[Congressional Record Volume 143, Number 12 (Tuesday, February 4, 1997)]
[Extensions of Remarks]
[Pages E152-E153]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     INTRODUCTION OF THE DISTRICT OF COLUMBIA ECONOMIC RECOVERY ACT

                                 ______
                                 

                       HON. ELEANOR HOLMES NORTON

                      of the district of columbia

                    in the house of representatives

                       Tuesday, February 4, 1997

  Ms. NORTON. Mr. Speaker, today, I am introducing the District of 
Columbia Economic

[[Page E153]]

Recovery Act [DCERA] as my first bill of the 105th Congress. It would 
be irresponsible not to do so. I introduced virtually the same bill on 
April 15, income tax day, last year. I reintroduce the bill today for 
two reasons: First, lethal taxpayer flight continues unabated; second, 
the District has no State safety-net backup to recycle income back from 
wealthier areas. With only the residents who remain available to keep 
the city alive, a tax cut incentive to keep taxpayers here has become 
an imperative. In short, taxpayers are in full flight, and only a 
dramatic and focussed incentive can keep them here.
  The DCERA will reduce Federal income taxes in three ways. First, to 
effect the tax cut the DCERA raises the traditional standard deduction 
and personal exemptions: $15,000 instead of $6,550 for single filers; 
$25,000 instead of $8,450 for single heads of household; and $30,000 
instead of $11,800 for married joint filers. Thus, residents who can 
least afford to pay the city's high taxes and the high cost of living--
with incomes below $15,000, $25,000, and $30,000--will pay no Federal 
income taxes. Second, a uniform rate of 15 percent will be applied 
progressively up the income scale to reduce present tax liability--from 
a 79-percent reduction to a 34-percent reduction, depending on income. 
The lower the income, the greater the tax reduction. The uniform rate 
rescues residents from bracket creep, the mechanism that taxes away a 
portion of an individual's income as it increases from one bracket to 
the next. The uniform rate assures that residents whose income 
increases because of the tax cut will not have any significant portion 
immediately taxed away. Third, the mortgage interest and charitable 
deductions remain. The home mortgage interest deduction is especially 
vital because homeowners make a sizeable investment in the city and are 
most likely to remain here. Home ownership in the District of Columbia 
is the lowest among the 50 States and the District of Columbia.
  The bill also seeks to spur business and economic development in the 
city in two ways. First, the DCERA exempts capital gains so long as 
they derive from District investments by District residents. Second, 
investment income will qualify for the low 15-percent rate, so long as 
these are investments in activity within the District by District 
residents. Social Security income and income from traditional IRS-
qualified pension plans also qualify for the low DCERA rate.
  In the absence of a State, a unique tax incentive is fully justified, 
is profoundly fair, and absolutely essential. The tax cut is justified 
and fair because District residents pay the full load of Federal taxes 
while lacking full representation and full home rule, and they have no 
State to recycle income from wealthier areas. Instead, the city is 
burdened with just the opposite. The Congress has imposed on District 
residents the cost of providing services for commuters while protecting 
them from paying any part of the rising cost of those services. The tax 
cut is essential because every plan and proposal, including the recent, 
welcome proposal by President Clinton, will pick up only a small 
fraction of the costs the District taxpayer bears. As important and 
gratifying as the President's plan is, its basic assumption is that 
there will be a large enough tax base here to pay for most of the costs 
of the city. That assumption defies the latest census data. This city 
is on track to lose nearly three times as many residents in the 1990's 
as in the 1980's. Today, the city's population has dropped to where it 
was in 1933. Yet, the President's proposal will leave 90 percent of 
District Government costs that are currently funded from locally raised 
revenues to be picked up by a tax base that is being miniaturized.

