D.C. Commuter Tax Case Heads to Federal Court

Posted February 10, 2004 at 1:56pm

Attorneys for the District of Columbia who charge that the Congressional ban prohibiting the city from enacting a commuter tax is a “discrimination case” will begin arguing their case in federal district court next week

Earlier this month, U.S. District Judge Ellen Huvelle agreed to hear oral arguments in the suit, which names the governments of Maryland and Virginia and Congress as defendants.

District lawyers hope a ruling in their favor will allow the city to begin taxing some $30 billion in income that is earned in the city each year by workers who live outside the District. Many District financial watchers feel the ability to tax this income would go a long way toward making up for large budget shortfalls in the District.

The commuter tax ban has been in effect since 1973, when Congress enacted a statute providing that the District City Council “shall have no authority to … impose any tax on the whole or any portion of the personal income … of any individual not a resident of the District.”

According to Stephen Fuller, the director of the Center for Regional Analysis and a professor at George Mason University, 71.6 percent of the city’s work force, or 481,112 people, commute to the District every day. D.C. officials hope that being able to tax commuters will help relieve a structural imbalance in the District budget, which the General Accounting Office has estimated to be somewhere between $470 million and $1.1 billion annually.

District attorneys argue in their lawsuit that the ban violates “the universal rule of taxation — that income is taxed where it is earned regardless of the earner.”

But although the suit invokes the Equal Protection Clause in claiming that the ban is unconstitutional, attorneys for the Justice Department, who are representing Congress and the state governments, argue that Congress has ultimate legislative authority over D.C.

“By constitutional command, the District and its citizens are different than the States and their citizens and Congress, when exercising its ultimate legislative authority over the District, is not required to treat them alike in order to avoid the prohibitions of the Equal Protection Clause,” argued Rupa Bhattacharyya, an attorney for the Justice Department, in a recent filing.

“Our argument says that the ban on the tax is unconstitutional and, no big surprise, they want the money and so do we, so that’s where we are,” said Walter Smith, executive director of D.C. Appleseed Center for Law Justice, a group advocating on behalf of the District in the case.

The lawsuit also charges that Members of Congress have not, and cannot, act in the best interests of the District because Members do not have to answer to District residents at election time.

“The crux of the whole matter is whether can you treat the citizens of the District of Columbia differently than you treat everybody else. Well, we are protected by the equal protection law, in which case you can’t,” said District Councilman Jack Evans (D-Ward 2).