Call to Raise Income Taxes
-----We have about $3.2 billion – billion – in federal payment and grants for next year’s budget. Unprecedented. That’s more than enough to cover revenue losses from the pandemic-induced recession. That’s more than enough to provide additional funding to help our schools – and students – recover from virtual learning loss. We have over $350 million to help tenants with past due rents and unpaid utility bills. Yet the Council is being bombarded with demands to raise peoples’ taxes.
-----I have yet to hear a coherent, logical explanation for why the Council should be doing this.
-----At a recent budget hearing numerous advocates demanded we increase taxes simply because “we need to increase revenue.” In spite of the federal largesse. In spite of the fact that local revenues next year are projected to be $162 million more than pre-pandemic 2019.
-----Advocates are saying that’s not enough.
-----It’s never enough.
-----The proposal from the Fair Budget Coalition is to raise several taxes including income tax rates for residents earning over $250,000 and to increase the real property tax rate on homes valued over $2 million. The Coalition demands at least $240 million in additional revenue – additional to the $3.2 billion from the Feds.
-----“This is just a first step on advancing racial justice through tax justice,” says the Fair Budget Coalition.
-----Is this just about raising taxes on the rich?
-----Well, “no,” say the advocates. “We need the money to fully fund worthy programs.” But in fact, their demands for various programs total far more than their proposed tax increases: hundreds of millions to end homelessness and repair public housing, $200 million for excluded workers, at least a hundred million related to childcare, about $60 million for the Alliance (public health insurance), etc.
-----If the tax increases are to fund these programs, then what happens next year, since the demands won’t be fully funded this year? Raise taxes again?
-----When does it end?
-----Why not instead look at whether these programs are wasting money, or not being effective?
-----For instance, last year the Council budgeted $50 million for public housing repairs. “Not enough!” screamed the advocates. One year later the Housing Authority has spent about one-quarter of what we provided. Another example: last year the Council added more money for permanent supportive housing to reduce homelessness. Here again we see significant underspending – about $14 million. But the demand on Councilmembers is to increase that budget by $60 million.
-----The advocates say we must raise taxes now because the federal funding is one-time. True, although the federal money can be spent over three years. I do not understand the argument that we must raise taxes now to fill the gap when the federal funds run out three years from now.
-----The advocates cite a poll, paid by the DC Fiscal Policy Institute (DCFPI) and DC Action for Children, claiming that about 80% of DC residents support raising taxes. But the polling questions were incredibly leading.
-----For instance: “Q10 Big corporations like Walmart and Amazon took home billions in profits last year, despite the economic downturn. Do you strongly support, somewhat support, somewhat oppose, or strongly oppose raising District taxes on profitable corporations who pay a lower income tax rate than middle-income residents?” -- unsurprisingly, 84% said support!
-----The progressives say we need to raise taxes so as to have an equitable tax structure – that the more one earns the higher their tax rate. But that is already true for our income tax, arguably the most progressive income tax in the country. The Council raised income tax rates on the wealthiest, and reduced tax rates for the poorest, in 2013.
-----If we look at total tax burden, including sales and property taxes, the rich maybe pay a slightly lower percentage of their income in taxes than do the middle class. This comes from a study circulated by DCFPI. The study, however ignores the senior citizen property tax credit (a 50% credit), ignores the probate tax on wealth, and attributes business taxes to residents. Even so, the study scores DC second-best on the equity scale among the 50 states.
-----Nevertheless, we could further equity by slightly raising the highest income tax bracket and then reducing the rate for middle income tax payers. That would be equitable.
-----The advocates aren’t interested in that. They want the money for programs.
-----How much?
-----It’s never enough. So do we keep raising taxes year after year?
-----They say that “equity” comes from the programs. I support the programs. Year after year I push the Council to increase funding for public education, affordable housing, combatting homelessness, access to justice. Year after year I present a budget to the Council that adds funding – above what the Mayor proposed and above what the committees recommended – in these areas. And while I support them, I don’t see that the wealth gap, achievement gap, income gap, or racial injustice gap is changing.
-----We have to do something different. Raising taxes is the easy way out. What ought to happen is that the advocacy groups focus on waste and inefficiency. Before demanding another $100 million for public housing repairs, look at what needs to change at the Housing Authority so that the $50 million we budgeted last year gets spent. Before demanding that we add another billion dollars in human services, look at whether spending more on existing programs is actually the best path to end poverty.
-----Unless, however, the goal is the redistribution of wealth. Not only is a 3% increase in taxing millionaires not going to accomplish that, but if that’s really the goal then DC won’t be an attractive place for the .7% of our taxpayers, who earn over $1 million, and who pay 23.1% of our income taxes.
-----We ought to be thoughtful about raising taxes and improving our tax structure. That is why the Council called for re-establishing a Tax Revision Commission which the Mayor funds in this budget (and which every progressive group opposed at a hearing last fall). We ought to be mindful that already our income tax and commercial property tax rates are the highest in the region.
-----As I said at the beginning, where’s the logic? If we are to raise taxes to fund programs, we won’t raise enough under the advocates’ proposal; we’ll have to raise them again next year. If this is to replace the loss once the federal funds run out, then why are we raising taxes now? If this is for equity, then why not simply restructure the tax brackets?
-----We really ought to be thoughtful about this.
