Editor’s note: A previous version of this article incorrectly stated the budget’s authorized spending in local and federal funds and the percentage increase over last year.
Come Oct. 1, D.C. workers will probably find more taxes withheld from their paychecks. Many of the District’s businesses, particularly national chains, could pay more taxes. Drivers who park in the city’s garages might also pay a higher tax. Private investigators and armed guards would be required to charge sales tax for the first time.
The city’s highest-earning residents, however, will probably not pay a higher income tax rate.
Under a budget deal that passed an initial vote Wednesday, D.C. Council Chairman Kwame R. Brown (D) made good on an oft-repeated promise not to raise income taxes, eschewing a $18.7 million proposal by Mayor Vincent C. Gray (D) to implement a 0.4-percentage-point increase on residents making more than $200,000 a year.
But to close a budget gap once estimated at $322 million while funding an array of social service programs that Gray planned to cut, Brown and his colleagues found scads of revenue in several new taxes and fees — including a little-discussed proposal to tax non-D.C. municipal bonds for the first time.
Despite eliminating the income tax increase and a controversial sales tax on live performances, Brown found ways to offset the cuts to social services, including $23.4 million for homeless shelters and other human services programs. He also increased funding for Metro to stave off transit service cuts. In all, the budget authorizes the spending of $10.8 billion in local and federal funds, 3.1 percent more than last year.
“It would be easy if we could simply tax our way out of a difficult budget situation, Brown said, “but that’s not a realistic solution.”
But advocates and some members still wanted the income tax increase, which had been extensively debated since Gray delivered his proposal April 1. After a spirited debate, members defeated 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 and use the proceeds to restore more social services.
The budget does not immediately fund more police officers, which many council members deemed a top priority. But in a novel move, the legislation passed Wednesday 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, the council decided how it would spend as much as $125 million in yet-to-be-identified funds.
First on the list is $10.8 million to bring the D.C. police force up to 3,900 officers.
But the bulk of Wednesday’s debate concerned whether the new revenue should instead be used to eliminate the new bond tax. Brown proposed doing so, but Tommy Wells (D-Ward 6) proposed an amendment removing the “buy-back.”
In a unusual example of open horse-trading on the council dais, Wells won the support of Vincent B. Orange (D-At Large) after agreeing to set aside about $500,000 for a D.C. Emancipation Day celebration next April, to be held at the Lincoln Theatre on U Street NW. Orange’s vote was enough to pass the buy-back amendment, vexing members who supported the bond tax with the understanding that it would be probably be eliminated with new revenue.
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