Evening Star Newspaper, May 28, 1937, Page 4

- RELIEF MARKING Tagging Third of Fund for P. W. A. Would Cost 530,000 Jobs, He Says. BACKGROUND— Appropriation bill for Federal relief jund has precipitated bitter- est fight of present session of House. Caught first in economy drive, bill was cut down from $1,500,000 to $1,000,000. Larger sum, request- ed by President, later was restored, dbut House members then began to load up bill with specific instruc- tions as to how money should be spent. B3 the Assoclated Fress. President Roosevelt estimated today the $505,000,000 earmarked by the House for flood control and other proj- ects in the $1,500,000,000 relief bill would give employment to only 100.000, whereas if expended through W. P. A. 630,000 would be given relief jobs. He told a press conference that re- Hef and public works should be sepa- rated in considering the $1.500,000,000 bill and forecast many individual proj- ects would be straightened out before the House passes the measure He said he would be willing to dis- cuss the matter with individual House members if they desired it. Meanwhile, House leaders, trying to reverse a defeat on salient provisions of the bill, were planning to appeal to the President to help bring about & compromise. Representative Rayburn, Democrat, of Texas, majority floor leader, indi- cated that he would canvass the en- tire subject with the President during the week end Rayburn staved off a final vote on the bill in a turbulent sossion yester- day, asking members t» ‘“‘cool off” until next Tuesday. In the meantime, he sz 4, he and | others would try to werk ¢ * a com- promise fair “to every sec on and every project.” Rayburn, who spoke after his fellow | Texan, Representative Maverick had accused the members of “acting like a mob,” disclosed he had just ccme from a White House conference. Earmarking Causes Fight. The cause of the controversy was tentative earmarking of one-third of the proposed relief fund for roads, dams and other special projects, ap- proved Tuesday during a revolt by a coalition of Democrats and Repub- lcans. Rayburn and other administration chieftains sought yesterday to throw out the earmarking provisions, giving the administration a free hand on relief expenditures. (The House can reverse itself under its rules at any time before final passage of the bill.) Instead, the revolt continued, and the coalition put across a tentative reduction of $2,000 in the $12,000 sal- ary of Harry L. Hopkins, works progress administrator. In Indianapolis, Hopkins commented later: “I don’t know anything much about my salary cut, but it’s all right—just €0 they don't cut down on the relief money.” “Disgrace to Congress.” Representative Maverick denounced the earmarking proposals as “‘a pork- barrel bill and a disgrace to Congress.” Representative Starnes, Democrat, of Alabama, countered that the adminis- tration leadership was filibustering— that is, delaying a vote by parlia- mentary tactics—so that it could bring “enough political pressure to bear on members of Congress.” That was just before Rayburn took the floor. After adjournment, a conciliatory proposal came from Representative | Beiter, Democrat, of New York, author of an amendment setting aside $300,- | €00.000 fo the Public Works Adminis- tration. “I think we can get along on $100,- 000,000 less,” he said, “because some projects are not in shape to be started promptly.” Starnes, who won approval of an amendment setting aside $45,000,000 for flood control, expressed belief, how- ever, that was insufficient for the pur- pose. HOUSE APPROVES $445,000 D. C. FUND Most of Sum Will Go to Repay U. S. Bureaus for Services, Judgments, Fees. Appropriations totaling some $445,- 800 for the District were approved when the conference report on the second deficiency appropriation bill passed the House late yesterday. The House agreed to one batch of 21 amendments totaling $337,355.48, made up as follows: $74.855.48 for judg- ments, refunds, audited claims and amounts due other departments of the | Federal Government for services ren- dered the District during the last fiscal year,! $32,000 for jurors’ fees and wit- nesses and other current expenses of the Dnited States District Court for the District of Columbia; $80,500 oc- easioned by additional maintenance eosts;and increased population in four District institutions, and $150,000 on sccodnt of construction costs for five schogl projects which cannot be built under the original plang and within the [original appropriations, due to rise iin construction costs since the estimates were made. The House approved an appropria- tion :of $10,000, instead of $13,000 as propbsed