Chairperson Mendelson and members of the Committee, thank you for the opportunity to provide testimony. My name is Tazra Mitchell, and I am the Policy Director at the DC Fiscal Policy Institute (DCFPI). DCFPI is an anti-poverty non-profit organization that promotes opportunity and widespread prosperity through rigorous research and policy solutions to address DC’s racial and economic inequities. I am also the Chair of the Fair Budget Coalition’s (FBC) Fair Taxes and Public Deals Issue Group.
I’m here today to ask this committee and the full DC Council to enact bold revenue ideas to protect vital community programs and to lay the groundwork for a just economic recovery that advances racial justice, puts people first, and protects residents experiencing economic hardship. Public needs are rising dramatically due to the pandemic, but the crisis is projected to create revenue losses of more than $1.5 billion over the next two years.[i] To ensure our city comes out of this crisis stronger than before, it is important for the Council to raise revenue to preserve crucial investments in homeless services and housing, health, social services, and education.
The recent surge in police violence against Black communities reminds us that state-sanctioned oppressions have long been manifestations of larger degradations—structured economic injustice, entrenched inequality, and racism. These linkages remind us that fair budget policy is also Black liberation work—as Stephanie Sneed, the Executive Director of FBC, has pointed out. In the aftermath of the police murder of George Floyd, several members of this committee rightly acknowledged that our city’s response must go beyond criminal justice—that economic justice is required. DCFPI agrees that adequate funding paired with meaningful policy changes will help move that vision forward.
DC Council has the power to use fiscal policy as a tool to right these wrongs and build a better future. DCFPI encourages this committee to consider all of the revenue ideas in the FBC sign-on letter (Attachment 1) as you finalize the budget. When advocates and residents seek more funding for important services, members of this body invariably ask them where to find the money. The attached sign-on letter attempts to answer that.
This written testimony:
- Explains shortcomings in the Mayor’s budget.
- Demonstrates how raising revenue would minimize harm and reduce long-standing, unacceptable disparities that the pandemic is worsening in the District.
- Urges the city to make DC’s richest households and profitable businesses pay more of their fair share, so we have more revenue to provide targeted recovery support to the individuals and local businesses who have been hardest hit.
- Suggests which programs and services the DC Council should consider funding with existing and/or new revenues.
Thoughtful Revenue Increases Would Enable DC Council to Build on the Mayor’s Budget, Support Residents and Our Economy
Mayor Bowser’s proposed FY 2021 budget staved off deep across-the-board budget cuts that would have deepened the economic downturn, in large part by tapping a portion of the reserves, using surpluses and fund balances, and refinancing our debt, among other tactics. We applaud her for this resourceful leadership. Yet, she could and should have done more to commit to a just recovery.
The Mayor’s budget fails to fund some critical needs, such as a stabilization fund for child care providers and cash assistance for immigrant residents ineligible for federal stimulus payments and unemployment insurance; it underfunds critical services and programs, such as permanent supportive housing for our neighbors who are homeless; it asks too little from our wealthiest residents and too much from others, like city workers who would face a cost-of-living adjustment freeze; and, it fails to lay the groundwork to address entrenched structural inequities, many of which the pandemic has amplified.
We are in an unprecedented moment. Our policy response must also be unprecedented. DC residents deserve a bolder vision that generates the necessary revenue to go from a normal budget to laying the groundwork for a just economic recovery.
Raising Revenue Would Minimize Harm and Reduce Long-Standing, Unacceptable Disparities
Ultimately, DC leaders have a choice during downturns: cut and/or underfund services, often in ways that harm families most in need, or raise revenue. That’s a racialized choice, given the District’s history and stark income and wealth divides. Tax policy has contributed to an economic system in which Black, brown, and low-income people are less likely to thrive.[ii] But lawmakers can also use tax policy as a tool for justice—to fund crucial unmet needs, reverse the economy’s fall, and support families and small businesses struggling to stay afloat.
