Greater Greater Washington

Gray budget generally good for transportation

Mayor Gray released his proposed budget on Friday. It makes deep cuts in many areas, especially social services, but makes some exciting investments in transit funding, especially a big commitment to the streetcar program.


Photo by DDOTDC on Flickr.

Besides a capital investment in streetcars, the budget maintains Circulator funding and gives WMATA a small increase, but not enough to stave off Metro service cuts. Off-street parking taxes raise general revenue and will also create incentives for employers to stop subsidizing parking.

Streetcars. The budget contains $99 million from now until 2017 to make a substantial start on the District's streetcar system. DOT is also hoping to get some federal match and private sector funding from property owners and businesses who would benefit, to magnify the effect of this money.

Which lines will get built will depend on many factors, but DDOT's transit head Scott Kubly said they are hoping to advance lines through Anacostia, over the 11th Street bridge and over to the Southwest Waterfront, and also to extend the H Street/Benning Road on both ends to Benning Road Metro in Ward 7 and K Street downtown.

Circulator. There's $12 million in Circulator funding. Kubly believes that's enough to extend the Union Station-Navy Yard line across the South Capitol Street bridge to Anacostia, Skyland and the Giant shopping center.

DDOT has already canceled the Mall route and plans to suspend the Convention Center-Waterfront one. It will also go ahead with plans to expand hours on Union Station-Navy Yard, reroute that line to pick up on Columbus Circle and take a more direct route along 2nd Street, add ADA features to the buses, and the other immediate steps in the plan.

Metro. There's a $6.2 million more for WMATA, which the budget document claims is a 4.7% increase. That just happens to be exactly the same percentage as the Maryland draft budget.

WMATA had asked for a $32.6 million increase to avoid any service cuts. Had the DC budget included a bigger increase than Maryland's, and given that Virginia counties are likely to offer more, it would put pressure on Maryland to do better. Instead, DC seems to be giving tacit agreement that 4.7% is what Metro will get.

Without more, Metro will be forced to increase rail headways and cut buses. While there may be a few bus cuts that make sense, this will surely go farther. We managed to avoid service cuts to transit for two tough years; it would be too bad to lose vital service that people of all incomes depend upon just as an economic recovery seems within reach.

However, I'm not sure this is actually a 4.7% increase. It seems that they only increased the local bus contribution by 4.7%, not the overall subsidy. A 4.7% increase across the board should be $11.6 million, not 6.2.

It's a little bit tricky to tell in this budget. Gray's budget staff have made a strong commitment to transparency in this budget, after being frustrated by some very opaque Fenty budgets. In transportation, however, two things are going on simultaneously that make it hard to follow.

First, they are moving a lot of money from one section to another, like transferring the WMATA subsidy into its own section, moving money between capital and operating, and more. Second, some budget areas are increasing and decreasing. As a result, there are large areas that go from zero to tens or hundreds of thousands of dollars, and others that move in reverse. That makes it difficult to follow which functions within DDOT will end up with more budget and more staff, and which with less.

Capital Bikeshare. The budget calls for accepting advertising on Capital Bikeshare stations, for total revenue of about $500,000 a year.

The money will go into the general fund. That's helpful to close a big budget gap and avoid even deeper cuts to important social services. However, many had hoped the money could go toward expansion and making Capital Bikeshare self-sustaining.

There's an argument that advertising revenue from city programs that can earn some revenue should also help contribute to other functions that can't, like education, public safety or social programs. There's also a strong argument for creating programs which can run like businesses, earn their own money and spend it to grow themselves and also add value for residents.

Off-street parking tax. The tax on parking garage spaces would rise from 12% to 18%. Most of this will actually come from parking operators' profits rather than drivers, according to people familiar with the parking industry. That's because the overall demand for parking governs the rates right now, rather than the costs of the garages and operations.

Nevertheless, Barbara Lang, head of the DC Chamber of Commerce and author of the atrocious transition report about getting commuters in and out of DC, hates the plan. She said that "people that are going to be impacted are people like me who provide parking for their employees."

That sounds like an added benefit to this plan, not a drawback. Not only does DC raise some revenue but the organizations which are most distorting the transportation market get an incentive to stop. People who pay each day to park already are shelling out for parking. They know it's not free. They are making an economic choice between driving and other modes, and some have few alternatives.

But when Lang or another employer provides free parking but doesn't provide free SmartBenefits, the employee isn't choosing between the cost of Metro and the cost of driving. They're choosing between paying the cost of Metro themselves or having their employer pay for the parking. That's a huge incentive to drive even if transit is a great alternative.

