A D.C. Council committee has recommended the District not close a tax loophole for multistate corporations if future budget predictions for the next fiscal year can more than cover the $22 million the change was expected to raise. Mayor Vince Gray included in his fiscal 2012 budget proposal the $22 million expected to be raised by “combined reporting,” a tax-restructuring measure that prevents multistate companies like Home Depot, CVS and Starbucks from hiding profits earned in the District in states that won’t tax them. But the council’s finance committee, led by Ward 2 Councilman Jack Evans, has recommended it be slated for repeal in the final budget if the chief financial officer determines there will be more revenue next fiscal year than he previously thought.
It’s one of several key measures that will be debated by council members during an hours-long budget discussion on Monday. When they’re done, it will be up to council Chairman Kwame Brown to put the various recommendations together into a budget proposal for a May 25 council vote.
Evans said he supports combined reporting, but “the business community is up in arms about it. If we don’t have do it, we can prevent what they’re saying is something that would be a burden.”
In recent weeks, lobbyists have visited council members with an information sheet obtained by The Washington Examiner that raises questions about combined reporting. The sheet describes it as a “fundamental change” to the tax structure that could be damaging “at a time when the economy is struggling to recover from the recent recession.”
Evans said he’s not relying too heavily on those concerns and that the committee’s recommendation is for any future increases in revenue estimates to go to several other priorities before being used to repeal combined reporting. Key among those, is a suggestion to use the extra dollars for raising the police force to 4,000 sworn officers. The force is down to about 3,850 members, about 50 more than a level Police Chief Cathy Lanier has said would mean “trouble.”
But Ed Lazere, who heads the D.C. Fiscal Policy Institute, said closing the corporate tax loophole is necessary to help raise dollars for the cash-strapped city. “The evidence is very clear that combined reporting is the best way to prevent corporate tax avoidance at the state level,” Lazere said. “Every indication is that it would raise revenue for the District.”
