Evening star., 1939-02-19
Senators Will Start
Hearings tuesday on
Reciprocal Tax
Varied Viewpoints
Given by Members
Of Committee
BY ]. A. OLEARY.

will begin hearings at 10 am. Tues.
day on the bill already passed by
the House to apply the Federal in
come tax to salaries of State en-
ployes, and to permit the States te
tax the pay of Federal employees.
Viewpoints in the committee
varied yesterday as consideration
okthe subject approached. Senator
King, Democrat, of Utah announced
his present intention is to oppose the
measure, declaring:
Il am unwilling to take that step
If we do, the next step would be to
authorize taxation of State securi-
ties"
He said he does not believe the
Nations founders intended that the
States which created the Federal
Government should be subordinated
to it, adding his belief the Constitu-
ton will have to be amended to
bring about reciprocal taxation of
State and Federal salaries and
bonds.
Preliminary Report Soon.
Chairman Harrison said he is
awaiting the views of the special
Senate committee, which has studied
the subject for more than six
months, before discussing the pend
ing bill. This special group, headed
py Senator Brown, Democrat, of
Michigan, expects to make a pre-
hmlnary report in the next day or
so to the Finance Committee on the
salary measure without waiting to
complete its findings on whether
State and Federal bonds should be
taxed reciprocally.
Senator Brown has called a meet
Ing OF his committee for tomorrow
TO decide what recommendation to
make 10 the Finance Committee on
the House bill.
Senator George, Democrat, of
Georgia indicated he has not made
up his mind on the House bill, ex-
planning:
L have serious doubts about the
validity Of it, but as to its merits
l am keeping an open mind until
hear the testimony"
Capper Favors Move.
Senator Capper, Republican, of
Kansas, on the other hand, said
he is strongly in favor of removing
the tax exemption from Govern
ment securities, and sees no reason
why 1t should not be removed also
TO permit reciprocal taxation of
governmental salaries.
Senator Connally, Democrat. of
Texas said he wants to give the
House bill further study, particu-
larly on constitutional grounds. be-
fore forming an opinion.
II Congress should permit the
States to tax Federal salaries. it
might have some bearing on the
legal question of whether a Dis
trlct OF Columbia income tax could
be applied to Federal salaries.
From practical standpoint, how
ever, clearing the way for the
States to tax Federal salaries would
be likely to reduce the revenue DOS
sibilities of local income tax here,
because Of the number of Federal
employees who maintain a legal resi-
dence in the States.
Point Carried in Report.
This point was brought out last
month in the report of the experts
who drafted the pending new rev.
snue program for Washington. The
report stated:
If the Federal Government
should permit the States to tax
Federal salaries, those Federal en-
ployes who live in the District, but
maintain a legal residence in the
States to take advantage of the ap-
portionment provision of the civil
service law or to vote, would have
to be allowed credit for State in
come taxes, which would curtail
District tax revenue from this
source. No Federal employe would
be expected to relinquish his voting
privilege for the sake of paying a
District income tax"
In another place, the report
pointed out that unless such en-
ployes were allowed credit here.
the result would be triple taxation
Federal, State and District.
III such a situation should arise"
She report continued, 1T is probable
Congress would not require Federal
employees to pay a District income
tax, and the District would derive
materially less revenue as a result"
$4,000 Salaries Affected.
The constitutional uncertainty of
levying an ordinary local income
tax on Federal salaries was one of
the reasons prompting the experts
to propose the combination income
sales levy here, with the income tax
applying only above $4,000.
There are few incomes of Fed
eral employees in the District which
exceed $14,00O" the report stated.
This will permit test of the con-
stitutionality of a District tax on
Federal salaries without leopard
tzing District revenues"
The pending bill for reciprocal
taxation of Government salaries is
an outgrowth of two messages from
President Roosevelt urging it, one
last April and another since this
session convened.
II separate move is launched
later to remove the exemption from
State and Federal bonds, 1t prob
ably will be fought more strenu-
ously than the salary bill. Strong
opposition to Federal taxation of
State securities was expressed in
the hearings Of the special Senate
Committee.