there has accumulated in the Treasury a sum of approximately $4,000,000, and if we now exceed our proportion of 60 and 40, we are only ofsetting by a present deficit a surplus of the past.

Mr. CRAMTON. Of course, you will remember that the 60-40 basis is not a new adjustment, but is a temporary expediency pending legislation in other committees which would perhaps cover the other subjects as well.

Mr. SISSON. Col. Kutz, there has been a contention for some time in this District on the one side that the 50-50 proposition was simply a tax like any other tax, and some of the ablest lawyers of the Congress who were the proponents of the 50-50 proposition contended in the debates that that was a tax going into the Treasury like any other tax, and after the 50-50 had been contributed, Congress could appropriate the money, as much or as little, as it pleased. You are now raising a controversy here which I expect will take a lawsuit to settle, that is, whether or not the Federal Government is due to the District of Columbia money which it did not pay although it used all of the District's 50 per cent, and did not of necessity have to expend that matched number of dollars out of the Federal TreasSo that that contention in my judgment can not be settled in this committee, nor am I, as a member of the committee, willing to settle that proposition because I have some very strong and well defined opinions about the matter they may or may not be just because I have looked up that legislation and the exact language in which it was carried, and the theory upon which Congress has been proceeding always in the past, and repeatedly Members of Congress, none other than a lawyer whom I have great respect for, Mr. Sherley, took very direct issue on that proposition as a legal proposition. He was the latest of the authorities on the question. So in the discussion of that proposition before this committee, we would get into an interminable difference which neither you nor I nor the members of this committee could settle.

ury.

Col. KUTZ. We did not intend to open up that question because that is a question that is now pending before the conference committee.

Mr. SISSON. Yes; that is purely a legal question or a question of the policy Congress may adopt in the future. I think Congress might change its policy in the future with reference to the District but for the present that matter, I imagine, so far as this committee is now concerned, would have to rest where it is.

Col. KUTZ. But there is no impropriety or illegality in recommending an appropriation that will be in excess of the amount that would be raised based on the 60-40 contribution.

Mr. SISSON. None in the world, Colonel, provided the people in the District are paying a tax at all commensurate with the benefits received by the people of this community, as compared with what people are paying for benefits in other communities, and following the suggestion of Mr. Cramton, if these things are absolutely necessary, the only question before the committee would be whether or not we should raise your rate up to a point where it would be commensurate with what other communities pay for like improvements, and when we shall have reached that point, then the Federal Treasury might begin to respond, but until the District carries its proper load

Mr. DAVIS (interposing). Have you ever thought of raising the intangible tax rate? I would like to get your views on that.

Col. KUTZ. I have never given that very much consideration, but, personally, I do not believe in that form of taxation.

Mr. DAVIS. Some question arose on the floor during the consideration of this bill last year as to why we did not raise the intangible tax

rate.

Col. KUTZ. I know that it has been suggested that that tax rate be raised, and there are certain of the States of the Union, after having tried that form of taxation, have since abandoned it. Massachusetts, I think, is one of them. From my limited knowledge of the subject and from such superficial studies as I have made of it, I am convinced it is not a wise form of taxation and leads, in many cases, to a double tax. Take, for instance, the situation in the District of Columbia: The minute the intangible tax was imposed, the rates on all loans on real estate were increased by the amount of that intangible tax and the tax did not affect the man it was intended to affect.

Mr. BUCHANAN. That is true throughout every activity of Government. Every tax which the Government imposes upon any activity is carried on to the consumer.

Col. KUTZ. Yes; I think that is true.

Mr. BUCHANAN. Based upon your estimates, what rate or rates of taxation would be necessary to meet what you term the necessary requirements of the District?

Col. KUTZ. If the only change is made in the tax on real estate and tangible personal property?

Mr. BUCHANAN. Yes; I suppose so.

Col. KUTZ. I will ask the auditor to compute the tax rate on tangible personal property and on real estate that would be necessary to bring revenues of $16,200,000, which is 60 per cent of the total amount.

Mr. CRAMTON. Less the amount raised from other sources.

Col. KUTZ. Yes; I am assuming that the other rates will remain unchanged.

