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D.C. Approves Tax Hikes

1 min readBy: Justin Higginbottom

The District of Columbia Council has approved a 2010 budget designed to close their $666 million budget shortfall. TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increases within the budget include:

  • Raising the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. from 5.75 percent to 6 percent for three years. At 6 percent, D.C. would share the 13th highest sales tax rate rank among states.
  • Raising the gasoline tax from 20 cents per gallon to 23.5 cents per gallon. D.C. would share Maryland’s gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. rate-ranked at 26th highest among states.
  • Raising cigarette taxes from $2 a pack to $2.50 a pack—a penny less than Massachusetts cigarette tax that ranks 6th highest among states.

(Tax rate rankings for all states can be seen in the Tax Foundation’s mid-year update of 2009 Facts & Figures: How Does Your State Compare? )

Combined reporting was approved as a way to force businesses to pay corporate income taxes on profits reported for subsidiaries not inside Washington. Also, indexing on homestead deductions for property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. es would be delayed until 2013.

Click here for more on DC taxes.