Council Chairman Phil Mendelson is proposing to accelerate $71 million in tax cuts to wealthy individuals and businesses. While he justifies them with rosy rhetoric about “progressive tax reform,” these tax giveaways aren’t progressive, and they aren’t reform. And worse, this move is being rammed through with little warning to the public. In other words, the Chairman’s maneuver is misguided in substance and in process.
The Council Chair would have the public believe that he is merely implementing the recommendations of the Tax Revision Commission (TRC). He is not. The tax package that Mendelson pushed through last year represented the Council’s priorities, not those of the TRC. The Council chose to ignore $67 million in revenue increases that the TRC proposed to ensure our fiscal stability. The public should be very clear: these tax cuts are the responsibility of the Council, not the TRC.
A fair and responsible budget requires that during each budget season, the Council would weigh the costs and benefits of each tax cut in the context of the fiscal needs at the time, and with the maximum participation of the public in making those decisions. Instead, Chairman Mendelson plans to push through these tax cuts on June 30, moving their scheduled implementation up by a year. The public will not know their cost until the day of the vote, when the Chief Financial Officer will release an estimate. This lack of transparency ensures that the public will have no time to weigh in, and therefore gives the Council Chair maximum power to do as he will with virtually no scrutiny.
We call upon the Council to reject any plans for automatic implementation and re-consider the tax cuts alongside other critical funding priorities as new revenue appears.
DC for Democracy also opposes three specific giveaways within this plan. Even after some modest positive changes in recent years, our tax code remains unfair and regressive: working- and middle-income families will still pay a notably higher percentage of their income in taxes than the wealthiest.
Nevertheless, the tax cuts being accelerated under this proposal are clearly tilted towards the wealthiest individuals. It would:
- Reduce the marginal tax rate of individuals earning over $350,000 and up to $1,000,000 per year from 8.95% to 8.75%.
- Cut the estate tax by raising the threshold that triggers paying the estate tax from $1 million to the federal level (currently $5.25 million).
- Slash the business franchise tax from 9.4% to 8.25%, a blunt-axe approach that benefits giant corporations and developers.
The high-end individual income tax and estate tax cuts would bestow an estimated $18.3 million annually upon the DC’s wealthiest families, at a time when income inequality in the District of Columbia is among the worst of any city in the United States. While we support targeted support for true locally-based small businesses, the proposed business tax cuts are decidedly not targeted, giving more of our limited dollars to wealthy developers and multinational corporations who are already enjoying hundreds of millions of dollars in economic subsidies. DC for Democracy members stood against these unnecessary giveaways as they were being formulated by the Tax Revision Commission, we stood against them as the Council considered the TRC’s recommendations last year, and we continue to stand against them.
Regardless of whether or not these three giveaways are ultimately approved, we want to know whether our elected Councilmembers are willing to support them on the record. Therefore, we call for stand-alone votes on each of the provisions included in the package.
We are counting on those Councilmembers who believe in openness and transparency in government to put their principles into action and stand up to Chairman Mendelson’s unilateral maneuver.