Protest Pits DC Sales Tax Expansion Against Safety Net

May 7, 2010

Just when I thought I’d heard everything comes an orchestrated groundswell of grassroots protest against the proposed expansion of the D.C. sales tax. Seems that relatively well-off fitness buffs are outraged that their gym memberships and yoga classes might be taxed.

The sales tax expansion is part of a package of revenue-raisers proposed by the DC Fiscal Policy Institute and the more than 60 members of the Fair Budget Coalition. As they say, the sales tax hasn’t been updated to reflect the fact that people now purchase a wide variety of services, as well as the goods to which the tax applies.

If the DC Council doesn’t adopt some reasonable measures to increase tax revenues, the Fiscal Year 2011 budget will have to be balanced by devastating cuts in core programs and services.

We can get a glimpse of what this will mean in the mayor’s proposals for child care subsidies, adult education and training, affordable housing programs, community health services, legal aid for low-income residents and temporary cash assistance for those with severe disabilities.

Another glimpse, were one needed, in yesterday’s massive layoff of child welfare workers, including every one of those who provide much of the direct, day-to-day support for foster children and children at risk of removal from their families.

Yet at the very moment these workers were getting their pink slips, e-mails about the potential health club sales tax were flooding Councilmembers’ inboxes.

Whom will we hear from next? People who object to paying a few dollars more for private golf lessons, cleaning services for their hot tubs and professional advice on their closet space?

Rental Housing Grows Less Affordable For Low-Income Households

May 6, 2010

For 10 years now, the National Low Income Housing Coalition has issued annual reports on the affordability of rental housing in the U.S. It’s just released the latest. And the news is not good–either nationwide or here in the District of Columbia.

No surprise, given what we read in the papers and in other reports, like the recent update from the Center on Housing Policy. But NLIHC provides a unique perspective and alarming figures.

Though the rental unit vacancy rate is up, demand is also up, due to the continuing foreclosure and employment crises. And though, in most states, the minimum wage increased last year, there is still no state in which someone working full-time, year-round at a minimum wage can afford even a one-bedroom apartment at the applicable fair market rent. (The affordability measure here is the U.S. Department of Housing and Urban Development’s standard 30% of income.)

The news is even worse for extremely low-income people, i.e., those whose incomes are at or below 30% of the median average for their area. Nationwide, there are an estimated 9.2 million renters in this category. But, according to the latest NLIHC survey figures, there are only 3.4 million available units they could afford. Seventy-one percent of extremely-low income renters pay more than half their total income for rent.

The figures are new, but the problem isn’t. As NLIHC notes, the affordable housing stock has shrunk–down 6.3% between 2001 and 2007. Meanwhile, high-cost rental stock has increased 94.3%. So the vacant units now available are mostly well beyond the affordability range for the growing number of low-income households.

As in the past, NLIHC has an online tool, plus some ranking tables to let us zero in on key data for every major metropolitan area and combined non-metropolitan areas, by state. So here’s the latest for the District.

  • A household would have to have an income of $59,760 a year to afford a FMR two-bedroom apartment. At full-time, year-round work, that’s $28.73 per hour.
  • This “housing wage” is higher than for any state except Hawaii.
  • A household would need 3.5 full-time minimum wage workers to afford the two-bedroom apartment.
  • A FMR one-bedroom apartment costs $1,116 per month more than someone who relies solely on SSI (Supplemental Security Income) can afford.

All these figures are higher than those NLIHC reported last year, when the District’s “housing wage” was $24.77 and two states, rather than one, outranked D.C.

This should be a wake-up call, if another were needed, to the DC Council, as it deliberates the proposed no-growth Fiscal Year 2011 affordable housing budget.

New, Quick Way To Support A Balanced Approach To DC Budget-Balancing

April 18, 2010

I’ve already beaten the drum for tax increases to help balance the District’s Fiscal Year 2011 budget. Now the Fair Budget Coalition has given us a quick and easy way to support them.

Though the mayor’s proposals include some revenue-raisers, they’re apparently not enough to avert cuts to a number of programs that serve the needs of the District’s low-income residents. As the DC Fiscal Policy Institute reports, child care, adult education and job training, mental health services and support to help grandparents care for their grandchildren will all take hits.

