The District had been fortunate over the past several years to continuously collect tax revenue in excess of the amounts we've budgeted for.
That's good news for you as taxpayers as I've been able to keep my colleagues from spending all that excess money, and instead put it into our city savings account to make us financially stronger, increase our credit rating, and as a result make it cheaper for us to undertake capital projects like rebuilding schools, roads, and bridges.
While financial reserve funds are critical to a strong municipality, there's an even better use for excess revenue for tax payers: lowering tax rates.
At the end of September, DC CFO Jeffrey DeWitt certified our revenue was $39.3 million more than we budgeted. Despite attempts by some of my colleagues to delay tax cuts we have already promised to residents and businesses.
Specifically, beginning next year (tax year 2016), personal income between $40,000 and $60,000 will be taxed at 6.5%, rather than 7.5%; the tax rate on income between $350,000 and $1 million will drop from 8.95% to 8.75%; and the business income rate will drop from 9.4% to 9.2%.
These cuts follow even more substantial cuts that we implemented this past year including the creation of that $40,000-$60,000 income bracket and an expansion of the Earned Income Tax Credit for low income residents.
Some of you may remember that in 2014, the Council passed a sweeping tax reform package that was based on recommendations from an expert Tax Revision Commission lead by former Mayor Anthony Williams.
The tax package was a broad-based adjustment to our tax structure to make it fairer and stronger. It included some provisions that I didn't like (expanding the sales tax to fitness classes) and some that some of my colleagues didn't like (lowering the business tax and personal income tax rates), but the commission made principled recommendations based on sound tax policy. It was a compromise that we agreed to implement over several years as we saw increased revenues.
Implementing these tax cuts now is responsible public policy. It puts money back in the hands of the individuals and business who earned it, makes us more competitive to attract and retain residents and businesses, and reminds people that the District government is able to make good on its promises.
We're got more work to do to improve our tax structure, but this is an excellent start. It is important that we recouple the District's estate-tax level to the federal level, which adjusts with inflation every year. This change is particularly important for our seniors, many of whom cross the District's threshold simply by owning a home here. We also need to expand the personal exemption and standard deduction to ensure all residents are benefiting from the increased prosperity in the city. Additionally, we need to continue to implement the commission's recommendations about lowering the business tax rate to attract and retain more businesses in the city to employ District residents.
The tax cuts were unfortunately, hard fought, but well earned by DC residents and businesses. I will continue to fight to ensure that our growth in prosperity can be enjoyed by all residents who want to live, work, and operate a business in the District.
Monday, October 26, 2015
CM Jack Evans on revenue, tax cuts
From the CM's October 22, 2015 newsletter: