The D.C City Council played redistribution politics recently with a sneak attack $300 million yearly retroactive tax increase on overtaxed D.C. residents and businesses. It “decoupled” the President’s Big Beautiful Bill’s federal tax deductions and credits on tips and overtime pay, among other important tax relief, to buy votes with a $1,000-per child monthly handout called a “tax credit.”
The House voted to overturn this latest example of exploitive economics. The Senate will soon act. Unless a permanent fix is found, more D.C. Council mischief is inevitable. Nothing will otherwise stop an exodus of industrious D.C. residents and businesses fleeing to neighboring lower-tax states and Florida.
America’s capital should never be held hostage to the pathologies of other declining socialist cities. President Donald Trump, with Congress’ help, can correct an historic injustice and simultaneously transform Washington into an island of prosperity and excellence. Repealing federal taxation of D.C. residents’ and businesses’ income will attract the best and brightest and revitalize America’s capital. Revitalization will cure D.C.’s ailing commercial real estate market hit by right sizing the federal bureaucracy and offloading surplus federal buildings and real estate.
Besides reviving a broad base of restaurants, hotels, and other businesses, a federal tax-free D.C. would be a magnet for world-class companies and technologies. The increase in real estate property values and resultant tax revenue should force lower D.C. personal and business income taxes typical of prosperous world cities like an earlier Hong Kong. The underserved would be well served.
Fairness and the law support making D.C. a federal tax-free haven. Like American citizens in Puerto Rico, the Virgin Islands, Samoa, and Guam, D.C. residents have no Congressional voting representation. Unlike fellow Americans living in Puerto Rico, the Virgin Islands, Samoa, and Guam, however, D.C. residents must pay federal income taxes, a shocking injustice. Together with D.C.’s crippling marginal personal income tax rates, District residents are among the most heavily taxed U.S. citizens yet have no voice in Congress.
Why haven’t District leaders challenged the obvious unfairness of taxation without representation? Actually, they have, but not against federal taxation. Instead, they have unsuccessfully demanded representation, with two Senate and at least one House seat. Adding guaranteed Democrat seats has been a losing proposition. For some 50 years, D.C. residents have thus suffered taxation and still no representation. Given D.C. leaders’ financially dependent voter base, there was no political risk for D.C. politicians to sacrifice those who pay federal income taxes.
The City Council’s emergency “decoupling” trick is only the latest example of D.C.’s taxpayers’ political victimization. Enjoying decades of high salaries and little credible competition in D.C.’s one-party reality, local politicians understood their potential political vulnerability. If D.C. blossomed with successful entrepreneurs and others motivated to demand lower local taxes, less waste, and more government accountability, old D.C. politics would end.
Ultimately, an influx of personal and business dynamism, with a responsive government (and continued Congressional oversight), would harness capital to address the needs of District residents. It would enhance the District’s cultural preeminence represented by greats like music’s Duke Ellington and the Smithsonian museums. It would also fortify the District’s world class universities while refurbishing the District’s aging infrastructure.
Our Maryland and Virginia neighbors would profit from a tax-free D.C. while D.C. would enjoy greater local economic leverage thanks to its federal tax freedom. The District’s limited land and inevitable competition for limited residential, retail, and commercial sites will raise suburban real estate prices by sheer proximity while incentivizing suburban governments to become tax competitive.
Congress retains ultimate veto right over the nation’s capital’s local government under the Home Rule Act. After earlier successful administrations of mayors Tony Williams and Adrian Fenty, Mayor Murial Bowser has shown similar astute political instincts. She defied skeptics by attracting a new Commander’s stadium while keeping the Wizards and Capitals at a revived Capital Center. These accomplishments need a tax-free D.C.’s private investment to succeed.
The D.C. City Council’s newest financial “decoupling” chicanery threatens to destroy Bower’s accomplishments and any hope for a lasting D.C. economic renaissance. In fact, the “decoupling” could threaten Home Rule itself. Taxpaying D.C. residents will simply vote with their feet and take prosperity with them.
A majority of City Council delegates thrive on a soak the rich redistribution mentality so deadly to prosperity. D.C. will only enjoy a cure when its voters have an incentive to limit government, cut government waste and inefficiency, and entrust the private sector to invest in D.C.’s prosperity.
Our forefathers orchestrated a tea party to protest unjust taxation. We Washingtonians need only address the inherent injustice of such taxation by demanding its removal to build a nation’s capital that all Americans can treasure.
William H. Shawn is a Washington, D.C. long-time resident.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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