A Cordon Charge for the District of Columbia: a Solution to Dc’s Fiscal Problems and the Region’s Congestion?

This paper investigates a solution to an existing federal policy which prohibits the District of Columbia (DC) from imposing commuter taxes on non-residents, a tool which other cities in the US use to address revenue problems associated with high numbers of non-resident workers. DC, which has higher local governance costs per capita than its surrounding suburbs, must impose higher income tax rates to balance its budgets. However, because DC cannot legally levy a commuter tax under existing federal policy, many workers in the region currently “escape” taxation: as residents of the surrounding suburbs, they pay substantially lower income taxes. Non-residents account for more than 70% of DC’s workforce. These workers enjoy costly city services without any substantial remuneration to DC. This scenario has resulted not only in a structural fiscal imbalance for DC, but also one of the highest levels of congestion of any region in the US. A per-vehicle cordon charge may be the answer, internalizing the costs to DC for providing services to non-residents visitors by collecting revenues for the services it provides, while reducing congestion. Here, it is estimated that DC spends $3.50 per visitor per day on city services for nonresidents. Thus, this amount is proposed as the approximate cordon charge per vehicle, to help cover services DC provides such visitors. Electronic toll collection (ETC) technologies allow DC to impose a cordon charge without significant impacts on existing traffic flows. An estimate of ETC costs suggests that implementation could easily be supported by the region, while economically viable for DC.