2026-10-16 - Committee of the Whole

Thank you. I'm going to order this hearing. This is a public hearing of the Committee of the Whole, the Council of the District of Columbia. Today is Friday, October 16, 2026. The time is 10/16 in the

morning and we are in Room 412 of the John A. Wilson building. The subject of today's hearing is revenue proposals for the fiscal year 2028 budget. This hearing was noticed, I believe, back in August

and we limited the witnesses to those who were invited, although we were somewhat loose about that as in if somebody contacted us representing an organization and asked to be invited, then they were

invited. So we have about 30 witnesses, maybe I'm a little off on that. We've divided them by panels because we've limited the witness list. We're going to give more time to witnesses than I

ordinarily do and we have a Committee of the Whole hearing. The subject of this hearing, as I said, is revenue proposals for the fiscal year 2028 budget. That does not mean that necessarily we are

going to be raising revenues or raising taxes. But what we have seen in recent years, I would say the last maybe six years, is that whenever we have the budget, which is typically in April/May of the

year, there is considerable testimony about the need to raise revenues. Some years we've done this. Actually, every year the Mayor, when she proposes her budget, has included some revenue-raising

measures, even though generally the rhetoric is that there are no tax increases in the Mayor's budget, but there have been, I would say, pretty much in each of the last several years. But there are

proposals or requests or lobbying or testimony or insistence that the Council raise taxes. And it's been my view that the limited time that the Council has to consider the budget in April and May is

not adequate for us to fully examine different proposals. And for the Council to actually consider and adopt a significant change in our taxes ought to have more discussion opportunities to understand

the pros and cons. So reading from the hearing notice for this hearing, in the Mayor's proposed fiscal year 2027 budget, many critical programs such as the Early Childhood Educator Pay Equity Fund,

the Health Care Alliance, out of school time grants, and temporary assistance for needy families were either eliminated or reduced in the out years, that is fiscal years 2028 through 2030, and

eliminated or reduced in the out years of the financial plan in order to balance the budget. The Council was able this year to reverse cuts to many of these programs when it adopted the fiscal year

2027 budget. However, this was done with one-time funds and with projected revenue growth, failing to keep pace with inflation, existing revenues may not be sufficient to sustain these critical

programs moving forward. Let me say a little bit more before I go back to the hearing notice. So my estimate is that in one-time spending, which is both budgeting that the Council adopted for programs

where we funded it for FY27, but not through all the years of the fiscal plan, or in the Mayor's proposals, which she did not call one-time spending, she called it out year reductions, but it's

actually the same thing. The total, and an example of that in the Mayor's proposal, was the funding formula for public education, the UPSFF, which she cuts, if I remember correctly, something like 15%

beginning in FY28. By my rough estimate is these one-time spendings, whether from the Mayor or the Council, total about $650 million. If we want to sustain those programs, we have a $650 million gap

plus inflation and other increased costs in operating our programs. And I'll add further that the Chief Financial Officer intends to be releasing fairly soon a current funding services level budget,

that is his calculation excluding the one-time expenditures of what it will cost to fund existing programs at the same level of program next year. And we're going to see that there's some gap there.

Rather than wait until budget time next spring to visit this situation, the Committee of the Whole would like to thoughtfully examine revenue proposals now that may be used to address funding

shortfalls in the fiscal year 2028 budget. To that end, the Committee of the Whole is having this hearing. The purpose is to hear and consider the pros and cons. I want to emphasize to consider the

pros and cons of various revenue proposals, including, so we may get testimony for other proposals, including the following. Following a new business activity tax, a new wealth proceeds tax,

transitioning to a land value tax, a new Pia de Terre tax, a sales tax increase, a real property tax increase, and an income tax increase. The purpose of this hearing is to hear from expert witnesses

on the potential revenue impacts of these proposals, as well as whether these proposals advance guiding principles of sound tax policy, such as equity and fairness, simplicity, economic efficiency,

stability, and transparency. In the hearing notice, we referenced several bills, but this is not technically a hearing on those bills. Where a bill is not referenced, the Committee has posted draft

legislative language and background materials on the website, the Council's website, and so those were available for witnesses to analyze. The record in this matter will be open for two weeks. We're

