Council Chairman Phil Mendelson
D.C. Council Chairman Phil Mendelson Credit: Darrow Montgomery/File

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Every month, D.C. Council Chairman Phil Mendelson publishes a newsletter. It typically lands in constituents’ inboxes near the beginning of the month, and lately, much of it is dedicated to Mendo’s crusade against vacant buildings. In chronicling his trips to the “empty and rotting” structures, he’s hoping to highlight the failure of the Department of Consumer and Regulatory Affairs, which is responsible for designating a building as “vacant” or “blighted.” Those designations trigger a higher tax rates, meant to incentivize property owners to fix the places up. DCRA has done a “poor job,” according to the chairman.

With the budget vote coming up, Mendelson’s July letter also included his thoughts about the the call to raise taxes. In a rather grumpy 1,100-word screed, the chairman lays out his argument against tax increases and dismisses the advocates making the demand. Councilmembers Brianne Nadeau (Ward 1), Janeese Lewis George (Ward 4), and Charles Allen (Ward 6) will introduce an amendment to the budget bill today that raises income taxes on people making more than $250,000.

Loose Lips spent the past week speaking with some of the advocates for tax increases, as well as a Council staffer familiar with the budget. Read the chairman’s letter below, with their annotations.

We have about $3.2 billion – billion – in federal payment and grants for next year’s budget. Unprecedented. That’s more than enough to cover revenue losses from the pandemic-induced recession. That’s more than enough to provide additional funding to help our schools – and students – recover from virtual learning loss. We have over $350 million to help tenants with past due rents and unpaid utility bills. Yet the Council is being bombarded with demands to raise peoples’ taxes.

“We have federal money to allow for some childhood stabilization grants, but we’ve not made investments in raising childcare worker wages,” says Erica Williams, the executive director of the D.C. Fiscal Policy Institute, a left leaning think tank. “These are predominantly Black and Brown women who are not earning much more than minimum wage. We need to raise their pay, and we are supposed to be doing that according to the birth to three law we passed in 2018.

“The other area of need that’s not adequately funded for the moment we’re in is housing and homeless prevention. We’d like to see more put into meeting the need for permanent supportive housing vouchers for families and individuals. We’d like to see money put into targeted affordable housing vouchers. No dollars were committed to reducing the D.C. Housing Authority’s waiting list.”

“This [budget] vote on Tuesday is perhaps one of the most important votes the Council will make in decades, and it’ll show if they’re choosing to learn the lessons of the pandemic that everyone needs housing or if we’ll go back to how things were before,” says Jesse Rabinowitz, senior manager for policy and advocacy at Miriam’s Kitchen, a social services agency dedicated to housing and homelessness. “To me, that’s what the first paragraph about federal money speaks to. Returning to a status quo, pre-COVID, is not the goal.”

I have yet to hear a coherent, logical explanation for why the Council should be doing this.

“Well then, he’s not listening very well,” says Amber Harding, an attorney with the Washington Legal Clinic for the Homeless. “If you can find the money to meet the pressing needs in the community in another way, great. If not, it would be irresponsible to turn away from those needs, and raising taxes is one option the Council has.”

“He presided over a hearing where dozens of people came out and made the case for raising taxes,” Harding adds. “It’s hard for me to imagine what he would find persuasive at this point.”

At a recent budget hearing numerous advocates demanded we increase taxes simply because “we need to increase revenue.” In spite of the federal largesse. In spite of the fact that local revenues next year are projected to be $162 million more than pre-pandemic 2019.

“The funny thing about that is, people were calling for revenue for additional investment in the people who need it,” Williams says. “Lots of childcare providers were asking to raise revenue so they can be paid better and survive this moment and stay in their jobs that. You had housing advocates calling for additional investments in housing affordability and stability and homeless prevention. Nobody is calling for revenue for no reason.”

Advocates are saying that’s not enough.

It’s never enough. The proposal from the Fair Budget Coalition is to raise several taxes including income tax rates for residents earning over $250,000 and to increase the real property tax rate on homes valued over $2 million. The Coalition demands at least $240 million in additional revenue – additional to the $3.2 billion from the Feds.

