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Councilmember Evans proposes D.C. business tax breaks

February 12, 2009 - Washington Business Journal - by Jonathan O'Connell

D.C. Councilman Jack Evans, D-Ward 2 and chair of the finance committee, plans to propose a series of tax breaks for businesses that he says are needed to cushion D.C. companies from the recession and attract new economic stimulus-related business to the city.

In what he calls a "D.C. economic stimulus package," Evans said he will propose cuts to corporate income taxes and commercial property tax rates in coming weeks. D.C.'s corporate income tax rate, which applies to almost every incorporated and unincorporated business in the city, is 9.975 percent, third highest in the country behind Massachusetts and California. Maryland's rate was 8.3 percent last year and Virginia's was 6 percent.

"In good times it 'doesn't matter as much," Evans said. "But in tough times, when every dollar counts, all of a sudden the disparity of almost 4 percent in an incorporated business tax is huge."

The changes are in the early stages of formulation but, if enacted, would cost the District revenue at a time when it faces shortfalls but is in much better fiscal shape than surrounding jurisdictions. The city faces a projected $456 million gap in fiscal year 2010 and rather than raising taxes or fees to fill the gaps, Evans said the city needs to stall budget increases. "It's been shown that in a recessionary environment like we're in now, that the worst thing we could do is raise taxes. It's the easiest thing we could do but it's the worst thing we could do," Evans said.

He said he would propose specific budget cuts to pay for tax reductions when Mayor Adrian Fenty presents his budget proposal next month. "Our spending increases in a whole bunch of categories every year, so [the city needs to] limit the increases," Evans said.

Part of the councilman's argument to improve the business climate is that - just after the city was passed over for more than 300 Hilton headquarters jobs - companies and government agencies will be looking to move to the region to manage federal economic stimulus spending, and he would like to see them come to D.C. "My view is, with this economic stimulus passing, you're going to have a huge influx to the region to manage this. Where do they locate? Well I want them to locate in the city," Evans said.

Evans and Council Chairman Vincent Gray, D-at large, led the passing of $98 million in commercial property tax relief in 2007, but the city reduced the savings in filling its 2009 shortfall. Commercial property owners now pay $1.65 per $100 of assessed value for the first $3 million of a property's value and $1.85 above that.

Evans has also begun calling on his colleagues not to rely on federal economic stimulus spending as an excuse not to shrink its budget. "That's what this whole economic catastrophe that we're facing is about - is not living within our means. And to rely on economic stimulus money to continue to live outside of our means is foolhardy," he said.

For more information, see the original article.