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  • May 10: A Fraction Fractures D.C. Mayor, Council
  • May 8: Mayor Rejects New Tax Deal
  • May 6: Residents Ponder Pros, Cons of Plan
  • May 5: D.C. Tax-Cut Plan Wins Preliminary Vote
  • May 3: Report Criticizes Bid to Cut D.C. Taxes
  • April 15: Williams Announces Budget Plans
  • Feb. 21: Tax Comparison Between Va., Md. and D.C.

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  •   Williams, Council Agree on Tax Cut

    Mayor Anthony Williams
    Mayor Anthony A. Williams said he is "very, very happy" with the budget agreement that city officials have reached. (File Photo by Susan Biddle — The Washington Post)
    By David A. Vise
    and Vanessa Williams
    Washington Post Staff Writers
    Tuesday, May 11, 1999; Page A1

    Mayor Anthony A. Williams and the D.C. Council reached agreement on the largest tax cut in District history last night as part of a $4.7 billion budget that also includes tens of millions of dollars for new children's programs, health insurance and other mayoral priorities.

    The compromise budget deal, which has the blessing of the D.C. financial control board, would slash personal and business taxes by nearly $300 million over five years while boosting funding for children's programs next year by more than $20 million. It also would expand health insurance coverage to thousands of additional District residents and initiate a program of "managed competition" that would require city workers in some agencies to compete for their jobs against private-sector firms.

    "I'm very, very happy," Williams said. "This budget is going to go a long way toward enhancing the climate for doing business and living here. It sends a strong signal that we are making investments in children generally and in education in particular. . . . The two things I'm proudest of are the commitment to children and the commitment to a labor strategy on managed competition."

    Under the compromise agreement, the individual income tax rate for the highest tax bracket would be reduced from 9.5 percent to 8.5 percent over five years. The top personal income tax bracket, $20,000 and above, would be raised to $40,000 and above over several years.

    On the personal income tax side, the biggest percentage reductions go to low-income residents, who would see their tax rates cut deeper and faster than the city's richest residents. Those earning less than $10,000 would have their income tax rates cut from 6 percent to 4 percent over five years; those earning $10,000 to $20,000 a year would have their tax rates cut from 8 percent to 6 percent over the same period.

    The tax cut, aimed at making the District a more attractive place to live and do business, would make the city's income and property tax rates competitive with those in Maryland but higher than the rates in Virginia. Ultimately, the tax cut that was agreed to was smaller than the D.C. Council initially had sought, bigger than the mayor originally had proposed, and in line with what the control board determined the city could afford.

    Council member Jack Evans (D-Ward 2), who along with colleague David Catania (R-At Large) crafted the original broad-based tax-cut plan, said he was pleased that city leaders agreed to a tax reduction, even though it was smaller than the original proposal. That plan would have slashed the top individual income tax rate to 6.5 percent over three years. He also noted that the tax cut would benefit low- and middle-income District residents much more than the original plan, which some analysts had said primarily would benefit the wealthy.

    "I'm very excited about this," Evans said. "We spent many, many long hours . . . working on this compromise, and it's an enormous step forward to achieving tax parity with the suburban jurisdictions."

    Control board Chairman Alice M. Rivlin, who had opposed the original council tax cut plan because she feared it would undermine the city's financial recovery, hailed the fiscal 2000 budget agreement, including the compromise tax cut. She said the tax cut and the entire budget would be approved today by the D.C. Council, signed swiftly by the mayor, approved quickly by the control board and sent to Capitol Hill for review within weeks.

    "The tax bill is quite a good bill, and it does not pose a threat to the future financial health of the District. That, of course, is what I was worried about," Rivlin said. "It is a balanced budget, balanced between the spending side and the tax side."

    Council member Vincent B. Orange Sr. (D-Ward 5) expressed disappointment that his proposal to reduce the property tax rate for D.C. homeowners was dropped from the bill, even though a plan to reduce property tax rates on rental property was included. (D.C. property tax rates for homeowners already are competitive with surrounding jurisdictions.) But Orange said he still plans to vote in favor of the budget today.

    "You have to concede some things for the greatest good," Orange said.

    Commercial property tax rates would be slashed about 15 percent over several years, while business income tax rates would be cut from 9.5 percent to 8.5 percent over five years. In addition, tax cuts proposed by the mayor for small businesses and technology firms, including an elimination of sales taxes on Internet transactions and a reduction in taxes on inventories, would be enacted.

    "We are smiling," said council Chairman Linda W. Cropp (D). "It will make the city a much better place. The council would have liked to see the reduction of tax rates at a faster pace, but we are extremely pleased that all the components are in there."

    While the mayor's effort to reform the city's health care system and labor policy will proceed at a slower pace than he desired, the council agreed to his proposal to appoint a commission to make swift recommendations on higher education. It also approved his request to create a new technology high school, make a one-time $5 million investment in the University of the District of Columbia's endowment and invest millions of dollars to repair crumbling public school buildings.

    The council rebuffed the mayor's request to slash city funding for D.C. General Hospital and also refrained from endorsing his request to earmark tens of millions of dollars from a national tobacco litigation settlement to repair public schools. Instead, the mayor and council agreed to put the money from the tobacco settlement -- which several council members want to use for antismoking and health care programs -- into a special fund and decide how to use the money later.

    The council granted the mayor's final request for additional money for after-school programs for children and foster care, which was smaller than his original proposal.

    The city plans to stretch out payment of about $400 million in outstanding debt to help pay for the tax cuts. The tax plan will cost the city an estimated $59 million next year, rising to an estimated $286 million in 2004.

    Williams pledged to find savings in agency budgets to help pay for some of his new initiatives, including programs for children and expanded health insurance for thousands of adults and children. At the end of the day, said the mayor's chief of staff, Abdusalam Omer, "the dream budget became a reality budget."

    © Copyright 1999 The Washington Post Company

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