True or False: All DC households who earn more than $350,000 had their taxes raised last year.
The answer is false.
In fact, it is possible that households with incomes of up to $700,000 did not see their income tax raised one penny.
That’s because when the DC Council decided to implement a high-income earners’ tax last year, the new 8.95 percent rate applied to individuals instead of households. So, a couple that lives together where each earns $350,000 ‘ that is, with family income of $700,000 ‘ is unaffected by the new tax bracket. Yet, it seems the intention was to apply it to households with incomes above $350,000, and a majority of these residents said they were willing to pay more in a poll last year.
A relatively simple technical change to last year’s income tax law could help close this year’s budget gap. By requiring high-income two earner couples to report their income together, Gray can put that money toward critical programs. Removing the “married filing income separately” option for high-income households could raise $2.4 million for FY 2013 and about $6 million annually after year one, keeping that many more services safe from the chopping block.
DCFPI strongly urges the Gray administration to consider this additional revenue option along with forgoing the paygo provision. While the initial revenue generated may seem small, generating $6 million after this year may mean the difference between sustaining necessary services and making drastic cuts to programs. It reflects a balanced approach to the budget that poll respondents said they support and avoids budget-balancing that relies only on cuts, which DC voters said they don’t want.
