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Feds and DC in Tax/Fee Dispute

2 min readBy: Joseph Bishop-Henchman

Taxes are charges to pay for general government services, while fees defray the cost of a service provided to a particular individual. Officials determined to avoid being labeled a “taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. -raiser” often try to elude that definition, as the American public has historically scrutinized any charge with “tax” in its name.

Whether something is a tax or a fee also matters if a state requires a public vote or multiple readings for taxes but not for fees. It also matters when taxes can’t be imposed but fees can be, as with feds’ paying for their DC water service. WTOP reports:

The District of Columbia began itemizing the Impervious Area Charge on monthly bills in order to defray the costs of this mandate to clean up stormwater runoff that makes its way into the Anacostia River and then into the Potomac River. The Potomac runs into Chesapeake Bay, the nation’s largest estuary.[…]

In the District, the fee is based on how much land you own, which means the average homeowner pays about $2.20 a month. The fee for the federal government — which owns nearly 20 percent of the land and is WASA’s biggest customer — is more than $2 million a year.[…]

Susan A. Poling, managing associate general counsel for GSA, says “under the supremacy clause of the United States Constitution, the United States government is immune from taxation from states, cities and other municipalities.”

If it’s a fee, the federal government has to pay it. If it’s a tax, the federal government doesn’t have to pay it. The situation is much like the tiff between the U.S. Embassy in London and the city government over the congestion charge to drive into central London. That charge is more fee-like than tax-like.

Here, this sounds like more tax-like. Environmental cleanup is a benefit enjoyed by everyone, not just those who pay the charge to fund it. I guess the question would be whether cleaning stormwater run-off is inseparable from providing drinking water to consumers, but to me, the former sounds like a government program designed to benefit the general public, while the latter is a service for a particular individual.

More on taxes and fees here and here.