The District is collecting a lot more tax revenue, according to the city’s latest revenue forecast, which reflects a growing economy that is outperforming the rest of the region. In particular, tax collections this year will be much higher than expected, creating an opportunity to make important one-time investments in affordable housing and other needs before the year ends.
Let’s explore this a bit more, with some numbers:
- Where’s the new money coming from? Nearly all of DC’s major revenue sources are growing, according to the recent forecast, including property, sales, and business income taxes. (The one tax source not growing—resident income taxes—appears to reflect people holding on to investments, waiting for a possible federal income tax cut before cashing them in.) The robust growth of many tax sources is a reflection of a strong DC economy, which has outpaced the region in population and private-sector job growth for the past decade.
- What can be done with more money this year? The new forecast shows that tax collections in 2017 will be $73 million higher than previously thought. That’s an opportunity to make new investments before the year ends. If nothing is done, the added revenue will end up as a budget surplus and add to DC’s substantial $2.4 billion fund balance.
We hope that Mayor Bowser and the DC Council will make thoughtful choices and use this 2017 bonus to meet the most pressing needs of DC residents. This revenue is mostly a one-time windfall, so it would have to be used mostly for one-time expenses, rather than projects with ongoing costs. The funds could be used to build more affordable housing—a top priorityof DC residents—through the Housing Production Trust Fund, helping tenants buy their buildings, repairing public housing, or preserving low-cost housing in developing neighborhoods. The money also could go to renovating more schools or other construction projects.
Check back next week, when we will write about other important implications of this latest revenue forecast!
