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DISTRICT OF COLUMBIA
SUBCOMMITTEE ON FISCAL AFFAIRS OF THE
H. R. 5647 and H. R. 6577
BILL TO PROVIDE REVENUE FOR THE DISTRICT
OF COLUMBIA AND FOR OTHER PURPOSES
MARCH 7, 9, 15, 21, AND 28, 1939
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1939
COMMITTEE ON THE DISTRICT OF COLUMBIA
JENNINGS RANDOLPH, West Virginia, Chairman AMBROSE J. KENNEDY, Maryland
EVERETT M. DIRKSEN, Illinois WILLIAM T. SCHULTE, Indiana
GEORGE J. BATES, Massachusetts JACK NICHOLS, Oklahoma
PAUL W. SHAFER, Michigan DAN R. McGEHEE, Mississippi
STEPHEN BOLLES, Wisconsin JOE B. BATES, Kentucky
ALBERT L. VREELAND, New Jersey WILLIAM D. BYRON, Maryland
JAMES SECCOMBE, Ohio PIUS L. SCHWERT, New York
HARRY SANDAGER, Rhode Island JOSEPH A. MCARDLE, Pennsylvania FRANK W. FRIES, Illinois HERMAN P. EBERHARTER, Pennsylvania RUDOLPH G. TENEROWICZ, Michigan WILLIAM R. POAGE, Texas JOHN F. HUNTER, Ohio
EVERETT M. DIRKSEN
DAN R. McGEHEE
LIBRARY OF CONGRESS
JUL 27 1939
DIVISION OF DOCUMENTS
TAXATION IN THE DISTRICT OF COLUMBIA
TUESDAY, MARCH 7, 1939
HOUSE OF REPRESENTATIVES,
Washington, D.C. The Subcommittee on Fiscal Affairs of the Committee on the District of Columbia met in the committee room, Old House Office Building, at 10 a. m., Hon. Jack Nichols (chairman of the subcommittee) presiding.
Mr. NICHOLS. The meeting will please come to order. We will first hear from Commissioner Hazen.
STATEMENT OF HON. MELVIN C. HAZEN, PRESIDENT OF THE
BOARD OF COMMISSIONERS OF THE DISTRICT OF COLUMBIA
Mr. HażEN. Mr. Chairman, and gentlemen of the committee: The Commissioners feel they should state to this committee their views respecting the proposed changes in the District's tax structure. This is the third time in as many years it has been necessary to come to Congress for legislation providing additional revenue for the District. In 1937 and 1938 Congress passed what we may term emergency or stopgap measures applying to the fiscal year 1938 and the current fiscal year of 1939.
The latest legislation will expire on June 30 next. With its expiration and on the basis of the District budget now pending in Congress it becomes necessary for further Congressional action providing more revenue for the fiscal year 1940 than can be raised under the District's normal tax structure.
To meet appropriation needs of the District for the present fiscal year Congress provided for additional taxes to be raised by increasing the tax rate on real estate and tangible personal property from $1.50 to $1.75, and by continuing the business privilege tax in modified form. These are estimated to amount to approximately $5,200,000. Even with this increase it is believed the District will end the fiscal year of 1939 with a slight revenue deficit of about $200,000. It should be borne in mind that the need for additional revenue in the past 2 years, and for next year and thereafter, has relation only to the District's general fund. Therefore, the special funds for highways and for the water service are not involved in the revenue proposals under consideration by this committee.
It should also be borne in mind that a revenue deficit confronts the District solely because of the expiration of existing legislation on June 30 next. In other words the District would have sufficient revenue to meet anticipated appropriation requirements in the fiscal year 1940 were it not for this fact.
The District budget for the next fiscal year as submitted to Congress by the Budget Bureau contains a total of $40,079,000 in appropriation items chargeable to the general fund. In addition to this there are appropriation items carried in other bills, for which revenue provisions must be made, estimated at $1,300,000. These two totals, together with the probably revenue deficit of $198,030 on June 30, 1939, would require the District to raise general fund revenue in the ensuing fiscal year in the total sum of $41,577,000.
