WASHINGTON – D.C. Delegate Eleanor Holmes Norton recommended Tuesday that Congress declare the District a federal tax-free zone.
Norton, a Democrat, said exempting District residents from federal income, gift and estate taxes will help lure businesses to the city and create a “revenue stream” to help the city out of its fiscal crisis.
She added in a press conference that it is unfair for residents to have to pay billions of dollars in federal taxes without adequate congressional representation. The city has no senators and Norton this year was stripped of a vote in the House.
District residents paid $1.6 billion in individual federal income taxes in fiscal year 1993, Norton said. Figures for estate and gift taxes paid by city residents were not available, an Internal Revenue Service spokesman said.
The rest of the metropolitan area will not be harmed by the proposal, Norton said.
“The District cannot begin to absorb Maryland and Virginia businesses,” Norton said. “But it will get a little more of the share.”
The chairman of a House Government Reform and Oversight subcommittee likely to review the bill could not be reached.
But a spokeswoman for Rep. Chaka Fattah, a Pennsylvania Democrat and member of the subcommittee, said “he is all for exempting the District from federal taxes if they will continue to not have a vote in Congress.”
Steve Kreseski, spokesman for Rep. Robert Ehrlich Jr., a Baltimore County Republican and member of the full committee, said his boss supports the principle behind creating economic means to revitalize the District’s economy.
“He is for incentives to put more money in the hands of the people,” Kreseski said. “The more disposable income they have, the more spending capability they have.”
But at least one congressman who voted for D.C. statehood last year said he could not support a federal tax exemption.
“It wouldn’t seem fair to the rest of the country if District residents are still eligible for federally sponsored programs like Social Security and Medicaid,” said Tony Caligiuri, administrative assistant for Rep. Wayne Gilchrest, an Eastern Shore Republican.
Norton said Congress provides the District with a federal payment – to help cover taxes lost from federal property in Washington – that is about 20 percent of the city’s budget. But, she added, the city still pays a disproportionate share for Aid to Families with Dependent Children, Medicaid and Metro services.
“The federal payment was insufficient to make up for the increasing concentration of the poor in this city and the flight of taxpayers,” Norton said. “The District can cut itself to smithereens, but it can’t cut its way out of this crisis.” -30-