Commuter/mobility tax discussion for DC
I didn't write about this when Congressman Darrell Issa, a Republican, said that a commuter tax on nonresidents working in DC should be on the table ("Rep. Darrell Issa proposes hearing on D.C. commuter tax," Washington Post) because I intended to write a letter to the editor to the Post to the effect that a commuter tax likely is a nonstarter (and yes, that's what happened, see "Proposed D.C. commuter tax dealt another blow" from the Examiner and "Talk of D.C. commuter tax finds opposition in Maryland" from the Baltimore Sun), but instead the city should focus on proposing a tax on commuters that likely could pass.
Such a tax would be a mobility withholding tax. It would be charged to employers, not employees (although you could argue it could slightly depress wages as employers would make up for the cost by reducing paid wages).
I call it mobility because it could support more than just transit improvements.
Currently, while many transit systems are supported by sales and real estate taxes of various sorts and fees on car registration as a part of the creation of transportation benefits districts (Washington State, e.g., in Seattle), or parking taxes (the Baltimore Circulator bus service, which is free to riders, is paid for by a tax on parking, see "Baltimore Hotel Tax | Increases in hotel, parking taxes draw complaints" from the Baltimore Sun), I am aware of transit withholding taxes only in two places, Oregon, in Portland and Eugene, and in New York State, in the MTA service area, to pay for transit services a withholding tax of 33 cents/$100 of wage income was instituted after the precipitous fall in tax revenues associated with the financial crash which was particularly acute in New York City.
Besides the difficulty in getting such taxes approved, the big problem with transit withholding taxes is that so many employers get exemptions or in the case of state and federal government agencies, are exempt from local withholding taxes. In the case of DC exempting federal employees from the tax would significantly reduce revenues, making the exercise somewhat futile.
But if Congressman Issa could push such a tax forward, and get the federal government to accept paying such a tax, it could happen.
I wrote a paper in 2007 on creating a linked transportation and land use planning paradigm in DC and this was one of the funding sources I wrote about (blog entries: "A payroll tax to fund transit" and "More on funding subway improvements within DC").
I didn't think a congestion tax was a good way to go because it would displace commerce to the suburbs and more importantly, many more areas in the suburbs are congested than are roads in DC, with some exceptions of course, mainly the main entrypoints into the city, along with some roads downtown.
I don't remember the numbers off hand, but I calculated that as much as $250 million/year could be generated from such a tax, which I proposed could be used both to support improvements of the current system as well as transit system expansion such as the separated blue line, streetcars, etc.
I suggested that possibly, surface bus transit could be free, but that would absorb a huge proportion of the revenue and at least in the intermediate run, it wouldn't be a good use of funds--besides current system improvements, my biggest priority would be the creation of the separated blue line.
Note that separately, there is a review of DC tax policy ("Tax-reform panel aims to untie D.C. code's 'knot'," Washington Times). From the article:
Among other priorities, Mr. Gray wants the commission to consider a decrease in commercial real estate taxes to fill vacant space and drive up values.
Many of the mayor’s proposals ask the commission to weigh the loss of direct revenue from lower tax rates or abatements against the added revenue gained by retaining or attracting residents and businesses to the District.
Former D.C. Council Chairman Kwame R. Brown had been a vocal supporter of the commission, arguing a piecemeal approach to tax policy was inappropriate.
His successor, Phil Mendelson, said the board should look at whether everyone is paying his or her fair share under the tax code of the city. He also asked the commission to look at whether the city’s tax system actually drives people away from the District, since that long-standing belief seems to be “more anecdotal than evidence-based.”
Image from study for Sarasota County, Florida on the tax yield per acre by different types of development. In DC, income taxes on residents generate additional income.
But I expect very little from this review, which ought to be very expansive in terms of how it considers:
1. Tax revenue generating capacity of various types of development ("Mixed Use Reduces Infrastructure Costs and Increases Tax Receipts," SvR company blog);
2. Commuter tax issues;
3. Tourism taxes and the systematic planning and funding of visitor and cultural services (blog entry: "Cultural resources planning in DC: In the land of the blind, the one-eyed man is king");
4. Taxes that fund mobility (parking tax, tax on parking benefits, mobility withholding tax, etc.);
5. How the commercial property tax methodology negatively impacts properties in neighborhood commercial districts because the national-international property market in the central business district drives up prices across the entire city (blog entries: - Testimony -- Historic Neighborhood Retail Business Property Tax Relief Act (2006); - A solution for the overtaxing of properties in neighborhood commercial districts (2009); Displacement of retail businesses through increasing property tax assessments (2005); Forcing Displacement by the disconnection of tax assessment models from public policy goals (2005); Globalization of the DC real estate market catches neighborhood commercial districts up in the wake (2006); Avoiding the real problem with DC's property tax assessment methodologies (2007)).
It's unclear that these more fundamental questions will even be asked, based on the Mayor's stated interest in various commercial property tax reduction schemes.