Hearings

6. WHAT IS THE DIFFERENCE

BETWEEN THE RECIPROCAL
INCOME TAX AND A COMMUTER
TAX?

The reciprocal income tax is not a commuter
levy. The term "commuter tax" is commonly
used to describe a tax levied by a city on the
income earned within its borders by nonresi-
dents, in addition to any state income tax they
might pay.

The reciprocal income tax would establish
a situation parallel to paying income tax to a
state rather than paying a commuter tax to a
city. Unlike a commuter tax, the reciprocal
income tax would permit the taxpayer to take
advantage of exemptions provided in District
income tax law. Additionally, a commuter tax
payment could not be deducted by the non-
resident from his state income tax bill as could
the reciprocal income tax payment. Finally, the
reciprocal income tax plan would allow the
States of Maryland and Virginia to tax District
residents who earn income in their states,
whereas the commuter tax does not provide for
reciprocal arrangements.

7. WHY SHOULD NONRESIDENTS
HELP PAY FOR THE EXPENSES OF
THE DISTRICT GOVERNMENT?

The District, as the Nation's Capital and a
major commercial center, provides an employ-
ment base for 280,000 nonresidents who com-
prise over 1/2 of the total number of persons
working in the city. In order to insure that
the working day of the nonresident is made
safer and more comfortable, the District Govern-
ment must provide a variety of municipal
services; for example, police and fire protection,
traffic management, and sanitation.

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70-195 O-71-7

Nonresidents, who earn income in the District, have never been called upon to bear a fair share of the costs of providing these city services from which they benefit, while District residents and the Federal Government have borne increasingly heavier burdens of support. In order for the District of Columbia to remain a vital center of commerce and employment, the costs of its government must be shared by all those who take part in its life and benefit from its services. MEA

8. WHILE CERTAIN CITY SERVICES
PROVIDED BY THE DISTRICT
GOVERNMENT DIRECTLY
AFFECT THE NONRESIDENT,
HOW DO BUDGET EXPENDITURES
FOR SOCIAL SERVICE PROGRAMS
BENEFIT HIM?

The revenue to be gained from the reciprocal income tax will help ease the financial crisis of the District and assure that it does not adversely affect the entire region; additional revenue also will help assure that the District of Columbiathe vital heart of the region - remains a viable, thriving, and interesting work, and visit.

ng place in which to live.

9. NONRESIDENTS ALREADY
CONTRIBUTE TO THE DISTRICT
BY THE FEDERAL PAYMENT
SUPPORTED BY THEIR FEDERAL
INCOME TAXES. WHY SHOULD
THEY PAY MORE?

The Federal payment represents a contribu-
tion from all Americans for the Nation's
Capital City - from residents of the District,
residents of neighboring states, and residents of
all other states.

There is a clear difference in the type of
financial allegiance owed the District by resi-
dents of Oregon or Maine, who earn no income
in the District, and the type owed by residents
of Maryland or Virginia, who earn their liveli-
hood in the District. By the same token, District
residents who earn income in Maryland or
Virginia owe a fiscal allegiance to those states
above what they indirectly contribute to those
states through their Federal income taxes.

10. WHY PROPOSE TO TAX

NONRESIDENTS? WHY NOT
RAISE TAXES ON RESIDENTS
OR SEEK AN INCREASE IN THE
FEDERAL PAYMENT?

The financial plan for the coming year
proposes increased support from both the
Federal Government and District residents by
requesting an increase of $27,000,000 in the
Federal payment and a 30 cent increase in the
property tax rate.

Over the last several years numerous tax
increases in the gasoline, liquor, sales, and
income tax rates - have been enacted, bringing
D.C. tax rates to a level comparable with the
rates in surrounding jurisdictions.

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While Maryland and Virginia will lose money,
in the past the District has lost incalculable
revenues by being denied the right to tax
income earned within its borders. Meanwhile,
both Maryland and Virginia have benefited
substantially by taxing both the income of
their residents earned within the District as well
as the income of nonresidents earned in their
states.

13. WOULD NONRESIDENTS PAY
MORE TAXES TO THE DISTRICT
THAN TO THEIR HOME
JURISDICTIONS UNDER THE
RECIPROCAL INCOME TAX
PLAN?

Only when D.C. tax rates exceed Maryland
or Virginia rates for particular taxpayers. This
is more likely to occur at higher income levels.

14. TAXPAYERS IN MARYLAND
PAY A COUNTY TAX IN
ADDITION TO STATE INCOME
TAX. WOULD THAT "PIGGY
BACK" TAX BE AFFECTED BY
THIS PROPOSAL?

No. The proposal would have no effect on
Maryland county taxes. County taxes are
computed before deductions for income taxes
paid other jurisdictions are credited.

1/ Includes $8,000,000 as provided in Public Law 91-106 for law enforcement activities in fiscal year 1970 only and $8,000,000 as provided in Public Law 91-297 for use in defraying the cost of the retroactive pay increases for policemen, firemen, and teachers.

2/ Includes first and second supplemental.

1971

1972

657,512,162 2/ 855,870,100

131,000,000

19.92

153,000,000 3/

17.88

Based on new revenue legislation.