required to follow record after our hearings, and that which we receive testimony, comments, written oral testimony today, but any other comments that anyone is welcome to submit. If we receive them

by 5 p.m. on Friday, October 30th, we'll include them in the record. That doesn't mean that's the end of discussion. This is a political body, so we'll be receiving comments and testimony and

lobbying. Maybe I shouldn't say testimony, but comments and lobbying, I'm sure, for the next six months. The idea with today's hearing is to hear the pros and cons of these different proposals, and to

have a better understanding of what the implications would be, and also to stimulate conversation over the next five months before we get the budget, so that we're in a better position to understand

these proposals if and when we need them. I want to emphasize today's hearing is not to raise taxes, but to understand these different tax proposals. Again, the record will close in two weeks, 5 p.m.,

Friday, October 30th. I have been given a list of the order in which Councilmembers arrived, so I'm going to call them if they have opening statements, although I think I'll put folks on a three-

minute clock. Councilmember Felder, you did this list, and you listed yourself first. Do you have an opening statement? Well, good morning, everyone, and obviously thank you, Mr. Chairman, for

convening today's public hearing to examine several important tax and revenue proposals that could have significant applications for the district's fiscal and economic future. The district faces

important economic and fiscal challenges. Job losses and economic uncertainty have placed pressures on residents, working families, and small and locally owned businesses. At the same time, the

district must ensure it has the resources to provide essential services and invest in our communities. As we consider these proposals, we must carefully examine their potential to generate revenue,

their impact on residents and businesses, and their implications for the district's long-term economic competitiveness. The central question before us is, how do we strengthen our economy and maintain

the services residents depend on while keeping the district affordable for those who live, work, and do business here? That requires a balanced approach, grounded in sound fiscal policies, reliable

data, and a clear understanding of who may be affected by these proposals. We must consider their potential impact on homeowners, renters, seniors, working families, and businesses across all eight

wards. I approach today's hearing with an open mind and look forward to hearing from our expert witnesses, community advocates, business representatives, and residents. Their testimony will help us

better understand the potential benefits, costs, and broader economic implications of these proposals. Our responsibility is to carefully consider the available evidence and determine how best to

support the district's fiscal stability, economic growth, and affordability. And with that, I look forward to today's hearing. Mr. Chairman? Thank you, Councilmember Felder. Councilmember Fruman?

Thank you, Chairman Mendelssohn, and thank you very much for holding this hearing. I think it's a very important step, and it's happening at the right time. We face an enormous challenge. As the

Chairman said, there's $600 to $700 million in one-time spending in our budget for this year that would need to be filled. There's likely $200 to $300 million in natural increases in costs, and we

have a sales tax in our current budget for FY28 of $150 million. In order to preserve the status quo without a revenue increase, it will take a billion dollars. The revenue estimate shows an increase

on the order of $500 million between the FY27 and the FY28 budget. So some of that will be solved by increases in revenue, but there's $500 million that need to be solved either through cutting

spending or increasing revenue or both. I hope that everyone here shares the view that we need to scrutinize our budget for savings so that we can avoid waste and avoid having to increase spending

unnecessarily. I think that has to be a very important project for the Council and the incoming Mayor as we approach our next budget. But I also think that it is likely that we will need to include

revenue raisers in the next budget in order to make things work even just to preserve the status quo. And that is what makes this hearing so important as a way of vetting ideas and kicking off the

conversation about this topic. For me, when I look at revenue raisers, I have two key criteria. One is, how does it affect the burden on district residents across the economic spectrum? We need a fair

tax system that applies as fairly as possible across the spectrum. And then the second factor is, what does it mean for regional competitiveness? How do we compare to our neighbors in the taxes that

we impose and what impact might revenue raisers have on our ability to retain taxpayers at high incomes? The two things sometimes push in different directions, but I do think those are key metrics. We

need to meet our needs, we need to do it fairly, and we need to do it in a way that protects the district's long-term economic strength. I really am grateful to you, Mr. Chairman, for having this

hearing. Thank you, Councilmember Froome and Councilmember Parker. Thank you, Mr. Chairman, and thank you to everyone here to testify. The district is facing important decisions, as has been

mentioned, about spending and revenue. And those conversations are never easy, but they are important. Today's hearing feels exceptional, but it shouldn't. We should be holding hearings on tax policy

on a regular basis. Oftentimes, I find that, especially on social media, it is easy to talk about tax policy in reductionist terms. It's either too much or too little. And today, I'm hoping that we

can go beyond that to ask some meaningful questions. Things I'm hoping that we address as fairness. What are the effective tax rates that residents and businesses are paying relative to their income?