Mr. HENDRICK. Mr. Chairman, on the question of intangible tax, I have given some thought to that, and it might easily occur that a man would be taxed on five times his actual property. For instance, we will assume the case of a $10,000 purchase of real estate or stock, and a man borrowing $8,000 on that, which is not so frequent in real estate but quite common in stocks. That man owns $10,000 worth of property. He has a debt of $8,000 on it. His real property value is only $2,000. He would be required to pay a tax on $10,000. Take another case where a man, we will say, has a mortgage of $5,000 on his home and he had owing to him from other sources $5,000, secured or unsecured, as the case might be, but unable immediately to collect in time to pay off his mortgage. He then owes $5,000 on his house, he owns $5,000 due from other sources. He has no property value in so far as those two things are concerned, one offsetting the other. He has only the equity in his house. He is paying the real estate tax on the entire property and he is paying the intangible tax on $5,000 worth of notes, which is already eaten up or offset by the other.

Mr. DAVIS. Take an illustration which has just occurred to my mind: Suppose you have a little business up here as a groceryman or otherwise, and own the building and have a stock of goods of $10,000, and the whole property is worth $20,000. You transact business in that place for 8 or 10 years and make, as a rule, an average of 7 or 8

or 10 per cent profit over and above overhead and everything. Suppose you sell that for $20,000, take the money and put it in your pocket, or invest in bonds or railroad stocks. Of course, the man who bought that property of you will pay taxes on the property hẹ bought. Now, you are simply transferring your property from real and personal property into money, and ought you not to pay a tax on that $20,000?

Mr. HENDRICK. If there be no other form of taxation, which in your opinion, would properly reach it.

Mr. DAVIS. Ought he to escape taxation on that $20,000?

Mr. HENDRICK. No; he should not escape taxation.

Mr. DAVIS. Having a $20,000 business he pays taxes on it, but the moment he shunts that off to somebody else and puts the money in his pocket he pays no taxation.

Mr. HENDRICK. You are exactly correct; but the point I have in mind is this, if there be some other form of taxation, and I think there is, that would cover that to your satisfaction, well and good. If there is no other form that will so properly cover it as an intangible tax, that intangible tax should have a proviso exempting men from paying on property that they do not own; in other words; pay on what they actually have with deductions for debts; or, in other words, pay on their net worth rather than their gross.

Mr. SISSON. If you did that, Mr. Commissioner, it would not be very long until even the tax dodging that is now so difficult to catch up with would be so enormous that no one would ever pay any tax. You can not afford to base it on net ownership. For instance, I may own a piece of land. That land is subject to taxation, and I buy it with the idea that the Government and the State must be supported by taxation on that land. Then if a man has a mortgage against me, he owns an equity in the land, but he is drawing interest on that note which is secured by the land. Now, the State protects his interest in the land just as it protects my land, and so both pieces of property are legitimately subject to taxation, and every court that has ever decided the matter has decided that it is not in any Each man has his property and sense of the word double taxation.

has it protected and has his individual inte est in it.

Mr. HENDRICK. That part is true. I am only speaking of the net worth of the man; that he should pay taxes on what he is actually worth and not on paper duplications. Do I make myself clear?

Mr. SISSON. Yes; but that is so altruistic, M. Hendrick, that we would never be able to get enough money to run State, county, and municipal governments, and that is the trouble with the District of Columbia.

MY. HENDRICK. The income tax law provides for that.

Mr. SISSON (continuing). They are too altruistic in everything except in their relations with the Treasury. That is only a tax on incomes and involves an entirely different proposition.

Mr. BUCHANAN. What is your intangible tax rate now?

Mr. HENDRICK. Three-tenths of 1 per cent.

Mr. BUCHANAN. What revenue does that bring?

Col. KUTZ. I think it is about $1,000,000.

Mr. BUCHANAN. Have you noticed the intangible taxes in other States, what rate they have?

Col. KUTZ. I have not made any comparison of rates. My attention was called to the fact that Massachusetts, after several years of experience, had abolished it and substituted an income tax.

Mr. BUCHANAN. I think there is an intangible tax rate in several States of the Union, but your definition of intangible property may not be exactly like theirs. Now, three-tenths of 1 per cent brings in $1,000,000?

Col. KUTZ. Yes, sir.

Mr. BUCHANAN. To double that would bring $2,000,000.

EXECUTIVE OFFICE.

Mr. DAVIS. Mr. Commissioner, on page 3, under the head of "General expenses" for the executive office, I wish you would make a statement for the record as to what the increase from $30,280 to $40,840 is composed of.

