not get Bishop McConnell, president of the organization, who lives in New York City, to come here and speak on a bill concerning the District of Columbia.

I am not in favor of taxing the people of America for the sole benefit of land speculators within the District of Columbia. I believe I voice the sentiment of all good Americans in what I shall say about this matter.

Of the total revenues of the District of Columbia in 1938-$45,307,492-only $8,407,367, representing real-estate tax on land values, or less than one-fifth of the total was derived from a tax based directly on benefits received or ability to pay.

For the benefit of the Democrats who have not read their platform of 1932, I want to remind you that that platform calls for a

Mr. NICHOLS. It will not be necessary that you get into any national or partisan discussion in consideration of this bill. You can probably help the committee, because we are much interested in hearing your views as to this particular matter, if you will confine your remarks to the bill only. We are not interested in your philosophy concerning national affairs.

Mr. MARSH. It does not seem that the Democratic Party means to apply its principles as enunciated in its own platform to the government of the District of Columbia.

Mr. NICHOLS. I am speaking as chairman of this subcommittee and not for the Democratic Party. The members of this subcommittee are interested in this proposed tax bill and not in your philosophy of Federal Government.

Mr. MARSH. This proposed tax bill violates the principle that a tax should be based directly on benefits received or ability to pay.

The remainder of the $45,307,462, or $36,900,000, was largely obtained, exclusive of the Federal Government appropriation, by taxes which curtail industry, employment, and consumption, which the administration and the Congress both say they want to increase. They have called for "appeasement," as in a speech delivered by Mr. Hopkins very recently.

The untaxed selling price or value of taxable land in the District is $480,420,638, from which, if properly used, owners would have derived an income of 4 percent, or about $19,210,000. They figure 5 percent. That was the untaxed selling price of the land. You exempt land from taxation in the amount of its assessed value.

Real-estate taxes on buildings were $12,090,925. While in most large cities the value of improvements is only about equal to the value of the land, here in the District of Columbia the assessed value of improvements was $691,000,000 compared with $481,000,000 assessed value of land.

In other words, what you are doing here in the District of Columbia under your uniform tax system is making the fellow with a little home, who has put some improvements upon his home, on owners of office buildings, pay more taxes than the other fellow, who keeps his land. idle.

I need not tell you that idle land never employed a single person. On the other hand, one who improves his property is doing a useful service.

All consumption taxes hurt legitimate business, keep up rents, and soak little home owners for the benefit of the owners of valuable land in the center of the city.

2. For practical purposes, it is necessary to view the District as a State. Regarded in this light, it follows that the limitations placed upon State taxing powers should apply. This includes restriction of taxation on Federal salaries.

In this connection, it is not enough to point to Federal taxation of District salaries as sustaining the reverse situation. The Supreme Court has never held the Federal taxation of District employees to be constitutional, but even if it were sustained another decision would be required to validate District taxation of Federal salaries to settle the issue, because of the general tendency of the Supreme Court to favor the Federal Government in questions of the taxation of the instru mentalities of the State as against the taxation of Federal agencies by the States. This is due to the fact that the Federal Government is viewed as being supreme within the sphere of its delegated powers.

3. The largest industry in a taxing jurisdiction is usually the largest taxpayer. In the District, the only certain way of reaching the Federal Government is by the manifestly indirect method of retail-sales taxation.

4. Strenuous efforts have been made to enact a graduated income tax on the one hand, and a retail-sales tax on the other. The present plan, by attempting to weld the two into a single tax which will approximate in effect the graduated income tax on all incomes, should bring these two contending forces together. A conventional type income tax plus a retail sales tax would work an undue hardship on low-salaried individuals. Such is not the case under the proposed plan. 5. Recent Bureau of Labor Statistics' figures show that three-quarters of the total family expenditures in the lowest income groups goes for food and housing combined. On the basis of these figures, it has been estimated that a $1,000 income would pay less than $5 in retail sales taxes, spread over an entire year. People with earned income over $14,000 or investment income over $500 will pay both the sales tax and the personal income tax, the combination resulting in effective progressive taxation.

6 The combined personal income-retail sales tax will have a broad base. Civic responsibility and tax consciousness go hand in hand. Only under such a situation will there be sufficient popular interest in taxation.

7. If the Federal Government should permit the States to tax Federal salaries, those Federal employees who live in the District, but maintain a legal residence in the States to take advantage of the apportionment provision of the civil-service law or to vote, would have to be allowed a credit for State income taxes which would curtail District tax revenue from this source. No Federal employee would be expected to relinquish his voting privilege for the sake of paying a District income tax.

8. For those who spend their entire income, the sales tax equalizes the differential resulting under the income tax which reaches both savings and the income from them.

