Mayor Muriel E. Bowser (D) did not include tax increases in her budget proposal, instead saying she would plug an $800 million hole largely by freezing pay and hiring, and tapping reserves. In a letter Saturday to lawmakers, Bowser said it would be “foolhardy to raise taxes this year,” given the uncertainty of the economy.
But lawmakers raised an extra $63 million by increasing some business and other taxes and dedicated the funding to social services including housing vouchers, assistance to undocumented immigrants and mental health assistance in schools.
The marathon hearing turned chaotic at times as lawmakers, meeting virtually via Zoom, struggled to follow the details of complex tax proposals and to agree on how the additional money would be split. The total budget before the council is $16.7 billion, but much of that is federal money and dedicated funds. Local officials have discretion over $8.5 billion.
Council Chairman Phil Mendelson (D) sought to delay some of the tax increases for the time being. He noted that revenue projections are likely to shrink again when forecasters revise their estimates in late summer, which would force the council to revisit the budget and find new cuts or ways to boost revenue.
“The prudent thing is to wait and hold tax increases for that eventuality,” he said, adding that the council probably would have to increase the unemployment insurance tax paid by employers.
Some lawmakers said Mendelson was being hypocritical; a day earlier, he had proposed raising $37 million in taxes. Mendelson said that his revenue proposals were meant to forestall his colleagues’ pushing greater tax increases, a move he said “backfired.”
The council approved Mendelson’s tax increases, including a gas tax increase of 10 cents per gallon, an $11 million cut to a tax break for technology companies and a 3 percent tax on the sales of advertising and personal information. Some council members raised concerns that the advertising tax could hurt small newspapers operating on thin margins.
Lawmakers also approved amendments to the budget that raised an additional $26 million. They lowered the threshold for imposing estate taxes from $5.6 million to $4 million, which would generate about $1.8 million for the city; raised $7 million by delaying a tax break for corporations; and voted to gut the tax break for technology companies by an additional $17 million.
But the council voted 8 to 5 to reject a tax increase on incomes higher than $250,000, proposed by council member Charles Allen (D-Ward 6).
Under Allen’s proposal, income between $250,000 and $350,000 would have been taxed at 8.75 percent instead of 8.5 percent, while income between $350,000 and $1 million would have been taxed at 8.95 percent instead of 8.75 percent. The highest tax rate, on income over $1 million, would have risen to 9 percent from 8.95 percent. In all, the increases would have raised about $12 million annually.
“Our wealthiest residents are already paying by far the highest tax rate in the region,” said Mendelson, who opposed the increases.
Allen countered that the District was on par with Maryland when state and local taxes are combined and said the increases would be negligible for the wealthy. For example, a person making $1.5 million a year would pay an extra $1,800 under a new tax rate, Allen said.
“We need to ask everyone to chip in a little bit,” Allen said. “I don’t think $1,800 is going to force you to flee the District.”
Council members largely ignored other concerns raised by Bowser, who urged them not to create new government programs or positions while a pay freeze is in effect.
Bowser renewed her objections to the council’s cutting $15 million from the police budget that could lead to the loss of 200 officers from the 3,800-member force while violence is surging in some neighborhoods. The money was redirected to alternatives to traditional policing.
“This reduction would result in a level of sworn officers that has not been seen in D.C. since the 1990s, with seemingly no analysis on the impact this cut would have on the deployment of officers, officer response times to calls for service, and on community and neighborhood safety,” she wrote.
The council voted 8 to 5 to transfer management of the D.C. Public Schools security contract to the school system instead of the police department, a change sought by advocates eager to reduce the role of police in schools.
Because students are unlikely to be in school full time next academic year, the council also slashed the security contract by $4 million and directed the school system to put most of the money saved into school budgets.
Council member David Grosso (I-At Large), who co-chairs the schools committee and is critical of police, spearheaded the move over the objections of Mendelson and the mayor’s office.
The change stops short of calls by some activists to remove armed school resource officers employed by the police department from schools or to significantly reduce the security footprint in schools.
Separately, the council also revisited the emergency policing legislation that lawmakers passed last month, voting to cancel the bill and replace it with key changes, including the elimination of new standards for using nonlethal force to stop suspects and a delay on identifying officers who use deadly force.
The new version of the bill also allows D.C. felons to vote while still incarcerated, an opportunity that exists only for prisoners in Vermont and Maine. “This is a huge justice issue,” Allen said. “Frankly, it is used to suppress the black vote, and the District isn’t going to stand for it.”
During the debate on the budget, the council rejected a proposal by council member Robert C. White Jr. (D-At Large) to redirect $35 million slated for the extension of the streetcar line to Benning Road NE and shift it into public housing repairs. White said poor residents living in dangerous conditions needed the help more than they need the transportation project, which has been mired in controversy.
Council member Vincent C. Gray (D-Ward 7), whose district stands to benefit from the streetcar extension, noted that the council was able to double funding for public housing repairs to $50 million without taking money from the streetcar.
After passing the budget, the council approved without debate legislation needed for the Bowser administration to move forward on a deal to build a new hospital to replace the public United Medical Center in Southeast Washington.
The council also voted to grant Bowser the power to keep restricting businesses and social activities to limit the spread of novel coronavirus, even as the pandemic stretches on longer than any other health emergency in recent memory.
Under law, the mayor can declare a state of emergency for 135 days — meaning the current emergency would end July 24. The council voted to allow Bowser to keep emergency restrictions in place until October.
Perry Stein contributed to this report