Decades-long effort to exempt D.C. residents from U.S. income tax still simmers

In the long battle to end the District’s particular plight — “taxation without representation” — most of the political energy has gone toward adding the latter, rather than rolling back the former.

Yet with the arrival of another Tax Day, the idea of exempting D.C. residents from paying federal income taxes remains alive, if only at the margins. Championed by Democrats, then Republicans, then Democrats again, the concept is promoted now by just a few conservative voices as most District advocates focus their attention elsewhere.

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In addition to electing a D.C. Council member, city voters on April 23 will act on a ballot proposal intended to give the District a measure of budget autonomy, a cause that Del. Eleanor Holmes Norton (D) and her allies are championing on Capitol Hill. And Norton continues her efforts to win voting rights in the House, often pointing out that District residents do pay federal income taxes — unlike residents of Puerto Rico, Guam and other U.S. territories that also lack full representation in Congress.

But Norton isn’t pushing to give the District a break on April 15, in part because she doesn’t think that’s what most city residents want. At town hall meetings and on the streets, “I never hear it,” Norton said recently. “All I hear is statehood and voting rights.”

Twelve years ago, Norton thought that an income tax exemption — at least until the city got voting rights — was a goal worth legislating.

“We put the same demand to the Congress that the founders of our nation put to King George: ‘Give us our vote, or give us our taxes,’” Norton said upon introducing a bill in 2001. “Confronted with the alternative: D.C.’s $2 billion in federal income taxes or voting representation for its citizens, we believe that Congress will ultimately choose the vote over the money.”

(The numbers have gone up since then. For 2010, the most recent year for which data are available, District residents paid $3.9 billion in federal income taxes, according to the nonpartisan Tax Foundation. That works out to about $6,500 per resident — more than double the national average.)

Plenty of lawmakers agreed with Norton: 119 House members, all Democrats, signed on, and then-Sen. Joseph I. Lieberman (D-Conn.) carried the bill in the Senate.

Because giving the District voting rights in Congress would spark a legal fight — some experts say that doing so would be unconstitutional — ending federal taxation might be a more elegant solution. It does not raise constitutional issues and would not change the partisan balance of the House or Senate. It also would not end Congress’s role in overseeing the District.

But it might, some critics contend, turn Washington into a landlocked version of the Cayman Islands – a fat tax haven easily accessible to Americans eager to avoid the Internal Revenue Service. And Norton raised another potential consequence: Congress might stop giving the District the same per-capita funding that states receive for most federal programs.

If the income tax ended, Norton said, “we would then almost surely be relegated to the status of a territory.”

Norton dropped the idea from her legislative agenda in 2002, largely because she couldn’t get any Republican support. But it resurfaced in a 2009 bill by Rep. Louie Gohmert (R-Tex.), an outspoken conservative, that drew 10 co-sponsors — all Republicans.

The partisan seesaw started more than two decades ago.

In 1990, the Rev. Jesse Jackson and then-Mayor Marion Barry (D) urged then-Del. Walter E. Fauntroy (D-D.C.) to introduce a House bill to exempt the District from the income tax. Fauntroy declined, though he had previously called on District residents to protest by refusing to pay federal income taxes and sending their money to a special escrow fund instead.

In 1995, Jack Kemp, a former Republican congressman and future vice presidential nominee, pitched the idea to District officials as an economic stimulus for low-income families. He proposed exempting D.C. residents from the federal income tax and replacing the local levy with a flat tax of 15 or 16 percent.

Norton soon offered a bill to slash the top federal income tax rate for D.C. residents to 15 percent, with Kemp and then-House Speaker Newt Gingrich (R-Ga.) on board. But the plan was opposed by the Clinton administration.

Grover Norquist, the head of the anti-tax Americans for Tax Reform, thinks ending the District tax is “exactly what we should do.”

Of course, Norquist, a D.C. resident, might be biased on the subject. But he said, “I would be for it even if I lived in Virginia”

 
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