DC residents to be excluded from paying federal taxes?

Photo by PoPville flickr user fromcaliw/love

The Hill is reporting:

Florida Rep. Allen West (R) said he’s unsure whether the District of Columbia should be a state, but suggested its residents be excluded from paying federal taxes.

“If you live in the District, perhaps an exclusionary zone should be set up where District residents do not pay federal taxes,” he added.

I think we may have discussed this once before – but I’ll ask again – would you trade representation in Congress if you didn’t have to pay federal taxes?

67 Comment

    • ah

      Yeah, something for nothing? Of course.

      But it won’t happen.

      And if it does, DC’s income tax will increase massively, and then won’t come down once the fed tax is reimposed.

      • Why would it increase.

        1. All district residents would have anywhere between 15 and 35 % of their income free up as discretionary income. The amount of “crap” that people would buy and the increased sales tax collection DC would get would add hundreds of million of dollars to the treasury the first year.

        2. You would have thousands of high net worth individual move their residency to the District the first year alone. Millionares and billionares who would then be paying DC income tax.

        3. Property values would skyrocket and property tax revenues would increase accordingly.

        So the council hasn’t lifted a finger and by the end of the first year the District has probably collected an additional 400-600 million dollars in a variety of taxes.

        Granted, our current council can’t count to ten or balance a 3 line budget to save their lives, hence our current fiscal situation, and would likely raise taxes somewhat, but they would be voted out of office as tens of thousands of new voters (Republicans likely) move to town.

        Heck, DC could use all the new found wealth to actually lower the corporate tax rate, lower property and income taxes to make the District even more attractive to companies and individuals and it still wouldn’t matter as the tax paying population of the District would likely more than double by the next census.

        What people lose sight of is that while the District currently has 600K residents, only about 190K of them pay any income taxes. That number would instantly balloon under this admittedly “pie in the sky” scenario.

  • This is super unlikely to ever happen. Yes, even more unlikely than DC ever gaining voting representation in Congress.

    • Considering that this wouldn’t require a Constitutional Amendment, whereas DC statehood would, saying it’s MORE unlikely is a bit of a stretch.

      But yeah, I’m not holding my breath. And since a halt of federal aid would come in the deal, DC would use it as an excuse to impose even more confiscatory local rates.

    • I agree especially when it won’t take long for them to realize what would actually happen if it was to be implemented.

      Of course Republicans who had the Democratic District might find turning it whiter and even wealthier might be what they really want. Don’t have to worry about those pesky Democrats in D.C.

  • So the feds have yet MORE reason to shit on us? No thanks. I want to at least be able to take umbrage at the poor treatment we get from them.

  • I would trade my dog

  • Hells yes I would! Imagine if it was retroactive…

  • Yes,

    And this has a larger (but not great) chance of passing than does actually giving DC residents representation. It is somewhat interesting that a Republican has offered it up

    After having lived here for decades and watched no fewer than a dozen solid attempts at getting voting representation fail, I can say with absolute certaintiy that it won’t happen in the next 50 years.

    The first year of the Obama presidency was the best opportunity in the past half century to remedy this issue and it still failed.

    So, a worthy tradeoff while we aren’t getting voting representation would be a federal income tax abatement.

    For those of us who have made our homes in the District and love to live here, it would also be a huge boon to the District.

    The population would probably double from its current 600K by the next census, the bulk of those people higher earners. Even our useless and quasi criminal City Council couldn’t find ways to waste all of the additional revenue from income, sales and property tax that would result.

    The District would flourish like a oil patch or gold rush town.

    • Obama has proven that he really doesn’t care all that much about the people of the District of Columbia.

    • I agree with the population increasing explosively if there was ever a federal tax abatement; however, if that ever happened, Republicans would surely flip positions — I’m 100% sure of that. So the end result would be full voting rights for the District and Fed taxes having to be paid.

    • “Even our useless and quasi criminal City Council couldn’t find ways to waste all of the additional revenue from income, sales and property tax that would result. ”

      If you truly believe that… then can I interest you in this deed to the Brooklyn Bridge?

    • I would be there would end up being a lot of people who “lived” in D.C. (i.e. some cheap ass condo would have multiple people “living” in it) just to get out of paying taxes somewhere else.

      • Yes, but they would have to pay DC income taxes to prove the lived here, so goody for us.

        Plus the value of your cheap-ass condo just went way up…

  • houseintherear

    Oh wow, BAD idea.

    • A bad idea for whom and why?

      • houseintherear

        It is a bad idea for every person with established residency in D.C., because we would no longer be considered “federal” citizens and would quickly lose any federal rights. It’s a dumb idea, and it’s scary as hell, and Allen West only cited it to spark the debate (again) on representation for the District. Oh, and to get his name in the news, which he has accomplished quite easily.

