Saturday, November 1, 2008

By day more than a million people work in the District — half of whom pay neither income nor property taxes to the city. By night the city reverts to the 581,000 residents, who pay sales, excise, income and property taxes.

For years, D.C. Council members, mayors and the congressional delegate have argued for a “commuter” tax. The last such proposal would have imposed a 2 percent tax on nonresidents’ income. The plan ultimately failed before it was even introduced due to the objection of Maryland‘s and Virginia‘s congressional delegations. Now there’s a new wrinkle — this time from the D.C. Transportation Department — under the guise that money is necessary to fix the city’s roads and bridges. It is called a “congestion tax.” The proposal’s ambiguity could result in an additional tax on tourists and presumably any company giving bus tours.

The argument for a commuter tax has always been that Maryland and Virginia residents, and commuters — indeed the entire national and international tourist class — benefit daily from such city services as public safety, roads and public works and the 911 system without having to pay for them. So goes the pro-commuter tax argument. On the flip side is: D.C. Delegate Eleanor Holmes Norton was asked once about all the money the city takes in from commuters and others who eat and shop in the city every day — in other words, paying sales and excise taxes. She quipped, “Yes, we are very happy to have their lunch money.”

But that “lunch money,” as Mrs. Norton refers to it, adds up to quite a chunk in taxes. Factor in the inevitable late meeting over drinks (sales and liquor excise taxes) or dinner after work and you get a lot more than “lunch money.” And that is just the everyday working crowd. Twenty million tourists a year eat, buy souvenirs, rent cars and hotel rooms in the city. All told, the city rakes in an estimated $5 billion a year from the “lunch money” from workers and tourists every year. Consider that the city’s contribution to its annual budget is currently $5.7 billion.

When the city was in disrepair and under the thumb of crime, it could not draw significant evening and nightly crowds downtown. Rampant crime and ragged streets during the late 1980s thru mid-1990s were chiefly responsible for the city’s empty coffers. If the mayor and lawmakers could curb crime and improve basic services, then they could create incentives for established businesses and new entrepreneurs to rebuild the nation’s capital. That has now happened, and the city has enjoyed several years of surpluses.

So, why does the city need a congestion or commuter tax — a tax that would essentially create disincentive for its neighbors, economic development and tourism? The city is barking up an old tailpipe. Instead, City Hall should slash business and income-tax rates to make the city a more desirable place to live, work and play. A commuter tax by any other name is still a commuter tax, and Maryland and Virginia leaders should tell D.C. officials what they have been saying all along: No commuter tax.

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