Most DC residents — like most Americans — agree that income tax rates should be graduated by income. Low-income households should pay the lowest rate, so that there is an incentive to work and they can support their basic needs. This kind of progressive approach also means tax rates get higher as incomes rise and as the ability to meet basic needs gets easier. Given the high cost of living in the District, using the tax system to help residents make ends meet is very important.
There is good tax news in Mayor Gray’s proposed fiscal year 2015 budget, including two steps to make DC’s income tax more progressive. Following recommendations of the DC Tax Revision Commission, the budget would lower the income tax rate on moderate income residents and keep an income tax bracket for very high-income residents that otherwise would soon expire.
Unfortunately, however, the proposed budget leaves the Commission’s most targeted income tax cut recommendations on a wish list. In other words, there’s room for more progress.