PRINCE GEORGE'S COUNTY, MD., COMPARATIVE STATE AND LOCAL TAX BURDEN WITH THE DISTRICT OF COLUMBIA FOR A FAMILY OF 4, FISCAL YEAR 1970-71

1. Market value of home was assumed to be related to family income as follows: $12,500 ($5,000 income); $18,750 ($7,500 income); $25,000 ($10,000 income); $35,000 ($15,000); $40,000 ($20,000 income); $50,000 ($25,000 income).

2. Average assessed value to market value -55 percent.

3. Present average property tax rate-$4.186 in Prince Georges County; $3.10 in District of Columbia per $100 of assessed value.

4. For income tax purposes a standard deduction of $500 was assumed for family incomes of $5,000 to $10,000. A 15-percent itemized deduction was assumed for family incomes of $15,000 and above.

5. Sales tax based on tables prepared by the Internal Revenue Service.

Prepared by Office of Finance, Prince George's County, Md., July 14, 1971.

[Reprint from Washington Evening Star, July 18, 1971]

COMMUTER TAX WAR-COUNTY FIRES DATA TO HILL

Prince Georges County officials have released statistics which they say show county residents are paying more taxes now than their neighbors in the District. The statistics were compiled to add "more weight to the county's opposition to the proposed D.C. commuter tax," Jay F. Morris, administrative aide to County Executive William W. Gullett, said.

Morris said the information, compiled by Albert W. Gault, county finance director, has been sent to the House District Committee's subcommittee on business, commerce and fiscal affairs which is studying the commuter tax proposal, also called a payroll tax.

Gullett said, in releasing the statistics, that the city would have more tax money if it would increase its taxes to the level of those in the county.

The statistics show that a family of four in the county with an income of $5,000 a year pays $426 a year in income, sales, real property and auto tags compared to $365 paid in the same taxes by a family of the same size in the city.

At the other end of the income level, a family of four with a $25,000 a year income in the county pays $2,669 in such taxes. A similar family in the city pays $2,304.

Gullett said this means the county family with the $5,000 income pays $61 more than his neighbor in the city. The $25,000 family pays $365 more.

Morris said that in measuring comparative property taxes for the statistical study, market values of homes were geared to family income and a standard assessment rate of 55 percent of value.

Mr. CABELL. The Chair has a request for Senator Beall of Maryland to insert a statement in the record, which statement will not be ready until tomorrow.

Without objection from the committee, the record will be held open and that will be accepted. That is so ordered.

(The statement subsequently submitted follows:)

STATEMENT OF HON. J. GLENN BEALL, JR., SENATOR IN CONGRESS FROM THE STATE OF MARYLAND

Mr. Chairman, I strongly urge the Subcommittee to reject the socalled Reciprocal Tax. This proposal was advanced by Mayor Washington in his 1972 District of Columbia Budget. Basically, the proposal provides for a levying of the District of Columbia income tax on non-resident commuters from Maryland and Virgina. The proposal is estimated to raise some $51.6 million for the District of Columbia. Over one-half, or $28 million of this gained revenue for the District of Columbia will be at the expense of Marylanders based on the over 200 thousand commuters who happen to work in the nation's Capital. Under present law, the District of Columbia has no authority to tax the income of non-residents. Congress should emphatically reject this reciprocal tax and I hope that in so doing we will hear the end of it.

The District of Columbia Government's request for a commuter tax is bad on many accounts.

It is unjust as a basic taxing principle. It has been a traditional as well as a fundamental taxing principle that citizens should be taxed by the jurisdiction in which they reside. "Taxation without representation" was a rallying cry leading to this nation's independence. This basic plea, signifying the principle of taxpayer representation and some control of expenditures of hard earned tax monies, is as valid today as in the time of our nation's founding. In fact, it is one of the repeated cries of the District of Columbia as they attempt to gain greater home rule and representation.

It is unwise because it tends to divide the area representatives in Congress at a time when the many problems of the area demand that we work together for the overall metropolitan good. Pollution, transportation and other common problems require the cooperation of these subdivisions not the aggravation of potential divisions.

It is bad politics because, in my judgment, the measure has little chance of passing and has a tendency, as I just mentioned, to split the citizens of the area rather than unite them.