And the level funding proposed for some other programs–homeless services and locally-funded housing vouchers, for example–will deny many low-income residents the help they urgently need.

DCFPI has pulled together its previous recommendations for revenue-raisers and, unless I’m mistaken, added some new ones. All told, they would raise somewhere in the neighborhood of $70 million. Together with Congressional approval of more reasonable rainy day fund rules, they would produce the wherewithal for a budget that minimizes immediate hardships and puts our community on track toward a fairer, more prosperous future.

FBC has an editable letter we can send to support this balanced approach. DC Council committees have begun work on their parts of the budget. So time is of the essence here.

Read His Lips: No DC Tax Increases

April 9, 2010

Mayor Fenty has triumphantly announced that his proposed Fiscal Year 2011 budget “solves a $523 million budget gap without increasing taxes on District residents.”

The credibility of this statement rests in part on a fine distinction between taxes and fees. Because many D.C. residents would most certainly be using more of their income to provide the District with revenues.

Based only on what’s been reported thus far, we know that:

  • Everyone with phone service would pay a higher monthly charge for the privilege of having 911 emergency service.
  • Parking meter rates would go up to $1.00 an hour and residential parking permits by $10.
  • Fees for renewing licenses issued by the Department of Health would go up by an as-yet unreported amount.
  • Various new fees would be imposed on health care organizations and other businesses, some of which might be passed through to us in price increases.

The proposed budget would also cut the Earned Income Tax Credit. Like the federal EITC, the D.C. credit reduces the income tax liability of low-income families and refunds to them any difference between the amount of the credit and what they owe. I’ll leave it to the mayor to explain how reducing the credit isn’t a tax increase.

There’s a more fundamental issue here than taxes versus fees–even than fees that would hit low-income residents hardest. More fundamental even than reduced taxes credits versus tax increases that would affect only low-income residents.

Why should we think it’s so great to preserve the current tax system?

As the DC Fiscal Policy Institute has been arguing for some time, there are strange anomalies in our sales taxes. For example:

  • Theater and opera tickets aren’t taxed, but movie tickets are.
  • Health club memberships aren’t taxed, but exercise equipment is.
  • Pet shampoo is taxed, but pet grooming services aren’t.

Do we see a pattern here? Or in the nearly-unique provision that allows D.C. residents to pay no taxes on interest from out-of-state bonds? The District essentially gives $10 million a year to well-off residents who invest in projects that don’t do a thing for us.

And then there’s the matter of our personal income tax rates. They’re progressive only up to $40,000. So people earning a relatively modest amount pay the same 8.5% rate as people with incomes over $1 million.

Last year, DC Councilmember Jim Graham proposed a new top tax bracket for income over $500,000. The Council instead opted to make the income tax structure more regressive, by eliminating the cost-of-living adjustments for the standard deduction and the personal exemption. The former, of course, meant nothing to high-income filers, since they generally itemize deductions, and the latter much less as a percentage of income.

We may again see proposed legislation to establish a new tax bracket–or maybe a couple of brackets. The Save Our Safety Net campaign is calling for two new brackets–a 9% rate for residents with incomes over $200,000 and a 9.4% rate for those with incomes over $1 million. It’s got a statement of support that we can sign on its home page.

The new rates would not only raise an estimated $50 million that would mitigate the need for budget cuts. They would also make our entire tax system more progressive.

According to a recent report by the Institute on Taxation and Economic Policy, state and local tax systems tend to be regressive in part because they rely heavily on sales and excise taxes. It goes without saying that wealthy families pay a much smaller percentage of their income for these. Once they’ve satisfied all their worldly needs and desires, they sock the rest away in investments–some taxable at a lower rate, some temporarily shielded altogether.

ITEC looked at total state tax burdens and adjusted for the amount that filers who itemize can shift to the federal government. For the District, it found that:

  • Residents with incomes less than $20,000 a year paid only 0.2% less of their income in taxes than residents with incomes of $1.54 million or more.
  • Those with incomes between $20,000 and $33,000 paid 3.3% more.
  • And those with incomes between $33,000 and $57,000 paid 4.1% more.

This is a system we should cut critical services to preserve?