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many other Federal taxes that must be paid. The U.S. News and World Report, issue of February 22, 1971, carries an articles "Why Cities Go Broke" an interview with Mr. Dick Netzer, a recognized authority on urban problems. Mr. Netzer is Dean of the New York University Graduate School of Public Administration, and a member of the Mayor's Fiscal Advisory Commission in New York City. The following is quoted from the interview:
Question: Should commuters who earn their living in cities make some sort of payment to help support city services !
Answer: I have a somewhat agnostic view on that. I fail to see much equity in the argument. In most cities, commuters don't put much real burden on the community's services. About the only place you can see much direct effect is on the transportation system.
Certainly, we are all aware of the financial plight of the City of New York, yet Dean Netzer as an advisor to Mayor Lindsay, considers equity in taxation rather than the desire to bring in additional revenue from commuters who in his opinion “don't put much burden on the community's services".
The State of residence bears the burden and the fact that Marylanders work in other States does not lessen that burden. Foremost in the services provided by the State of residence, is education, health and welfare, none of which are provided by the nonresident State. In fiscal year 1970, Maryland spent $745,000,000 for education, health and welfare, or approximately 55 percent of its total budget expenditure.
8. While certain city services provided by the District government directly affect the nonresident, how do budget expenditures for social service programs benefit him!
Areas in the counties of Maryland adjacent to the District are also a part of the metropolitan area. Programs financed by these counties and the State of Mary. land benefit all citizens in the metropolitan area and improve the quality of life in the whole area. All of the States that are in the metropolitan area have an equal responsibility. It cures no financial problem in the overall picture to provide the District funds at the expense of other jurisdictions.
9. Nonresidents aready contribute to the District by Federal payment supported by their Federal income taxes, why should they pay more!
We recognize no real financial allegiance owed the District by other States whose residents work there. We recognize no real financial allegiance that residents of the District owe Maryland because they work in our State. For the Nation's Capital we would favor larger support payments from the Federal government, out of the taxes paid by Maryland residents as well as the residents of other States in the Union.
From news sources it would appear that the District Congressional Committee would not be adverse to increasing the District payment, except that they seem to have certain reservations with respect to the District's proposed budget. We have no knowledge in the premises and thus make no comment as to the validity of the reservations.
10. Why propose to tax nonresidents? Why not raise taxes on residents or seek an increase in the Federal payment !
While the pamphlet indicates that an increase of $27,000,000 in the Federal payment has been requested, as we stated in answer to question 9, we would favor a much larger increase in the Federal payment. With respect to raising taxes on residents, it is our understanding that the current District property tax rate of $3.10 and that it is proposed to raise the rate to $3.40. We call attention to the fact that the current tax rate of Baltimore City is $5.34 which together with the State rate of 18 cents, makes the total property tax rate in Baltimore City $5.52. Montgomery County's tax rate varies from $3.085 to $4.435. Prince George's County tax rate varies from $3.911 to $4.256. Baltimore County's current tax rate is $3.74 and their proposed rate for the ensuing year is $3.96.
In the case of Montgoniery and Prince George's Counties, the rates vary because of the imposition of the property tax by the various municipalities, there being 22 municipalities in Montgomery County and 27 municipalities in Prince George's County.
It would seem that even with the 30 cent rate increase the District property tax rate will be considerably lower than the surrounding areas and of Baltimore City and Baltimore County-certainly the rate could be increased grently in ex. cess of the proposert 30 cent increase.
11. What has the District government done to save money!
We bave no comment in this regard other than to say that in these days any reduction that is made in the cost of government is certainly commendable.
12. How much money is involved for the District and the adjoining States!
The District government estimates that it will receive $51,600,000 from nonresidents under their proposal. They estimate that $28,000,000 of this will come from the treasuries of Maryland and $17,000,000 from the Commonwealth of Virginia. It would appear that they had spent considerable time and effort in developing these figures and we assume that they are correct.
13. Would nonresidents pay more taxes to the District than to their home jurisdictions under the “reciprocal” income tax plan?
