BY ANY LIGHTS D.C. seemed like the last place in America where taxes would be cut. Along with high crime rates, poor services, and a dysfunctional educational system, the District of Columbia has a poverty rate that, if it were a state, would be the second worst in the nation. (Instead of crisscrossing the country, President Clinton could have just taken a walk around the District for his recent "poor tour.") And despite years of mismanagement and corruption under Marion Barry, the District's answer to practically every problem has been increased spending. Fortunately, none of this stopped David Catania from aggressively pursuing a tax cut.
The role of maverick suits Catania, who is perhaps most famous as the council's first openly gay member. His strategy was novel. In January 1998, the Republican council member at large, just a month into his term, began asking residents how they wanted the city's surplus to be spent. From comment cards distributed at his public appearances, Catania discovered that, lo and behold, many residents of D.C., where 80 percent of registered voters are Democrats, wanted the surplus to be used for personal and business tax reductions.
In any case, something had to be done. Since 1960, D.C.'s tax rates have nearly doubled. During the same period, the District has lost nearly a third of its population. "In Virginia," Catania says, "you have good services at a good price. In Maryland you have okay services at an okay price. And in the District you have terrible services at an expensive price." But with only 2 Republicans on the 13-member city council, Catania had his work cut out for him.
At the same time that Catania was canvassing residents on what to do with the surplus, he was approaching council members about a tax cut. Their response was lukewarm. Several members were running in the Democratic mayoral primary and viewed tax cuts as politically risky. After Jack Evans, a moderate Democrat with close ties to business, lost that primary, the cautious pol suddenly became more receptive. This was a good alliance for Catania; Evans knows a thing or two about winning. While campaigning in 1991 for a seat on the council, Evans visited gay bars in Dupont Circle, the district he hoped to represent, leading many to believe that he was gay, an impression the now-married politician did nothing to dispel.
Together, Evans and Catania put together an extensive package of information showing the District could afford the tax cuts. And their timing was excellent. The council, which for years has been viewed as politically impotent, was looking for an opportunity to impose its will on the new mayor, Anthony Williams. Catania and Evans began courting their respective allies on the council and were able to pick up seven additional votes. By the time the Tax Parity Act of 1999 was introduced on "tax day," April 15, it already had the support of the council.
With its surplus, Catania and Evans reasoned, the District could lower income and property taxes to the levels found in Maryland and Northern Virginia. This would at least slow the flight of residents, if not lure people and businesses back. The income tax rate for all groups would be lowered by one percentage point a year for the next three years, reducing the top marginal rate from 9.5 percent to 6.5 percent. This would be a 50 percent reduction for people making under $ 10,000 a year and a 32 percent reduction for everyone making over $ 20,000. Taxes on businesses and rental and commercial properties would also be reduced substantially to become more competitive. After three years, District taxpayers would be saving $ 420 million a year, with individuals enjoying 56 percent of the benefits.
Although the council approved the proposal by 10-2, the mayor, the Financial Control Board, and the Washington Post's editorial board, all immediately criticized it. Unwilling to believe that lowering taxes can increase revenue, critics worried the tax cuts would force cutbacks in services or generate deficits. The local head of the AFL-CIO, Joslyn N. Williams, said the package was "unacceptable because it is not targeted at those residents who need it most -- the working poor and middle-income households." The Washington Post wrote that the "tax-slashing plan" was "too much too soon." Others argued that the surpluses should be used to combat the city's social problems.
But all of this carping overlooked the basic injustice of paying high taxes for terrible services. According to Catania, the District spends a whopping $ 13,500 per student each year on education. And 20 percent of the city's $ 5.3 billion budget is spent on public welfare. In the words of council member Carol Schwartz, "If high taxes meant good services, we should have the best services in the country." That clearly is not the case, and D.C. residents had begun to realize it.
Although Evans and Catania had enough votes to block a threatened mayoral veto, they could not overcome the opposition of the Financial Control Board, a presidentially appointed oversight commission created by Congress in 1995. So they decided to compromise and were able to build a broad consensus for a more moderate tax cut. The resulting legislation, which passed unanimously with the mayor's support, reduces marginal rates by a smaller percentage and stretches the time for implementation from three to five years. In response to the charge that the "rich" would enjoy a disproportionate share of the savings, the highest tax bracket will be raised gradually from $ 20,000 to $ 40,000. This final package will eventually save taxpayers about $ 300 million a year.
Whereas the original plan cut the marginal rate for the poorest residents by 50 percent over three years, the new plan only cuts it by 33 percent over five years. Yet somehow the Washington Post judges this plan fairer than the original, which allegedly had "serious distributional defects." Nonetheless, it is the largest cut in District history. And, as Grover Norquist, president of Americans for Tax Reform, said, the tax cut is "substantial compared to any city's" and a "tremendous step forward" for the District.
Most important, it seems the District is growing a conscience. At a certain point, says Catania, it's just immoral "to pick a person's pocket in the name of government and give him nothing for it."
Eric Forman is a senior at Duke University, where he is publisher of the Duke Review.