Monday, March 26, 2012

DC PEOPLE  OVERTAXED AND UNDERSERVED:  OR RIP VAN WINKLE SLEEPS ON

G. Lee Aikin, Statehood Green Party, At Large candidate for City Council, gleeaikin@yahoo.com  
Printed as a Viewpoint article in The Current, March 21, 2012    [Changes or additions since printing]

Today we face a number of major issues--statehood, housing, schools, small business growth, 6 Walmarts, etc.  Underlying most is the very unsexy issue of taxes.  Nobody likes taxes and most of us, including me, are not fond of or good at the underlying math.  We mostly try to ignore them, pay, grumble, and move on to nicer things.  We even ignored asking why we are one of the highest taxed people in the country.  Apparently, so did our elected representatives.

How did we get that way, what has it cost us, and how can we fix it?   When Congress granted us Home Rule in the early 1970s, they said, "...it is the intent of Congress, that the tax burdens in the District be reasonably comparable to those in the surrounding jurisdictions..."  {DC Code, Paragraph 47-817}.

We need to understand several technical terms to figure out how we got so overtaxed.  Adjusted Gross Income is the amount of all income received less certain individual expenses. From the AGI everyone is then allowed to subtract Deductions & Exemptions.  The figure remaining is our Taxable Income, the number typically used to figure the tax we owe.

In 1974, our D&Es  were similar to the Federal rates, both allowing a $2,000 Deduction for a couple, with one  important difference.  Federal D&E rates change yearly to reflect inflation.  DC rates were changed occasionally, if Council and Mayor remembered.  By 1991 our D&Es were 1/2 the Fed rate, and updating was completely forgotten.  By 2004 the D&Es were about 1/3rd, and DC still only allowed $2,000 per couple AFTER 30 YEARS!!!

That year I realized I was paying more DC taxes than Federal.  Years earlier I had only paid 1/2.  Digging through old records revealed the above facts.  I explained this to David Catania.  He [tried to introduce] a bill in 2005 to "couple" our D&Es with Federal rates.  The [effort] failed, but a slight increase occurred in 2006 and another in 2008.  I think my efforts saved DC taxpayers about $28 in 2006 and around $90 in 2008, to 2011, totaling over $400.

The 2011 DC rates for D&Es are $4,000 per couple and $1,650 each. The Federal figures are $5,800 single, $11,600 couple Deductions; and $3,700 Exemption each.  With "coupling" Taxable Income for a family of four would be $15,800 lower, a couple $11,700 less, and single $3,850 lower.  Has this tax unfairness helped drive families out of the city?  Councilmember Jack Evans proposes cutting taxes about 1/2% from the top down.  I say, let's cut taxes from the bottom up, restore the 1974 parity, and keep our families. 

Unfair, uncomparable property tax rates have really hurt our businesses.  Surrounding jurisdictions tax residential and business property the same.  DC taxes homes 85 cents per $100 Assessed Valuation, but businesses $1.85 per $100.  Thus small business ownership is a loosing proposition unless located in a high-end neighborhood or a liquor store, club or restaurant.  Fine little businesses fail regularly because their sales don't cover the tax/rent costs.

Property taxes in Arlington and Alexandria are about 85 cents per $100 including in Rosslyn.  Is this fair to Georgetown businesses paying $1.85?  Prince Georges County, MD rates range from 88 cents to $1.08.  Montgomery County, MD rates range from $1.18 to $1.69.  Perhaps upper Wisconsin Ave. can compete with Bethesda, but how can Anacostia and Georgia Avenue compete paying $1.85?*

The idea every DC business everywhere should pay the same tax doesn't make sense.  No wonder business property owners neglect property to keep their tax assessments low.  Why fix them before there is enough business activity to support a higher rate?  [A reduction in business property tax to $1.65 for property valued under $3 million has since been implemented.  How about an even lower rate for business property under $500,000, and let's not forget to INDEX such figures for inflation.]

If we raise our D&Es and lower business taxes to fair levels more DC funds will be needed.  What are some possible sources?  Ask the Federal government for more payment for our untaxable lands?  Pay only 2/5ths Federal income taxes since we lack 3/5ths fair representation; this would give residents more taxable income for DC?  Revisit the commuter tax issue?  Allow much taller buildings in undeveloped areas away from the monumental core and existing low-density neighborhoods?  [Pay slightly higher tax rates at upper income levels.]  Reduce upper level salaries of DC employees?  Should I win I would gladly pay 10% less than the $125,000 Council salary.

*Tax rate source:  DC Government report.  Part II: A comparison of Tax Rates in the Washington Metropolitan Area as of Jan. 2009, page 35.  {I can send you a link if you need it.}

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