New Hopes For DC Tax Reforms

Local listservs are buzzing. Advocacy groups are huddling. We’re all concerned about how the DC Council will close the $175 million gap in the current budget.

We know that spending cuts will be at least part of the answer. What they’ll be and how big are open questions. But if past is prologue, programs that serve the needs of low-income residents will be highly vulnerable.

Last year, funding for human services and other programs for low-income people took at $49 million hit — the second largest after public education. And it could have been worse if the District hadn’t still had unused federal stimulus funds for our schools.

It would have been better if Mayor Fenty and the DC Council had focused more on the revenue side of the ledger. What we got were a couple of sales and excise tax increases, plus freezes in the homestead property deduction and the standard exemption and personal deduction in the income tax — all disproportionately costly for low-income residents.

This year a similar story. Some fee increases, a couple of highly targeted taxes and one regressive expansion in the sales tax, which now covers soft drinks, but not various services used mostly by higher-income residents.

But maybe the day for a serious look at the local tax structure has dawned. Soon-to-be-mayor Vincent Gray has remarked that services have been cut to the bone. “Actually, we’ve cut down to the bone marrow,” he’s said.

More importantly, he’s reportedly told attendees at two successive ward meetings that he’s ready to consider new or expanded revenue raisers.

As you may recall, the Save Our Safety Net coalition championed two news brackets last spring — a 9% rate for residents with incomes over $200,000 and a 9.4% rate for those with incomes over $1 million.

SOS-DC is back on the case — hopeful that it can help shift Gray and a couple of other Councilmembers to the “yea” column. How many have to shift depends on when the Council gets around to voting.

SOS is still working as the grassroots arm of the Fair Budget Coalition and an overlapping coalition including FBC members, local labor organizations and some faith-based and other community groups.

They’re now focusing on one new tax bracket — 1% higher for residents earning over $200,000. This, I assume, is after the adjustments the federal tax code permits.

Gray has said that he thinks District residents will at least be open to tax increases if they understand how damaging a cuts-only approach to budget balancing will be. “If we can make the case that the vulnerable are going to be imperiled, I think there are going to be a lot of people who are going to entertain some sort of tax increase.”

“Some sort,” of course, covers a lot of territory. But a new top tax bracket certainly could be there, along with some other measures that would increase both revenues and fairness. I’m still hopeful eliminating the District’s almost unique exemption for interest paid on out-of-state bonds.

Gray has reportedly challenged advocates to make the case to the public. Originally, I thought this was shifting the burden where it didn’t belong. Now, however, it appears that what he actually wants are the facts, figures and, very importantly, the stories to help him make the case.

He’s planning to work with fellow Councilmembers on a list of potential budget cuts and then seek public input on whether taxes should be raised instead. So look for announcements of public hearings — or maybe just one of those all-nighters the Council sometimes perpetrates.

In the meantime, there’s a need to show that we, like Gray, wouldn’t mind paying more if the trade-off were protecting investments in our safety net and other key programs that can give low-income residents a better chance at finding full-time, living-wage work.

SOS-DC has an editable letter we can send to our representatives on the Council. A quick, easy way to voice our support for a balanced approach to budget balancing.

3 Responses to New Hopes For DC Tax Reforms

  1. This should be of interest to you and hopefully readers of your blog..

    Public Briefing – The Executive’s Fiscal Year 2011 Budget Gap-Closing Plan

    Tuesday, November 30, 2010 9:30 AM

    Location: John A. Wilson Building, Room 500

    Committee of the Whole, Vincent C. Gray, Chairman
    Testimony

    David Schwartzman, dschwartzman@gmail.com, 829-9063

    DC Statehood Green Party

    A balanced budget should not be the first priority of the City Council’s deliberations, rather it should be a just budget that is balanced. If the Council passes Mayor Fenty’s proposed budget for FY2011 intact it will be a budget balanced once again on the backs of the poor, a repeat of the Control Board era, as well as the budgets passed in the last several years, which have progressively reduced funding for essential programs such as affordable housing and child care.

