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Posted at 12:01 PM ET, 04/11/2011

D.C. budget roundup: Everybody hurts!

UPDATED 4/11, 12 P.M.

Mayor Vincent C. Gray’s budget plan is now in the public domain. Go to budget.dc.gov and soak it in. Read my tweets and really soak it in. The theme of this year’s mayoral budget is “One City Rising to the Challenge.” Here’s an alternative: “Everybody Hurts.”

There are few city residents who won’t be able to find something objectionable in this budget — starting with the city’s most vulnerable residents. Of $187 million in Gray cuts, more than 60 percent came from social service agencies. As for the least vulnerable, they’re being asked to pony up $35.4 million in the form of a new top tax bracket of 8.9 percent on those earning $200,000 and up, not to mention a flurry of business taxes.

Here are some more or less random observations:

1. The income tax increase was somewhat of a surprise, given the political reality Gray is dealing with. Keep in mind how marginal tax rates work: High earners would pay the increase only on the 200,000th dollar and beyond. Tax hike opponent Jack Evans (D-Ward 2), who earns about $365,000 between his council salary and his pay from the Patton Boggs law firm, stands to pay an extra $660 a year. And here are states that have a higher top marginal rate than D.C., per the Tax Foundation: California, Hawaii, Iowa, New Jersey, New York, Oregon (11 percent!) and Vermont.

2. Gray is proposing extending allowing a tax hike on package liquor sales, from 9 percent to 10 percent (which is the current rate for bars and restaurants). He’s also proposing extending sales hours from 10 p.m. to midnight. This reporter can already hear the wails of advisory neighborhood commissioners from here to Eastern Avenue complaining about neighborhood winos. Seeing as the hours extension would raise only $6,000, consider that as good as dead. Or maybe not, considering the extended hours could very well be a sop to the liquor lobby. [UPDATE, 4/11, 12 P.M.: I misread the budget book. The extension of sales hours is expected to raise $2.37 million, not $6,000. That hole will be somewhat harder to fill, but far from impossible.]

3. A parking tax increase is a political risk in a town where lot owners have traditionally held a lot of sway. But Gray — who wants to up the rate from 12 percent to 18 percent, the first such hike since 1976 — is competitive with peer juridictions. Baltimore charges 16 percent. New York City charges more than 18 percent. Philadelphia and Miami are at 20 percent. In San Francisco, it’s 25 percent. In Chicago and Pittsburgh, parking taxes exceed 30 percent. Interestingly, he is proposing dedicating all of the new parking revenue to the city’s Metro subsidy.

4. Gray wants to charge sales tax on live theater events for the first time. I’m eager to get my hands on the Budget Support Act to see just how “live theater” is defined. What about improv comedy? Performance art? Interesting line-drawing exercise. Also: We shall see if local theaters, many of which have been prime beneficiaries of city largesse in better times, lobby against the move. Still omitted from sales taxation: yoga.

5. Gray dinged Adrian Fenty on the campaign trail — and even after the campaign was over — for upping street parking rates. Gray appears to have proposed nothing to bring them downward.

6. The Circulator fare might go up to $2 cash — but SmarTrip users would pay only $1.70. Small comfort: Still more than Metrobus.

7. In terms of city services, there is one place residents might notice a real difference: trash. Gray is proposing a slash of 100 full-time equivalent positions from the Department of Public Works’ Solid Waste Management division. That makes this passage ring a tad hollow: “A clean city with a superior public works program is one of the Mayor’s Administration’s highest priorities, and the proposed cost savings will not affect DPW’s ability to perform its core services. The trash and recycling collection, nuisance abatement, street sweeping, and leaf removal programs will remain at the same exceptional level in FY 2012.” Hmm.

8. Charter schools didn’t do badly under the circumstances. They won a hike in the per-student facilities allowance, from $2,800 a head to $3,000 — thanks to federal funds. Probably not as much as the charter advocates, which supported Gray intensely, might have wanted, but they did as well or better than they could expect, given the big picture.

9. Sometimes political metaphor and political reality quite nearly align. If Gray had a third-rail issue, particularly on the capital budget side, it was his commitment to the city streetcar program — which he famously sought to cut before reversing himself. Gray most certainly declined to touch the third rail with his new budget, committing just shy of $100 million to the program through 2017. It’s a significant gesture of confidence in the program.

10. Gray said today he’s aiming for a gimmickless budget. But there are some definite detours into gimmickry. For instance: Having the Washington Sports and Convention Authority pay the city $5 million to lease the Carnegie Library, across the street from the convention center. Perhaps the WCSA, in negotiating convention deals, will have more success extracting revenue from the property than the city has had. But still: A leaseback is pretty much the definition of an accounting gimmick. But that is small potatoes compared to a Gray-proposed change to the way that employers are required to withhold city income taxes. Under Gray’s plan, standard deductions would no longer be taken into account when calculating withholding rates. In other words, the government would keep more of your money until they give it back to you in the form of a tax refund. The average District resident will see an additional $160 withheld yearly from paychecks under the proposal, according to the Office of the Chief Financial Officer. The measure is expected to generate nearly $41 million in fiscal 2012, but because it doesn’t affect taxpayers’ actual liabilities, it’s nearly all given back in the following year. Sound gimmicky? Call it the interest-free government lending program. This appears similar to a budgetary feint recently attempted in California, which the Wall Street Journal called the “ultimate budget gimmick.”

By  |  12:01 PM ET, 04/11/2011

 
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