Evening star., 1940-03-12
Problem in Tuxution

Appeals that the District tax on
intangibles is invalid as applied to
Federal worker claiming a legal
residence in State is to present
this community with a very serious
revenue problem.
1t is true that the appellate court
ruled only on the intangibles tax,
but its reasoning, under like cir
cumstances, is fully applicable to
the present income tax. That being
the case, the District will not be
able to collect the tax on the 1899
incomes of those who live and work
for the Government in the District,
but who can establish a claim to
legal residence outside this jurisdic-
ton. 1t has not been determined
how many persons would thus be
able to avoid the local tax, but it is
certain that they represent sub
stantial proportion of the population.
The result is, of course, that the
income tax is assessable against
some, but not all, of the, people in
the Capital. Those who have no
claim to residence outside the COM
munity would, under an income tax,
be obliged to support a privileged
class who would enjoy all benefits
of residence in the District but who
would contribute nothing toward
defraying the expenses of the city.
In addition to being inadequate as
revenue provider, such tax would
be intolerable by reason of its
discriminatory feature.
District officials have not as yet
indicated what plans they may have
for recouping the revenue loss which
will result from their inability to
apply the tax to all 1889 incomes.
But the course which must be fol-
joWed in the future, so far as the
taxing power is concerned, is clearly
indicated: The income tax must be
repealed and a substitute found to
produce the revenue now lost. In
considering the choice of a Substi-
tute, the sales tax will, by process of
elimination, receive first considera-
ton. Whether, as in the Pond plan,
the sales tax would be combined
with an income tax on earned income
In excess of $4,000 is again made
questionable, however, by the broad
implications of the appellate court
decision. That decision indicates the
gross discriminatory features of any
local income taX-regardleSS of the
income level at which it is applied.
For the principle that only those
who live here without allegiance to
State sovereignty elsewhere can be
taxed for the community's benefit is
as discriminatory in its application
to high incomes as it would be to low
incomes.
In holding that Federal employe,
even though he may have lived in
the District for twenty-five years,
cannot be compelled by tax statute
to divest himself of legal residence in
State, the Court of Appeals laid
great stress on our dual system (of
government) which postulates al
legiance to Nation and State" and
declared itself unwilling to impair
that dual allegiance regardless Of
the damage it may work to the tax
ing policy of the District. Employees
of the Federal Government, the
court said in effect, have natural
and proper desire to retain their
residences in the States, and that
desire should not be defeated mere
lv because the District, which fur
nishes them with all municipal serv-
ices, seeks to compel them to share
municipal expenses by levying tax
which negateS their claim to being
domiciled in the States.
This decision, unless some other
satisfactory tax plan is worked out,
presents a problem which has two
possible solutions. The revenue
difficulty might be cleared up If
Congress, in determining fair
Federal contribution to the upkeep
of the District, would take into con-
sideration, with other things, the
fact that the National Capital must
provide municipal services for a
large number of citizens who pay
taxes to the States, but not to the
District. Thus, the States are profit
Ing at the Districts expense, and
that fact is now added to other COM
pelling considerations which create
the Federal Governments obligation
in support of National Capital main
tenance and development. The Fed
eral payment should in justice be
increased substantially.
The other possibility is that the
District might be given the repre-
sentation in Congress and the right
to participate in national elections
which are now enjoyed by the resi-
dents Of the States. If that were