The head of the House panel that oversees District spending said yesterday that he wants to ensure that a nearly $300 million D.C. tax-cut package is implemented on schedule even if the economy slows during the next several years.
Rep. Ernest J. Istook Jr. (R-Okla.), chairman of the House Appropriations subcommittee on the District, praised D.C. officials for their May approval of the wide-ranging tax cuts and said the reductions have great potential to boost the city's economy.
But he warned that "circuit breakers" approved this week by city officials have undermined the impact of the proposed tax cuts by creating too much uncertainty about whether all of the reductions will be carried out in the next five years.
Istook suggested that if the economy slows significantly, the city should automatically slash spending rather than halt the phase-in of the tax cuts. That way, he said, individuals and businesses considering moving into the city can have confidence that the full range of income, property and commercial tax cuts will be adopted.
"I want to make sure the tax cuts happen," Istook declared during a hearing of the D.C. spending panel. "To achieve the benefits, there has to be certainty. . . . I don't want headlines that say, 'D.C. Tax Cuts: Fact or Fiction?' "
Alice M. Rivlin, chairman of the D.C. financial control board, countered that residents and businesses will move into the city only if public schools, public safety and other services improve. She said tax cuts alone are not enough to make the District a more attractive place to live and work, and she argued that circuit breakers that would halt the tax cuts in future years are needed to ensure fiscal stability as well as enhancements in services.
"You don't want to see headlines that say, 'Service Improvements in the District: Fact or Fiction?' either," Rivlin said.
Rivlin dodged Istook's request to identify what areas of spending she would be willing to cut automatically if the economy slowed. After the hearing, Istook said he will continue to seek an answer to that question as an "alternative" to the current circuit breakers.
The trigger mechanism approved on Tuesday by the D.C. Council, at the behest of the control board, would halt the phase-in of the tax cuts if the nation's economic growth rate drops below 3.5 percent, or 1.7 percent when adjusted for inflation.
Valerie Holt, the District's chief financial officer, characterized the circuit breakers as modest but necessary, given the long time frame for implementation of the tax cuts. Holt said the circuit breakers are so conservative that if they had been in effect in recent decades, they would have been triggered only a few times.
"You have to be prudent," Holt said.
Overall, the tax-cut package would reduce personal and business income tax rates by roughly 30 percent, making the District more competitive with the Maryland and Virginia suburbs. The package also would slash the District's commercial property tax rate and a handful of other taxes on small businesses.
Istook said he wants to give Mayor Anthony A. Williams whatever additional powers he needs to bring about cost savings to pay for the tax cuts and achieve greater efficiency in government. Williams, who initially opposed the size and scope of the broad-based tax cuts, said yesterday that he supports the reductions as part of the overall D.C. budget. However, like Rivlin, the mayor said he does not want service improvements to suffer in favor of tax cuts.
"We must be vigilant against the temptation to over-promise on tax cuts while under-delivering on services," the mayor said. "As we move forward, I will continue to insist on sound financial planning, increased efficiency and fiscal prudence."
Although the House subcommittee headed by Istook is not planning to vote on the D.C. budget before the July 4 congressional recess, the Senate Appropriations subcommittee on the District is planning to take its first vote on the city's fiscal 2000 budget today.
In addition, Sen. George V. Voinovich (R-Ohio) is holding a hearing on a bill that would provide in-state tuition rates at colleges across the country for high school graduates who live in the District. Voinovich, chairman of the Senate Governmental Affairs subcommittee on the District, said yesterday that he hopes to move that bill, which already has been approved by the House, to the Senate floor soon.
The mayor, a strong supporter of the D.C. tuition bill, said there are many parts of the city's $4.7 billion budget that are designed to improve the quality of life for children.
"I am acutely aware that our government has a moral obligation to do more for children," Williams said. "The Annie E. Casey Foundation recently released a report that measured the well-being of children. The District rated worst in the nation in every category but one, from infant mortality to the rate of teenage births to statistics chronicling child poverty. Clearly, we have serious work to do."
CAPTION: Rep. Ernest J. Istook Jr., chairman of the House Appropriations panel on D.C., wants tax cuts to be fact, not fiction.
CAPTION: D.C. Chief Financial Officer Valerie Holt said amendments curtailing the tax cuts during an economic downturn are modest but necessary.
CAPTION: Pondering the Budget: D.C. Council Chairman Linda W. Cropp, left, and Mayor Anthony A. Williams, right, listen to testimony during a hearing of the House Appropriations subcommittee on the District, where the $300 million D.C. tax-cut package was discussed. Story on Page B4. Also, today is Richard Monteilh's last as director of the Department of Housing and Community Development. Story on Page B3.