Evening star., 1940-02-27
Tax Exemption
|PIan Alarms
d. {. Officials
Freeing Payers Of
A Stote Income Levy
Would Slash Revenue
BACKGROUND

Would SIush Revenue
BACKGROUND
Persons "domtctled" In District
1oere subject to personal income
tar In act of Congress last July.
"Domicile," Corporation Counsel
Seal ruled. means residence for
indefinite period and makes Fed
eral employees ltping here ,Dtth
Doting residence elset1here liable
to tar. Some charge this tDiH re-
suit in triple tdration-Federdl,
District and State-tn many tn
Municipal officials today voiced
fears a considerable dent would be
made in anticipated receipts of the
District income tax If Congress
adopted the proposal of Representa-
tive Cooley, Democrat. Of North
Carolina to exempt from the levy
all persons who pay a State income
tax "back home"
Mai. Daniel j. Donovan, District
auditor and budget ofilcer, said ut
Is impossible to determine the num-
Der of persons who would be exempt
under such an amendment. I be-
lieve the loss would be considerable,
but we do not know"
Some idea of the magnitude of the
problem presented by Washingto.
mans having legal residence in the
Sfotoe ;e oI,t q IL, a l,lo fro,,, an asfiv,,o<a
If the Absentee Voters Bureau of the
District. The bureau, which aids
Washington residents in voting
where they have legal residence, to-
day stated that at least 5000 per.
sons who live in the District vote in
States.
Budget Difficulties.
Already, some city officials ex-
planned, the District was facing dim,
culties in arriving at balanced
budget for the next fiscal year be-
cause of uncertainty as to just how
much revenue would be produced by
the personal income levy and the
corporate income tax. Estimates for
these revenues have been revised
more than once since the law was
enacted last year. Much greater
uncertainty would result from adop-
ton of the Cooley exemption plan,
they said.
Mai. Donovan emphasized that
the District now is facing finan-
cial problem by reason of the plan
to permit a split in payment in the
Districts income levies, although
he was not arguing against the wis
dom or fairness of this move.
Under present law these taxes must
be paid In full by March Is. but
Congress has passed an amendment
to permit semi-annual payments.
to be made by April Is and October
Is. The measure now is awaiting
the signature of the President.
Million Deficit Possible.
District officials generally favored
this change, but Maj. Donovan said
1t would mean that If all taxpayers
take advantage of the deferred Sec
ond-half payment the District would
fail to receive in this fiscal year
| (Which ends June 800 as much as
81 ,600,0 900 that would be collected
in the next fiscal year. If this
happened, and District officials be-
lieve that not all taxpayers would
take advantage of the semi-annual
payment plan, Maj. Donovan esti-
mates the present fiscal year would
| end with deficit Of more than
81, 900 900, instead of. q previously
estimated surplus of some $500, 900.
To meet such an exigency, Con-
gress has authorized the Treasury
to make any necessary advance Of
funds. Maj. Donovan explained,
however, that this would not alter
the fact that the District was post
poning from one year to the next
the collection Of sizeable amount Of
revenues.
Some District officials today
turned to the Pond report on q
study of District taxes in the hope
of finding some light on how much
revenue the District might lose If
the Cooley plan were adopted. The
Pond report proposed combina-
ton income and sales tax plan q
a substitute for the old business
privilege tax and the old Intangible
personal property levy, both Of
which have been repealed.
| The Problem. =
These district ofiicials quoted the
following paragraphs from the Pond
report:
Data compiled by the Civil Serv-
ice Commission on 93,047 positions
in executive departments in WASH
ington are Of some assistance here
(this referring to Pond Committee
estimates Of possible income tax
receipts to the District and the
Federal employe figure was for the
year 1886. Assumed that these
people represent 40 per cent of the
taxable income derived from within
the District due to the probability
that a larger proportion of non.
Federal salaries would be below
81 500, fact which would Offset any
failure to make adequate allowance
for taxable income from the re-
naming sources. II all income above
81 500 were viewed as taxable-and
probably more than half Of the
Federal employees are married and
their exemptions for dependents
would counter balance the lower
exemptions Of, say $1,000, accorded
the unmarried-this group of 93,047
with q total annual income Of
$187 SOC, 900. Of which $130, ,4O0, COO
would be exempt, would have . tax
base Of $49, 500 900.
mo allowance against this sum
for losses, taxes paid and the other
common deductions allowed under
the ordinary income tax law has
been made. If 10 per cent Of . total
Of $6,775, 900 tax had to be raised
i