Income inequality is on the forefront at the start of 2014, with everyone from incoming New York City Mayor Bill de Blasio to President Obama talking about addressing this pressing issue. In its first meeting of this year, however, the DC Council might move in the opposite direction: Legislation that will be considered tomorrow would widen our city’s already gaping income gap. The Residential Real Property Tax Relief Act of 2013, which reduces the cap on taxable home assessment increase to 5 percent per year, will benefit homeowners with high-value homes in Wards 2 and 3 the most. Meanwhile, residents of Wards 7 and 8, the District’s lowest-income wards, would see very little tax help from this proposal.
This is one of many reasons why the Council should study this proposal more closely before taking a first vote.
Another reason is that the DC Tax Revision Commission, which spent the last 18 months examining the District’s tax system, did not recommend any reductions in residential property taxes. The District has the lowest residential property tax rate in the region, and homeowner assessments cannot grow more than 10 percent a year for tax purposes. Most DC homeowners pay taxes on far less than their home’s full value, and tax bills in DC are far lower than in the suburbs.
Beyond the fact that residential property taxes don’t make sense as a target for reductions, the bill also is problematic because benefits would be highly skewed 
toward higher-income households. We noted last week that two-thirds of the tax cuts would go to homes worth $550,000 or more, even though they represent just one-third of the city’s homes.
The benefits also are skewed by geography. Wards 2 and 3 — the city’s highest-income wards — have high rates of homeownership and the highest average home values. This means that most of the benefits of a 5 percent property tax cap would go to these parts of the city.
- Over half of the tax cuts under this bill would go to homeowners in Wards 2 and 3.
- Just 4 percent of the tax cuts would go to residents of Wards 7 and 8, where income are lowest, and thus home values and homeownership rates are low, too.
It does not make sense for the DC Council, at its first legislative session following the completion of the tax commission, to adopt tax changes the commission did not suggest. Instead of reducing residential property taxes further, the mayor and Council should look to the tax commission’s proposals, such as reducing income taxes for low- and middle income residents.
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