Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.twt.news From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Commuter tax could hit hard Date: Sat, 21 Nov 92 17:35:41 EST Message-ID: \SE A \HD Commuter tax could hit hard \SH New Jersey man tells how \BY Jim Clardy \CR THE WASHINGTON TIMES Oliver Kirna, a health care consultant and New Jersey resident, has several ideas on what he would do with an extra $250 each year: dinner with friends, diapers for his 2-year-old daughter or a nice anniversary present for his wife. That's how much Mr. Kirna pays each year for the pleasure of working in New York City, which levies a tax on those who work there but live in another state. "The worst thing is that my money is going to pay for the city's mismanagement. All the revenue they're raising and they still have a billion-dollar deficit," said Mr. Kirna, 28. His complaints already are being echoed in the Washington area as District officials renew their drive to impose a tax on Virginians and Marylanders who work in the city. District leaders say that the city's deficit could reach $1 billion over the next two years, but that they could raise that amount annually by taxing District workers regardless of where they live. Mayor Sharon Pratt Kelly is expected to unveil a commuter tax proposal next month. A tax would have to be approved by the D.C. Council and Congress. Council Chairman John Wilson yesterday endorsed a commuter tax but warned that it will not be enough to spare city residents from tax increases and program cuts. City officials say they lose millions each year subsidizing the estimated 2 million commuters who receive free water, sewer and emergency services. "It's time for those who have been getting a free ride to start paying their fair share," said D.C. congressional Delegate Eleanor Holmes Norton. Suburban leaders counter that the city has not cut enough fat from its budget, and that taxing commuters would only continue mismanagement of city finances. Maryland and Virginia representatives on Capitol Hill also say a commuter tax would hasten the exodus of companies to the suburbs. "I'm sympathetic to their plight, but a commuter tax would put more pressure on businesses to move away from the District. Rather than make money, the city would be losing money," said Rep.-elect Leslie Byrne, Northern Virginia Democrat. Mrs. Kelly on Thursday reiterated her intention to introduce some form of nonresident income tax to close the latest in a long line of budget shortfalls. The city is putting workers on 12 unpaid furlough days to save money this year, and Mrs. Kelly said she will reduce city services further unless additional revenue flows into District coffers. "We must insist on the right to tax all of those who earn their income here in the District. I will not support penalizing our taxpayers for D.C.'s colonial status," said Mrs. Kelly. District officials eager to tap the incomes of suburban residents can choose from two models: The city could levy an income tax on commuters or, if granted statehood, could tax all income earned in the new state. Detroit, New York City, Cleveland, Kansas City, Mo., and Wilmington, Del., are among a handful of cities that follow the first model, imposing up to 2 percent income tax on commuters, according to the Washington-based Advisory Commission on Intergovernmental Relations. Philadelphia levies a 4.3 percent income tax on suburban residents who work in the city - the highest in the nation. Some states allow residents to deduct such assessments from their state income taxes. Should the District win statehood, it could follow the lead of several other states and levy what is known as a reciprocal tax, imposing a state tax on all income earned within its borders. Virginia and Maryland residents now pay less than 6 percent in income tax, compared with the top rate in the District of 9.5 percent. Under such a levy, a Virginia resident making $50,000 a year in the District would see his state taxes rise from $2,875 to $4,750, according to Chris Zimmerman, chief economist at the National Conference of State Legislatures. Virginia and Maryland lawmakers adamantly oppose such an arrangement because their states would lose all revenues paid to the District. D.C. officials counter that with a commuter tax they would be able to lower their business and income taxes to competitive rates and help stem the flow of District businesses and residents to the suburbs. A commuter tax "would allow us to reform the tax code of the District, lowering income tax rates as well as business and property taxes. It would put us on a much more even footing," said D.C. Financial Director Ellen O'Connor. City leaders are pinning their hopes for a commuter tax on President-elect Bill Clinton, who said he would sign legislation making the District the 51st state. But federal lawmakers from the area said they will move swiftly to kill any proposal to levy a commuter tax or grant the District statehood. Rep. James P. Moran, Alexandria Democrat, estimates a commuter tax could cost Virginia $221 million a year in lost revenue and has promised to lobby against statehood with most of the 110 new House members. "I'm going to rally the forces and make sure they understand the arguments. We can't afford to allow the suburbs to be the financing mechanism for the D.C. government," said Mr. Moran. Among local congressmen, only Albert Wynn, newly elected from Maryland's 4th District, favors D.C. statehood. But he said that he would fight a commuter tax. This article is copyright 1992 The Washington Times. 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