D.C. residents, it’s worse than you thought. You thought it was only about the loss of federal deductions. But guess what? The D.C. government is a beneficiary of the new federal tax bill, too.
How so? D.C. tax law allows its taxpayers the same deductions as may be taken on federal tax returns, though it does disallow federal deductions for state and local taxes. With that, disallowance or limitations of federal deductions other than state and local taxes (e.g. tax preparation fees, money management fees, moving expenses and others) will not be allowed as D.C. deductions either. So far unobserved, this unanticipated revenue windfall for D.C. should incentivize even our most progressive citizens to demand that D.C. give it back and then some. But will they?
It has been widely publicized that the disallowance of state income and property taxes as federal deductions will cause D.C. taxes to become much more expensive for many of us.
Much has been written about ideas to ameliorate the impact of lost state tax deductions circulating in other high tax states such as New York, New Jersey and California. One would seek to treat citizen payments to states as charitable contributions with offsetting credits against state income and property taxes. Another would have the states abolish income taxes in favor of a deductible payroll tax (what happens to affected retirees who are not on anyone’s payroll?). Good luck with all of that, but keep thinking. Someone may yet come up with a feasible strategy.
The fact is thousands of us are faced with the biggest tax increase in D.C. history. It remains to be seen whether our citizenry will demand restraint on the free spending habits of our all-Democratic city council. Without a loud citizen outcry, is it too much to expect the council itself and the mayor – which have been the beneficiaries of ever increasing tax revenues owing to favorable demographics (read gentrification) in recent years – to decide on their own to give back this latest windfall?
They could easily amend the D.C. tax code to restore the deductions that are allowed this tax season. But will they find new “needs” to fund and new ways to spend it? Regrettably, there have been no reports of a responsible D.C. official even considering the impact of the GOP tax bill as are Democratic leaders in Sacramento, Albany and Trenton.
Up until now our overwhelmingly progressive citizenry has been largely supportive of D.C. taxing and spending decisions. Will taxpayers simply blame those nasty congressional Republicans and that unmentionable president for the fact that state taxes are about to become more expensive? Have we had enough yet?
The GOP tax bill will not change D.C. politics. We Washingtonians are not going to elect conservative Republicans to public office even if we could find a few living among us. Yes, Democrats will one day be running our national government again, but they will not restore any deductions. It would be unprecedented. Why would Ohio or Pennsylvania Democrats be willing to restore high state tax deductions that would cost their own citizens?
No, we D.C. residents are on our own. Will we finally demand tax relief by asking the DC government to absorb some of the burden of more expensive state taxes by cutting rates? Certainly we are entitled to much greater accountability by of our elected representatives.
We should demand competitive bidding for city contracts and really devise ways to combat waste and abuse. Might we consider an independent spending czar to root it out? Such an independent official might oversee budgets and provide real oversight of city contracts, especially construction contracts once they are awarded. Is there bloat in city jobs? Are we funding jobs that do not really exist, or even whole departments?
Without a public outcry nothing will change. Have you heard enough? Have you reached the tipping point yet?
Louis Nevins is a resident of Foxhall Crescent.