DC taxation datapoint of the day

By Felix Salmon
July 14, 2009

Ryan Avent quotes Alice Rivlin:

The CFO’s office estimates that if DC were able to tax non-resident income at its current tax rates it could raise more than $2 billion additional revenue, more than doubling the current yield of the District’s individual income tax of about $1.3 billion.

If the District of Columbia were to become a state, it could and almost certainly would start taxing people who work in DC but live elsewhere. Which is a huge proportion of DC’s professional classes. Needless to say, this is a Very Good Idea. Not that it’ll ever happen.


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As I native Washingtonian, I can say that DC’s problems aren’t a lack of tax revenue. It’s already one of the highest tax jurisdictions in the country. We have the best funded schools and the lowest test scores, even the president won’t send his kids to DC public schools. Not to mention that our former mayor was just arrested (again). If they want to tax people who work here, they only realistic plan is to retrocede.

It is precisely because DC would tax suburbanites that it will not become a state. Until DC’s political class (Marion Barry, Eleanor Holmes-Norton) shows some willingness to pay taxes, they certainly won’t deserve access to any more revenue than they currently have.

Posted by Eric | Report as abusive

While I agree that this might be good for DC, I would be furious. I purposefully just moved into MD, 1 block from the DC border to avoid DC taxes (and, probably more importantly, get in to the Montgomery County school district). Secondly, I spend more money in DC now then every before. It’s not like I’m trying to move my sales tax dollars out of DC…

Posted by chappy | Report as abusive

When Obama becomes president, this will change.

Posted by Chi | Report as abusive

The underlying problem is that DC is a city without the same-state suburban hinterland that normally surrounds American cities. Its tax rates are high because it cannot capture the tax revenues of a significant portion of the employees that work in the city because they effectively live in a different state. The tax rates in any central city would be significantly higher if there were not intra-state transfers and shared funding of large institutions such as universities and prisons.

The best answer to this problem is retrocession. The second-best is the commuter tax. Neither are doable at this point.

Posted by anon of the moment | Report as abusive