Are there loopholes that certain individuals and businesses enjoy that others do not? And how do we address them? Resiliency. Are taxes keeping up with the district's GDP and associated demands on

district services? Are we positioning our tax code to weather significant structural changes to our economy, including lower commercial property values? Adequacy. Are we raising enough to cover

services that our residents expect, like investments in education and human services? What are the risks if the district is unable to provide those services? What are the risks if the district places

too many burdens on residents and certain businesses? And how will that impact the city overall? Opportunity. We know that many district residents still live in poverty. And the many of them are

families with children. I have long championed a district child tax credit and other proposals that amount to direct investments back into the pockets of working class families. By giving families

more resources to pay for food and housing and health care here in D.C., we can lift the economic floor for our communities. A few other preliminary thoughts. First, I view the options on the table as

a starting point. For instance, it would be easy to pair the individual income tax proposals with a child tax credit so that tax increases are coupled with tax relief for lower and middle income

filers with children. That approach could supplant one of the options advanced and that we will discuss today, where rates for some of the middle graduated income brackets are reduced. Secondly,

generally speaking, I favor revenue approaches that increase taxes on income generated from wealth. Let me take a minute to explain. Taking both federal and local tax regimes into account, wealth

generated income enjoys lower effective tax rates than wage-based incomes. Wealth-based income is largely not subject to Social Security and Medicaid or Medicare taxes. Rules like stepped-up basis for

inheritance create tax-free gains for those who benefit from intergenerational wealth, and it disadvantages those who don't. I see the clock ticking, so I will just end with this, Mr. Chairman. A word

of caution. The reality is that the financial proposals on the table today offer ways to address spending and balances across the four-year financial plan, but they are unlikely to support massive new

spending programs. We also need to continue to do the hard work of rooting out waste, improving our procurement systems to deliver better results, and to cut bloated spending in our budget. And I hope

we'll one day have a hearing on that as well. So with that, Mr. Chairman, I look forward to today's hearing. Thank you. Thank you, Councilmember Parker. Councilmember Biles. Thank you very much,

Chairman. I want to start by thanking you for the meeting today. This hearing is very, very important, and I really appreciate the fact that when I spoke to you a few months ago and said it is time,

it is time that we focus on our revenue, that you move forward to put this activity, this very important roundtable on the record. This is very important because we're going to hear today from not

just those who helped to raise the various revenue sources in our city, but we have already heard from so many public witnesses. And the audience today is a preponderance of individuals, our

residents, our organizations that help to get messaging out about our revenue and how we're going to use the monies that we accumulate every year and devote to various projects. I think it's very

important that as we talk today and we hear about the new opportunities that we are also focused on, how do we get to a balanced budget? Because ultimately, that is the requirement for any community

to provide quality living for its residents and services to its residents and to its businesses. So today, I'm listening to those who profess to have the magic wand that can help us understand how we

should handle these so-called revenue enhancements that may be proposed. I'm not suggesting for a minute that we are going to look to these revenue enhancements as a methodology to balance the budget.

We may actually finally, in our life journey, look to how do we reduce some of the cost to the residents, the consumers, those who buy these enhancements and deliver the resources that we spend $22

billion budget. We want to go down. That's my method. I'm leaving the council so I can say that. We want to go down. And I believe many people in community want to go down in what it costs in order to

run this government. Do we want to go down in service delivery? Of course not. So these trade-offs are going to be very, very difficult. And as some of my colleagues have already said, the real issue

is what, if we have to do it, is it that you believe we should really be doing when we talk about revenue enhancements? Thank you, Chairman. Thank you, Councilmember Bonds. Councilmember Henderson?

