District homeowners who have complained about rising taxes and inequities should get some relief from a host of tax changes approved this week by the D.C. Council.
The largest and most immediate change would give every homeowner in the city a reduction of more than $200 by increasing the homestead deduction from $38,000 to $60,000, eliminating any levy on an additional $22,000 for every household. The council also voted to continue the city's residential property tax cap, which limits yearly tax increases. It would be reduced to 10 percent from 12 percent.
If District revenue continues to climb as it has in recent years and the city runs another surplus, other measures included in the Budget Support Act would come into effect, including the first reduction in the city's tax rate for residentially owned and occupied property in 16 years, from the current 96 cents per $100 of assessed value to 92 cents.
"It's overdue," said council member Phil Mendelson (D-At Large), who has been pushing a tax rate reduction, which he says is the fairest way to reduce taxes citywide. "People have been screaming across the city that real property taxes have done nothing but go up in the past five years, and there should be relief."
Mayor Anthony A. Williams (D) had objected to lowering the tax rate, saying he did not want to give the biggest breaks to those homeowners who lived in the city's most affluent neighborhoods. He also had said he worried that the council would balk at increasing taxes to fund needed services if the revenue picture faded.
Despite those concerns, Williams spokeswoman Sharon Gang said yesterday, the mayor plans to sign the budget support act.
Another provision passed by the council would eliminate an inequity established when the city began assessing properties citywide once a year instead of every three years. Because of fast-rising property values and caps that were not as generous in some years as in others, some homeowners did not get the same protection from rising taxes as those who lived in other neighborhoods during the conversion.
Properties that were assessed in the first and second year did not have the lower cap that was granted in the third year, creating a continuing disparity.
Council member Jack Evans (D-Ward 2), chairman of the finance and revenue committee, said the difference in the caps created as much as a 26 percent difference in the assessments of similar properties. Under this week's action, assessments would be adjusted so that all property owners wind up without that disparity.
"We're going to try to go back in time to when they came out of the three-year assessment program and give them the same cap so they are at the same base as everyone else,'' Evans said.
The council also approved a tax break for disabled residents, providing a 50 percent reduction on their property tax liability. Evans said the break provides disabled residents an income tax exclusion of as much as $10,000 as long as their income is below $100,000. It also provides a 50 percent reduction on property tax liability, the same break given to seniors.
Another change gives a break to owners of low-income housing cooperatives by changing how they are assessed. Some of these cooperatives limit the resale price of units to keep the housing permanently affordable.
The changes -- other than the homestead deduction and the reduction in the cap -- depend on the performance of the District economy and whether the housing markets continue to hum and fill the city's coffers with greater than expected tax revenue. The Office of the Chief Financial Officer will issue an updated revenue estimate before the end of the fiscal year on Sept. 30, said spokeswoman Mary Ann Young.
Ed Lazere, executive director of the D.C. Fiscal Policy Institute, a nonprofit organization that studies the District's finances, said the city probably will have a surplus and the tax changes will take effect.
"They will be implemented before the year is up, barring some unforeseen disaster," Lazere said.