If Not Tax Increases, What?

May 14, 2011

Spent a good part of last Monday watching the DC Council hearing on Mayor Gray’s Fiscal Year 2012 budget. None of the six Councilmembers participating was ready to go along with all the proposed revenue raisers that would help close the $322 million budget gap.

Much has already been written about the split over the proposed income tax increase. What was news, at least to me, was that even Councilmembers in favor of that balk at extending the sales tax to live performances.

Bad for the cultural vitality that makes the District an attractive place to live.

So there goes an estimated $2.3 million — not much, but it has to be made up somewhere.

Then there’s the matter of $22 million or so that the mayor’s budget would shift from two special accounts established to fund neighborhood development projects. “Not fair,” says Councilmember Jack Evans. “Disingenuous,” in fact.

And the matter of the large funding reduction for homeless services. Council Chairman Kwame Brown repeatedly expresses concerns about impending shelter closures.

Says he intends to look for a way to restore the lost funds. That’s at least $7.1 million, since he seems committed to sheltering only homeless families and victims of domestic violence.

Also to addressing the perceived need for more police officers. Another $10 million there.

So where are these millions going to come from?

Not from an income tax increase, it seems. Council Chairman Brown and participating colleagues Bowser, Evans and Catania all reiterate adamant opposition.

Brown since has said he’ll accept the deduction limit, but not the rate increase, which accounts for the larger share of the $35.4 million the mayor’s proposal would raise. Questionable whether he can corral a majority for this.

Catania rails against “the tired old notion of tax increases” — apparently referring to the idea that high-income residents should pay higher rates.

Seems he’s again holding out the possibility that he’d support a uniform across-the-board rate increase. “Whether people can afford to contribute” is something he “doesn’t care about.”

But this is merely a rhetorical flourish. He repeatedly insists that spending cuts versus tax increases is a “false either/or.”

When he became chairman of the Health Committee, he reviewed every item the departments the committee oversees spent money on. Found a lot of excess expenditures. Would that other committee chairs had done the same.

The answer, Catania says, is to go after our “gout-ridden government” — shrink “the bureaucracy that continues to feed itself.” This apparently would not qualify as a spending cut.

We heard a less florid version of the same from witness Barbara Lang, President and CEO of the D.C. Chamber of Commerce. She, on behalf of members, objects to all tax increases. Also wants the funds cut from small business technical assistance restored.

The local government, she says, isn’t operating efficiently. Implies that eliminating unnecessary and redundant functions would allow the government to deliver all essential services without raising either taxes or fees.

Now, I’m the last one to say that the District government — or any government for that matter — is as efficient as it could be. Surely some functions are duplicative, unnecessary or of such low priority that they could, in theory, be eliminated.

But let’s get real. Virtually every function — indeed, every significant expenditure — has supporters that would make meaningful reductions politically difficult. Recall, for example, what happened when former Mayor Fenty tried to fold the Office on Asian and Pacific Affairs into a larger unit.

More importantly, the Gray administration and the Council would have to find — and agree on — some $127 million in “efficiencies” in order to balance the budget with no tax increases or yet deeper cuts in core services.

Also somehow to accommodate the cost impacts of a large increase in unemployed residents — not only government employees, but those employed by contractors and the many local retailers that would come up short on revenues.

And they’d have to do it before May 24, when the Council is scheduled to vote on the budget.

All this efficiencies business is just a distraction from the very real choice between adopting even more significant revenue raisers than the mayor has proposed or creating even greater hardships for low-income District residents.

NOTE: Just as I was finishing up this posting, Councilmember Evans marked up the Finance Committee’s share of the proposed budget. Under his leadership, the committee majority rejected virtually all the revenue raisers. This reportedly leaves the budget shy nearly $119.5 million.

Like Catania, Evans claims that revenue raisers versus deep cuts in social services is a “false choice.” No hint as to what the real choice is.


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.