Thank you, Mr. Chairman, and good morning, everyone. I'm going to be brief because I want to get to the panels and the conversations and talking about the proposals and the solutions. I'm glad we're

holding this hearing today. Oftentimes when we're talking about revenue, it's in the context of the budget. So we don't actually have an opportunity to consider all the varying ideas on their merit on

their own. And it's usually in a very time crunch situation. So I'm hoping that today's conversation won't be the only conversation that we have going forward. I think all of us understand that the

district is facing an economic challenge. We have a federally imposed economic contraction in part that is happening at the same time that we have issues with regard to affordability and housing. But

when we have conversations about revenue, there are other things that we have to think about as well, particularly in a jurisdiction as unique as ours, where we don't sit on an island. We are very

much a region. And so the decisions that we make in D.C., we have to ensure that we're still remaining competitive with our surrounding jurisdictions, of course, out of regional cooperation. And also,

I want the businesses to locate here. I want people to raise their families here and I want D.C. to grow and thrive as well. And so I hope as we're considering these proposals today, I'm going to be

asking some questions about what are some of the tradeoffs and what are some of the potential risks. Now, obviously, risks are estimates. They're not known in terms of concrete, but it's something

that we should certainly take account and move with clear-eyed. On the other hand of what some colleagues talked about as well, I was thinking about this yesterday in the philanthropy space and in

higher ed and oftentimes we talk about institutional trust. And donors like to give to institutions for which they trust. They believe that their dollar is going to go far. They believe their dollar

is going to be spent well. They believe that it's going to be effective. And I think when we talk about taxes, we have to think about that as well. We can't continue to ask residents to pay for more

and then we deliver less. If we're going to ask for you to raise taxes, your trash needs to be picked up on time. If we're going to ask for taxes to be raised, potholes need to be fixed. If we're

going to ask to do all these things, then the services need to follow as well. And that's a separate conversation, but it's something for us to keep in mind because I feel like we can't vote to raise

taxes. And then every other week we have a story about some inefficient program, some fraud, something happening, something, some service delivery not taking place as well. But it's a comprehensive

conversation and I'm ready to get to it. Thank you. Thank you, Councilmember Henderson. Councilmember Silverman. Good morning. Yes, good morning to my colleagues, to all the panelists who will appear

before us today and to the residents, the businesses and taxpayers who ask for a public conversation about who pays for our government and our services. I also want to say thank you to Chairman

Mendelssohn for holding this hearing, and I hope it will be a constructive conversation. So in thinking, at least for me, and thinking about the conversation today, I'm trying to separate the urgency

of trying to figure out how to fund our government next year with just a very basic question. Is everyone who relies on DC government and services and wants to be a part of our community, are they

paying their fair share? And I think the basic principles to get at that are things that my colleagues mentioned. Is it fair? Is it transparent? Is it simple or at least as simple as it can be for

people to understand compliance? And is it designed to truly meet our needs? So today's hearing, at least for me, and I might be the only one perhaps because of my unique entrance into the Council, is

really trying to determine where our tax system has fairness gaps and who benefits from being in our city versus who is paying for it to make it a great place to live, play and do business. Now, if

any of the panelists disagree with my approach, to think of this as a hearing really about tax fairness, as opposed to a hearing on how we can get more money for fiscal year 27 and beyond, feel free

to disagree with me. I look forward to that. We will have a new mayor and we aren't sure what the new executive will put forth in her budget proposal. So I think today really gives us a chance to

think about where we go from here to make our city fair, to make our tax system as progressive as possible and well positioned for our future. Finally, I think there are seven proposals we have on the

table. I guess I would ask our witnesses, is there something we're missing here? So I look forward to the conversation. Thank you so much. Thank you, Councilmember Silverman. Councilmember Nadeau.

