D.C. budget plan triggers debate on possible tax hike

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By Nikita Stewart
Washington Post Staff Writer
Wednesday, December 1, 2010

D.C. Council members debated a possible income tax increase Tuesday as a stream of advocates for low-income residents, small-business owners, labor leaders and others lamented the proposed cuts in Mayor Adrian M. Fenty's gap-closing budget plan.

At the all-day hearing, some council members and advocates called Fenty's spending plan shortsighted and unfair, setting a stage for likely measures that would squeeze more dollars out of the city's wealthier households to help close an estimated $188 million budget deficit.

Council member Tommy Wells (D-Ward 6) said the mayor's approach significantly reduces programs in human services, but "at the same time, I haven't been asked to pay one additional cent."

"This is one village, and we're all in this together," said Wells, chairman of the Committee on Human Services.

Fenty's spending blueprint keeps his promise of no new taxes by mainly relying on program cuts, such as $2.4 million from job training for adults, $2.6 million from financial assistance to grandparents caring for children and $2 million from placement services for developmentally disabled residents. In his plan, the mayor also calls for reducing the popular summer jobs program and delaying the start of a program requiring public schools to serve students more healthful meals.

At Tuesday's hearing, the most discussed possible tax increase was a 1 percent hike in income taxes for those earning more than $200,000. No council member has introduced legislation seeking the increase, but the possibility alone triggered intense debate.

In one of the more heated exchanges, council member David A. Catania (I-At Large) challenged conclusions presented by Ed Lazere, executive director of the D.C. Fiscal Policy Institute, which conducts research on city budget and tax issues. In making the case for a 1 percent tax hike, Lazere said that, according to a city analysis, the increase would generate $75 million. But Catania labeled the figure as "false," saying his calculation showed the increase would generate just $6 million for the remainder of fiscal 2011.

After he testified, Lazere provided a written analysis from the office of the chief financial officer showing that a 1 percent increase on residents earning $200,000 or more would produce $45 million in fiscal 2011 and an additional $66 million in fiscal 2012. The D.C. Office of Tax and Revenue shows that about 12,000 District income tax filers in 2008 earned more than $200,000.

When he released his plan last week, Fenty said his budget proposal represented "tough decisions" during an economic downturn. "These are tough economic times for residents across the city, and we cannot afford to ask them to shoulder a bigger financial burden," Fenty said. "We found efficiencies and cut nonessential spending in a plan that will keep our government moving without harming service delivery."

Tuesday's council debate mirrored arguments among council members in May, when the mayor and council were shaping the fiscal 2011 budget. At that time, the council rejected a proposal by council member Jim Graham (D-Ward 1) to raise the income tax rate on residents earning $350,000 or more a year to 8.9 percent. (Currently, the rate for residents making more than $40,000 is 8.5 percent.)

Six months and an election later, the city government is now faced with an estimated $188 million deficit in that same budget. Graham likened Fenty's plan to "Reaganomics," saying the theory that the wealth of rich residents would "trickle down" to the less fortunate doesn't work.

Council member Marion Barry (D-Ward 8) said the mayor's lame-duck status gave him cover. "This is what I call a 'don't care budget.' He has nothing to lose by proposing this budget," Barry said.


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