House Oversight and Government Reform Committee Chairman Darrel Issa, R-Calif., startled D.C. officials last month when he casually suggested his willingness “after the election” to reopen discussion on one of the city’s most cherished goals: a commuter tax.
But no matter which party wins in November, Congress is unlikely to approve an income tax on nonresidents who work in Washington. It’s not just the many legal and political obstacles that have prevented this in the past. They should be especially unlikely to do it after the recent revelation that the District is voluntarily forgoing tax revenue that is already available.
The Home Rule Act of 1973 forbids a commuter tax, which would fall heavily on the 165,000 federal employees who commute from Maryland and Virginia to the District every day. A federal appeals court upheld the ban in 2005 when the District challenged it in court. And as for changing the law, members of Congress in both parties representing districts in Virginia and Maryland are firmly united in opposition.
At a hearing before Rep. Issa’s committee, District Chief Financial Officer Natwar Gandhi argued that the tax was needed because the large presence of the federal government and many nonprofit entities in Washington severely limits the city’s tax base. This is most compelling argument for a commuter tax. But as the Washington Post first reported, Gandhi’s own Office of Tax and Revenue has been quietly undermining his own case. Against the recommendation of the city’s real estate appraisers, he has reduced the tax assessments of 532 commercial properties in D.C. by $2.6 billion. The District’s complaints about its diminished tax base seem a lot less credible when its top officials diminish it themselves.
The reassessments went into effect last month. They lowered some major developers’ tax burdens by up to 40 percent, and were made before the Real Property Tax Appeals Commission — a new independent board specifically set up by the D.C. Council under then-Chairman Vincent Gray to adjudicate such disputes. Gandhi claims that the settlements, which will cost the city almost $50 million in revenue this year, were necessary to avoid costly litigation. But several members of the council, including current Chairman Phil Mendelson and Finance and Revenue Committee Chairman Jack Evans, aren’t buying it. A public hearing should be placed on the agenda when the council returns from its summer recess.