It is wrong because it is based on the premise that the commuter is a burden to the city which according to a recent impact analysis of the proposed District of Columbia reciprocal tax by the State of Maryland is certainly not the case. This report found "profound effects on the economy of the District of Columbia by the imput of the Maryland commuters". The study found that the Maryland commuter spent approximately $360 million in the District of Columbia last year and this did not include such expenditures as personal care and dry cleaning. I ask unanimous consent that a table from this study, showing the estimated dollar value of the expenditures in the District of Columbia by Maryland commuters, be printed in the Record.

The proposal is misdirected because the suburban commuter should not be the person whom the District of Columbia looks to for support its operations. The greater bulk of the expenditures in the District of Columbia Budget go to education and human resources. Education, for example, accounts for approximately 25% of the total operating requirements and 41% of the capital request. Human resources take

30% of the District of Columbia operating request and 8% of the capital request.

There seems to be no reasonable basis to burden a non-resident for the cost of educating, welfare and health care services to the District of Columbia residents, the commuter simply does not add to these problems. There is no more reasonable basis for Maryland residents to bear these costs than there is for any other citizen who does not work in the District of Columbia to pay these costs. There are other segments of the District of Columbia budget which are also not sufficiently related to the benefits received by commuters. These would include police safety, recreation and economic development, housing, protection in the urban environment, transportation, finances and revenue, executive direction and general support and debt service.

It is terribly unfair, even for an item such as police protection, to single out the commuter as the recipient of an incidental service. All non-residents including the millions of tourists are likewise the recipients of such services. True, it is assumed that the citizens of suburban Maryland communities would be given a tax credit for taxes it pays to the District of Columbia. Yet the State of Maryland would have to make up for $28 million in revenue by some means. This would mean that all Marylanders from Maryland's Eastern Shore to the mountain area of Appalachia would be called upon to foot additional tax bills for payments made to the District of Columbia.

It is also a undesirable proposal because it would add to the multiplicity of tax forms. Maryland citizens already have to compute and file a Federal tax form, compute and file a State tax form including a computation of a "piggy back" county tax. Can you image how upset Marylanders would be to know that in addition they would have to file a District of Columbia tax return which would require an additional Maryland tax form (502CR) in order to receive tax credit for the District of Columbia tax. We need to make our tax laws simpler not multiply and complicate them.

Mr. Chairman, I am very sympathetic to the problems of the District of Columbia, but I argue and I do so strongly as I can that the District of Columbia's problems, besides being a problem of those who reside in the District of Columbia, are of a special concern to all of the citizens. It is after all our nation's Capital and it behooves Congress to make this Capital a model city befitting the world's greatest democracy. I will support adequate measures and revenue, as evidenced by my cosponsorship of the Inouye Amendment which would raise Federal payment to the District of Columbia to $74 million. In recognition of the special relationship of the Federal Government to the District of Columbia. The Federal Government should pay its fair share. For example, one cannot expect the District of Columbia or the suburban commuters to bear the additional responsibility of policing the large demonstrations which have been coming to the nation's capital in recent years. They come here because it is the national capital and the expenses resulting therefrom, in my judgment, should be borne by the Federal Government.

Mr. Chairman, there is an old 18th century French maxim, which I believe best describes the reciprocal tax proposal. It reads: "the art of so plucking the goose as to procure the more feathers with least possible amount of hissing." This is what the District of Columbia did in pro

posing the reciprocal tax. They attempted to "pluck" the most amount of revenue with the least possible "hissing" of its own citizens.

We Marylanders are "hissing" not because we are not in sympathy with the District of Columbia problems, but because we simply believe the proposal is a bad one. The District of Columbia should look to its own citizens, and I would point out that property taxes as well as certain other taxes in the District of Columbia do not approximate those in Maryland suburban communities, and to the Congress for the additional revenues that they need. The Congress as well as the country should want to see the nation's capital not only as a show place for democracy but also as a show place among the cities of the world.

I believe that a national commitment is in order and I can assure you that Marylanders are willing, along with citizens from the other states, to contribute their fair share.

In addition, if it has already been included, I ask unanimous consent that the study of the "Impact Analysis of the Proposed District of Columbia Non-Resident Personal Income Tax" done by the Maryland Division of Economic Development be printed in full in the Record.

Mr. BROYHILL. Mr. Chairman, I should like to make the same request regarding a resolution passed by the Alexandria City Council with regard to this tax.

