THE PACKAGE of tax proposals sent to the city council yesterday by Mayor Barry is well crafted. It distributes the burden of new taxes on both residents and businesses. Most important, the package seems more likely than any other to gain resonably quick passage in the city council. This is no time for every council member to renegotiate the package, arguing over each item. The city needs new taxes to avoid its prospective tax deficit and it needs those taxes now.
The main critics of the package are likely to be the business people and automobile drivers. The drivers will be angered by the added gas tax. But the increase in the gas tax is necessary. The gas tx has not been raised here since the price of gas was about 30 cents a gallon. Raising the tax to a percentage of the price would give the city its share of the steadily increasing price paid for gas. Business leaders, unlike drivers, will resent and resist the tax package because it puts the burden of most of the new taxes on businesses. One local businessman said yesterday the tax package amounts to a "street mugging" of businesses.
Over the long run, businesses deserve some review of their total tax burden. For example, a 5 percent tax on personal services rendered by lawyers, architects, engineering firms and beauticians has been proposed. That tax is expected to bring in about $5.2 million this year. But next year, over a full 12-month period, the tax could raise as much as $30 million, a very heavy tax load to ask businesses, particularly small businesses, to carry. This tax could really drive some businesses out of town if it were left permanently in place.
Any long-term package needs a federal payment formula that is stable. Much of the reason for the city's financial troubles lies with the steadily declining percentage of the federal payment in the city's budget over the last five years. Congress has allowed the government's fair-share contribution to the District government to lag, and it is a rising burden on other taxpayers, principally businesses, who have to give more and more to keep the city afloat.
But not enough has yet been done to curtail spending by city agencies. Some city council members are saying they can support no new taxes or tax increases unless more cuts are made in city spending. In addition, the cuts were made in some areas, notably jail guards and recreation centers, that seemed to be the worst possible targets for budget cuts. The council needs to keep the pressure on the mayor to make more and better cuts.
The mayor has made a good beginning in proposing a reasonable package to resolve the immediate problem. The council should support the mayor's tax package now, and then demand that the city begin taking a long-term look at taxes and city spending. Right now, however, there is more need for quick action than argument.