Meet the Democrat in D.C. who is cutting taxes for the rich – and for everyone else
June 29, 2015 Leave a comment
Meet the Democrat in D.C. who is cutting taxes for the rich – and for everyone else
By Aaron C. Davis, Washington Post, June 28 at 8:08 PM
Phil Mendelson could be a comic-book caricature of a bleeding-heart D.C. liberal.
He drives an aging Ford Focus because it was union-made. He tried to keep Wal-Mart from moving into the nation’s capital unless it agreed to boost wages. And he has voted against tax cuts for the wealthy as many times as he has fingers.
Picture D.C.’s version of Bernie Sanders — only balding and with a mustache.
But Mendelson (D) is now fighting a title as improbable as any in his nearly two decades in public office — and one that is anathema to almost every other elected Democrat in the District. Mendelson has been labeled by Mayor Muriel E. Bowser (D) as a man cutting taxes for the city’s wealthy and its businesses. What’s more, Bowser charges, he’s on the verge of a power play to rush into law those tax cuts for the rich.
In truth, the District’s most powerful politician you’ve probably never heard of is in the middle of a once-in-a-generation campaign to cut taxes for almost every D.C. resident. A council vote Tuesday could be a litmus test, not only for Mendelson’s power as chairman, but also for the mayor’s — and for the identity of a rapidly gentrifying city.
The District, facing bankruptcy 20 years ago, is now flush with cash. An explosion of lucrative government contracting jobs and industry leaders choosing to relocate in proximity to the nation’s power brokers have pushed tax revenue up 50 percent over the past decade. D.C. now spends $13 billion a year — more than 15 states — but it still struggles to overcome some typical urban ills. High school graduation rates hover around 50 percent, and a crisis of more than 7,000 homeless people is evident to any resident or visitor.
The question circulating around the offices of District lawmakers ahead of Tuesday’s vote is whether the city should continue to pump its rising tax revenue into expanding city services or, with tax rates still much as they were two decades ago to stave off bankruptcy, it should instead return some of that windfall to residents.
The council seemed to answer the question last year when it approved a five-year, $162 million package of tax cuts. The first wave of relief went mostly to families making less than $60,000 a year.
But with rumblings that new, liberal members of the council and Bowser may try to stall or even kill the remainder of the cuts, Mendelson inserted a little-noticed provision into a spending bill last month to speed up and lock in a second phase of tax cuts, including controversial ones for the wealthy.
Under Mendelson’s plan, an expected uptick in city revenue would be earmarked for tax cuts, and the city’s middle- and high-income earners could see refunds next April instead of later, in 2017, under the plan the council approved last year.
Bowser said Mendelson is risking money that may be needed next year for D.C. schools or affordable housing, and she has touched off a firestorm on the council by suggesting that Mendelson has used subterfuge with colleagues to get his plan this far.
“I don’t know that there was any discussion — any debate” about accelerating the tax cuts, Bowser said in a meeting with council members last week. After the meeting, a spokeswoman for the mayor issued a statement saying Bowser did not support “arbitrarily accelerating tax cuts for upper-income earners without any discussion and ahead of existing spending pressures for schools, public safety, transportation and other critical investments.”
The pending cuts, first proposed by an independent tax review commission last year, would create a lower tax bracket for D.C. residents making $350,000 to $1 million a year. The city also would lower tax rates for its 43,000 businesses, eventually equaling franchise taxes in neighboring Maryland. And over two years, the District would lower the estate tax to the same as the federal government, beginning by doubling to $2 million the threshold for collecting inheritance taxes.
Mendelson charged repeatedly last week that Bowser was ignoring the fact that his fast-track plan also would accelerate further tax cuts for those making $40,000 to $60,000 a year. He said that by labeling the tax cuts as being for high-income earners, Bowser was distorting the aim of the overall package. According to one study, the plan would by 2020 make the District’s tax code more progressive than that in any of the 50 states.
The chairman also questioned the mayor’s commitment to carrying out the remainder of the cuts, saying he can only surmise that by trying to delay them, her intent is to ultimately subvert all or part of the package — which she voted for last year when she was a member of the council.
“What else could be her aim?” Mendelson asked.
Bowser denied that. Pressed by reporters last week on whether she was seeking changes to the tax package, she said she was not, and she committed to implementing the cuts on the schedule the council approved last year. She said the issue is with accelerating the cuts and the possibility that that could tie her hands on $50 million or more in possible spending next year.
The episode has exposed a fault line not only between Bowser and Mendelson, but also between the council chairman and a freshman class of five new lawmakers, many of whom are closely aligned with Bowser.
The council chairman traditionally has immense sway over the District’s final budget, and last year Mendelson made his tax-cut plan public only the night before lawmakers voted to approve it. This year, the acceleration of those cuts was included in a budget bill he released a day before the council’s first vote.
Ahead of Tuesday’s vote, aides to the mayor last week were using the issue as a wedge, between the chairman and new members as well as those up for reelection.
Some new council members, such as Elissa Silverman (I-At Large), a former advocate for the poor, are unapologetically more liberal than Mendelson and in need of a little convincing.
“My self-interest is in seeing those who need the relief the most get it,” Silverman said last week, questioning whether the timing, and perhaps the content, of the tax package should be reopened for debate.
All of that has left Mendelson, a Democrat who cut his teeth as a tenant advocate in the 1970s and has been a hero of progressives for much of the past two decades, working doubly hard to prevent a rare coup to push back the tax cuts, including those for the wealthy.
Mendelson said he’s intent on the council not reneging on the vote it took last year to cut taxes for everyone.
He also doesn’t see himself at odds with Democrats nationally, saying the dichotomy between Republicans and Democrats on the issue doesn’t apply, given the District’s vibrant local economy.
“We’re notching down our high tax rates and balancing the budget, and we can do it all at the same time because our revenues are growing faster than forecasted,” he said. “That’s not the formula in the national debate.”
Mendelson, however, also laces in some rationale that doesn’t sound like the party line. He doesn’t like the city spending its way out of every problem, he said, including the District’s increasingly high cost of housing. Bowser allocated $100 million to underwrite construction of affordable housing next year. Mendelson said some of the money should be left to residents to best figure out how to pay for their own housing.
“This is another way to address affordability. I don’t think that’s spin,” Mendelson said. “We can spend a lot of money on subsidizing affordable housing, but we can also reduce the tax burden on individuals so the city becomes a little more affordable. I would argue that we should do both.”
Ed Lazere, a tax commission member and head of the D.C. Fiscal Policy Institute, which advocates for low- and middle-
income residents, sees it differently.
Since the District is implementing the tax commission’s overhaul in pieces, he said, each cut needs to be weighed against the city’s needs at the time. Mendelson’s accelerated plan, he said, “would put tax cuts ahead of everything else.”
Gerry Widdicombe, executive director of the tax commission, said that he hoped Bowser and Mendelson could work out their differences and that he took Bowser at her word that she intends to still implement the cuts. But moving forward with cuts as soon as there is money to do so, as Mendelson has proposed, would be best, Widdicombe said. “Continuing with the tax cuts is clearly what the commission intended. Steady as she goes would be the ideal thing.”
Mendelson said he doesn’t fear Bowser’s criticism or that his reputation will be damaged.
“I’ve got too long a record on this issue,” he said. The criticism “won’t stick.”
Aaron Davis covers D.C. government and politics for The Post and wants to hear your story about how D.C. works — or how it doesn’t.