        • You’re out of your mind! It would be the best thing to happen to DC since the control board took over.

        • ah

          Why would it go that far? Payment of taxes has basically nothing to do with the existence of every other federal right, including voting.

  • YES. If this ever happened you can bet everyone in the country would learn about DC’s lack of voting rights real quick.

    • My answer is a wholehearted “no” to foregoing both federal taxes and representation, but I love this silver lining –

      passage of an abatement would certainly get DC’s lack of voting rights front and center in the national news.

      In the meantime, I’ll happily continue to fork over a quarter of my income only to get most of it back every April.

      • You need a new tax advisor. You acknowledge the fact that you pay way to much in taxes, yet don’t adjust your withholdings?

        Thanks for the interest free loan I guess…


        • A “quarter of my income” as in I’m in the 25% tax bracket and my reasoning is that I’d rather pay too much throughout the year than face an unmanageable tax bill in April.

          • Just figure out how much you should be paying and adjust your withholding according at the beginning of the year. That way you’ll owe about $0 every April… really, ask a tax advisor!

          • Cait-

            Please refrain from voting. You lack the requisite ability to make rational decisions.

  • Jesus christ, not paying fed taxes is worth so much more than 1 measly vote in the house. People would flock here in droves. Reason 23094832094 why this would be awesome: athletes would be dying to play for our sports franchises.

  • i would LOVE it. please pass this! i don’t even vote anyway. i bet most people in DC also don’t…

  • while this is a fantasy-never-happen-situation, of course i’d trade my non-vote for no taxes. the last (best) time we took a run at getting the vote on the hill, a similar amendment was proposed and readily shot down.

    if this really happened, you’d see a situation like monaco, where tons of rich people establish their residency here. muggers would be psyched.

  • Funny how we go barking about democracy all over the world, yet we can’t figure this shit out ourselves. Quite a rock-solid argument you got there, Uncle Sam.

    So yes. Give us the vote or stop taking our money. This is capitalism, baby. Money is freedom.

  • Love this idea in theory. But then rent would double or triple for every place in the District as every VAer or MDer decided to find a place in the city.

    • For the first couple years, rent would go up. Figure that not having to pay Fed taxes is worth roughly 1/3 of a current NoVa resident’s income. So rents can’t go up higher than 1/3. But the majority of units in DC are rent controlled, so they’d go up the maximum, which this year was about 3% — no where near 33%.

      At the same time, rents would drop in VA. So you could live in Rosslyn and work in DC if you wanted.

      It makes more sense to pay more taxes rather than more rent, because taxes are subject to deductions and never go up faster than your income. Two major bonuses. After the exodus happens and rents in DC finally adjust upward 33%, the smart move would be to set up in VA.

      • That’s not what would happen. Every investor in the country would buy out every rental property in the city in 6 months.

        • If by “buy out”, you mean buy as a new owner, then most of those guys will have to pay 33% increased prices that sellers will suddenly demand. There’s no arbitrage potential there. To top it off, there’s always this giant risk that prices fall 33% if congress takes away the abatement. Bad investment. The smart money is selling.

          If you by “buy out”, you mean landlords buy tenants out of their leases, keep in mind that landlords currently pay multiple $10’s of thousands to buy someone out of a modest rental when tenants organize collectively. If tenants are given the option of moving to a new place where their rent will go up whatever the current maximum increase is (12%?), do you think they’ll still accept a $20k buy out — or do you’ll think they’ll demand $20k + the cost of a giant rent increase, compounded over several years? That 20k buy out could easily rise to $40k in no time.

  • Oh hells yes I’d make that trade — in a heartbeat.

    I think it’s fantastically unlikely that this would happen, but if it did, just watch the real estate market in DC have the mother of all bubbles once it went into effect … if you think rent is expensive now, just wait. Other things I predict would happen: the DC Council would try to raise every single local property, sales, and miscellaneous tax rate to get their hands on that “freed up” money; private schools admissions applications would go through the roof as many District residents previously unable to afford the tuition found themselves with an additional 30-50k/yr; Silver Spring and Arlington both would lose about 5,000 residents; and as noted above, the Wizards would suddenly be a very attractive free agent destination.

    • The DC City Council as it exists today would be gone by the following election. The tax rate would drop to whatever it cost to pay for the cops and nothing more.

      • Not sure I follow the reasoning here. Are you saying that more wealthy individuals would move into DC, thereby changing the political makeup so far to the right that we wound up with a libertarian-leaning Council? I have a hard time imagining that happening. I could see, however, that the likes of Mendelson would be gone from the at-large seats, and as a whole the Council would become more conservative with a large influx of wealthy voters.

  • Not only would a large number from MD and VA move here, but many of the nation’s rich would move here for those benefits.

    Watch hyper-gentrification explode everywhere. Anyone earning under $100k would have to leave.

