The overall tax burden shouldered by D.C. families generally falls in the middle of the pack among major U.S. cities and other Washington area jurisdictions, though taxes paid by the District’s lowest-earning households rank near the top, according to a new report.
For a family of three earning up to $25,000 a year, the District’s tax burden is No. 1 among five regional jurisdictions — Montgomery, Prince George’s, Alexandria, Arlington and Fairfax — and 15th compared to the largest city in each of the 50 states. Higher income and sales taxes are largely to blame, according to the annual study prepared by the D.C. Office of Revenue Analysis.
“Our tax rate at the lowest levels is still high,” said Ward 2 D.C. Councilman Jack Evans, chairman of the finance and revenue committee. “It costs money but it’s something we’d like to fix.”
As income increases for that same family of three, however, the tax burden falls. At $50,000, the District ranks sixth locally and 27th nationally, according to the analysis. At $75,000 it is third regionally and 23rd nationally. And at $150,000 the District holds at third regionally and 12th in the United States.
The tax burden numbers were calculated by combining income, real estate, sales and use and automobile-related levies.
Ed Lazere, executive director of D.C. Fiscal Policy Institute, said the city’s analysis failed to account for D.C.’s 10 percent cap on annual real estate tax increases. Lazere’s budget watchdog group contends the tax burden in D.C. is the area’s lowest.
“From our perspective, it means the city’s leaders do not need to worry about whether the city is being competitive on a tax basis but rather that we’re being competitive on education and other quality of life issues,” Lazere said.
The District has long contended that it faces a federally imposed “fiscal imbalance,” the difference between how much it needs to operate and how much it is allowed to collect. Two-thirds of all income is earned by nonresidents and is not taxable. A third of all property is tax exempt, and 7 percent of sales are tax-free due to military and diplomatic exemptions.
“It’s just hard to reduce taxes in this environment,” Evans said.
Average tax burden for D.C. family of three
» $25,000: $3,088; area average $2,769
» $50,000: $4,052; area average $4,476
» $75,000: $6,986; area average $7,404
» $100,000: $9,482; area average $9,729
» $150,000: $15,027; area average $14,628
Source: D.C. Office of Revenue Analysis
