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TWO PIECES IN YOUR JULY 21 issue were startlingly inaccurate. First, as the Department of Consumer and Regulatory Affairs (DCRA) employee that Loose Lips referred to, in my testimony before the financial control board (which, as in this letter, was on my own behalf as a District resident), I did not say that the department was “misspending funds.” What I did in fact say was that a substantial percentage of money received by the department in the form of permit and license fees was diverted for other, albeit worthy, purposes by past and present mayors and city councils. I stated that no matter how worthy the purpose, license and permit fees could not be diverted on such a substantial extent without harming the District’s economy.
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This is because (contrary to the thesis of “Tax Hell,” the second inaccurate piece in the issue) license and permit fees are not taxes. What distinguishes license and permit fees from taxes is simple; through a system of license and permit fees, those individuals and corporations engaged in business, professions, and activities that are regulated by the government pay the cost of regulatory oversight by the government. For example, if someone wants to work as a clairvoyant in the District, they have to pay a $550 fee. Because fortunetelling has often been used as a means of scamming the public, applicants for such licenses are put through an extensive background check, including a sign-off by the Metropolitan Police Department. Unless a specific fee was charged, the general public would have to bear the cost. By charging the license fee to cover such costs, the District lowers the overall tax bill to the general public. This also means that not even one dollar from sales, income, or property taxes goes to pay for the operation of the DCRA.
One other crucial aspect of license and permit-fee usage is that prices set for fees and permits are calculated to cover the cost of government oversight and nothing else. This means that if any of the money collected for the administration of such licenses and permits is diverted, the regulatory program can be hurt. When, as has been happening for years in the District, millions of dollars meant for regulatory programs are diverted, the regulatory structure can crumble and eventually break down. In modern cities, where we all do business with strangers on a daily basis, we rely on government to make sure that scales at the supermarket are accurate, restaurants store and prepare their food properly, dentists have actually gone to dental school, and on and on. In short, a modern city cannot operate without a functioning municipal government. What fund diversion has meant to the District so far is that everything takes longer. This is because broken and outdated computers haven’t been fixed or replaced, and openings created by retiring inspectors, counter people, and computer-input personnelhaven’t been filled. The money earmarked for such purposes has been sent elsewhere. This means that license and permit-fee payers have been subsidizing the nonregulatory functions of the D.C. government.
This is what I said to the financial control board. I also said that one of the challenges the board faces was whether it would end such fund diversion, thereby making its goal of financial solvency more difficult by tens of millions of dollars, or continue the past practice of the mayor and the city council of robbing Peter to pay Paul at the expense of fee- and permit-paying District businesses and residents.