Commissioner TOBRINER. Thank you, Mr. Chairman. The Commissioners appreciate the opportunity to present their views on the proposed amendments to H.R. 11487 to provide more adequate financing for essential District activities. As passed by the House of Representatives, H.R. 11487 would increase individual income and motor fuel tax revenues and would provide additional borrowing authority for the highway fund. When I testified before your committee on H.R. 11487 last October I stated that, in the light of the impending adjournment and the urgency of the District's revenue needs, the immediate and most practical course of action was to enact H.R. 11487 without amendment in order that the sources of revenue provided therein would become available without delay. For the longer run, however, a program to increase all three major revenue sources available to the District, namely, local taxes, the Federal payment, and borrowing is extremely necessary. Since H.R. 11487 was not enacted last year, I am gratified that the committee has seen fit to hold hearings on the proposed amendments to H.R. 11487, dealing, in one legislative package, with the Federal payment, borrowing authorizations and all of the local tax increases needed at this time. For the sake of clarity, titles I through VII are new and cover the following: With respect to spirits an increase of from $1.50 to $1.75 per gallon. In respect to beer an increase of $1.50 to $3.50 per 31-gallon barrel. The yield from those two taxes will be approximately $1.2 million. Title II relates- The CHAIRMAN. At that point and I think it would be helpful. One of the problems we always have in this field of tax increases is that we don't like tax increases. In my years of government this is not a pleasant task with which we are confronted but we have to face up to the realities of the situation. I don't want to anticipate what you are going to say in your statement but if you have not covered it I want you to be prepared to cover it. What is the necessity for these additional revenues? Why do you need them? Why can't you get along with the money you have now? No. 2, how do these increases compare with those in the metropolitan area? These are always important questions because if you raise the tax on wine or other products, it is argued that consumers will make their purchases in Maryland or Virginia. I wish you would cover that when you cover the taxes. Commissioner TOBRINER. We will do that, Mr. Chairman, when we develop the specific taxes. Title III relates to an increase in the motor vehicle excise tax, from 2 to 3 percent and would yield approximately a million and a half dollars. Title III relates to increases in the general sales and use tax. So cigarettes would yield $1.3 million. Telephones, local telephone calls, $600,000, and increasing the rate on hotel rooms from 4 to 5 percent would yield an additional half million dollars. Title IV relates to an increase in the cigarette tax rate from 2 to 3 percent with an expected yield of $1.8 million, and title V relates to a proposed new tobacco products, tax on products, other than cigarettes such as snuff, cigars, chewing tobacco, and the like, which would be 20 percent of the wholesale rate or the retail rate where there was no wholesale involved and that would produce an anticipated revenue of $200,000. Title VI relates to the formula based Federal payment which Mr. Staats has discussed. Title VII relates to increased borrowing authority for general fund purposes which Mr. Staats has also discussed. And we have titles VIII through XII which were the subject of hearings on October 20 and 21 and they remain unchanged. The CHAIRMAN. Do you comment upon those at all in your statement? Commissioner TOBRINER. The unchanged? The CHAIRMAN. The unchanged items. Commissioner TOBRINER. Yes; I do. The CHAIRMAN. I don't think there is any need of going into detail but I wish you would capsulize this and advise us as to how you are going to increase title VIII and how you are going to now increase title IX? Also what you do in titles X and XI. Commissioner TOBRINER. Yes. Title VIII would provide a compression of the income tax bracket so that we would achieve an additional revenue of $4 million for a full year's operation. Currently the rates on personal income tax are at the rate of two and a half percent on the first $5,000 of taxable income, 3 percent on the next $5,000. It reaches a peak of 5 percent on income, taxable income, in excess of $25,000. The proposed bill would compress the taxable brackets so that instead of increments of $5,000 there would be increments of $2,000 on which these present rates would operate. So that we would get to the maximum percentage of 5 percent on incomes over $10,000. The CHAIRMAN. This would give you an additional estimated income of $4 million? Commissioner TOBRINER. $4 million for a full year's operation, Mr. Chairman. The CHAIRMAN. Very well. Commissioner TOBRINER. We would also increase the motor vehicle fuel tax from 6 to 7 cents, and this is expected to yield $2 million