Raising Revenue Without New Taxes or Fees? Mayor Gray’s Proposed Budget (Almost) Does It
Will DC residents pay more out-of-pocket if Mayor Gray’s Fiscal Year 2013 proposed budget and revenue proposals become adopted? For the most part, Gray’s proposals would not require DC residents or businesses to pay more in basic taxes and fees for the services they receive. But if you owe the city taxes but haven’t paid up, if you run red lights sometimes, or if you like to buy alcohol early in the morning or late at night, you will pay more.
Mayor Gray’s proposed budget for next year would boost the city’s resources by about $90 million, as part of a balanced approach to closing a pending budget gap of $172 million. The new revenues help limit the need for budget cuts; even with the resources, though, the budget would make some deep cuts in health care, housing, child care, and other services.
So how does the Mayor hope to raise more without changing the basic tax structure?
These are the ways:
- Doing a Better Job Collecting What Is Owed — $36 million: The District would collect about $36 million primarily by checking a retailer’s sales tax records against its credit card receipts and creating a new centralized team to collect non-tax revenues — primarily parking tickets issued to non-DC residents. (The city would pay $2 million to beef up these activities.)
- Expanding Traffic Enforcement — $25 million: The Metropolitan Police Department would expand its automated traffic enforcement capacity, which is expected to generate $25 million in net revenues — $31 million in revenues offset by $6 million in additional equipment purchases and related costs.
- Not Fully Adjusting Tax Deductions for Inflation — $12 million: Three tax benefits — the standard deduction and personal exemption in the income tax and the homestead deduction in the property tax — are supposed to be adjusted for inflation each year. But these benefits have been frozen in place since 2008, due to budget legislation passed that year. The benefits were scheduled to resume inflation adjustments in 2013, with adjustments all the way back to 2009. Mayor Gray proposes to index them using 2012 as the base. This means that residents will pay more in income and property taxes than if the benefits had been adjusted fully back to 2009.
- Expanding Liquor Sales Hours — $5 million: By allowing stores to sell liquor earlier in the morning and allowing bars to stay open later at night, Mayor Gray expects to generate $5 million in new alcohol taxes.
These changes add up to a solid amount of new resources, and— outside of the limited inflation adjustments for tax benefits— do not reflect notable changes to the city’s taxes or fees. That doesn’t mean they all will be popular, however. For example, some Council members and residents already have expressed concern about expanding hours for liquor sales.
However, subtracting a revenue source from the budget means the Council needs to add an equivalent amount of revenue back— or make additional cuts. We urge the Council not to make changes to revenue that lead to even deeper budget cuts or limit the Council’s ability to restore some of the most serious cuts.