DC Council Approves Historic Tax Cuts

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Posted by Alexander Bobroske on Thursday, July 17th, 2014, 4:35 PM PERMALINK


Earlier this week the DC Council voted 12-1 to override Mayor Vincent Gray’s budget veto. The budget vetoed by Mayor Gray includes historic tax cuts not been seen by DC residents in 15 years. Americans for Tax Reform applauds the DC City Council for restoring this much needed tax relief for District residents.

The budget includes triggers for tax cuts if revenue targets are met, providing tax relief for District employers and residents. Key provisions of the plan include the following:

  • Middle class taxpayers (making between $40,000 and $350,000) will see their top marginal tax rate drop from 8.5 percent to 7 percent next year and then 6.5 percent the year after that.
  • Those earning up to $1 million will see their top rate fall from8.95 percent to 8.75 percent.
  • Increase of standard deductions and person exemptions.
  • Childless low-income workers will see their Earned Income Tax Credit increase from 40 to 100 percent of the federal credit.
  • The business tax will drop from 9.975 to 9 percent in 2016, 8.5 percent by 2018, and finally to 8.25 percent by 2019. This places DC business taxes in line with Maryland’s.
  • Death tax threshold will increase from $1 million $5.25 million to match the federal death tax exemption threshold.

 

The $225 million tax cut is offset partially by the $67 million in new revenue from expansion of the sales tax base, leaving the majority of tax relief facilitated by spending restraint in the $10.6 billion budget, down from $12.85 billion in FY 2014.

There has been a lot of uproar over the alleged yoga tax included in the budget. But District yogis should fear not. There is no special wellness tax going into effect; the new tax plan merely applies the local sales tax to yoga and gym glasses, along with other previously exempt services. The amount of income tax cut far exceeds higher sales tax collections that this base broadening will generate. This newly increased disposable income will allow Washingtonians to afford even more yoga sessions.

The DC Council should be commended for clamping down on Mayor Gray’s expensive pet projects, such as his citywide streetcar service plans. Former mayor and current councilmember Marion Barry recently stated that taxpayers would have to pay $2,000 to subsidize each ride on the only existing streetcar line, a line which is yet to open even after years of planning and construction.

It appears that Washington’s business tax climate has become so onerous that even the DC Council realizes the status quo is unacceptable.  ATR applauds the DC Council members for overriding Mayor Gray’s veto of much-needed tax relief. After being hit with over 20 federal tax hikes signed into law by President Obama over the last four years, Washingtonians need tax relief at the local level now more than ever.

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