Evening star., 1940-03-24
Detailed Analysis
Of Bill PROVIDING
Combination Levy
Transactions Of 3 Cents
Or More Covered in
Druft of Measure

A summary of the Districts pro-
posed new tax program, which will
be considered in the House this
week, follows:
In brief, the proposed legislation
calls for:
l. A 2 per cent sales and use tax
on tangible personal property sold
at retail, to become effective Janu-
ary l, 194l.
2. A graduated income ta.. on
earned incomes in excess of $4,000
and on investment Cor unearned in
comes in excess of $1,000, to be ap-
plicable to incomes for the current
taxable year.
3. Continuation of the present fiat
rate per cent corporate income tax
4. Repeal of the current tax on
personal net income.
The new income tax would be i'm
posed on taxable income at rates
ranging from 2 to 7 per cent, as
follows: 2 per cent on the first 81 ,000
Of taxable income, 3 per cent on the
next $4,000. 4 per cent on the next
$4,000, per cent on the next $4,000
6 per cent on the next $4,000 and Z
per cent on all taxable income above
$4,000.
Returns Required.
Income tax returns would be re-
quired of Cd Every individual having
q net income for the taxable year
(net income being the gross income
less the deductions allowed; 90
Every individual having earned in
come in excess of $4,000 for the
taxable year, and 60 Every indi-
vidual having income other than
earned income in excess of 81 900 for
the taxable year.
This tax also would apply to the
incomes of fiduciaries and the in
comes of estates or any kind OF
property held in trust.
The income tax portion of the bill
follows closely the provisions of the
Districts present income tax, with
the exception that salary and wage
incomes under $4,000 and invest
ment incomes under $1,000 would be
exempt.
Because of the $4,000 earned in
come and $1,000 unearned income
exemptions no provision is made in
the new tax bill for the personal
exemptions and credits for depend
ents contained in the present In
come Tax Act.
The income taxes, both personal
and corporate, are applied to in
comes during 1910, the time for
filing returns and paying bills de-
pending on whether the income is
on a calendar or fiscal year basis
Returns Due April l.
Returns made on a calendar year
basis would be filed on or before
the first day of April. Returns
made on a fiscal year basis would
be filed on or before the first day
of the fourth month following the
close of such fiscal year. Those
filing returns on fiscal year basis
would be required to pay half o1
the total amount of the tax on the
first day of April and the remaining
half on or before June Is, while
those filing returns on the basis OF
fiscal year would be required to
pay half the tax on or before the
first day of the fourth month fol-
lowing the close OF the fiscal year
and the other half on the 18th
day of the sixth month following the
close of the fiscal year.
The term taxable income" means
the amount of the gross income
less the allowable deductions. In
the case of resident individuals
gross income includes gains, profits
and income derived from salaries
wages or compensation for personal
services of whatever kind and in
whatever form paid, including SAL
aries, wages and compensation paid
by the United States to its officers
to the extent that the same is not
immune from taxation under the
Constitution, or income derived from
professions, vocations, trades, busi-
nesses, commerce or sales or deal
ings in property; also from rent
royalties, interest. dividends. securi-
ties or transactions of any business
carried on for gain or profit.
Only District Income Taxed.
In the case of corporations and
nonresident individuals gross in
come includes only the income from
sources within the District. The de-
ductions provided would be allowed
to corporations and nonresident in
dividuals only if and to the extent
that they are connected with income
from sources within the District.
The proper apportionment and al
location of income and deductions
with respect to sources of income
within and without the District
would be determined by formulas
which the Commissioners would be
authorized to prescribe.
In addition to the $4,000 earned
income and $1,000 unearned income
exemptions, the following items
would be excluded from gross in
come and exempt from those i'm
posed by the bill:
/. Amounts received under a life
insurance contract paid by reason of
a death (unless the money is being
held by the insurer under an agree
ment to pay interest on 1t, in which
case the interest payments must be
included in gross income.
2. Amounts received under life
insurance or endowment contract
(other than amounts paid by rea-
son of death. interest payments on
such amounts and other than
amounts received as annuities), un-
less they exceed the aggregate pre-
miums paid, in which case the ex-
cesses must be reported. Amounts
received as an annuity under an
annuity or endowment contract
would be included in gross income
except that there shall be excluded
from gross income the excess of the
amount received over an amount
equal to 3 per cent of the aggregate
premiums paid for such annuity until
the aggregate amount excluded from
gross income equals the aggregate
premiums paid.
A.