Jack Evans ReportJanuary 25, 2012

Any of you who have heard me speak recently have probably heard me talk about the fact that the District of Columbia is in a better financial position than any other city, county, or state in the country.? Our finances remain strong and the development projects in our city are the envy of our neighbors.

I have the firm belief, however, that we would be doing even better if we had a more straightforward business regulatory structure and took steps to roll back some of the substantial disincentives to those who consider relocating to the District to start a business and raise a family, or who consider moving out of our city when they reach retirement age.? Therefore, in our next budget, I am recommending a number of specific proposals that I hope you will support.

First, our corporate income tax is a tremendous burden at 9.975%, much higher than the 6% Virginia charges and even the 8.25% levied by Maryland.? Particularly when times are tight, how can we expect a business to choose to sacrifice an extra 2-4% of their already slim profit for the privilege of doing business in our city?? ?I propose lowering this tax to 6%. Secondly, on a similar note, the District charges a tax of 9.975% on unincorporated businesses, while our neighbors do not.? We should phase out this tax entirely.

Third, our income tax is too high and is based on bad policy.? As I have said before, a member of the Council cannot claim to be in favor of small business and also of an increase in the income tax, which falls heavily on many small businesses.? I propose to create a more progressive income tax structure by lowering them ? those earning above $350,000 would pay 8.5% rather than 8.95%; those earning between $100,000 and $350,000 would pay 8.0% rather than 8.5%; those earning between $40,000 and $100,000 would be placed in a new bracket and pay 7.5% rather than 8%; and those earning between $10,000 and $40,000 would be taxed at 5.5% rather than 6%.

Fourth, the District made a mistake by decoupling our local estate tax from the federal estate tax.? We should eliminate the District?s estate tax to encourage our retirees to remain residents of the District, investing in our local economy and contributing to our civic and cultural life.

Fifth, we need to repeal the wrongheaded tax on formerly tax-free municipal bonds.? As predicted, the implementation of this tax appears to be resulting in an administrative nightmare.? For example, it is unclear whether taxpayers have enough information to determine whether a share held in an ostensibly grandfathered municipal bond mutual fund nevertheless has become partially taxable as the fund manager executes future trades.? This unfortunately may be just the first onslaught of many where the supposed grandfathering provision could be chipped away.

Sixth, we must sunset the sales tax increase as promised and lower it from 6% back to 5.75%. Part of why I was so skeptical of the deal to grandfather current holdings of municipal bonds while taxing new purchases is that I have been in the government long enough to see promises like this made, and promises broken.? The city promised it would sunset the sales tax increase this year, then broke this promise when the city decided it needed the money in order to pass the largest budget in our history.? We are only a quarter of the way through fiscal year 2012, and the mayor is already projecting $45 million in government overspending despite having raised every tax on the books.? This has to stop.