Evening Star Newspaper, December 15, 1931, Page 6

THE EVENING STAR, WASHINGTON, D. C., TUESDAY, DECEMBER 15, 1931 TEXT OF REPORT BY MAPES COMMITTEE ON FISCAL RELATIONS h t of the Mapes Com. | CoSU of operating the District govern- Tepo! | the poliey ineugurated of dividing lhe‘ The value of all Federal real property a~tually used for Federal Government the larger city. That is particularly true in so fer as personal property out of the general revenues of the Dis- trict for maintenance and repairs to than $750,000 annually and, as has al- ready been raid, the tax will be much for an income tax, an inheritance tax, |ices that are taken care of outside by | an increase in the gas tax from 2 cents | county, State and school taxes. ttee and of the minority views purposes, it is claimed, should be em- | wealth is concerned. To show how true more equitably distributed among the | to 4 cents per gallon and a motor ve- | mittee e mi of Fevresentative Frear of Wis- | nsin follow, in part mflmn after its B;;r"mlnlrrr’lpn;.d?:; cember 3. 1930, and el !D“fc?:‘r}\%ern}n 1930, the committee held public hearings, at which representa- tives of various civic organizations and public officials of the District of Colum- bia and others who desired to do so appeared befare the coTmittee and pre- sented their views as to what they re- spectively considered to be a solution of the problem of the fizcal relations between the United States and the Dis- trict of Columbia For the purpose of aiding the com- mittee in its work it engaged the rerv- fces of George Tord of Detroit, who has had many years' experience in tax re- gaarch werk and who enjovs a natinnal reputation in the fieli of taxation * + = A questionnaire was prepared and sent to cities in the Unit=d States of comparable size with the District of Columbia, raneing in population from 252,981 tn 900429, acking for detailed information concerning the taxati-n of the various forms of taxable property within their respective jurisdiction. | e | History of Fiscal Relations. | The goverrmental set-up of the Dis- trict of Cclumbia is unlike that of any other city in the United States. and. so far as this commitiee knows, it is un- like that of any other in the world The constitutional provicion requiring Congress “to e e legisiaii-n in ail | cases whatsocver oven such Ditrict s may 3 becoine the seat of the Government of the United States” has led, starting almost from | the beginning. ty constant controversy both as to the form of the government of the District and es to how the ex- penses of the District government should be met, what proportion of them, if any, should be borne by the Feceral | Government and _what prop-rtion of | them should be borne by the people and | the privately owned property within the District As stated by Brvan in his “History of the National Capital:" The decade that care to an end in the early thir- | ties * * * was * * * marked by an almost continuous agitation for a change in the government.” (I1 Bryan, | 150). This agitation in varving degrees of} intensi has continued down to the present time. Frem time to time. as different phases of the controvers: have bec me acute, committees of Conaress have been ap- pointed to invesiigais and report upon them. The reports of these various committees have, each in its turn, had a tendency to quict the agitation for a time, but only for a time. Comparative Taves Studied. There is little that can be said about the relationship between the Federal and District governments that has not | already been said by one or another of | these varfous committees, * * ¢ In| undertaking the task assigned it. how- ever, the committec did feel that no | thorough and satisfactory study had ever been made of the comparative tax burden of the people within the District with those who live in other cities of comparable size and advantages, and | that such a study should be made in | crder to determine what would be a fair and just tax for the people of the | District to pay. It therefore gets out | to make such a study. | Up to the time of the adoption of the present form of government for the District in 1878 there had never been any uniform or consistent policy as far | as making contributions by the Feceral Government to the expenses of the gov- ernment of the City of Washington or of the District of Columbia is concerned. | * * * Since 1871 the City of Wash- | ington and the District of Columbia | have been one and the same, or, to be | entirely accurate, since that date there has been no such legal entity as the | City of Washington. There has been only the District of Columbia. The Federal Government never contributed | to the expenses of anv of the other | governmental units in the District ex- cept the City of Washington, and never adopted ani uniform or consistent pol- icy of making contributions to the City of Washington until the adoption of the present form of government for the District in 1878. Scme years it con- tributed liberally, some vears sparingly some years not at all The and report. submitted to the House from the Committee on the Judi- ciary in 1874, referring to the question “whe some accurately cefined basis of expen cannot be preseribed and | mainta; by Jaw,” declared: “There | never has been since the location of the Capital at this place anv consistency, or even intelligence. in the adjustment | of these expenditures.” Southard Report Quoted. The government of the of Wash- . and later the District of Co- . has never been very successful | hagement of its finances when | s own devices. As early as | 2, 1835, the Southard report ! February declared: The city is involved in pecuniary ob- . from which it is utterly impoe- sible that it can be relieved by any means within its own control, or by any exertions which it may make, unaided by congressional legislation.’ | On June 16, 1874, the Allison report stated “The testimony discloses District treasury is practi . er in all its department Referring to the territorial ment with a delegate in Con- | which had been in effect for| three vears, the same report declared “Vour commitfee have unanimously arrived at the conclusion that the | existing form of government of the! District is a failure.” In this connection, and in view of the present acitation of some of the people of the District for the ballot, it may not be out of place to call af tention to the esperiences of the Dis- trict when the people in it exercised the right to vote (Here follow excerpts from “wuh-! dngton -A Not Too Serious History” | by George Rothwell Rrown, describing | the riots of 1857 and of 1852.) | that the | 1ly exhaust- form of 1835~ “The design of the Constitution | and its founders was to create & res- idence for the Government where they should be regulated and governed by them without the interference of par- tia] interests in the States, which should have absolute and unlimited con- | tral. which should be regulated and gov- | erned by them without the interference | of partial Interests in the States, which | should be built up and sustained by their authority and resources, not de- ! pencent upon the will or resources of any State or local interest.” Committee of Congres in 1915—“This was the great plan conceived by the of thich grows more and more appar- ent with the coming and going of the }' Present Form Adopted in 1878, | The Joint Select Committee of Con- | ess, .