The pamphlet states that this is more likely to occur at higher income levels. District rates exceed the Maryland rates after a net taxable income of $5,000 has been reached, it can be readily seen, therefore, that the District income tax will exceed the Maryland income tax in what may well be the majority of instances. This difference can be most significant when dealing with incomes of $18,000 or more. The Maryland rates range from 2 to 5 percent, the District rates range from 2 to 10 percent.
14. Taxpayers in Maryland pay a county tax in addition to the State income tax. Would that "piggy-back” tax be affected by the District proposal?
As indicated in the pamphlet, the local income tax would not be affected. But by the same token, the District income tax would not operate as a credit against the local tax. In the Metropolitan area the local income tax is 50 percent of the State tax, thus in addition to the high District tax our residents must meet this local income tax obligation.
This concludes our comments with respect to the specific questions set forth in the District's pamphlet.
It is significant to note that District officials have made a complete "aboutface' on the question of fairness and equity in income taxation. They along with Maryland officials have been strong advocates of reciprocity for many years. In 1962 when Virginia adopted withholding provisions and made certain other amendments to their income tax law, advertently or otherwise, they omitted the existing reciprocity provisions in their law. In so doing, it would have imposed their tax on nonresidents. This action on the part of Virginia created quite a furor among large Federal agencies with installations in that State, particularily those agencies located in the Pentagon. The District and Mary. land also voiced their concern in the matter. Two conferences were held in Washington in this regard, the first in the office of Senator Brewster and the second in a Treasury Department office, the latter conference being presided over by Mr. Harvey Brazer, Deputy Assistant, in the office of the Secretary of the Treasury. Present at the latter conference were high-ranking Federal officials and tax of. ficials representing the District, Virginia and Maryland. District and Maryland officials joined with the Federal officials in urging Virginia to restore its reciproc ity provisions. This was subsequently done by Virginia.
In 1966 Delaware repealed its long-standing reciprocity provisions, effective as of January 1, 1967. A conference, called by State Comptroller Louis L. Goldstein, was held in Annapolis on February 3, 1967, with tax officials from the District, Delaware, Virginia, West Virginia and Maryland, being present. The tax officials of the District, Virginia, West Virginia and Maryland, were in unanimous agreement that Delaware should restore its reciprocity and they urged the Delaware State Tax Commissioner to so recommend to the Governor of Delaware and the General Assembly of his State.
Two officials of the District attended the Annapolis conference and it seems of interest to note that one of them made the statement "we believe in reciprocity and we practice it".
It seems further apparent that the desire for additional tax revenue has transcended the high principles of equity and fairness so long adhered and subscribed to by District tax officials. Presumably, they no longer believe in reciprocity, although they have appropriated the title for their proposal.
As we have indicated, the State of residence bears the burden of providing essential government services to its residents, the State of nonresidence providing only token services. In our opinion the beneficial effect on the economy of the District resulting from the many Maryland residents employed there, outweighs the insignificant expenditures made by the District to provide the token services. Our Maryland Department of Economic Development has conducted a survey in this regard and they estimate that Maryland residents employed in the District spend nearly $360,000,000 in the District. Certainly this tremendous sum increases the profits of the merchants and business firms in the District and thus contributes to larger income and sales taxes collected by the District government. In addition, the District imposes its unincorporated business tax on Maryland residents who have places of business in the District. Maryland imposes no such taxes on residents or nonresidents.
The District also receives a bonanza in whiskey taxes. According to data taken from tax records the per capita consumption of whiskey in the District of Columbia is 7.57 gallons per year while in Maryland it is only 2.23 gallons. Of course no one really believes that every man, woman and child in the District consumes approximately 38 fifths of whiskey each year. At least a part of this extremely high figure must be in the fact that Maryland residents purchase some part of the whiskey they consume at home in the District of Columbia. The District tax on whiskey is $2.00 per gallon while the Maryland Tax is $1.50 per gallon, of which 50¢ is distributed to the local sub-divisions.
It is not difficult to believe that the District realizes several million dollars in revenue from this source. The same situation exists with respect to cigarette taxes since it is natural to suppose that many Marylanders who work in the District purchase their cigarettes there.
