For the first time in 15 years, residents of the District of Columbia will receive significant tax relief. The budget, approved by the city council would provide a net $158 million in tax relief over the next five years. Initially, the tax cuts would impact low and middle income residents – once fully phased in, residents earning up to $1 million a year would see income tax relief as well as tax relief on inheritance.
It was incorrectly reported that Americans for Tax Reform supported the expansion of the city sales tax to yoga and gym services specifically. Americans for Tax Reform does NOT endorse this tax increase, NOR do we endorse the targeted excise tax increase on high-end tobacco products, among others. We do acknowledge that the overall budget is a net $158 million tax cut on District of Columbia taxpayers and view this as a step in the right direction.
While sound tax reform often involves expanding the sales tax base, ending credits and deductions, and lowering overall tax rates accordingly – in at least a revenue neutral manner – the Washington, D.C. city council would have better served taxpayers by eliminating wasteful spending and outdated city programs to pay for income tax relief. Too often politicians engage in tax shifting – hiking taxes on specific industries to pay for broad based income tax relief. Tax shifting is NOT sound tax policy.
The net income tax cut for taxpayers in the city budget is a step in the right direction for an overtaxed city like Washington, D.C. However, taxpayers and members of the city council should be leery of tax shifting schemes. It is far better to reduce spending as a means to reduce the tax burden on Washington, D.C. residents than by increasing taxes on specific industries.