Council Winds Up Approving Two New Taxes
One little irony about yesterday's council tax vote kerfuffle that LL would like to point out is that the council actually approved two new taxes, instead of just one as the mayor originally proposed in his budget. There is the marginal tax increase of 8.95 percent on income over $350,000 that's got Ward 2 Councilmember Jack Evans so upset, but there's also now a new tax on the interest earned on out-of-state municiple bonds purchased by District residents after the end of this year. (Though it should be noted that since there's no longer a tax benefit of buying these bonds, few are expected to buy them. The CFO's office estimates that the revenues from this new tax will only be about $1.1 million a year. )
That's quite an accomplishment for the council, especially given that Council Chairman Kwame "Fully Loaded" Brown took a firm stand against raising taxes in general. "People are tired of their taxes going up, especially in these environments," Brown said back in March.
So how did the council get here? The roots of this two-tax mess began when Brown proposed swapping out the mayor's proposed income tax (which originally would have increased taxes on folks making $200,000 or more a year) with a new muni bond tax. Brown was able to garner support for the move on the premise that the muni-bond tax would go away once expected additional revenues appeared. That plan, however, was just a shade too cute and backfired when Ward 6 Councilmartyr Saint Tommy Wells threw a monkey wrench in the works by essentially prohibiting a buy back of the bond tax.
In early July, Brown tried again and the council approved using the city's reserves to delay collections on the new bond tax. That idea that didn't fly with the mayor, who used a pocket veto to throw his own monkey wrench into the Brown's plans.
The lesson here is don't include anything in your budget you and your allies can't ultimately live with. Ward 3 Councilmember Mary Cheh couldn't live with a municipal bond tax being retroactively applied to all the the grumpy bond-holding retirees who live in her ward. She provided the crucial seventh vote yesterday to approve the income tax hike in place of a tax on muni bonds already purchased.
That leaves Brown in the awkward position of being a council chairman who drew a line sand against new taxes and then presided over a council that not only jacked income taxes but created a new tax as municipal bonds as well.