Proposed DC Taxes Would Hit Low-Income People Hardest

Mayor Fenty’s proposed budget includes about $120 million in new and expanded revenue raisers. These are to offset the sharp drop in District revenues due to the recession.

In principle, they’re the right approach to the projected shortfall because the alternative would be drastic program cuts. And some of them make a lot of sense. Look, for example, at the discussion of corporate tax loopholes in the DC Fiscal Policy Institute’s budget toolkit.

But, as DCFPI shows, about $26 million of the revenue raisers would disproportionately impact low-income residents. They include:

  • The elimination of the cost-of-living adjustments for three tax benefits–the personal exemption and standard deduction for personal income taxes and the homestead deduction for property taxes.
  • A new fee for streetlight maintenance, to be added to electricity bills.
  • An increased fee for the operations of 911 emergency services, which is folded into our phone bills.

Eliminating the COLAs will affect all D.C. taxpayers. But, for various reasons, they’ll have greatest impacts on low-income residents. For example, most low-income residents take the standard deduction, while many higher income residents itemize because they’ve got mortgage interest and property taxes to deduct.

The fees will also hit low-income people hardest. They may not seem much to residents in upper income brackets, but low-income residents often have to struggle to pay their utility bills. The increase could lead to even more shut-offs or force poor families to cut back even further on other essential needs.

The District has other revenue raising options. As I wrote awhile ago, the Coalition for Community Investment has offered a number of them. One is reflected in a bill introduced by City Councilmember Jim Graham–a new top income tax bracket.

The current top tax rate applies to taxable incomes over $40,000. Graham would create another rate for residents with taxable incomes of $500,000 or more.

The new rate would be only 0.4% more than the current top rate. Seems to me it could kick in at a lower income level–say, $200,000. But even the $500,000 seems to be giving other Councilmembers heartburn.

DCFPI is spearheading a campaign against the tax and fee increases. It’s posted a letter for organizations to collectively communicate their concerns. So if you belong to an organization, you might see whether it would sign on.

The rest of us can raise concerns by e-mailing the City Council, dccouncil@dccouncil.org. Better yet, we can write or call the Councilmembers who represent us.

The Council will vote on the budget on May 12, so they need to hear from us soon.

3 Responses to Proposed DC Taxes Would Hit Low-Income People Hardest

  1. […] proposed funding levels for programs that serve low-income residents–or with the proposed tax changes and fees that would hit low-income residents […]

  2. […] I wrote awhile ago, the proposal was all but DOA in April. But that was then and this is now. And the DC […]

  3. […] Mayor “No Tax Increases” Fenty put some fee increases into his proposed budgets, plus freezes on several broad-based tax benefits. Virtually all these revenue raisers would have affected low-income residents the […]

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