DC Council Chairman Says No To Tax Increases

March 24, 2011

News Talk host Bruce DePuyt reports that DC Council Chairman Kwame Brown will oppose any local property or income tax increase. “People are tired of their taxes going up,” says Brown, “especially in these environments.”

Whom, I wonder, has Brown been talking to? And what are they griping about anyway?

Property tax rates have remained flat, except for the rates on vacant property. So most of those who are paying more are homeowners and businesses whose property, according to the assessors, is worth more on the market. They’re tired of seeing their assets appreciate?

Income tax rates have also remained flat, notwithstanding proposals to add at least one new bracket for high-income residents. So we’ve still got a system that taxes households with incomes below the median average for the District at the same rate as those with incomes over $1 million.

As the DC Fiscal Policy Institute recently wrote, we’ve all — but especially the wealthiest among us — gotten a windfall from the extension of the Bush era tax cuts. For those in the top 5% of the income scale, it nets out to an average of at least $9,400.

Windfalls like these would more than offset the increased local taxes better-off residents would owe if the Council adopted the progressive reforms that Save Our Safety Net and allies now advocate.

Perhaps it’s really the “environments” Brown’s concerned about. None of us is happy paying taxes to satisfy his personal transportation preferences — or, for that matter, to cover what seem to be excessive and unwarranted salary increases for some of Mayor Gray’s appointees.

But I doubt many of us would let these tawdry matters cloud our view of the issues confronting the Gray administration and the Council.

Once again, there’s a budget gap to close. Every budget gap for some years now has been closed primarily by spending cuts.

Programs that serve the needs of low-income residents have been cut so much that they’re serving only a shrinking fraction of those needs. (I’ll forgo the links here because, sadly, they’d stretch this posting beyond compass.)

Public education has thus far weathered the storm. But it’s hard to see how the District can sustain its investments in this second largest major budget area without more revenues or devastatingly large cuts in other areas.

Reasonable tax increases won’t drive families out of the city. According to a recent DCFPI analysis, District residents generally pay lower taxes than their counterparts in some neighboring counties. In the rest, taxes are about the same.

But if cuts prevail, families who can afford to will leave the city, taking their income tax and at least some of their sales tax dollars with them.

They understandably want good schools, convenient, well-maintained libraries and recreation centers, clean, safe streets — and a community that’s not pocketed with decay and desperation. As do we all.

Brown says we need to “cut programs that don’t work and reallocate those dollars to programs that do work.” No one would argue with that. But we’ll have scant dollars to reallocate if the Council again relies mostly on spending cuts to eliminate the shortfall.

DCFPI has made the case for a balanced approach to budget balancing repeatedly — and from more angles than I imagined possible. It’s identified a range of revenue-raising options (not mutually exclusive). It’s put figures on the consequences of adopting — and not adopting — them.

I’d just add that I think it’s high time the District develop a systemic solution to its chronic budget problems. And, to my mind, that means, among other things, revisions to the tax code that will bring in more revenue from those who can best afford it.

The current tax structure may again yield more local revenues — unless, of course, the economic recovery flags. But the District, like all state and local governments, depends in part on federal funding for its programs.

The Gray administration and the Council would be well-advised to assume that the District will have to rely more on its own resources in the future — even if the House Republicans don’t get their way on the upcoming bills to avert a government shutdown or a default on the federal debt.

Because the cuts on the table now areĀ  just a harbinger of things to come.


DC Council Cuts TANF Benefits, Approves Full Cut-Offs

December 26, 2010

Our lawmakers on the DC Council had decided to wrap up lawmaking for the year on December 21. They had a long agenda and, with Christmas fast approaching, probably shopping to finish up, parties to get to, etc.

So they decided to vote on a revised Budget Support Act* that they’d seen for the first time less than a day before. Decided not to worry that they wouldn’t have a second chance to vote, since Council Chairman Vincent Gray had introduced it as emergency legislation.

Gray had obviously had second thoughts about the impending cuts in cash benefit to families in the District’s Temporary Assistance for Needy Families program. Also third thoughts, since the final TANF provisions were significantly different from those I’d seen in a version of the substitute BSA circulated several days before.

For poor families dependent on TANF, there’s some tentative good news about cash benefits. Also some news that very ominous — both about cash benefits directly and about sanctions that will henceforward put families at risk of no benefits at all.

Cash Benefits

As I earlier wrote, the Council voted in early December to phase out benefits for TANF families who’d been in the program for a total of more than five years. This would have meant a 20% cut each year until 2015, when benefits would have been zeroed out.

The final version of the BSA imposes a 20% reduction on these families’ benefits after February 2011, but specifies no further reductions. In other words, it reverts to Mayor Fenty’s budget gap closing proposal.

However, the final BSA allows the mayor to adjust the level of TANF assistance payments through the rulemaking process. It thus opens the door to further benefits reductions.