“Who are these nameless, faceless advocates?” Harding asks. “Certainly paid advocates like me came out. But there were also a lot of District residents and [advisory neighborhood commissioners]. Is anyone who comes to the Council an advocate? It’s just a very weird way of framing. You have a hearing to get input and then frame them all with this broad based ‘advocate.'”

“There are other options,” Harding continues. “I have not heard an alternative plan from him for how he’s going to meet the needs of the community. That is actually his job as chairman of the Council.

“Having done budget work for 20 years, when we don’t give them options for how for pay for things that we say are pressing needs, we are criticized. They say ‘Where’s the money? How do we pay for that?’ Then we come up with ways to pay for it, and get rejected.

“There’s no path here that meets his approval, so it feels like he just doesn’t want to fund the programs.”

“This is just a first step on advancing racial justice through tax justice,” says the Fair Budget Coalition.

Is this just about raising taxes on the rich?     

Well, “no,” say the advocates. “We need the money to fully fund worthy programs.” But in fact, their demands for various programs total far more than their proposed tax increases: hundreds of millions to end homelessness and repair public housing, $200 million for excluded workers, at least a hundred million related to childcare, about $60 million for the Alliance (public health insurance), etc.

“So is the argument that we can’t fully fund our asks with the options we’ve given him, so we shouldn’t fund our asks at all?” Harding asks. “That’s interesting.

“We fully expect there to be a balance of moving money around and raising revenue. I was just reading how Events DC has an $80 million surplus. Good. Take that. Lower the police budget. And the local government subsidizes police in public housing by $4.2 million a year. Why would the local government subsidize that? Why do we need police in properties where low-income residents live and not in neighboring properties?

“We’ve identified multiple pots where we’ve said this isn’t a good use of money. Take it and put it into critical needs.”

“He says it like those are all bad things,” Williams says. “I’m not sure why this doesn’t make sense for him, but achieving racial justice and racial equity means we’re going to have to raise revenue to meet the needs of all of our communities.”

If the tax increases are to fund these programs, then what happens next year, since the demands won’t be fully funded this year? Raise taxes again?

When does it end?

Why not instead look at whether these programs are wasting money, or not being effective?

“I’m confused. Is the chairman asking for a higher tax increase? Is he upset at the advocates for being too moderate?” asks a D.C. Council staffer who works closely with the budget and who LL agreed not to name.

“There’s a damned if you do, damned if you don’t vibe here,” the staffer continues. “If the advocates ask for the amount they think they really need, they get laughed out of the room for asking for too much. If the advocates reduce their demand and ask for a more reasonable amount spread over a few years, they get dinged for asking for too much. So what should they do?”

“Yeah, you know, I think that’s why it’s named by Fair Budget Coalition as a first step,” Williams says, responding to the chairman’s question. “We’re not gonna solve all the problems with it. We should be taking ourselves out of the frame of ‘When is it ever gonna be enough?’ and be thinking about what’s it going to take to build the kind of city where we’ve minimized poverty and hardship and inequality and made it so kids from every part of the city and their families can actually thrive.”

“Of course we should have appropriate oversight of our programs and services,” Williams says. “That is certainly the job of the Council.”

“Like, for instance, cutting the [Qualified High Tech Companies] business tax credit, which the CFO found to be not effective, and which the Chairman repeatedly voted against significantly cutting?” the Council staffer asks. “That kind of waste?”

For instance, last year the Council budgeted $50 million for public housing repairs. “Not enough!” screamed the advocates. One year later the Housing Authority has spent about one-quarter of what we provided.

“The Housing Authority has something like a $2 billion repair backlog,” the Council staffer points out. “If they can’t spend $50 million in a year, that seems like a problem they and the Council need to fix, not that there’s not a need for the money.”

Another example: last year the Council added more money for permanent supportive housing to reduce homelessness. Here again we see significant underspending – about $14 million. But the demand on Councilmembers is to increase that budget by $60 million.

“Generally, there is a real misunderstanding about how voucher money gets spent,” Harding says. “There is literally no voucher program that can spend all the money in the first month or two. 

