Very Flat Tax

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I'm busy collecting my bets for predicting that the Norton flat tax proposal was going nowhere. Although Tom Davis is scheduled to hold hearings on the proposal soon, Newt Gingrich--whose conviction span is the equivalent of a teenager's attention span--has already backed off it. And White House Chief of Staff Leon Panetta put the kabosh on it yesterday on the Brinkley hour. The Post reports that Panetta is "profoundly misinformed." And she goes on to argue that, "Most cities get 75 percent of what it takes to keep them running from states." Norton--and many others--have argued that the federal government is the District's state and should be providing that portion of revenues.

The same argument appeared in the first article of the New York Times' District series.

"If you move out of New York to Westchester County, you still pay taxes to the state, which kicks back some to the City of New York in the form of state aid," said James O. Gibson, who was Barry's planning commissioner during the mayor's first term. "Here, if you move, it's a 100 percent loss to Washington."

You know what? Their argument is wrong. Let me try to explain without bogging you down with numbers. (If someone wants to pay me to churn the numbers, I'd welcome the assignment.)

Norton, Gibson, Mark Plotkin, Jack Evans, and others who make this argument forget one thing. City residents everywhere pay taxes to the state. In return, the state provides services to the city. The state may provide "75 percent" of the cities' operating revenues, but city residents and businesses provide the state with the money to do it. In some cases, cities get more a little more back from the state than they kick in, but often the cities--the richest part of the state--support the rest of the state and get back far less than they kick in.

For example, I'm told that New York City receives about $1 billion less from Albany than it sends up the Hudson River. Growing up in New York State, it was a common complaint that upstate Republicans who controlled the state assembly milked New York City. Remember that New York State still provides services to the city--prisons, medicare payments, education, motor vehicle services, etc. (the same services the District wants Uncle Fed to supply)--but for every dollar city residents spend in taxes, they get back less than a dollar worth of services from Albany.

The same may not be true for all cities. Some may be supported somewhat from the non-urban areas. It all depends on the political climate and the way the states and cities have divided up responsibility for providing services. But I am certain that you can't find one state that is providing gratis 75 percent of a cities' revenue needs.

Yet that's what Norton and others are calling for. The sad reality is that the District can't provide services even though it has taxing authority that is the equivalent of a city and a state. (Yes, I know we lack authority for a commuter tax, but that's been a net loser for New York. Imposing one in D.C. would merely drive out more businesses (if there were any left) and with them, more residents.

The crux of the problem is that our city stewards squander our money and provide such horrendous services that people don't want to live here. Yes, we should have congressional representation. Yes, the home rule charter ought to be brought up to date. Yes, Congress should pick up it's share of the unfunded pension liability. But as for fundamentally restructuring who does what, the District of Columbia has it better than most cities. Wasting energy on arguing that the federal government owes us is just another manifestation of the entitlement mentality that afflicts this city.

Norton does have one point though. Federal fiscal and tax policy favors the suburbs over cities. How much? I haven't read the literature. I've just asked the experts. American does not love its cities. If the federal government leveled the playing field and took away the suburbs advantages--did I hear a $1 per gallon gas tax--then I think you would see a great diminishment of city problems.

But we would still be saddled with corrupt and inefficient local government. To address that problem, we ought to stop looking for excuses and "think local and act local."

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Cheers,

Jeffrey Itell

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New York Times

With respect to the New York Times feature on Ward 3, if reporter Francis X. Clines had me on tape referring to Ward 3 residents as "my people," and if he has me on tape waxing enthusiastic about retrocession to Maryland, I will eat the tape. And I will tell him so.

Kathy Patterson Ward 3 Councilmember KpattDC3@aol.com

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The Norton Plan's Next Iteration

Hanging on the Old Main Post Office near Union Station was this stirring motto:

Give Me Liberty or Give Me Beer

I expect this will be the flat taxers' next proposal. It uses the same logic.

Actually, I've long thought that since Congress will never address the District's status in a fair way we should at least get them to pass some legislation changing some things along the lines of providing some "truth in advertising," for example,

... with liberty and justice for all, except DC citizens.

... E Pluribus Almost Unium

... of the people, by the people, for the people -- not good in the District of Columbia

... Taxation without representation -- big deal

You get the idea. Wouldn't change our status, but at least it would end a little hypocracy.

Carl Bergman cbergman@radix.net

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dc.market

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Jeffrey Itell Story@intr.net

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