In addition to raising the parking tax, DC should also finally get around to closing the free-parking loophole with the "Clean Air Compliance Fee," which would also charge a similar rate to employers who own their own garages and therefore don't pay a parking company for spaces. Barbara Lang hates that, idea, too. That could be another sign that it's another great public policy.

Other taxes. Another measure institutes "combined reporting," which ensures multi-state businesses pay a share of their taxes to DC instead of sheltering it in other states. This is a sensible measure and somewhat overdue.

Finally, the budget contains a tax increase on incomes over $200,000. I've endorsed a tax on high income earners before. Several councilmembers, including Kwame Brown and Jack Evans, and several candidates for the at-large seat have already come out against the budget on those grounds. It'd be interesting to see if they can find an alternative to the $35 million this will raise.

Already, this budget does hit the poor fairly hard, including cuts to affordable housing and homeless services. Some of this could end up costing DC more in the long run, like homeless people who might end up in emergency rooms far more often as a result.

In upcoming articles, we'll look at some other potential revenue sources and other elements of the budget.

This article originally said the Convention Center-Waterfront Circulator had already been canceled. DDOT is proposing to suspend it but has not yet done so.

David Alpert is the founder and editor-in-chief of Greater Greater Washington. He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He now lives with his wife and daughter in Dupont Circle. 

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Dave, a couple small points:

1. "99 million" in streetcar funding -- but it over a period of year. How does it break down yearly? Is that a reasonable request compared to last year?

2. I read in the Post that the fare increase wlll only bring in $1 million for circulator. doesn't seem worth it. Cutting lines and slowing expansion might be a better path.

3. Circulator vs. WMATA. OK, 12M for circualtor, and a 4.7 percent increase for WMATA. Total dollar? Rail vs. bus.

Glad to see taxes on higher incomes and also parking garages. Need to increase property taxes as well for very expensive houses. I've always thought it would be good idea to tax private school fees as well.

Long term, I'd like to see a plan to phase out WMATA bus service in DC and replace most of it with Circulator/Streetcar.

Isn't' the barrier to advertising on Cabi the remaining agreement with Clear Channel?

by charlie on Apr 4, 2011 12:43 pm • linkreport

Will the streetcar tracks be rolled into the 11th Street Bridge project?

Seems like there's still plenty of time to build them into the local span. (I should add that that project seems to be progressing very nicely, and seemingly ahead of schedule. The girders for the freeway portion are almost all in place, and they seem to be moving forward topping off the foundations of the local span, which I thought wasn't supposed to happen until a lot later)

I'm already a little peeved that the Adams Morgan streetscape project won't be including tracks. It's incredibly wasteful to tear up the entire roadway twice in a decade.

To add insult to injury, Georgetown's historic streetcar tracks are being meticulously removed, restored, and reinstalled on a stretch of road that will almost certainly never see another streetcar.

by andrew on Apr 4, 2011 12:48 pm • linkreport

If anyone truly thinks that DC will in effect double last years streetcar spending to 100 million a year, while simultaneously cutting 135 million from Human Services, then I have some awesome beachfront property in Colorado to sell you.

Gray's core demo is the hate yuppies/bikelanes/dogparks/streetcar voice, who also tend to heavily rely on the citys safety net, so this obviously won't stand. He will get some cover though...because he will hide behind the Council claiming they "cut" it, but regardless, it "ain't" gonna happen, not after all the heat the city has gotten over the past 3 budget years for already cutting hundreds of millions out of the net.

I know Gray sat down with you last year and whispered sweet nothings into your ear (that have all since turned out to be laughable jokes) but there is zero chance of it.

I would hope you Gray hopefuls who so naively voted for Lurch would realize that by now.

by freely on Apr 4, 2011 1:06 pm • linkreport

I'm pretty sure that was $100 million in the 6-year capital budget. I think the streetcar figure for FY12 was $25 m.

by Alex B. on Apr 4, 2011 1:08 pm • linkreport

@charlie:
I read in the Post that the fare increase wlll only bring in $1 million for circulator. doesn't seem worth it. Cutting lines and slowing expansion might be a better path.

Long term, I'd like to see a plan to phase out WMATA bus service in DC and replace most of it with Circulator/Streetcar.

Does not compute. So we should be cutting lines and slowing expansion in order to prepare to replace WMATA bus with Circulator? OK.

