The District of Columbia had been fortunate over the past several years to collect tax revenue in excess of the amounts we’ve budgeted for. That’s good news for you as taxpayers, because I’ve been able to keep my colleagues from spending all that excess money. Instead, it has gone into our city savings account to make us financially stronger, increase our credit rating and, as a result, make it cheaper for the District to undertake capital projects such as rebuilding schools, roads and bridges.
While financial reserve funds are critical to a strong municipality, there’s an even better use for excess revenue for taxpayers: lowering tax rates.
At the end of September, D.C.’s chief financial officer, Jeffrey DeWitt, certified that our revenue was $39.3 million more than we budgeted — despite attempts by some of my colleagues to delay tax cuts already promised to residents and businesses.
Specifically, beginning next year, personal income between $40,000 and $60,000 will be taxed at 6.5 percent, rather than 7.5 percent; the tax rate on income between $350,000 and $1 million will drop from 8.95 percent to 8.75 percent; and the business income tax rate will drop from 9.4 percent to 9.2 percent.
These cuts follow even more substantial cuts implemented this past year, including the creation of that $40,000 to $60,000 income bracket and an expansion of the Earned Income Tax Credit for low-income residents.
Some of you may remember that the District Council passed a sweeping tax reform package in 2014 based on recommendations from an expert Tax Revision Commission, led by former Mayor Anthony Williams.
The tax package was a broad-based adjustment to our tax structure, making it fairer and stronger. It included some provisions that I didn’t like (expanding the sales tax to fitness classes) and others that some of my colleagues didn’t like (lowering the business tax and personal income tax rates), but the commission made principled recommendations based on sound tax policy. It was a compromise that we agreed to implement over several years, as we saw increased revenues.
Implementing these tax cuts now is responsible public policy. It puts money back in the hands of the individuals and business who earned it, makes us more competitive to attract and retain residents and businesses and reminds people that the District government is able to make good on its promises.
We’re got more work to do to improve our tax structure, but this is an excellent start. We need to recouple the District’s estate-tax level to the federal level, which adjusts with inflation every year. This change is particularly important for our seniors, many of whom cross the District’s threshold simply by owning a home here.
We also need to expand the personal exemption and standard deduction and continue to implement the commission’s recommendations about lowering the business tax rate. This will help to attract and retain businesses in the city, employing more District residents.
The tax cuts were hard fought, unfortunately, but they were well earned by D.C. residents and businesses. I will continue to fight to ensure that our growth in prosperity can be enjoyed by all residents who want to live, work and operate a business in Washington, D.C.