of already over-burdened taxpayers, and to the detriment of other areas of public need that are continually deprived of adequate financing because one area of our national life is massively funded without regard to need.

APPLY "USERS" CHARGES TO HIGH INCOME PUBLIC SCHOOL & COLLEGE FAMILIES

I ask your Committee for congressional leadership that will motivate state and local governments to introduce "Users' Charges" for high income public school and college families. Such charges could be paid as additives to state income tax reports, avoiding embarrassing means tests for anyone; and would self-finance public education tax needs-and free perhaps 20 billions of tax dollars annually for other purposes.

NON-EDUCATION AREAS OF PUBLIC NEED CAN BE AIDED WITH SAVINGS $20 BILLION YEARLY

I ask your committee to initiate formal studies that would determine dollar savings possible by plugging this leak in our tax structure which hurts so many in need, and I have attached a sample constitutional amendment which states could perhaps utilize to study and implement this plan.

Thank you for your consideration.

HOUSE JOINT RESOLUTION NO.

JOINT RESOLUTION Submitting to the qualified voters of Missouri, an amendment repealing section 1(a) of Article IX of the constitution of Missouri relating to education and adopting one new section in lieu thereof relating to the same subject

Be it resolved by the House of Representatives, the Senate concurring therein:

That at the next general election to be held in the state of Missouri, on Tuesday next following the first Monday in November, 1970, there is hereby submitted to the qualified voters of this state, for adoption or rejection, the following amendment to Article IX of the constitution of the state of Missouri:

Section 1. Section 1(a), Article IX constitution of Missouri, is repealed and one new section adopted in lieu thereof, to be known as section 1(a), to read as follows:

Section 1(a). The general assembly shall establish and maintain free public schools for the gratuitous instruction as provided by law of all persons in this state who have not reached the age of twenty-one, and whose annual income or the annual income of his parents, does not exceed the sum of fifteen thousand dollars. Any person whose annual income or the annual income of his parents exceeds the sum of fifteen thousand dollars shall be required to pay a portion of the cost of his instruction and that portion shall be computed as follows:

Any person whose annual income or whose parents' annual income is fifteen thousand dollars or more, but not more than fifteen thousand nine hundred and ninety-nine dollars and ninety-nine cents, shall pay fifteen percent of the cost of his instruction; any person whose annual income or whose parents' annual income is sixteen thousand dollars or more, but not more than forty thousand dollars shall pay an additional one percent of the cost of instruction for each one thousand dollars of annual income in excess of fifteen thousand dollars; any person whose annual income or whose parents' annual income exceeds forty thousand dollars shall pay one hundred percent of the cost of instruction.

The percent of instruction due shall be paid as a tax reported and paid with the state income tax of such person or his parents. Proceeds from this tax shall be used for public educational purposes and for no other purposes.

STATEMENT OF ROBERT V. Moss, JR., UNITED CHURCH OF CHRIST

I am Robert V. Moss, Jr., President of the United Church of Christ. Our national office is at 297 Park Ave. South, New York, N.Y., 10010 and our Washington office is at 110 Maryland Ave. N.E., Washington, D.C. 20002.

The United Church of Christ was formed on June 25, 1957 by the merger of two of America's oldest denominations, the Congregational Christian Churches and the Evangelical and Reformed Church. It has approximately 7,000 local churches, with slightly over two million members. The representative body of the United Church is the General Synod, which meets biennially.

The Seventh General Synod met from June 25 to July 2, 1969. Its 744 delegates from across the nation, among other things, adopted a pronouncement on tax reform, entitled sharing the cost of government fairly, which I am privileged to file with you today.

I should note for you the participation of the local churches in the preparation of this statement. During the previous seven years, the Church had circulated two study documents on tax reform among the local churches for their reaction and comment. From those comments a specific proposal was prepared and circulated. Three-fourths of the bodies responding voted to support the statement or something close to it. The final drafting and adoption at the Synod thus reflect attitudes back home as well as at the convention itself.