We’ve got some evidence that Gray has his eye on them. The prior draft of his substitute BSA imposed an across-the-board 12% reduction. For a family of three, this would have meant a maximum of $377 a month — less than 25% of the federal poverty line.

Councilmembers got wind of this, thanks to some swift and effective advocacy. Gray apparently got enough pushback to opt for a strategic retreat. But I think it’s prudent to view further benefits reductions as dormant, not dead.

Sanctions

The final BSA apparently authorizes full family sanctions, i.e., termination of all cash assistance when a participating parent fails to comply with some program requirement.

I say “apparently” because the relevant provision doesn’t expressly authorize full family sanctions. But Chairman Gray referred to them in summarizing the BSA changes, and no one else on the Council piped up to challenge him.

As some of you may recall, Mayor Fenty’s mid-2009 budget gap closing proposal included full family sanctions. The Council rejected them — and wisely.

An Urban Institute study found that many District TANF recipients who’d been sanctioned faced serious challenges that might hinder not only their ability to comply with the work requirements, but even to understand them. Studies of TANF participants in other jurisdictions have raised similar concerns.

Yet the Council has decided to let the Department of Human Services move forward with a three-phase sanctions plan, ending in a total benefits cut-off for any failure to “participate [in] or complete an Individual Responsibility Plan,” i.e., the program of activities the participant is supposed to follow.

The final BSA directs the mayor to submit proposed sanctions policy rules to the Council by April 1. They’ll become effective 45 business days later unless the Council officials disapproves them.

But DHS has until September 30 to fully implement its TANF program reform plan. It can thus begin imposing full family sanctions before it has improved assessments, referral processes, training or other services.

Does it make any sense to punish recipients based on their failure to comply with an Individual Responsibility Plan that may be egregiously inappropriate? Because they haven’t received the services they’d need to comply?

What’s the big rush here anyway?

We know that DHS and some Councilmembers are very concerned about the high percentage of District TANF families who’ve been in the program for more than five years — close to 45%, according to recent testimony by DHS Director Clarence Carter.

How many of them could “graduate” if they’d just buckle down to their required job preparation and/or search activities is an open question. Full family sanctions supporters imply the answer is a lot of them. They just need a greater incentive than the partial sanctions already used.

During the Council’s discussion of the BSA, Chairman Gray said that we “need to encourage people to go to work,” implying that harsher sanctions will do that. But he also linked the new sanctions provision to his decision to, at least temporarily, limit the benefit reduction for long-term participants.

Councilmember Marion Barry, who supported the sanctions provision, noted that the existing appeals process will probably delay completion of the 20% reductions until the end of next year. In other words, not much by way of immediate savings from them.

But when Mayor Fenty proposed the reductions, they were supposed to contribute $4.6 million to closing the budget gap.

That could explain the rush.

As Legal Momentum recently reported, full family sanctions have contributed to large TANF caseload reductions. And states have financial incentives to impose them rather than rely on partial sanctions that preserve assistance for the children in a family.

With full family sanctions, states can avert penalties for failing to meet the federal work participation standard — something the District has struggled with. They can also free up funds for a variety of programs and services available to non-TANF families, e.g., child care, early childhood education.

So is the Council really hoping to bring a lot more families into compliance? Or is it banking on the savings DHS will realize by getting jobless families out of the TANF program?

Could it be hoping to mitigate budget constraints by having additional TANF funds for programs more politically popular than “welfare?”

* The Budget Support Act is one of two pieces of legislation needed to enact or make changes in the District’s budget. It makes whatever changes in existing legislation are necessary for the executive branch to carry out the spending directions in the Budget Request Act, i.e., the actual budget. Like most District legislation, it ordinarily must be passed by the Council twice.


DC Council Makes Bad TANF Benefits Cut Worse

December 8, 2010

Talk about robbing Peter to pay Paul!

DC Council Chairman Vincent Gray has pushed through a budget gap-closing plan for this fiscal year that takes cash assistance away from families in the District’s Temporary Assistance for Needy Families program to fund adult job training — maybe some other things as well.

I say pushed through because Councilmembers didn’t get the final plan until the wee small hours of the morning the vote was scheduled. No time for them — or the public — to work through the details or come up with vote-ready alternatives.

I, for one, am feeling hampered by the lack of a clear account of the total package. But the stepped-up raid on TANF is clear enough.

As I previously wrote, Mayor Fenty seized on Councilmember Marion Barry’s now-repudiated proposal to impose a five-year lifetime limit on TANF benefits for poor D.C. families.

Under his gap-closing plan, maximum benefits would have been cut by 20% for all families who’d been in the program for more than five years, whether consecutive or occasionally over a long period of time.

Gray’s version adopts this cut for the current fiscal year, then increases it by 20% each year so that post-five year benefits are fully phased out in Fiscal Year 2015.

