Cuts to the District’s estate and business taxes will take effect next year despite a last-minute revolt by some D.C. Council members who said they would rather spend those dollars on social programs.
The council voted to preserve the cuts during a preliminary vote Tuesday approving the city’s $13.8 billion budget. Members also voted to spend more on public schools than Mayor Muriel E. Bowser (D) originally proposed.
Education funding and the fate of the tax cuts were the twin dramas of the council’s budget deliberations this year, and underlying both was a broader debate about how the District’s poor are faring in a turbocharged local economy that has brought the city newfound prosperity.
The District’s growing population and abundant tax dollars have been welcome in a city that flirted with bankruptcy in the 1990s, when it was put under the oversight of a federal financial control board. But many argue the District is not spending its money effectively to deal with problems such as rising rents, a high rate of homelessness and a school system with one of the country’s widest achievement gaps between low-income and affluent students.
“All the data I’ve seen is that the District is only getting wealthier, but we have a lot of people who are struggling to live in our city,” said council member Elissa Silverman (I-At Large), one of the three lawmakers who were on the losing side of votes to stop the tax cuts.
Those cuts were among the last in a series of tax-relief efforts approved by the council in 2014. The reductions for businesses will be paired with increases in personal exemptions and standard deductions that will benefit a large group of low- and middle-income residents next year.
By preserving the estate-tax cut, she said, “We’re voting for about 100 wealthy people and against thousands of our poorest families and children.”
Council member David Grosso (I-At Large) proposed amendments to the budget legislation that would have stopped an increase in the estate-tax exemption from the current $2 million to $5.5 million and set the business franchise tax rate at 9 percent instead of 8.25 percent. The franchise-tax provision would have applied only to businesses with gross incomes over $10 million.
“I do not think it makes sense for us to give a tax cut to big businesses and millionaires,” Grosso said.
Few of his colleagues agreed. Grosso, Silverman and council member Brianne K. Nadeau (D-Ward 1) voted to halt the tax cuts, while member Trayon White Sr. (D-Ward 8) joined them to vote only against the estate-tax cut.
Council member Charles Allen (D-Ward 6), who initially had supported delaying the increase of the estate-tax exemption, voted against the idea Tuesday. Allen said that he had wanted to use the savings from the delay for school renovation projects but that Chairman Phil Mendelson (D) found money to fund the projects while keeping the tax cuts in place.
Mendelson said that businesses, in particular, would have been hit hard under Grosso’s proposal.
“Businesses don’t vote for us, so it’s kind of easy to hit on them, and businesses — if they’re good — make money, so it’s kind of easy to hit on them,” he said. “But we can’t keep going back to the golden trough to ask businesses for more money.”
In December, the council voted to approve a paid-family-leave program for private-sector workers that will be funded through a 0.62 percent payroll tax on employers.
Council member Robert C. White Jr. (D-At Large) said altering the tax-cut package now would “broadcast to our constituents that our word means nothing and that we are not capable of making strategic decisions to use a $14 billion budget.”
In contrast to the dispute over tax cuts, the council spent no time Tuesday debating its plan for education funding, which will increase per-pupil spending by 3 percent from last year. Bowser initially suggested an increase of half that amount.
The mayor’s proposed schools budget was widely panned by parents, educators and council members who said it was not sufficient.
To cover increased spending on schools and in other areas, the council trimmed the budgets at many city agencies, including the Metropolitan Police Department. Council members also jettisoned an increase to the hotel-occupancy tax that the mayor proposed to pay for upgrades to the city’s 911 and emergency radio systems.
“The public is really concerned about crime,” said John Falcicchio, the mayor’s chief of staff. “Cuts to the fire department fleet, to the MPD budget and taking away the investment in the 911 technology — all of that points to a lack of seriousness on the part of the council about public safety in the District of Columbia.”
Some advocates said the budget also fell short on reducing the District’s rampant homelessness. A U.S. Conference of Mayors study last year found the District had the highest per capita rate of homelessness of the 32 cities surveyed.
Bowser’s budget did not include new money for temporary apartments for single homeless men and women, nor funding to renovate overcrowded shelters for some 4,000 adults.
The council added money for 112 units of new permanent supportive housing on top of the 162 that Bowser funded. But combined, the 276 new units were half of what advocates lobbied for this year.
The council will take a final vote on the budget June 13.