Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.wpost From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Kelly's Commuter Tax Call Exposes a Dirty Little Secret: Area Economic Date: Thu, 19 Nov 92 04:44:31 EST Message-ID: <12.1992Nov19.044432@AmeriCast.com> Kelly's Commuter Tax Call Exposes a Dirty Little Secret: Area Economic Rivalry=BY RUDOLPH A. PYATT JR.= Economic warfare is a nasty business. Even the threat of start- ing an economic war is nasty business. It's come to that in metropolitan Washington, nonetheless, as politicians confront a stagnant economy and the District's call for a commuter tax. By renewing her call for the controversial reciprocal commuter tax, D.C. Mayor Sharon Pratt Kelly has succeeded in nothing less than exposing regional cooperation as a farce. Moreover, the mayor has uncovered the face of hypocrisy in Washington's suburbs. As reported by The Washington Post, the Fairfax County Board of Supervisors this week approved a resolution calling for retalia- tory measures if the District wins congressional approval to im- pose a commuter tax on suburban residents who work in the city. Some Fairfax County officials went so far as to threaten to "steal" businesses from the District as part of what they termed an "economic war." That kind of reaction would be laughable if it were simply poli- tics as usual, though that's a major factor involved. To some, the reactions may be seen as political theatrics. How- ever, threats to steal businesses from the District should be taken for what they are: a sinister attempt to cripple the city's already weakened economy. As alarming as the threats may seem, however, they're really a reflection of attitudes that have contributed significantly to the plundering of the District's economy over several years. It's just that no suburban official ever publicly threatened to steal business from the city. Given the poor state of the District's fiscal health and the continuing erosion in its tax base, however, this is hardly the time to engage in a political war that the District can't win. On its face, a reciprocal commuter tax has some merit and prob- ably could be implemented if political leaders were willing to make compromises. It's probably wiser at this stage, however, for District officials to develop alternatives for strengthening the city's economy. The trick is to develop strong political support for those al- ternatives, which could include a proposal for a substantially larger federal payment to the District. From a practical standpoint, meanwhile, resorting to threats against the District is hardly necessary. Realistically, the chances of Congress approving a commuter tax for the District are slim and none. Pressing for it now appears to be an exercise in futility. The threat of economic warfare remains, nonetheless, and should not be taken lightly, even in the absence of congressional au- thority for the District to impose a commuter tax. Indeed, Fair- fax County, threats aside, recently approved a series of economic development initiatives that could siphon business from the Dis- trict. First, county officials announced plans to seek an in- crease in the number of trade and professional associations in their jurisdiction. Thirty-one percent of all associations in the United States have their headquarters in metropolitan Washington; most of those are in the District. In recent years, far fewer associations have indicated interest in moving their headquarters to the Washington area, according to the Greater Washington Society of Association Executives. With the large concentration of associations in the District, it obvi- ously has to be considered a target for recruitment efforts by Fairfax County. There is, meanwhile, a 21 percent office vacancy rate in Fairfax County, one of the highest in the area. County officials sought to lower the vacancy level by turning to the General Services Ad- ministration, hoping to persuade the agency to lease space for several federal agencies. That obviously has implications for the District's ability to retain its share of federal agency offices in the area. Threats or no threats, holding on to federal agencies, commer- cial enterprises, trade associations and middle-income taxpayers is crucial to the District's economic health. The Rivlin Commis- sion, in concluding two years ago that the District confronts an immediate fiscal crisis, reaffirmed earlier findings of a long- term decline in the city's economic base. The District has been losing middle-income residents, jobs and retail sales to its ra- pidly growing suburbs, the commission concluded. Although the commission expressed support for the idea that the District should be allowed to tax all income earned within its borders - a commuter tax - it suggested several other sources of revenue. An obvious alternative cited in the Rivlin Commission report is a formula-based federal payment that would adequately compensate the District for the costs and revenue-raising res- trictions imposed upon it by virtue of being the nation's capi- tal. A strong argument in favor of that position just might win support in the new Congress. Tactically, it may be better to put that before Congress now and worry about statehood later. Cer- tainly, the more immediate concerns should be the District's fis- cal crisis and its declining economy. In the meantime, it's possible that by combining an aggressive program to attract and keep businesses with other alternatives suggested by the Rivlin Commission, the District can achieve its goal of tax revenue growth. It could, for example, tax those unincorporated businesses that are now exempt, as the Rivlin Com- mission suggested. Or it could follow the commission's suggestion to impose a 1 percent gross receipts tax on all businesses. Com- mission members estimated the yield would range from $20 million to $70 million. Regardless of what the District might adopt, it's clear that discussions of regionalism and cooperation among local government officials have become little more than academic exercises. Barely six months ago, the Greater Washington Board of Trade held a retreat for 52 leaders from the public and private sectors to discuss regional issues and a vision for the future. Two themes that emerged from the retreat sharply define the differ- ence between the rhetoric of such gatherings and the reality of parochial interests. A new effort is needed to "improve the process by which regional coalescence and cooperation are brought to bear on solving re- gional problems," participants at the retreat agreed. They also recognized, according to a summary report, that the District is "the hub of the region and that its fiscal and other problems must be dealt with if the overall vision for the region is to be attained." 02:08 11-19 C9999----- Copyright 1992, The Washington Post. This story is from the Washington Post's Capitol Edition On-Line and is not to be ar- chived or redistributed. For more information, send-email to American Cybercasting Cor- poration (usa@AmeriCast.COM)