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The DC Tax Revision Commission will soon consider which of the 60 policy proposalsto include in a recommendation report for the mayor and DC Council. After last night’s public testimony, it is clear the commission will at least consider options that make the DC tax system more progressive.Out of the more than 30 public witnesses who testified, nearly half supported proposals that target more tax reductions for low- and moderate-income District residents. And several commissioners spoke up in support of such proposals.
Speakers in support of a more progressive tax system generally were concerned with the District’s growing income inequality, displacement of long-time, low-income residents and the struggles of the working poor. While perspectives on how to change the tax code and which tax rates and brackets should be adjusted varied, several major themes and principles emerged:
- Reduce income taxes for middle-income families and the working poor
Speakers suggested that increasing the personal exemption and standard deduction and expanding the earned income tax credit (EITC) for workers without children were two ways to provide such relief. The personal exemption and standard deduction shield income from tax and provide the most relief to low and moderate-income residents — about 75 percent of filers with incomes below $75,000 claim the standard deduction. Currently, the District’s EITC for childless workers provides a low maximum benefit of $195, far lower than the benefits available to working poor families with children. Expanding the credit could help more workers keep more of their earnings. - Restructure the income tax’s rates and bracket structure
Speakers questioned the fairness of DC’s bracket structure — in which someone making $40,001 and someone making $400,001 face less than a half percentage point difference in marginal tax rates (8.95% vs 8.5%). Several witnesses suggested increasing the number of brackets and the marginal rates for incomes at the very top, while lowering the marginal rates for people making below $50,000. - Reduce sales and property taxes for low income residents
There was concern that a proposal to expand sales taxes to groceries and nonprescription drugs would disproportionately impact low income residents. While complicated to administer, speakers suggested reducing sales tax for low income families through a standardized deduction on the income tax. Witnesses also supported expanding the low income property tax credit, Schedule H. - Maintain the estate tax
One proposal that met a lot of opposition was the elimination or reduction of the District’s estate tax. Speakers suggested that eliminating that tax would be an unneeded tax break for the District’s wealthiest households and worsen the existing imbalance in DC’s tax system.
The Tax Revision Commission will continue deliberations next week and begin to formalize recommendations for the mayor and DC Council. To read more about the policy options discussed and view public testimony, please visit here.
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