DO YOU WANT $85 MILLION IN ALL OUR POCKETS NOW?
[1/21/19] - Because in 2019 we will now be subject to the workings of the new Trump federal tax code, I felt it important to see how that affects our DC personal income tax, the D-40. I was distressed that eliminating the federal Exemptions and only allowing the Standard Deduction (if not using the Schedule A Itemized Deductions) might once again hurt us, the lower income tax payers. Having now compared the IRS 1040 Standard Deduction rate with the DC D-40 Standard Deduction rate, I find good news.
At least for a single taxpayer, the rates for IRS and DC are now identical, this puts us one year ahead of schedule for complete comparability with the federal rates (see below) and means an unexpected additional amount of cash for taxpayers and community businesses. The 2018 Standard Deduction for a single taxpayer under 65 is now $12,000 (in 2017 it was only $7,425 in DC including both the Standard Deduction and Exemption). For the healthy 65 and over crowd the rate for SD is now $13,300 (in 2017 it was only $9,200 in DC including both the SD & E). In 2017, the IRS SD & E combined rates were $10,400 for under 65, and $11,950 for 65 plus.
Thus the increase in savings for us on 2018 IRS tax rates is $1,600 if under 65, and $1,300 for 65 plus. However, the increase in savings is much more when the 2018 IRS rate is compared with the 2017 DC rates--$4,575 under 65, and $4,100 for 65 and over. I am so glad our DC and IRS rates are comparable one year earlier than planned.
I plan adding updated information to the Table below on FAMILY SIZE - Deduction soon. I also need to see how eliminating the Exemption will affect families with children.
[1/21/19] - Because in 2019 we will now be subject to the workings of the new Trump federal tax code, I felt it important to see how that affects our DC personal income tax, the D-40. I was distressed that eliminating the federal Exemptions and only allowing the Standard Deduction (if not using the Schedule A Itemized Deductions) might once again hurt us, the lower income tax payers. Having now compared the IRS 1040 Standard Deduction rate with the DC D-40 Standard Deduction rate, I find good news.
At least for a single taxpayer, the rates for IRS and DC are now identical, this puts us one year ahead of schedule for complete comparability with the federal rates (see below) and means an unexpected additional amount of cash for taxpayers and community businesses. The 2018 Standard Deduction for a single taxpayer under 65 is now $12,000 (in 2017 it was only $7,425 in DC including both the Standard Deduction and Exemption). For the healthy 65 and over crowd the rate for SD is now $13,300 (in 2017 it was only $9,200 in DC including both the SD & E). In 2017, the IRS SD & E combined rates were $10,400 for under 65, and $11,950 for 65 plus.
Thus the increase in savings for us on 2018 IRS tax rates is $1,600 if under 65, and $1,300 for 65 plus. However, the increase in savings is much more when the 2018 IRS rate is compared with the 2017 DC rates--$4,575 under 65, and $4,100 for 65 and over. I am so glad our DC and IRS rates are comparable one year earlier than planned.
I plan adding updated information to the Table below on FAMILY SIZE - Deduction soon. I also need to see how eliminating the Exemption will affect families with children.
My 12 year effort to restore Tax Fairness to Working Poor and Middle Class is now bearing fruit (slightly). G. Lee Aikin, 2016 At Large candidate, DC Statehood Green Party. The Council has just approved (11 to 2) a phased in implementation of this proposal. For comparison here is a summary of Mayor Gray's proposals. New details below.
[11/1/15] - contrary to expectation, our April 2015 forms for DC taxes in 2014 did not improve our Deduction and Exemption situation AT ALL relative to the federal allowances. FOR SHAME DC COUNCIL!! However, our Council has approved over $70 million to destroy our last big potential park site--McMillian Park.]
[11/1/15] - contrary to expectation, our April 2015 forms for DC taxes in 2014 did not improve our Deduction and Exemption situation AT ALL relative to the federal allowances. FOR SHAME DC COUNCIL!! However, our Council has approved over $70 million to destroy our last big potential park site--McMillian Park.]
In 1973 when DC obtained Home Rule, our DC income tax Deductions and Exemptions (D&E's) 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. In 2004, after I brought this inequity to David Catania's attention, he tried to introduce a bill to "couple" these rates.
