The District Must Enact Revenue Options to Thwart Deepening Income Inequality

In order for the District to recover from the pandemic economy, lawmakers must address widening racial inequities by ensuring support for those most harmed by the pandemic and its economic consequences, namely DC’s Black and brown residents. Both research and common sense show that the District will be stronger if all residents have resources to pay rent, feed their families, and shop for necessities in their community. For that reason, the District should do more to fund services for struggling residents, including raising taxes on our highest-income residents and big businesses, to support economic stability that benefits the city.

The pandemic has worsened unequal economic conditions, with some residents poised to come out of the crisis fine or even stronger, while the rest remain trapped in decline and uncertainty. Low-income residents who make up a large share of workers in sectors hit hardest by the pandemic are facing disproportionate job and income loss. Economic hardship has spiked over the past six months, particularly among Black, Latino, and immigrant households.  Meanwhile, wealthier, higher-income District residents who are mostly white have largely avoided the worst economic effects of the pandemic, benefitting from telework opportunities and a faster-than-anticipated stock market recovery.

  • DC employment rates dropped by 6.2 percent between January and the end of September for people earning over $60,000, many of whom can telework, while employment rates have fallen by nearly 18 percent for workers earning less than $27,000.
  • 16 percent of all adults living with children in DC were living in a household where there was not enough food, and 24 percent of all adults were behind on rent, according to Census data from October-November 2020. Black DC households make up 21.6 percent of households in poverty likely to experience these devastating conditions, compared to 8.8 percent of Latinos and 5 percent non-Hispanic whites living in poverty.
  • In the midst of shocking levels of unemployment and hunger, the stock market has reached record levels, adding to the wealth of those with enough income to invest. Nationwide, over 90 percent of capital gains go to families earning over $163,000.

Income inequality in DC was growing even before the pandemic.  In 2019, the top 20 percent of households in the District had an average income of nearly $362,000—26 times larger than the average income for households in the bottom 20 percent and nearly four times larger than the average income for the middle 20 percent. This inequality is highly racialized—white household income was more than three times the Black median income and 1.5 times as large as the Latinx median income.

The disproportionate racial harm of the pandemic reflects long-standing inequities, stemming from structural racism in education, employment, housing, and health care. Because Black residents are overrepresented in low-wage jobs, they are more likely either to have lost jobs and income due to the pandemic, or to work in a frontline, essential occupation and risk exposure to COVID-19 and its health consequences.

Past Recession Provides a Cautionary Tale

The aftermath of the 2008 Great Recession shows that the economy grows more slowly when income inequality is high or growing, which suggests that addressing DC’s growing income inequality now will help us recover from the pandemic more quickly. Lower-income families must spend nearly all of their income to meet their basic needs—which in turn supports the economy—while higher-income families don’t necessarily adjust their spending much in response to higher or lower income because they are able to meet their needs on just a fraction of their income. This means that the current loss of income for unemployed low-wage workers is hurting the DC economy, while the stock market gains for higher-income residents are not helping much.

As the District responds to the pandemic and economic crisis, lawmakers should prioritize increasing support for residents who have lost income because their jobs were eliminated or cut back, including smart ideas like the Mayor’s new one-time $1,200 stimulus payments for DC jobless residents who have applied and are eligible for Pandemic Unemployment Assistance. This approach will help offset the unequal harm of the pandemic, support the stability of Black and brown residents, and also help the District recover faster from the economic downturn. Putting more local funds into programs like emergency rental assistance or income supports will reduce the likelihood of evictions and food insecurity, and will support landlords and other DC businesses, which will in turn support the jobs that these businesses create.

Expanding support to DC residents will likely require the District to raise revenues or use more of its reserves, and this should be done by increasing taxes on DC’s wealthiest and highest-income residents and big businesses. It is fair, and urgently needed, to ask more from those wealthy residents so the District can fund and preserve funding for lifesaving programs. This approach will provide badly needed stability to those hurt most by the pandemic, and pump more money into consumer spending, thus helping the entire city recover faster from the pandemic.

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