by the Senate, for main- tenagce of Freedmen's Hospital, to be chargeable one-half to the District, in accofdance with the provisions of the Interior Department bill. The House voted separately on an appropriation of $95,748.91 for pay- ment of a final judgment against the District from the gasoline tax fund. ‘This was because an oil company had paid’into the District fund gasoline taxes later determined to be due Mary- land-and Virginia. Subsequently the taxeg were paid to these States. UTILITY EXEMPTED 8. E. C. Frees Phelps Dodge From : Registering. THe Securities Commission an- nounced yesterday it had. exempted the Phelps Dodge Corp. from registra- tion junder the 1935 public utility hold- ing eompany act. Alhough the corporation owns three utilities in Arizona, the commission ruled the utilitles were incidental to its cppper business. The Arizona sub- sidiaries are Ajo Improvement Co., Upplr Verde Public Utilities Co. and New Income Tax Proposed for District Duplication Among Objections Thus Far Raised to Bill HE new income tax bill, pro- posed by the House Subcom- mittee to be keystone of the District of Columbia five- point tax program, was originally de- signed to raise about $5,000,000 gross, or a net of $2,500,000, if the intangible tax is repealed. The new District of Columbia tax would levy another load on the same incomes already taxed here by the Federal Government and, unless re- vised by the District commisisoners, contains several features which have been analyzed by tax experts to be decidedly objectionable. Briefly, the bill would require all single individuals to flle a return if they make a ‘“net income” of $1,000 or over, and all married persons liv- ing with husband or wife, to file a return if making a net income of $2,500 or over. Returns must also be filed by every individual havirg a gross income of $5.000 or over, re- gardless of the amount of his net in- come. The old tax structure provided as follows: On net income not over $2,000, a tax of 1 per cent. On net income between $2,000 and $5,000, a tax of 1'; per cent. On’ net income between $5,000 and $10,000, & tax of 2 per cent. Between $15,000 and $20,000, a tax of 3 per cent. Between $20,000 and $30,000, a tax of 3'> per cent. Between $30,000 and $50,000, & tax of 4 per cent. Over 850,000, a tax of 5 per cent. The corporation tax was 5 per cent on net income. Outstanding Objections. Among the outstanding objections 50 far raised to the income tax bill in its present form are these: It is duplicate taxation, taxing the same source against which the Fed- eral Government already levies an in- come tax. If a local State Legislature, acting for an individual State, cannot tax Federal employes’' incomes, how can Congress, acting in the capacity of & local Legislature for the District, do that which is forbidden to other State Legislatures? Attempts by the proposed bill to collect a tax from non-resident indi- viduals and “foreign” corporations, lo- cated in other States promises to run into a veritable morass of difficulties of administration. The District measure, while laying a tax load on most of the rank and file of the Federal employes of the city, would exempt the President and Federal judiciary. Income from Federal securities held by persons residing in the District would be subject to the District in- come tax, but income from Federal securities held by a person not a resi- dent of the District would not be sub- jected to a State income tax where he resides. These complications and inequities in the pending District income tax act face the District Commissioners as they take up the proposal of the House Subcommittee today to prepare the five-point tax structure for sub- mission to the House in revised form. The commisisoners have been given only until Tuesday to whip the pro- posals into final form. Estimates on the old income tax bill point to a gross revenue of about $5,000,000. If, however, the intangible tax is repealed, with its revenue of roughly half that amount, the net gain in revenue for the District would be about $2,500,000. Last year, how- ever, the intangible tax produced $2,- 147,000. Proponents of the income tax claim that, despite the fact it is a perfect example of double taxation, it is a fair tax, similar to that now levied | by 34 States of the Union, and would be very productive. By taking a tax from incomes already taxed by the Federal Government it is really double taxation of the most direct sort. No credit is allowed locally for Federal income tax payments. Federal Rates Similar. How the local tax will pile on top of the Federal levy is seen by taking a look at the Federal rates. Uncle Sam requires