“The overemphasis on voucher underspending to me reflects a misunderstanding of how voucher programs work. You should expect a certain amount of that spending to be underspent every year even in the most efficient program.”

“It’s notable that this letter doesn’t include a critique of how the sports betting program is laid out or overspending in the D.C. police department,” Rabinowitz says. “The only time we talk about getting money out the door, whether it’s too little or too much, is when we’re talking about poor Black people.

“If there are capacity concerns, let’s fix them,” he says. “The chairman of the Council has the authority and ability to do oversight and fix these problems.”

The advocates say we must raise taxes now because the federal funding is one-time. True, although the federal money can be spent over three years. I do not understand the argument that we must raise taxes now to fill the gap when the federal funds run out three years from now.

“For things like permanent housing vouchers, through the nature of the program, it cannot be funded with one-time money,” Rabinowitz says. “Those people deserve stability and continuity. What we need are recurring dollars, starting in this year’s budget, to ensure these programs are funded for as long as they need to be funded and not the ‘We’ll fix it next year,’ mentality.”

“We have a four year financial plan for programs,” Harding says. “So people are concerned about the cliff.”

The advocates cite a poll, paid by the DC Fiscal Policy Institute (DCFPI) and DC Action for Children, claiming that about 80% of DC residents support raising taxes. But the polling questions were incredibly leading.

“This is similar to survey we put out last year and we got similar results,” Williams says. “We got similar results even when polling a much much larger sample, 2,400 voters, which is a huge sample size for a city. Our sample was weighted to reflect D.C.’s demographics. We feel very good about our poll.”

For instance: “Q10 Big corporations like Walmart and Amazon took home billions in profits last year, despite the economic downturn. Do you strongly support, somewhat support, somewhat oppose, or strongly oppose raising District taxes on profitable corporations who pay a lower income tax rate than middle-income residents?” — unsurprisingly, 84% said support!

“That’s lower than I would expect,” Harding says. “The tax on high-income earners only effects the top three percent of earners. Of course the vast majority of people will support that. It’s a tiny fraction of the electorate for a huge gain.

“He heard testimony from high income earners, who are saying ‘tax me more if it goes to these programs,'” she continues. “You can throw the entire poll out, but that’s what public hearings are for. Beyond the poll his job is to listen to people in the community. Plus, the poll is a red herring. It’s literally on the national Democratic party platform to raise taxes on high-income earners.”

The progressives say we need to raise taxes so as to have an equitable tax structure – that the more one earns the higher their tax rate. But that is already true for our income tax, arguably the most progressive income tax in the country. The Council raised income tax rates on the wealthiest, and reduced tax rates for the poorest, in 2013.

“I thought the chairman thought he was a progressive,” Rabinowitz says. “Isn’t that what he campaigned on?”

If we look at total tax burden, including sales and property taxes, the rich maybe pay a slightly lower percentage of their income in taxes than do the middle class. This comes from a study circulated by DCFPI. The study, however ignores the senior citizen property tax credit (a 50% credit), ignores the probate tax on wealth, and attributes business taxes to residents. Even so, the study scores DC second-best on the equity scale among the 50 states.

“That’s a study by the Institute on Taxation and Economic Policy,” Williams says. “I think looking at seniors complicates things because a lot of times folks are on a fixed income and might skew the results.

“They make an assumption about business taxes that lot of folks agree with, which is that those costs get passed through to customers through higher costs on goods and services.”

Nevertheless, we could further equity by slightly raising the highest income tax bracket and then reducing the rate for middle income tax payers.

That would be equitable. 

“So the chairman actually supports raising taxes, as long as it goes to his priorities?” the Council staffer says.

“I fundamentally disagree with his framing of equity,” Rabinowitz says. “To me equity means addressing and reversing centuries of racialized capitalism and funding programs that bolster transformative change like ending homelessness. Equity means making sure people who are struggling in the city, who are primarily Black and Brown, can afford to live here and thrive.”

The advocates aren’t interested in that. They want the money for programs.

How much? 

It’s never enough. So do we keep raising taxes year after year?

