In Battle Over The Funds From Online Sales Taxes, Cutting Commercial Property Taxes Wins Out Over Homeless Services

By Rachel Sadon on December 4th, 2018 on

D.C. law would currently split revenues from internet sales taxes between Metro and homeless services. Legislation before the D.C. Council would direct it instead to cutting commercial property taxes.

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The D.C. Council voted Tuesday to use millions of dollars in new revenue from online sales taxes to cut commercial property taxes, over the objections of advocates who lobbied to direct that funding toward homeless services instead.

An amendment from Ward 1 Councilmember Brianne Nadeau that would have given a smaller break to property owners in favor of funding housing programs failed on a 6-6 vote.

A Supreme Court decision in June made it possible for states to begin taxing digital retailers. The chief financial officer expects that in the first full fiscal year that such a tax is in effect, D.C. would take in $24.7 million. The CFO estimates that it will go up to nearly $26 million in 2022, and that revenue is only likely to increase from there as e-commerce continues to gain in popularity.

Five years ago, the D.C. Council anticipated such an opportunity, and directed that half of the revenue would go toward Metro and the other half to homeless services.

But within a few weeks of the ruling, right before the Council’s summer recess, Chairman Phil Mendelson and Ward 2 Councilmember Jack Evans introduced the Internet Sales Tax Amendment Act of 2018. It repealed the earlier legislation, instead proposing to use the new revenue to lower the commercial property tax rate on properties worth over $10 million.

The legislation largely flew under the radar; just one public witness testified at the hearing in October and the bill passed on a first vote by a 12-1 vote. But in recent weeks, activists began pushing for lawmakers to instead use the funds to address homelessness, calling it a “moral choice.”

“We think that this revenue stream allows D.C. to really stand behind our commitment to ending homelessness,” Jesse Rabinowitz, the advocacy and campaign coordinator for Miriam’s Kitchen, told DCist last week.

But Evans and Mendelson countered that the Council should use the opportunity to lower a tax that had been recently raised, bringing the commercial property tax rate down from $1.89 to $1.85 per $100 of assessed value.

The D.C. Council increased a number of taxes–on general sales, ridehailing apps, hotel occupancy, and commercial properties–to pay for dedicated funding for Metro earlier this year. When asked why he was focused on reversing the commercial property tax hike among them, Evans told DCist on Monday that “the other ones don’t need to be lowered back down.” He argued at the dais that, with the highest commercial property tax rate in the region, “we’re not only not competitive, we’re out of the ballgame.”

Nadeau proposed lowering the commercial tax rate by one cent instead of four and using the remainder to fund permanent supportive housing, the DC Local Rent Supplement Program, and relief for nonprofits struggling with stormwater fees.

“This is a balanced proposal,” Nadeau argued, noting that as the head of the Committee on Human Services, she would have preferred to direct the entire balance toward homeless services. “We’ve heard that the commercial tax rate is the highest in the region. But you know what else is? Homelessness.”

She was joined by At-large Councilmembers Elissa Silverman and David Grosso, Ward 3’s Mary Cheh, Ward 6’s Charles Allen, and Ward 8’s Trayon White in favor of the amendment–one vote shy of passing.

Ultimately, the Internet Sales Tax Amendment Act of 2018 passed on an 8-4 vote.

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