returns from single people making $1,000 or more, and married persons making $2,500 or List This ‘as g “Best Buy” g/en[)r O()l{ the Warren Co. } in Present Form. Personal Exemptions. Class of Tax. Proposed District _ Virginia ______ The District of more. Exemptions amount to these same figures with $400 additional de- duction for each dependent in the Fed- eral schedule. The Federal normal tax rate is 4 per cent on complete net income. The Federal surtax is gradu- ated, beginning at 4 per cent on all net. income between $4,000 and $6,000, and running up to a total of 75 per cent for all over $5,000,000. This makes a grand total for the top bracket of 79 per cent. The District of Columbia bill would start the District income tax at 1 per cent, and run up to 5 per cent for all over $50,000. The nearby State of Virginia has a State income tax, which contains certain reciprocity provisions, allowing certain credit for income taxes “paid | in the District of Columbia. These provisions would be helpful, since the District bill also has somewhat similar reciprocity. The adjacent State of Maryland has no income tax act. The reason why residents in nearby States will be affected by the proposed District income tax is that the new tax here would be levied not only on residents, but on all income earned here in the District, either by indi- viduals or corporations. The difficul- ties of collecting such taxes from non- residents are expected to lead to com- plexities. One means provided for getting at the income of non-residents who earn their pay here is that all employers must report their pay rolls to the Government. Marylanders who earn their living here simply will have to pay both a Federal tax and the District tax. The case of a Virginian earning most of all of his pay here is more complex. Designed to operate to the benefit of the taxpayer both the District bill and the Virginia law have credit pro- visions which would prevent both Jurisdictions collecting their total in- come tax. Virginia has two kinds of reci- procity. First, it provides that resi- dents of Virginia liable te income tax ir other States shall be credited with amounts paid to such other States on their Virginia returns. Secondly, Virginia provides that non-residents subject to taxation in their State of residence on income earned in Vir- ginia shall receive proportional credit for taxes paid, provided the State of residence grants similar credits to resi- dents of Virginia or exempts from taxation the income of residents of Virginia. “Foreign” Corporations. Much more difficult to enforce, however, according to experts, will be the complex provisions of the bill which attempt to extract a tax from all “foreign” corporations and busi- nesses which own property here or which transact any kind of profitable business in the District, even though | their principal headquarters and operations are elsewhere. Efforts of many other States to do this have re- sulted in confusion and difficulty, leading to reversals in the Supreme Court of the United States, disputes among tax collectors of the various States, and, of course, double and triple taxation. The constitutional objection to Con- gress acting as a State Legislature and levying a tax on Federal em- ployes has been advanced from sev- eral different sources. Corporation Counsel Elwood Seal raised it re- cently in questioning the constitu- tionality of a District income tax. Suppose for instance, he pointed out, that tax should be contested in the courts and collections have to be made under protest, possibly impounded, pending court decision. This would deprive the District of needed reve- nue. Collections under such a local | tax act would not begin to roll into the coffers for about another year yet, anyhow, it has been pointed out, and the District needs funds sooner than that. Another constitutional, but some- what similar, point made against the income tax act is that the District itself originally was carved out of the States of Virginia and Maryland, President and Federal fudiciary are exempt under the proposed Columbia bill, as originally drawn. | and spends more than three months of | chairman of the Public Utilities Com- whose residents, as Federal employes, Tropica Suits Married. $2,500 2,500 2,000 Dependent. $400 300 200 are exempt from local income taxa- tion. Can they now be deprived of such exemption? Supporters of this contention refer to a famous Supreme Court decision in the case of Downes vs. Bidwell, One of the further complexities in the District of Columbia bill is its attempts to levy an income tax on all residents. Under the bill a resident is further described as