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District of Columbia

The Facts on the District of Columbia's Tax Climate

Here are some basic facts on Washington, D.C.'s tax system and how it compares to the 50 states:

Tax Freedom Day Arrives on May 3 in D.C.
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, D.C. taxpayers had to work until May 3 to pay their total tax bill. That's 10 days later than the overall U.S. Tax Freedom Day (April 23). Neighboring states' Tax Freedom Days are: Delaware, April 14 (ranked 37th); Pennsylvania, April 21 (ranked 18th); West Virginia, April 8 (ranked 47th); Maryland, April 28 (ranked 7th); and Virginia, April 25 (ranked 12th).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

D.C.'s Local Tax Burden Higher Than Most States in 2007
Estimated now at 12.5% of income, D.C.'s state/local tax burden percentage is higher than in all but four states and is well above the national average of 11.0%. D.C. taxpayers pay $7,873 per capita for state and local taxes on per-capita income of $62,852.
State-Local Tax Burdens, 1970-Present

D.C.'s 2008 Business Tax Climate
D.C. ranks ahead of only five states in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales and gross receipts taxes; unemployment insurance taxes; and taxes on wealth, including residential and commercial property. Neighboring states ranked as follows: Delaware (9th), Pennsylvania (27th), West Virginia (37th), Maryland (24th), and Virginia (14th).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

D.C.'s Individual Income Tax System
D.C.'s individual income tax system consists of three separate brackets with a top rate of 8.5%, kicking in at an income level of $40,000. In 2005 D.C.'s individual income tax collections were $1,972 per person.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

D.C.'s Corporate Income Tax System
D.C.'s corporate tax structure consists of a single rate of 9.975% on all income, with a minimum tax of $100. In 2005, D.C.'s corporate tax collections were $342 per capita.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

D.C. Levies Sales Tax Above National Median
D.C. levies a 5.75% general sales or use tax on consumers, slightly above the national median of 5.4%. In 2005, the District collected $2,187 per capita in general sales taxes. D.C.'s gasoline tax stands at 20 cents per gallon, while its cigarette tax stands at $1.00 per pack of twenty. 
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

D.C.'s Property Tax System
D.C.'s local government collected $1,027,976,000 in property taxes in fiscal year 2004, which is the latest year the Census Bureau published state-by-state property tax collections. That amounts to $1,856 per capita in taxes, which is less than only three states (New Jersey, Connecticut, and New Hampshire).
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: D.C. is a Net Beneficiary
D.C. taxpayers receive more in federal funding per dollar of federal taxes paid than any of the 50 states. Per dollar of Federal tax collected in 2005, D.C. citizens received approximately $5.55 in the way of federal spending. This ranks the District highest nationally by a wide margin. Neighboring states and what they received in federal spending per dollar of federal tax collected was: Delaware ($0.77), Pennsylvania ($1.07), West Virginia ($1.76), Maryland ($1.30), and Virginia ($1.51).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

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