Col. KUTZ. An increase in the compensation of employees, which for the office as a whole amounts to an increase of 33.9 per cent. There are no increases in the number of employees.

Mr. DAVIS. Is there not an increase as to one messenger?

Col. KUTZ. There is a change from a messenger to a clerk. The number of personnel is unchanged.

Mr. HENDRICK. Mr. Chairman, at this point I would like to make a statement regarding the recommendation for an increase in the salary of the commissioners. The present board of commissioners has no concern as to what the rate of compensation may be, and we would like to have you understand that we are making this recommendation based on what we believe is the least amount of money that will command in the open market a man or a woman of proper caliber. We think that $7,500 is a fair and a modest rate of compensation.

Miss BOARDMAN. May I say, Mr. Chairman, that in the report of the commissioners for 1920, at page 12, on the topic of increased salaries, it is stated:

The commissioners have included an increase in the salaries of the Commissioners of the District of Columbia, but in doing so they have no intention in urging that this increase apply during the term of office of present incumbents. They do, however. desire to place themselves on record as earnestly recommending the increase of the salaries of their successors in this office, in order that they city may secure the services of persons capable to fulfill the duties of a commissioner efficiently and without personal financial sacrifice.

The statement I read was put in our report to Congress.

Mr. DAVIS. Have you anything further to say concerning the salaries?

Col. KUTZ. I might make this general statement, which will apply to certain of the other offices, and that is we have assumed a minimum salary for clerks, in general, of $1,200, and we have placed messengers and the laborers in the department at a salary of $840. All these salaries are based on the assumption that the present bonus will remain in effect.

Mr. DAVIS. And also that the cost of living will remain where it is? Col. KUTZ. No, sir; we assume that the bonus will be changed from time to time, abolished or diminished, depending upon the cost of living; but we have tried to recommend for the consideration of this

committee basic salaries on the assumption that the bonus was a temporary feature which might be continued, might be reduced, or might be abolished at any time, depending upon changes in the cost of living.

Mr. CRAMTON. To what extent is the cost of living in the District of Columbia dependent upon the salaries we fix. The entire population here being dependent on the Government, is it not rather a settled policy here to fix the cost of living so as to absorb whatever salaries may be granted?

Col. KUTZ. I do not think that is possible.

Mr. CRAMTON. For instance, there is a variation in the cost of fresh meats in the different markets of the city of as much as from 20 to 30 cents a pound, indicating the policy of your retailers to charge all they can get out of your customers, which means whatever salary they receive.

Mr. SISSON. Enforcing what my friend has said about thet, immediately after the salary of Members of Congress was raised from $5,000 to $7,500, every hotel in the city of Washington automatically increased the congressional rate exactly 50 per cent. It was about $60 a month for room and beth, but immediately after their selɛries were raised the congressional rate was increased to $90, and they did not hesitate one minute to tell you that they had increased the rate and why they had done so. They do not tell you so now because people got tired of thet, but that was done with deliberation, and I think the statement made by Mr. Cramton is almost literally true.

Col. KUTZ. There is competition, though, in the city, but I have no doubt there are some dealers and some landlords who are actuated by the motive to get all they can and all a customer cen efford to pay.

Mr. CRAMTON. It is so widespread and so general that I personally believe the higher salaries we give to the great army of clerks in the departments here, including your service, the higher will be the cost of living in Washington.

Col. KUTZ. But, Mr. Cremton, our ples for these employees is a ples that you do for them just what you have done or Congress has done for 4,000 other District employees. You have increased the basic salaries of the policemen, 1,000 in number; of the firemen, six or seven hundred in number; end of the 2,000 and odd school-teachers, and the only employees of the District whose basic compensation has not been increased are these 1,500 clerical employees.

Mr. CRAMTON. Please do not take my expressions as an expression upon these particular increases, but that is one angle of the problem which makes it a difficult one.

Mr. DAVIS. What is the total number of District employees?
Col. KUTZ. I think it is about 7,000.

Mr. DAVIS. Thet includes school teachers and every one?

Col. KUTZ. Yes; of course, it varies from time to time because we have certain day-labor gengs that fluctuate, depending upon the season of the year.

Mr. DAVIS. That is, from street cleaners to the top, you have about 7,000?

Col. KUTZ. Yes, sir.