As part of her $12.9 billion budget request, Mayor Bowser proposed to raise the District’s sales tax rate by 0.25%. That bump would have raised $22 million in FY 2016 or about 0.17% of the total budget.
The mayor also proposed a 4 percentage point increase (from 18% to 22%) in the the parking tax that would have raised $9.9 million in 2016, or 0.07% of the total budget.
Neither tax increase would have a material impact on revenue nor the economy, other than to offer a small encouragement to shop and park less, so why was it important for the DC Council to reject them? In a word — stability.
Tax rates affect the behavior of every District resident and every business. A stable tax system allows families and small business owners to plan more than twelve months in advance.
Rejecting this tiny tax increase sends a giant message to the people who make investment, hiring and spending decisions in DC. It will increase the confidence of businesses and consumers, clearing the way increased capital spending and consumption.
Chairman Mendelson and the Council should be congratulated for using some foresight. It’s not something governments are known for.
Just a side note on the budget: DC approved a $12.9 billion budget. The District has 658,893 residents. New York City, with a population of 8,406,000, passed a $78.5 billion budget. That equates to per capita government spending in DC of $19,578. New York, a city of similar political disposition with about the same level of services, will spend $9,338 per person. Where, exactly, does our tax money go?