Evening star., 1946-09-01
Three Cities Solve
Revenue Dilemma
Small Gross Income Tax Levy
Spreads Burden More Equitably
By John w. Thompson, Jr.

OPP Sndo DohoSh NAOiS LduitoOiy
By John w. Thompson, Jr.
There is ,Philadelphia story that
can be told when, on September 49, the
Commissioners and the community rep
resentatives discuss across the District
Building boardroom table ways and
means to rescue city on the brink of
an operating deficit.
1t Is the story of how the sprawling.
mainline Pennsylvania metropolis, beset
by shrinking real property values and
heavy use Of its facilities by noncontrib-
ing nonresidents, devised in 1899 rem
edy which taps virtually every income
earned in the city, both resident and
nonresident. both individual and cor
porate. It Is remedy which brings In
$50 900 900 a year and. in its nonresident
aspects, has stood the test Of court
challenge.
Today 1t Is no longer Just Phila-
delphia story. but tale Of at least
three cities-Toledo, Ohio. and st. Louis,
Mo- also having put similar programs
into effect. Many other communities
nave 1t under serious study.
In essence the problem Of Philadel-
phia Is the problem Of Washington. Not
that realty values are collapsing here.
| Just the opposite is true. But the net
| result is the same-a steadily decreasing
| limit to what real estate tax can in
equity be expected to produce as the
Federal and foreign governments and
| private institutions continue to acquire
more and more land for tax-exempt
purposes from a constitutionally mex
tensible whole. Here, too, because of the
inflexible District boundaries, the nom
resident problem is especially acute.
Washington's difficulty lies not In a
shortage of taxes but in a shortage of
taxpayers. Nobody realized this better
than the members of the Commits
sioners' Special Tax Committee. who
have submitted recommendations esti-
mated to raise s17,750,O00. Their ef-
forts to avoid pyramiding new levies on
the already paying few in favor of
reaching out for new contributors Is
Seflected In their proposals to broaden
the base of the present District income
tax by removing the "domicile" clause,
and for per cent retail sales tax.
1t is an interesting prelude to the
Philadelphia success story that the city
in 1888 first sought financial salvation
in sales tax. The levy became more
and more unpopular, chiefly, apparently,
because 1t was such nuisance and be-
cause opponents were convinced it drove
business across the line into unaffected
suburbs. 1t was repealed.
The cropping of city officials from this
point on produced the answer-a low
rate tax on the gross wages and earn
ings in the city, whether by resident
or nonresident, with the tax collected
at source, that is, from the employer
The tax is withheld in manner similar
to the deductions now made from pay
rolls for Federal income tax by en-
ployers. Basically it is a payroll levy.
Coupled with this was tax on net in
come OF corporations, something the
District already has.
Frankly Philadelphians were told the
tax was necessary to exact from those
who received city services some measure
OF contribution thereto. On the oues-
ton of payment by nonresidents the city
administration sat back and awaited
the inevitable challenge. It came from
an employe of the Philadelphia Navy
Yard who lived in New Jersey. In sup
port OF contention that he received
no city benefits he told the court he
came to work daily across the river in a
boat. The State supreme tribunal. hold
ing for the city, pointed out that the
city policed the river and that it was
common knowledge that the city kept
the river ice-free in winter. Last spring
the Supreme Court of the Nation re-
fused to review the case, leaving the
city undisputed victor.
~ x
Toledo enacted its payroll tax last
January, effective last March. The
levy was bitterly fought by labor groups
when at first the city proposed to apply
1t to wages only. The AFL later with
drew its opposition when a corporation
tax was included but the CIO fought
to the end. According to a report by the
American Municipal Association, the op-
ponents might have defeated the tax
had they been able to suggest anything
better. But the only alternative propo-
sition advanced was to replace the city's
round trash cans with square ones and
sell advertising on the four SIDES The
best estimate of the amount this would
produce was about 100000 a year
far less than was needed. The ! per
cent payroll and corporate income tax
Is expected to raise from 100000 to
100000 this year.
Philadelphia's tax Is now I per cent,
although 1t started out at IL per cent.
st. Louis aldermen voted the plan at
a rate of one-quarter of l per cent last
July 8 and expect 1t to yield $4,000 900 a
year.
The Districts corporation tax is now
5 per cent and the personal income rate
runs from / to 3 per cent with fewer
than 100000 actually paying.
The problem of applying the Philadel-
phia solution directly to the District sit
uation, even should this be considered
desirable by the Commissioners, the
community at large and Congress. in
wolves the obvious question of the legal
ity of taxing Uncle Sans payroll for
local purposes But whatever Is de-
cided upon as new tax structure geared
to present-day conditions, it must find
more contributors to share the load.