DC Council Chairman Rethinks Taxes

August 25, 2011

So DC Council Chairman Kwame Brown thinks that maybe a new top income tax bracket would be okay after all. As Washington Post reporter Tim Craig tweets, “BIG Change.”

Yet, as Brown explains it, the income tax increase he has in mind comes with strings attached.

The first string — and undoubtedly most important to him — is that the new bracket would replace the tax on out-of-state bond interest the Council passed in mid-June and then backtracked on a couple of weeks later.

Mayor Gray wouldn’t go along with the alternative the Council passed. So now it has to find about $13 million.

One option, of course, is to start collecting the out-of-state bond interest tax next year, as originally planned. But some bondholders have reportedly raised a ruckus.

All of a sudden, the new income tax bracket, which Brown staunchly opposed, looks more attractive. Also perhaps more attractive to Councilmember Mary Cheh, who was against it but strongly objects to the bond interest tax.

Now for the second string — one that, so far as I know, has no history or analysis behind it. All the revenues raised from the new tax bracket would have to be dedicated to maintaining city-owned properties — or perhaps to maintaining only schools, parks and community centers.

Craig says that Brown’s new-found openness to the tax bracket “could represent a major break through for progressive advocates, who have long argued the city needs a more progressive tax structure.”

Well, yes, we have. But I, for one, have reservations about Brown’s trial balloon.

First off, the Gray administration estimated that the new tax bracket would raise $10 million next year. So it looks as if the Council would still be short some $3 million.

Where will the extra money come from? Might the Council whittle down funds it restored to some key safety net programs that Gray’s proposed budget had cut?

Call me paranoid, but programs that serve low-income residents have repeatedly been tapped when revenues were short.

The second and larger issue is the restriction. Why should property maintenance get an indefinitely large revenue stream, untouchable for any other priority?

No question that schools, recreation centers and the like should be kept in good repair. But what much would that cost per year?

Surely the Council should have a good fix on the figure before it votes to dedicate the entire new bracket’s revenue stream. Also a plan for the millions I suppose would be freed up, since I assume the budget already makes some provision for maintenance.

And what about future years? Even with a slow economic recovery, we should expect revenues from the new tax bracket to rise — maybe more than essential maintenance requires. Yet the excess couldn’t be used for anything else — unless the Council “undedicated” it.

Meanwhile, there’s every reason to believe that other vital programs and services will need more local funding.

The Council, for example, has agreed to large cuts in funding for key affordable housing programs — unless next year’s revenues prove many millions of dollars more than projected.

Seems to me it would want to undo the damage in future budget cycles. Also to anticipate increased needs for homeless services, precipitated in part by the affordable housing cuts.

Cash benefits under the Temporary Assistance for Needy Families program have been cut for long-term participants. For the rest, they’ve been frozen since 2008, pushing families who depend on them further and further below the federal poverty line.

Our unemployed and under-employed residents need more and better job training. And whatever comes of the Gray administration’s outreach to Wal-Mart and other corporations won’t yield either funds or the types of training needed to move a significant number of people into jobs that pay enough to cover the high costs of living here.

We read that Mayor Gray is calling for more federal help. But the end result of the deficit reduction deal will almost certainly be less — not only for job training, but for a wide range of other critical needs.

Seems to me then that it would be extraordinarily imprudent to do anything that would limit funding choices now.