The D.C. Council’s deliberation over increasing income taxes on wealthy residents for the fiscal year 2021-2022 budget is generating spirited discussion among city leaders.
On July 20, the council voted 8-5 to hike income taxes on District residents making $250,000 a year or more to fund early childhood education for up to three-year-olds, pay for 2,400 housing vouchers and provide monthly basic income for selected families.
Council Chairman Phil Mendelson, along with Council members Mary Cheh (D-Ward 3), Anita Bonds (D-At Large), Kenyan McDuffie (D-Ward 5) and Brooke Pinto (D-Ward 2) voted against the increase.
“We have about $3.2 billion — billion — in federal payments and grants for next year’s budget,” Mendelson said. “That’s more than enough to cover revenue losses from the pandemic-induced recession. Yet, the council is bombarded with demands to raise people’s taxes.
“I have yet to hear a coherent, logical explanation for why the council should be doing this,” Mendelson said.
Mendelson’s frustration capped a July 20 session for the first vote on the District’s proposed $17.5 billion budget. According to its schedule, the legislative body will hold its final budget vote on Aug. 10.
Mayor Muriel Bowser’s budget proposal in May didn’t include any tax increases and heavily relied on federal American Rescue Plan funds supported by President Biden and the U.S. Congress.
Bowser’s budget last year didn’t have any tax hikes, either.
Council member Charles Allen (D-Ward 6) led an effort in last year’s budget cycle to increase taxes on the wealthy but the proposal failed.
With Council members Janeese Lewis George (D-Ward 4) and Christina Henderson (I-At Large) elected this year, there may be enough legislative support for the tax boost on the rich to possibly make it a reality.
Status Quo Backers
McDuffie has voiced concerns about the council’s tax increase.
“I have supported new tax policies in the past, but yesterday’s vote was a missed opportunity to thoughtfully modernize our tax code to meaningfully address the tax inequities that have contributed to D.C.’s stark racial gap,” he said. “However, a more collaborative approach may have yielded a more comprehensive tax reform proposal that better levels the playing field for vulnerable District residents.”
Last year, District lawmakers voted to create a commission to examine the city’s tax code to determine ways residents of all incomes could pay their fair shares of taxes. Pinto acknowledged, “There is a huge need in the city and the programs funded through the proposed tax are critically important” but she criticized the tax hike.
“As a former tax attorney for our city, I do not believe passing an ad hoc tax is the right way to create tax policy,” the Pinto said.
“The Council voted to establish a Tax Revision Commission. This entity is entirely devoted to evaluating our tax code, understanding where loopholes are and weaknesses exist and developing evidence-based recommendations to make our tax code equitable.
“In this way, she added, “the Tax Revision Commission is working to ensure that our tax code best serves all residents and considers the District’s long-term success within our region. We should give the Tax Revision Commission a chance to do its job.”
Praise for Tax Increase
Council members Allen, George and Henderson, along with Robert White (D-At Large), Elissa Silverman (I-At Large), Vincent Gray (D-Ward 7), Trayon White (D-Ward 8) and Brianne Nadeau (D-Ward 1) who voted for the tax increase received praise from Jeremiah Lowery, chair of DC for Democracy.
“In the weeks leading up to yesterday’s historic vote, we made it clear to the D.C. Council that we considered the vote on the income tax proposal to fund housing and child care to be the most significant vote of the budget season, and one of the significant votes of the year,” Lowery said. “This is a huge win for racial equity, tax justice and progressive values.”
Lowery said business lobby groups led by the Federal City Council — an organization of companies with operations in the city — and its CEO, former D.C. Mayor Anthony Williams, opposed the tax increase.
Tazra Mitchell, policy director of the DC Fiscal Policy Institute, agreed with Lowery on the council’s vote.
“With a modest tax increase on D.C.’s wealthiest residents, the council will raise over $170 million each year by fiscal year 2025 to help dismantle structural barriers to opportunity for Black and Brown communities and those living on low incomes,” she said.
