Testimony of Tazra Mitchell at the Committee on Business & Economic Development Performance Oversight Hearing

Chairperson McDuffie 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 nonprofit 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 has created revenue losses of more than $1.5 billion over the next two years.[1] To ensure our city comes out of this crisis stronger than before and builds an inclusive recovery, it is important for the Council to raise revenue to preserve crucial investments in homeless services and housing, health care, 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. Chairperson McDuffie, in the aftermath of the police murder of George Floyd, you rightly acknowledged that our city’s response must go beyond criminal justice. Thank you for making the case that “an economic justice” is required, “particularly as the city looks at our budget.”[2] DCFPI agrees that adequate funding paired with meaningful policy change help move that vision forward.

Last year, this committee absorbed most of the duties of the now debunked Finance and Revenue Committee, meaning that this body has a lot of 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 develop your committee budget.

This written testimony:

  • Explains shortcomings in the Mayor’s budget and why thoughtful revenue increases are important to the health of DC residents and the economy.
  • 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, giant corporations, and real estate developers pay their fair share, so we have more revenue to provide targeted recovery support to the individuals and local businesses who have been hardest hit.

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.

Her 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.

A more equitable tax structure that makes the wealthy and profitable corporations pay their fair share would mean greater opportunities to fund crucial unmet needs, reverse the economy’s fall, and support families and small businesses struggling to stay afloat.

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 US and District’s history and ongoing biases. 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. Raising revenue would also help to assure that no one segment of residents and businesses bears the brunt of the budget shortfall.

The District’s rising economic tide hasn’t been lifting all boats for a long time. The income and wealth divides are stark, and Black median income is no higher today than it was during the last recession.[3] The pandemic is already laying bare the dire consequences of systemic racism and policies that have led to widespread poverty and inequality: Black residents have borne the greatest brunt of COVID-19 both in deaths and positive cases.[4] Our city can’t afford to enact a budget that largely maintains the status quo and fails to address inequities—or worse, a budget with cuts that deepen inequities. A balanced approach that includes new revenue would enable the DC Council to minimize harm while reducing entrenched disparities through targeted investments.

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 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 is vital to keeping families afloat.[5]

Make Wealthy Residents and Profitable Corporations Pay Their Fair Share of Taxes

We are all in this pandemic together, yet our tax policies tell a different story. By asking DC’s richest households, giant corporations, and real estate developers to pay 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 DC Council should enact strategic tax increases on households, businesses, and sectors of the economy that continue to have high incomes, profits, and activity even in these troubled times. Asking more from  taxpayers with a clear ability to pay is far preferable to underfunding the District budget in ways that harm low-income families—in areas such as child care, housing, and human services—and do too little to reverse entrenched economic injustices. The attached FBC sign-on letter includes specific revenue ideas to build a just recovery, including, but not limited to:

Making Wealthy Residents Pay Their Fair Share of Income Taxes. DC residents making $60,000 in taxable income a year and those making $350,000 pay the same income tax rate. And millionaires pay a tax rate that is just slightly higher. This is unjust and bad fiscal policy. Targeting tax increases on the wealthiest taxpayers would increase equity and generate new revenues to fund services that the Mayor underfunded in her budget.  DC could raise $186 million by adding a 3-percentage point surcharge to the top two tax brackets, for example, making those with taxable income of $350,000 or more pay their fair share.[6]

These taxpayers would still be better off due to the massive 2017 federal “Trump tax cuts,” which provided the top 5 percent of DC taxpayers tax cuts totaling $500 million.[7] More recently, the federal CARES Act gave the wealthy additional tax breaks too. They can afford to chip in; the city can’t afford for them not to. And, during a downturn, raising taxes on wealthy residents is better for the economy compared to cuts to low-income programs that further reduce economic activity. Even when taxes are increased, wealthy residents are less likely to reduce their purchases than low-income folks because they have savings and a larger financial cushion for disposable income purchases than other households.

Ending special treatment for profitable corporations and businesses. Each year, the District wastes millions on ineffective business tax cuts that don’t contribute to economic growth.[8] Eliminating these lucrative tax giveaways for entities that reaped massive profits and benefited the most from a booming economy would help address current budget shortcomings. For example, the Qualified High Technology Company incentive provides generous tax subsidies and should be eliminated given that the CFO found it to be ineffective—eliminating it would save about $24 million. The DC Council should also eliminate the deferred tax liability deduction for businesses that kicked in this year, 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 giant companies like Amazon and real estate developers 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.

The city has and can continue to support small businesses through a targeted grant and/or loan program, leveraging the new infrastructure that Council recently created, rather than arbitrary and poorly targeted tax cuts. Lawmakers can also provide targeted relief by waiving fees on tax payments paid late and enacting rent control for local “store front” businesses. These ideas ensure that small businesses most in need get supports to help them rebound while not crowding out funds for other vital public investments and economic lifelines for residents and jobless workers who too are struggling to get by. (The federal dollars that the city received is providing substantial funding to help cover some of these investments.)

[1] Chief Financial Officer’s April 2020 revenue forecast.

[2] Councilmember McDuffie’s Instagram Account, June 2, 2020 post, https://www.instagram.com/tv/CA8U2zgnRrp/?igshid=dndfkkuarmei.

[3] Tazra Mitchell, The District’s Rising Economic Tide Isn’t Lifting Black Boats, DCFPI, October 2019, https://www.dcfpi.org/all/the-districts-rising-economic-tide-isnt-lifting-black-boats/.

[4] Doni Crawford and Qubilah Huddleston, The Black Burden of Covid-19, DCFPI, April 2020, https://www.dcfpi.org/all/the-black-burden-of-covid-19/.

[5] Doni Crawford and Kamolika Das, Black Workers Matter, DCFPI, January 2020, https://www.dcfpi.org/all/black-workers-matter/.

[6] DCFPI’s special data request to the Institute on Taxation and Economic Policy, May 2020.

[7] Kitty Richards, As High Income DC Taxpayers Reap Large Federal Tax Windfalls, DC Can Make Our Tax Code More Progressive, January 2018, https://www.dcfpi.org/all/as-high-income-dc-taxpayers-reap-large-federal-tax-windfalls-dc-can-make-our-tax-code-more-progressive/.

[8] Amy Lieber, Revenue Revealed: It’s Time to Amend DC’s Tax Expenditure Programs, DCFPI, March 2019, https://www.dcfpi.org/all/revenue-revealed-its-time-to-amend-dcs-tax-expenditure-programs/.