The SENATE voted Friday to give the District a $1.9 billion budget for the 1982 fiscal year. Included in that amount is $336 million that is the federal payment, the money the federal government pays the city for occupying tax-free District land, for the city land that foreign governments occupy free of tax charges, and for using city services--from policemen to water. The amount of the payment the Senate approved for the 1982 fiscal year--still subject to House action--was the highest ever for the District. But while that may seem like a munificent gesture, in fact the Senate is only beginning to repair a longstanding disgrace.
The federal government occupies about 50 percent of the usable land in the city. But even in fiscal '82--with the biggest federal payment ever--the federal government would be contributing only 21.2 percent of the District's tax revenues. The low point in this relationship came in 1979, when the city received only 18.7 percent of its revenue from the federal government. The argument has been made that the federal government's presence brings in tax dollars and establishes institutions here, such as the Kennedy Center and the Smithsonian, that any other city would be very pleased to have--even tax free. That is probably true.
What is also true is that those other cities have the right to tax commuters, and they are not defined in the same way as this city, which has grown up around the federal government. For example, in 1981, when the District received a federal payment of $300 million, or 20.6 percent of the total operating budget, the city says it was losing $640.5 million, or 44 percent of the operating budget, through the federal government's tax-free status here. That money includes $271.1 million that the federal government would have paid in property taxes and $334 million that commuters would have paid in income taxes in practically every other city or state in the nation. The result of this loss has been to raise taxes for residents of the District to the point that 49 of the 50 ratstates have lower state and local tax burdens. The negative effect that high taxes have on any business that might be interested in locating here is very obvious--and adds to the District's dependence on the federal government.
The Reagan administration, which supported the District's drive in Congress to get the full amount of the federal payment this year, might also consider supporting the city's push to get a reciprocal payroll tax established in this area. Such a tax would negate at least some of the damage done to the District by the insufficient federal payment without adding to the federal government's budget trouble.