A family with an annual income of $30,000 or more pays more local taxes in the District of Columbia than anywhere else in the Washington metropolitan area and more than in most other major cities in the United States, according to new studies by the D.C. Department of Finance and Revenue.
Families in those upper brackets who live in the District pay more total state and local income, real estate, sales and automobile taxes than those in any nearby Maryland or Virginia jurisdiction.
For example, a family of four earning $40,000 a year would pay $4,474 in state and local taxes in Washington, compared with $4,101 in Montgomery County, the second highest, and $3,847 in Prince George County. The smallest tax burdens would be in Charles County ($3,286), Fairfax City ($3,32l) and Prince William County ($3,377). The more District families make, the greater the tax burden gap.
The studies also found that of the 30 largest cities in the nation, only six impose a greater cumulative tax burden on their residents. Baltimore is one of them.
The studies show that the tax structure in the District is generally hardest on those in the upper income brackets but favors those at the low end of the scale. At every income level, the overall burden of sales, property, income and automobile taxes is lowest in Charles County.
The tax comparisons bear out Mayor Marion Barry's contention that citizens of the District of Columbia are already taxed at the highest levels they can fairly be expected to endure.
That contention is at the heart of his economic program, which stresses federal aid and service cutbacks instead of new taxes to bring the city out of its financial crisis.
Earlier studies showed that business taxes in the District are generally the highest between Richmond and Baltimore, and Barry and his advisers agree that further business tax increases would be counterproductive.
District officials prepare the tax studies annually. They examine the total burden of sales, property, income and automobile taxes on a hypothetical family of four that includes only one wage earner, owns its own home and lives in the jurisdiction where the wage earner works. Few taxpayers actually fit that description, but city officials say the overall conclusions of the tax studies are generally valid for all taxpayers.
Tax burdens on the prototype family fluctuate wildly among the nation's major cities, the tax comparisons show. A family with a gross income of $30,000, for example, pays 15.1 pecent of its income in local taxes in Boston, 14.5 percent in Baltimore, 10.7 percent in Washington and 3.7 percent in Nashville.
In general, residents of cities in the Sun Belt of the South and the West pay far less in total local taxes than those in the industrial cities of the North and Northeast.
At every income level, the local tax burden is highest in Boston, New York, Baltimore, Milwaukee and Pittsburgh, with the District of Columbia close behind. The cities with the lowest local taxes are San Antonio, Tex., Seattle, New Orleans, Jacksonville, Fla., and Nashville.
The tax comparison study for the Washington metropolitan area shows that residents of Montgomery County pay the highest real estate taxes and Charles county residents the lowest.
The effective property tax rate, which measures the actual impact of the current tax rate against actual value, is $1.64 per $100 in Montgomery County, $1.22 in the District, $1.12 in Arlington and $1.11 in Charles County.
Virginia residents pay the most in automobile taxes and user fees because of that state's personal property tax on motor vehicles.The annual cost of owning and opeating a two-year-old, eight-cylinder Chevrolet Monte Carlo that consumes 900 gallons of gasoline a year, for example, is $397 in Arlington and $374 in Alexandria, $157 in the District,but only $101 in the Maryland counties.
The District more so than any other jurisdiction except Charles County placed the greatest tax burden on those whith the highest incomes -- largely because this city's personal income tax for those in the upper brackets is by far the highest.
At a $50,000 income level, the highest measured in the study, the fictional family would pay $3,347 in D.C. income tax, $2,693 in Montgomery and Prince George's counties, and $1,982 in the Virginia counties and cities.
On the other end, if the annual income of the imaginary family is only $7,500, for instance, the studies show that state and local taxes consume 7.12 percent of income in Charles County and 8.21 percent in the District, but 9.85 percent in Fairfax County.
Virginia's tax system is the least progressive because of its automobile taxation policy, which taxes the poor man's car the same as it taxes the rich man's, and because of its income tax system, which reaches its maximum rate of 5.75 percent at an income of $12,001.
The District's income tax rate, by contrast, keeps rising to 11 percent for those with taxable incomes over $25,000. Maryland's maximum state and local income tax rate is 5 percent, reached as soon as the income exceeds $3,000 a year. CAPTION: Graph, State and local tax burdens for a family of four earning $40,000 and residing in selected Washington metropolitan area jurisdictions 1980, By Gail McCrory -- The Washington Post