As the mayor and DC Council create their spending plan for fiscal year (FY) 2027, they must restore and strengthen funding to programs that help residents meet their basic needs. Many DC residents—particularly Black, brown, and immigrant residents with low incomes—are in crisis. Lawmakers need to adequately fund policies and systems that reduce poverty and address racial disparities, rather than turn their backs on residents with the fewest resources.
Historic federal program cuts will leave DC residents worse off through lost health coverage, less money for groceries, and fewer supports they need to stay on their feet and unlock their full potential. The Trump Administration’s extreme agenda has also slashed thousands of jobs held by federal workers who operate critical programs in DC and the region. Still, Mayor Bowser and DC Council made significant cuts to critical local programs last year—including health care for immigrants, rental assistance, cash support for moms struggling to get a toehold in the labor market, and living wages for early educators. Residents are likely facing the largest reduction to DC’s safety net in a generation. As a result, more DC residents will experience economic hardship, homelessness, and deep poverty, and the lasting harm will disproportionately fall on Black and brown people because of systemic racism.
Right now, DC unemployment is the highest in the nation, and nearly 1 in 3 Black residents lives in poverty. Corporate profits and non-wage income like capital gains are driving DC’s revenue gains, suggesting that corporations and wealthy residents continue to benefit the most from DC’s economic growth at a time when federal lawmakers are handing them another windfall of tax breaks. In fact, the District is tied with New York and Puerto Rico for the highest level of inequality in the nation. Meanwhile, lawmakers continue to invest limited resources in trickle-down economic strategies that further benefit the corporate elite and disrupt DC’s economic resilience and inclusion.
To fund the programs that support residents struggling to make ends meet, lawmakers should increase taxes on DC’s concentrated wealth. High inequality not only limits economic growth, but concentrated wealth also gives undue power to the people who hold it—the consequences of which all Americans are living with today.
DC lawmakers can do more to address inequality, deep and chronic racial inequities, and economic hardship. The DC Fiscal Policy Institute (DCFPI) urges consideration and prioritization of the following recommendations:
Early Education
- Fully fund the Pay Equity Fund at $94.2 million in FY 2027 to pay the wages that all early educators deserve—relative to role and credentials, based on the original 2022 salary scale—and provide a modest 2 percent cost-of-living adjustment to ensure parity with public school teachers. Allocate $1.5 million in approved contingency funds and reprogram at least $7.5 million of local funds in FY 2026 to reverse the pay cuts early educators received in January.
- Increase the child care subsidy program in FY 2027 by $31.2 million to sustain the current caseload and by $57.5 million to allow new families into the program, eliminating the waitlist. Allocate the $5.5 million in approved contingency funds and reprogram at least $25.7 million in FY 2026 to maintain current enrollment levels.
Health
- Allocate $77.7 million to the DC Health Care Alliance to remove the FY 2026 enrollment cap that limits new enrollment to individuals under age 26, restore income eligibility to 210 percent of the federal poverty line, and preserve the current benefit package. The Alliance provides critical health care coverage to residents with low incomes who do not qualify for Medicaid, most of whom are immigrants. Allocate $21.5 million in approved contingency funds for FY 2026 to undo the reduction in benefits that DC implemented in October 2025. These funds will allow the Alliance to once again cover vision, dental, non-emergency transportation, podiatry, and home health care services for the rest of the fiscal year.
- Provide funding for dental and vision benefits in the Basic Health Plan, now known as the Healthy DC Plan, to minimize harm to those moved out of Medicaid. Medicaid covers dental and vision care, but the Healthy DC Plan does not, meaning residents shifted to this plan lost this coverage. Thus far, DC will only provide dental and vision under the Healthy DC Plan if Congress renews the enhanced premium tax credits that expired last year, which would create health care savings to do so.
Affordable Housing
- Allocate $120 million to the Housing Production Trust Fund (HPTF). Increase investment in the HPTF to build and preserve more affordable units. Enforce the statutory requirements that the HPTF produce deeply affordable housing at 30 percent of the area median income.
- Set-aside 30 percent of the Housing Production Trust Fund for preservation. Make the one-time preservation set-aside in the FY 2026 budget into a permanent 30 percent preservation set-aside. Consistent and predictable preservation dollars will support affordability for tenants and sustainability for housing providers. And allocate $10 million in approved contingency funds for preservation in FY 2026.
- Allocate $10 million towards the First Right to Purchase Program (FRPP) to sustain tenant ownership. Increase funding for residents who have successfully created affordable ownership opportunities through limited-equity cooperatives and to support tenants seeking to use TOPA to purchase their buildings.
- Allocate $17.33 million to the Local Rent Supplement Program to improve housing affordability for residents and families with extremely low incomes. This would create about 600 new housing vouchers, improving housing affordability for those with extremely low incomes.
Ending Homelessness
- Fund 1,260 new Permanent Supportive Housing (PSH) vouchers for individuals experiencing chronic homelessness, annually for three years. Fund 782 PSH vouchers for families and invest in Targeted Affordable Housing (TAH) for families. PSH combines a housing voucher and individualized, intensive case management. TAH combines a housing voucher with light-touch case management, and housing search and move in assistance.
