Today, we resume Tax Commission Tuesday! DC’s Tax Revision Commission has examined the research on various parts of the District’s tax system and is now in the deliberation phase. So far, the Commission has discussed several proposals to modify the sales tax, and yesterday looked at the income tax and estate tax.
During yesterday’s meeting, the Commission discussed several critical changes to the income tax, including many options that can help balance DC’s tax system so that DC’s low- and moderate-income residents are not paying the highest shares of income in combined sales, property and income tax. Among the proposals discussed, DCFPI believes that the Commission should prioritize the following:
- Raise the standard deduction and personal exemption to match federal levels.
The standard deduction and personal exemption are parts of the income tax that are available to all residents, but provide the greatest assistance to low- and moderate-income residents. DC’s deductions, however, provide much less tax relief than the federal income tax system and the average state. Increasing DC’s personal exemption and standard deduction to match federal levels would exempt all working-poor families from income tax, increase the effectiveness of DC’s Earned Income Tax Credit, and provider greater tax relief to working poor families with incomes above the poverty line.
- Reduce income tax rates on low- and middle-income earners.
One of the ways that the District can help to balance the tax system is to reduce income taxes on low- and moderate income residents. This would also boost the effectiveness of DC’s earned income tax credit (EITC) for moderately low-income residents. In fact, despite having one of the highest refundable state-level EITCs in the nation, a married family in DC with two children and $40,000 in income faces higher income taxes in DC than in 15 other states with EITCs. That’s due to a combination of DC’s higher marginal tax rates on low- and moderate-income residents and larger share of their income being taxable.
- Increase the Earned Income Tax Credit for childless workers.
The EITC helps make work pay for low- and moderate-income residents. But the benefits for workers without children are much lower than for families with kids. In 2012, for example, a worker with one child could get a maximum DC EITC benefit of $1,268 while a worker with no children was eligible for just $190.
Through the end of October, the Commission will continue deliberations, focusing on changes to business taxes (October 21) and property taxes (October 28). You can see the complete list of proposed policy changes in these areas on the Commission’s website. By December 3, the Commission plans to release a draft set of recommendations to the public and hold a hearing the following week (December 9) to get feedback.
Stay tuned to the District’s Dime for more on DC’s Tax Revision Commission in the coming weeks.
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