Mr. CABELL. Without objection, that will be entered into the Record. (The resolution follows:)

ALEXANDRIA CITY COUNCIL

RESOLUTION NO. 13

Whereas, officials of the government of the District of Columbia have proposed that a "reciprocal income tax" be levied on the commuters and other non-residents who earn their living in the District of Columbia; and

Whereas, this reciprocal income tax would adversely affect 280,000 suburban residents; and

Whereas, the revenue needs of the City of Alexandria are as acute as those facing the District of Columbia; and

Whereas, while the District Government would obtain $15.6 million dollars in additional revenue under this arrangement, the State of Virginia would lose 17 million dollars; and

Whereas, this loss of revenue could reduce the State of Virginia's ability to provide local and State services to its citizens in such vital areas as education, health and welfare; and

Whereas, such a tax is unfair since the District of Columbia now receives direct financial support from the Federal government; and

Whereas, residents of Virginia already pay sales and other taxes on purchases made in the District of Columbia; and

Whereas, residents of Virginia and all other American taxpayers already rightfully support the District of Columbia through Federal taxes; and

Whereas, the City Council of the City of Alexandria recognizes that the District of Columbia, like most American cities, is in desperate need of additional revenues to meet the pressing and legitimate needs of its citzens; and

Whereas, the primary responsibility for the plight of the District of Columbia rests with the United States Congress; and

Whereas, the unique character of the District of Columbia as a federal city, governed in most major respects by the Congress of the United States, mandates that its revenue needs be met, to the extent that they cannot be met locally. by the taxpayers of the United States as a whole and not by taxpayers of Maryland and Virginia.

Now, therefore, be it resolved by the City Council of the City of Alexandria, Virginia:

1. That the City Council of the City of Alexandria on behalf of its citizens, joins other jurisdictions in Virginia and Maryland in urging the House District Committee to oppose the District Government's reciprocal income tax.

2. That the City Council of the City of Alexandria on behalf of its citizens urges its representatives in Congress and the members of its delegation to the Virginia General Assembly to join in opposing this commuter tax plan and, in lieu thereof, to support a higher federal payment, or other appropriate relief, to meet the pressing revenue needs of the District of Columbia.

3. That copies of this resolution be forwarded immediately to the Chairman of the House District Committee, Senator Byrd, Senator Spong, Representative Broyhill, and the members of our delegation to the Virginia General Assembly.

Mr. CABELL. Thank you, gentlemen. We will try to get the major portion of our direct testimony in by virtue of the fact that we have quite a number of witnesses, and will withhold questions until that time if we may.

Mr. FAUNTROY. Will these gentlemen be available for questioning at that time?

Mr. CABELL. I am sure that they will. We will immediately excuse Mr. Hogan, who has other commitments.

Mr. HOGAN. My colleagues from Prince Georges County will have to depart too. We would be happy to answer any of Mr. Fauntroy's questions.

SOLUTIONS TO DISTRICT'S FISCAL CRISIS

Mr. FAUNTROY. Mr. Hogan has pointed out that Maryland has a serious fiscal crisis. Of course, he knows the D.C. has a very serious fiscal crisis. While you point out that the 280,000 non-resident workers in Washington make up half the working population and do not avail themselves of the services of the city, such as sewage and police and fire protection and traffic management and the like, I wonder how you would see us out of our fiscal crisis in a situation where we are left with the largest proportion of the low-income residents who you would not like to have in Prince Georges County and which Mr. Broyhill has said would be a liability in his district, should federal installations there attract only workers of that income level.

How do you see us out of our considerably more difficult situation, given the basis upon which you have rejected the concept of attracting the people who live in the District.

Mr. CABELL. Mr. Fauntroy, if the Chair may interject himself at this point, I think that is putting a rather difficult burden on these gentlemen because they have problems of their own. It is our job to co-relate them, to take their testimony and arrive at a decision as to what can be done.

I think it is definitely unfair to ask them to solve our problems for us. Let's hear their problems with reference to what this revenue measure would be and then it is up to this committee in executive session to determine.

Mr. HOGAN. Mr. Chairman, I would like to make a comment.

Mr. CABELL. We are trying to establish the facts of the impact upon the neighborhood in these hearings and try to arrive at an equitable solution for the problems that involve the District of Columbia.

Mr. HOGAN. Mr. Chairman, may I make a brief comment in response?