- Fully fund Emergency Rental Assistance Program (ERAP) and allocate $1.75 million to Project Reconnect to prevent evictions. Every additional $8 million in ERAP investment helps approximately 2,000 households avoid evictions by helping to pay overdue rent and legal costs. The funding for Project Reconnect, DC’s prevention program for single adults, would ensure all who qualify can find alternatives to shelter such as reuniting with friends and family. Also allocate $2.95 million in approved contingency funds for FY 2026.
- Restore 300 Rapid Rehousing Program (RRH) beds for individuals and create an additional 100 slots to eliminate the wait list. Because of funding pressures, the RRH program was reduced from 600 to 300 slots. Restoring the cut slots and adding 100 more should serve all individuals on the wait list in need of RRH’s support services and short-term rental assistance.
- Fund DC Flex to support 100 individuals with small subsidies that improve rent affordability for working households. The pilot was supposed to include 100 individuals, but lawmakers cut eligibility to 25 individuals because of spending pressures.
- Allocate $6.4 million to the Coordinated Street Outreach Network. This program helps unsheltered residents meet their basic needs and move into housing, if housing is available.
- Invest $1.5 million to provide storage space for unhoused individuals so they can keep their belongings in a safe place until they find housing.
- Allocate $500,000 in approved contingency funds in FY 2026 for the Personal Needs Allowance (PNA) to improve living standards for chronically unhoused residents who now call DC’s first assisted living facility home. Raising the monthly PNA will improve the ability of facility tenants with Medicaid to purchase essentials like hygiene products and clothing.
Inclusive Economy
- Reverse cuts to TANF scheduled to take effect in FY 2027 that will harm 15,000 children. Ensure the TANF program remains fully funded by continuing cost-of-living adjustments, rejecting the re-instatement of local time limits, and keeping sanctions at current rates.
- Fund the reparations taskforce under the Insurance Database Amendment Act of 2023 to establish a database of enslavement records to assist in the development of reparation proposals for Black residents. And, ensure Black communities most harmed by historic racism shape the taskforce members and process.
- Fund a more balanced economic growth strategy for DC that invests in residents in all eight wards, with an emphasis on Wards 7 and 8. Invest more in locally owned Black and brown businesses and legacy businesses rather than a disproportionate focus on corporate subsidies and downtown investments.
Tax and Revenue
- Protect the expansion of DC’s Earned Income Tax Credit (EITC) and the restoration of the DC Child Tax Credit (CTC) to support workers’ and families’ economic security. These improvements benefit 78,000 children and their families and are estimated to reduce child poverty by 20 percent. The tax credits put money into the pockets of those struggling the most, and they provide long-term benefits over a child’s life cycle, and for the economy broadly. The EITC expansion went into effect tax year 2025, and the CTC goes into effect tax year 2026.
- Eliminate or further delay the planned increase to the sales tax to 7 percent, from 6 percent, in October 2026. This tax increase will harm low- and moderate-income households the most because they pay a larger share of their income in sales taxes than higher income households.
- Close a loophole to ensure all businesses operating in DC pay their fair share of taxes by adopting a Business Activity Tax. Close a lucrative loophole that allows many non-resident business owners, and some high-powered corporations, to avoid DC business taxes. A 2 percent BAT could raise $500 million per year, depending on adjustments to existing business taxes.
- Tax DC’s outsized concentration of wealth to reduce wealth inequities by either creating a progressively tiered surcharge on capital gains or via a wealth proceeds surcharge.
- A progressively tiered capital gains surcharge would apply to households with an adjusted gross income (AGI) above $500,000 and for capital gains at/above that level only, affecting just 1.85 percent of taxpayers overall.
- Alternatively, DC could piggyback on the already existing federal net investment income tax (NIIT) on proceeds generated by wealth, including capital gains, dividends, and other forms of passive income. DC could add a local surcharge on the federal tax and with the ease of administration from using the federal definition of wealth included in the NIIT. DC taxpayers would pay a percentage of what they report to the federal government if they have incomes over $200,000 (single)/$250,000 (joint/married), and only on the wealth that exceeds those thresholds. In DC, that means that 82 percent of the surcharge would be paid by taxpayers with incomes above $1 million. DC could adjust income thresholds as desired.
- Eliminate the stepped-up basis for capital gains bequeathed at death to raise $46.3 million. If an investor leaves an appreciated asset to an heir upon death, neither they nor the heir will ever owe capital gains tax on the growth in value up to that point. DC can either tax realized gains at the time of transfer to an heir or implement a carryover basis tax. Lawmakers may want to consider an exception for residents participating in the Heirs Property Assistance Program or others with low incomes inheriting a primary residence.
- Save tens of millions of dollars by rejecting poorly designed tax breaks that fail to advance racial justice. Avoid poorly targeted tax breaks and implement strong claw-back provisions in public deals. End the Housing in Downtown program’s annual 4 percent increase in funding for the abatement that begins in FY 2028, add a sunset date for the program, and include claw-back provisions for developers that don’t meet targets. Also, eliminate or further delay the franchise tax deduction for certain combined reporting filers to after December 31, 2030, rather than December 31, 2029.