Evening star., 1939-01-19
District Tuxes

n Careful TedQlIS OF Une new DIS
trict tax report should convince
Congress and local residents that
an individual income tax on wage
earners generally would not be
successful source of revenue here,
because of conditions peculiar to the
National Capital.
Opinions differ widely as between
the income tax and the retail sales
levy as sources of local revenue, and
1t is not the purpose here to attempt
to say which is the fairest. But, re-
gardless of the relative merits of the
two forms of tax, the report shows
why a general income tax would be
of questionable revenue-raising value
in the National Capital.
First of all, there is serious doubt
as to the constitutionality of Dis
trict income tax levied against Fed
eral employees In legislating for the
District, Congress acts as a local
legislature, and at present Federal
salaries are not subject to State tax
alton, nor are State employees sub
ject to Federal tax on their SAL
aries. The tax experts have paved
the way for a court test of the legal
question without disrupting the local
tax structure by recommending a
personal income tax only on earned
income above $4,000 year, coupled
with two per cent sales tax
But, assuming for the moment
that there was no legal obstacle to
taxing Federal salaries for local pur-
poses, the report indicates clearly
that there are practical, realistic
reasons why District income tax
would either fail to produce sub
stantial revenue, or do so only by
exposing Federal workers to the pos
sibility of triple taxation.
Congress at this moment is con-
sidering doing away with the tax
exemption on government securities
and the advisability of reciprocal
taxation of Federal and State SAL
aries by the respective governments.
The tax report wisely points out
that, If the States are given the right
to tax Federal salaries many of them
will require Government employees
here to pay the State income tax if
they wish to maintain voting resi-
dence back home. That would mean
triple taxation of government SAL
ary-Federal, State and District, un-
+, less the Federal worker was allowed
credit here for the tax paid to a
State. The tax experts predict that,
under such circumstances, Congress
probably would not require Federal
employees to pay the District tax.
That would be reasonable, but
what would it leave of the income
tax as a source of local revenue?
Here again the answer may be found
in the tax report itself, which states
that Uncle Sam is the largest en-
ployer in Washington, having more
than half of the monthly pay roll of
the city in the executive depart
ments, without counting the legisla-
tive and judicial branches of the
government.
Unpopular though it may be, the
sales tax recommended seems the
only alternative, If the controversial,
temporary gross receipts tax is to be
dropped.
Any form of tax imposed to meet
the impending deficit under the new
budget, however, will be unfair to
local residents, unless this Congress
also takes some action to replace the
lump sum policy of Federal payment
by some equitable formula. The
lump sum, either going down or
standing still, while the total budget
goes up, has put nearly ninety per
cent of the annual burden of Ma
tional Capital development on the
local taXpayer.