District's Financial Woes Reopen Debate on Tax Burden

By Tim Craig
Washington Post Staff Writer
Wednesday, July 29, 2009

The D.C. Council is struggling to determine whether it can close a $666 million revenue shortfall without raising taxes and fees, reopening a debate about whether District residents have a higher tax burden than their neighbors in Virginia and Maryland.

Despite the District's reputation for high taxes, some council members and social activists say the stigma is undeserved, especially when it comes to the region's wealthiest households.

"It's an old rap that's not true," said council member Jim Graham (D-Ward 1), who is proposing to raise the income tax from 8.5 to 8.9 percent on households with annual incomes of more than $500,000.

But other council members are adamant that the District, struggling to build a business-friendly image, cannot afford to raise taxes in a recession without damaging what they consider its fragile image among suburbanites.

"I will not support a budget that raises sales, property or income taxes," said council member Jack Evans (D-Ward 2), chairman of the Finance and Revenue Committee. "It's taken us too long to get even in the ballpark with surrounding jurisdictions."

The tax debate comes as council members continue a weeklong series of private meetings to try to agree on a new budget. A final vote is scheduled for Friday.

The extent of the challenges facing the council was evident Tuesday when Council Chairman Vincent C. Gray (D) outlined a proposal to cut $45 million from public schools. The proposal is a direct challenge to Mayor Adrian M. Fenty (D), who is trying to shelter the school system from the cuts he has imposed on other city agencies.

The council appears likely to approve millions of dollars in budget cuts to most agencies. It is also exploring eliminating earmarks to arts and nonprofit groups, slashing the Summer Jobs Program, scaling back road resurfacing projects, reducing library hours and limiting the hiring of police officers.

"There are choices that have to be made," said council member Phil Mendelson (D-At Large).

The council was reviewing a menu of 32 possible tax increases Tuesday night. The list included raising the sales tax on parking from 12 to 15 percent, imposing a 5.75 percent tax on theater tickets and higher taxes on alcohol and cigarettes.

Council members also heard a presentation about how increasing the sales tax from 5.75 to 6 percent would raise about $21 million annually.

In trying to agree what revenue should be raised, council members are comparing the District with Maryland and Virginia.

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