High Court Won't Hear Commuter Tax Bid
Tuesday, May 16, 2006
The District's bid to tax commuters -- and take a step toward solving the city's inherent fiscal weaknesses -- was dealt a deathblow yesterday when the U.S. Supreme Court declined to take up the issue.
But the hundreds of millions of dollars in revenue that the levy was intended to recoup might not have gone to the grave.
The money could end up in the District's coffers in the form of an annual federal payment to the city, an idea that has been championed by Del. Eleanor Holmes Norton (D-D.C.) but until recently attracted little notice or support.
Now, the Supreme Court's decision could be the impetus to move forward with Norton's proposal for the District of Columbia Fair Federal Compensation Act, which would establish a mandatory annual subsidy to the city, starting at $800 million and escalating with inflation.
The bill, she said, has the support of every member of Congress from Maryland and Virginia. And with the wrangling over a commuter tax put to rest, Congress can take up a legislative solution to the District's fiscal issues without a legal fight lurking in the background, supporters say.
As the nation's capital, the District faces unique demands on its services and infrastructure. But as a federal jurisdiction, it does not have the freedom to raise revenue that states do.
A study by the Government Accountability Office in 2003 concluded that the District loses out on $470 million to $1.1 billion a year in tax revenue because of the federal government's presence.
With tax rates already high, the D.C. government has little room to raise them further, analysts say.
"We're clearly at the limits of taxation," said Alice M. Rivlin, a senior fellow at the Brookings Institution and the former chairman of the D.C. financial control board. "We tax everything we possibly can."
With the majority of the city's workers living outside the District, a commuter tax was seen as a way to generate additional revenue. But in the Home Rule Act of 1973, Congress barred the city from imposing such a tax.
Led by DC Appleseed, a civic organization, advocates challenged the ban, arguing that it resulted in an undue tax burden on D.C. residents. But a federal judge dismissed the challenge in 2004, and a federal appeals court upheld the ruling in November.
The Supreme Court was the last hope for the advocates.
D.C. Mayor Anthony A. Williams said in a statement: "I am disappointed that the members of the Supreme Court refused to hear this case. The infrastructure of our city is obviously taxed by the daily wear and tear of tens of thousands of commuters who work in the District but who do not pay for the city services that they use."
The failure of the commuter tax bid was unwelcome if not unsurprising news. But it comes as Norton and others appear to be making progress in their quest to secure a voting member in Congress for the District, with Norton and Rep. Thomas M. Davis III (R-Va.) pushing a bill that they believe can draw broad, bipartisan support.
Walter Smith, DC Appleseed's executive director, said Congress needs to look hard at its obligations to the District.
"This is the nation's capital," Smith said, "and Congress has put these limits on the local government, and it's got to compensate the local government so it can meet its responsibilities to the nation's capital."