%une. was the chairman, reported in i 1874: “The committee recommends n’ of the errors and short-comings of the pst, and to promote the interests of | i { eepnected or associated with the na- | ! tibhal capital in the future, that Con- over the District with which it is frpvested by the Constitution, and pro- of“its affairs and the enforcement of | the laws through officers and agents ecutive authority of the United States Whatever one may think of the w Hon referred to, there 15 no doubt | about the fact that it imposes upon | roviding for the government of the | trict, ‘ And again in the report of the Joint fathers of the Government, the wlsdnm‘ of which Senator Morrill, of | bet calculated to avoid a repetition all Who are or may be in any way| { gtess exercise that exelusive legisla- !v e for the general superintendence directly amenable to the supreme ex dom of the provision of the Copstitu- Congress the duty and responsibility of n 1878 the present form of govern- Jment for the District was adopted, and | ings located in the District of Columbia. | - = ment equally between the citizens and property of the District and the Fed- eral Government. In other words, the Federal Government contributed 50 per cent of the cost and the taxpayers of the District contributed 50 per cent This plan was based upon the unique method of measuring the value of Fed- eral property with that of the private- Iy-owned property in the District. A velue of 30 cents per square foot was placed upon the streets and avenues, which added approximately 50 per cent to,the valuation of actual Federal prop- erty, consisting of parks, public build- ings, etc. In this way a valuation for Government, property equal to the val- uation of privately-owned property was reachel and Congress evidently was persuaded that the cost of operating the District povernment should be split evenly betweem the United States and the District in 1876 A oin investigating com- mittee deterr ned that the Federal share of the expenses of the District government ould be fixed at 40 per cent. The v--ommendation of this joint committee, however. was not received favorably. The fifty-fifty law was in effect from July 1, 1878, to July 1, 1920, when a change was made from & 50 per cent proportion to a 40 per cent proportion of the total District ex- penses contributed by the Federal Gov- ernment. This sixty-forty plan con- tinued until July 1, 1925, when Con- gress changed from the proportionate contribution to an annual contribution of $9.000.000. The Seventy-first Con- gress provided a lump-sum contribution of $9,500.000 There has been a great deal of con- troversy from time to time as to the wisdom of changing from a proportion- ate plan of contribution to a lump-sum | plan. Several of the civic organiza- tions in the District have protested the change. sotting up the cleim that as the expenses of the District grew, it would be only fair that the contribu- tion of the Federal Government should increase accordingly. and that this could only be fairly done by fixing defi- nitely the proportion of the total ex- | penses of the District that should be paid by the Federal Government. Advocates Cite Benefits, The advocates of the lump-sum plan | claim that it has the advantage of aid- ing rather than curbing the carrying out of public improvements in the Dis- trict; that it tends to moderate local demands for appropriations through a realization that the increase must be locally borne: that being a definite and fixed 2mount it can at once be set down in the pudget. thus simphfying budget- ary procedure; that it makes possible d in the taxable real values and | this to the limit of structural costs, or | present-day reprodurtion structural costs, | irrespective of use, income, obsolescence or market value. Evidently no consider- | ation is given to the monetary value to | the people of the District of Columbia | because it is the Nation's Capital, nor to | the benefits derived by the people in the District by the flow of visitors to the [ city who spend large sums of money | while here. Nefther is there any con- | sideration given to the increment pri- | vate property values, created almost | solely because of the activities of the Federal Government in the District. It is perhaps needless to say that many citizens of the District have grown wealthy because of this increment value, It is cnly necessary to refer ta the large increase in Jand values, as chown by the pe siderable shtement | The committee cannot agree with the | contention that the Federal real cstate | or property should b= use? in the com- | parison of relative tax burdens. The | buildings owned by the Federal Govern- ment would be practically useless to any | one but the Government. They have | practically no market value * * ¢ | Under such conditions it is decidedly | unsound to use the cast or reproduction [ value of these buildings in any com- | parison of relative asseesed values or | tax burdens. Furthermore. much of the |land value upon which these Govern- | ment buildings stand was created by | the Feceral Government, and due con- sideration certainly should be given to this fact by Congress The principal reas-n advanced for tncluding such property values in the comparative is that it i< the onlv large industry in the District of Columbia and trat this in-ustry is fairly com- parable with large industries in other cities. The committee cannot agree with this contention, either. The Fed- eral Government's activities in the Dis- trict have tke highest degree of stabil- ity. There is no diminishing of its activities. Indeed, they are quite gen- erally on the increase,” with a corre- sponding increase in the Government pavroll. They are continuous, not in- terrupted by financial and industrial depression. * * * (Here follows an excerpt from a radio speech by Robert J. Cottrell, executive secretary of the Board of Trade, cis- cussing the relative absence of the de- pression in Washington.) The committes cannot see anv logic in makirg a comparison of Federal Government properties with the prop- ertics of industrial corporations located clsewhere. extent the truth of this an increase of approprintions needed | for public improvements in the District | within the limits of fair taxation with- out any increase of the burden upon an already overburdened Federal Treas : and. furthermore, that the economic condition of the country. together with the extraordinary burden of taxation carried by the people in the States and the condition of the Federal Treasury is the answer to the demands for in- crased Federal aid to the District Gov- ernment. (Here follows a quotation of views ex- pressed before the Joint Select Com- mitee of 1915 by George E. Hamiiton, against the fifty-fifty principle of ap- propriations.) At best. as was well stated by the | joint committee of Congress in 1915, the half-and-half plan “was conceived as an economic necessity to lift the burden of debt from the oppre: trict and its taxpaying citizens. again, “This arbitrary rule -a rule of then seeming necessity—need no longer be_applied to District appropriations.” | ‘The committee has given careful con- sideration to all arguments used for and against the lump-sum plan and has come to the conclusion that it is the preferable one. General Taxation. In the study of the taxation of gen- eral properties in the various cities of the U reasor Jation of the District of Columbia. it has been disclosed that in all these cities the people are groaning under the burden of taxation which they have been compelled to carry. That is partic- ularly true of the taxes levied npon real property. This condition is made promi- nently evident by the extraordinary amount of delinquent taxes. * * ¢ similar eonomie condition obtains in the rural sections of the country, if anvthing. to a greater extent than s found in urban districts. The commit- tee calls attention to this fact in order that it may be given mature thought in ! the consideration of the comparative tax burden carried by the people of the District of Columbia with the tax burden carried by the people in other munieipalities - Another thing that should not be for- gotten in a study of this matter is that there has been a decided depreciation in realty valies everywhere during re- cent years, particularly in in the indus- trial ‘urban centers. Notwithstanding