  • What about a federal tax credit which is maxed out at the equivalent to those earning AMI?

    ie. AMI of 100k @ 25% federal tax rate results in a max TC of $25k.

    Those earning less than AMI would essentially pay zero federal taxes, while those above AMI receive only $25k.

  • Yes, in a heartbeat. If you can’t get the vote with a Dem house, senate and prez, then go for the taxation. GOP would love the experiement. The only concern would be District income taxes, would they go up and wipe out the benefit?

  • Wrong Question: I can’t trade Representation for No Fed Income taxes – because I don’t have Representation to trade.

    But, as long as we’re trying to be consistent, then Yes, DC residents should not currently be paying Federal income taxes. Take a look – residents of the territories (who also have Delegates in the House, no Senate voice) don’t pay Federal income taxes. Of course, DC does have Electoral College representation – so maybe that’s what we’re paying for.

    A sharply reduced Federal income tax burden for DC residents (say 30% of the standard rates) sounds fair for our crummy status. Of course, that would have to be associated w/ a fairly firm residency test to make sure this doesn’t turn into Tax Shelter Town, USA.

    • ah

      Yeah, some value the electoral college gives us. The presidential candidates don’t even bother because they know DC will vote 85-90% for the democrat anyway.

  • ive argued this for as long as i can remember… seems so simple.. we arent represented.. we shouldnt pay until we are (civil disobedience…ghandi style…district residents stop paying)bet wed have a rep quick…

  • Quincy St Neighbor

    Iowan makes a good point, we have to representation to trade in the first place, so I would totally take federal tax exemption!

    I imagine life goes on in Puerto Rico and the other US territories who don’t pay federal taxes. Heck, most Puerto Ricans would prefer to remain a territory and not pay taxes over their own nationhood.

    Imagine the population boom that would bring the District’s population back to its heyday! And I could sure use a $25k boost to my disposable income too. Perhaps I’ll use it to hire a driver? lol.

  • We would be like a little Mariana Islands. All the bank execs would change their residence from DE to DC for a tax shelter. Who knows what would happen, but it would certainly make property in the Dis much, much more valuable. Heck, even serious rumors of it might cause a property surge!

  • Hell fking yes. But then Mayor Old Dude would just raise DC taxes and hire more government employees to watch each other work.

    • The current DC council would be gone in 1 election, then the city tax rate would drop precipitously to accommodate the new wealthy residents.

      There would be a land rush in wards 7 and 8 like you’ve never seen before.

  • Has anyone read the Constitution lately? Amendment XVI (Ratified 2/3/1913) states: “The Congress shall have power to lay and collect taxes on income, from whatever source derived, without apportionment (my caps follow) AMONG THE SEVERAL STATES, and without regard to any census or enumeration.
    We’re not a state – so where in the Constitution does it say WE have to pay taxes?? Although I can’t put my fingers on it now, I seem to remember that the Supreme Court did include in some ruling that since DC wasn’t a state, then we had not rights in some other context. I’m not a lawyer, but it they can say it in that other context, why is that denial any difference than the Amendment above. We’re not a state, therefore we don’t have to pay taxes!!!

  • So what about Social Security, Medicare, etc. Would we lose that coverage?

  • No Way – there are no free lunches in this life. From a selfish point of view, yeah it would be nice, but if anyone has been listening, our Country isn’t in the best fiscal situation of all time. We gotta do our part and pay our taxes and THEY – US Congress has to do their part and give us the VOTE!

    This is all childish!

    • I agree that we should do out part and pay our taxes – but Congress will never, ever do its part and give us a vote. In that vein, we’re really disenfranchised citizens. We didn’t have any vote to start the expensive wars or have any say in how money was being overspent. Why should we be responsible for paying for it?

  • “would you trade representation in Congress if you didn’t have to pay federal taxes?
    Well, the way you ask the question is would you rather pay for something you’re not getting or not get it for free?
    As they say “DUH!”

    Of course this will never happen. And it shouldn’t happen.
    There is only one solution and that is that District residents have the same rights and representation as everyone else in this country.

    My solution is that only Federal buildings have jurisdiction in the District. The rest should go to Maryland. All residences, all businesses. The District should have no residents, and no private business.
    If the District is a federal district, let it be so.

  • dc cant govern itself so hell yeah ill take the exemption!!

  • blester01

    Emphatically yes.

    Really what are three members in Congress going to do? I assume we would only receive 1 rep and two Senate seats. The only thing it would accomplish is to guarantee three Democratic seats.

    Ending the Fed taxes to compensate statehood would be a huge win for the city. You would see a lot of businesses move in to get the exemption.

  • As a property owner, I will be happy to sell you my house for more and move elsewhere

  • As long as DC doesn’t try to eat it up; yes.

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