“All options should be on the table.” That’s what Mayor Vincent Gray and Council Chair Kwame Brown said a few months ago about DC’s large budget shortfall. They meant that both spending cuts and revenue increases should be considered as solutions. In the last two weeks, however, both Gray and Brown have suggested that the city should not raise either income or property tax rates.
Yet a budget without notable new revenues is likely to include deep cuts to services that have helped make the District a stronger, growing city, as well as to services that provide basic support for DC’s low-income residents.
Raising taxes is never politically easy, and recent news of expensive car leases and high-salaried government appointees undoubtedly has fueled the sentiment that there is too much waste in DC government, that city leaders should be focused on eliminating that rather than raising taxes.
But while these scandals have received a massive amount of attention, their impact on DC’s finances is small. The real culprit behind DC’s huge budget woes is the recession, which has depressed the city’s income, property, and sales tax collections for three years in a row. Even with recent news of the start of a rebound, revenues next year will remain hundreds of millions below pre-recession levels.
That is too large a problem to be fixed by eliminating waste, fraud, and abuse. Due to budget cuts, DC government agencies have been looking for all kinds of efficiencies, but recent reports show that the cuts have gone well beyond this. Due to limited resources, DC has a shrinking police force and has run out of Supercans. New libraries have reduced hours, and new rec centers don’t have enough money to provide recreation programs. And the District’s largest homeless shelter for families with children will start shutting down as early as this Friday.
Even more cuts are expected to be announced this Friday, when Mayor Gray submits a budget for 2012 to the DC Council. For several reasons, an increase in taxes, particularly income taxes, would make sense as part of a balanced approach to the shortfall:
DC has cut both income and property taxes in past decade. For someone earning $500,000, the income tax cuts alone amount to more than $5,500 in savings.
DC is now the low-tax leader in the region. Combined income and property taxes for most families are lower in DC than either suburban Maryland or Virginia.
DC residents have benefited from federal tax cuts: Just the federal income tax cuts for DC families above $250,000 — recently extended by President Obama and Congress — add up to nearly $260 million!
An increase in revenues, combined with targeted spending cuts, would be a balanced approach to meet the needs of DC’s growing population and to preserve services for residents still reeling from the recession. Passing a budget without an increase in income or property taxes may be popular in the short term, but the District would pay for it in the long-term.