SIGNIFICANT ASPECTS OF STATEMENT

There are three aspects of this pronouncement which strike me as especially significant.

1. This is surely one of the most non-self serving statements to be filed with this Committee. We ask nothing for ourselves. In fact, we recommend the closing of one loophole favoring churches, i.e. the taxing of church owned properties and businesses not related to normal religious pursuits. Our primary concern has been for the welfare of the general community of which we are a part. We are even studying taxation of church property per se and some local churches contribute to local governments in lieu of tax payments.

2. Our recommendations for the closing of loopholes are generally tougher than the provisions previously enacted by the House of Representatives. For example, we recommend that the preferential treatment afforded capital gains be "eliminated"-not merely reduced by lengthening the waiting period to one year and that the preferences extended to the oil and gas investors should be "ended"-not merely reduced from 272% to 20%.

3. We did not put in a plea for tax reduction. Although we have previously called for a reduction in national armaments and are gravely concerned over the high military expenditures, we realize that there are vast human needs which require large government funding. Thus we have not dealt in this pronouncement with the amount of taxes needed but only with the obligation of each person to pay his share. Our title, sharing the cost of government fairly, is accurate.

SUMMARY OF STATEMENT

After general statements of principles and tax criteria, our statement proposes the following tax reforms:

(a) interest paid on state and local government bonds should be taxed like other income, with federal government grants or loans to offset any increased interest costs;

(b) corporations should be allowed to deduct dividend payments as a business expense, as they now deduct interest payments;

(c) preferential treatment afforded capital gains "should be eliminated" with provisions for averaging the gains over the years involved;

(d) provisions for averaging income generally should be simplified and extended;

(e) preferential treatment extended to oil, gas and mineral industries shou'd be ended and only depreciation deductions allowed;

(f) estate and gift taxes should not be levied on transfers to the surviving spouse;

(g) the inheritor of property of increased value should take the decedent's cost base for the property;

(h) spurious foundations should not confer benefits of tax deduction; (i) businesses and property of churches, etc. unrelated to their normal religious pursuits should be taxed at the standard rates;

(j) there should not be a minimum threshold limiting deductions for small contributions;

(k) persons under or near the poverty line should not be taxed;

(1) increases in Social Security should come from general revenues rather than increased taxes on workers' wages.

And now, Mr. Chairman, I file with you our entire statement.

SHARING THE COST OF GOVERNMENT FAIRLY

A pronouncement of the United Church of Christ, Adopted July 1, 1969 Christians recognize that government has an important place in the providence of God in meeting His purposes and human needs. Christian stewardship regards the payment of taxes, levied through the democratic process, as a public duty, and their responsible use as a public trust. In the interest of justice, we insist that the revefues necessary to meet the expenses of government must be apportioned with utmost fairness.

TAX CRITERIA

Taxes, while primarily a source of governmental revenue, intentionally or unintentionally also affect the economic and social process. Tax policy, therefore, requires difficult choices to be made in accordance with the relative weight given to diverse, sometimes contradictory, norms. The following criteria, however, are basic in a just system:

1. Adequacy.-Taxes should provide adequate revenue for the government. 2. Simplicity.-The law should be understandable to the taxpayer and relatively easy for both taxpayer and government to administer.

3. Distributive Justice.-Taxes should fall on taxpayers in accordance with their ability to pay. While income is not the only element in a measure of ability to pay, it is proper for individuals with higher incomes to be taxed at successively higher rates, other things being equal. Regressive taxes-which take a larger share of income from the poorer taxpayer than from the richer— should be used sparingly and avoided entirely whenever possible.

4. Neutrality.-Taxes should not create artificial incentives for making economic decisions except where explicitly intended as a matter of public policy. Even then, the end sought may be more effectively and forthrightly achieved through properly designed controls and incentives.

