Dan Wedderburn testified for DC for Democracy before the DC Council’s Committee of the Whole on May 9, 2014 regarding the Fiscal Year 2015 Budget Request Act.
Mr. Chairman, members, my name is Dan Wedderburn. I chair the Government Reform Committee of DC For Democracy. DC For Democracy (DC4D) is a leading non-aligned progressive organization in the District with over 500 members.
Three longstanding myths about DC were dispelled by tax experts invited by the Tax Commission to present their findings. The first myth is that DC has a progressive tax system. When all taxes are included (income, property, sales taxes). The facts are DC has a regressive system. Data from the Chief Financial Office shows this too.
A second myth is that DC residents pay far higher overall taxes than the surrounding areas in Virginia and Maryland. Residents here pay lower overall taxes.
The third myth is that DC businesses pay far higher taxes than our neighbors. The reality is that no significant differences exist. Moreover fully two-thirds of DC businesses don’t even pay the 9.975% business tax rate. Further, Maryland owners of DC businesses receive a 100% credit on their return.
Another longstanding myth — really a fear — is that DC with the highest 8.95% tax rate on individual incomes will cause the wealthy to move to Virginia. No data at all exists to support this. Since this rate went into effect, CFO data show property values continue to rise rapidly in our wealthy areas including Foxhall, Spring Valley, Wesley Heights, Georgetown and Forest Hills. Nor is their evidence of an increase in ‘for sale’ properties.
Maintaining this tax rate instead of reducing it to 8.5%% means households with taxable income of $1 million will pay about $1,950 additional. Taxable income is much less than total income. Those with taxable income of $1.5 million will pay about $3,450 more. Who at such income levels and beyond will move to Virginia with its suburban sprawl and 7 day a week traffic gridlock? The tangible and intangible benefits of living in DC far outweigh these increase taxes.
The Commission wants to increase the $1 million exemption on estate taxes to the $5+ million exemption at the Federal level. The Federal exemption combined with a large reduction in the estate tax rate became law due to efforts by the Republic Right against deep opposition by Democrats and the President.
The District ranks 3rd among the largest cities in terms of income inequality. This is the truly great issue of our time. In a city where elected officials and candidates all claim to be progressives, none can claim this mantle by supporting the massive shift in wealth that’s well underway. It is a huge threat to government by and for the people.
If DC is to become the great city we aspire to, nothing is more important than to focus on ways to substantially reduce the burden on the poor, low income earners and, most of all, our thousands of at-risk youth. This should be a top priority in the fiscal 2015. The Tax Commission made many sound recommendations that should be adopted, including moving significantly but not completely to eliminate the regressive tax system, raise the standard deduction and personal exemption to Federal levels, create a lower tax rate for some middle income earners and expand the EITC credit for childless workers.
The Mayor’s Budget also asks for some sizable increases to meet these pressing needs. DC For Democracy believes the city is in a financial position to go much further. For example, let’s start now to provide funds for year round housing for the homeless, and to provide expanded tutoring and mental health programs, especially for at-risk children. DC4D also supports specific efforts by the Fair Budget Coalition for more funds to support programs for the needy.