this depeciation in values, the assessed valuations have not been reduced to |any considerable extent end the publ expenditures- have been constantly on the increase, resulting in an increase in the levy of taxes. * * ¢ Assessment of Property. In making a comparison of assessed valuations of property in the various cities it was necessary, of course, to as- certain at what ratio to actual value property was being assessed. In its stiudy of this matter the committee found that various methods are used to arrive at a determination of the re- lation of assessed valuation to actual values, none of which determines such relation with absolute accuracy. * * ¢ Although it is difficult to determine the relation of assessed values to actual values, the committee believes that the ratios as they appear in the statistical tables attached hereto are as accurate as it is possible to obtain. These ratios were obtained from the administrative officers of the municipal governments who actually make the assessments and from such organizations as real estate boards, chambers of commerce and indi- vidual citizens familiar with property values. These administrative officers, | organizations and citizens, being famil- | As stated in the Southard report of | iar with property values in their respec- | ed States having a population | ly comparable with the popu- | Federal Aid to States. In discussions of the fiscal relations | between the United States and the Dic- trict of Columbia a comparisien has b2en made of the arount of Fe‘eral aid given to States with the Federal ai? given tre District of Columbia. This comparison has little, if any. signifi- cance, fer the reason that very little of the Federal aid given the States reaches the municipalities. It nearly ail goes to the rural communities. Further- more. most of this money given to the Stetes censtitutes a conditional grant, in that the States are required to match the amount of the Federal grant. Federal Intangible Property. A unique method has been employved and recommended to this committee in | determining the amount of intangible Feceral preperty holdings that should be charged to the Federal Government for the purpose of comparing the rela- tive tax burdens of the District with tie tax burdens of other cities. It is argued that the value of intangible personal property in the hands of private owners is about equal to the value of their tangible property. The tangible prop- erty owned by the United States and located in the District of Columbia, it | is said._has a value of $80.000.000, and therefore that $90,000,000 of intangible property should be included in the com- parative so as to place it on the same basis as the tangible ani intangible property holdings owned by the citizens of the District. This. it seers to the committee, is purely an arbitrary set- up. There would be iust as much sense in saying that $900.010.000 of Federal intangible property shculd be included | in the comparative as $30.000,00). By what reasoning $90.000,000 of intangible property should be allocated to the Dis- trict of Columbia the committee coes not know. * v ¢ Assessment of Intangible Property. The use of the assessment of intangi- | ble property and taxes levied thereon for comparative purpses is exceedingly difficult and unreliable. The systems of taxation employed and the rates of texes imposed upon this class of prop- €Ity vary so greatly in the various tax- ing units that no comparison can be made that would be Worth considera- o e s = The committee doubts that the assess- ment of personal property and the le: thereon can be safely used in a com- perison of tax burdens. In many tax- ing units some classes of tangible per- sonal property are exempt from taxa- ' tion, such as manufacturing profucts Other forms of taxation, such as taxes irpesed on franchises and the imposi- tion of other excise taxes, are substi- tuted for personal property taxation. | For these reasons the committes thinks that the most reliable ecmpari- | son of tax burdens is confined to the | assessment of real property and the taxes Jeviei thereon. * * * Loss of Revenue to the District. | ._One of the chief arguments made for | increased Federal contributions toward the expenses of the District Government, is that the District has suffered loss of | taxes because of the exemption of Fed- eral properties from taxation. In esti- mating the loss of revenue it has been the fashion to treat the Federal prop- erties as if they were always on lg assessment rolls of the District. This, the comrmittee thinks, is a mistake. The only possible loss of revenue would be the revenue cerived from the taxation | of the land and improvements thereon immediately preceding the acquisition | of the properties by the Federal Gov- | ernment. In other words, the amount | of taxes paid by the private owners of property at the time the Federal Gov- crnment acquired it. In tais connection ssment rolls, to indicate to a con- | tive communities, are more competent ‘ it is pertinent to that the assessing to determine the actual ratio of assessed | officer of the District, Mr. Richards, valuations to actual value than any one | contends that there is no loss of reve- else, and therefore the information they nue because of the acquisition of these furnished the committce is the most properties by the Federal Government, reliable that could be obtained for ad- | * ¢« justing tax rates. * * * | The actual value of the property ac- The committee has found that one | quired by the Federal Government from method cf finding the ratio of assessed | private owners in the last 10 years has values to actual values frequently used | been appraised by Mr. Richards, the is to compare the assessed value of | city assessor, at $36,204,049, so that the property with the price paid for it at|loss & revenue from this valuation, voluntary sale. This the committee feels | based on the prevailing tax rate, would is not a safe method, for the reason | be a little over $600,000 n year. It is that most of the sales of real property are made on land contracts. ‘In other words, on the installment plan. Sales of this character are freqeuntly made at a substantial amount in excess of actual value. That is evidenced by the faet that these contracts are often discounted to finance companies and others dealing in such securities at anywhere from 10 to 40 per cent. Another novel method employed by some to determine relative assessed val- uations to actual values relative tax rates, tax levies, etc., is the per capita basis of assessments. ¢ ¢ ¢ This committes cannot agree with this con- tention. Property values eannot be cre- ated in excess of their actual value by any system of mathematical caleulation. One city having approximately the same populaticn as another may have within its borders property wealth far in excess of the other city. It i5 impossible to arrive at a true comparison of relative assessed valuations and tax levies by any such method. Federal Real Property in Tax Base, It js argued that no true comparison of the relation of the tax burden car- ried by the people in the District of Columbia with the tax burden carried by the people in other cities can 'be made without considering in the cam- parative value of Féderal preperty hold- | certain that no individual or private gpcorporation woud have made the costly | Improvements on the land that the | Federal Government has made and it | is doubtful that improvements would | have been made at all by private par- ties to any considerable extent. Fur- thermore, the appreciation in the value Federal improvements, which appreei- ated value undoubtedly will be reflected Mn the assessment rolis of the District, will to a considerable extent offset the loss of revenue caused by the removal of this $36,204,049 from the assessment Tolls, to say nothing of the replacement of the privately