Also, you complain that the fare increase will bring in "only" $1 million but you don't compare that to anything else. If DC's total funding for the circulator is $12 million, isn't that $1 million increase pretty big? I'd say so.

by MLD on Apr 4, 2011 1:08 pm • linkreport

@Andrew, yes, the local span will have the streetcar tracks laid in it. See graphic at bottom: http://www.jdland.com/dc/11bridges.cfm and also this DDOT presentation: http://www.jdland.com/dc/file-view.cfm?filename=11bridges_20101108_anc6dpresentation.pdf

by JD on Apr 4, 2011 1:11 pm • linkreport

Freely: The streetcar money is capital, and over 6 years. The human service money is operating. Capital money has to go to build things, not run programs.

And I love seeing the Gray hater arguments evolve. First it was there's no way he'll fund the streetcars and he's lying when he said he wpuld. Now that he did, he's still lying and just put this in there as a fake so others can take it out?

by David Alpert on Apr 4, 2011 1:13 pm • linkreport

@MLD; I am actually wondering how accurate the Post's rendition of the increase was, and how good a number it is. I suspect Circulator's fare increases will be very hard to model.

And yes, $1M out of $12M is significant. However, how much of 12M is a increase in new lines? Or just regular operations.

There is very little plan with Circulator expansion. Putting it E-O-T-R is a bad idea. There isn't any rhyme or reason to expansion.

by charlie on Apr 4, 2011 1:17 pm • linkreport

I think the increased tax on incomes over $200K is acknowledged to apply mostly to small businesses.

Not that many individuals with incomes over $200K keep legal residency in DC for income tax purposes.

by Tom Coumaris on Apr 4, 2011 1:20 pm • linkreport

@JD Oh. That's awesome -- for some reason, I thought the plan was to build the bridges so that the tracks could be "easily added," which always sounded a bit bizarre to me. Glad to see that the tracks will be laid, even though it'll be a long time before there's a connection on either side.

(Also, unless they plan to significantly build on top of the pilings, the local span looks like it's going to be a lot lower to the water than what's indicated on those drawings, which will be nice for pedestrians and cyclists! Conversely, the freeway bridges are a bit higher than the existing bridge.)

by andrew on Apr 4, 2011 1:21 pm • linkreport

@Andrew, yes, the plan is for the local span to feel much more like just 11th Street extended rather than a bridge. (They've started calling it "11th Street Local.") Much more of a promenade-type feel.

It's going to be a very different traffic flow for 11th Street and the local connections between east and west of the river when it's done. Will be interesting to see.

by JD on Apr 4, 2011 1:24 pm • linkreport

Was there anything in the budget for more bike lanes and cycletracks? Are there any other cycletracks planned other than the long-awaited L and M St ones?

It's too bad CaBi advertising revenue isn't going toward supporting CaBi when demand is far outstripping supply of bikes. This would be like Metro not being allowed to keep the money raised by the retail operations they're allowing in stations.

by Falls Church on Apr 4, 2011 1:30 pm • linkreport

Over 6 years? My mistake, but then I have to ask, whats the point of wasting ~17 million dollars a year on something that isn't being built? He reduces Streetcar funding from ~25 mil a year to 17 and you think that illustrates success?

What could they possibly be doing? 17 mil isn't enough to build any tracks, or are they buying new streetcars at the rate of one per year? Again, my original point stands. Won't happen.

You are right, I am a Gray hater. The man is a younger version of Marion Barry. Everyone who was paying attention and who looked further than a year into his long and pathetic tenure in DC knew that going in. Unlike you, I've been proven to be 100% correct in my assesment and views of the man, and you 100% wrong. The best part, I only had to wait 2 months into a 4 year term to be completely proven correct. The man has been and is a joke and has done more damage to DC's image in 2 months than William and Fenty did in 12 years combined, and we are just getting started. Now that the feds are involved and Gray has lawyered up I would be shocked if federal charges aren't levied against him and his large group of "now" former associates within the next year. Yep, that was one heck of a recommendation you gave your readers !

Hehehe..."one city"!

by freely on Apr 4, 2011 1:35 pm • linkreport

@freely

All Gray can do is include the funding in the budget. Now it becomes a political discussion. One which readers of this blog and others can engage in by lobbying Councilmembers to retain the funding the final, approved budget.

Rather than criticize David and others (like me) who supported Gray in the last election, why not turn the energy towards supporting this and other budget initiatives which move the Distict to being the model American city that it should be?

by Andrew on Apr 4, 2011 1:41 pm • linkreport

They're cancelling the Convention Center - Waterfront route?? This is definitely the first I've heard of that, and even their own website makes no mention of it. I'd thought they were just doing some route changes down at the Waterfront to get around the new stadium.

by Bossi on Apr 4, 2011 1:44 pm • linkreport

@Freely, you've likely known about Gray much longer than I. I first learned of him in 2003 (I think) when he ran and later won Ward 7's council seat.

