D.C.’s Found Money
D.C. Mayor Vince Gray and Chief Financial Officer Nat Gandhi announced today that the District ended fiscal 2011 with an extra $240 million in its pocket, but Gray says don't expect any relief from the city's high taxes and fees.
Much of the reason for the extra bounty lies in an extra $97 million in income and franchise taxes than the CFO had earlier anticipated. The District can thank a stronger-than-expected stock market and corresponding capital gains tax revenues for much of that increase. Local lawmakers may also want to send a thank you note to the apparently large number of rich residents who died in fiscal 2011: The estate tax pulled in a whopping $50 million more ($89 million total) than it did the previous year, according to the CFO's office.
Gray said it wouldn't be prudent to lower taxes and fees because the city's reserves are still tender from the beating they took during the last administration and need more help being nursed back to good health. Also, the District is still, at least on paper, facing a $150 million budget gap for fiscal 2013, says Gray budget director Eric Goulet (thanks in part to large projected increases in Medicaid spending that are due to health care costs rising at rates well above inflation).*
But Ward 2 Councilmember Jack Evans says he'd like to see the surplus used to lower the District's income taxes, an idea Council Chairman Kwame "Fully Loaded" Brown said the council should consider. The council voted to raise the marginal tax rate on high earners last year at the mayor's suggestion, with both Brown and Evans on the losing side of a lengthy fight. Does a rematch await?
On another note: Gray's announcement today came during the official unveiling of the city's annual audit, or Comprehensive Annual Financial Report, which is filled with fun facts and figures.
One set of numbers that caught LL's eye is the breakdown of income tax revenues that illustrates the District's explosion of rich people in the last nine years and the city government's growing dependence on their wealth.
Between 2002 and 2009, the number of tax filers in the District grew by nearly 40,000, with almost all of that growth occurring in higher income brackets. In 2002, there were 27,209 tax filers who made $100,001 or more. In 2009, that number had grown by a staggering 88 percent to 51,407. The high earners paid more than $912 million in income taxes last year, accounting for 71 percent of all of the District's income tax revenue. In 2002, six-figure-earners accounted for just 57 percent of income tax revenue.
The number of filers making between $75,001 and $100,000 grew by 63 percent, and the group making between $50,001 and $75,000 grew by 36 percent. But the number of filers making $50,000 or less actually shrunk by nearly 7,000, or 3 percent.
Nobody ought to be shocked by now to learn that the District is attracting and retaining large numbers of high income residents. But LL thought a nearly 90 percent increase in less than a decade of six-figure-earners deserved at least a low whistle.
*This post has been updated.
Photo via Wikimedia Commons