August 3, 2009

D.C. Approves Tax Hikes

by Justin Higginbottom

The District of Columbia Council has approved a 2010 budget designed to close their $666 million budget shortfall.  Tax increases within the budget include:

• Raising the sales tax from 5.75 percent to 6 percent for three years.  At 6 percent, D.C. would share the 13th highest sales tax rate rank among states.
• Raising the gasoline tax from 20 cents per gallon to 23.5 cents per gallon.  D.C. would share Maryland's gas tax rate-ranked at 26th highest among states.
• Raising cigarette taxes from $2 a pack to $2.50 a pack—a penny less than Massachusetts cigarette tax that ranks 6th highest among states.

(Tax rate rankings for all states can be seen in the Tax Foundation's mid-year update of 2009 Facts & Figures: How Does Your State Compare? )

Combined reporting was approved as a way to force businesses to pay corporate income taxes on profits reported for subsidiaries not inside Washington.  Also, indexing on homestead deductions for property taxes would be delayed until 2013.

Click here for more on DC taxes.