Report

Tax Savings from a Five Percent Property Tax Cap Go Mainly To High-Income Neighborhoods

by Ed Lazere

On Friday, May 4, the Committee on Finance and Revenue approved a reduction in the 10 percent property tax cap for homeowners to a five percent cap, which will result in a revenue loss of $17 million in FY 2008.  This tax cut now will be considered by the full Council when it votes on the FY 2008 budget on May 15.

While the cap benefits all homeowners, the tax savings from it would flow largely to residents of DC’s higher income neighborhoods.  This reflects the fact that high-income residents are more likely to own their homes than low- and moderate-income residents, and that the homes owned by high-income household typically are worth more than homes owned by lower-income households.

When combined with the fact that DC’s homeowner property taxes are now the lowest in the region, these findings call the five percent cap into question and suggest that more progressive tax relief alternatives should be considered.

  • Of the $17 million in tax cuts, $6 million would go to homeowners in Ward 3.
  • In Ward 8, by contrast, residents would receive just $200,000 in tax relief.
  • Tax relief in the four wards getting the smallest benefits ‘ Wards 1, 5, 7 and 8 ‘ would total just $3.3 million.  The combined relief in these four wards would be far less than in Ward 3 alone and about the same as in Ward 2.
  • The tax savings in some neighborhoods ‘  such as Chevy Chase and Georgetown ‘  would exceed $1 million, or more than the relief provided to all residents East of the Anacostia River.