The District government is about try to shake its image as a high-tax city.
After more than 18 months of study, the D.C. Tax Revision Commission is recommending a series of tax cuts for low- and middle-income workers, a big break for estate taxes, and cuts in corporate taxes.
But the commission, headed by former Mayor Anthony Williams, also is suggesting that the city’s 5.75 percent sales tax increase to 6 percent.
And it is proposing that private businesses pay a new $100 "service fee" for each private sector employee. This proposal already is being seen as a stealth commuter tax because 70 percent of the jobs in the District are held by suburban commuters.
It’s unclear that the "service fee" will survive public debate.
The D.C. Council Committee on Finance and Revenue holds a hearing on the tax commission proposals Wednesday.
It’s the first major revision of city tax policy in decades.
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Committee Chairman Jack Evans (D-Ward 2) told News4, “What this does is, it changes the image of the city as being a high tax jurisdiction and it becomes more a jurisdiction welcoming to both the residents and the businesses.”
Evans noted that the District is financially in the best shape that it has ever been and that District citizens deserve relief.
The proposal would especially affect middle income workers who earn from $40,000 to $60,000 a year.
Right now, those workers pay the same 8.5 percent tax rate that is imposed on workers who make up to $350,000 a year.
The proposal would create a new middle class rate of 6.5 percent. For a person earning $50,000 a year it would mean a tax cut of about $1,000 a year.
There also are bigger tax credits for lower income workers who experts say will likely recycle the money back into the city’s economy.
“Mostly it’s back due bills, rent, clothes, so every dollar they get they’re spending locally,” said Teresa Hinze of the nonprofit group Community Tax Aid.
The council hearing Wednesday will be followed by intense lobbying over the entire tax proposal. Legislation is expected to arrive before the council later this year.