The District of Columbia runs on its businesses. It is business that brings jobs to the community and provides the amenities that make our neighborhoods vibrant and attractive places to live--and it is business that delivers a significant portion of the tax revenue that funds our municipal budget. Over the past decade, the city collected a total of $3.3 billion in corporate taxes, and in the coming year, business will bear an even larger share of the tax burden. Take a look at the following facts, from the District Government’s Chief Financial Officer:
• District businesses are expected to pay $388 million in franchise taxes in Fiscal Year 2012
• District permits fees and fines are expected to reach $107 million in FY12
• FY12 deed transfer, recordation and economic interest taxes could reach $315 million
• District businesses are expected to collect $1.046 billion in sales tax in FY12
It all adds up to nearly $2 billion in taxes and fees to be collected in FY12. That’s a lot of tax revenue, courtesy of DC’s business community. Meanwhile, the city has reported surpluses in FY11 and the first two quarters of FY12, while at the same time asking businesses and residents to contribute even more, through a series of new taxes and fees.
DC businesses are subject to a tax rate of 9.975%--among the highest in the nation, with the national average being 6.6% and Virginia and Maryland assessing taxes at 6% and 8.25% respectively. There is little incentive to conduct business in the District, due to the high tax rate compared with our neighbors. Our city is ranked 51st out of 51 in terms of small business friendliness--dead last. That’s not a statistic to be proud of! The District’s tax structure is a major contributing factor to that ranking, which is why we are most anxious for the newly-formed Tax Revision Commission to move quickly with their work to overhaul our tax structure. We at the Chamber are dedicated to working with the Commission in achieving this goal.
The District should take a close look at its priorities, and adopt policies that encourage business growth. Otherwise, future development will slow to a crawl--which ultimately hurts tax receipts. If the existing revenue is not enough to cover the District budget--which has increased by $1 billion since 2008--maybe it’s time we look at how that revenue is being spent, instead of how we can collect yet more from the pockets of DC’s beleaguered businesses. Millions of dollars could be saved through consolidation and streamlining of city programs, making the District run more efficiently overall. This is where we should be looking in order to balance our budget, not towards new taxes and fees. It is time to spend more effectively--and not just spend more.