The Dangers of the Commuter Tax

Today, Washington Post editorial writer Colbert King offered an interesting eulogy to his former boss, Senator Charles McCurdy Mathias, a Republican from Maryland. Mathias was truly a non-partisan in the old mold, a Republican who helped pass both the 1971 Federal Election Campaign reform law and the 1973 War Powers Resolution. But King also mentions a little known political tactic Mathias employed along with former Washington DC mayor Walter Washington...

Washington and Mathias had a routine based on their mutual needs that they would employ from time to time. Both men told the story of how Washington would ask, "Now, Mac?" And Mathias would reply, "Not now, Walter, I'll tell you when."

When political troubles seem to be stirring in the Maryland suburbs, Washington would publicly call for a commuter tax (which would have been impossible to pass) - allowing Mathias to "defend" his constituents by denoucing the idea.

This would be followed by a call from the Senate: "What can I do for you up here on the Hill, Walter?" Mac would ask. And the city's budget would sail through.

Of course the commuter tax is like catnip to DC residents and kryptonite to DC suburbanites. Since only one of those two groups gets to elect members to Congress, a DC commuter tax will not happen as long as DC can't decide how to turn Eleanor Holmes Norton into a full-fledged representative. In fact, a commuter tax for DC has been explictly barred ever since the 1973 District of Columbia Home Rule Act (which Mathias also helped pass).

Even if the political situation were different, however, a commuter tax wouldn't make sense for DC. As I've discussed earlier, commuters actually pay more than their share of local taxes almost everywhere in the nation, mainly through the high property taxes paid by their employers. Most importantly, commuters don't use local schools or social services, which in major urban cities like New York constitute over 50% of all spending.

In fact, New York City was forced to drop its commuter tax back in 1999, and in the following eight years, despite the apocalyptic screeds of the tax's proponents, the city increased its population by 4.4% and its employment by over 10%. And this while the city almost doubled its revenue to over $50 billion dollars a year (although much of this went towards projects, and pensions, few today would consider wise). Clearly the end of the commuter tax didn't end revenue flexibility for the city government. Still, the New York Times never stops trying to get that old commuter tax magic back.

Those cities which have heeded the call of the Times and other downtown papers and maintained a commuter tax (such as Philadelphia, Newark, Detroit), continually number among the worst performing and most consistently bankrupt urban areas in the nation. Philadelphia was in fact the first city in the country to impose a commuter tax, back in 1939, and it has not been a notable success there. Haughwort (2000) estimates that the city lost over 127,000 jobs just since 1970, almost 1/4 of its entire employment base, simply from the rise in the wage tax rate during those years, which at one point constituted almost half of the city's revenue. The tax now takes almost 4% of non-residents income, and that on top of state and federal income taxes. No city in the nation even comes close to that burden, or manages to offer such poor urban services in return for the vast sums it receives. Still, according to advocates of the commuter tax, those tens of thousands of lost jobs should mean that tens of thousands of commuters are no longer a burden on the municipal fisc, and Philadelphia should be booming, but of course it continues to lose population while it lurches from one fiscal crisis to the next.

Mathias's and Washington's old routine dramatizes the sempiternal conflict between suburbs and cities, but both sides should now understand that when it comes to commuter taxes, they're all on the same side.