This Council failure means that for 2013 taxes a family of 4 paid DC taxes on all 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 paid IRS taxes on income above $27,800. How wonderful if our families could have had those deductions for 2013, this year, 2015, and 2016. But, no, they will have to wait until 2017 before they can even begin taking higher Exemptions on their children or themselves. Even then it will only be about half of the federal Exemption.
We have now passed the April 15, 2015 filing of 2014 taxes. Although DC made small additions in the 2014 reductions allowed, they were even less than the inflation adjusted federally increased rates. See chart below.
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, especially families, 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. We must persuade the Council to speed up implementation. It will especially pay dividends with businesses and people in our poorer communities.
The Tax Revision Commission agreed this was grossly unfair. They wanted to put $85,000,000 back in our pockets annually. Did they want us to wait 5 more years for the full benefit? We must all lobby Council members or elect Council members to get this done quickly, not waiting until calendar 2020 (for the 2019 tax year). Here are the current DC rates compared with the Federal rates by family type and numbers. The bill just voted by the Council (May 2014) will phase in the increases over a 5 year period. See how that small 2014 increase falls more behind the federal rate.
FAMILY SIZE-Deduction DC Tax Federal Tax Fed Tax &
[Using 2013 figures] D&Es D&Es DC D-40
2013 2014 2013 2014 2018#
Single, under 65 $ 5,775 $ 5,875 $10,000 $10,150 $12,000
Single, over 65 or blind 7,450 11,500 13,600
Single, over 65 & blind 9,125 13,000 13,600?
[Using 2013 figures] D&Es D&Es DC D-40
2013 2014 2013 2014 2018#
Single, under 65 $ 5,775 $ 5,875 $10,000 $10,150 $12,000
Single, over 65 or blind 7,450 11,500 13,600
Single, over 65 & blind 9,125 13,000 13,600?
Couple, under 65 7,450 7,600 20,000 20,300 24,000
Couple, 1 -65, 1 over 65 9,125 21,200 25,300
Couple, 2 over 65 10,800 22,400 26,000
Couple, 2 over 65, 1 blind 12,475 23,600 26,000?
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 11,050 27,800 28,200
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
#The year 2018 is supposed to be directly above the last column on the right, but 3 times I have tried to correct this but it still ends up on the next line on the left. Grrrrr.
There are other credits and benefits the very poor may be able to deduct, but this chart starkly shows how decades of Council neglect have systematically injured poorer people and families. This one simple fix, is worth $85 million a year. But urge your council members to speed it up! See tax posts at my blog: gleeaikin.blogspot.com for other information.
***[2018 taxes] The exemption for children is gone, but both the IRS and DC have various credits and provisions regarding children which I need to study before adding comments. We will need to see if large families are badly affected. In 2018, Head of Household rate is $18,000 under 65, and $19,600 65 and over. Qualifying widow(er) rate under 65 is $24,000, and 65 plus is $25,300.]
There are other credits and benefits the very poor may be able to deduct, but this chart starkly shows how decades of Council neglect have systematically injured poorer people and families. This one simple fix, is worth $85 million a year. But urge your council members to speed it up! See tax posts at my blog: gleeaikin.blogspot.com for other information.
***[2018 taxes] The exemption for children is gone, but both the IRS and DC have various credits and provisions regarding children which I need to study before adding comments. We will need to see if large families are badly affected. In 2018, Head of Household rate is $18,000 under 65, and $19,600 65 and over. Qualifying widow(er) rate under 65 is $24,000, and 65 plus is $25,300.]
When our Council actually passed a bill to implement this and other TRC ideas at Phil Mendelson's urging, I was overjoyed. But then was shocked to see parity with IRS rates phased in slowly, not fully until tax year 2019. [Now that DC rates have full parity with IRS rates for tax year 2018 I am glad to say we are a year ahead of schedule.] Moreover, the deduction for "dependents" (children) doesn't even BEGIN until 2017. Then it will be $2,200, about half the federal Deduction. Our Council's choices seemingly designed by some to drive families (especially black ones) from DC continue. Our families have already lost over $1 billion over the years thanks to our Council's neglect. No more waiting!!
I have only found one report of actual benefits by salary class*. Individuals earning $25,000 to $50,000 gain only $352. People earning $10,000 to $25,000 and $50,000 to $500,000 all gain more. Only people earning above $500,000 might pay more, depending on their allowable Itemized Deductions. What a betrayal. This is why I have chosen to run for Chairman of the Council in Nov. 2014. No more gifts to upper income taxpayers at unfair cost to the poor and middle class.
When the Tax Revision Commission began its work, one goal was to provide fairness to the middle class. The middle 20% ($38,000 to $62,000**) of DC taxpayers were paying over 11% of income in taxes. The bottom 20% and top 1% paid a little over 6%. Has the Council corrected this unfairness? I doubt by much! I can't wait to see an Institute for Taxation and Economic Policy (ITEP) or Fiscal Policy Institute evaluation of the Council's handiwork.
I have only found one report of actual benefits by salary class*. Individuals earning $25,000 to $50,000 gain only $352. People earning $10,000 to $25,000 and $50,000 to $500,000 all gain more. Only people earning above $500,000 might pay more, depending on their allowable Itemized Deductions. What a betrayal. This is why I have chosen to run for Chairman of the Council in Nov. 2014. No more gifts to upper income taxpayers at unfair cost to the poor and middle class.
When the Tax Revision Commission began its work, one goal was to provide fairness to the middle class. The middle 20% ($38,000 to $62,000**) of DC taxpayers were paying over 11% of income in taxes. The bottom 20% and top 1% paid a little over 6%. Has the Council corrected this unfairness? I doubt by much! I can't wait to see an Institute for Taxation and Economic Policy (ITEP) or Fiscal Policy Institute evaluation of the Council's handiwork.
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 for Chairman. Unfortunately, the Council felt it was better to implement this measure over a 5 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:
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 2013 $6,100 each.
The IRS rate for 2014 is $6,200 each. Up by $100.
The 2017 full federal rate will be higher than its 2013 $6,100 each.
The IRS rate for 2014 is $6,200 each. Up by $100.
Personal Exemption: fully implement in 2019;
$2,200 in 2017; $3,200 in 2018. For 2014 it is $1,725
In 2019 the full federal rate will be higher than its current $3,900.
The IRS rate for 2014 is $$3,950. Up by $50.
In 2019 the full federal rate will be higher than its current $3,900.
The IRS rate for 2014 is $$3,950. Up by $50.
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 that the Personal Exemption, which means everyone in the family, does not even START until 2017. [They must have changed their minds a little, since I now see an increase of $50 per person for 2014.] This is very 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 them have been driven out of DC by our high tax rates.
While there was a slight concession for tax year 2014 in DC, we still fall further behind the federal IRS rates. A single person in DC deducts $100 more, but the federal allows $150 more. Families are still even MORE shortchanged as the federal allows a family of 4 an additional $400 to deduct, while DC only allows $250 more. And we wonder why there is a homeless problem.
This link on the change in federal tax benefits one receives when having a baby shows just how much the failure of the DC Council to rapidly implement coupling our Deductions and Exemptions with the federal rate will continue to hurt our families and single parents. It gives the 2015 federal rates for several deductions which DC taxes probably will continue to fail to provide.
If excluded from the federal rate it is unclear what their rate will be.
Note that the Personal Exemption, which means everyone in the family, does not even START until 2017. [They must have changed their minds a little, since I now see an increase of $50 per person for 2014.] This is very 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 them have been driven out of DC by our high tax rates.
While there was a slight concession for tax year 2014 in DC, we still fall further behind the federal IRS rates. A single person in DC deducts $100 more, but the federal allows $150 more. Families are still even MORE shortchanged as the federal allows a family of 4 an additional $400 to deduct, while DC only allows $250 more. And we wonder why there is a homeless problem.
This link on the change in federal tax benefits one receives when having a baby shows just how much the failure of the DC Council to rapidly implement coupling our Deductions and Exemptions with the federal rate will continue to hurt our families and single parents. It gives the 2015 federal rates for several deductions which DC taxes probably will continue to fail to provide.
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. The burden on caregivers is considerable. This deduction would pay for occasional relief.
How to Pay for More Rapid Phase-in of Higher
DC Deductions & Exemptions?
