A foreigner dropping into “The District” from wherever, would be flabbergasted by the local debate over Statehood, home rule, etc. for the District.
The powers of Congress enumerated in Article 1, Section 8, of the U.S. Constitution include the power to govern a federal district:
- “Clause 17: To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;”
The Residence Act passed by Congress on July 17, 1790, established what is now called the District of Columbia, or Washington D.C., as the capital of the United States. Maryland and Virginia ceded between them 100 square miles of their territory for this purpose. Congress moved from its first capital in Philadelphia to Washington in December 1800. On February 27, 1801, 212 years ago today, the so-called Organic Act was approved giving control of the District to Congress “and took away the right of residents to vote in federal elections.” District of Columbia retrocession – Wikipedia
And in 1812 our British friends burned down the White House forcing James Madison to live in what is now the Arts Club of Washington (of which Ito and I are members).
In March 1847, Congress and Virginia’s General Assembly approved the return (“retrocession”) of Virginia’s contribution to the District of Columbia but the retrocession of Maryland’s contribution failed to pass Congress. Turning Maryland’s part of the district into a new state makes no sense to me at all. But neither does Congress’s continued control over all of Maryland’s portion of the District.
The provisions of the Constitution giving Congress legislative power over the lands needed for and occupied by its facilities would be fully met by returning most of the District to Maryland (thus restoring full voting and other citizen rights to its residents). Virginia did it and so can (and should) Maryland.
Warren's space 
Your solution appears simple, but it actually would be very complicate to implement. For example, the division of responsibility for everything from taxes to public safety to education between the State of Maryland and the city that would be created out of the retroceded land would need to be sorted out. Moreover, I doubt this approach could garner support from either Congress or the residents of the District, neither one of which would want to give up their governing powers. And I suspect Maryland wouldn’t want to assume fiscal responsibility for us.
I have an administratively simpler, and perhaps more politically palatable solution, which I call virtual retrocession. Under this approach, DC would retain its current borders, its current status as a federal city, and its current home rule government. However, for federal election purposes, the residents of the District would be treated “as if” they were residents Maryland. Under this arrangement, DC residents would vote for the two Senator who would serve as representatives of Maryland and the District of Columbia. (The title is a bit cumbersome, but no worse than Rhode Island and Providence Plantations.) As Maryland is a pretty consistently blue, state, this would be unlikely to shift the balance of power in the Senate. In the House, Maryland would be given one additional seat, which would be filled by a voting representative of the people who live in the District, which has more people than some states that get their own congressman, making this hard to object to. There is one big downside to this proposal: it almost certainly would require a constitutional amendment.