The Tax Grab Game

Source: Josh Goodman, Governing, Vol. 20 no. 7, April 2007

Cities are finding ways to raise revenue from suburbanites, without actually calling the levy a commuter tax.

Talk about a politically charged phrase. “Commuter tax” is such a loaded term that people who support one often try to find some other way of saying it. Alice Rivlin, who’s spent much of her professional life managing or overseeing federal budgets and helping to rescue local finances, steers clear of the phrase–even though she’s a firm believer in the idea of her hometown, the District of Columbia, taxing the income earned in the city by people who live in the Maryland and Virginia suburbs. “I never use the term ‘commuter tax,'” she says. “That’s anathema.” It’s also the fastest way to doom a city’s attempts to raise money from suburbanites. At the heart of the commuter-tax debate is this question: Do the millions of people who enter cities to work each weekday cost more than they contribute to the urban center? Suburbanites almost always answer “no” and they’ve made sure their representatives in elected office agree. For years, central cities have been learning that this is a fight they can’t win as, time and again, their efforts to tax the wages of suburbanites have failed in the face of political tension and economic reality. Often, cities also face the opposition of their own business communities, which believe that such a tax could drive employers away. No city, after all, can be a center of economic activity without its commuters. But there may be an end run around the commuter-tax dilemma. Quietly, a number of cities are figuring out ways to raise revenue–without also raising the spectre of a commuter tax–from workers who commute to the city. Cities in Ohio and Texas have found success by casting inter-jurisdictional taxation as an alternative to something suburbs and their residents fear even more: annexation.

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