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

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

$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.

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

Estimated sales tax by income group

Percent

family

living

expense

101.5

96.5

94.2

92.4

82.3

61.6

Expenditures of $5,000 to $7,500 income group1 (based on $6,250)

1 Based on 62 percent of income for living expenses, see p. 16, Spending and Saving.

Mr. PRESS. They show, for example, that a family in the $1,500 to $2,000 income group would pay approximately $8.11 in sales taxes per year, or 0.47 percent of income, and that the amount of tax and the percentage of tax to income increases slightly as the income groups become higher. The $10,000 to $12,500 family, we calculated, would pay $64.68 a year in tax, or 0.57 percent.

Mr. BATES. Your organization, of course, is opposed to a sales tax, except as a last resort.

Mr. PRESS. Yes, sir, we favor another program. We feel that we will not get this, and we want to make a few comments respecting it. This last exhibit is a summary there, and tables for the various income groups are submitted therewith.

Mr. Chairman, I merely want to put those tables and that information in the record for the consideration of the committee.

Mr. BATES. Now, Mr. Press, again let me ask the same question I did of General McCoach the other day, representing the finance committee, municipal finance committee, of the board of trade, if you have very carefully examined this program of public works, of municipal expenditures, upon which this new source of revenue is required, and whether or not in your opinion the program is well justified or whether