5. Vitality. Both the nature and extent of taxation should be designed to enhance rather than inhibit economic efficiency, healthy non-inflationary growth, and productivity in a socially constructive manner.

6. Encouraging voluntary agencies.-The tax structure should continue to stimulate the use and development of voluntary agencies for their salutary contributions to our life.

SHORTCOMINGS OF OUR TAX SYSTEM

In the light of these principles, we believe that major reliance should be placed on the income tax. But we call attention to certain shortcomings in present United States tax policy.

1. The Tax System Does Not Meet the Test of Equity.-Since 1913 the United States has accepted the principle that a person's income tax should be related to his ability to pay, and that those enjoying greater income should contribute a larger percentage in taxes than those with a smaller income. Nevertheless, this rule is inequitably applied in practice. The mass of our citizens, who work for wages and salaries, pay full tax on their incomes. Yet in 1965 individuals reporting incomes over $1 million paid, in the aggregate, income taxes amounting to less than 31% of the net taxable income which they actually reported. They paid far less than this percentage of their total income, although the nominal rate scale called for a tax of at least 67%.

In 1967, there were 155 Americans with incomes in excess of $200,000 who paid no federal income tax at all. (Testimony of former Secretary of the Treasury Joseph Barr before the Joint Economic Committee of the Congress.) At the other end of the income scale there are persons who pay income tax on annual incomes of less than $2,000, in addition to Social Security payroll taxes and a host of state and local taxes.

These disparities are not due to dishonesty in reporting. In great measure they are the result of legal "loopholes" which favor certain forms of income as

over against others or apply inconsistent criteria in defining the (untaxed) cost of earning income.

These disparities are not due to dishonesty in reporting. In great measure taxes at a still higher level those of moderate income who already pay taxes. It taxes at a minimum rate, or not at all, those who are able to escape a full share of the tax burden.

Tax reform, largely deferred when taxes were reduced in 1964 and substantially denied when taxes were increased in 1968, is important to counteract the prevailing bitterness and sense of injustice. It would assure that the burden will fall fairly on all the American people, not just on those powerless to secure preferential tax immunity or relief.

2. The Tax Base Does Not Meet the Test of Adequacy.-The federal tax base has been eroded by many provisions that permit vase amounts of real income legally to avoid inclusion in net taxable income. As a result, those who can benefit are too much concerned with the technicalities of tax avoidance; and a high rate scale is applied to those forms of income which are fully taxed. Our direction must be toward a broader tax base involving fewer tax preferences, with a consequent reduction in rates.

3. Tax Inequities Prevent Counterbalancing Fiscal Policies.-In order to carry out its responsibilities to eliminate unemployment and inflation, the government needs effective tools and techniques. One of the most important ways of achieving these objectives is by adjusting income tax rates to counteract adverse economic trends. To be most useful, however, these changes must be enacted as soon as such problems appear. So long as our tax law is laden with complexities and inequities, Cogress will be reluctant to alter tax rates to meet national economic requirements.

4. The Inequities of the Federal Law Become Inequities in State Taxation. -Many states compute their own income taxes on a base that is identical with that for the federal tax, except for minor modification. As a result, the state income tax heightens the inequities of the federal tax. This inequity is intensified by state reliance on property, sales, and other taxes that have undesirable impacts on economic efficiency, urban development, housing, and the living standards of the poor. States cannot take the lead in tax reform without increasing the compliance burdens of taxpayers. Reform at the federal level, therefore, is essential for the improvement of state fiscal systems.

PROPOSED REFORMS

We recognize that a revision of the federal tax structure involves many technical questions. Nevertheless, we ask for correction of certain glaring and obvious deficiencies.

1. All personal income, whatever its source, should for tax purposes be treated on essentially the same basis, and be subjected to a graduated rate of taxation which is progressively heavier as the total amount increases. Any exceptions must be fully justified by a vital social or economic purpose, and must be scrutinized particularly as to their effect upon the less affluent members of society.