Now how is it proposed to get this money? If we eliminate from consideration the 25-cent increase in the tax rate on real estate and tangible personal property, and the business-privilege tax, legislation authorizing which, as I have previously stated, expires at the end of the fiscal year we are now in, we are dependent upon what I may call the District's normal tax structure. This means the usual real estate and tangible personal property taxes with a tax rate of $1.50, the tax on intangibles, the tax on public utilities, banks, etc., together with a Federal payment of $5,000,000.
The general fund revenue to be raised from these several sources and on the above basis in the fiscal year 1940 is estimated to total $37,370,000. This amount deducted from the anticipated appropriations of $41,577,000 for next year shows the District will be confronted with a revenue shortage of $4,207,000. Bear in mind that there would be no deficit next year on the basis of the tax structure in effect in the current fiscal year of 1939, and that a deficit will exist solely because of the expiration of the legislation providing certain additional taxes. I wish to emphasize this statement to remove any impression that may exist that the probable deficit of $4,207,000 next year is over and above, and in addition to, the taxes imposed in the present fiscal year. This is not the case.
The tax program before this committee is the product of long extensive study. Mr. Stam, chief of staff of the Joint Committee on Internal Revenue Taxation, and Dr. Pond of Albany, N. Y., who was brought to Washington to be directly in charge of the tax study, were assisted by an advisory committee composed of five District officials and five citizens of this city. These several persons gave their best thought and judgment in evolving a fair and equitable tax program for the District and the Commissioners feel they have accomplished a good job.
It is not necessary at the moment and for the purposes of this general statement to go into a detailed discussion of the several tax features which make up the program as a whole. Such a discussion is left to Dr. Pond and probably one or more members of the advisory committee. The Commissioners do feel, however, that they should advise this committee that they give their approval to the tax program in its entirety.
The Commissioners believe that with the exception of the 2-percent retail sales tax, coupled with a nonsalary, nonwage personal net income tax, the new tax program is generally acceptable.
Mr. Nichols. You say "is generally acceptable.” Do you mean by that you approve of it partly?
Commissioner HAZEN. No; you see there was some opposition to those two features.
Mr. NICHOLS. Do you mean on the part of the Commissioners? Commissioner Hazen. No, Mr. Chairman; we approve of it in toto.
Concerning the combination proposal mentioned, they realize there is much local opposition to its approval by Congress. Apparently those voicing opposition to the retail sales tax favor a graduated personal income tax. However, the fact should not be overlooked that the combination proposal of a sales tax and a nonsalary, nonwage personal net income tax recommended by the tax experts and the advisory committee has a large measure of local support. While, as I have stated, the Commissioners have approved this combination proposal as a part of the entire tax program, they appreciate that it is up to Congress in the final analysis to decide what will be done.
The Commissioners hope that this committee will endeavor, in whatever legislation it may recommend, to provide a tax structure sufficiently adequate to meet revenue needs over a period of years, and obviate the necessity, as has been the case in the past 2 years, of depending on legislation covering only 1 year at a time. This situation, I am sure you will agree, does not conduce to the tranquility of this community. The tax program before you for consideration will, we believe, accomplish such a result.
It might be stated that the advisory committee held extended public hearings on the new tax program. Copies of the complete testimony given at these hearings have been delivered to this committee room and are available for the information of the members of this committee.
May the Commissioners be granted a few minutes to refer to a matter which in their opinion should receive most serious consideration in any tax program which you may decide to adopt for the District of Columbia? I refer to the amount of the annual Federal payment appropriated by Congress toward the expenses of the District.
It is hardly necessary for me to say to this committee that this has been a matter of serious disagreement for a great many years between Congress and this community. Recently Senator Overton of Louisiana introduced in the Senate a bill which prescribes a formula for determining the amount of the annual Federal payment. This formula, if adopted, the Commissioners, believe, would provide a fair and equitable method of settling once and for all this long drawnout and much vexed question. They earnestly urge this committee to include this formula as a part of the new tax program for the District of Columbia.
The Commissioners wish to insert in the record as a part of their statement, a table prepared by the auditor showing the actual general fund revenue for the two completed fiscal years of 1937 and 1938, and the estimated revenue for the fiscal years 1939 and 1940, with an attached note explanatory of the basis on which the revenue for the fiscal year 1940 is determined.