Evening star., 1937-06-13

IN administration, omissions, deviations from
standard practice in Federal tax procedure and
confusion over Attempts to collect from for
elgn" corporations on the amount of business
done in the District.
One important question concerning the
income tax Is whether members of Congress
will leave themselve: subject to the tax, along
with other non president Federal employees as
provided in the bill now, or whether they will
attempt to exempt themselves and others from
the tax.
:. 1t is generally agreed that If they exempt
themselves and others, such as non-residents.
from the bill, the local income tax will be Of
little value as revenue producer and will be
marked in its inequitable discrimination against
other Federal employees who live in Washington.
Several changes already have been made
on this point in the bill. First, members of Con-
gress were specifically exempt from taxation,
then they were made subject to tax. The only
persons now exempt are the President and
members of the Federal judiciary.
But last week another word was slipped
into the billIJust the word legal" 1t was put
n tnt Of the words resident Of the
to restrict taxation to local legal residents"
Revenue Estimates Differ Widely.
But the bill retains, unchanged, another
provision which authorizes taxation Of NON
trict OF Columbia. This will enable the District
to tax members of Congress, and others, who
maintain legal residences elsewhere, on the
sfry re fGs services @ IN the
OF the District" That same provision Is con-
tanned in all local income tax laws
The income tax probably would raise far
more revenue than the latest estimates of the
House District Committee, bringing the total
revenue from the omnibus bill far above the
$6,0OO.000 or $7,5O0000 deficit.
Wide differences have appeared in esti-
mates of revenue: First, the original Collins
Dill was supposed to raise about $6000000,
eXempting members OF Congress, and others
elected or appointed to definite terms. 1t was
In fho YNrip0 ino1 oh tn u,ivi
the deficit Then the bill was changed to in
clude members of Congress, and others formerly
omitted, rates were kept the same, and the
estimate of return dropped to about 50 900 900.
But an independent and careful investiga-
tion of the matter, by outside experts, based
on Federal revenues from the District of CO.
income bill hiked the estimate up to about
s., 100000. This estimate is based on the latest
Federal returns available, the various classes
District of Columbia bill
Constitutes Double Taxation.
At the outset the local income tax consti-
tutes double taxation-by both the Federal Gov
ernment and the local government-on the
same source Of income. For years this prin-
cple of double taxation has been opposed by
tax authorities. The Federal Government per-
mits deduction of the amount Of income taxes
actually paid State, along with other taxes,
When the Federal income tax is being computed
The local income tax, however is not deducted
from the Federal tax due, but is only subtracted
from the gross income ON which Federal tax
The income tax bill attempts to set up
reciprocity provision which would prevent the
District, Tor instance, and the nearby States
OF Maryland and Virginia from piling one State
income tax on top of another without credit for
taxes paid. But in its reciprocal provisions the
District OF Columbia bill has omitted a vital pro-
@ vision A., which is included in both the Virginia
and the new Maryland income tax acts de-
signed to protect residents
The District bill contains complicated
reciprocal @ provision concerning "non-resi-
in Genus. applying 1or instance: to persons earn
ing their incomes in the District of Columbia
and residing in nearby Maryland or Virinia
But the District measure leaves out altogether
provision which would protect its own resi-
dents" from taxation by another State which
may not have such State income tax rec-
procity
The fact that the District bill attempts to
reach out far into both nearby Maryland and
Virginia to tax residents there on income
earned In Washington. Thus the reciprocal
provisions are of great Importance The nearby
states, OF course, cannot tax the income Of
Federal employees. But Virginia has been tax
Ing the incomes OF Virginia residents privately
employed in the District.
Intangible Tax Kept-in Case.
The constitutional question which arises
from several quarters rests on the theory that
Congress acting a local legislature for the
Dlstrlct OF Columbia cannot tax the salaries Of
Federal employees who are exempt from local
income taxes in the States Sufficient force was
given the argument to retain the Intangible tax
here in case the income tax should be held
unconstitutional
Serious objection was raised yesterday in
authorltatlve quarters to administrative diff
culties which will be faced by administrators of
the District of Columbia act, in the matter of
capital gain or loss. The bill provides that
such gain or loss must be figured on the basis
OF the fair market price or value on January
l, 1881" This means that whenever ANYTHING
is sold in the District, the seller must figure for
the purposes OF paying his District income tax
the fair market price or value on January l.
1887 in order to determine whether he made
gain or loss.
This very thing has given the Federal Gov-
ernment one of its biggest tax headaches. The
Federal capital gain tax was interpreted bv the
Supreme Court Of the United States to Ak the
date OF March l, 1913, from which to figure
gain or loss. Difficulties in estimating value as
OF that date have proved problem to the Fed
eral Government. Authorities predicted the
same thing will involve the District in highly
troublesome administrative problems.
Other administrative difficulties are be-
lieved to be raised by the bills attempt to COL
lect tax from all foreign corporations' on
the business they do here in the District of
Columbia. Complex procedure is set up to
attempt to collect this tax. Experience in the
States along this line proved great difficulties
inherent in such problem.
Bill Complicates Itself Again.
Furthermore in levying tax on part of
the income of outside corporations, the bill
complicates another of it's own provisions con-
cerning deductions which individuals may take