follows: “When 8 person domiciled without the District of Columbia maintains a place of permanent abode within the District the taxable year within the District of Columbia, he is a resident for the entire period during which he main- tains said permanent place of abode.” This is expected to be difficult of administration. Taxes _(Continued From First Page.) details of the gas tax collection ma- chinery into a bill separate and dis- tinct from the other tax measures. When the House subcommittee yes- terday flatly rejected the Commis- sioners’ proposal for a 2 per cent re- tail sales tax as the major element of the “emergency” tax program of- fered by the Commissioners, instruc- tions were given that the r~vised pro- gram should be designed to produce | only $6,149,000—the size of the defi- cit expected to develop in the fiscal year beginning July 1 on the basis of the 1938 budget as passed by the| House. i Estimated Revenue. The revised tax program would produce approximately $6,000,000 above revenues from the present tax system, provided the receipts of the weight tax were placed in the special highway fund. If the weight tax money went into the ‘“general fund” and were available for the cost of | general municipal operations the new | tax program would bring into the “general fund” some $7,500,000 in- stead of slightly more than $6,000,000. If the Senate adds any consider- able sum to the 1938 budget as passed by the House and if Congress finally approves such increases the tax pro- | gram again would have to be re- | vised. The Commissioners in the past con- sistently have opposed an increase in the real estate tax rate, but there have been suggestions that in an| emergency the Commissioners might have to boost the present rate of | $1.50 per $100 by 5 or 10 cents. Under present plans, the Commis- sioners’ committee proposes an !n-“ come tax measure which would ex- | empt no resident of the District other than those exempted by the Federal Constitution, the President and the | Federal judiciary. Te Hold Rates Down. | They worked also along the line | that the income tax rates should be | held to the minimum and that the| tax for the privilege of engaging in | business in the District should carry the larger load, as between the two. What the rates and the personal exemptions will be under the income tax bill, to be proposed by the Com- missioners, was being studied today by the Commissioners’ committee, consisting of Maj. Daniel J. Donovan, auditor; Elwood H. Seal, corporation counsel; Richmond B. Keech, vice [PONTIAC IMMEDIATE DELIVERY WE NEED USED CARS Flood motor Co. Direct Factory Dealer 4221 Connecticut Ave. Clev. 8400 Our fifteenth successful season for this garment, -unapproachable anywhere for value, smartness and cool comfort. See the new modern patterns and models in a vast variety of sizes. Avail Yourself $1 9 L of Our Expert Fitting Service ® Palm Beach Suits __________________$16.75 ® Silk Sharkskin Suits __ e $2150 ® Summer Gabardine (worsted) Suits____$27.50 ® Coronado (worsted and_mohair) Suits__$29.50 ® Imported Flannel (3-piece) Suits $32.00 Courtesy Parking Convenient N.W. Cor. 12th and E Charge Accounts 19 Coat ond Trousers Sts. I at Eleventh mission; Assessor Allen and one of his assistants, H. D. Scantlin; Capt. H. C. Whitehurst, director of high- ways, and Vernon E. West, principal assistant corporation counsel. Even with the proposed now tax- ation load, Commissioner Hazen and Budget Officer Donovan empha- sized today that it would be essentia. for Congress to permit the District to obtain temporary loans from the United States Treasury in order to enable the District to meet its current bills in the earlier part of the new fiscal year, beginning July 1. For instance, it is explained that if the income tax is adopted the Dis- trict will not expect to collect most of that revenue until late in the next fiscal year. Meanwhile, the District would have to meet, month by month, the costs of its personnel, the opera- tion of its buildings and services. Quarterly Payments Undecided. District officials plan to make the proposed District income tax returns and payments due at the same time as the Federal levy, the returns being due by next March 1. This would afford an easy comparison of the two returns. Tentatively it is planned to permit the payment of the income taxes on a quarterly basis, just as is the case with the Federal returns. In order to assure full collections for the 1938 year, it has been suggested quar- terly payments might not be allowed for the first year of the operation of the law. There was not immediate decision on this point. GETS COAL UNIT POST J. L. 8mith Named Acting