DC Fiscal Policy Institute: Expanding the District’s Sales Tax Can Raise Revenue, While Increasing Tax Fairness

In response to the most recent revenue shortfall, the DC Council voted in July 2009 to raise the District’s sales tax rate from 5.75 percent to 6 percent. Raising revenue is important to ensure that DC can continue to provide education, transportation, and other critical services during this economic downturn. As policymakers approach future revenue shortfalls, they should consider building on prior efforts to expand the sales tax base by including more services in DC’s sales tax. This approach can improve both the fairness and the adequacy of the District’s sales tax, and it can prevent the need for future rate increases. Expanding DC’s sales tax could generate $14 million or more in additional revenue each year.

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