Evening star., 1939-01-17

LevIeS on SulurieS.
SoIes Linked
Under Plan
A condensed version of the Dis
trict of Columbia tax study, as made
by the experts employed by the
Joint Congressional Committee on
Internal Revenue Taxation, follows
SUMMARY.
This study of the District of Co.
1umbia tax structure has been un-
dertaken in order to frame recon-
mendations for such changes as may
be necessary to provide an adequate
and equitable tax system. Although
1t is without parallel among political
units in the United States, the Dis
trict of Columbia is more like a
State than any other type of gov
ernment. The comparison of the
tax burden in the District with its
equivalent in IL States and their
constituent subdivisions has fur
nished means for appraising Dis
trict taxes.
The results Of the comparison
show that the District of Columbia
relies too heavily upon the general
property tax and gives almost no
consideration to the ability theory
Of taxation. In order properly to
remedy this situation, the business
privilege tax should be allowed to
expire on June 30, 1899, and the
tax on Intangible personal property
should be eliminated. Recognition
of the ability theory and adequate
taxation of public utilities require
some form of income taxation. 1t
is, therefore, proposed to tax corpo-
rations and individuals on their net
income. In view of the doubtful
constitutionality of District tax on
Federal salaries, an exemption for
earned income to the extent of $14,-
900 has been provided, since it would
be grossly unfair to exempt only
Federal salaries from the income
tax. There are a few Federal sal
aries in excess of $4,000, fact
which will permit testing the con-
stitutionality of the proposed income
tax without disrupting the entire
revenue structure. In order to meet
the increasing demands of the Dis
trict budget between now and 1947,
and because of the limitations which
circumstances have forced upon the
income tax, retail sales tax, sup
plemented by use tax, Is proposed.
The rate is 2 per cent of all tangible
personal property sold at retail, with
food, medicine, sales of less than 20
cents, and articles already subject to
selective sales taxation by the Dis
trict exempt. Taken together, the
taxes on retail sales and personal
incomes are referred to as the per-
sonal-income retail-sales tax, be-
cause it is intended to accomplish
essentially the same result that
would have been attained by the
enactment of broad income tax
reaching into the lower brackets,
which would be required to raise the
needed revenue. The personal-in-
come retail-sales tax is, therefore, to
be regarded as an entity.
The recommendations of this study
are, of necessity. mutually depend
ent upon each other. For instance,
the removal of the business privilege
and Intangible personal property
taxes is contingent upon the levying
of the new taxes chosen to replace
them and to supply the District
with the additional revenue re-
uuired. The balance Of the pro-
posed system is contingent upon
favorable action on virtually all the
recommendations.
1t Is accordingly recommended
that
1. The tax on, Intangible personal
property be repealed. This tax Is
ineQuitable, is difficult to administer
and has fallen into general disrepute
The annual loss of revenue will be
$1,000 900.
2. The business privilege tax be
allowed to expire on June 80, 1899
It has no relationship to ability to
pay, works a hardship on new and
struggling concerns as well as those
showing a deficit, and discriminates
against firms operating on narrow
profit margins and offering low
prices to consumers. The loss OF
revenue will be $2,200,000 a year.
3. The combined personal income
retail sales tax be enacted. The
personal income tax will apply to the
net income of the taxpayer follow
ing In general the net income con-
cept OF the Federal individual in.
come tax with these EXCEPTIONS:
(a) The tax will apply only or
that portion of earned income in eX.
cess of $4,000.
CO. The tax will apply to thai
portion of investment income In ex.
cess of $500.
The rates of the personal income
tax will be as follows: per cen
on the taxable net income not II
excess Of 81 900, 3 per cent on tn,
taxable net income in excess O.
$1,000 and not in excess Of $1,000
4 per cent on the taxable net incom,
In excess of $4,000 and not in excess
OF $4,000, S per cent on the taxable
net income in excess of $4,000 ant
not in excess of $1,000, 6 per cen
on the taxable net income in exces
Of $1,000 and not in excess of SO ,00'
and Z per cent on the taxable net in
come in excess of $1,000.
The retail sales tax on tangibl
personal property allows the follow
ing exemptions: (a) Food not con
sumed on the premises, 90 medi
cines, (c) sales under IS cents, an,
cd articles subject to selective sale
taxes by the District.
In order to aid the enforcement
Of the tax on retail sales, retailer
should be required to obtain a licens
and pay a IS license fee for eacl
place Of business.
To prevent avoidance of the re
tail sales tax it should be accom-
panied by per cent tax on tangi