Mayor Anthony A. Williams plans to devote at least $200 million to new services and projects in the budget he will deliver to the D.C. Council next week, including more than $40 million in property and income tax cuts aimed primarily at the city's poorest residents.
With tax revenue soaring far beyond expectations, Williams (D) said he hopes to use the extra cash to address pressing social service and construction needs while satisfying a growing clamor for tax relief, especially among poor and elderly homeowners burdened by rising property taxes.
"The mayor is reaching across the city and investing the benefits of the District's good times in those who are most impacted by the strong economy," City Administrator Robert C. Bobb said. "He's using portions of the surplus to pay dividends back to District residents for key services that lift people up."
Under the mayor's tax plan, a copy of which was obtained by The Washington Post, the city would allow taxpayers to keep more of their money, increasing the personal income tax exemption by $130 per person and raising by $500 the standard deduction for those who do not itemize. The mayor also proposes to expand the city's earned-income tax credit, the local version of a federal tax credit available to the working poor.
Anticipating another year of skyrocketing property values, the mayor would ease the tax burden by increasing the homestead deduction to $60,000 from $38,000. Under the proposal, every homeowner in the District would get to keep an extra $211, according to a city analysis.
The mayor also would freeze property taxes for homeowners with incomes of $50,000 a year or less. Their additional tax liabilities would not come due until a house is sold or the owner dies. And property taxes would be cut in half for disabled residents with incomes of $50,000 a year or less.
The proposed tax cuts would come in addition to $53 million in income tax reductions set to take effect in the fiscal year that begins in October. Under a 1999 law, the top tax rate for residents making more than $40,000 a year will fall from 9 to 8.7 percent; the rate for taxpayers making less than $10,000 will drop from 5 to 4.5 percent.
Council members who had been briefed on the mayor's tax package yesterday praised it, saying it would provide desperately needed relief to poor and elderly homeowners who are being forced out of their homes by rising property taxes.
"For the first time in many years, the mayor is taking the initiative in the debate by making property tax relief part of his budget. That's key here," said council member Phil Mendelson (D-At Large). "This is considerably progressive, and it attempts to address the needs of people who cannot afford rising taxes during a time of displacement and gentrification."
Others stopped short of endorsing the plan. Council members have introduced nearly a dozen proposals for tax relief, and council Chairman Linda W. Cropp (D) predicted a robust debate over the issue.
"Obviously, the council has several tax packages before us, and we are looking at ways of reducing taxes for our citizens. The specifics of it we have not yet come to agreement on," Cropp said. She added that she would like to see "tax approaches that will give relief to a wide spectrum of District residents." The mayor's proposal, for example, contains nothing for the city's business owners.
Meanwhile, council member Jack Evans (D-Ward 2), who chairs the council's Finance and Revenue Committee, said he will continue to press for a 5 percent annual cap on tax increases attributable to rising property values. The city currently caps such increases at 12 percent a year.
The mayor's plan is "all very good," Evans said. "But what people are crying for is the 5 percent cap."
In addition to cutting taxes, Williams said his budget proposal will please many of the interest groups and community organizations clamoring for a piece of the city's burgeoning revenue pie. One such group, Empower DC, brought dozens of children to the John A. Wilson Building yesterday to plead for more money for child care.
Williams declined to provide details, urging reporters to wait until he delivers his State of the District address Monday. Bobb said a significant amount will be dedicated to "generally fixing things" suffering from long decay, including school buildings, recreation centers and homeless shelters.