At least two D.C. Council members are proposing that the District delay tax cuts planned for next year and spend the resulting savings on schools.
David Grosso (I-At Large) and Charles Allen (D-Ward 6) said in interviews that money set aside to offset some of the tax reductions may be better used to shore up funding for public education in next year’s budget.
Their statements come after weeks of pressure from parents, the city’s nonprofit service providers and left-leaning activists, who have argued that the budget creates tax breaks that should be spent on schools and other social services.
Grosso and Allen disagree on the extent to which the cuts should be delayed. Allen suggests a brief postponement or phasing in of a plan to expand the estate-tax exemption, while Grosso wants to delay both the estate-tax cut and reductions in business taxes.
But the mere suggestion of raiding dollars currently earmarked for the tax reductions is likely to stoke intense debate on the council, which approved the cuts in 2014 after a commission led by former mayor Anthony A. Williams suggested ways to modernize the tax code and make the city more economically competitive with Maryland and Virginia.
The cuts — many of them targeted at lower- and middle-income District residents — are close to the heart of Council Chairman Phil Mendelson (D), who has billed them as a way to tackle growing income inequality by putting money back in taxpayers’ pockets.
Mendelson said in a statement that the city should look to other parts of the budget to increase education spending and that he was opposed to meddling with the tax cuts. “Any effort to repeal them is, in effect, raising taxes,” he said.
It is not clear how much traction proposals to delay the tax cuts may have on the council. Several members said Thursday that they were reviewing the proposals from Allen and Grosso and could not yet comment.
Kevin Harris, a spokesman for Mayor Muriel E. Bowser, said Bowser would not support delaying the tax cuts and that it was “a false choice that we have to choose between investing in education or funding other priorities that also help low- and moderate-income residents.”
Bowser is facing a backlash from education advocates, who say her proposed budget shortchanges the city’s schools.
The complaints feed into a broader debate about the District’s fiscal stewardship.
A long era of financial mismanagement led to the creation of a federal control board for the city in the 1990s, but over the past two decades, an increasingly prosperous D.C. has begun to see its coffers overflow with tax revenue. Some say too little of that money is reaching those who need it, such as the poor, the homeless and schoolchildren.
Much of the excess has been put into reserves that now stand at about $2.4 billion. But under the plan approved by the council three years ago, a broad range of tax reductions would be triggered when enough surplus revenue was generated to pay for them.
Next year’s cuts — the final round to take effect, completing the city’s changes in its tax code — include increases to the standard deduction and personal exemption that could benefit wide swaths of the city.
The estate-tax cut singled out by Allen is perhaps the most politically vulnerable of the tax reductions. Raising the threshold for those who must pay the tax from $2 million to $5.5 million — the federal level — it is narrowly tailored to the rich.
Allen said he will suggest either phasing in the change over multiple years or delaying its implementation until more excess money arrives to pay for it. That could be as soon as this summer, he noted, allowing the cut to take place as scheduled in January 2018.
However, he said he thinks the roughly $12 million now budgeted to offset the cut could instead be used to finance bonds for $100 million in school renovations.
“I’m not saying that we not do it,” he said of the estate-tax cut. “But I think the timing matters, and there’s a way we can make choices within this budget to put a much-needed infusion of capital dollars in school modernization.”
Grosso said he would go further, delaying both the estate-tax cut and a reduction in the business franchise tax from 9 percent to 8.25 percent. By delaying the business-tax cuts, the city could free up an additional $28 million. Grosso said that money could be used to increase the District’s rate of per-pupil spending.
“She put her money into tax cuts and into savings,” Grosso said of the mayor. “I don’t think the people want that right now. I think they want investment in our city — in housing, and public safety and public schools. I don’t think they want more savings.”
Yesim Sayin Taylor, executive director of the D.C. Policy Center — a think tank aligned with the business-oriented Federal City Council — said she feared proposals to roll back the tax cuts were “less about finding money but more about ideology” and that the business-tax cuts in particular stand to benefit many small businesses in the District.
Ivan Frishberg, father of two children at Brent Elementary School on Capitol Hill and a board member of the school’s parent-teacher association, said he knows business owners in the District and supports the idea of offering them tax relief.
By contrast, Frishberg — who testified in favor of increased school funding before the council’s Education Committee on Thursday — said it was a “no-brainer” to scrap the cut to the estate tax.
“Nobody’s leaving the District because they’re afraid of dying wealthy,” he said. “But I know families that are leaving the District … because of the state of our schools.”