on an annual basis. The CHAIRMAN. How does raising the tax on a gallon of gasoline from 6 to 7 cents, compare with Maryland? Is there a tax on it in the Commonwealth of Virginia? Commissioner TOBRINER. Yes; we would reach a parity with Maryland and Virginia by raising the tax from 6 to 7 cents. The CHAIRMAN. If this title IX were enacted into law then the tax that I would pay on gasoline per gallon would be the same whether I obtain it in Maryland or Virginia? Commissioner TOBRINER. That is correct. The CHAIRMAN. That would be 7 cents rather than 6 which it is now? Commissioner TOBRINER. That is correct, Mr. Chairman. Commissioner TOBRINER. Title X is really a technical provision that relates to tax abatement provisions which would make it unnecessary unless requested by the taxpayer that we refund excess payments not over a dollar and also that the taxpayer not be required to pay odd cents. It is an administrative provision, a provision for administrative ease and is embodied I believe in the Federal income tax law. Title XI relates to the additional borrowing authority of $35 million in respect to the highway fund and would raise the borrowing limit from $50.25 million to $80.25 million. So that the total The CHAIRMAN. On that point, have we been furnished with all of the supporting material that we needed as a result of our hearing of last October in order to meet questions that were raised about the highway problem? Commissioner TOBRINER. Perhaps I should ask General Duke about that because he was mostly directly involved. If General DUKE. So far as we know, sir, we have responded to the request of the committee that the committee made at that time. there are deficiencies in that information we have provided obviously we will be happy to remedy that. The CHAIRMAN. I have to be frank to say, General, I will have to check with my staff man. I don't see him right at this moment. Maybe they could make it clear whether or not we have all the material we desire. I have not examined the material that was furnished pursuant to our request at the last hearing. Mr. McIntyre, our legal counsel, tells me that you have furnished all the material that we have requested. The staff is of course now going over it to see if then it complies with the information that we thought was desirable as we move forward on title XI. Commissioner TOBRINER. I might say to you, Mr. Chairman, that in respect to the relocation aspects of the highway program I am developing that point later in my statement. We will furnish you a more detailed statement for the record on that aspect of the problem if you so desire. The CHAIRMAN. That was one of the points that came up the last time. The cost of relocation and how many families you have seemed to depend on the highway program and a lot of unknown fac I hope they have been resolved so as to make a satisfactory record. If we have to defend our position we have to have the ammunition to do it. Maybe you cover that later on. The staff says you furnished us everything that is requested. After we have gone through, if there is anything further we will get it to you immediately. Commissioner TOBRINER. So, H.R. 11487 as proposed to be amended will provide for the general fund a total of $12.4 million in additional local tax revenue annually, a formula-based Federal payment, and increased borrowing authority. It would provide $2 million annually of motor vehicle fuel taxes revenue and $35 million of new borrowing authority for the highway program. We therefore strongly urge enactment of the House bill with the proposed amendment. The effect of the financing that will be provided by this legislation over the next 6 years is summarized below. Exhibits A and B that are now on easels show additional detail (see pages 41 and 42.) Does the chairman desire me to read these tables or since they are in the record perhaps it would be easier to refer to them in the record? The CHAIRMAN. I don't know. You proceed to tell me anyway what these things mean. Commissioner TOBRINER. In 1967 the excess of our requirements over our existing revenue availability is $24.3 million. The CHAIRMAN. That means that for this next fiscal year you have to have another $24 million? Commissioner TOBRINER. That is correct, of which $12.4 million is in the additional tax revenue and $11.9 million is in the additional Federal payment. The CHAIRMAN. I understand that now. Commissioner TOBRINER. And correspondingly, then, for the next year we show that we have an excess of $27.1 million in our anticipated requirements and that this will balance out, if the proposed amendment is passed. The same is true of 1969, we will have an anticipated requirement of $57.9 million and in The CHAIRMAN. In 1969 you are going to need $57.9 million more than your anticipated expenditures if the legislation which is before us now is enacted into law. Will that give you that much money? Commissioner TOBRINER. Yes, sir. It will balance out. The CHAIRMAN. Why in 1968 does it only give you $27 million? The CHAIRMAN. Why in 1968 does the bill