Evening star., 1940-02-13
Tax Exemptions
Seen Putting
D. {. in Red
General OverhuuIinu
Forecast as House
Members Protest

SSSSSSN ~S sSSSS
Members Protest
Large-scale exemptions Of Fed
eral employees from the District in
come tax on the basis of legal resi-
dence elsewhere probably would
plunge the District into the red, and
require either a larger Federal con-
tribution or a revised tax structure,
according to opinions expressed to-
day at the District Building
Protests against levying the tax
against Federal employees main
tanning legal residences in the
States, made on the floor of rhe
House yesterday. forecast a general
cverhauling Of the entire District
Revenue Act, the heart of which
is the income tax provision.
The Fiscal Affairs Subcommittee
of the House District Committee
plans to convene within a few days
to consider series of amendments
to the act. Subcommittee Chairman
Nichols intimated move may be
made to substitute a sales tax for
the income levy.
$1,000,0O0 Revenue Hoped.
It was recalled at the District
Building that some $1,000, 900 was
expected from the personal income
tax for the first year. At the same
time the 1941 District budget now
before Congress comes. as far as
the general fund alone is concerned,
within $1.I40 Of anticipated revenue.
Thus any considerable falling off in
the income tax yield would put the
District in the hole.
Some officials pointed out that the
present situation was predicted in
the Pond report of last year, in
which a combination sales and in
come tax was recommended with
an estimated yield of more than
100000. 1t was predicted the tax
situation would be reopened, pos
sibly with the Pond report as a
basis. Others, however, thought the
problem of exemptions could be
ironed out without going back to
the sales tax feature of the report.
Meanwhile, it was established that
no District officials have yet been
asked to draw up amendments to
the tax act, with the exception of
q few clarifying amendment" be-
ing prepared by Corporation Coun-
sci Elwood H. Seal.
Difficulty Predicted.
Tax proposals hased on the Pond
survey, at the time the present in
come tax was adopted, called for a
2 per cent sales tax. a graduated
income levy, applying 70 incomes
over $1,000, and S per cent cor
poration @iacome tax. In connec-
tion with the imposing of an income
tax, the Pond report said: -@, -
: Many OF the States wiA require
the Federal employees to pay an in
come tax on their salaries in order
to maintain voting residence.
Thus, Federal employees who desire
to vote in their home States will be
subject to triple taxation-that is,
Federal tax, State tax and Dis
trict tax. unless permitted to credit
State income taxes paid against the
District tax. If such a situation
should arise, it is probable that Con-
gress would not require Federal en-
ployes to pay District income tax,
and the District would derive ma
terially less revenue as a result"
1t was the prospect of such a
triple taxation" which precipitated
the protests in the House yesterday.
First hints that the tax structure
might be revised came from Chair
man Randolph on the House floor
yesterday afternoon as he piloted
through bill to permit payment of
the income tax in two equal INSTALL
ments.
Halts Move in House.
Several House members, aroused
by the recent ruling that Federal
employees domiciled in Washington
would have to pay the local income
tax even though they pay an in
come tax to the State in which they
vote, threatened to make a move to
amend the split income tax pay
ment bill without further delay. Mr..
Randolph, however, assured them
his committee would soon propose
legislation to correct this situation
and any other "inequities" that may
exist.
AS a result, the House passed the
bill with but one amendment and
sent it to the Senate. The only
change, insisted on by Representa-
tive Rankin, Democrat, of Missis-
sippi would exempt from the income
tax pensions paid veterans Of all
wars by the Federal Government.
The income tax under existing law
would have to be paid in full March
Is. The House-approved bill would
permit payment Of the first half of
the tax April is and the second half
October Is.
Mr.. Nichols said the proposals to
amend the Revenue Act paves the
way for scrapping the income tax.
May Combine Two.
The whole subject is open," he
declared. I'VE may have to go to
sales tax or even to the combination
sales-income tax proposed in the
Pond report.
II said last year this income tax
wasn't going to work in this juris-
diction. Now we've got the thing
back in our laps"
Mr.. Nichols said his subcommittee
would consider seriously all proposed
amendments to the revenue act.
Chief among the amendments
under consideration at the District
Building, it was said, is one that
would save corporations that have
no income in the District from pay
ing the required $25 filing" fee.
These corporations, however, would
still be required to file q return.
Another amendment under con-
sideration would allow deduction
from the income tax Of capital as
sets" that are sold or become worth
less. A third would eliminate the
requirements for. an oath and no.,