suggest that to the committee, if it does specify the brackets for payment of the tax in the bill, start at a figure no higher than that.