Several TRC recommendations for raising income were not considered or acted on by the Council. Since increasing the sales tax from 5.75 to 6% affects lower income people more it was considered regressive and not increased. On the other hand, a proposal to have a $100 per employee annual local services fee was not given much consideration. That is unfortunate given that 70% of DC employees are not residents and we get no tax benefit from them although DC pays for the roads and police services from which they benefit. Follow up reports by TRC members like Fiscal Policy Institute's Ed Lazere provide useful insights,
Business property taxes were not changed, but changes for low value properties would help low income owners. Currently, homeowners pay 85 cents per $100 assessed value. On the other hand owners of business property pay $1.85/$100 above property value of $3 million. Below that the rate is $1.65/$100. We should have addition rates of $1.45 for businesses $1 million and below, and $1.20 for businesses $500,000 and less. This might save small businesses across from the new Walmart in Muriel Bowser's Ward 4, which are mostly assessed under $500,000, who are also being hurt by loss of parking they used to have in front of their stores for quick pick-ups of food and merchandise.
The Business income tax (D-30) that was reduced from 9.975% now to 8.25% by 2019 should be scaled back to 9% or 8.75%. The TRC did not seem to feel there was a big problem with competition from MD and VA. In fact at a follow-up meeting the TRC stated the biggest problem is that DCRA and other agencies are not business friendly. In Virginia, a big project is immediately assigned a government point person to speed permitting and other red tape. [This tax rate has not been changed on the 2014 D-30 form. However it still requires paying a $250 minimum tax even though this tax still applies to all grossing $12,000 or more business income. It is very unfair to increase the minimum tax from $100 to $250, while NOT CHANGING the minimum gross income. This whole D-30 tax situation needs a major rework.]
A major harm to very small businesses is the fact that all businesses grossing more than $12,000 need to file the inscrutable D-30 tax form. This figure was set in 1986 and needs to be updated. The $100 minimum fee/tax was increased to $250 recently. This is totally unfair without increasing the gross to $30,000. A lot can be done to improve the D-30 which will make life easier for small business and probably improve collection amounts.
The implementation of the TRC suggestions was made possible by cutting the short term budget for an extended street car system in half. Just how much more than the late, but soon to begin, H St. portion of this system should be built is very controversial as this article shows.
How to Pay for More Rapid Phase-in of Higher
DC Deductions & Exemptions?
Several TRC recommendations for raising income were not considered or acted on by the Council. Since increasing the sales tax from 5.75 to 6% affects lower income people more it was considered regressive and not increased. On the other hand, a proposal to have a $100 per employee annual local services fee was not given much consideration. That is unfortunate given that 70% of DC employees are not residents and we get no tax benefit from them although DC pays for the roads and police services from which they benefit. Follow up reports by TRC members like Fiscal Policy Institute's Ed Lazere provide useful insights,
Business property taxes were not changed, but changes for low value properties would help low income owners. Currently, homeowners pay 85 cents per $100 assessed value. On the other hand owners of business property pay $1.85/$100 above property value of $3 million. Below that the rate is $1.65/$100. We should have addition rates of $1.45 for businesses $1 million and below, and $1.20 for businesses $500,000 and less. This might save small businesses across from the new Walmart in Muriel Bowser's Ward 4, which are mostly assessed under $500,000, who are also being hurt by loss of parking they used to have in front of their stores for quick pick-ups of food and merchandise.
The Business income tax (D-30) that was reduced from 9.975% now to 8.25% by 2019 should be scaled back to 9% or 8.75%. The TRC did not seem to feel there was a big problem with competition from MD and VA. In fact at a follow-up meeting the TRC stated the biggest problem is that DCRA and other agencies are not business friendly. In Virginia, a big project is immediately assigned a government point person to speed permitting and other red tape. [This tax rate has not been changed on the 2014 D-30 form. However it still requires paying a $250 minimum tax even though this tax still applies to all grossing $12,000 or more business income. It is very unfair to increase the minimum tax from $100 to $250, while NOT CHANGING the minimum gross income. This whole D-30 tax situation needs a major rework.]
A major harm to very small businesses is the fact that all businesses grossing more than $12,000 need to file the inscrutable D-30 tax form. This figure was set in 1986 and needs to be updated. The $100 minimum fee/tax was increased to $250 recently. This is totally unfair without increasing the gross to $30,000. A lot can be done to improve the D-30 which will make life easier for small business and probably improve collection amounts.
The implementation of the TRC suggestions was made possible by cutting the short term budget for an extended street car system in half. Just how much more than the late, but soon to begin, H St. portion of this system should be built is very controversial as this article shows.
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.
*From Jack Evan's Newsletter of July 17, 2014.
**From 1-30-13 ITEP table 1, The Impact of DC Taxes on Different Income Groups.
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