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(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-

$616 New Orleans --

602

.017

Sales-tax yield per dollar:
New York City (based on 2 percent).

0.016 New Orleans--Yield per dollar was figured on the basis of the retail sales per 1944 in re lationship 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.

$15, 042, 535 Based on New York's tax---

14, 157, 680

OTHER METHOD OF COMPUTATION

Based on the population estimate of 865,000 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.

$12, 332, 400 Based on New Orleans_

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.

I wish to submit for the record also a tabulation of items exempt from the sales tax in other States, which has been compiled from information on hand in our office.

(The tabulation referred to is as follows:)

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Mr. PRESS. I also submit a list and a map showing the States which have a tax on retail sales in effect in those States.

(The documents referred to are as follows:)

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STATES WHICH HAVE A TAX ON RETAIL SALES

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Rate percent

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States having a tas of 1 percent or more on retail business

Rate

percent Alabama

12 New Mexico.-Arkansas.

2 North Carolina. California

2. 5 North Dakota. Colorado

Ohio.. Illinois.

Oklahoma. Iowa.

2 South Dakota. Kansas

2 Tennessee Louisiana.

Utah.-Maryland.

2 Washington. Michigan. 3 West Virginia

2 Mississippi.

2 Wyoming--Missouri.-

2 * Except autos.

Mr. Press. We suggest that the committee give consideration to allowing a 2- or 3-percent discount to the merchants who collect this tax, in order to partially offset the cost of collection. Such a discount is allowed in some States, and we believe that it is a fair proposal inasmuch as it is a matter of considerable expense for the merchant to handle sales-tax collections and make returns to the District of Columbia.

Opponents of the sales tax use as their principal argument the fact that the sales tax is regressive. For the information of the committee, therefore, we have estimated the amount of the tax which would be paid by families in nine income groups, ranging from the $1,000 to the $15,000 level. In making these computations we have assumed that the law would exclude from the tax public-utility bills, cigarettes, newspapers, periodicals, medicines, food for home consumption, and restaurant checks up to $1.

Tables for the various income groups are submitted herewith for the record.

(The documents referred to are as follows:)

ESTIMATION OF SALES TAX BY INCOME GROUP

We have examined all available material in an effort to determine how the various income groups spend their money. Since there have been no recent studies on consumer expenditures for the District of Columbia and since such figures, if they were available, would not reflect a normal distribution of family expenditures due to wartime conditions, it was deemed wise to accept the 1941 figures on consumer expenditures developed by the Bureau of Labor Statistics as more nearly approaching normal. For purposes of this study, the average for urban families was used for it more nearly approaches the conditions which exist in Washington, the median living expense in urban families being 14 percent higher than the national level, while Washington's per capita income for 1945 was actually 18 percent higher than the national level. With these percentage break-downs as a base and by application of the practical rule of reason, the following tables were developed showing that for families and single consumers the tax would start at 0.43 percent for the $500–$1,000 income group and progress in steady steps to 0.59 percent of income in the $12,500-$15,000 group.

TAXABLE ITEMS

In computing the amount of tax to be paid in the various income groups it was assumed that all sales of tangible personal property to consumers, including alcoholic beverages, would be taxable but that personal services, admission fees. public utilities, cigarettes, newspapers and periodicals, and medical care would

be exempt. Food purchased for home consumption was not considered taxable, but restaurant checks of $1 or more were considered taxed. Up to $5,000 income group the taxes were based solely on the Bureau of Labor Statistics distribution, however, due to the inadequacy of the sample for incomes over $5,000 as expense distribution was developed based on their estimate of 62 percent of income for family living expense. (See table 7 B. L. S. Spending and Saving.)

Percentage of family living expenses to net money income

Net money income class

Percent family living expense

$500 to $1,000
$1,000 to $1,500
$1,500 to $2,000.
$2,000 to $3,000
$3,000 to $5,000.
$5,000 and over.

101.5 96.5 94.2 92.4 82. 3 61.6

Source: Bull. No. 723, Spending and Saving of the Nation's Families, BLS.

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Total..

2, 264

589.83

12. 35

Sorrior not taxabler
wa HL Sendung und Saving, 1941, table &

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