Can you provide more insight into what you feel demonstrates his "long and pathetic" tenure in DC.

Also regarding the "now," what are 3 specific acts committed/implemented by Gray reflects the worst damage over the past 12 years?

Thanks

by HogWash on Apr 4, 2011 1:44 pm • linkreport

@charlie:
There is very little plan with Circulator expansion. Putting it E-O-T-R is a bad idea. There isn't any rhyme or reason to expansion.

Why is it a bad idea to expand Circulator E-O-T-R? I would think it would make sense given the demand created by the St. E's/DHS project. It is also consistent with the mayor's intentions to unify the city.

by DCster on Apr 4, 2011 1:46 pm • linkreport

@Hogwash,

Google Gray's days as head of DC's Dept of Health and Human Services in the early 90's. Epic disaster.

@Andrew,

Thats the point, and it completely sails over your head. I did "turn my energy to move the Distict to being the model American city that it should be"... by NOT voting for Gray.

Your flagrant hypocrisy on the matter is astounding. You and some other folks who either weren't paying attention (unforgivable in the day of google where all the worlds information is at your fingertips) or who've been in DC for the blink of an eye come to town thinking you know whats best for DC and vote for Gray, laughably thinking it was good for the District.

People would take you and others who so glowingly voted for the man far more seriously if you simply admit to your mistake. Just say, "I was completely wrong for voting for Gray", and it would be done. Chiding others for being 100% correct and trying to change the conversation to cover your glaring mistake doesn't accomplish anything.

DC was moving forward in a manner complimentary to all the goals of GGW under Fenty, and yet despite having the chief executive on board with your goals and who is giving you everything you want, you decide to fire him and put your support behind a Barry era hack who has an epic history of fail and cronyism.

I will never understand that...but it will provide lots of laughs in the days to come as Gray continues to drop the ball.

by freely on Apr 4, 2011 2:04 pm • linkreport

I'm not sure extending the US-NY Circulator across the river is a great idea. I thought the whole point of the Circulator (vs. Metrobus) was that it was to have easier-to-understand, straightforward routing with short headways. I think if this route adds across-the-river, it gets more complicated and probably slower/more problematic headways. Metrorail and Metrobus already do a pretty good job connecting the Navy Yard Metro and 8th St to EOTR. While I'm not opposed to Circulator connecting E and W OTR, I'm not convinced expanding this route is the best way to go.

by m on Apr 4, 2011 2:04 pm • linkreport

@Tom Coumaris: I think the increased tax on incomes over $200K is acknowledged to apply mostly to small businesses.
Not that many individuals with incomes over $200K keep legal residency in DC for income tax purposes.

The tax is only on individuals. If you aren't an individual with an income over $200k then you wouldn't pay it. It's irrelevant where you get that income, from running a small business or a large business or investing or lobbying or anything else. The idea that small businesses are somehow treated differently is just spurious.

by David desJardins on Apr 4, 2011 2:06 pm • linkreport

@DCster; funny, I thought that was the point of the streetcar? Or is it circulator.

Unifying the city is a noble goal. Putting Circulator in so federal bureaucrats can get subsidized rides to St. Elizabeths and figure out the next generation of anal probes -- not so wise.

(I mean, really. Putting DHS in a former Asylum? HUD in slum clearing? State in swamp? DOD in another state? Labor in a building OSHA should condemn? Does GAO have a sense of humor, or what?)

by charlie on Apr 4, 2011 2:18 pm • linkreport

As someone who was (and still is) skeptical of Gray, I have to say I'm generally pleased with this budget (at least as presented here, I haven't gotten a chance to see other takes on it). Transportation is generally preserved and a higher tax bracket is introduced (because $42K should not be the top tax bracket anywhere).

by Steven Yates on Apr 4, 2011 2:35 pm • linkreport

@David "Gray hater

Isn't using the word 'hater' inciteful ... kinda like saying 'NIMBYs'.

Those kind of words show no acknowledgement that different people may view the same situation in the different ways. I was/am a Gray supporter, but I'm not about to call someone who isn't a Gray 'hater'. Believe, there have been times I've wanted to in the last few weeks seeing how people are suddenly holding him responsible for lax oversight and hiring practices that have been endemic to the District for 30 years now ... And which were just as bad under Fenty. But I refrain from that ... It doesn't make for civilized conversation.

by Lance on Apr 4, 2011 2:41 pm • linkreport

@freely 'He will get some cover though...because he will hide behind the Council claiming they "cut" it ...'

