In her State of the District address, Washington D.C. Mayor Muriel Bowser unveiled a $15.5 billion spending plan for next fiscal year that includes higher taxes on commercial property owners. The added tax revenue would be spent on programs to create or preserve affordable housing.
Deed and Transfer Taxes Targeted
The mayor wants to spend an additional $55 million on affordable housing programs. To pay for these programs and other priorities, Bowser proposes an increase in the deed recordation and transfer tax on commercial property worth more than $2 million from 1.45% to 2.5%.
Officials estimate a gain of $79 million next year from the higher commercial property taxes. Taxes on residential real estate would not be affected.
Budget Reverses Council Approved Tax Cut
The mayor’s spending plan declines to implement a $25 million commercial property tax cut that was approved by the D.C. Council late last year.
The council passed the Internet Sales Tax Amendment Act of 2018 to lower the property tax rate for commercial properties valued greater than $10 million from $1.89 back to $1.85 for every $100 of assessed value. The tax rate can only be reduced if the Internet Sales Tax (IST) revenue is in excess of the amount required for the financial plan for the current fiscal year.
Revenues Fall Short
While the D.C. budget has grown in recent years, tax revenue is lower than expected. It’s due in part to the economic slump and the 35-day partial shutdown of the federal government, which hurt restaurants, retail, hotels, and other businesses across the District.
The budget proposal includes about $129 million in spending cuts. Officials say they are spread across the budget and will not require layoffs or the elimination of major programs.
The D.C. Council must pass a budget by the end of May.