Just finished my annual dialogue with my tax preparation software. So as always, my thoughts turn to the tax laws that determine what I have to pay. A sweeping federal tax reform is much in the news. And I’ll probably have things to say about that.
But I’ll start with the automatically triggered tax cuts Mayor Bowser has decided to let alone in her proposed budget, styled “DC Values in Action: A Roadmap to Inclusive Prosperity.”
These because they don’t hinge on new legislation. And they push down spending because the District, like most states must balance its budget every year.
As you may know, the triggered tax cuts reflect recommendations made by the Tax Revision Commission in 2014. It didn’t recommend triggering them whenever a certain revenue projection exceeded the version the budget was built on.
That was the work of DC Council Chairman Phil Mendelson, who folded them, ranked according to his preferences into the final version of the legislative package that accompanied the Fiscal Year 2015 budget.
A last minute thing. Other Councilmembers had no chance to consider them — perhaps didn’t even know they were there.
The triggered tax cuts have already reduced revenues by $102 million — none a one-time loss. The rest will all kick next fiscal year, unless the Council decides to instead recoup about $100 million.
Some of the cuts, would benefit lower and moderate-income residents, though not those with incomes so low they already don’t owe income taxes, once they’ve taken all now allowable exemptions, credits and the like. Nor, of course, those who’ve no taxable income at all.
These cuts include a further increase in the standard deduction, which a very large percent of DC filers with incomes less than $75,000 choose because they don’t have more costly specific deductions like interest on a mortgage or real property taxes high out-of-pocket medical expenses. (The District relies on the federal government’s Schedule A for these.)
The other of this sort is a multi-part increase in the personal exemption, which applies to all filers and their dependents, except apparently those whose incomes exceed $275,000.
But the surplus also triggers a second increase in the threshold for the estate tax, bringing it to $5.49 million if left by an individual and twice that for a married couple — the same as in federal law.*
Why the District should aim to mirror a tax giveaway to heirs of the very most prosperous that Congressional Republicans insisted on as part of the deal that pulled us back from the fiscal cliff is a mystery.
Additional cuts in the business franchise tax, coupled with a further cut in the business income tax are, at the very least questionable.
Sure, we want profit-making businesses in the city — a source of jobs, among other things. But a recent survey indicates that the taxes they must pay are a relatively minor factor in their decisions on whether to locate here or elsewhere.
Topping the list is the ready availability of workers with the knowledge and/or skills they need. One could do a lot to help residents qualify for and get jobs with the potential loss of $35.7 million.
Advocacy organizations of various sorts have already flagged a wide range of shortfalls in the Mayor’s proposed budget. We’ll have a fuller accounting from the DC Fiscal Policy Institute fairly soon — and undoubtedly more from other concerned nonprofits too.
I’d thought to cite examples, based on the Mayor’s prosperity promise and my own topmost concerns. But even summaries made this post far longer than my somewhat flexible maxim. So I’ll return to them shortly.
Yet I don’t want to leave the impression that the Mayor’s budget shortchanges her low-income constituents in every way.
The most significant example of how it would benefit them is the funding she proposes to begin the Temporary Assistance for Needy Families time limit reforms recommended by diverse working group the Department of Human Services convened.
This will not only save roughly 6,500 families from losing all their benefits when the new fiscal year begins — and more as time goes on.
It will preserve those benefits for all children and all parents who’re meeting their work preparation and/or job requirements until they’ve found jobs or otherwise gained enough income to put them over the eligibility cut-off.
Cash benefits being as low as they are — and will be — the initiative in and of itself hardly shares the non-inclusive prosperity reflected in the District’s tax revenues. But it does save very poor families from the most dire poverty.
And the non-cash benefits — free training and, in some cases, formal education, no-cost child care and transportation — give parents a chance to move from welfare to decent-paying work and, in the process, improve their children’s future prospects.
* The thresholds were somewhat lower when the Council adopted the triggers, but the legislation refers to raising the threshold “to conform to the federal level.” And the federal level rises with the inflation rate.
UPDATE: I’ve learned that the Mayor’s budget doesn’t altogether reflect the working group’s recommendations. They would significantly protect children if their parents had their benefits cut for not complying with their work requirements by allocating 80% of the family grant to them.
The Mayor would split the grant 50-50. As a practical matter, this might not make much difference. The parents will have the same amount to spend, and it will surely go for the same basic needs. We will need to see how the Mayor justifies her split, assuming she or a Department of Human Services official is asked.