A long-considered and novel proposal for taxing profits made by speculators on residential property in the District of Columbia was approved yesterday by the D.C.City Council's finance and revenue committee.
By a vote of 5 to 1, the committee sent the measure to the full Council, which is expected to begin deliberations next month.
The measure would tax profits made by dealers who buy residential properties, hold them for relatively short periods and then resell, often at inflated prices.
The tax rates would range from 3 to 97 per cent - the latter in extreme cases where the dealer would make a profit of 300 per cent from property that is bought and sold within six months.
In its official report to the Council, the committee out of their homes - often with no place to go.
Such sales have been blamed for removing blacks from such areas as Capitol Hill, where they are replaced by whites who are able to pay the higher prices.
The bill in various forms has been under consideration for nearly three years. One of its backers said there is no other measures like it in this country that applies to urban property.
Vermont has a speculation tax on rural acreage.
Within minutes after yesterday's committee vote, lines were drawn between community groups that feel the bill is too weak and business groups that feel it is too burdensome.
Betty Callet, a communtiy worker for Friendship House on Capitol Hill, said the bill contains so many exemptions that it "stop flipping to some extent, but that's all."
Flipping is the termn used for the speedy purchase and resale of property at a higher price, without any improvements or renovation being made in it.
Dan O'Leary, legislative chairman of the D.C. Builders Association, said he expects his group to oppose the measure, mainly because of burdensome administrative procedures.
Debate at yesterday's meeting centered on a provision by committee chairman Marion Barry (D-at large) that exempts renovated properties from the tax if the ulitmate seller grants the buyer a one-year warranty on materials and such features as heating and electrical systems.
Council member Douglas E. Moore (D-at large) contended that supporters of the warranty provision "sold out" to what he called "the parasitic real estate industry." Asserting that the committee produced a weak bill, he cast that the only vote against it.
Council member David A. Clarke (D-one), the original author of the bill, opposed the warranty exemption but supported the measure, saying it represented progress. He accused Moore of "an immature effort at political posturing."
As approved yesterday, the bill contains a tax table that is applied after a complex computation is made of the profit a dealer makes on a piece of property. The first 15 per cent of profit is exempt from the proposed new tax.
If a dealer makes a 50 per cent profit in a buy-and-sell deal within six months, the tax would be 76 per cent. But if the dealer waits more than two years to resell, the tax would drop to 14 per cent. After 30 months, there would be no speculation tax levied on the deal.
In another matter, the council's government operations committee voted to postponed action on the city's proposed new personnel system until March 1, instead of Feb. 1 as scheduled earlier. The new system would detach D.C. employees from the federal government's personnel system.