9. There are no large industrial establishments in the District and local wealth is extremely mobile, a fact which precludes the adoption of an income tax with rates so high as to discourage capital remaining in the District. Although the 7-percent maximum rate in the recommended law is above the mode of 5 percent for the States, the exclusion of salaries under $14,000 and of investment income under $500 must be taken into consideration. The proposed taxation of individual incomes will not discourage residence in the District.

10. Maryland voters have recently rejected a graduated income tax of the conventional type and there is no assurance that the people of the District would not do likewise.

11. Even the Federal Government is forced to rely on its excise or selective sales taxes in order to balance the extremely fluctuating yield of the income tax which suffers in times of depression from the deduction of losses. Because of its relative stability, the sales-tax portion of the dual tax commends itself.

12. It is estimated that around 3,000,000 visitors annually spend about $38,000,000 in the District of Columbia. They are responsible for some of the costs of government and would contribute through the retail sales tax.

13. District residents are notable for their mobility and probably exceed residents of all other tax jurisdictions in this respect. It is much easier to collect taxes from such people under the sales tax than any other form.

14. An income tax on all salaries except Federal salaries would be grossly unfair. nstead, a sales tax will reach all according to their expenditures without discrimin

ation as to the sources of their income. The transient, the lobbyist, the rootless resident, and the seasonal sojourner, all these will contribute something toward maintaining the costly, ornamental features of the District, for which they are in part responsible.

15. There are a few incomes of Federal employees in the District which exceed $14,000. This will permit a test of the constitutionality of a District tax on Federal salaries without jeopardizing District revenues.

Mr. MORGAN. How many inhabitants, male inhabitants, have we above the age of 20 who are living in the District who pay what we call a "poll tax"?

Mr. NICHOLS. We do not provide for any poll tax. There is none paid and you would not have a poll tax here as we do not vote. Mr. BATES. That is no requisite to vote in my State. Mr. NICHOLS. It is in Virginia.

Dr. POND. I think that is all at this time, Mr. Chairman, without review of reasons for proposing the personal income-retail sales tax. Mr. NICHOLS. I think that is sufficient at this time, and if there are no other questions we will stand adjourned until 10 o'clock tomorrow morning.

It is estimated that the 2 percent retail sales tax will yield $5,500,000. Mr. BATES. And what would be the cost of collection?

Dr. POND. It will be higher probably at first because it must get in operation. I have not estimated that so that I cannot tell you.

Mr. BATES. What has been your experience in New York? Does it mean another swarm of tax collectors, or can it be done for a relatively low cost?

Dr. POND. It was our thought that you had the business privilege staff already set up and that could be carried over into this work.

Mr. NICHOLS. We will adjourn until 10 o'clock Thursday morning, and it is understood we will conduct hearings the entire day.

(Thereupon, at 12 o'clock, noon, the hearing adjourned to meet Thursday, May 9, 1939, at 10 a. m.)

TAXATION IN THE DISTRICT OF COLUMBIA

THURSDAY, MARCH 9, 1939

HOUSE OF REPRESENTATIVES,

COMMITTEE ON THE DISTRICT OF COLUMBIA,

Washington, D. C.

The subcommittee this day met at 10:25 a. m., Hon. Jack Nichols, presiding, for further consideration of a bill to provide revenue for the District of Columbia.

STATEMENT OF JO. V. MORGAN-Resumed

Mr. NICHOLS. The committee will please come to order.

By reason of the fact there have been some administrative changes made as between the report prepared and filed, representing the views of the citizens' committee, which held hearings and went into this matter quite thoroughly during the summer, and the committee print of the bill, presented to the committee as a form, I think that before we start taking testimony of other witnesses this morning it would be well to have Mr. Morgan point out as best he can any of the changes that were made between the report and the committee print of the bill.

Will you please proceed, Mr. Morgan?

Mr. MORGAN. The first change is in section 1 of the committee report.

Mr. NICHOLS. The committee print?

Mr. MORGAN. The citizens' committee report. I will call the citizens' committee report the report and the bill before us the print.

As I have said, the first change is in section 1 of the committee's report.

Mr. NICHOLS. At what page will we find that?

Mr. MORGAN. At page 127 of the citizens' committee report.

In the report the first taxable year is 1939. The return in the latter part of the report is provided to be made on March 15, 1940, and the tax to be paid March 15, 1940. I have two changes to suggest in that regard.

The reason the whole tax would have to be paid in the spring of 1940, if the first taxable year were 1939, is because we need that money in the taxable fiscal year ending June 30, 1940.

It was suggested that because some or many corporations who are nonresidents have to report somewhat differently for the District of Columbia than they would in connection with their other business, and so many person would have to do the same, that the report should be delayed until April 15, 1940, and the tax paid on that day.

That would bring the money within the fiscal year if we got it all in the spring of 1940, which is doubtful.