Institute Disputes Need for Next Cut In Real Estate Tax

District homeowners will receive a tax break in less than two weeks based on a law approved by the D.C. Council last year.

The real estate tax rate will fall Oct. 1 to 88 cents, from 92 cents, per $100 assessed value, said Natwar M. Gandhi, the D.C. chief financial officer. The decrease is the result of a law that automatically lowers the property tax rate if tax revenue surpasses projections.

For a property owner with a house worth $400,000, the savings will be $160 for the year, said Martin Skolnik, director of real property tax administration.

But the tax rate reduction also means that the city will not collect more than $17 million that it would have amassed under the old rate.

That money could have been used for schools, libraries, housing and health care, said Ed Lazere, executive director of the D.C. Fiscal Policy Institute, a think tank that analyzes city tax and budget issues. "Do we really want to be cutting taxes further?" Lazere asked. "I'm not suggesting that any of the tax cuts be reversed, but should we let $17 million go?"

The institute released a study yesterday showing that middle-income District residents earning $50,000 to $150,000 annually are paying lower taxes than do their neighbors in the Maryland suburbs and in most communities in Northern Virginia.

The conclusion is based on a study of income, property and vehicle taxes -- levies that directly affect households, Lazere said. He said the result contradicts the popular belief that D.C. residents pay more taxes than their suburban peers do.

Comparing married couples with two children and earning $100,000 annually, the study found that District families pay an average of $4,619 in income and property taxes a year, families in Prince George's County pay $6,509 and those in Fairfax County pay $5,883.

In recent years, the D.C. Council has approved several tax breaks on grounds that it wanted to create tax parity with the rest of the region.

Council member Adrian M. Fenty (Ward 4), the Democratic nominee for mayor, should consider the institute report before proposing any more tax breaks, Lazere said.

Fenty said during the primary campaign that he would not raise taxes, and he maintains that position, said Alec Evans, Fenty's spokesman. "Mr. Fenty's commitment not to raise taxes is as strong as ever," Evans said. "He believes we ought to be able to run our government and provide the necessary services to residents with a $7.4 billion budget," he said.

Council member Jack Evans (D-Ward 2), chairman of the Finance and Revenue Committee, said he disagreed with some of the study's findings, because the institute did not include parking and sales taxes, which also affect D.C. residents.

According to the study, sales taxes were not included because it was difficult to estimate a family's purchases. In addition, District residents cross borders to shop in suburban malls, and suburban residents often commute to the District.

Julia M. Friedman, the city's deputy chief financial officer for revenue analysis, said that other taxes, such as those on utilities, should have been considered and that the report does not reflect the majority of District residents who are renters and earn less than $50,000 a year.

But the report shows that the city is meeting its goal "to reduce the tax burden on residents," Friedman said.