Monday, May 14, 2012

DC Tax Rates Hurt Working Poor & Middle Class, also Loss of Federal Payment

As pointed out by several member of the DC Statehood Green Party, we definitely need to consider  additional tax brackets.  The current jump from $40,001 to $250,000 is much too hard on people in with incomes below $100,000.  No tax rate above $250,001 is also unfair to the moderately well off.  As I have pointed out often when I have testified on relevant matters, our government has repeatedly failed to maintain the benefits we had at the time of the Home Rule charter in the early 1970s.

The simplest to understand is failure to index our Deductions and Exemptions on the tax form D-40.  When I checked my old tax forms for 1974, these were roughly comparable for DC and the Federal rates.  While some increases were made in the intervening years, by 1991, DC only allowed about one half the amount allowed by the Federal tax form.  Thereafter, nothing was done to keep up with inflation. 

In 2004 I brought this to Mr. Catania's attention and in 2005 he tried to introduced a bill to "couple" our D & E rates with the Federal 1040 rates.  At that point our D&Es were only about 1/3 the Federal rates, and a couple was still only allowed $2,000, AFTER 30 YEARS!!!  Although his bill failed to make it out of Committee, in 2006 and 2008 some additional increases were made in the DC D&E rates.  These rates continued to be the victim of budget difficulties and are frozen at the already inadequate 2008 rates.  With 4 years of DC income surpluses, and a full rainy day fund, it is time to fix this and other inequities.

The 2011 DC rates for D&Es are $4,000 per couple or single, and $1,650 each.  The Federal figures are $5,800 single and $11,600 per couple for Deductions, and $3,700 Exemption each person.  With "coupling" Taxable Income for a family of four would be $15,800 lower, for a couple $11,700 less, and for singles $3,850 lower. You must ask yourselves if this tax unfairness has helped drive families out of the city.

Actual tax savings for a family of 4 with Adjusted Gross Income of $40,000 using "coupling" would be $948.  A similar family with $60,000 AGI saves $1,183.  A family of 4 with $26,400 AGI currently pays $750, with "coupling" $ ZERO.  One councilmember has proposed cutting taxes about 1/2%.  Using this amount, the hypothetical family of 4 with $26,400 AGI would still pay about $600.

The fairest and most practical taxation strategy would be to introduce "coupling" and make moderate income tax rate increases in the upper bracket(s).  Now that our neighboring states are considering raising taxes on the wealthy, the argument that we will scare away our own rich is a lot less valid, if it ever was.

Another move which seems to have cost us dearly is the deal from around 1996 wherein DC gave up our special Federal payment in exchange for the Federal government taking over some of our functions.  We ended our prison at Lorton, and turned over our prisoners to the Feds and the Prison Industrial Complex.  I was particularly annoyed about this because I had been working on the very GREEN project of restoring food raising there to be used for better nutrition for the prisoners, their families and DC social service agencies. 

 I had researched such successful food raising programs in prisons in 5 other jurisdictions where the benefits were appreciated by all.  When I had visited Lorton as a member of the Mayor's Commission for Food, Nutrition, and Health, I was surprised to see more than 100 acres devoted entirely to GRASS, and not the medical kind.  What a waste.  When I spoke with the prisoners about growing food for their own use, for their families and for social service agencies and schools, they liked the idea.  They did not view it the same as Prison Farms where cotton and other cash crops were grown without benefit to the prisoners and families.

Now I  hear that we are having a hard time getting the Federal government to make promised payments for DC Jail and other programs.  Nevertheless, we still pay 100% Federal taxes even though we only have 40% voting representation. Worse yet, Puerto Rico and Guam pay ZERO% federal income taxes.  Why has no one had the guts to start an escrow account for the other 60% to be held until the Federal government either restores a fair payment for all our untaxable property, or eliminates our taxes as is the case for the nearly 4 million people in Puerto Rico.  

If we paid only 2/5ths Federal tax (2/5ths based on the fact we vote for President and VP, but not for Congressperson and 2 Senators), the increased income for DC residents would result in close to $1 billion extra DC government revenue.  That would solve our budget crises and enable us to lower income taxes.  Establishing such an escrow account could also be used to highlight our lack of STATEHOOD and the resulting unfairness.  The City also needs to look at how much we pay in Federal taxes versus how much we get back in standard Federal payments.  One set of statistics I found at Google suggests that we only get back about 1/2 of what we pay in. At another site it was shown we paid 5 times as much as we get back.   This despite our high number of low income residents needing social services.  The reason I do not propose territorial status as some have done is that territories, including Puerto Rico cannot vote for President and Vice President.  I don't believe in giving up any rights we already have, nor do I wish to forgo benefits we could obtain, while waiting for the "perfection" of statehood.

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