D.C. Council Chairman Kwame R. Brown (D) said Thursday that there is little chance he will accept a tax increase on the wealthy to delay implementation of the city’s new bond tax, setting up a showdown between the council and Mayor Vincent C. Gray.
On Wednesday, Gray vetoed a council budget amendment that would have delayed the collection of the city’s new tax on out-of-state bonds for one year. Gray (D) argued that the delay would put the city’s credit rating at risk because the council wanted to use $13 million in reserve funds to pay for it.
Instead, Gray suggested that the council raise the city’s income tax from 8.5 to 8.9 percent on residents who earn $350,000 or more annually.
But in an interview with The Washington Post, Brown derided the idea of raising taxes, saying the District should instead “right-size its government.”
“I’m not interested in any tax increase,” Brown said. “At the end of the day, people are tired of taxes and fees being raised and want to right-size the government.”
Instead of a tax increase, Brown said he will probably push to establish a commission to explore potential cuts and savings to the city’s budget. Brown said the commission would include government officials and citizens who will work to ferret out “wasteful spending within the government.”
Brown’s stance create a major ideological rift on the council when the council returns from summer recess in early September. If no action is taken, the city will be begin collecting the tax on non-District bonds purchased after Jan. 1 2011 on Oct. 1. Some bondholders have decried the move, calling it a retroactive tax.
Some of Brown’s colleagues, including Council member Jim Graham (D-Ward 1), applauded Gray’s veto. Graham and other liberal members of the council could try to circumvent Brown by trying to push through Gray’s proposed tax increase absent the support of the chairman.
But Brown blamed Gray and his budget team for creating the crisis. Brown noted it was the council – not Gray – that worked this spring to shore up the District’s fund balance.
Brown accuses Gray of blindsiding the council by issuing his veto while the council was on recess.
“Quite frankly, he does not run the fiscal matters of the city, the legislature has a voice,” Brown said. “For them to say at the last minute, ‘Oh, $13 million is going to cripple our bond rating,’ is unacceptable and not true. If this city has a problem, it’s overspending and not dealing with its fiscal problems.”