2. In the interest of greater equity and adequacy, the following steps should be taken to correct existing preferences and inconsistencies:

(a) Interest paid on bonds hereafter issued by state and local governments should be taxed like income from other investments. In order to make this change financially feasible for state and local governments, federal grants and/or low interest loans to such governments must be provided to offset the otherwise increased interest costs. This would be preferable and cheaper than the present hidden subsidy by tax exemption, which is no longer required by constitutional interpretations.

(b) Corporations should be allowed to deduct cash dividends as a business expense in determining their taxes, just as interest payments are now deducted. This would eliminate "double taxation" and tend to encourage the sale of new stock.

(c) The present preferential treatment afforded most capital gains should be eliminated and such gains should be taxed at the same rates as any other income. Provisions should be made for averaging the gains over the years involved to prevent unduly high rates for a single year. It is contrary to most notions of fairness that capital gains income should be taxed at lower rates than income earned as wages or salaries. Such preference also injects an arti

ficial influence into business decisions. There are better ways to improve the vitality of our economy.

(d) Provisions for averaging income for tax purposes should be simplified and extended to taxpayers not presently enjoying this advantage. Persons who receive the bulk of their income in a relatively short period of their working life tend to pay higher income taxes over their lifetimes than those receiving their income more evenly throughout their productive years.

(e) The preferential treatment extended to taxpayers who invest in oil, gas and mineral properties should be ended. Depletion deductions, like depreciation deductions available to taxpayers in other fields, should be limited to the amount of the taxpayer's actual investment.

(f) Federal estate and gift taxes should be revised to permit a husband or wife to receive property from the spouse tax free; but the law should not permit wealthy families to avoid estate taxes for generations by the use of long term trust arrangements.

(g) Provisions permitting profits on property appreciated in value to escape tax free at the owner's death should be changed so that where no inheritance tax is paid, the recipient of the inherited property takes the decedent's basis for the property.

(h) Property contributed to spurious, tax-haven foundations which do not significantly serve social purposes should no longer confer the benefits of tax deduction on the individuals who created them.

(i) Businesses and property of churches, foundations, educational and charitable organizations, but unrelated to their normal religious, educational and humanitarian pursuits, should be taxed at the standard rates applicable to business and property not so owned.

(j) We oppose use of a threshhold principle below which charitable gifts would not be deductible.

3. The income tax should be completely eliminated for those below the poverty line, and should not fall so heavily upon those immediately above the poverty line that they are thereby brought below it. Millions of citizens living below the subsistence level already pay unduly large portions of their income in income, sales, Social Security, and other taxes.

4. Any future increases needed to augment our Social Security trust funds for higher benefits to persons below or near the poverty level, should come from general revenues, principally the graduated income tax, rather than from increased taxes on the low-income worker's take-home pay. (How best to assure a reasonable minimum income to those living in poverty is not the subject of this pronouncement. Better Social Security, an improved welfare system and the use of a negative income tax for these purposes are still under review by the C.C.S.A.)

We recognize that these initial efforts will not eliminate all inequities, but they will provide a worthy beginning. We must remove any ground for the cynicism which results when the tax system favors the citizen who can afford a lobbyist or a high priced tax advisor, and places a disproportionate share of the cost of maintaining the peace or eliminating want upon those who are below, at, or immediately above the poverty level. The sense of shared entérprise and purpose will be real and deep only when each person who is required to help finance the national effort knows that each of his fellow citizens is, sharing the burden as he is, and that all increases is given equal treatment.

STATEMENT OF UNITED STATES CATHOLIC CONFERENCE

The history of our income tax laws demonstrates the necessity for periodic revision and reform. Economic and social conditions change, creating the need for equitable adjustments in such matters. Experience under existing law has demonstrated unforeseen and unintended results which make it necessary for Congress to take remedial action.

Several proposals for tax reform are currently pending before this Committee. Some of the proposed revisions of the tax law are of great interest to the