Of course you're correct. BUT the fact that he funded it (capital funding) to such a high level shows that he's intending at least a part of that funding to remain when all is said and done. Were he really looking to cut it out completely, the proposal would have been for far less dollars.

by Lance on Apr 4, 2011 2:45 pm • linkreport

@freely

The problem was and is that the Fenty Administration was beset by what can at best be characterized by a serious lack of oversight and management of the District monies and resources. There is no reason to rehash the ills of the Fenty Administration here and now (you too can use Google to look up specifics that don't need to be recounted here and now) to see that the Fenty Administration blew through the billions of dollars of "rainy day" surplus. Some of these monies were diverted away from Council oversight and were given to fraternity brothers and others generally under or un-qualified to do the work as contracted.

I am not saying that the Gray Administration has been spotless. There are obvious issues, however to assess the "progress" of the Fenty administration without acknowledging the severe mismanagement that took place discounts the reasons why many residents who supported the initiatives without supporting the man and some of the other insiders, supported Gray.

The District simply could not afford another 4 years of Fenty, even if we liked some of the policies. With Gray, we have a shot at continuing some of the progress, but with the fiscal management necessary to keep the city solvent. Fenty would not have done this, and at the end of the day, the city would be in an even worse financial predicament.

by Andrew on Apr 4, 2011 2:47 pm • linkreport

@ David desJardins

Any business with a business license in DC has to by definition have legal DC residency and pay DC income tax on income earned here. That includes sole proprietorships.

by Tom Coumaris on Apr 4, 2011 2:52 pm • linkreport

@Freely, I've read all the stories about his tenure @DHS. But I can't imagine that you are suggesting that Gray's time there accounts for his entire professional life. Even if so, what someone did almost 20 years ago surely isn't epic proof of their performance now.

I actually believe that you have no real substantive critique of Gray to warrant your conclusion that his 3mos in office is worse than the previous 12 YEARS combined. I believe you, like many others, are content with hurling accusations and unfounded rumors as evidence to prove your political point.

You are a mental case if you honestly believe that Gray has presented himself as Marion Barry.

Besides, as you clearly indicated here, your purpose is to prove that you were 100% correct about Gray. That makes for quite the nonsubstantive argument each and every time.

by HogWash on Apr 4, 2011 2:55 pm • linkreport

"I've always thought it would be good idea to tax private school fees as well."

... um... wut? How have we gotten this far in the thread and no one has pointed out "property taxes" as a response to this nonsense yet.

by Andrew in DC on Apr 4, 2011 3:00 pm • linkreport

I also think it buys into the notion that any person who served under Barry is corrupt - which is silly.

During the past election, somehow the talking point against Gray was that "he was from the old school" which IMO is just as silly. He, like many others, was born and raised in DC. It's virtually impossible for a native (within Gray's age group) interested in politics, to not have ties to Marion Barry.

by HogWash on Apr 4, 2011 3:01 pm • linkreport

Charlie:
@DCster; funny, I thought that was the point of the streetcar? Or is it circulator.

If so, then of course I agree the Circulator route should avoid redundency. But my impression was the streetcar (at least the portion to DHS) wasn't going to be complete in the short-term... Aside from DHS, there's also the major Skyland development project which would (at some point) benefit from this Circulator route.

I would like clarification on the seeming overlap between metrobus/Circulator missions though.

by DCster on Apr 4, 2011 3:07 pm • linkreport

@Andrew,

There is one thing you need to know about how the city spends its money.

Here we go, Lesson 101 on the legal machincations of the District spending money.

The mayor proposes it, the Council, led by its chair (Gray in this case) approves or disapproves it.

Every single last dollar spent during the Fenty administration, even including those big bad supposed "shady" parks and recs monies Gray claimed was 80 million, but then we find out (~two weeks ago) was less than a quarter of that was 100% approved by not only then Council Chair Gray, but the entire council.

Heck, Gray even grandstanded the entire park and recs thing, stopping the contracts until there could be a Council investigation, then cleared them and released the money! So if you are saying Fenty is somehow responsible, when Gray himself was holding the purse strings, then you are sorely mistaken.

I will agree, the city burned through an unhealthy amount of its fund during the recession to maintain existing levels of service, and cuts (including that last minute 50 million dollar freebie Gray personally wrote back into the budget for streetcars) should have been far deeper, but it's not legally possible to assign any more blame to Fenty for the budget woes than Gray.

