With the District of Columbia facing a steadily rising $300 million budget shortfall, it is understandable that D.C. officials are looking for novel ways to raise revenue. However, D.C. Councilmember Mary Cheh’s (D-Ward 3) recent proposal to strip Georgetown and other universities in the District of their tax-exempt status is not the answer. Georgetown is, after the federal government, the largest employer of D.C. residents, and taxing the financially constrained institution will only hamper its growth and ability to employ new workers.
The District’s authority to raise tax revenue is constrained due to the fact that 49 percent of the city’s real estate is occupied by the federal government—which cannot be taxed—or non-profit organizations like Georgetown, which are currently granted exemption. In addition, as non-profit institutions, Georgetown and other universities enjoy the right to raise revenue with low-interest government bonds.
Cities around the country have recognized the drawbacks of taxing universities, and some municipal governments have attempted to negotiate alternative agreements to replace the lost revenue. In Cambridge, Harvard pays a fee in lieu of taxes to replace the revenue they take away from the city. However, Harvard boasts an endowment of $26 billion. Georgetown’s endowment is a small fraction of that, and any fee would exacerbate the University’s precarious financial situation, which already relies on one of the largest tuitions nationwide. Even paying a small portion of the total cost of services used would open the door to further fee increases and demands from the city, which the University definitely could not afford.
Cheh’s decision to target universities specifically is also illogical. Why shouldn’t other charitable institutions, like churches, be asked to pay taxes? Plenty of large D.C. churches and non-profits could afford to bear the cost of their municipal services. Georgetown and other universities are not to blame for the budgetary hole the District has found itself in, and it is not Georgetown’s responsibility to dig the city out.
A better solution would be to take a look at a second major element of the budget shortfall problem—commuters. Approximately 300,000 people who work in D.C. live in Maryland or Virginia. As a result, they file their tax returns there. If the District could institute a commuter tax on wages earned by non-residents, it could significantly reduce the current budget deficit. Although the Home Rule Act of 1973 bars D.C. from enacting such a tax, widespread concern within Congress about budget deficits makes amending the act a possibility.
D.C. needs to find ways to fix its budget deficit. However, Cheh’s attempt to pin the issue on universities is misguided. Her proposal ignores other, more equitable solutions in favor of a tax slapped onto D.C.’s largest employers. Georgetown invests a lot of money in the District, but it is no cash cow. City legislators need to stop acting like it should be.
