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 (Schoenberg, 1). Spearheaded by the Mayor of the District, Anthony Williams, the suit argues that every other state in the country except the District is able to tax commuters who work in their state. 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. Government leaders in Virginia and Maryland are opposed to the commuter tax, fearing the payments will come out of their budget pockets forcing them to raise taxes.
This proposal will discuss the issues and arguments of the state governments (D.C., Virginia, Maryland) in order to demonstrate why the dispute arose. Also incorporated into the research will be the dynamics of inter-state government collaboration, the D.C. budget woes, revenue sources, commuter taxation and the present situation among the District, Virginia and Maryland. The way in which the federal government enters the process as a resolution a body will also be described. A summary will include the l...