owned buildings in other parts of the District. Tax Levies Per Caplita. Statistics have been presented to the | committes to show that, based on the | per capita basis, the taxes paid by the | people of Washington compare favor- | ably in amount with the taxes paid by the citizens of other municipalities, and in some instances exceed the amount paid by such citizens. Various methods have been followed in order to arrive at this comelusion, none of which appears ;n" lt‘hls{ commitiee as belxng 1m"rella!hle for comparison of relative tax burdens. cm‘gty may have one-half | the population of another city and still the smaller city may have within its borders much mese taxable wealth than ’ of land in the immediate vicinity of the | this is it is only necessary to point out | that there is an utter lack of uni- formity in the varfous States and municipalities in the systems and methods employed in the taxation of | personal property. In many of the citles the ad valorem system of t tion is followed, in others the millage tax system is followed, in others income taxes are imposed as a substitute for both ad valorem and mileage taxes, and in others there is either a total or par- | tial exemption of certain ciasses of property. Because of this wide differ- ence in the base of taxation no com- parison of personal property taxation on a per capita basis can be made with | any degree of accuracy as to equality of burden. If any consideration is to be given at all to per cepita tazation it should be | confined to the per capita taxes levied on real property. While the per capita taxes have been computed by Mr. Lord, of which mention will be found on an- other page of this report, for reasons already stated the committee does not believe it is a reliable basis for com- parison of relative tax hurdens. Comparative Assessments and Taxes. Particular attention is called to the statistical compllation embodied in this report showing & comparison of as- sessed valuations, tax levies, etc., in ]earh of the 23 cities used in the com- parison. This statement the commit- | tee believes is as accurate a picture of | the tax burden carried by the people of these cities as it is possible to obtain from the stendpoint of statistical in- | formation. * * * | In determining the adjusted rate of | taxation and the amount of taxes levied upon the specific amount of proper valuation, the utmest care has been ex- ercised. This, of course. was necessary | in order that no injustice be done. * * * | The statistics * * * have been Sa!h-' |ered after much painstaking effort, | which required extensive research work. They present as accurate a picture of |the "relative assessed valuations and | taxes levied in the various cities as it s _possble to obtain. e following remarks relating to | these statistical compilations will be of interest: | The total population of the 23 cities embraced in the comparative statement is 10,959,751, The total tax levied upon the real property in these cities amounts to $526,444 179, and the average per capita is $48.03 | Eliminating the District of Celumbia the total popu'ation of the other 22 | cities is 10,472,882, | | $48.35 Per Capita. The total tax levied upon the real | property in the 22 cities other than the District of Columbia amounts to $506,- 342,302, an average per capita of $48.3. ‘The population of the District of Co- lumbia is 485869 and the tax levied | upon real property amounts to $20,101.- 877. or a per capita of $41.29. which is $675 per capita less than the average per capita for all cities and $7.06 less per capita than the average per capita for_the other 22 cities The total of all taxes levied in the 23 cities amounts to $637,120.676, an aver- age per capita of $58.13 The total of all taxes for all of the | cities, except the District of Columbia amounts to $610,250,892, an average per capita of $38.27 The tote] taxes levied in the District of Columbia amount to $26.878.784. a per captta of $55.21, or $2.92 less than the averags per capita for all cities and $3.06 less per capita than the average for_the other 22 cities. The total full valuation of real estate in the 23 cities amounts to $22.229.107 .- 292, upon which was levied a tax of $526.444,179. The average adjusted tax rate for all the cities is $23 68 Excluding the District of Columbia, the full value of real property in the other 22 cities in $20.915.259.131 and the total tax levied thereon $506,342.- 302. The average adjusted tax rate is 182421 The adjusted tax rate in the District of Columbia is §15.30, or $8.38 less | than the average adjusted rate for all cities. pnd $891 less than the average adjusted rate for the other 22 cities Based on Actual Realities. ‘The average tax levied upon a $10.000 property is $237. Excluding the District of Columbia, the average tax on a $10.000 property is $242. The tax levied on the full value of a $10.000 property in the city of Washington is slsg, or $84 less than the average for all the cities, and $89 less than the average for the other 22 cities These comparisons are based upon actual tax realities in the various cities, which the committee believes is the only fair comparison that can be made In making the comparisons the com- mittee has eliminated from considera- tion any and all arbitrary set-ups of values and taxes that would be levied on such values. Arbitrary set-ups of property values can be worked out to the advantage of any interests by mathematical calculations. They are not found on facts. and therefore are not worthy of consideration. It is the actual amount of money that the taxpayers pay into the public treasury upon their properties that | eounts, irrespective of what the tax { may be named. That is the guide the ‘rommltlfl has followed in its investi- gations, and the committee believes it is the only safe guide to follow for | comparative purposes, committee does not deem it | necessary to dwell furthér upon thes: | statistics, It has endeavored to compile | | them in such a way as to be under- | standable by anyone who cares to study them. (Here follows brief reference to com- parative statistics relating to bonded debt, exemptions, park area and reve- | nue derived from taxing public utilities) Changes in D. C. Revenue Laws (Gasoline Tax) For eight i;eelr! the District of Co- | lumbia has en imposing an excise tax of 2 cents a gallon on gasoline. There was derived during the last fis- | cal year from this tax approximately | $1,800,000. There are only four Btaf that impose as low a tax as 2 cents a gallon on gasoline, namely, Connecticut, Missouri, New York, and Rhode Island. | In the ‘other States the tax ranges | from 3 cents a gallon to 7 cents a gallon, | _The average tax for all the States, | excluding the District of Columbia, is | a fraction over 4 cents a gallon. In he States in close proximity to the| | District of Columbia, Dalaware levies a | | tax of 3 cenis a gallon, Maryland levies | a tax of 4 cents a gallon, North and South Carolina levy a tax of 6 cents | llon, Pennsylvania levies & tax of 3 | cents a gallon, Virginia levies a tax of | 5 cents a gallon, and West Virginia | levies a tax of 4 cents & gallon, so that | 8o far as the tax on gasoline is con- | | cerned the owners of motor vehicles in | the District are in a favored class. The claim is made that it is hardly | fair to compare the gasoline tax in the | District with the tax in the States for the reason that the revenue derived from such a tax in the States is used for improving public roads and not pub- lic streets, as is the case in the District of Columbia. It does not seem to the committee that there is much weight in that argument, for the reason that motorists from the District of Columbia use these roacs, especially roads located in States bordering the District. Citi- zens of other cities pay the same gas | | tax as their fellow citizens of the State in