Next week, the DC Council likely will consider a property tax bill that analysis has shown will disproportionately benefit wealthier areas of the District. The legislation, the Residential Real Property Tax Relief Act of 2013, was tabled earlier this month after some members questioned whether the Council should move forward with a bill making significant tax changes before DC’s Tax Revision Commission has been given a chance to present its recommendations. That’s the right thing to do.
The Council should hold off voting on any tax policy bills until the Commission’s recommendations are fully considered, as Commission Chairman Tony Williams has 
asked the Council to do. The Council tasked the Commission with taking a comprehensive look at DC’s tax system and making recommendations to make it fairer and broader, as well as more transparent and competitive. The Residential Real Property Tax Relief Act goes in the opposite direction. By lowering the property tax assessment cap (the cap on annual increases in taxable assessment) from 10 percent to 5 percent and removing the current property tax assessment floor, the bill will help DC residents with pricier homes a lot more’and that’s not a policy making our tax system fairer.
DCFPI urges members to vote against this bill after considering these facts:
- The bill would disproportionately benefit residents with high-value homes. The benefits would skew to homes worth more than $550,000, even though just 31 percent DC homes are at or above this value. Because of this, the legislation has the effect of concentrating over half of the benefits in Wards 2 and 3, where incomes are highest, and just four percent of the benefits in Wards 7 and 8 where incomes and homeownership rates are lower.
- The bill would create greater property tax discrepancies among two DC homes of similar value. Removing the current 40 percent assessment floor would make it much more likely that two homes next to one another, with similar values, could be paying wildly different property taxes. The floor was created because many homeowners were paying tax on less than 40 percent of their home’s assessed value ‘ due to the homestead deduction and assessment cap ‘ while new homeowners were paying closer to 100 percent of their assessed value. The floor helps ensure that even though one’s property taxes may fall as a share of their home’s assessed value over time, a homeowner is paying tax on at least 40 percent of their home’s assessed value.
- The Tax Revision Commission did not recommend changes to DC’s property tax. DC’s Tax Revision Commission spent over 18 months researching DC’s tax system and did not recommend changes to DC property taxes. The commission found when looking at the property tax that DC already had several mechanisms in place to provide relief (such as the homestead deduction, property tax cap, senior property tax reduction and, Schedule H, DC’s low income property tax credit) and had significantly cut the property tax rate several times within the last 10 years. As a result, DC has the lowest property taxes in the region. Because of these factors, the Commission chose to prioritize changes to DC’s income, business and sales taxes over the property tax.
Not only does the pending legislation create greater inequities in DC’s tax system, but will also make it harder for the Council to focus on providing tax relief in areas the Tax Revision Commission did recommend, such as the income tax. The Commission is set to officially present its set of recommendations to the Council on Feb. 12. The Council should at least hold off on making any decisions on further tax reductions until it has had a chance to hear from the Commission.
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