I have devoted most of my time to the first part of the subject “the reciprocal income tax and you" as there is little that can be said to the latter part "and you". Suffice it to say, however, that Maryland residents who work in the District would be required to pay the District income tax on salaries and wages earned in the District. These rates range from 2 to 10 percent. They must also Ale returns to Maryland and include therein their entire taxable income, they compute the Maryland tax at our rates that range from 2 to 5 percent. They then complete our Form 502CR, which is in the tax packet. They develop their allowable credit for the District income tax and reduce their Maryland "State" tax to that extent. It is to be noted that the District tax does not operate as a credit against the local income tax.
In brief "you" the residents particularly of Montgomery and Prince George's Counties, on the higher brackets of income will be paying an income tax to the District in excess of your Maryland State income tax and your tax to Maryland will not be sufficient to offset it by way of the tax credit. You will also continue to pay the local income tax, which except for four counties on the Eastern Shore, is 50 percent of the State income tax before the tax credit. (See breakdown of tax to Maryland and the District at various salary levels in separate schedule attached.)
The District estimates that they will receive $28,000,000 from Maryland residents ... this is a most significant amount . . . Maryland cannot absorb such an amount under its current tax structure ... thus, Maryland will have to look to other sources of tax revenue or increase its rates on existing tax impositions ... how this will affect "you" depends entirely on how Maryland will raise this $28,000,000 in lost revenue. We feel that it can be assumed that residents in this area as well as all other areas of the State will be taxed in one form or another to replace this revenue.
In our opinion the District proposal is most unfair and inequitable and should not be adopted. The District should look to other means, an increase in their real estate taxes for example, and a larger grant from the Federal Government. We feel that full reciprocity in the matter of income taxation should be maintained.
House Joint Resolution requesting the Congressional Delegation from the State of Maryland to use all means available and all due diligence to prevent the enactment of a commuter tax in the District of Columbia and to procure the release of funds appropriated by Congress for the construction of the subway in the District of Columbia.
By the HOUSE OF DELEGATES, January 26, 1971. Introduced, read first time and referred to the Committee on Ways and Means.
By order, JAMES P. MAUSE, Chief Clerk.
REPORT OF COMMITTEE
JOHN HANSON BRISCOE, Chairman.
By the HOUSE OF DELEGATES, February 17, 1971. Made a Special order for Friday, February 19 at 12:01 o'clock P.M.
By order, JAMES P. MAUSE, Chief Clerk.
By the HOUSE OF DELEGATES, February 19, 1971. Amendments offered from the floor by Delegate Douglas rejected, ordered printed for third reading.
By order, JAMES P. MAUSE, Chief Clerk.
House Joint Resolution No. 14-By Delegate Dorman.
House Joint Resolution requesting the Congressional Delegation from
the State of Maryland to use all means available and all due diligence to prevent the enactment of a commuter tax in the District of Columbia and to procure the release of funds appropriated by Congress for the construction of the subway in the District of Columbia.
1 WHEREAS, In regional problems the State of Maryland has repeat2 edly demonstrated its sense of comity through its cooperative efforts 3 to deal with recreation, transportation, police, pollution and water 4 supply problems emanating from the Federal City; and 5 The State of Maryland stands ready to commit funds, secured 6 from Maryland taxpayers, to subway construction in the metropolitan 7 area; and 8 The 91st Congress appropriated funds to finance construction of 9 the District portion of the subway but has to date refused to release 10 these funds; and 11 The State of Maryland is concerned with the fact that the con12 tinued refusal of the Federal Government to fulfill its commitment 13 to subway construction has allowed inflation to drive construction 14 costs far above original estimates; and 15 The State of Maryland is concerned with preventing the enact16 ment of a proposed commuter tax to finance the D.C. portion of the 17 subway and to pay for these additional inflationary costs as this 18 would result in a double taxing of Maryland residents who work in 19 the District; now, therefore, be it 20 Resolved by the General Assembly of Maryland, That the Con21 gressional Delegation from the State of Maryland is requested to 22 use all available means and due diligence to prevent the enactment 23 of a District of Columbia commuter tax; and be it further
EXPLANATION: Italics indicate new matter added to existing lav.
[Brackets] indicate matter stricken from existing law.