which they live are required to pay. It is also claimed by those opposed to an increase in the tax on gasoline | that tke District is now receiving suffi- clent revenue to take care of the entire expense of street improvements and maintenance. The facts, the committee finds, disprove that contention. Maj. Donovan, the Distriet auditor, in his appearance before the committee stated: “The amount of the gas tax fund is ot sufficlent to take care of the entire pald in rom 0] X fund, but in idflltlofl m‘:r‘iat about 1$1,200,000 more will have to be provided | etreets.” | rial street highwaye. | Columbia be increased to 4 cents a | too severely condemned. It is the heavy | the public streets. To charge the same Streets Subject to Heavy Travel S5 that it is certain, notwithstanding the statement that $2,000,000 would be derived from a tax of 2 cents a gallon on gasoline, that $1,200,000 additional money would have to be obtained from the revenues derived from other sources in the District in order to meet the entire expense of {uture street improve- ments and maintenance. Certainly no stronger argument could be made in support of a reasonable increase in the tax on gasoline than the statement made by Maj. Donovan. The streets in the District of Colum- well as the strests in other cities, are subjected to heavy motor vehicle travel, necessitating the raising by some form of taxation a large annual main- tenance fund, in addition to the cost of | widening and the creation of now arte- It is only fair, the committee thinks, that the owners of motor vehicles in ‘the District should | meet to a large extent these costs. ‘The comimittes can see no logical res son why the owners of motor vehicles Iocated in the District should not. pay a tax on gasoline reasonably compar- able with the tax levied upon the same roduct in other communities, particu- arly in the communities adjacent to the District. Their failure to do so gives the retail gasoline industry in the District an unZue advantage. The committee, therefore, recom- mends that the present law providing a 2-cent tax on gasoline in the District of gallon, which rate of tax would be less | than the average rate imposed on gaso- | line in the States, and is rep-rting a | bill to that effect. | | Motor Vehicle Weight Tax. Uncer the present system of taxing automobiles as personal property and the flat rate of §1 registration fee in the District, the owners of motor ve- hicles in the District have been and are in a highly favored class as compared with the taxes paid on motor vehicles in the several States. The flat rate of 81 registration fee, irrespective of the weight of the motor vehicle, cannot be | cars, such as trucks and busses, that do the most damage to pavements and which occupy by far the most space in registration fee for such motor vehicles es Is charged for a light-weight passen- ger car is ridiculous. In adcition to this flat registration | e of $1 per car, the District assesses all cars as personal property Accord- | 1n§ to the testimony of Maj. Donovan bef-re the e~mmittee, thare were a little over 126,000 motor vehicles acsessed the first part of last year, and the revenue derived from the assess- ment of these cars for the one-half vear Eerind amounted to $214.190. On this hasis fhe total personal property tax on that number of vehicles For the full ye: would be $428,380. Tt is eviient, there- fore that the total tax, including the registration fee on motor vehicles, for 1930 would nat exceed $600,000, or a total tax of $4.75 per car. 30,000 Pay Minimum of $1. In addition to the 126,000 cars on which the tax was paid, Maj. Donovan , stated that there were approximately 30,000 cars hnvln, no value, on which & minimum tax of §1 per car was paid. These cars were still being used on cr | occunying the streets. and certainly while in use on the public strests should | be required to pay a tax comparable | with the tax paid on other cars of ap- | proximately the same weight | The average tax per car in 1930 in the United States was approximately | $14, or about three ani one-half times the average tax paid upon motor ve- hicles in the District of Coluxbia. The | committee can see no reason why that condition should Isnger obtain. It be- lieves that the most equitab'e system of taxing motor vehicles is a tax based on | their weight. It is the simplost as well | As the fairest and most equitable method of taxing them. It is con- ceded by every one that the heavier the | vehicle the more it dam=ges the public Pighways. This fact should be a prime factcr in the determination the amount of tax that should be imposed | on_motor vehicles | The comrmittee therefore recommends | the enactment of a law providing for a | tax on automcbiles basei .on their | weight as a substitute for the present | registration and personal property tax | n°w imposed on motor vehicles in the District. If the rate of tax based on weight shall be fixed so as to produce an average of $14 per car, whieh it the average tax per car in the United States. it would produce a substantial increase in the District revenues and no cne would be hurt. The committee I8 reporting a bill to put this recom- mendation into effect. Inheritance Tax. At the present time there is no in- Deritance or estate tax imposed in the District of Columbia, except the Fed- eral estate tax. All States impase either 2 tax on inheritance cr estates except the States of Florida and Alabama. A reascnable rote of tax on inheri- tances or estates imposed by the Dis- trict government would produce an av- | erage annual revenue of not less than 8750.000. The committee knows of no good reason why such a tax should not b> adopted in the District, especially as the Federal Qovernment permits s | credit of all inheritance taxes paid in | the States, or which may be paid in the District of Columbia, up to 80 per cent of the Federal estate tax. The committee believes that the es- tate tax is preferable to the inheritance tax because of its simplicity. It has the advantage that the tax may be com- | puted immediztely after the value of the net taxable estate is cetermined. This results in a material saving in time and expense, both to the estate and to tre governrent that imposes the tax. Furthermore. it is easy for the testator to determine in advance the t-tal tax burden upon the estate, and therefore he ean carry out exactly his | intentions as to the net amount which the several beneficiaries are to receive. | In the case of inheritance taxation | the amount of tax depends upon the | number and relationship of persons who receive the property. These facts, how- ever, cannot be determined as to the remainder until after the death of the life tenant. It often happens, there- fore, that it is necessary wo postpone the taxation of the remainder unthe life tenant’s death. In some cases arbi- trary rules of cetermining the tax have been adopted, and this quite often works hardships. Such complicated problems as these are avoided in imposing a tax | cn_the estate. | The estate tax has the advantage of simplicity and of relative speed with which estates may be rettled. The com- mittee, therefore, recommends that a law be enacted providing for a reason- able tax upon the estates of decedents. The Clinton Joint Committee in mak- ing its report in 1915 stated: “We be- lieve there should be a proper tax on inheritance in the District.” The committee is reporting a bill to put this recommendation into effect. Income Tax. The committee believes that a tax upon incomes is the most equitable tax that can be imposed, becaused it is based on ability to pay and is s tax that is hard to evade. More and mere this is recognized, as evidenced by the increase in the number of taxing juris- dictions that have provided for a tax comes, ""a‘z’-’»’ue\’»‘m‘;‘fl.m« believes that if such a tax was imposed in the District of Co- lumbia, as