Chief of Federal Division. By the Assoclated Press. The Bituminous Coal Commission announced today appointment of J. L. Smith, Cincinnati, as acting chief of the marketing division. Smith will have direct charge of the regulation of all sales of soft coal | in the Nation. PRESIDENT VETOES INSURANCE BILL He Bars Plan to Ex‘end Conversion Time for War Risk Policies. President Roosevelt today vetoed an | act of Congress which would have ex- tended the time in which World War veterans could renew their five-year war risk term insurance policies. The President in his veto message said he did not believe any further extension of the privilege of con- | verting the temporary war-risk life insurance was warranted or would ultimately prove profitable to the in- dividuals concerned: Three previous extensions had been granted. Mr. Roosevelt pointed out that the war risk insurance act, which au- thorized the writing of life insurance by the Government for members of | the military and naval forces, stated that “not later than five years after termination of the war, as declared by proclamation of the President of the United States, the term insurance shall be converted.” Rates Are Beguiling. The President explained that “the kind of insurance to which term insurance was to be converted was founded upon a mutual basis, the Goverment simply administering the system for the benefit of the policy holders. Premiums received on mc- count of such insurance were for de- posit in the Treasury in a trust ac- count separated from and not com- mingled with the general funds of the United States.” The lower initial premium rates on | term insurance policies are beguiling,” Mr. Roosevelt wrote, “and the holders thereof should realize that the time must ultimately come when such MORIAL DAY, MAY 30th, the Nation pays its tribute to the departed with gifts of flowers. No day has attained greater meaning—and none but a floral offeri gives true expression to to the day. ng from Gude Bros. Co. the sentiment attached Our Four Stores Will Be OPEN Sunday, May 30, and Monday, May 31, Until Noon Flowers Fresh Cut Twice Daily 1212 F St. We Telegraph Flowers—Ask About Our F. T. D. 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A Breach of Faith. “Furthermore, enactment of this pro- | posed legislation would constitute a | brexch of faith on the part of the Federal Government toward the large body of converted policy hoiders con- { tributing ‘o the Government life in- surance fund, and on two counts: “(1) The small group of term insur- ance policy holders would continue to carry their life insurance at consider- ably lower premium rates than the great majority of converted policy holders are allowed; “(2) The reserves which have been built up almost entirely by the con- verted policy holders would continue to be drawn off to meet undue losses sus- tained in carrying the low-premium term policies.” Finance (Continued From First Page.) last 10 or 15 years it seemed to have accelerated in the last year. ‘The actions planned by the Treas- ury will be based on findings con- tained in a special survey ordered by Secretary Morgenthau after March income tax collections fell 17 per cent below estimates. Results of the study, made by Un- dersecretary Roswell Magill, were pre- the Internal Revenue Bureau, sald he could not estimate exactly liow many legal proceedings would be un- dertaken. Other officials sald there probably would be numerous suits, Foreign Corporations Formed. Officials said one plan of tax evasion | Which has been carefully investigated involves formation of corporations in foreign countries by large taxpayers. Some of these taxpayers, they said, transfer funds to the corporations to escape taxes. In a recent speech, Shafroth out- lined this method of evasion and said that “It is our settled policy to resist to the utmost all schemes wherein the taxpayer seeks apparently to wipe out his income and avold a tax by merely going through a lot of motions and formalities.” Senator Wheeler, Democrat, of Mon- tana, veteran Senate investigator, said today he would favor a congressional inquiry into tax evasions under the new revenue laws. gation by the Treasury would be preferable, since it is much more familiar with the facts than a cone gressional committee could be. Internal Revenue authorities already should be at work, he suggested, to plug loopholes in the tax laws and start prosecutions where fraud is suse pected. Other congressional leaders would not talk for quotations about the tax situation, but said they expected a sented to President Roosevelt yester- day by Morgenthau. 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