Lesson complete:

@ Hogwash,

I am not going to do your work for you. Your apparent indifference to history is the reason we have Barry II in office. It's really easy, just "google" Gray.

Gray was hounded by his preference for nepotism during his HHS days, his personallly appointed commissioner was forced out after half a year because of it. Gray was uncerimoniously thrown out of his job as head after the entire agency was put into receivership.

You take it from there...

by freely on Apr 4, 2011 3:14 pm • linkreport

My prediction is a lot of the proposed tax increases and social cuts will get dropped as the special interests hound the Council and an increase in our property taxes will be substituted. Probably an amount a little under the decline in appraisals the past couple years.

by Tom Coumaris on Apr 4, 2011 3:30 pm • linkreport

@freely, this will be my last post on the matter;

The Council has a limited amount of time to approve/amend a budget proposed by the executive branch. Yes, Gray and the Council approved the budgets, but you can only do so much when the inner workings are so intertwined, and as the much maligned transition report indicated, for example, the DDOT budget was a mess. The executive has months to put a budget together, the council has weeks to review and approve it.

There is blame all of the way around, but ultimately it is the executive branch which is responsible for proposing and executing a balanced budget. Fenty didn't come close and now the chickens are coming home to roost.

I prefer a different approach towards the budget process. I am not sure yet if the Gray administration "gets" it, but I know for sure that Fenty didn't. To put it simply, the District could not afford another four years of Fenty. Period.

That doesn't mean Gray is a panacea, not even close, but he will have three years from now to try to right the ship and then we will see if Kwame Brown or someone else wants to step up to make it better. Or, we could choose our Congressional overlords to see if their approach is better.

by Andrew on Apr 4, 2011 3:31 pm • linkreport

"and then we will see if Kwame Brown or someone else wants to step up to make it better"

Urk.

Unfortunately, I was taking a drink when I read this. I just snorted a little water out of my nose.

Kwame Brown, Mr. Fiscal Responsibility. Balancing budgets everywhere.

by dcd on Apr 4, 2011 3:44 pm • linkreport

@Freely, thankfully, I have the ability to research and disseminate information. That's a given.

I asked you to clarify YOUR position against Gray. That is certainly not the same as asking you to provide me with a list of criticisms against Gray. That much I can and have done online and other places.

I was not here during the 90's. So what Gray may or may not have done 20 years ago is quite irrelevant. It is why I don't wax poetically for OR against Marion Barry. Why should I when I never lived under his mayorship. I leave that up to the thousands of others who never lived here (then) either but love to talk about how bad a city was..that they never lived in until it was much better.

That said, you have not one bit shied away from your over the top criticisms of Gray. Yet, when prodded, the most you came up with is nepotism? HA! And here I thought you were a serious candidate for intelligent discussion.

I would be more than happy to talk about the challenges "a" new DHS head (the largest agency w/a 1billion dollar budget) would have faced as the 11th director in a 12 year period.

If you would rather mischaracterize and lie - so be it.

by HogWash on Apr 4, 2011 3:47 pm • linkreport

@Tom Coumaris: Any business with a business license in DC has to by definition have legal DC residency and pay DC income tax on income earned here. That includes sole proprietorships.

Sole proprietorships don't pay any income tax. They pass through their income to the owner. If the owner has personal income (from his business and other sources) in excess of $200k, he will pay his personal income tax in the higher tax bracket. If he doesn't, then he won't. What's wrong with that?

It's a pretty small fraction of "small businesses" that net $200k in profits. Why shouldn't they pay at a higher rate than all of the really small businesses?

by David desJardins on Apr 4, 2011 3:49 pm • linkreport

@freely 'The best part, I only had to wait 2 months into a 4 year term to be completely proven correct.

Not really ... All these things going on there that have suddenly been 'discoverd' have been 'normal operating procedures' in the DC government since at least the time of Mayor Barry. Williams didn't attempt to put a stop to them, nor did Fenty. And Gray hasn't had a chance to do so yet given he's only 3 months into his mayorial term. To put all the blame on him for decades on institutionalized bad government is really disingenuous. Haven't you wondered how it is that all the Fenty folks know where the look to point out these things? It's like someone moving out of an apartment they've trashed and then calling the landlord and saying 'Oh, btw ... that new tenant in there ... Did he tell you he the toilets are clogged with rolls of paper towels?' ... and all the while the new tenant is in there trying to figure out why the shit won't flush out ..

by Lance on Apr 4, 2011 3:59 pm • linkreport

@Lance,

Williams or Fenty had nothing to do with the dozen or so obvious nepotism hires in Grays lap, or the "pay to play" debacle that is Suliman Brown.

