Marion Barry rejects tax increases on $200k earners, rest of council falls in line

[Anonymous]

http://washingtonexaminer.com/local/dc/2011/05/dc-budget-without-mayors-income-tax-increase-likely-clear-council

[Anonymous]

It looks like it wasn't barry's rejection but that he agreed in exchange for some tax abstements for ward 8.

Also they will eliminate tax free status on out of state muni bonds so taxes on the wealthy will go up but no one will be able to tell unless they have a very unusual portfolio.

[Anonymous]

Actually, the taxes on out of state muni's is a tax on retirees, sure some might be wealthy, but many are middle class who have followed the rules and invested in bonds.

If the District had bonds available for residents to invest in, this wouldn't be a problem, but it doesn't, or certainly not to the extent that demand would meet. As a result, when the home rule charter was penned in the early 1970's, the predecessors determined that a tax-free status on these bonds was appropriate.

It is one of the levers that enables residents to age in place.

Well now, with no notice, no hearings and no chance for rebuke, the District has told its aging population that it isn't interested in their continued participation in the city any longer.

If they are going to pass this legislation, they should 1) exempt seniors and 2) make it apply to future bond purchases, rather than changing the rules for people who have existing investments.

The Council simply sees this as a bold money grab, but it is really horrible government oversight and policy making.

[jsteele]

Anonymous wrote:Actually, the taxes on out of state muni's is a tax on retirees, sure some might be wealthy, but many are middle class who have followed the rules and invested in bonds.

According to DCFPI, two-thirds of the bond holders have income greater than $200,000. DC is the only jurisdiction not to tax out of state municipal bonds. According to Eric Fidler (who I know nothing about), taxing the income from other states' bonds will give DC bonds a slight advantage, potentially lowering DC's borrowing costs a bit.

I learned all of this from Twitter, making me an instant expert

[Anonymous]

Anonymous wrote:Actually, the taxes on out of state muni's is a tax on retirees, sure some might be wealthy, but many are middle class who have followed the rules and invested in bonds.

If the District had bonds available for residents to invest in, this wouldn't be a problem, but it doesn't, or certainly not to the extent that demand would meet. As a result, when the home rule charter was penned in the early 1970's, the predecessors determined that a tax-free status on these bonds was appropriate.

It is one of the levers that enables residents to age in place.

Well now, with no notice, no hearings and no chance for rebuke, the District has told its aging population that it isn't interested in their continued participation in the city any longer.

If they are going to pass this legislation, they should 1) exempt seniors and 2) make it apply to future bond purchases, rather than changing the rules for people who have existing investments.

The Council simply sees this as a bold money grab, but it is really horrible government oversight and policy making.

It's great policy. It was a freebie that is now closed.

And the "lack of available bonds", as you put it, is another way of saying that the government doesn't borrow that much money. In what crazy bass-ackwards world is that a bad thing? Should the government borrow more so that you can have more tax free munis to buy? Oh, brother!

Sorry, but closing a tax loophole that does not exist in any other state is telling seniors they don't want them anymore? You seriously jumped the shark on that one.

[Anonymous]

I was disappointed but I have only myself to blame because I didn't contact my councilman to support the tax increase.

[Anonymous]

It just goes to show you that for any government policy, there is someone who will whine about it.

[Anonymous]

Anonymous wrote:

It's great policy. It was a freebie that is now closed.

And the "lack of available bonds", as you put it, is another way of saying that the government doesn't borrow that much money. In what crazy bass-ackwards world is that a bad thing? Should the government borrow more so that you can have more tax free munis to buy? Oh, brother!

Sorry, but closing a tax loophole that does not exist in any other state is telling seniors they don't want them anymore? You seriously jumped the shark on that one.

DC is a tiny municipality by bond issuing standards. It is maxed out in terms of what it can issue and yet most of its paper is held by institutional investors. There is very minimal ability for retail investors to purchase DC bonds. This isn't a loophole, it is simply providing the opportunity for individuals, mostly seniors, to share the same investing rights as residents across the country.

The only reason other states do not exempt out of state bonds is because they don't have to. They have the ability to issue bonds and there is a vigorous market for them. DC's market is very thin. It isn't that complicated, but you clearly don't understand. This isn't some sort of freebie for the rich.

[Anonymous]

jsteele wrote:

According to DCFPI, two-thirds of the bond holders have income greater than $200,000. DC is the only jurisdiction not to tax out of state municipal bonds. According to Eric Fidler (who I know nothing about), taxing the income from other states' bonds will give DC bonds a slight advantage, potentially lowering DC's borrowing costs a bit.

