Evening star., 1932-05-24

would increase local taxation by $2,741.-
600. Whatever plan. may be adopted as
to those bills, the bureau points out
that they contemplate substantial in
creases in taxation in the District, land
their consideration requires care to see
that the burden is distributed equitably
among the several classes"
Divided in Two Groups.
The corporations now taxed on gross
earnings or receipts, and therefore ex-
empted from the House income tax bill,
are classified by the Efficiency Bureau
into two groups-financial institutions
and public utilities. Taking up the
financial institutions, the Efhciency Bu-
reau expresses the following view:
National banks and trust companies
pay relatively high tax-6 per cent on
their gross earnings-compared with the
average in the States. Statistics on
bank expenses compiled by H. N. Stronck
& Co., bank consultants, show that for
the 10-year period 1921 to 1880 the
total taxes paid by all banks in the
District OF Columbia were 8.87 per cent
Of their gross earnings, against $50 per
cent TO rthe entire United States. Last
year the Federal Reserve Bank of
Richmond reported that member banks
of the fifth Federal Reserve district
paid in taxes Of all kinds about SIS go
on every 500 gross income, whereas in
the District in some cases bank taxes
exceeded $l2. A survey of the income
tax laws made by the Committee on
Taxation Of the American Bankers
Association, published in September
1881, shows that of 20 States having
corporation income taxes ten tax all
banks, three tax only State banks and
seven exempt all banks.
incorporated savings banks pay a
tax Of per cent on gross earnings
after deducting interest on deposits
Their working capital is made up largely
of savings accounts, on which interest
at 3 per cent is paid. Were not the
deduction for interest allowed, the tax
would be burdenSome and in some cases
prohibitive. Owing to the narrow mar
gin of profit, any increase in the tax
would ultimately lead to the reduction
of interest paid to depositors or would
weaken the banks resources, either re-
suit being undesirable.
Bad Results Feared.
Some Of the banks less favorably
situated might be forced out of bust
ness. Although the tax paid by saw
ings banks is not as high as that on
national banks and trust companies,
nevertheless 1t averages about 7 per
cent Of their gross earnings figure
higher than the average tax paid by all
banks in the country. The majority of
states having income taxes exempt saw
ings banks.
The total taxes paid by banks in
the District of Columbia for the fiscal
year 1881, exclusive of real estate taxes,
amounted to S859922l4.
Building and loan associations have
commonly come TO be regarded as pub
lie benefactors. Primarily their pur-
I pose is to aid persons who otherwise
! would be unable to purchase homes.
They also furnish a means for GepoSi-
tors Of small amounts to earn fair
interest return on secured investments
| Where rate of S per cent is paid on
deposits and 6 per cent charged as in
terest on loans. but per cent remains
for margin on which business is done.
Accordingly. per cent tax on mort
gage interest received, without the privi-
! lege of deducting interest paid, amounts
to II per cent of the net interest
earned. The policy Of the Federal Gov
ernment and most OF the States is to
exempt this class of establishments
from income taxes if substantially all
the business is confined to making loans
to members. Taxes in the District. ex-
elusive of real property taxes. assessed
against building and loan associations
for 1891 amounted to S79 26406.