Nor did that have anything to do with breaking campaign finance laws, or did they get the US Attorneys office involved.

I just looked at the WAPO website, another Gray nepotism hire and multi-felon friend of Gray, Cherita Whiting bit the dust today.

The lunacy of the past two months would be hilarious, if it wasn't so sad.

by freely on Apr 4, 2011 4:12 pm • linkreport

Sorry but nepotism is not a crime. Or at least it hadn't been until 2011. This is after Fenty's longtime, family friend and godfather, acted as the mayor's personal city's AG.

An accusation that he paid a former fellow candidate to "act out" is just that - an accusation. It still says nothing to back up your assertion that 2mos of what we think of as scandal is worse than the past 12 years.

Face it, your card has been pulled and if you keep saying that the sky is purple w/fuschia hues, you just might believe it.

And convince others of the same....

Just not here.

by HogWash on Apr 4, 2011 4:23 pm • linkreport

@Hogwash,

Where did I say nepotism was a crime?

You can avoid and obfuscate as much as you like. I get it that your ox has gotten gored (self gored in this matter), but being a serial denier isn't going to make that "Gray" headache in your head go away.

And I don't have to convince anyone of anything. Considering Gray's approval rating (out last week) is at 31% (lowest I believe of any polled DC mayor on record), it looks like the vast majority of DC agrees with me. Lurch has done this all to himself.
Cheers!

by freely on Apr 4, 2011 4:53 pm • linkreport

@Freely, you didn't. What you did do was muddy the waters by attempting to have everyone believe that your ire against Gray is grounded in some sort of objectionable fact. We see that's it not.

I could have listed every accusation labeled against Gray. That's easy. Probing the minds of his most ardent detractors is less so - which is why I asked you what I did.

I support Gray 100% and have only been slightly disappointed with his handling of certain matters. So no headache here!!!!

Not surprisingly Gray's approval ratings are low in no small part thanks to the type of reporting that has followed his swearing in.

And Sarah Palin's approval numbers were (at some point) above 60%.

Not sure if polls reflect reality rather than where we are at a particular moment in time.

by HogWash on Apr 4, 2011 5:36 pm • linkreport

@David desJardins

If you're licensed as a business in DC you may not avoid tax on the business's income by claiming residency elsewhere.

If there are in fact any individuals making over $200K/yr. still claiming DC residency for taxes, there will certainly be fewer of them after this.

I think the judgement was made that that horse has already left the barn and it's a positive to raise the tax on those who have to pay tax here.

by Tom Coumaris on Apr 4, 2011 7:27 pm • linkreport

@Tom Coumaris: If there are in fact any individuals making over $200K/yr. still claiming DC residency for taxes, there will certainly be fewer of them after this.

I can't believe that increasing the top rate by 0.4% only on the very top earners is going to have any noticeable effect. For a taxpayer with a taxable income of $250,000, that's going to cost them $200 a year. You think there's going to be a mass exodus of wealthy people moving out of DC to save $200 a year?

by David desJardins on Apr 4, 2011 7:48 pm • linkreport

P.S. As far as I can tell from the budget proposal, the franchise tax on DC businesses with nonresident owners would hardly be changed at all.

by David desJardins on Apr 4, 2011 7:50 pm • linkreport

Who really cares if the income includes sole propiertiership and/or individuals. From a taxing perspective they are the same. Income come in and it is taxed. In any case it is a Schedule C vs. Schedule S solution.

The more troublesome part is an sales tax increase to 6%.

by charlie on Apr 4, 2011 8:21 pm • linkreport

I've repeatedly said I don't think it will matter much as most high income people have already changed legal residency to non-income tax states. Residency for tax purposes for an individual goes by where they say they "reside" more than 6 months of a year. The tax year isn't prorated as with newcomers.

For those with independent income this isn't hard and in fact is prevalent. (Even those with daily salaried jobs sometimes claim Delaware residency at beach houses to pay no state income tax). Revenue agents don't hide in bushes to see where someone is actually sleeping for 6 months.

Once I had to work Kalorama in election canvassing and was surprised at how few registered voters there were in the huge houses there until the former ANC clued me in. (Then she married up and also moved to Delaware).

by Tom Coumaris on Apr 4, 2011 9:28 pm • linkreport

I am skeptical that outright tax fraud is that common. It is certainly not true that "most" high-income taxpayers lie about their residence.