Revenue increases are a particularly good option for addressing budget challenges in bad economic times, especially when those measures target the wealthy, whose consumption is least affected by economic downturns. In fact, residents who are Black and low-income would benefit the most from tax increases that target DC’s wealthy residents and profitable corporations. That’s because they stand to suffer most from a budget that underfunds childcare, housing, and health care. Because historical and ongoing discrimination often forces Black residents into the lowest-income jobs[iii] and leaves them with little or no wealth to fall back on during hard times, maintaining and strengthening anti-poverty programs and community services that help them weather hard times and thrive long term is vital to keeping families afloat.
Make Wealthy Residents and Profitable Corporations Pay More of Their Fair Share of Taxes
By asking DC’s richest households, profitable businesses, and real estate developers to pay more of their fair share, we will have more revenue to provide targeted recovery support to the individuals and local businesses who have been hardest hit. The attached FBC sign-on letter includes specific revenue ideas to build a just recovery, including, but not limited to:
- Making wealthy residents pay more of their fair share of income taxes. We are all in this pandemic together, yet our tax policies tell a different story. DC residents making $60,000 in taxable income a year and those making $350,000 pay the same income tax rate. Multi-millionaires’ tax rate is just slightly higher. This is unjust and bad fiscal policy. The Council should ask higher-income residents to pay more to build a just recovery. In recent years, the top 5 percent of DC residents benefitted from local income and estate tax cuts and very generous federal “Trump tax cuts.” This year, the federal CARES Act gave them even more tax breaks. These tax breaks have been so generous that the DC Council could raise the top 5 percent’s local taxes and they would still be better off.
- Ending special treatment for profitable corporations and businesses. The District wastes millions on ineffective business tax cuts that don’t contribute to economic growth. Eliminating these tax giveaways for profitable entities that benefited the most from a booming economy would help address our budget challenges. Council should eliminate the Qualified High Technology Company, which the city’s Chief Financial Officer found to be ineffective. At minimum, they should reject the Mayor’s proposal to invest an additional $1.9 million into this incentive. Council should also eliminate or further delay the deferred tax liability deduction (FAS 109) for businesses, which would save $7.4 million and could be used to protect the safety net and invest in things that strengthen the economy.
DCFPI also encourages the DC Council to reject DC2021’s suite of irresponsible tax cuts that would pad the pockets of DC’s profitable business industries while growing our budget shortfall and destroying our ability to build a just economic recovery. Many small businesses are facing existential threats, while real estate developers and giant companies like Amazon are reaping profits—and in some cases increasing their market share—further concentrating economic power. There are better ways to help struggling businesses—and the workers that power them—that aren’t detrimental to our economy.
Where to Target Revenue Increases
With new revenues, here are some of the underfunded policies in the Mayor’s budget proposal that DC Council should prioritize funding:
At a minimum, approximately 30,000 DC residents—including those who are undocumented or otherwise in the informal cash economy—are excluded from federal unemployment insurance relief efforts. Residents who have lost their jobs through no fault of their own are in dire need of modest assistance so they can afford the basics. Given exclusions at the federal level, DC government must find local dollars to ensure all residents get the help they need. The $5 million allocated through Events DC is insufficient to stave off food insecurity and evictions for excluded workers. At a minimum, DC should allocate $30 million through the standing community-based organization distribution process.
Early Childhood Education
DC’s already fragile childcare system is at risk of collapsing due to the health pandemic and ensuing economic downturn. The DC Council should provide $10 million in stabilization funds in the revised FY 2020 budget toward financial relief to providers, whether they rely on a mix of childcare subsidies and private tuition or private tuition alone. Many families are unable to continue making tuition payments during the shut down, and as a result, some childcare centers are at risk of closing their doors permanently. The Council should provide $10 million more in FY 2021 to ensure childcare providers can adequately reopen and meet pandemic-induced safety requirements such as reduced class sizes and increased sanitization requirements.
