- The Washington Times - Sunday, December 22, 2013


If you’ve been busy this holiday season pricking your fingers on holly bushes and closing your company’s books on 2013, this news is for you — and it’s good and bad.

The good news comes from D.C. Chief Financial Officer Natwar Gandhi, who late last week informed the city’s leaders that there is an unanticipated $19.8 million in extra funds for this fiscal year and a projected $42.7 million in extra funds for the next.

Don’t toast his tidings of joy just yet, however, because the Grinch is trying to put tax thorns in the sides of individuals and businesses alike.

That bad news comes from the D.C. Tax Revision Commission, which, also last week, released its list of tax proposals to be considered by mayor and the D.C. Council.

The thorniest of those proposals would open a back door for a commuter tax, raise the D.C. sales tax, and expand that tax’s scope to new businesses.

In other words, the Grinch’s specter of higher taxes would include everything from the roof over your home to the hair on your head, from the water you drink and the storage facilities you use to that health club you joined.

It was easy for the tax panel to develop a new list of tax proposals since officials last reviewed the city’s tax law in 1998, when federal authorities established a control board to resurrect the capital from a sea of red ink.

Seated in 2012, the panel proposed and signed off on a huge deal that also tries to sneak a commuter tax onto the financial books.

Called a “local services fee,” this new tax would mandate that employers pay the city $25 per employee, per quarter. The new tax would help offset cuts to the business franchise tax, which would decline from 9.975 percent of net income to 8.25 percent. The panel said the franchise tax cut would cost about $57 million a year and that a new “local services fee” would bring in about $45 million.

Be mindful, though, and focus on what the District is really trying to do — and it has nothing to do with offsetting cuts in one revenue source with increases in another. It has everything to do with a commuter tax, which the District is forbidden by law from instituting.

Not only does the U.S. Constitution have a few things to say about a D.C. commuter tax, but so do the congressional delegations from Maryland, Virginia and other states whose residents work in the city and rightly pay their income taxes to the states in which they live.

The states and jurisdictions have always stood steadfast against such a D.C. commuter tax, and they should continue to fight against this backdoor effort.

The District also would weaken its competitive sales-tax edge if it were to adopt changes proposed by the panel.

Currently, D.C. levies a 5.75 percent sales tax, and the panel wants it raised to the same 6 percent rate as prevails in Virginia and Maryland. The higher rate would generate an additional $58 million a year if also applied to hair salons, health clubs, storage facilities, home-improvement and construction services, and other businesses that are now sales-tax exempt.

Even your favorite billiard parlor would have to levy a sales tax for racking up in D.C.

Not everything among the tax panel’s recommendations deserves a bah-humbug, however.

Among the tax reconfigurations is a proposal to raise standard and personal income-tax exemptions to federal levels and give mid-level earners a break by cutting their current 8.5 percent rate to 6.5 percent.

Of course, none of the proposals made by the tax panel and none of the CFO’s projected dollar signs take into account the potential political climate of 2014, when several members of the legislature will try to unseat Mayor Vincent C. Gray.

But while voters get their first say during the April 1 primaries, the mayor and lawmakers, including those on Capitol Hill, will continue in power through the end of the year. That’s a long stretch for the tax-and-spend crowds.

By April, Mr. Gandhi, the city’s independent bean counter, will be long gone but his warning flags will likely remain in place: D.C. job growth is slowing and fewer people who live in the city are working compared to 2012.

Mr. Gandhi characterized that development as “distressing.

Stakeholders should recall Mr. Gandhi’s characterization in 2014, every time a politician or candidate says, “I need your support.”

Deborah Simmons can be reached at [email protected]

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