  The analysts agree on the two basic necessary for the city to 
recover: An adequate tax base and relief from State functions and 
pension liability. We are gratified that the President's proposal 
strides in the direction we must go to fund at least some of the 
functions no city could bear today. My bill assures that his plan will 
not be stillborn. Stated painfully, but plainly, the President's plan 
will fail if taxpayers continue to leave at the present rate.
  The DCERA has been carefully crafted as a bipartisan bill consistent 
with the principles of both parties. It is sizable enough to attract 
Republicans and to act as a realistic incentive for District residents 
to remain. It is steeply progressive in the tradition of Democrats in 
general and the 1963 JFK tax cut in particular. Once the bill is 
passed, half of District residents will be off the Federal income tax 
rolls. Tax cuts for working people will progressively depend on income.
  To encourage investment in a city desperate for business, the DCERA 
taxes small District-based business at the 15-percent rate and 
eliminates capital gains, but only for District residents, thus 
accomplishing two goals at once. It helps reverse the huge business 
exodus from a city that is dangerously overdependent on the rapidly 
downsizing Federal sector, while encouraging business people to reside 
here--the only way to take advantage of the DCERA. Already 
impoverished, the District's business sector lost 1,800 businesses 
between 1990 and 1995.
  Equally important, the bill contains protections against 
gentrification and unnatural increases in the cost of living. For 
example, the DCERA applies only to bona fide District residents who 
spend 183 days of each taxable year physically in the city, to wages 
earned in the District or the metropolitan region, and to investment 
income earned on District investments only. The bill exempts capital 
gains taxes only on investments in the District by District residents. 
Stand-by legislation further guards against unnatural increases in the 
cost of living. Examples include: a city council bill passed last year, 
at my request, that freezes property, sales, and income taxes effective 
when the DCERA is enacted; a measure similar to TRIM in Prince George's 
County that limits property tax rates and the growth of assessments; a 
surtax on capital gains if derived from excess profits; and a revolving 
fund for zero-percent interest loans--or tax credits--for home buyers 
to cover unusual increases in home prices, with the money to be paid 
back upon the sale of the home; and the maintenance of rent control. 
The bill also requires the Secretary of the Treasury to prepare an 
annual study to determine the effects of the bill, thus allowing each 
year for the correction of unintended consequences, if any. However, 
the analysts and experts who have studied the DCERA closely to not 
predict unusual effects, but rather, they indicate that the market will 
discount for urban conditions in general and conditions and services in 
the District of Columbia in particular in the prices of property and 
other investments.

  Our greatest risk at this late hour is that even a tax cut may be too 
little to check the flight. At the very least, however, the 
overwhelming support for the bill among residents of every ward, every 
income group, and every racial and ethnic background is some evidence 
that the bill will help keep taxpayers here who might otherwise leave. 
The DCERA will give us time to improve services and to more fully 
regenerate our tax base. The introduction of the DCERA and the strong 
support it has won in the Congress has already raised resident morale 
and contrasts sharply with the long-running dearth of support for other 
approaches to help the District in the House and Senate.
  Time is running out to stop the taxpayer drain. We must hope that we 
have not already passed the point of no return. Once a city loses a 
critical mass of taxpayers, it loses the capacity to turn taxpayer 
losses around. No city has ever reversed a taxpayer hemorrhage. With 
the city on life support and no state safety net to rescue the 
District, the greater risk lies in doing nothing.
  Only blinders to the last great injustice on American soil could lead 
any American to question a bill reducing Federal taxes on the residents 
of the Nation's Capital. Third per capita in Federal income taxes, 
District residents stand alone in shameful defiance of the American 
principle of no taxation without representation. The four territories 
pay no Federal income taxes yet have the same representation in 
Congress as the District. The four territories have full self-
government; the District's limited home rule is self-government only 
when the Congress says so. The Congress will compound the harsh civic 
injustice it imposes if it also insists on taxing the District's tax 
base into extinction. With the DCERA, District citizens ask only to 
rebuild their own city with their own money. Their country owes them 
that, and more.

            DCERA PROVIDES SIZABLE PROGRESSIVE TAX REDUCTIONS           
------------------------------------------------------------------------
                                                    IRS         DCERA   
                                                 deduction    deduction 
------------------------------------------------------------------------
Single Filer..................................       $6,550      $15,000
Head of Household Filer.......................        8,450       25,000
Married-Joint Filer...........................       11,800       30,000
------------------------------------------------------------------------


------------------------------------------------------------------------
                                                               Percent  
                                                  No. of    reduction in
                 Income range                     filers         tax    
                                                              liability 
-----------------------------------------------------------------\1\----
Under $15,000................................       50,390           100
$15,000-$29,999..............................       87,117            79
$30,000-$49,999..............................       52,060          51.2
$50,000-$74,999..............................       23,568          44.2
$75,000-$99,999..............................        9,822          36.8
$100,000-$199,999............................       10,259          35.7
$200,000+....................................        4,286          34.2
                                              --------------------------
      Total filers...........................      237,502          44.3
------------------------------------------------------------------------
\1\ Includes a tax rate of 15 percent and charitable and mortgage       
  deductions, which are retained.                                       

  

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