MOST OF US put all thought of income taxes out of mind after April 15. Not so the D.C. government. A week late, the council passed and the mayor signed legislation to conform District tax forms to those of the federal government. Unless disapproved by Congress--and why should it be?-- it will become effective next month.
Hooray! By adopting the federal definitions of "gross income" and "adjusted gross income" and by allowing District taxpayers to take most of the federal itemized deductions, the new law will greatly simplify tax preparation. For Schedules A, B, C, D and E, a simple one-page form will be used instead. This simplification will save the city an estimated $298,000 next year on audits, printing and the like.
For taxpayers, the biggest savings will be in pensions and charitable contributions. Contributions to Keogh plans, IRAs and certain university pension plans will be treated the same way on federal and District tax forms. This eliminates a very real problem for District residents who move to another state after retirement. Under the old law, they would have been taxed by the District on pension contributions while they were working, and taxed again when the funds were withdrawn. The new law eliminates this possible inequity by providing that pension funds be taxed by the District after retirement--as federal law and the laws of most states already provide.
Until now, the District had allowed deductions for charitable contributions only to organizations that conducted their activities substantially here. The new law allows a deduction for contributions to any charitable institution, including your old college, qualified under federal law.
Taxpayers at the lower end of the income scale get some relief, too. The first $1,000 of income will be excluded, instead of the first 10 percent up to $1,000. To offset some of the losses expected from the new deductions, some people who aren't taxed now will have to pay. The measure also provides for a tax on interest on state and local bonds purchased after 1991.
Reform of District tax laws had been under consideration for years. The federal tax legislation enacted last summer, greatly increasing the potential for local confusion, made reform imperative. The council and the mayor deserve applause for this sensible and fair revision.