Evening star., 1939-01-17
Summary Of Experts Program to Increase District Tax Revenue

receipts tax should be per cent
Of the taxable gross receipts Of the
electric, gas and telephone COM
panies and per cent Of the taxable
gross receipts of the Capital Transit
Co. This rate differential is to allow
for the unfavorable economic and
competitive situation of the transit
company.
3. In regard to other public util-
tiles, 1t is recommended that no
special forms of taxation be en-
acted, but that the recommended
tax structure be made to apply
wherever applicable.
NEW TAXES.
Corporation net income taxa
logical counterpart to the loss of the
business privilege tax is the imposi-
ton OF a tax on business measured
by net income. Because the Federal
Government is already imposing
such a tax on corporations which
could serve as model for the Dis
trict, it seems best to follow the lead
OF the Federal Government in this
respect. 1t is proposed to tax all
corporations domiciled or conducting
commercial activity in the District
at the rate of per cent Of net
taxable income derived from sources
within the District, with a mini
mum filing fee of $25 to be credited
against the tax. There would be no
tax on corporations expressly ex-
empt, a corporation remaining in
this category until its status is
changed. Banks. building and loan
associations and insurance COM
panies would not be subject to the
tax, since they are specially taxed.
The four major public utilities, on
the other hand, would be included,
since this is the best means of TAX
ing their surplus income.
Modelled closely on the Federal
law, fact which will greatly bene-
mt its administration because rul-
ings and precedents are already
available. the proposed corporate
net income tax is an important link
in the new schedule of taxes recon-
mended as part of this study.
The legislation Of 1902 providing|
for corporate excess tax on com
panies exercising special franchises
or privileges beyond the ordinary
franchises. should be repealed. The|
tax is dead letter and the repeal
would clarity the situation. The|
rate was fixed at IA per cent onl
the assessment of the capital stock
in bulk after deducting the value
OF separately taxed real estate. Com
panies taxed on gross receipts or
gross earnings were not included
nor were newspaper, real estate and
mercantile companies, on the ground
that they received no special fran
chises or privileges by virtue of in
corporation. In 1904 the tax was
made inapplicable to businesses
which had no special franchises.
Since public utilities are the only
corporations enjoying special fran
chlses and these are subject to gross
receipts or gross earnings taxes, the
corporate excess tax has had no ap-
plication and only in one instance
was there even an attempt made to
enforce it.
Personal inc0me-retail sales tax.
Ordinarily. in a sufficiently large
tax jurisdiction untroubled by spe-
cial economic and legal problems,
the decision would call for a grad
, uated personal income tax. How
ever, there are numerous consider
|. ations which have led to the pro-
posed personal income tax coupled
!, with a retail sales tax Although
1t may seem anomalous. it is highly
important, in fact it is absolutely
necessary, that these two taxes be
! considered as a unit. Reflection
.. will show at once why this is so. BY
exempting that portion of salaries
and wages under $4,000 and that
portion of investment income under
$500, the personal income tax be-
comes, in effect, tax on the high
income brackets as we'll as one on
= unearned income. So much stigma
.. has come to attach to the express
. sion, "unearned income" that Its
= use is always fraught with the dan
!. ger that it will be misunderstood
1t is here taken to mean all income
other than earned income. AS with
the corporation income tax, the Fed.
. eral law has been followed wherever
possible.
. Because Of the steep progression
= of Federal income taxation. it is i'm
. possible to enact sharply graduated
tax for the District modelled on tht
. Federal law, since this would amoun
to downright confiscation in tn,
higher brackets. The devastating
!, cumulative effect of such tax Anc
= the Federal one needs only to bt
= mentioned to be appreciated.
. In order to raise the necessary
$6,775 900 required of straight per.
, sonal income tax based on q per.
. centage Of the Federal tax, a ia,
amounting to over so per cent Of the
Federal tax would be required, usins
! data from Statistics of Income fol
1896. If it be objected that thi:
y leaves out Of account a considerable
. amount of income earned In the
s District but reported elsewhere, at.
tention is called to the fact thai
1886 represents by far the most IA
s vorable recent year. In fact, its use
as typical and as indicative Of the
yield Of a District income tax may
r be seriously questioned, unless al.
q lowance is made for this fact.
e The reason why the sales tax car
e raise revenue without resting so Sc.
n verely on any one group or combina-
h ton Of groups is because all group.
Il contribute something without payins
:. on the bare necessities Of food anc
t medicine. When the 81 900 to 81 ,50t
: income pays nothing under an in.
il come tax, then other incomes have
e to shoulder the burden.
r 1t is proposed to follow closely tn,
IS Federal personal income tax pro
It visions with the exception that sal
s ary and wage incomes under $14
d 600 and investment income unde,
v $500 will be exempt.