a substitute for the present millage tax on intangible property, it would result in greater equality in the distribution of the tax burden in the District and would produce & sub- stantia]l amount of revenue in excess of that now obtained under the mill- age-tax system. Last year the District received a revenue of $2,725.941 from the tax imposed on all intangible prop- erty. It is our opinion that, if a reasonable income tax s adopted, the amount of revenue.obtained therefrom ‘will ‘exéeed the revenue from the tax now «on intangibles by not less people, An income tax would reach many people well able to pay some tax to- ward the support of government who now pay no taxes, and it would reach the income derived from intangibles, which intangibles are now concealed from the taxing authorities of the District. The committee, therefore, recom- mends the enactment of a law pro- viding for a reasonable tax on incomes as a substitute for the present millage tax on intangible propetty, and is re- porting s bill to put this recommenda- tion into effect, Taxation of Public Utilities All the public utilities in the District are subject to specific taxation or fran- chise taxes. The tax is based on gross earnings or s receipts and the rate varies according to the class of cor- poration. The rate on the gross earnings of gas companies is 5 per cent, Electric strest-railway companies are taxed at | the rate of 4 per cent on gross receipts. Electric light companies are taxed at 4 per cent on gross earnings, Telephone companies are taxed at 4 per cent on gross earnings, It will be noted that these rates of taxation are unequal and therefore violate the basic principle of equality in taxation. If the present system of taxing these utilities is to be continued, and the committee doubts its wisdom, the law should be amended so as to provide uniformity in the rate of taxa- | tion, According to figures furnished the committee by the office of the District assessor, if these various utilities were taxed on an ad valorem basis of valua- | tion the District would gain consider- able revenue. These companies pald last year in taxes a total of $1,611,000. It is estimated by the District assessor's office that {f they had been taxed at the same rate of taxation as im) on other classes of tangible and in- tangible property they would have paid $2,500,000, or approximately $900,000 more than they paid under the present system. The present specific tax on fron earnings and gross receipts is in ieu of any ad valorem tax on tangible personal property and the millage tax on_intangible personal property. In addition to these public utilities there are two others operating in the | District now—the Western Union Tele- ' ernmental quest graph Co. and the Postal Telegraph- Cable Co. The Western Union Tele- graph Co. last year paid in taxes only $8.471, and the Postal Telegraph-Cable Co. paid in taxes only $1424. These compsnies practically tax themselves in that it has been the practice to accept without question a statement from each of the companies as to the value of its property in the District for urposes of taxation There never has n any appraisal made of its personal roperty by the assessing officer of the istrict. The committee believes and recommends that an appraisal of the gmpmy of these ecompanies in the istrict should be made by competent engines ;. Ta .ation of Steam Railroads. ‘There {5 contained in the law govern- ing the taxation of steam railroad prop- erty in the District a unique provision, as follows: “It being the true intent and mean- ing hereof that the lines of railroads and terminals hereby authorized shall be assessed and valued {°r the purpote of taxation and taxes on the same basis a5 if the same were not conrtrued and maintained by means of suth bridges, tunnels, viaduct retaining walls and other structures. The construction placed upon this cfficers of the District is that the tun- | nels or bridges spanning the streets or | on to say: water communications in the Distric the retaining walls around Union St tion and along Maryland, Delaware and Vi ia avenues and the iron viaduct at the south end of the tunnel southeast, are not subject to assessment for taxes. It is estimated bv the District asses- £or, Mr. Richards, that the value of this property, which is not now assessed for taxes, is anywhere from $10.000.000 to $15,000,000. If it was placed upon the tax rolls, the revenue derived therefrom weuld approximate $200.000 annually, which s nearly double the tax now im- posed upon railroad property in the District. ‘The total revenue the Dis- Lr!r,l'l ";J] receive l‘l‘:flm the taxation of railroad property year amounts to $233.878. 2 i The committee knows of no good rea- son why this property should be longer exempt from taxation, and if it can be legally placei upon the sssessment roll by an amendment to the law, the rom- mittee recommends that the law be amended accordingly. It is only fair and equitable that all privately owned property. especially that used for commercial purposes and profit. be placed upon the assessment roll for taxes. There should be no such thing as favoritism in the levy of taxes upon :‘rlet:ksi]“fi:nol p]raptny All should be V] relative equality i o levy of taxes. 3 e (Here follows a digest of the federal ?:;i toiclpgtal"‘cilles extended by coun- es In South America and Europe. The Star will prasent the commimg‘s findings in this respect later.) Conclusions. No one likes to pay taxes. The 0- ple of the District of Columbia ll’epeno exception to the general rule in this respect. Nor is it a pleasant duty to vote to impose a tax burden upon any one. It cannot be stated too emphati- cally that no one, especially no member of this committee, wants to overtax the people of the Distriet. At the same time it is probably fair to say that the people of the Distriet, being human, do not want to pay any more taxes than they are obliged to pay, and very natu- rally resist any effort to inciease the existing taxes or to impose any addi- tional ones, realizing, no doubt. that whatever they pay, whether much or g’t!lkee umeth Fl;ielral Government will 2 e balance necgssary to run the Dlag'lct Bovernment. "8; the other hand, there are those who think that the people of the District are in a privileged class as far as, taxation 1s concerned; that they are not paying as much toward meeting the expenses of the District government as they should, or as much as the people who live in other cities in the United States of comparable size and advantages are re- quired to pay. Should the people of the District be required to pay the same as people who live in other cities of comparable size and advantages, or should some consid- eration or concession be given them be. cause they have no voice in their gov ernment, or should they be required to pay a little more because they enjoy the privileges and advantages of living in the Capital City? Should the Dis- trict be treated like any other city and the people who live in it be required to pay the entire expenses of the District government, as the people of other cit- les are required to do, or does the coun- try want a more beautiful and magni- ficent city for the Capital of the Nation than the people of the District should be asked to maintain or would require if it were not the Capital City? These are some of the questions which naturally suggest themselves to any one who makes any serious attempt :a‘ ctomider the tax probiem of the Dis- rict. Commitice Drafts Bills. Carrying out the purposes of the res- olution, the committee, as hereinbefore set forth, recommends the enactment of an income and an inheritance tax law for the District, an increase of the gas tax from 2 cents to 4 cents per gnllon, the énaetment of a motor ve- icle weight tax law, a change in the taxing system of certain public utilities and a revision of the law providing