I learned all of this from Twitter, making me an instant expert

Eric Fidler is a blogger who doesn't have any apparent expertise in municipal finances. The DCFPI is a biased city based think tank. Neither are reliable sources of authority for this issue. I explained in the previous posts why DC is the only city to do this. It is similar to the tuition grant program. If DC had a viable and robust "state school" the DCTAP wouldn't exist. Same thing here, but in bond form.

[jsteele]

Anonymous wrote:
Eric Fidler is a blogger who doesn't have any apparent expertise in municipal finances. The DCFPI is a biased city based think tank. Neither are reliable sources of authority for this issue. I explained in the previous posts why DC is the only city to do this. It is similar to the tuition grant program. If DC had a viable and robust "state school" the DCTAP wouldn't exist. Same thing here, but in bond form.

Thank you for explaining who Eric Fidler is. Regardless of his expertise or lack thereof, do you have any reason to suggest his theory is wrong? I am familiar with DCFPI. Regardless of any biases it has, do you have statistics that contradict the Institute's?

[Anonymous]

On the income tax issue, one justification I have heard from a Councilmember is that the tax increase would not obviate the need for cuts, so if they did increase the tax, "you" (implying each and every voter) would both pay more taxes and get services cut. This, of course, overlooks that the service cuts will impact the poor much more directly and the the tax increase would have hit the better off, as well as the fact that the cuts would at least have been ameliorated somewhat by the tax increase.

I'm sure there are reasonable arguments not to have the tax increase, but that one seemed like pure sleight of hand. The argument came from a CM I like (which is why I mention no name), and really disappointed me.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

It's great policy. It was a freebie that is now closed.

And the "lack of available bonds", as you put it, is another way of saying that the government doesn't borrow that much money. In what crazy bass-ackwards world is that a bad thing? Should the government borrow more so that you can have more tax free munis to buy? Oh, brother!

Sorry, but closing a tax loophole that does not exist in any other state is telling seniors they don't want them anymore? You seriously jumped the shark on that one.

DC is a tiny municipality by bond issuing standards. It is maxed out in terms of what it can issue and yet most of its paper is held by institutional investors. There is very minimal ability for retail investors to purchase DC bonds. This isn't a loophole, it is simply providing the opportunity for individuals, mostly seniors, to share the same investing rights as residents across the country.

The only reason other states do not exempt out of state bonds is because they don't have to. They have the ability to issue bonds and there is a vigorous market for them. DC's market is very thin. It isn't that complicated, but you clearly don't understand. This isn't some sort of freebie for the rich.

Of all the things a city is supposed to provide, the LAST THING is to spend money so that someone has a tax free investing opportunity. WTH???? Listen to yourself. I don't have the "opportunity" to live tax free like they do in Florida. Missouri does not have the "opportunity" to have the National Mall or the Smithsonian. DC does not have the "opportunity" to dig itself out of a mountain of debt like in California.

Tax free muni bonds are for the benefit of funding District projects, not so that you have another investment option.

[Anonymous]

I looked up DC's per capita debt. We have more per person to go around than any of the 50 states.

If there is not enough tax free muni debt to satisfy you, it is not because of insufficient supply.

Not. Our. Problem.

[Anonymous]

Anonymous wrote:On the income tax issue, one justification I have heard from a Councilmember is that the tax increase would not obviate the need for cuts, so if they did increase the tax, "you" (implying each and every voter) would both pay more taxes and get services cut. This, of course, overlooks that the service cuts will impact the poor much more directly and the the tax increase would have hit the better off, as well as the fact that the cuts would at least have been ameliorated somewhat by the tax increase.

I'm sure there are reasonable arguments not to have the tax increase, but that one seemed like pure sleight of hand. The argument came from a CM I like (which is why I mention no name), and really disappointed me.

So, instead of a tax income increase that people were not opposed to, they chose to saddle retirees with a tax increase. Bravo.

[Anonymous]

jsteele wrote:

Thank you for explaining who Eric Fidler is. Regardless of his expertise or lack thereof, do you have any reason to suggest his theory is wrong? I am familiar with DCFPI. Regardless of any biases it has, do you have statistics that contradict the Institute's?

I don't know him either, just googled the name when you posted it. His theory is wrong because bonds in the District are so thinly traded that they are already at a premium. If residents were given first opportunity to purchase the bonds as part of their retirement consideration, with institutional investors purchasing the rest (the demand is there), then perhaps that could be a solution.

On the DCFPI, I am not privy to how they arrived at their numbers, but anecdotally, I know scrores of seniors from around the city who are upset about this who are not in that wealth range. If people made retirement decisions based on a tax-free scenario, then the tax on bonds is no different to a tax on social security income or other devices that seniors have endured in recent years. Changing the policy without a hearing and without grandfathering existing investments is bad government oversight.