February 7, 2013 | by Mark Lee
Another D.C. surplus? How about tax relief?

The astonishing thing is what didn’t happen.

When the D.C. Council received news last week of a whopping $417 million prior-year city revenue surplus for the 2012 fiscal period through last September, the immediate reactive desire of many was getting their hands on the monies in order to further increase spending. The surplus was even larger than the $240 million yield of the previous year.

Tax relief for residents and local businesses again proved to be the furthest thing from the minds of Council members, despite extraordinarily high District tax rates. Not a word was uttered about returning even a portion of the surplus to those who supplied it while suffering under the nation’s tip-top tax burdens. Nor did the conversation include consideration of a reduction in tax rates.

It’s not difficult to imagine that if the city’s CFO unwrapped a roll of quarters and splayed them across the Council chamber several of the more notoriously spendthrift elected officials might spontaneously leap over the dais to grovel across the carpet to scoop them up as bounty.

Not even overflowing city coffers are sufficient to combine their desire for additional spending with any modicum of tax relief. To his credit, Council member Jack Evans had last month proposed a limited and targeted property tax relief measure, to ease the nation’s highest per capita levies, which produced mostly derision. In the wake of the surplus announcement, some of his colleagues pondered utilizing an obscure law to wrest $100 million of the largess to spend.

Mayor Vincent Gray and D.C. Council Chair Phil Mendelson remained committed to dedicating the entire revenue surplus for replenishing the city’s reserve fund. This will bring the fund total to over $1.5 billion – equal to approximately two months of local government spending.

Maintaining adequate cash reserves is a smart move. Wall Street bond raters look to it for assurance that the city remains on stable financial footing, despite past excesses and resulting financial meltdown. After all, the city’s debt burden is $7.9 billion, or a little more than $12,538 for each of the city’s estimated 630,000 residents, nearing the city’s statutory total debt cap.

However, although flush with cash, the reflex of local officials doesn’t include revising local taxation. On Tuesday evening, in his annual State of the District address, Mayor Gray touted the city’s growing population, expanded tax base and robust revenues. He also announced the formation this week of a task force to recommend ways to make the city more business friendly and ease licensing and operational requirements. Yet Gray made no mention of lowering taxes.

With even larger future revenues projected, it’s time that the mayor and the Council undertake meaningful tax reform.

Tax revenue for the first quarter of the current fiscal year has already produced $160 million more than last year. While ongoing federal government downsizing and continuing congressional spending reductions will affect the Washington regional economy, and the outcome of federal budget sequestration negotiations is unknown, a record revenue windfall is anticipated.

Instead of creating a “wish list” enumerating dozens of additional spending items when approving the city’s budget – expenditures the D.C. Council would make if only they had the money, or in case they get it – reducing onerous local tax rates should be prioritized on their “to do” list.

Mayor Gray has announced his intent to allocate $100 million from the coming year’s surplus to fund affordable housing, along with other planned disbursements. A growing population requires additional expenditures and larger revenues permit beneficial investments. Those enhanced revenues also allow for a reduction in the significant tax burdens currently associated with living and conducting business in the District.

When measuring tax rates – including individual income taxes, corporate taxes, sales taxes, both residential and commercial property taxes, and other business taxes, fees and regulatory costs – the District ranks either last or among the very worst jurisdictions in the country. D.C. has long been the perennial bottom-of-the-barrel for small business friendliness and entrepreneurial environment.

Correcting that imbalance will fuel continued and expanded growth benefiting the entire city.

Mark Lee is a local small business manager and long-time community business advocate. Reach him at OurBusinessMatters@gmail.com.

3 Comments
  • Some people are continually asking for tax relief as if the public is clamoring for it and they aren’t. Business is booming in DC, over 1,100 people a month are moving in to the City. Clearly the tax rate isn’t an issue to them. There are much more important things to do with the money than lower taxes. The $100 million for affordble housing is a great start as well as the $15 million fund for non-profit grants. Time to stop constantly calling for tax relief everytime government runs efficiently.

  • So the District is booming right now (in what is likely a bubble inflated by unsustainable federal spending). Does that mean that there is no room for improvement? Of course it doesn't. One might as well argue that because business is booming and so many people are moving into DC, despite the state of the public schools, clearly the state of the public schools isn't an issue to them, so let's not worry about it.

    • D.C.'s public schools are its single greatest embarrassment known nationwide. Why are they not the highest priority item on this surplus wish list? Let's compare D.C. schools with Kenmore Middle School here in Arlington. How many of them feature electronic whiteboards in each classroom connected to the Internet? How many use essentially paperless tests and homework submitted by each student's laptop or tablet (loaned by the school to students who can't afford them)? How many teach music? Art? Drama? How many nurses in each school? How many Teacher's Aides? How many classes with less than 25 students? Even more basic … how many schools have inadequate air conditioning or often none at all? If Hizzoner really wants to improve his city's business environment, there's certainly no better place to invest these funds than in making his public schools attractive magnets for prospective business people with families.

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