Evening star., 1944-02-20
Tax Exemption
AS a Subsidy
By Ben McKel1Dau.


beyond its present boundaries. But
about half that area is exempt from
taxation, and the amount of tax-exempt
real estate increases whenever the Fed
eral or District government buys land,
whenever a foreign government de-
cides to build new embassy or lega-
ton, whenever a new church or school
or hospital or other institution serving
some acceptable public purpose is estab-
lished. The tendency, in other words,
is to reduce the amount of taxable prop
erty in the District to what may some
day be an irreducible minimum.
This condition lends added importance
to an examination Of the tax exemption
factor in public housing in Washington.
If the large-scale program now under
study materializes, the amount c' tax
revenue involved is substantial More
important, however, is the pr nciple
under which tax exemption has gained
acceptance as the community's contribu-
tion to housing subsidies. 1t is possible
that this contribution should be made
In some other way.
-
All public housing is tax exempt be-
ing Government property. But, fortu-
nately for the District, most of the pub
lie housing erected here during the war
years is paying money to the District
in lieu Of taxes and the District has
gained more than 1t has lost in tax re-
ceipts as a result of public housing de-
velopment.
The figures are interesting and As
SCISSOR Dent has made a compilation for
The Star which shows for the first time
as far as known, the amount In dol
lars and cents involved. The balance
shows net profit to the tax collector
from public housing of about $4,000
The largest taxpayer among the pub
lie housing agencies is Defense Homes
Corp. 1t has built such high-toned
developments as Mclean Gardens,
George Carver Hall, Lucy Diggs Slowe,
Naylor Gardens and Meridian Hill and
hopes some day to find a purchaser for
them. Defense Homes Corp. now pays
the District $203,l05 in lieu OF the
tax value Of its land and Improvements.
gain in tax revenue from previous
yields from the areas involved Of about
S1s51ls.
The National Capital Housing Author
ity's war housing developments, built
with Lanham Act funds, are now pay
ing to the tax collector, in lieu of taxes,
about s67 556, some Of this revenue COM
ing from the owners Of land leased to
the NCHA. Most of this war housing is
temporary and has been built with the
understanding that it will be removed
or otherwise disposed of after the war
housing emergency has passed.
1t is third type OF tax exemption
which is OF greatest interest in connec-
ton with future programs of low-cost
housing development. And here the
question is not so much the loss to the
community of the money represented in
tax exemption as the principle which is
involved. The principle is that exemp-
tion from taxation of low-cost housing
represents the community's contribu-
tion to subsidized housing for the lowest
income groups. The question is whether
this contribution should be made in the
form Of tax exemption or whether it
should be made as direct cash pay
ment out of tax revenues.
This tax exempt loW-cost housing
property in the District was built under
two authorizations. The first was under
Title of the original Alley Dwelling Act.
The tax exemption on this property now
amounts to s6,358 year, and is re-
garded merely as a contribution toward
eventual liquidation of the public in
vestment. The rentals charged include
theoretical tax item.
The second type Of low-cost housing
was built under Title 2 of the Alley
Dwelling Act with money borrowed by
NCHA from the Federal Public Housing
Authority and the sale of its own bonds.
The amount of tax exemption on this
construction amounts to sl56394 an
nually.
Under the United States Housing Act
an annual Federal subsidy for rentals
is granted to the NCHA, amounting
now to about $2O4960. The purpose of
the subsidy is to make up the difference
between what a tenant can pay for
rent, based on his income, and the
actual or economic" rent fixed by
NCHA. The law requires that this sub
sidy be matched by contribution from
the local community of ''at least 20 per
cent"
The Districts contribution in the form
of tax exemption is about 40 per cent of
the subsidy. In some municipalities the
same tax exemption amounts to so per
cent and in others it barely exceeds the
required 20 per cent of the subsidy. The
subsidy paid the NCHA is based on the
cost of construction-not on the demon
strated need of the tenants. Now more
than 10 per cent of the tenants, in fact,
are getting no financial assistance"
according to John 1hlder, executive
of1icer of the NCHA, although all of
them, at the time of acceptance, were
given the benefit of subsidized rents.
This is fine tribute to the rehabilita-
ting influence OF good housing. But there
does not seem to be any real relation
between the subsidy and the amount
needed to subsidize rentals, nor between
the amount of tax exemption as a COM
munity contribution and the amount of
the subsidy it is supposed to match on
20-80 basis.
The advantage of utilizing tax exemp-
ton as fixed contribution for subsidiz-
ing rents is that it is simple method,
it does not have tO run the animal
gauntlet of the appropriations COM