Thank you, Chairman. I appreciate you holding this roundtable today and, you know, I agree with everything that's been said so far about ensuring that we're providing effective services and that every

tax dollar is spent wisely. As the chair of the affectionately referred to nitty gritty city committee, focusing on the day to day services that we provide is quintessential to any government. And I

really truly look forward to a new mayor who is going to make sure that we are effectively using all these dollars and is focused on delivering those services. And I think demonstrating that

absolutely is critical as we consider raising taxes. Reforming our tax code is about ensuring a fair shared responsibility for the programs and services for safe and clean streets, for public

infrastructure, for housing assistance, for healthy food access that we all rely on. Our district must work for all of us, not just those who can most easily afford it. Fundamentally, the proposals

we'll talk about today are about fairness. Is it fair that there's a loophole that allows out of state businesses to operate in the district benefit from it and not pay taxes here when local

businesses doing the same work do pay taxes. Is it fair that district treats income from wealth more favorably than earned income. Is it fair that the district that district taxpayers in the top 20%

of income have lower effective tax rates than those in the middle. In every budget, the mayor and the council are forced to make difficult choices and far too often these choices include cuts to our

social safety net and asking our most vulnerable neighbors to figure it out as funds are drained from housing. TANF, alliance, childcare assistance and other programs. A conversation on revenue

proposals is long overdue. It's been six years since the council had a dedicated finance and revenue committee. And those six years have been some of the most tumultuous for the district's finances

and revenues since the 1990s. Even when the council reestablished the tax revision commission, we made little progress in creating a more sustainable and equitable tax code with respect to the

commission members and staff here today for their efforts. And I thank you for your efforts, but it imploded. And now we have nothing to go from the changes we have made to the tax code in the last

six years have been made outside of the committee process without official recommendations from the commission. Through amendments to the budget. And don't get me wrong, I'm proud of these

accomplishments, the homes and hearts amendment I authored with council members, and Charles Allen in 2021 resulted in funding for housing for 22,000 residents through a small tax increase on our

wealthiest residents. Analysis from the tax revision commission found that this did not result in any discernible tax flight. But I also know there's a better way to do this. And that's why I

introduced a bill to establish a permanent tax and revenue commission. While that bill is not part of the official agenda today I'm grateful the chairman has called this hearing. I hope it'll become a

more common practice, just don't have time left here to go through these proposals. But I will say that I really look forward to talking to local and national experts today on the impact all of the

proposals before us might have getting into the nitty gritty on who would pay, and how much how we can propel the district into an economic future that is stable, equitable and fiscally responsible.

One in which everyone pays their fair share. Thank you so much, Mr. Chairman. Thank you, Councilmember doe Councilmember Pinto. Thank you so much, Mr. Chairman, for holding this hearing today nice to

see so many of our colleagues engaged on this important topic. And thank you to all of the witnesses who are going to share your expertise. You know I think we need to zoom back and remember we have a

desire and a really important need to fund a lot of priorities of our city to ensure that everybody is safe to ensure our community can be in school and have enriching environments to ensure our

seniors have what they need to build more affordable housing to ensure people have health care. Those are priorities that we have to fund and they cost money. And in order to ensure that we are

upholding our end of the deal in the government, we need to ensure that what we're funding is being done effectively. And if we just seek to add more to the pot. I think we have to go through a more

comprehensive analysis on what is and is not being done effectively. We just had DCHA on account for $52 million from seemingly a spreadsheet error. We just had the auditor come out with a report on

the Department of Corrections that said our correctional staff are averaging 10 to 12 weeks of leave a year but we're spending $30 million on overtime. We spend more per capita on our students than

anywhere in the country but we're not seeing improved outcomes. And so we have to ensure that our budget is delivering and improving what we set out to do for our residents. We have a $22 billion

budget which reflects a 26% increase over the last five years, even though our population has remained relatively flat, and we should all be asking ourselves, how has that increase in money improved

lives of our residents and improved outcomes. So I think before we ask residents and businesses to just add more. We need to be going through that analysis. I also want to recognize our economic

outlook as a city, and the opportunity we have in this moment to shape a brighter future of opportunity for more of our residents across all eight wards. We are going through massive changes in our

workforce. In our economy, we have 100,000 residents in our region who've lost their jobs over the last year. And if we aren't extremely proactive about diversifying our economy, ensuring that new

businesses that are already here can expand, or to bring new industry and businesses to the district to provide those jobs, our residents are going to miss out on this critical juncture. We cannot be

overly reliant on one or just several industries like we have in the past. We've also seen dramatic and devastating changes to our social safety net, both from changes in the federal programs, like

staff and supportive housing, and our constrained financial outlook here locally and those are needs that have to be addressed. Councilmember, you've been over three minutes. Okay, well I will stop