only give you $27 million? Commissioner TOBRINER. It is the use of the loan that would make up the difference. The CHAIRMAN. There is quite a substantial difference there. Where do you get the $37 million? Mr. Lowe. Mr. Chairman, this question revolves to a considerable measure around the technicality that about 1968 we will have consumed all of our present borrowing authority. Therefore, we have a blanking out or elimination of what appears as a resource of $20 to $25 million in the financial tables. Now, commencing in fiscal 1969 the proposed new borrowing authority which was discussed by the Deputy Director of the Budget Bureau a few minutes ago would take over. So by virtue of this combination of the statistical quirk in the sense that you have here The CHAIRMAN. Maybe a statistical quirk but it is $30 million. Mr. LowE. Right. But it is not an actual expenditure of that much more money. The CHAIRMAN. I think I understand what you are saying. Will you explain this borrowing authority just a little more for the record? Commissioner TOBRINER. In respect to the highway fund we provide a table showing a similar approach and indicating that if we have the proposed gasoline tax increase and the increased loan authority we will have sufficient to finance highway requirements up until the year 1970. The most critical issue confronting the District continues to be the need for additional revenue to meet its increasing responsibilities in such areas as education, crime prevention, social welfare, and public health. In essence, the budget requirement of the District is rising more rapidly than available revenues as shown in exhibits A and B. In order to illustrate more quickly and more clearly some of the points I shall make in my testimony we have prepared several exhibits and other supporting tables which are attached to this statement. Some of these will be shown to you on the easels. In fiscal 1967 it is estimated that local taxes and appropriations of the presently authorized Federal payment of $50 million, plus the normal use of existing loan authority, will provide only $346.7 million of the $371 million budgeted in the general fund for District expenses. The CHAIRMAN. May I ask a question at that point? You say assuming the presently authorized Federal payment of $50 million? Commissioner TOBRINER. Yes, sir. The CHAIRMAN. What did you receive in fiscal 1966? Commissioner TOBRINER. $43 million of the authorized $50 million. The CHAIRMAN. You are assuming that they will appropriate the full amount of the authorization? Commissioner TOBRINER. Yes, sir. We make that assumption although as was pointed out during Mr. Staats' testimony, the Congress has never yet to our knowledge appropriated the full authorized payment. But it does seem to me that the two are interrelated and the higher the authorization the more tendency there would be to approach that ceiling. The CHAIRMAN. The authorized Federal payment is $50 million now? Commissioner TOBRINER. Yes, sir. The CHAIRMAN. It was $50 million in fiscal 1966? The CHAIRMAN. But instead of getting $50 million in 1966, and which I personally supported, you only got $43 million? Commissioner TOBRINER. That is right. The CHAIRMAN. What makes you think if you have the same authorization that you are going to get any more than $43 million? Commissioner TOBRINER. The trend has been with the authorization going up there has been also an incline in appropriations. The CHAIRMAN. What you are saying is that you hope if it is authorized above $50 million, the figure you are asking for here, maybe they will then give you $50 million. Commissioner TOBRINER. This is the way it works out practically, Mr. Chairman. The CHAIRMAN. I try to be a practical man because I have watched these authorizations and these appropriations for a number of years and I have I must confess I have always been somewhat mystified. What you are saying is that if you increase the authorization above $50 million, then maybe you will get $50 million? Commissioner TOBRINER. For example, we did not get above $30 million until the authorization was increased to $50 million. The first year it was increased to $50 million we got $37.5 million. The next year we got $37.5. So it does follow in a rough curve You may proceed. Last year we got $43 million. the increase in authorization. The CHAIRMAN. Very well. Commissioner TOBRINER. In fiscal 1967 it is estimated that local taxes and the appropriation of the presently authorized Federal payment of $50 million plus the normal use of existing loan authority will provide, as I stated, only $346.7 million of the $371 million budget in the general fund for District expenses. Thus, it can be seen from exhibits A and B that an additional revenue of $24.3 million is necessary to finance the 1967 general fund budget as I indicated earlier. The House bill as proposed to be amended would close this gap by making up that $24.3 million from increased local tax revenues of $12.4 million and an increase in the Federal payment by the formula approach to $11.9 million. |