No circuit breaker if the planned improvements in the TANF program don’t get fully implemented on schedule or deliver sufficient results. No exemption for victims of domestic violence or other singular hardships, though the District could still have used federal funds to support many, if not all of them.

Half the money saved will be invested in job training programs that target TANF recipients. Maybe Gray used some of the rest to restore the mayor’s proposed cuts to the adult job training programs operated by the Department of Employment Services.

But it’s hard to know how funds freed up in one area have been shifted to undo or mitigate proposed cuts in another.

Not hard at all to know that the phase-out of TANF benefits will work extraordinary hardships on for families who, for various reasons, can’t achieve sustained self-sufficiency. Or to know that it would never have materialized if Gray had decided to balance the budget by a reasonable mix of spending cuts and revenue raisers.

By the time of the vote, Councilmembers had a range of revenue-raising 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 organizations.

Councilmember Tommy Wells had a new income tax reform plan that would have created three new top tax brackets, the first beginning with a minimal increase at $75,000.

Councilmember Barry wanted to revive last year’s proposed expansion of the sales tax — anathema to the health club crowd, but still, I think, a good idea.

He’d also picked up on Councilmember Graham’s thoughts about increasing the tax on commercial parking fees. To these, added an increase in the District’s egregiously low minimum franchise tax.

But Gray decided to postpone any consideration of any sort of tax increase until next spring, when he has to produce his proposed budget for Fiscal Year 2012.

Fat lot of good that will do the TANF families who’ll be pushed out of the safety net.


Marathon Budget Hearing Previews Fight On DC Tax Increases

December 2, 2010

First a confession. I didn’t watch all of Tuesday’s 12-hour hearing on Mayor Fenty’s plan for closing the budget gap. Gave up mid-afternoon when I realized that more than half of the 144 scheduled witnesses still hadn’t been called.

But I heard enough to get a sense of how the revenue raising debate will proceed.

First the good news. Even Councilmember Jack Evans seems open to the idea of some revenue raising. True, he began by advocating for a process that would require any add-back to be offset by a comparable spending reduction. What we would expect, given his recently reaffirmed aversion to “revenue hikes.”

But he later remarked on the need for “those with the greatest ability to step forward” — this in reference to lawyers such as himself perhaps accepting an income tax increase. A number of lawyers testifying said they would.

Now the rest. Councilmember David Catania is ferociously opposed to a new top income tax bracket — or the two new top brackets that Councilmember Jim Graham earlier proposed and still seems to favor.

To Catania, a more progressive income tax structure is tantamount to “class warfare.” He absolutely rejects the notion that “one side” should pay — this framing itself a reflection of a class warfare mentality. He’ll have no part in “the game of politics that plays one community off against another.”

In his view, a new top tax bracket exemplifies what’s wrong with our country, i.e., having what we want so long as someone else pays for it. If we care about the safety net, then we should all contribute, he says.

He seems to be entertaining the notion of a 1% across-the-board tax increase. “We all give a little,” he says. No recognition that a little for someone supporting a family on a minimum wage translates into a lot of basic needs budget trimming.

Councilmember Marion Barry also speaks of an across-the-board tax increase. Says that the Earned Income Tax Credit will protect the lowest earners.

Quick review of the IRS rules shows that in many cases it won’t. But who knows where the self-described representative of the District’s “underserved and overlooked population” will be coming from these days?

Councilmember Tommy Wells, on the other hand, reviews some of the proposed cuts in services for low-income residents and says, as he has in the past, “I haven’t been asked to pay one additional cent.”

Wells has previously mentioned a possible new tax bracket that kicks in at an adjusted income lower than what’s been thus far proposed. Councilmember Mary Cheh may be thinking this way too. At any rate, she asks one of the witnesses how low a new tax bracket should go.

Not as much discussion of other potential revenue raisers. Several Councilmembers, however, seem to be looking for ways to get more revenues from all those Maryland and Virginia residents who come into the city to work.

No chance of getting Congress to lift the home rule prohibition on a commuter tax. But might there be some workarounds?

Evans seems inclined to impose a targeted salary cut on District employees who live outside the city, plus a 10% cut for the largest contractors.

Graham tees up the idea of raising the vehicle storage and use tax, i.e., the sales tax on charges for commercial off street parking. Kicking it up by 5.5%, he says, would nearly pay for restorations of cuts to key safety net programs that witnesses advocated for.

So Councilmembers, by and large, seem uncomfortable with the huge tilt toward spending cuts in the mayor’s plan. The DC Fiscal Policy Institute tells us it’s $40 in new cuts for every $1 in additional revenues.

Some Councilmembers also registered concerns about cuts in certain programs witnesses sought to defend. They’ll have a tough time restoring them all without adopting new revenue raisers.

But Council Chairman Vincent Gray didn’t tip his hand. And we know that, at the end of the day, it’s going to be his budget.