The D.C. Council narrowly approved an income tax increase on high-earning residents even as the city’s top financial adviser says the District will end the year with an $89 million budget surplus.
In a 7-6 vote Tuesday, officials approved an 8.95 percent income tax on residents who earn more than $350,000 annually, up from 8.5 percent. The new rate, one of the highest in the nation, affects roughly 6,000 residents in the city and will expire in four years unless officials move to extend it.
The tax was instituted in place of applying a new tax on purchases of out-of-state municipal bonds to current bondholders.
The income tax increase drew the instant ire of those who say they are already taxed enough by the city.
| No raise for council members |
| » At-large Councilman Vincent Orange quietly revised his bill proposal on Tuesday that originally proposed a pay increase for council members in exchange for the elected officials not taking any outside employment. The provision of the Full-time Employment Act that would have given council members a roughly $45,000 raise to $170,000 annually was taken out. Orange said he removed it after hearing from colleagues with second jobs that they wouldn’t support his legislation. |
“Between my property tax, business tax, my luxury car tax — because I have leather in my car even though it’s an SUV — and what I contribute [via my income], it’s already ridiculous,” said Tom Day, a Ward 5 resident and former council candidate.
In a nearly three-hour debate on the issue, which included officials bickering over what order they could speak, the rift generally fell between those who thought the council was overspending and those who saw the tax as the lesser of two evils.
Those putting up the fight against the income tax frequently cited the city’s extra $89.1 million from the 2011 fiscal year, saying it was hypocritical to raise taxes with extra money on hand. The city’s chief financial officer announced the unexpected budget surplus last week.
“Money is pouring out of the taxpayers’ pockets as fast as we can spend it,” said at-large Councilman David Cantania, who called the tax hike a “joke” and a result of lazy governing.
Several members suggested taking $13 million from the surplus to replace the retroactive municipal bond tax revenue at least for this year.
However, Chairman Kwame Brown, who voted against the increase, said at the start of Tuesday’s session that he would not approve any proposals that would divert any of that money away from the city’s depleted reserve fund. Lawmakers have dipped into the fund in recent years to avoid drastic budget cuts.
Ward 2 Councilman Jack Evans was also a vocal opponent of the tax and said after the hearing he thought it was “naive” for others to think the tax increase would actually expire in four years, noting the city’s sale tax hike was supposed to expire this year but the council voted to extend it.
Not all who opposed the tax represented the city’s wealthiest wards, however. Ward 8 Councilman Marion Barry voted against the budget amendment, noting the council was considering the measure without holding a public hearing.
The rate increase is subject to approval from Mayor Vincent Gray, who proposed an income tax increase to balance the budget during the spring session.
