Evening star., 1932-06-05
The D. C.. Income Tax Bill
Hearings Scheduled for Tuesday of Protests From
the District and Neighboring States-Featres of
Proposed Substitute for Intangible Tax Discussed.

ton to the taxes they may have to pay
in the States In which they reside.
Further reference will be made to this
problem later.
Computing Net Income.
(2) The bill defines the method of
arriving at net income First, it de-
fines gross income Then 1t defines
the deductions to be made from gross
income by individuals and corporations,
respectively, in order to arrive at net
income.
Gross income, as defined in the bill,
includes gains. profits and income de-
rived from business, including gains
or profits or income derived through
estates by their beneficiaries, gain
profits or income received as compen-
sation for services, as interest. rent.
commissions, brokerage or other fees
Where a business is conducted partly
in the District and partly elsewhere
the proportion of the business done in
the District Is to be established by the
assessor and proportionate share Of
the total gross income used In arriv-
ing at the tax.
Deductions to be made from the gross
incomes Of individuals In order to ar
| rive at net income include all interest
paid on Indebtedness, all taxes paid ex-
cept United States income tax, District
income tax and inheritance taxes and
taxes paid for the improvement of
property; all expenses of conducting
business. profession or occupation; losses
incurred; worthless debts charged off !;
an allowance for wear and tear on
business property; contributions to
charitable organizations; dividends re-
ceived from corporations taxed under
this bill and dividends received from
corporations required by law to pay q
gross earnings tax.
Under this bill no deduction Is al
lowed for interest paid on the purchase
price of a private home. as allowed in
the Federal income tax law and in the
income tax laws of most States. The
bureau report suggests that interest
paid on private homes be deductible,
Just as it Is on business buildings
under the terms of the bill.
Corporations are not allowed to de-
duct interest on indebtedness. but may
deduct the salaries of their officers and
employees.
The bureau report suggests also that
the bill carry list Of items which may
not be deducted, as a help to the tax
payer AL dP AAAo AAASOAAAS be@-N
return. The items suggested by the
bureau are: % Personal, living or
family expenses: (2) any amount paid
out for new buildings or for permanent
improvements or betterments, made to
increase the value of any property or
estate: (3l any amount expended In
restoring property for which an allow
ance is or has been made; a. pre-
miums paid on any life insurance policy
covering the life of any officer or any
employe of any individual financially
interested in any trade or business,
when the taxpayer Is directly or indi-
rectly beneficiary under such policy.
After arriving at net income, there
are still sums, classed as exemptions"
which may be deducted from the result
before estimating the amount on which
the tax is payable. These are: Divi-
dends from national and mutual saw
ings banks, United States pensions,
moneys received as inheritanceS during
the year and death benefit insurance.
Pensions Not Exempt.
It is to be noted that there is no
exemption allowed for pensions received
from the District of Columbia, such as
those available to teachers, flremen and
policemen.
There are exemptions for the in
comes Of single persons earning 1000
a year or less and for married couples
with single income making joint re-
turns, where the income is $500 or
less. Where both husband and wife
have incomes, even on a joint return,
the exemption for each Is only $1,000.
The S2,500 exemption applies only
where there IS a single income between
them Additional exemptions Of $500
per annum for each child or other de-
pendent are allowed The bureau sug-
gests that the s2,500 exemption for a
married person with $500 for each de-
pendent) be extended to single persons
who are the heads of dependent fam
lilies.
90 After arriving at the net income
and making the suitable deductions, as
outlined above, the tax Is calculated as
follows:
One per cent Of net income up to
$4,000.
One and a half per cent of the
amount between $4,000 and $4,000.
Two per cent of the amount between
SIS, 900 and $4,000
Two and half per cent OF the
amount between $4,000 and $4,000.
Three per cent of the amount between
$4,000 and $4,000.
Three and a half per cent Of the
amount between $4,000 and 100000.
Four per cent of the amount between
$50 1000 and s50,000.
Five per cent of the amounts over
$50,0O0
The bureau suggests different
schedule. 1t is as follows:
Under 10000 per cent.
$4,000 to s25, ,000-2 per cent.
S25,000 to $50,000-3 per cent.
Over $50,0004 per cent.
Variance in Rates.
The bureau bases its recommended
ton on comparable income tax rates
in the States, and on the prospect
of greatly increased Federal income
taxation, which must be borne by the
Dist let taxpayers. The comparison
with the States shows that while the
rates proposed in the bill are lower
for low incomes, they are higher for
| high incomes. The bureaus analysis
of the average rates in the States, COM
pared with those in the District,
follows:
Proposed Average
District Rates (T)
Income to sSsfs 20 ooo Rates 90 81 in ssatss os
1000 to 5000 $50 3.27
5000 to 10000 200 3.51
10000 to $4,000 $50 358
$4,000 to 10000 800 1853
| 10000 to 10000 $50 1868
10000 to $4,000 400 1868
|