Mr. EAGLETON, from the Committee on the District of Columbia, submitted the following

REPORT

[To accompany H.R. 12982]

The Committee on the District of Columbia, to which was referred the bill (H.R. 12982) to provide additional revenue for the District of Columbia, and for other purposes, having considered the same, reports favorably thereon with an amendment and recommends that the bill as amended do pass.

The amendment is as follows:

The amendment strikes out all after the enacting clause and inserts a substitute text which appears in the reported bill in italic type.

PURPOSE OF THE BILL

As amended by the committee, H.R. 12982 would provide an estimated $61.6 million in additional revenue for the District of Columbia government to help finance increased costs and workloads of existing programs and enable the District to develop urgently needed new services. More than half of the total $32.5 million) would be derived from expanded local taxes and fees. The bill amends existing law:

(1) To fix the annual Federal payment authorization at 30 percent of local revenue credited to the District general fund, with the payment for fiscal year 1970 not to exceed $120 million. The present payment is $90 million.

(2) To remove the present sales tax exemption of admissions to theaters and public events; repairs of tangible personal property; duplicating, addressing and mailing services; carwashing; materials used in construction of public and semipublic buildings, and laundry and drycleaning. The existing 4 percent rate would apply to these services.

(3) To increase the sales tax on restaurant meals and alcoholic beverages from 4 to 5 percent.

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(4) To increase the cigarette tax from 3 to 6 cents per pack. (5) To increase the motor vehicle excise tax from 3 to 4 percent. (6) To increase the alcoholic beverage taxes on beer from $2 to $2.25 per barrel; on spirits from $1.75 to $2 per gallon; and on wines at various rates.

(7) To require payment of estimated business income taxes beginning in 1970.

(8) To bring District of Columbia sick pay and capital gains income tax provisions into conformity with those of the Federal Government.

(9) To increase motor vehicle and license fees.

REVENUE PROPOSAL COMPARISONS

The reported bill represents a 10-percent reduction in the District government's request of $68.5 million, but it substantially increases the $39.7 million authorized by the House. The following table compares the District proposal and House and Senate recommendations for general fund and highway fund items:

DISTRICT OF COLUMBIA GOVERNMENT REVENUE PROPOSAL COMPARISONS, FISCAL YEAR 1970

DISTRICT OF COLUMBIA GOVERNMENT REVENUE PROPOSAL COMPARISONS, FISCAL YEAR 1970-Continued

DISTRICT OF COLUMBIA GOVERNMENT HIGHWAY FUND PROPOSAL COMPARISONS, FISCAL YEAR 1970

Highway fund

[In millions]

District of
Columbia

House 1

9. Establish a $10 restoration fee for permits suspended under Safety Responsibility Act.

1. Increase motor vehicle registration fees from $22.50 and $32.50 to $30 and $50 respectively, reduce the weight for the lower fee from the present 3,499 pounds to 3,399 pounds, and increase by all commercial vehicle fees..

2. Increase motor vehicle title fee from $1 to $5.

3. Increase temporary tag fee from $1 to $5, except where to meet DMV requirement, they shall be $2.

House action, $1 to $3.

4. Increase motor vehicle inspection fee from $1 to $3.

5. Increase operator's permit from $3 for 3 years to $12 for 4 years..

6. Increase learner's permit from $5 to $10.

8. Increase restoration fees for suspended and revoked permits from $5 to $10.

11. Increase duplicate (replacement) tag fees from $1 to $2.

. 021

12. Increase duplicate registration card fees from 50 cents to $1.

13. Increase transfer of registration fees from $1 to $2

.005

15. Impose a gasoline user tax on out-of-State commercial vehicles.

14. Tags with specially ordered markings; a registration fee of $25 and an annual fee of $10..

Total.

6.1

5.603

1 Senate amounts same as House amounts.

FEDERAL PAYMENT AUTHORIZATION FORMULA

Local taxation is by far the largest source of General Fund revenue (80 percent of the fiscal 1970 budget), but an important second source is the annual Federal payment to the District. This unique form of assistance is the Federal Government's contribution to the costs of operating the Nation's Capital and is given in lieu of taxes on Federal operations and real estate holdings.

As the District's principal industry, the Federal Government is a heavy user and beneficiary of common municipal services such as police and fire protection. The District is also called upon to provide

many special protective and ceremonial functions which have no parallel in other cities. This Federal burden on District services is aggravated by the fact that the United States owns about 43 percent of the land in the District, but pays no property taxes.

To compensate the District for the burdens of the Federal presence, the Congress has regularly provided payments to help defray the costs of operating the city. Since 1956, the authorized payment has ranged from $20 million to the presently authorized $90 million, but the increases have been irregular and have had no consistent relationship to the District's needs.

The committee is recommending this year that the Federal payment authorization be fixed at 30 percent of the local tax revenue which is credited to the District's General Fund. The formula would be limited to a 5-year period, but the payment for fiscal year 1970 shall not exceed $120 million.

It is the committee's view that a formula payment of this kind would provide a more equitable Federal contribution to the District than is now the case. It would allow the payment to grow proportionately with local tax revenues and enable the District government to plan its programs in a more reasonable and orderly fashion.

The committee notes that the concept of a Federal payment formula has been endorsed by both President Johnson and President Nixon and that a similar formula for District borrowing authorizations was approved by the Congress several years ago.

Taking into account the additional local taxes recommended in this bill, the Federal payment formula would provide an estimated $119.1 million to the District this year, or an increase of $29.1 over fiscal 1969. The House authorization of $105 million is $15 million more than the present payment and amounts to 27.4 percent of existing and House-approved increases in General Fund tax revenues.

The committee emphasizes that the implementation of the formula method would not mean an automatic Federal payment to the District government. As is now the case, the payment authorization would have to be acted upon by the Appropriations Committees of the House and Senate and approved by the Congress. Congress would also have to approve most changes in local tax laws which provide the basis for calculating the payment.

SPECIAL PAYMENT

In addition to the reductions made by the Congress, the District government stands to lose substantial revenue because it will be unable to collect many of the taxes (sales, excise, alcoholic beverage, and cigarette) authorized by H.R. 12982 for the full fiscal year which began July 1. Assuming enactment of the bill by September 30, the $39.7 million authorized by the House would yield only an estimated $34.6 million in fiscal year 1970. The $61.6 million recommended by this committee would be reduced to $53.1 million in actual collections. To avoid this unintended reduction of District revenue. the committee is recommending a special, one-time payment to put District tax collections on an annual basis. With passage of the bill before September 30, it is estimated that the payment would be $8.5 million. This payment shall not be considered part of the annual Federal payment, nor would it be considered for purposes of determining the Federal payment under the formula method.