About two-thirds of the people who work in the District live either in Maryland or Virginia. Unlike the 50 states, federal law does not allow the District government to tax these individuals even though they take advantage of many District services.
The District recently passed a family medical leave act that taxes District businesses to ensure that their employees can continue to have an income should they become ill or have a baby. However, roughly two-thirds of the money goes to Marylanders or Virginians.
We think the City Council should investigate whether the District government should tax employers at about a third of the rate they will be taxed under the law and then have the government itself offer benefits solely to employees of District businesses who are District residents and are in need of medical leave.
Under such a plan there would be no illegal taxation of Marylanders or Virginians, but non-District residents would not benefit from taxes paid by local businesses. Furthermore, the cost to District businesses would only be a third of what it will be under the current plan.