On February 12th, former Mayor Anthony A. Williams, the Chair of the DC Tax Revision Commission, testified at a DC Council hearing on behalf of the TRC’s recommendations. His full testimony can be found below.
Good afternoon Chair Mendelson and Councilmembers.
Thank you for creating, and continuing to support, the DC Tax Revision Commission. And thank you for allowing us to present our recommendations. I ask the Council to enter the report of our Recommendations dated February 12th, 2014 into the record.
Last December, our Commission unanimously adopted these recommendations, which we believe will increase fairness, broaden DC’s tax base, promote competitiveness, and encourage business growth. I would like to emphasize the unanimous adoption, which was remarkable given the wide range of political and economic backgrounds of our Commissioners. They included business leaders, tax lawyers, public finance economists, and community representatives. All of whom were volunteers.
Several of the Commissioners are here today, and I would like them to stand at this time to be recognized. For over a year, our Commissioners met. We met first monthly and, later, weekly. In all, our Commission held 26 public meetings, including three public hearings. I would like to publicly thank my fellow Commissioners for their time, passion, and intelligence in forging a set of unanimously approved recommendations.
In addition, I would like to thank the Office of the Chief Financial Officer, under both Dr. Gandhi and CFO DeWitt, for the exceptional assistance the Commission received from the Office of Revenue Analysis, led by Dr. Fitzroy Lee, and the Office of Tax and Revenue, led by Steve Cordi, and their staffs.
I am joined today by Gerry Widdicombe, the Commission’s Executive Director, on loan to the Commission from the Downtown Business Improvement District, and Steve Rosenthal, the Commission’s Staff Director, a long-time tax practitioner in the District, with both private and congressional experience. He now is a senior fellow at the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution.
First, I would like to describe the economic context in which the Commission deliberated. And, second, I would like to summarize our findings.
After I finish, Gerry will describe the schedule to wrap-up the work of the Commission, and the overall revenue impact of the Commission’s recommendations. And Steve will describe the details of the Commission’s recommendations, and the rationale for their adoption.
We all are happy to take questions at any time.
The District’s economic picture is largely bright. It weathered the recession better than most jurisdictions, adding businesses, jobs and residents during the recovery. More and more people are choosing the District as a place to live, rather than merely work. Private employment is growing, offsetting a loss of federal jobs. This economic strength translates into a strong and growing tax revenue base. The District’s budget is balanced (indeed, in surplus), and its tax system is fundamentally sound.
After a lengthy review, with the help of experts, elected officials, and members of the public, the Commission identified three major challenges for the District’s tax system:
- Middle-class residents bear a disproportionate tax burden. As a result, the progressive design of DC’s tax system is undercut, which interferes with the District’s efforts to attract and retain residents. The Commission recommended a series of changes in the individual income tax system to lower the taxes of the vast majority of District residents.
- DC’s business franchise tax and commercial property tax rates are the highest in the region. As the District prepares for future challenges, including a shrinking federal government, DC must attract businesses and diversify its economy. The District’s high business taxes could hinder future economic growth. The Commission recommended a substantial reduction in the city’s business income tax rate to send a strong signal that the District is “open for business.”
- Because of federal limitations, the District’s tax base is relatively narrow. The District cannot tax many organizations, businesses and individuals. As a result, existing taxable DC businesses and residents must payer higher taxes. The Commission recommended broadening the tax base, which would spread the tax burden more broadly, raise revenue more efficiently and improve fairness in having more revenue support from those that use city services.
The Commission unanimously approved a package of recommendations to address these challenges. I believe the Commission’s recommendations are a roadmap to lower taxes for most District residents and businesses and broader tax base that results in a better and more efficient tax system. In particular, the recommendations would help residents and businesses in the District prosper in the face of the current retrenchment of the federal government.
And, now, let me ask Gerry to describe the next steps for the Commission and the overall revenue impact of the Commission’s recommendations.
