Viewpoint: Regressive tax isn’t the answer to Metro’s woes

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A subway train arrives at the Georgia Avenue-Petworth Metrorail station. (Brian Kapur/The Current/July 2017)

D.C. Council Chairman Phil Mendelson’s Viewpoint in the Sept. 6 issue of The Current advocates for a regional sales tax, claiming it is “uniform approach — borne equally by everybody.” I take this to mean only that everyone would pay the same percentage increase in sales tax. Yet because this kind of taxation is the most regressive, with the heaviest impact on low-income folks (even pointed out by Maryland Gov. Larry Hogan), it would add one more burden in addition to fare increases and service cuts. A group led by Ed Lazere of the DC Fiscal Policy Institute called this the “Triple Whammy” in a press release and report released on Aug. 27. The DC Fiscal Policy Institute was joined by the Maryland Center on Economic Policy and the Commonwealth Institute of Virginia.

As a result of documented testimony to the D.C. Council by myself and others over several years, Chairman Mendelson should know by now that millionaires pay the lowest overall D.C. tax rate (6.4 percent) of all but the poorest residents, while working-class families with an average income per year of $52,000 are paying the highest (10.3 percent). In contrast to Maryland and Virginia, the poorest families in D.C., averaging $14,000, have a slightly lower burden (5.6 percent) than millionaires, thanks to the District’s earned income tax credit. (These figures come from the Institute on Taxation and Economic Policy’s “Who Pays?” 2017 report, with data from 2015.) How then can Mendelson pretend that his regional sales tax approach is “borne equally by everybody”?

But the fundamental challenge we all face is to make the Washington Metropolitan Area Transit Authority’s invaluable public transit more affordable with improved service, reversing the present course. Indeed, dedicated financing is imperative, and this is possible with a progressive approach. Metro’s policy of raising fares and cutting service will discourage Metrorail and bus ridership, shifting reliance for commuting to cars — precisely the opposite of what is needed to reduce regional air pollution and its negative health impacts, as well as carbon emissions that contribute to global warming. This outcome is directly opposite to the self-declared objectives of the District government’s Sustainable DC initiative.

We endorse the key solutions of the Save Our System Coalition, namely moving to a safe and reliable transit system that is more affordable and better funded by making those profiting most from Metro pay their fair share. Specifically, just like the DC Fiscal Policy Institute, we support a modest income tax hike for larger businesses and wealthy residents — especially millionaires — to create the required funding stream for Metro. A similar millionaire’s tax was recently proposed by New York City Mayor Bill de Blasio to support his city’s subway system.

In 2014 (the most recent data available), D.C. tax returns with adjusted gross incomes of $1 million and above had a taxable income of $4.59 billion, while for the same top bracket Maryland had a taxable income of $17.0 billion and Virginia $23.62 billion. For the region served by Metro, the total taxable income of these millionaires was $45.2 billion.

A 1 percent surtax on regional millionaire income would generate at the very least $450 million in potential funding — and probably more since the taxable incomes in question have very likely increased in the last three years. A modest tax hike along these lines would still leave these wealthy residents paying a lower overall percentage of their income in local taxes than working-class families do. And if a Trump/Ryan tax cut goes through, these residents would end up paying lower taxes than now.

This income tax hike, coupled with business taxes, would create a system of sustainable dedicated funding for Metro. The “Triple Whammy” report recommends that each jurisdiction should find its own way to implement dedicated funding. Instead of participating in more regressive Republican-like tax policies, “racing to the bottom,” D.C. should take the lead in advancing a progressive approach that would inspire similar efforts in Maryland and Virginia.

David Schwartzman is chair of the Political Policy and Action Committee of the DC Statehood Green Party.