D.C. Council approves budget without income tax rate hike

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Local,DC,Freeman Klopott
The D.C. Council approved a $5.6 billion budget Tuesday that doesn't raise the income tax rate on the wealthy as proposed by Mayor Vincent Gray, but adds other taxes and fees to cover drooping revenues and growing costs.

"We were able to pass a balanced and structured budget," Council Chairman Kwame Brown told The Washington Examiner. "Did everyone get what they wanted? No. Does it save important services? Yes."

The city was faced with a $322 million gap in fiscal 2012, which starts Oct. 1. Gray dealt with the shortfall in the budget he sent to the council in April by raising taxes on those who earned $200,000 or more and making deep cuts to human services. But Brown reshaped the budget by nixing the tax rate increase and adding millions to services that help the poor and the mentally disabled.

To cover the revenue lost by the tax rate hike, Brown pushed through a new 8.5 percent tax on out-of-state municipal bonds. The budget keeps Gray's proposal to raise taxes on parking garages and applies a new tax to live performances. It also requires multistate corporations to pay taxes on sales in the District, rather than file the revenue in states with lower taxes.

Brown initially intended for the municipal bonds tax not to be permanent, but the council voted otherwise. On Tuesday members voted down a final effort by Ward 3 Councilwoman Mary Cheh to use extra cash expected from a revenue projection later this month to prevent the tax from being applied to current bond holders.

"I'm voting for the budget even though I'm deeply disappointed in the unfairness for folks who will have a retroactive tax applied to their bonds," Cheh said. "I have to look at the package, and overall it's a good budget."

Not everyone agreed.

"The message sent by passing the largest budget this city has ever had is very bad," Ward 2 Councilman Jack Evans, who was one two votes against the budget, told The Examiner. "We are saying we are not operating within our means."

The debate often turned contentious Tuesday, and some council members described the scene as "chaotic."

"Gray had a firm hand on the council," Ward 6 Councilman Tommy Wells said, describing Gray's tenure as council chairman, which came immediately before Brown's.

"This time a lot was in flux," Wells said. "No one could whip votes."

Brown said he didn't think there was anything unusual about the how the council did its business Tuesday, but noted that "more issues arise when there are spending pressures."

"Clearly people are going to emotionally tied to things," Brown said. "I expect that to be part of the process."

fklopott@washingtonexaminer.com

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Freeman Klopott

Examiner Staff Writer
The Washington Examiner