D.C. business and trade leaders sounded the alarm Monday about Mayor Vincent C. Gray's call to increase or create 13 taxes to close a $322 million budget gap in the upcoming fiscal year.
Barbara Lang, president of the D.C. Chamber of Commerce, told the City Council that tax increases are a "drug" in the nation's capital and suggested that passing a fiscal 2012 budget with additional burdens on merchants, residents and the city's professional class will drive the District into a recession it has so far avoided.
"It is time for rehab for this government," she said before the city's Committee of the Whole. "The government can not simply tax and fee its way to sustained budgets. Businesses close, people move and less revenue comes in."
Mr. Gray's $9.6 billion budget plan for the upcoming fiscal year includes tax initiatives expected to raise $127 million, including a tax on live theater and raising the income tax on households earning more than $200,000, from 8.5 percent to 8.9 percent. It also raises the parking tax from 12 percent to 18 percent and the tax on carryout liquor, from 9 percent to 10 percent.
The budget plan by Mr. Gray, a Democrat, being considered by the 13-member council also calls for $187 million in spending cuts, notably to human services.
Jim Dinegar, president and chief executive officer of the Greater Washington Board of Trade, called the mayors plan a starting point but implored council members to tread carefully.
"The buck starts with the mayor, but it stops here with council," said Mr. Dinegar, who raised questions about the mayors call for calculating tax obligations for companies with locations in and outside the city through a new method called combined reporting.
The mayor's office said the method will generate $22 million annually.But Mr. Dinegar said a company's unprofitable branches in more depressed areas of the country could water down promising gains by the company's sites within the District.
"That's going to be a revenue loss," he said. "My caution is that the combined reporting at $22 million is false on its face."
Testimony from the council members provided some insight into how they might vote next month on the Mr. Gray's plan.
Council Member Jim Graham, Ward 1 Democrat, supported the income-tax increase - from 8.5 percent to 8.9 percent - saying it was an issue of "those most able to pay" versus "those least able to pay."
He said the city's neediest also are facing a loss because $31 million in being cut from such program as homelessness-prevention services, interim disability assistance and the Temporary Assistance for Needy Families fund.
Council Member Jack Evans, chairman of the Committee on Finance and Revenue, said increasing taxes is easier than facing the ire of city agencies and other beneficiaries for cutting services.
"If you do it and get away with it, you do it again and again," said Mr. Evans, Ward 2 Democrat, who has raised concerns about the mayor's budget from the moment it was introduced.
He also pointed out a 3.1 percent spending increase in the mayor's budget, compared with the fiscal 2011 budget.
"We are now spending more money than we ever have in the history of the city," Mr. Evans said. "Our revenues just don't grow that fast."
Council Member Tommy Wells, Ward 6 Democrat, suggested merchants might prefer tax increases over cuts to social-service programs, including one that gets people off city streets and into apartments.
"Well that's going to end," he said. "There will be homeless folks downtown again."
Council member David Catania, at-large independent, has issued a similar clarion call for weeks, saying he cannot support the budget in its current form.
"It's what do I need, and what can I live without?" he said. "And our government hasn't made these choices."
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