On September 30, 2020, the executive director of the DC Policy Center, Yesim Sayin Taylor, testified on the Tax Review Commission Reinstatement Act of 2019. You can read his testimonial below or download a PDF version.
Good morning, Mr. Chairman Mendelson and members of the Committee of the Whole. My name is Yesim Sayin Taylor and I am the Executive Director of the DC Policy Center, an independent, non-partisan think tank committed to advancing policies for a strong and vibrant economy in the District of Columbia. Thank you for giving me the opportunity to testify on the 2019 law amending the law on the re-establishment of the Tax Revision Commission.
The Eastern District has, in a very important way, demonstrated its commitment to good fiscal policy. There have already been two Tax Revision Commissions since the Revitalization Law (one in 1996, another in 2012),and both have produced reform programs that preserve solid principles: creating a simple and efficient tax system that maintains competitiveness by imposing as few disincentives as possible on economic activity while reducing tax burdens on low-income residents . The District adopted both packages with small modifications.
But between the adaptation of major tax reforms, sound tax principles could be forgotten. Especially when under pressure, district tax policy could crumble in an exercise to get a number to plug into the budget, with little regard for what will keep our tax system simple, fair and competitive.
For example, during the fiscal year 2019 budget cycle, in search of funding for the metro and the arts, the city completely changed the structure of commercial property taxes with almost no analysis. At that time, the Council created a three-tier system that charges the same value at different rates based on the overall assessment of a property. This was done without any study or analysis of the potential economic impacts. When tenants pointed out that taxes would be passed on to smaller establishments that rent space in larger buildings, the city created a circuit breaker-type program, but only for retail businesses. We ended up with a patched up and complicated system that penalizes development, especially in parts of the city where development is needed most.
And in the six months since this major tax change, the city first decreased and then increased the tax rate for the top tier.
It is unreasonable to expect a city’s tax system to be static. But it is above all for this reason that the creation of a recurring tax review commission is important: the commission’s work could serve as the basis for a catalog of well-studied tax policy proposals that pursue the important objective of maintaining the competitiveness of the city, while maintaining a tax system it is fair and simple. The Tax Review Commission can develop these policies outside the highly political environment of budget discussions, which do not always reward good tax policy. To be clear, tax review boards also need to achieve consensus, but not in a political environment. In the past, this consensus has been enough political pressure on district decision-makers to be adopted.
Being thoughtful and intentional about our tax policies is even more important today, as the district’s income base is decimated by economic shocks induced by COVID-19. What made the district attractive to residents, workers and businesses (density, amenities, transport infrastructure, quality of life elements such as nightlife, sports and cultural events) will likely be suspended in the near future. . The rapid transition to telecommuting means that even after we have a cure or a vaccine, commuter activity (and the benefits it brings, including the demand for office space in DC) could be impaired. In the long term, the city will need to ensure that it remains a âdestinationâ for workers, residents and businesses; and a stable tax environment can help.
Tax increases pay for large investments worthy of public support. But an erratic tax policy that ignores larger economic impacts does not serve the best interests of the District of Columbia. And when revenue initiatives sometimes run counter to what the budget is trying to achieve on the spending side, they spur the city to spin its wheels on important issues such as housing affordability and increased housing. of economic activity. They impose a pure cost on future growth.
The District need not be reminded that public investments can only continue to increase if the city continues to grow. And bad fiscal policy that does not weigh enough the importance of economic growth will frustrate government investments.
Yesim Sayin Taylor is the Executive Director of the DC Policy Center.
 There was also a Tax Review Commission established in 1976, which provided recommendations to the DC Council in 1977. We could not find any documents on what this Commission studied and what it recommended.
 Prior to this change, the City taxed the first $ 3M of assessed value at $ 1.65 per $ 100 of assessed value; and any assessed value greater than $ 1.85. The council changes meant the city began taxing properties valued at less than $ 5 million at 1.65%, properties valued between $ 5 million and $ 10 million at 1.77%, and properties valued at over $ 5 million. $ 10 million at 1.89%. This change generated $ 40 million in revenue.
 This provision, targeting retail establishments with annual gross revenues of $ 2.5 million or less, provided for a franchise tax deduction of up to 10% of their rent or property tax liability, capped at 5,000. $ per year.
Featured photo by Ted Eytan (Source)
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