September 26, 2002

Washington, D.C. - The Washington, D.C.-based Small Business Survival Committee (SBSC) today declared its strong opposition to the tax increases being proposed by District of Columbia Mayor Anthony Williams and the D.C. City Council.

"Raising taxes during tough economic times is a sure way to kill small businesses and jobs, and dig an even deeper financial hole in the future," said SBSC President Darrell McKigney.  "The current budget problems are fundamentally the result of a bad economy and out-of-control D.C. government spending.  Higher taxes will only make the economic climate worse and therefore make it even harder to solve the city's fiscal problems into the future.   The Mayor should remember the old adage:  'If you're in a hole, stop digging!'"

SBSC recently released its annual ranking of policy climates for small business, which ranked the District of Columbia as the toughest place in the country to do business due to its high taxes and cost of government.

SBSC chief economist Raymond J. Keating noted: "Predictably, Mayor Williams and the City Council want to increase taxes.  They choose to ignore both the true source of the District's current budget woes - that is, too much spending - and the fact that Washington, D.C.'s taxes already are far too burdensome."

Keating, who co-authored the 1995 book "D.C. by the Numbers: A State of Failure," pointed out: "According to the Mayor's FY2003 Proposed Budget and Financial Plan, gross operating expenditures from 1999 through 2002 increased at an average annual rate of 7%.  That's more than triple the rate of inflation."

He added: "Now, Williams and the City Council want to make matters worse by raising taxes.  A variety of tax increases are being considered, including an increase in the top tax rate on personal income and individual capital gains, or a possible hold on scheduled cuts in business tax rates.  Also, the tobacco tax may rise by 54%, and the tax on alcoholic beverage could increase from 8% to 9%.  Both the real estate transfer tax and the deed recordation tax might rise as well."

Keating explained: "Higher income taxes would simply magnify the current formidable disincentives for living, working and running a business in the District.  An increase in tobacco taxes would hit smaller retail enterprises with higher costs and reduced business.  More purchases would be pushed into the underground economy, or across the border into Virginia, where the tobacco tax is only 2.5 cents. Likewise, an increase in taxes on alcohol would hurt retailers and consumers.  And those in the real-estate business, as well as homebuyers and sellers, would pay for higher real estate transfer and deed-transfer levies."

In conclusion, Keating noted: "There is no reason to raise taxes in the District, especially given the enormous tax burden the city already inflicts on the private sector.  Instead, it is time to finally redress the festering problem of a city government that is far too big."

For more information, please visit SBSC's website at www.sbsc.org, or call 202-785-0238.  SBSC is a nonpartisan, nonprofit small business advocacy group with more than 70,000 members across the nation.