    Mayor Fenty’s proposed budget provides for a $43 million cut in programs that serve low income residents, according to the analysis of the DC Fiscal Policy Institute. In these times of recession and depression for our low income community, this approach translates into still another round of the war on the poor, and must be decisively rejected by the City Council. To claim that everyone must bear the burden of balancing the budget is equivalent to saying the rich and poor have an equal right to sleep under bridges.

    Here are key recommended actions by the City Council that would support a just budget for FY2011:

    1) Cancel all cuts in services for low income residents called for in Mayor Fenty’s proposed budget.

    2) Add at least $100 million to the budget for the same services. This will partially make up for the onerous cuts made in programs for affordable housing, child care and other services for low income residents since FY 2008, with affordable housing cut by one-third and child care cut by one fifth in FY 2010 (DC Fiscal Policy Institute).

    Let us assume a round figure of $150 million for incremental revenue is needed to balance the FY 2011 budget, while also avoiding other hurtful and unnecessary proposed budget cuts, where will this revenue come from?

    I submit the following sources are more than adequate:

    1) Our progressive restructuring plan for the DC income tax includes a modest hike in the tax rate of the top 5% income bracket. Our plan using the 2007 income levels generated $116 million/year additional revenue, while giving significant tax relief to the bottom 60% of DC families. Now the revenue generated would be about 20% higher using the latest available income data (Matt Gardner, ITEP). For details go to: http://www.dcstatehoodgreen.org/testimony/fairtax. Note that the effective increase for the top 5% income bracket would be about 1.4% of family income, or less than 2 cents/dollar. With lower tax relief for the bottom 60% income bracket even more revenue could be generated.

    2) A curb on corporate welfare, i.e., unjustified tax exemptions and abatements. Councilmember Michael Brown introduced B18-0400 in 2009. We urge that a strengthened version be adopted. Councilmember Brown estimated that $350 million/year is lost from our revenue from tax exemptions and abatements. Further, some $150 million/year is paid in rent to the corporate sector for municipal use when publicly owned property could be used for the same purposes in many cases.

    3) Potential PILOTS (payments in lieu of taxes) from tax-exempt entities such as the World Bank, IMF, Fannie Mae and non-educational activities of universities housed in the District. Our Mayor-Elect and Council should mount an aggressive public campaign to get PILOTs. Hundreds of millions of dollars are waiting to be collected from this source, just like is already the case in other cities.

    4) And here is one legislative step that could make a big difference: our Mayor-Elect and Council should act to establish a DC municipal (state) bank, that could leverage billions of dollars in DC taxes and fees for local green economic development, living wage jobs, and truly affordable housing, instead of continuing depositing this revenue into Wall Street banks. The North Dakota State Bank shows this approach works to support its local economy. On the public bank concept go to: http://www.yesmagazine.org/new-economy/campaign-for-state-owned-banks
    In conclusion, revenue sources can be found for a budget that better serves the needs of our residents if there is the political will to break with years of subsidizing the very wealthy and big corporate sector. Positive social investments are preventative medicine to avoid much greater costs in the future, the costs of more incarceration and needless suffering (see Money Well Spent, Justice Policy Institute, at http://www.justicepolicy.org/content-hmID=1811&smID=1581&ssmID=104.htm). Also see: “One City” a Pipe Dream, or Is Another DC Possible? (http://www.dcwatch.com/themail/2010/10-10-13.htm).

    Finally, I urge the Council to support full funding of the Renewable Energy Trust Fund (DDOE), a vital program promoting solarization in our community, and to insure $250,000 is kept in the FY 2011 budget for DC Statehood efforts.

  2. […] to Mayor Fenty’s proposed cuts that don’t make a bad situation worse — a new top income tax bracket among […]

  3. […] proposals in hand. Councilmembers Michael Brown and Jim Graham reportedly favored the single new top income tax bracket advocated by a large number of local […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s