The District of Columbia Tax Revision Commission reversed itself yesterday and, following an occasionally stormy hour-long debate, voted not to urge the City COuncil to tax commercial properties in the city at a higher rate than residential properties.
The commission's action followed arguments against the higher commercial rate by some of the businessmen and developers on the panel and, according to some supporters of the higher business tax, a strong lobbying effort by some city businessmen.
"Admittedly, I'm emotional on the issue," said shoe store owner and tax commission member Frank Rich. "But as a practical matter, those of us that are leasing from commercial owners and are trying to stay in business in the city can't stand another increase that is not equitable."
"So far as I can see, the reasoning (for the higher tax for business property) is so far off as to be fallacious. I think we're going to run the businesses out of the District or they're not going to be competitive (with suburban businessmen)," warned commission member Al Wheeler, a prominent Georgetown developer.
"Everything we're talking about is driving businesses out of the city," responded a visibly frustrated William Simons, another tax commission member and president of the Washington Teachers Union. "If the businesses have no interest in the city, then let them get out."
The 6-to-4 vote by the 20-member commission - half the membership was absent - does not in itself establish city policy on the tax rate, which is currently the same for commercial and residential properties.
However, the more than four dozen recommendations of the panel, which are to be presented to the City Councillater this month, are expected to form the basis for subsequent Council votes on a possible overhaul of the city's complex tax laws.
Councilmember David A. Clarke (D-one), who has already introduced legislation that would impose a higher commercial tax rate, said he has received more mail from city businessmen on that proposal than nearly any other item during the past three years.
Earlier this year, the commission voted to recommend that the city cease its current practice of taxing all properties in the city at the same rate. The recommendation was based on contentions that in recent years, the assessed values of homes had increased at a faster rate than that of commercial properties. As a result, an increasing proportion of the city's property tax burden is falling upon homeowners, supporters said.
If a dual rate structure were adopted, proponents argued, more than 90 per cent of all future tax increases would be borne by suburbanites (who own property in the city). Dual rates would also reduce the property tax burden of low income city residents.
The higher business tax was also expected to stimulate housing opportunities in the city by making housing less costly and, to some extent, providing a disincentive to commercial construction, according to commission staff members.
A commission report drafted to support the dual rate plan urged that the commercial tax rate be no more than 10 per cent higher than the residential rate. Imposition of the two-rate system, the report said, could increase the city's revenues by an estimated $6.3 million a year.
Robert D. Ebel, executive director of the commission, conceded that the higher rate might drive "a slight number" of businessmen from the city. But at yesterday's meeting, Wheeler and others aruged that the exodus could be much greater.
Rich said that the disproportionate rate increases for residences and businesses - some commercial values are said to have increased only one-third as much as residential value in the past four years - would not be change by a dual tax rate, but rather by improved assessing practices.
"The fact is that the system is not properly operating," Rich said. "But that is no reason to make it 110 per cent. It's doing the thing the wrong way."
Murray Drabkin, a lawyer with the firm of Kaler, Worsley, Daniel Holloman, said he disagreed with the idea of exporting city tax burdens to suburbanites. "It's nothing to brag about," he said, terming the idea "extortion" of people who cannot vote in the city.
Yesterday's vote suggested a strong division among those commission members present between the business and professional representatives, on the one hand, and the labor, education and community representatives on the other.
None of the other 50-plus pending recommendations of the commission were voted on for reconsideration yesterday. But there is still a possibility that additional reviews could be made before the final report is complied.
Jerry A. Moore III, a lobbyist for the Metropolitan Washington Board of Trade and the son of the City Council member, the Rev. Jerry A. Moore Jr. (R-at-large), said the Board of Trade had considered the dual tax rate issue the most important one affecting its members ince 1975, when Mayor Walter E. Washington Proposed - but did not get enacted - an increased gross receipts tax on businesses.
At times, Moore said yesterday, as many as five trade board lobbyists were working with members of the commission and the City Council in an effort to discourage the dual rate plan.
Judging by the letters some commission members have received, another proposal that the businessmen are gearing up to stop is a possible extension of the city's 5 per cent general sales tax to services such as dry cleaning, laundering and barber and beauty services.
Several developers, thinking that the tax would also apply to brokerage and legal fees, have written to oppose its enactment.
"In my opinion this tax would be a serious detriment to the overall economic health of Washington, D.C." wrote John O. Antonelli, president of ACF Developers Inc. and the sone of parking lot magnate Dominic F. Antonelli Jr. "Surely we want to attract professionals to the city, not make it a less desirable home location."