Washington Post Editorial Board: “DC’s Irresponsible Income Tax Hike”

D.C.’s irresponsible income tax hike

By Editorial, Published: September 20

MEMBERS OF the D.C. Council who voted Tuesday to increase the income tax for wealthy residents said they had no choice if they were to spare retirees and other investors from an even more onerous tax. Never mind that it was the council itself, months earlier, that blithely came up with the idea of a tax on out-of-state municipal bonds. The decision to swap one ill-advised levy for another is the latest example of this council’s alarming tendency to improvise the District’s finances.

“Doing it on the fly,” is the apt description that council member Jack Evans (D-Ward 2) gave to the council’s decision to create a new tax bracket for wage earners with more than $350,000 in taxable income. Instead of going through the council’s tax and revenue committee or letting a soon-to-be appointed commission study the issue, seven council members endorsed a proposal hatched by Phil Mendelson (D-At Large) and Mary M. Cheh (D-Ward 3) behind closed doors Monday that would, if signed as expected by Mayor Vincent C. Gray (D), give the District one of the highest top income rates in the country at 8.95 percent. (Currently all D.C. residents who make $40,000 or more pay an 8.5 percent income tax rate.)

Joining Mr. Mendelson and Ms. Cheh were Jim Graham (D-Ward 1), Harry Thomas Jr. (D-Ward 5), Tommy Wells (D-Ward 6), Yvette M. Alexander (D-Ward 7) and Michael A. Brown (I-At Large).

To make the boost more palatable, the council voted to sunset it in four years — although no one should be under any illusion about this increasingly malfunctioning council maintaining the fiscal discipline to let that happen.

Council members have been under pressure to rethink their decision to charge income tax on bonds that had not been subject to taxes — and that residents had bought with the reasonable expectation that the rules wouldn’t be changed midstream. The evident unfairness of their policy hadn’t disturbed the council, but when legislators started hearing from pensioners who depended on the income from these municipal bonds, they got nervous. Political panic first drove them to the city’s diminished reserves, but Mr. Gray wisely — in light of the downgrading of the outlook on D.C. borrowing — vetoed that idea. So the next stop was to soak the rich, which sounds fine until you start thinking about what will happen to the tax base if high-income people decide to settle elsewhere.

The one idea that didn’t seem to occur to the council or mayor was living within their means. Over the months in which the council has deliberated on the budget that takes effect Oct. 1, more than $400 million in unexpected revenue has been forecast by the chief financial officer; the council has siphoned off every penny to spend on other purposes. Council member David A. Catania (I-At Large), who opposed the tax increase, noted that the city is spending 8 percent more than it did last year.

It became clear during the heated debate Tuesday that a majority of the council wasn’t interested in alternatives. Why do the hard work when you can just raise taxes? After all, as the point was repeatedly made, it’s only 6,000 residents and they have money. Mr. Evans, who also opposed the tax hike, is probably correct that it won’t cause many wealthy residents to move out, but it could deter some from moving in. Indeed, even those with incomes not affected by the higher bracket might think twice about living under a government as unconcerned with taxpayers’ money as with its own ethics.

Kevin Wrege, Esq.

Founder & President

Pulse Issues & Advocacy LLC

Office: 202-625-1787

Mobile: 202-253-4929

4410 Massachusetts Ave., NW, #150

Washington, DC 20016

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