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Delegate Eleanor Holmes Norton is revving up a proposal to revive the District’s economy and compensate the city for its lack of congressional representation: partially exempting Washingtonians from federal income taxes. It’s a bad idea.
At a Monday town meeting in a House office building, Norton sketchily described her “Progressive Flat Tax” (PFT) to a vocal audience of about 250. The Progressive Flat Tax (a phrase that Norton admits is an oxymoron) would set federal taxes for D.C. residents at a flat 15 percent, with some exemptions and deductions. The PFT, for example, would entirely exempt single people earning less than $15,000 per year. The crowd greeted the idea with a decidedly mixed response.
Norton’s main motivation is as old as the Revolution: “The District is the only jurisdiction that flies the American flag where there is taxation without representation.”
The tax break is justice for an overburdened, underrepresented city, Norton says. Washington pays $1.72 billion in income taxes and $3.8 billion in total federal taxes—only New Jersey pays more per capita. “The city should be first in line,” she pleads. “We have paid higher dues than almost all other Americans—and have fewer rights to show for it.” She also sees tax relief as a palliative for losing her (quasi-) vote on the House floor.
And Norton, like conservatives who back the idea, extols the tax break as a lasting solution to the city’s financial crisis. It will “take more than fixing up…the government” to repair the District, she says. D.C. needs lower taxes in order “to stop the middle-class hemorrhage” from the city and “encourage new residents to move in.”
Without a tax break, “you will ordain the death of the District of Columbia,” adds the delegate. “You and I [will be the] only ones left in the District of Columbia. We have an obligation to think our way out of the problem.”
Norton is determined to pass some tax-relief legislation for the District. She made federal tax exemption the subject of her first bill this year: Her District of Columbia Tax Equity Act would have exempted city residents from all federal income, gift, and estate taxes. Jack Kemp has touted a similar scheme, and some Republicans in Congress, including Speaker Newt Gingrich, have hinted that they’re interested in a D.C. tax break. Saying “tax cut” to Republicans is like ringing a bell for Pavlov’s dogs. (Republicans are worried that the D.C. tax break will disrupt their plans to balance the federal budget. Norton is playing cute about how much the PFT would cost the U.S. Treasury: “I don’t want to tell Newt and company,” Norton said Monday.)
It’s no surprise that Norton is pushing hard for tax relief. It is a seemingly painless fix for a struggling city. But as passionately as Norton makes her case, this is a deal with the devil. I want a fatter paycheck as much as the next Washingtonian, but do we really want to relinquish our claim to being equal to all other Americans by paying lower federal taxes than they do?
Norton is ignoring an inescapable fact about taxes. Taxes are something people remember—at least, if you don’t ante up your share. Yes, Washingtonians do pay obscenely hefty local and federal taxes. But if we stop paying as much as other Americans, they will throw it back in our faces when we seek political equity. We will become as respected as (and only slightly more important than) the U.S. territories that don’t pay income tax: Puerto Rico, Guam, the Virgin Islands, and American Samoa. In effect, District residents will be begging to be unequal.
A federal tax cut would almost certainly bury the dream of statehood. When Norton stood on the floor of the House and demanded a vote, the rest of America would sneer, “They don’t pay federal taxes, you know.” Norton, however, uses all her courtroom bombast to argue that a tax break would help us toward statehood. She admits that the “District is now insolvent…and therefore does not qualify as a state.” But she contends that the PFT is the way to win statehood: It will put our “damn house in order financially” so that the “city can exist long enough to become a state [and not] a ward of the state.” Norton also notes that territories such as Kentucky, Arizona, and California were tax-exempt until they were admitted as states. In effect, Norton is claiming that we will eventually trade in our tax break for statehood.
But Norton fails to answer two questions: Why wouldn’t the state of New Columbia fall back into insolvency under a full federal tax burden? And how will Newt and his boys react when they learn that the PFT is a backdoor path to statehood?
Norton claims that the PFT’s limits on res idency and income will protect the character of D.C. But there is no detailed analysis that shows that D.C. won’t become a haven for millionaires. The PFT could foster immigration by rich folks looking for an April 15 windfall. Who knows? Maybe Bill Gates, Stephen King, and Oprah Winfrey will build themselves swank new houses in Anacostia, with its eye-popping views of the Capitol. But immigration by the rich and famous (or even by the upper-middle class) could send real estate prices skyrocketing, and speed the stampede of lower-income Washingtonians to Prince Georges County.
What would that do to the city? Would the departure of longtime city residents—almost all of them black—from Wards 4, 5, 6, 7, and 8 become unacceptably rapid?
Norton acknowledges that a total federal tax exemption “might drive property values up very quickly because, presumably, people would want to move here in larger numbers, making property more attractive and costly.” But she claims that her current proposal would strike the right balance between rich and poor, attracting middle-class families who would fill D.C.’s thousands of vacant buildings, but not pricing lower-income renters out of the city.
But where is her study of the relationship between tax cut and displacement? Why is Norton so sure that a partial tax break will not displace too many longtime residents?
Some Washingtonians are speaking out in opposition to the measure. Sam Smith, publisher of the Progressive Review and key Norton supporter in her first congressional race, calls it “the worst idea since the big bad wolf met Little Red Riding Hood.” The replacement of lower- and middle-class blacks by an “upscale elite” would cause the “Manhattanization of D.C.,” Smith says. The Coalition for Political and Financial Accountability, a citizens group that also campaigns against the control board, “urges caution in pursuing federal tax relief.” Instead of a congressional bribe in the form of lower taxes, the group favors remedies unpopular on the Hill: “a voting D.C. delegate” and federal responsibility for the unfunded pension liability, Medicaid, and “state” functions.
When I tell strangers that “I’m from Washington….No, Washington, D.C., the nation’s capital,” I very often get the same response: Their eyes widen a bit, and they say, maybe with a snicker, “Ohhh, the city of Marion Barry.”
While temporarily saddled with the Mayor For Life, I proudly say to myself: I may lack congressional representation, but I am a full citizen of this country, enduring all of its obligations—including and especially my share of federal taxes. I don’t want to lose this burden.