I am even more skeptical that the difference between 8.5% and 8.9% is going to affect it much. If you take only a small fraction of that extra revenue and put it into enforcement, you would come out way ahead.

by David desJardins on Apr 4, 2011 9:47 pm • linkreport

I think the way to balance the fraud issue it look at it from the question of independent income.

yes, I am sure the majority of people who report over $200,000 in independent income are lying about district residency. However, that is a small percentage of the people making over 200,000 in this city.

In the income for single or married?

And just to point out, nonprofits and association execs can't really lie about that stuff. 200K is decent income for a 3-4 year associate. Plenty of fat to be skimmed.

by charlie on Apr 4, 2011 9:53 pm • linkreport

It doesn't require fraud to choose a legal residency for tax purposes. Of the many people I know who live here but are not legal residents most have two homes. One has a farm in New Hampshire (no income tax), two have homes in Florida (no income tax) and umpteen have a place in the "nation's summer capital" of Delaware (no income tax). They register to vote and often register their cars in those states and manage to "reside" in those states for 6 months without much problem. Even their income earned in DC as individuals is subject to no DC tax since there's no payroll tax here.

While most people think the lack of a DC payroll tax mostly benefits Maryland and Virginia commuters, wealthier "Washingtonians" have figured out how to benefit even more. It's not a very well-kept secret.

by Tom Coumaris on Apr 4, 2011 11:51 pm • linkreport

freely, even though you didn't support Gray, as it turns out you don't win if he sucks. You still lose. In fact you lose twice. You will have lost the election and you will have had a crappy mayor. If that entertains you, then you're viewing this all wrong. You're viewing it as a sports fan. Politics is not sport. In addition, gloating is so unbecoming. Have some dignity.

by David C on Apr 4, 2011 11:55 pm • linkreport

@Tom Coumaris; good points on why any state income tax system can be defeated. Larger point -- we need to find way to tax wealth, not just income. Short term property tax, but many people have liquid assets that can be taxed too.

However, I'm pretty sure DC has a payroll tax. Just no commuter tax. And I don't see how a commuter tax would help the situation you describe.

by charlie on Apr 5, 2011 8:19 am • linkreport

Charlie:

A commuter tax would help because the "residence in Delaware" has gotten so out of hand that even salaried workers are using it. People who have plenty of leave or who don't have to be in the office every day can easily say they reside at their Delaware homes six months (and some actually do- it's not a longer commute than many already make).

I'm not sure we can extend the part-year tax for newcomers to the situation because newcomers actually change their legal residence to DC. But there's plenty of conflicts-of-law case law on how to structure taxes, especially asset taxation. DC is way behind on that; New York vs. Florida is where most of the cases are.

DC's extensions of the business license requirements has helped a lot since so many people work from home now. But tax avoidance is a tremendous problem in DC and average working DC residents get hit with making up the loss.

by Tom Coumaris on Apr 5, 2011 10:40 am • linkreport

@Tom; a commute from Delaware is longer than a commute in DC? I see it isn't much worse, than say, living in Annapolis, but those people aren't being taxed by DC anyway. Maryland's loss, not DC's.

Again, I see your tax policy point, but what are the numbers? How many people making over 200K in DC have the time and/or money to commute from DEL? Would an increase in that rate make it more likely?

I don't know the answers. I certainly know of one or two people who do the same (one claims Delaware as a home, lives in Dupont 2-3 days a week). But the pool of people who are making those incomes and have that flexibility is small.

The tax increase, again, applies to people making over 200K, so I am not sure if that is average.

I agree there is a not of tax evasion. I see it more in people who maintain an address out of state for payroll purposes, rent in DC (often sublet) and avoid DC taxes. The problem there is the maximum rate for DC is at too low a threshold.

And given the FPI claims DC has the lowest tax burden out of VA, DC and MD....

by charlie on Apr 5, 2011 11:03 am • linkreport

Charlie:

I just meant that a commute to Delaware is no longer than commutes to Western Virginia, West Virginia, or southern Penn. which a lot of people make daily. A place in Rehobeth is owned by a good number of upper income DC residents anyway and it becomes a matter of how many days are spent sleeping in which home and when the enticement is no DC income tax, people will recall sleeping at their Delaware home a lot.

At least people who have a business license in DC have to pay DC tax on the income earned in DC by that business.

Of course the major revenue drain in DC has always been the undervaluation of commercial property but that's a whole other can of worms.

by Tom Coumaris on Apr 5, 2011 5:25 pm • linkreport

Great articles. How do you find time to write all this up ?

by john on Apr 11, 2011 2:46 pm • linkreport

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