Tuesday, March 18, 2014

DC Council Approval of 2 Tax Revision Commission Recommendations Will Put $85 Million Annually in Our Pockets


My 10 year effort to restore Tax Fairness to Working Poor and Middle Class is now bearing fruit.  More details as this situation develops.

If you would like to support my efforts, please send a check written for "Elect G. Lee Aikin, to 1754 Swann St., NW, Washington, DC, 20009.  I am running for At Large  DC City Council in the June 14, 2016 Primary Election.

In 1973 when DC obtained Home Rule, our DC income tax Deductions and Exemptions had parity with the Federal IRS 1040 rates. Unlike the Federal rates which increase yearly with inflation, the DC rates only increased when our Council remembered to do so. For almost 40 year the mostly Democrat DC Council has failed to increase them annually. This failure means that for 2013 taxes a family of 4 pays DC taxes on income above $10,800. What a kick in the gut for poor families! With the Federal D&E rates this same family of 4 only pays taxes on income above $27,800.  

This Council failure has cost us well over a $billion throughout the years since we got Home Rule.  I cannot even begin to calculate the harm this his done to our working poor and lower middle class.  Has it been one important factor in forcing people in Anacostia out into Prince Georges County?  Think how much money has NOT been available for local spending.  Imagine what a difference it will make for local small business if we are getting this $85 Million back every year.

The Tax Revision Commission agreed this is grossly unfair. This April 30, 2014 article from the Tax Foundation outlines the TRC recommendations.  They want to put $85,000,000 back in our pockets annually. Here is the Tax Foundation comparison of what the TRC recommended, what the Mayor wanted, and what the Council actually did in May 2014.We must all lobby Council members or elect Council members to speed up implementation.  Here are the current DC rates compared with the Federal rates by family type and numbers.  The bill voted by the Council (May 2014) will phase in the increases over a 6 year period.
FAMILY SIZE – Deduction    DC Tax     Federal Tax
[Using 2013 figures]                   D&Es        D&Es                                                                                                
Single, under 65                        $ 5,775       $10,000
Single, over 65 or blind                7,450         11,500
Single, over 65 & blind                9,125         13,000
Couple, under 65                          7,450         20,000
Couple, 1 under 65, 1 over 65      9,125         21,200
Couple, both over 65                  10,800         22,400
Couple, both over 65, 1 blind     12,475         23,600

Single, 1 child                               7,450         16,750*
Couple, 1 child                              9,125         23,900
Single, 2 children                          9,125         20,650*
Couple, 2 children                     10,800         27,800
Single, 3 children                        10,800         24,550*
Couple, 3 children                       12,475         31,700
Single, 4 children                        12,475         28,450*
Couple, 4 children                       14,150         35,600

When Council actually passed a bill to do this and other TRC ideas at Phil Mendelson's urging, I was overjoyed. But was shocked it phases in slowly, not fully until 2019. I have only found one report of actual benefits. People earning $25,000 to $50,000 only gain $352.  People earning $10,000 to $25,000 and $50,000 to $500,000 all gain more.  What a betrayal. This is why I chose to run for Chairman of the Council in Nov. 2014. No more gifts to upper income taxpayers at cost to the poor and middle class.

I should point out that the above chart is by no means complete. *These figures include the additional amounts for "Head of Household" or "Qualifying Widow/er" on the Federal form which apply to one adult caring for dependents. There are other credits and benefits that the very poor may be able to deduct, but this provides a stark overview of how decades of Council neglect have systematically injured poorer people and families. This one simple fix, is worth $85 million a year. Let's get it phased in more quickly. Lobby Council. VOTE: G. LEE AIKIN, At Large Council.  Unfortunately, the Council felt it was better to implement this measure over a 6 year period so that upper income people and businesses could get large tax deductions.

Here in summary is what the Council has approved for the Deductions and Exemptions:

Standard Deduction: fully implement in 2017; 
    $5,200 single, $8,350 married in 2015 and 2016.
    The 2017 full federal rate will be higher than its current $6,100 each.
Personal Exemption: fully implement in 2019; 
    $2,200 in 2017; $3,200 in 2018
    In 2019 the full federal rate will be higher than its current $3,900.
High Income PE: fully implement exclusion in 2015; 
    incomes over $150,000 single, $200,000 married.
    If excluded from the federal rate it is unclear what their rate will be.
Note the Personal Exemption, which means everyone in the family, does not even START until 2017.  This is especially hurtful to families with children, especially lower income families with children.  The Standard Deduction only helps single and married adults.  I guess gentrification is more important than our families.  Many of which have been driven out of DC by our high tax rates.  If we hope to lure them back, we must speed up inclusion of the Personal Exemption which applies to the children as well as the parents.

At the recent forum for Council Chairman, I was also disappointed to hear Mr. Mendelson's pride at reducing the business tax by 17%.  Similar reductions have also been made to most of the upper income categories.  No wonder the Council had to allocate 6 years to phasing in this $85,000,000 restoration to all lower income taxpayers and their children.  Which is more important, saving our families or big benefits to people who are already doing well?

I would also like to pass a bill to allow anyone with a medically certified disability who is as handicapping as a blind person to deduct the same amount as a blind deduction. The federal government should also consider adding this to the 1040 form. From years of experience caring for a husband dying of Alzheimers, I can assure you that in the last 3 years he required more care than a blind person. We have many sick and injured in DC who should be eligible for this tax consideration.

There are also problems nationally for taxpayers depending on whether they are single or married.  Here is one article with some interesting comments on the "marriage penalty."

See my other tax posts on this blog for more information on this and other issues.  Check the Index posted Sept. 3, 2013.  All tax related issues are dated in red.

1 comment:

  1. Thanks for sharing this. Everyone surely love to have a certain money in their pocket. And this post will be an interesting read for everyone.