The District of Columbia, plagued by income shortages, is currently preparing to sue Maryland and Virginia for the right to tax residents of these states who work in the District. In line with legislation introduced in Congress by Eleanor Holmes Norton (D-D.C.), “Maryland and Virginia workers who work in the District would be taxed 2 percent of their annual salaries by the District” (Fehr 1). The stakes involved in this lawsuit on both sides are enormous, since more than two-thirds of the residents who earn income in the District are not residents “Such a tax would raise about $400 million a year for the District” (Fehr 1). While residents of Virginia and Maryland are opposed to the commuter tax, District officials say it is necessary because of their narrow tax base and the fact that commuters who work in the District cost the District money in terms of public services like police protection, sanitation, road construction and repair and fire services. Further, commuters who earn wages in the district spend little or none of their income in the District. Regional leaders are opposed to the commuter tax, fearing the payments will come out of their pockets which will force a raise in taxes.
This proposal will discuss the issues and arguments of the state governments in order to demonstrate why the dispute arose. Also incorporated into the research will be the dynamics of regional government, the D.C. budget process, revenue sources, commuter taxation and present conditions among the District, Virginia and Maryland. A summary will include the likely future outcome of this scenario between the states.
Government collaboration is needed in this case because the regions surrounding the District, Virginia and Maryland, are outpacing it in terms of economic growth. A small tax base, loss of tax monies from services provided to commuters, and slow economic growth compared to Maryland and Virginia are the reasons why this d...