for taxation of the pro) y steam rail- roads in the District. red and is The committee whith it asks the introducing bills House to And pass, providing hicle weight tax. The people in the States pay these taxes. If the people of the District are to pa are comparable with those paid by peo- ple in the States, they should pay them. As to these taxes, there is no chance for ent from a comparative standpoint. In fact, the rates suggested in the bills reported by the committee are somewhat under the average of the States. If they are not imposed in the District, the District is bound to be a haven for tax dodgers, for those who want to escape the payment of such taxes. The committee feels that the changes recommended in the laws relating to the taxation of certain public utilities 1 and of the property of the steam rail- roads should be considered and per- fected by the regular standing legisla- tive Committee on the District of Co- lumbia; that to perfect such legiclation would require more time and considera- | tion, including the hearing of those in- terested and affected by the proposed changes, than this committee is justi- fied or warranited in taking for that urpose. P e committee thinks that the malor | problem assigned to it, and the one| chiefly in the minds of the members of the House of Representatives when | the resolution creating the committee was passed, was, as stated in the first paragraph of the resolution “to investi- gate the various elements. factors and conditions which may be deemed perti- nent and essential to the accumulation of data and information bearing upon the question of fiscal relations between the United States and the District of Columbia and to recommend to the Hous? what emount. in their judzme the United Stotes should contribute an- nually toward the development and maintenance of the muniripality” and it has devoted a large portion of its time and study, with the assistance of its tax expert. Mr. Lord, to this feature of the resolution. In view of the facts developed in its investigation and study, and the findings, as before set out in this report, how much should the Urlted States, in the language of the | resolution, “contribute annually toward | the development and maintenance of the municipality” of the District of Co- | lumbia? | | Congress Has Dual Obligation. | This question, like many other gov- ions, is not “susceptible | of exact determinat but is a ques- tion that Congress is obliged to pass upon every year in the passage of the annual appropriation bill for the Dis- trict. In the performance of this duty Congress has a dual obligation to per- form. It muet be fair to the peopls of the District and it must be fair to the people of the Nation who live outeide the District. It is the principal ques- tion assigned to this committee to an- swer and to report upon. ‘There is no serious dispute about the principle to be followed in working out an answer to the problem. The diffi- culty comes in its application. The witnesses appearing before the | committee from the District very gen- | | eraly, if not without exception, agreed that the people of the District should pay in taxes abeut the same or bear about the same tax burden as people jof other municipalities throughout the United States of like size and advan- tages, but the majority of theme were tenacious in their contention that they are already doing that and many in- genuous arguments are advanced to prove that contention. The Joint Com- mittee of 1915 recommended “that the people of Washington pay a tax com- parable in assessment. rate and amount to that tax paid by the residents of other cities similar in population and | provision of the law by the assessing | location te the City of Washington.” The report of that committee went “We find after a most care- ful consideration of all of the evidence | and circumetances as shown to exist at | this tire that there is no reason for any arbitrary rule of proportionate con- | tributi>n for the expenses of the Dis- (near New Jersey avenue and C street trict of Columbia by the residents there- | of and by the people of the United States: that the correct rule should be that the responsibility in taxation of the residents of the District of Colum- bia be #s fixe” and certain as the re- £ponaibility of residents of other Ames can cities comparable with the Cit: Wasrington: that with the pavm 0 | such taxes as may be equitabl: and properly assessed against privately owned taxable property, the financial responsibility of the residents of the District should be concluded.” The Morrill Joint Select Committee of 1874 reported that the District “may ! properly be required to make that just contribution to the current annual ex- penses, the interest of the public debt and its ultimate payment, which a peo- ple 50 situated as compared with other communities may be required t> pay for | like protection, privileges an3 immuni- | ties.” | Correct Formula Believed Found The committee believes that the cor- rect formula is stated in these reports as above quoted, and it is happy tn say that that formula is generally acce d 85 being correct by students cf the ation both in and out of the District The committee has no doubt that every one in the United States desires the National Capital to be one of the best and most beautiful capitals in the world and that it forever be maintained as such, and that Congress shall. if necessary, from time to time, assist | financially in maintaining it at a stand- ard that shall be excelled by no other capital. The amount of this financial ance should be measured largely | by the amount necessary to conduct the | 8overnmental affairs of the District in an efficient and economical manner over end above the amount of revenue de- rived from the taxation of private prop- erty, license fees, etc. The rate of tax imposed on private property to reason- ably approach the average rate of taxa- tion in the other 22 cities of the ccm- parative. In other words, the amount of Federal contribution toward th> ex- penses of the District government should be based largely on the differences in the amount of revenue derived from the | taxaticn of properties levied on the basis | of a fair and equitable tax rate, together with the revenues derived from specific taxes, license fees, fines, etc., and the total amount of money that the District | ’ncods to conduct the District govern- | ment in 8 manner that shall be a credit to the District and the Nation. There | are few indeed who seriously dispute the | Jcorreclness of this statement. of On this basis the committee has made the study it has to ascertain with as | much definiteness as it is possible to do how the tax burden of the District com- pares with the tax burden in cities of | similar size and advantages. with the | result, as before stated in this report, | that it finds that the tax rata in tho District of Columbia is the lowest of {any of the 23 cities with which com- | parison has been made. * * * It is contended by some that in the consideration of comparative tax bur- | { dens all taxes ievied in other cities for | State and county purposes should be eliminated and the comparison confined | to taxes levied for the purposes of city government alone in those cities, and that interest on the bonded debt of | other municipalities be eliminated from the comparison because the District has no bonded debt. Actual Money Paid Counts 'Thl committee cannot agree with that contention, There are in the District instituticns maintained from revenues | derived from either Foderal or District taxation similar in character to insti- | tutions that are maintained by county or State governments. The District | has its courts, similar to cou'n:y and State courts. Other functions in | many respects similar to functions ex- ercised by State and county govern- District either by the District or