They say that “equity” comes from the programs. I support the programs.

Year after year I push the Council to increase funding for public education, affordable housing, combatting homelessness, access to justice.

Year after year I present a budget to the Council that adds funding – above what the Mayor proposed and above what the committees recommended – in these areas.

And while I support them, I don’t see that the wealth gap, achievement gap, income gap, or racial injustice gap is changing.

“And far far below the need,” Harding says. “He’s right that the mayor proposes budget every year that is even worse, and he does usually make it better. But the bar is ‘Are you meeting the need?’ The answer is no.”

“The committees can only ‘recommend’ changes they can pay for,” the Council staffer says. “If the Housing Committee wanted to increase the number of housing vouchers, they’d have to cut money from another housing program to pay for it. They couldn’t recommend, say, raising taxes to meet the need they see.”

“For my clients, every voucher ends their homelessness permanently,” Harding says. “That’s huge for that person. Life changing. We just aren’t doing it for enough people. The failure to see the stakes is disappointing from the chairman of our Council.”

We have to do something different. Raising taxes is the easy way out. What ought to happen is that the advocacy groups focus on waste and inefficiency. Before demanding another $100 million for public housing repairs, look at what needs to change at the Housing Authority so that the $50 million we budgeted last year gets spent. Before demanding that we add another billion dollars in human services, look at whether spending more on existing programs is actually the best path to end poverty.

“I’m pretty sure this is the government’s job—not the job of the advocates,” the Council staffer says. “How are they supposed to know where the waste or inefficiency is?

“Is the chairman asking the business lobby to also focus on waste and inefficiency? Is he asking them at all how to fund their requests?

“One place we can find some waste: the Department of Corrections food service contract, where DOC just asked the Council to approve an additional $2 million to the contractor in exchange for … nothing. Oh wait, the chairman voted for that too, never mind.”

Unless, however, the goal is the redistribution of wealth. Not only is a 3% increase in taxing millionaires not going to accomplish that, but if that’s really the goal then DC won’t be an attractive place for the .7%  of our taxpayers, who earn over $1 million, and who pay 23.1% of our income taxes.

“This is a literal goal of progressive tax policy,” the Council staffer says.

“People make decisions about where they live based on a whole host of factors, and the research out there tells us taxes don’t play a role in that,” Williams says. “That’s not to say you won’t ever get a wealthy person who moves because of taxes, but that it would happen en mass or that that is a primary factor for movement has been totally taken down by the research looking at state, national and international level. Actually the research does show that folks with low incomes are more likely to move than folks with high incomes.”

“If you earn over $1 million, you’re probably already paying at least $20,000 more a year in income taxes then if you move to Virginia,” the Council staffer adds. “So clearly they’re not too sensitive to the different state tax rates.”

We ought to be thoughtful about raising taxes and improving our tax structure. That is why the Council called for re-establishing a Tax Revision Commission which the Mayor funds in this budget (and which every progressive group opposed at a hearing last fall). We ought to be mindful that already our income tax and commercial property tax rates are the highest in the region.

“For this very reason!” Harding says. “We knew it would be used as delay tactic to avoid raising revenue for critical needs, and also because it’s super elitist. There’s no public hearing. It’s just bunch of people appointed by politicians who talk about what the best policy is divorced of any actual needs.”

“K, done. Mindful,” Harding adds.

As I said at the beginning, where’s the logic? If we are to raise taxes to fund programs, we won’t raise enough under the advocates’ proposal; we’ll have to raise them again next year. If this is to replace the loss once the federal funds run out, then why are we raising taxes now? If this is for equity, then why not simply restructure the tax brackets?

We really ought to be thoughtful about this.

“We were thoughtful at the revenue hearing held by [Ward 5] Councilmember Kenyan McDuffie and in our calls for an open public revenue hearing, which have been ignored by the Council,” Rabinowitz says. “We’re asking the Council to be thoughtful and recognize that some D.C. residents, who are primarily White are doing well contrasted with the reality that on the other end of the spectrum, people are really hurting. I think asking people to pay their fair share is the thoughtful thing to do.”