D.C. Council Tentatively Approves Hikes in Gas, Sales and Cigarette Taxes
Thursday, July 30, 2009
The D.C Council tentatively agreed to increase the sales, gas and cigarette taxes Wednesday after members determined that spending cuts alone would not resolve a projected $662 million budget shortfall over the next three years.
The agreement followed hours of heated debate about how much District residents could afford to pay to spare some services from deep cuts.
If approved Friday, when the council formally meets, the tax increases would raise about $50 million annually for the city as it struggles to respond to the national recession, which has caused property values to plummet and unemployment to rise.
The proposal would increase the sales tax from 5.75 percent to 6 percent. The city's 20 cent-a-gallon gas tax would rise by 3.5 cents.
The increases would make the District's sales and gas tax rates equal to those in Maryland but higher than Virginia's.
The proposal to raise the cigarette tax by 50 cents, to $2.50 a pack, would make the District's levy the sixth-highest rate in the nation, according to the American Lung Association. A pack of cigarettes in the District would cost about $7.50 after the increase took effect in October.
"We just can't cut our way out," said council member Kwame R. Brown (D-At Large.) "The budget should not be balanced on the backs of the low income . . . and I think some taxes are necessary so everyone shares in the burden in reducing the budget deficit."
The likely tax increases are in addition to nearly $100 million in proposed spending reductions that the council also tentatively agreed on this week. Mayor Adrian M. Fenty (D) has also proposed $250 million in spending reductions and other savings.
D.C. Council Chairman Vincent C. Gray (D) said he wanted a budget that addresses the city's long-term financial challenges. "We could have resolved this with gimmicks on the first day, but I refused to do that," Gray said.
Although there could be changes before the final vote, council members have agreed to eliminate hundreds of positions, curtail the hiring of new police officers, and eliminate earmarks for arts and social organizations.
The council is also proposing a $45 million cut in funding for public education, which will probably set up a major battle with Fenty.
Fenty, who has made school reform his top priority, has tried to spare the system from cuts even while reducing government spending in most other agencies.