Fed- | eral Government. The District govern- ment does practically everything that the varfous units of government do out- side in the Btates, and the people of the | District receive from the Federal Gov- ‘ernment the various benefits and serv- A Yy taxes that,pioperty in the | | ments_elsewttere are performed in_the | The true index to tax burdens is the actual tax levied and paid into the pub- lic treasury by the owner or owners of various cities having re’atively the same actual value. In the opinion of this committee it makes no difference by what name the tax may be called—a State tax, a school tax, a | city tax or a county tax—It is the actual | money pald over the counter of the pub- | lic treasury that counts, and that is the only true measure of comparative tax | burdens, |, Nor does this committee agree with | the contention that the interest on public debts of other cities should be eliminated. Other cities have been | forced into debt for different reasons, grlm‘lpfllly because their tax burden as been so great that they could not | afford to add to it for the cost of naed- ed permanent public improvements, | The District of Columbia is in a favor- ed position in this respect, made pos- sible to a large extent at least because of the financial assistance received by it from the Federal Treasury. As an illustration, the water system of the D, trict was originally paid for by the Fed- eral Government. 1t is obvious that if the cost of permanent public improve- ments in other cities had been includ- ed annually in their budgets, the rate of taxation in those cities would have been much higher and therefore the comparison with the rate prevailing in the District of Columbia would show a correspondingly wider difference than is now shown The committee has no sympathy with the attitude of hostile eriticism of the improvement and development of, the District and everything that is| v Congress to that end, that i expresced. The District o Columbia is probably the most beauti. ful and magnificent Capital in thd world. Enjoy Many Benefits. The people of the District of Col. umzia enjoy benefits and privileges thal re not enjoyed by the people in an; other city. In no other city in th country do the people enjoy so man advantages by way of beautiful pa library facilities, etc., as are enjoyel by the people in the District of Col- umbia, not to mention the innumerable and immeasurable advantages and privileges incident to being a resident of the Capital Citv. They are created and maintained to a considerable ex- tent at the expense of the people of the United States and not at the ex- pense of the people of the District of Columbia alone and constitute no part of the District budget The committee does not desire to place any undue burden of taxation upon the people of the District. On the contrary, because of the pecullar government set-up of the Disirict, it prefers to err, if any error is to be made, on the side of liberality toward the District. * * * The commiitee concedes that the government of the District of Columbia for the most part is efficiently and economically adr istered, without undue waste or ance and desires to give tne rict the benefit of such adminis- m of the committee to give the House sufficient statistical informa- tion and data to enable every member, not only now but in the future, to reach his own conclusion, from the mation given, as to what the co ition of the Federal Governme rd the expenses of vernment snouid be miitee coneiders this feature of its report of prime inportance, ‘The committee does not hacitate to say that in its judgment the tax rate, the tax burden, in the District is not as high, s not as burdensome. as 1. is in comparable cities, nor as it is in nearly every community, urban or rural, in the United States. Anyone Who thinks that it is either 1ooling hime: or blind to the actual fact. He can not reelize how the average citizen 1s almost literally sweeting blood in order to pay his taxes and many are utterly unable to do so The committee does hesitate, how- €ver, to make any recommendation, tr effect of which might lead to a tax rate in the District equal to the aver- even of those in other cities of size and advantages, be- pressed with act that such a rate on ge high, that 1t is often prohibitive. The commn lieves “that the general property tax should be relieved by other taxes, such as are herein recommended, wherever it 1s practicable to do f0. At the same time the committee can not help but feel that the tax rate in the District might well be raised to more nearly approach the average of other cities without any injustice to the District,- or without giving the District any reasonable cause to complain Rate Largely Up to District. The present law provides that tax rate in the Distriet shal les: N $1.70 per hun valuation of real estate a tangible personal property. As before stated, if the rate had been $20 por thousand valuation, for example, which is considerably below the average rate in the comparable cities, it would have produced a revenue, based on the 1930 valuation of properiy, of $25,793.397, as against $21,924,387 that was levied on such property in 1930 It is not the province of this com- mittee, however, to recommend a rate; it is rather to recommend what amount in its judgment the Federal Govern- ment should contribute annually tow- ard the development and maintenance of the municipality. The rate will de- pend upon the budget. the cost District government. It is lar the nds of the District to def the rate. It will be for the District asking for appropriations, largely determine whether the general erty tax will be increased or not, ar that is as it should be The committee feels that for the present, at least, the Federa! Govern- ment should continue to contribute something toward the expenses of the District, the Capital City of the Nation: that to do so is perhaps wise public policy and In accordance with the public sentiment of the country, but, with the constantly increasing values of privately owned property within the District, it becomes progressively more easy for the District to meet the ex- penses of the District government as the years go by, without undue burden or any increase in the general property tax. The time may come when the District should in all conscience meet the total normal budget of the District government, Tre District budget for the fiscal y 1933. beginning July 1, 1932, and e: ing June 30, 1933, submitted to Congress within the last few days, estim that the appropriations for the Di dur- ing that year, including ceficiencies, will total $45,633,312. and that the revenucs of the District. based upon a contribu- tion of $9,500,000 by the Federal Gov- ernment, will amount to $45,670,000, leaving a surplus of revenues over ex- perses of $36,698. If the bills reported by the commitfes, are enacted into law, approximatbly. $4,000,000 will be added to the revenues of the District, without any increase of the general property tax and without any increase of the assessed valuation of general property, The Federal con- tribution could be reduced that amount for the fiscal year 1933 at least, without interfering with a balanced budget. The committee feels, however, that on nt of present economic conditions ar ‘mu:m estimates for the fiscal year 1933 Fave perhaps been reduced to a | lower figure than it would be safe to depend upon as a permanent policy, but the increased revenues provided for in the bills which the committee is re- ?or(lng‘ and the additional revenues hat may be raised by the changes in the laws relating to the taxation of the | property of steam railroads and of cer- tain public utilities in the District, rec- ommended by the committee, together with the natural increase from & con- stantly. increasing valuation of privately owned property within the Distri (Coutinued on Sevenih Page.