Who Pays More Taxes? Virginia, Maryland or D.C.?
Everybody knows that Washington is tax-o-lific, a fiscal conservative's nightmare, a city that sucks dollars out of residents' pockets like no place else. Except that everybody is wrong.
A new comparison of the tax burdens in the D.C. area reveals that the stereotype of tax-loving District bureaucrats hoovering up residents' riches is true for the lowest income level--the $25,000 a year family indeed faces a greater burden in Washington than in suburban Maryland or Virginia.
But at the $50,000 income level, the District turns out to have the lowest tax burden of the three jurisdictions, and for the next three higher income brackets--families earning $75,000, $100,000 or $150,000 a year--the District lands pretty much in the middle, ranking third among six area jurisdictions.
The D.C. chief financial officer puts together an annual analysis of tax levels looking at income, sales, property and automotive taxes in the District, Arlington, Fairfax, Alexandria, Prince George's and Montgomery, and the results offer some surprises.
Some things are as you might have expected: The D.C. income tax surpasses the metropolitan average at every income level. But property taxes make life in the District considerably less burdensome than in the suburbs for two reasons: The rates in the city are lower, and the District offers homeowners a homestead exemption--a deduction this year of $64,000 in housing value--well beyond any such relief in the suburbs. (Virginia offers such relief mainly to the elderly.)
The District does have the highest sales tax rate at 5.75 percent (or did have--Maryland boosted its sales tax to 6 percent, up from 5 percent, as of last Thursday. Virginia's sales tax remains 5 percent.)
Of course, Virginia is still regional champion of auto taxes, even after the big rollback that was the central reason for Gov. Jim Gilmore's existence. No other jurisdiction in the region levies a personal property tax on cars. The highest gas taxes in the area are in Maryland, with 23.5 cents per gallon, compared to 20 cents in the District and 17.5 cents in Virginia (plus a two percent transportation sales tax surcharge in northern Virginia.) The District's other auto-related fees, however, tend to be much higher than suburban charges, both for registration fees and for taxes on the purchase of a new car.
All told, if you live in Montgomery County and make $75,000 a year, you face the biggest tax burden in the region, at $8,469. Prince George's comes in second at $8,408. The remaining jurisdictions are bunched closely together at a considerably lower price: D.C., $6,986, Fairfax, $6,903, Arlington, $6,886 and city of Alexandria, $6,769.
If you're up the income scale at $150,000 a year, the ranking breaks down like this:
Prince George's $16,455
A couple of other tax curiosities:
Virginia has far higher taxes on alcohol than either Maryland or the District. But as you might expect, tobacco is taxed at a little more than half the rate in Virginia as in the other jurisdictions--old ways die hard.
The District, true to reputation, is a more expensive place in which to do business--its corporate tax rate of 9.975 percent is well above Maryland's 7 percent and Virginia's 6 percent.
Again surprisingly, the District abolished its inheritance tax back in 1987, while Maryland still charges 1 percent for spouses and children and 10 percent for indirect inheritors, and Virginia doesn't have an inheritance tax per se but does levy a tax of 10 cents per $100 of value on the probate of wills and grants.
Water also costs more in the District than in most other places. But there's an important caveat here: Most suburban jurisdictions reward customers who use less water by offering them a much lower rate per gallon. The District makes no such allowance and charges everyone the same high rate of $2.03 per thousand gallons. (Montgomery County, by comparison, charges only $1.75 per thousand gallons if you use 49 gallons or less each day; if however you use 9,000 gallons a day, your rate soars to $4.06 per thousand gallons.)
The District is no tax haven, but it's also far from the tax house of horrors it's often portrayed as. Now, if it could only make certain more of those tax dollars actually get spent on government functions....
By Marc Fisher |
January 9, 2008; 7:16 AM ET
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