DC Council should provide an additional $11 million to ensure that every kindergartner through 12th grade student in DC Public Schools has a laptop or tablet to participate in distance learning in the next school year. The Council should also provide at least $4 million more to the Department of Behavioral Health’s (DBH) school mental health program to support the expansion of the program to an additional 60 schools. Too many students are struggling with increased stress, trauma, anxiety, and grief for the city to make DBH choose between additional academic supports or mental health resources. DCFPI strongly urges the Council to ensure students have the tools they need to be resilient during and after such stressful times.
DC Healthcare Alliance
The Council should use the FY 2021 budget to strengthen the DC Healthcare Alliance, a program that provides critical health care coverage to residents with low incomes who do not qualify for Medicaid, most of whom are immigrants. DC imposes a shorter-than-normal recertification period, among other barriers, in the DC Healthcare Alliance. These barriers contribute to both poor health outcomes and unnecessarily high program costs.[iv] Given the current COVID-19 crisis, the District should be doing all it can to ensure that as many residents as possible have access to insurance and that access is as easy as possible. We thank the administration for ensuring that no one loses eligibility during the public health crisis, but we need the permanent removal of the 6-month certification period to build a just recovery.
The DC Council should invest an additional $66 million to provide Permanent Supportive Housing (PSH) and end chronic homelessness for 1,650 households. The Mayor’s proposed budget adds nearly $5 million in new PSH funding for 96 individuals and 54 families, which falls short of what The Way Home campaign called for. The Mayor’s proposal also fails to replace $2.1 million in one-time funding allocated to street outreach services in FY 2020. These services target residents who do not stay in shelters, which is particularly critical during the pandemic. Continued funding is needed to ensure that residents do not fall through the cracks. An investment of $3 million in crisis shelter is also needed to help survivors of domestic violence stay safe, given that the incidence of domestic violence is anticipated to increase with the pandemic.
The Emergency Rental Assistance Program (ERAP) local budget remains flat in the Mayor’s proposal at $7.9 million, but she plans to supplement these funds with additional federal dollars to meet higher need for rental assistance due to the pandemic. ERAP helps residents facing eviction pay for overdue rent and related legal costs, among other needs. DCFPI urges the Council to explore how much demand the administration is anticipating as well as the amount of federal funding available. If federal funding is not sufficient, the Council should add local funding to the budget.
The DC Council should invest $60 million in recurring annual funding for immediate public housing repairs. We appreciate that the Mayor chose to invest in public housing infrastructure improvements, but the amount she allocated is insufficient to adequately address the pressing and hazardous physical and environmental conditions at many DCHA properties. Of the $76 million allocated to the Public Housing and Structural Transformation project over two years, only $25 million in FY 2021 and $15 million in FY 2022 is for rehabilitation and maintenance.
The Council should invest at least $10 million in the Preservation Fund to prevent displacement and preserve long-term affordability. Our housing stock is aging, and we are beginning to see that owners of small properties are seeking to sell due to affordability issues. While the scope of long-term harm of this downturn is still unclear, we can anticipate that this trend will only accelerate. Instead of allowing private, for-profit real estate ventures to take advantage of these sales, the District should strengthen the Preservation Fund as a tool that allows developers who are committed to affordability to purchase those properties. Investment in the Affordable Housing Preservation Fund should not come at the expense of the Housing Production Trust Fund, which is also a vital tool to build and preserve affordable housing. We urge the Council to preserve the original FY 2020 increase and devote $115.6 million in FY 2021.
[i] Chief Financial Officer’s April 2020 revenue forecast.
[ii] Michael Leachman, Michael Mitchell, Nicholas Johnson, and Erica Williams, “Advancing Racial Equity With State Tax Policy,” Center on Budget and Policy Priorities, November 15, 2018, https://www.cbpp.org/research/state-budget-and-tax/advancing-racial-equity-with-state-tax-policy.
[iv] Ed Lazere, “No Way to Run a Healthcare Program: DC’s Access Barriers for Immigrants Contribute to Poor Outcomes and Higher Costs,” DC Fiscal Policy Institute, revised March 17, 2019, https://www.dcfpi.org/all/no-way-to-run-a-healthcare-program-dcs-access-barriers-for-immigrants-contribute-to-poor-outcomes-and-higher-costs/