Over the weekend while talking DC Statehood at the Friends of Rhode Island Ave. Fall Fest a citizen who had lived in DC for many years but had not really understood the movement for DC Statehood asked me a series of questions about Statehood. Most of the questions were the most commonly asked questions: Is it constitutional? Can we afford it? Why not retrocede? He closed our conversation by asking an interesting question which was: Don’t we here in the District and in this neighborhood have special access and a distinct economic advantage because of our proximity to the capital (being the capital) and the entire center/base of the federal government?
The reality is yes, we have a distinct economic advantage over many municipalities in the 50 states because we are the primary federal government town but that does not tell the whole story. Maryland and Virginia also reap huge economic benefits from being so close to the capital and have more control over their economies than the District. A recent analysis in the Washington Post of the highest income earning counties in the country show that the suburbs of the District occupy 7 of the top 10 highest earnings in the country, yet the District ranks 125th if considered a county (but 16th if compared with other states). Clearly, the suburban counties around the District are reaping rewards of proximity without the drawbacks associated with being the federal district itself.
High incomes earned through both federal and federally contracted/associated work translates into huge revenues for both state governments. Additionally, it cannot just be looked at just as government jobs rather a big part of the District’s economy as well as that of the suburbs is a result of private industry working for or on behalf of the federal government. Take for instance the fact that 6 out of the top 10 defense contractors have corporate headquarters in Maryland or Virginia. Those companies pay a host of taxes to the states, including earned income taxes, generating huge revenues for Virginia and Maryland. These defense contractors and many like them are only in the area because they want to be close to the Pentagon, the CIA, and the seat of government not because the monuments are pretty at night.
While the DMV has a unique and stable economic engine based on our proximity to the seat of government it is the District, the actual seat of government that is at a distinct political and thus economic disadvantage to our neighbors. Because we are the capital we are at a distinct budgetary disadvantage for several reasons:
• 42% of our land is not taxable because it belongs to the federal government, foreign governments, and federally mandated tax exempt private institutions. This is what is often considered a big component of our ‘structural imbalance’ where we pay for the needs of others while crippled in our ability to generate revenue.
• We have limited control over our own budget as Congress can manipulate our budget however they so choose. While other states set their budgets and implement them when passed we still have Congress if and when it so chooses adding programs or subtracting them from our budget.
• Because of Congress’ inability to pass budget’s in a timely and consistent manner our budget, approved with the Health and Human Services Budget (yes, seriously), timeline is unreliable which can cause problems with government contracts and with rating agencies costing the District time and money.
• Members from neighboring states can more readily influence where federal buildings relocate to. With a more mobile workforce the need to have a dense federal presence in the capital is not as necessary so members of Congress can push advocate for agencies to move to their districts. Additionally, since states and counties have larger land masses to deal with they often can offer property at reduced rates to either entice governmental relocations or corporate relocations.
• Due to congressional control of the District we are not allowed to tax income where it is earned, a power the 50 states all have although many choose not to use it. This shackling of our ability to raise revenue costs the District on the low end $800 million a year up to $2 billion per year (depending on the proposed rate), an amount that could allow us to lower taxes, expand services, or enhance outdated infrastructure
So, yes, we have a distinct advantage because we are the capital with a good number of steady federal and associated private sector jobs are here in the District. However, there is no guarantee that District citizens get those jobs and the inexcusable denial of our democratic rights puts us at a democratic and financial disadvantage when compared to our neighbors in Virginia and Maryland. Marylanders and Virginians reap all of the rewards of being close to the capital including representation in it which helps to further enhance and expand both their private sector and public sector coffers. All we in the District want is a level playing field economically and democratically. Ain’t that America?
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