73

revenue would have been $454 million in 1984 and would

rise to $583 million in 1990. However, Government workers probably would be exempt

commuter tax levied after

earnings of

Federal

from a

statehood, and a tax on

private sector

nonresidents only is more

realistic. If

such a tax had been applied, the

additional

1984. If

imposed, it could yield $322 million by 1988

and rise to $356 million in 1990.

District

a

These estimates indicate that with no change in the of Columbia tax rates and with the addition of commuter tax on private sector earnings, total from the income tax could rise from about $400 million collected in 1984 to about $800 million in 1988, and nearly $880 million in 1990.

revenues

Section IV

OUTLOOK FOR THE FEDERAL PAYMENT UNDER STATEHOOD

A key question has been raised concerning statehood for the District of Columbia: would the present annual Federal payment continue? Since the Federal Government does not make similar unrestricted grants to any other state, it is natural to ask whether a basis would exist to justify continuation of the payment in the case of District if it were to become the state of New

the

Columbia.

A review of the history of the Federal payment and an examination of its logical and practical bases suggest that the state of New Columbia would most probably receive some form of Federal payment. In fact, a good case can be made for expanding the Federal contribution and for doing so in conjunction with the adoption of a fixed formula which would make the

receipts more

point of view.

predictable from the local government's

74

75

1987, level

During Fiscal Year 1986, the District received $412 million to cover the Federal payment. (See Table IV-1). The figure was set at $425 million in the budget for FY and the District Government has forecast the same through FY 1991. In 1986, the Federal payment represented 18.0 per cent of the District's general fund. However, the ratio is projected to decline to 17.4 per cent in FY 1987, and to 14.0 per cent by FY 1991.

The District

reimbursement

for

Federal buildings

of Columbia Government also receives sewer and water services supplied to

on a contract basis. These services

are billed at the same rate charged nonfederal users. The funds to pay for these services come from a special appropriation adopted each year. The District also qualifies for many of the Federal grants-in-aid programs in the same manner as other state and local governments. In addition, the District receives financial assistance from the Federal Government to offset part of the costs associated with special events such as Presidential inaugurations.

Table IV-1

77

The Federal Payment in Historical Perspective

From the

earliest days of the Nation, Congress

recognized

that

the Federal Government had a special interest in the District of Columbia. This led to the

acceptance

of a special responsibility to aid in the underwriting of the costs of local government within the District.

Initially, after the Federal Government shifted its location from Philadelphia to the District of Columbia in 1800, the Federal financial contribution to the District consisted of the proceeds from the sale of Federally-owned building lots. The funds were intended to help pay the costs of courts, jails, police and fire protection, public education, and other public services and facilities. However, as matters developed, the demand for building lots was not as robust as had been anticipated, so the sale of land generated less revenue than was expected. At the same time, the taxation of private real estate was the only means available to the District Government to raise funds to support activities.

its