AP Report Greatly Exaggerates Washington, DC Tax Burden
October 15, 2007
In a recent Associated Press (AP) article comparing federal taxes to federal spending by state, author Stephen Ohlemacher reports District of Columbia residents paid $31,250 per capita in federal taxes.
See an earlier blog post debunking Ohlemacher’s amateurish methods.
Ohlemacher calculated this greatly inflated amount for District of Columbia residents because he did not adjust the IRS data for the place of residence of taxpayers.
Many people work in Washington, DC but live in close-by Virginia and Maryland. The way the IRS reports its data, all the income taxes and FICA taxes withheld from these commuters are reported as coming from the District of Columbia. These taxes should be counted as being paid by residents in surrounding states.
To illustrate just how skewed the District of Columbia’s calculation is when not properly taking into consideration the geographical location of taxpayers, consider that the IRS reports that the District of Columbia has more income and FICA taxes withheld from its taxpayers than South Carolina-a state with over seven times the population. The IRS data is here.
The Tax Foundation finds that when the calculations are done properly, District of Columbia residents pay $11,582 in federal taxes- a far cry from $31,250.
See the Tax Foundation’s calculation of the ratio of federal spending received versus federal taxes paid by state for a more accurate depiction of each state’s ratio.
Look for the full report on federal spending compared to federal taxes paid by state soon.