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Posted at 02:30 PM ET, 05/25/2011

D.C. Council passes budget with no income tax hike

The D.C. Council passed its 2012 budget Wednesday afternoon after rejecting a proposal to tax the income of the city’s highest earners.

Under a budget plan released last night, Chairman Kwame R. Brown (D) proposed eliminating an income tax increase on residents making more than $200,000 a year, which was supported by Mayor Vincent C. Gray (D). Brown’s plan would replace much of the income tax revenue with a tax on municipal bonds not issued by the District, which would raise about $13 million. Brown also found new revenue to roll back cuts proposed by Gray to social services, including $23.4 million for homeless shelters that was to be cut from the budget.

In a morning session, members defeated by 8-to-5 an amendment by Michael A. Brown (I-At Large), Phil Mendelson (D-At Large) and Jim Graham (D-Ward 1) to reinstate the income tax increase — effectively killing the measure, which would have further restored social services.

The budget legislation also sets spending priorities for new revenue expected in the coming months as the city economy improves. Although it is unknown how much new revenue there will be, if any, the council decided how it would spend as much as $125 million.

Much debate surrounded whether that money should be used to roll back the new bond tax. Brown proposed to do so, but Wells introduced an amendment to remove the “buy-back.” In a unusual example of open horse-trading on the council dais, Tommy Wells (D-Ward 6) won the support of Vincent Orange (D-At Large) after agreeing to set aside about $500,000 for a celebration of D.C. Emancipation Day — long a pet issue for Orange. His vote was enough to pass the amendment, angering members who supported the bond tax with the understanding that it would be eliminated with new revenue.

Still, the budget passed a later voice vote. Several members said after the vote that they would work to eliminate the bond tax before a final budget vote on June 14.

Gray indicated in a letter sent to Brown on Wednesday morning that he would “look forward to signing this budget.” He wrote that he preferred the income tax increase because it has “received a full public vetting ... while a tax on bonds has not.” But he said that he would not veto the budget proposal over the inclusion of the bond tax.

The final budget, which authorizes more than $10 billion in spending, goes into effect Oct. 1.

By  |  02:30 PM ET, 05/25/2011

 
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