Tax Increases for Residents and Businesses in Gray Budget

Friday, Mayor Vincent Gray released the Fiscal Year 2012 (FY 2012) budget proposal that combines spending cuts with tax increases to cover a $322.1 million deficit and effectively balance the budget without using reserve funds.

The most significant impacts for Georgetown residents and businesses are likely to be the $127.2 million in tax increases. Gray also cut $187 million in expenditures, reducing spending in FY 2012 by half of one percent over FY 2011.

“In its current form, there is absolutely no way that I will support this budget,” said Ward 2 Councilmember Jack Evans in a press release. “The fact that we continue to rely on tax increases and gimmicks while failing to address our broader fiscal issues is nothing short of amazing to me.”

What exactly are those tax increases and "gimmicks" most likely to affect Georgetown? Gray proposes:

• Increasing the parking garage tax from 12 percent to 18 percent ($18.2 million in revenue projected)
• Marginal income tax increase to 8.9 percent for those earning above $200,000 and decoupling from Federal tax cuts with itemized deduction limitations ($35.4 million in revenue projected)
• Increasing off-premise (i.e. restaurants and bars) alcohol tax from 9 to 10 percent ($2.9 million in revenue projected)

“I unequivocally oppose increasing our income tax to 8.9% and maintaining our sales tax at 6%, making us without question the highest in the region,” said Evans.

At a press conference today, Gray said the income tax increase would only apply to an estimated 5 percent of D.C. residents.

Gray was asked if he thought there was a perception of unfairness to ask some to pay more when leaders have been seen as wasting District funds. Gray responded, "there is always a perception of government spending perhaps more than it should," but that he tried to made the budget balanced and efficient to counteract such perceptions.

Did Gray think his tax increases made him seem "less than business friendly"? The mayor responded, "Am I happy about this? Absolutely not."

Gray said his decision to increase taxes was not a target from the beginning, rather the budget was an "evolutionary process." The mayor added that "until this week...it was still evolving" and would continue to change, for that matter, once the District Council weighs in substantively.

“I am gravely concerned about this budget and can only hope that my colleagues will recognize it for what it is and address the many issues facing the District in a responsible manner," said Evans in a press release.