Council Chairman Phil Mendelson (D) said the revenue windfall offered a “rare opportunity” to reduce a tax — one that had been raised as a supposedly temporary measure. “Today, we were able to live up to our word,” he said.
The increase was made in 2009 as city leaders wrestled to close a $660 million two-year shortfall. It was intended to sunset in fiscal 2012, but Mayor Vincent C. Gray (D) proposed continuing with the higher rate in 2011 and the council assented.
Since then, the city’s economy has rebounded mightily. Fiscal 2012 ended with a $417 million surplus over projected revenue of roughly $6 billion, and the latest revenue estimates indicate that no slowdown is expected soon.
When the new rate takes effect Oct. 1, it will be slightly lower than the 6 percent rates in Maryland and Northern Virginia. Other parts of Virginia have a 5.3 percent sales tax.
The tax cut is expected to reduce city revenue by $19.8 million in 2014, and budget legislation carves out an additional $18 million for future tax cuts that are expected to be proposed by the Tax Revision Commission in coming months.
The tax reductions were outweighed by $50 million of new spending initiatives, also made possible by the revenue upgrade. They include several proposals from Gray — such as an expansion of early childhood education and more money for senior programs — as well as several pet initiatives of council members. Those include free Metro service for students, film and TV production incentives, and $1 DC Circulator bus fares.
The sales-tax cut won kudos from the D.C. Chamber of Commerce, whose leader, Barbara B. Lang, called it a “good start” and praised Mendelson for his “good judgment.”
Business leaders were less pleased by the council’s vote granting initial approval of a bill requiring “big box” stores such as Wal-Mart and Target to pay their employees no less than $12.50 an hour — a significant increase from the current citywide minimum of $8.25.
The 8 to 5 vote came after the incorporation of an amendment that would limit the law’s impact to stores doing business in spaces of 75,000 square feet or more.
Without the amendment, the bill would have covered all businesses associated with a national company that does yearly sales of $1 billion or more — potentially affecting such retailers as Apple and Nike. With the amendment, the bill is more squarely focused on Wal-Mart, which has announced plans to open six stores in the city.