there then. Thank you. Thank you, Councilmember Pinto. Councilmember Trean White. Yes, good morning, and thank everyone for being here. I think it's an overdue, very important discussion. We found

ourselves today at a critical crossroads as our city faced stark economic realities. I believe the chief financial officer projections made it clear that the ever easy revenue growth has slowed,

leaving us on the precipice of a serious fiscal cliff. It has been known for quite some time that our downtown is not as strong as it used to be, and many companies have not renewed their leases, and

at least five businesses in the world, they have closed down already with more in jeopardy of closing, and the list goes on throughout the city. And then writing has been on the wall, and FY 2027

budget cycle the council had to rely on one time funds, just to starve off devastating custom vital lifelines like the temporary assistance and even families, TANF programs, other housing, local,

local housing vouchers. The district faces contracting economy, the problem cannot be solved by cutting the very basic safety lines that keeps families here who are most vulnerable. There's a lot of

job loss, as the D.C. has noted, and some people are really feeling the pressures personally. And we cannot continue down the path that balances city budget on the backs of poor and working class

people while the system is remains one of the highest in the country, where people have to make a decision where to play, shop and work and worship, and note that the cost of living is still going up.

We must listen closely to our residents as well as our local business community concerns about keeping DC competitive while protecting our schools, our healthcare, and our family support initiatives

and most importantly, public safety. While there are more efficiencies to be achieved in the city's operation today we will have the discussion on the seven distinctive revenue and tax proposals. I

want to, along with my colleagues, evaluate these proposals and base our decisions on equity, fairness, and the protection of the working class and citizens of District of Columbia. I look forward to

hearing from today's invited witnesses to discuss how we can build a tax structure that reflects the true value of equity, stability, and opportunity for every single resident in DC, especially those

who have been left behind for far too long. I think we need some greater focus and conversation and workshops and intense time and energy on how to get this train going in the right direction, for

lack of better words. Not just a few hearings. I think it requires to have a real serious focus and time and energy put into it. So I look forward to discussing today and I'll takeaways. Thank you.

Thank you, Councilmember White. Councilmember Lewis-George. Thank you, Chairman Mendelssohn for convening this hearing and thank you to all of our panelists who will be with us today. It is incumbent

upon us as elected leaders to identify smart ways for us to be fiscally responsible with our taxpayer dollars to raise revenue and to spur economic growth. Today we have an opportunity to dig into

these proposals together. The decisions we make about revenue will help determine who can afford to stay in DC and what kind of future they can build here. We need to approach this hearing with that

responsibility in mind first and foremost. As a daughter of the district, I want the people who have made this city what it is to have a place in its future. The parent who works every day but still

cannot afford childcare and rent in the same month is who I want to be centering. The senior who spent decades paying for a home and now worries about being able to keep it or how they can be able to

age and place in this city is who I want us to be centering. The neighborhood business owner who is trying to pay their workers cover rising costs and keep their doors open is who I want us to be

centering in this conversation. They need us. They're relying on us to make this city more affordable. They need public services they can count on and they deserve to know that their dollars they

contribute are being put to good use. So that means this moment isn't about maintaining the status quo. That isn't going to cut it. This means that this moment isn't about kicking the can further down

the road. We can't kick this can any longer. That means taking a hard look at who contributes to those services and who our tax system lets off the hook right now. And we know right now every other

jurisdiction in this country can tax businesses operating in their borders no matter where their owners live. We must consider closing this tax loophole to fund universal childcare, which allows

parents to go to work and affordable housing, which helps families to put roots down here. We also have responsibility to get the details right by protecting our small and local businesses as we

consider new revenue. We also need to examine the burdens our current system places on our residents and our small businesses where we can simplify permitting and licensing and reduce unnecessary fees

and paperwork and make it easier for locally owned business to open and stay open. Where our residents missing out on tax relief or assistance because the application is too complicated or they do not

know it actually exists. There are steps we can take just outside of this, just making our government and our systems work better for everyone. I look forward to hearing from everyone about what these

proposals would mean in practice, what they need to work and how we can get them right. From our government witnesses we need clear estimates and realistic timelines so that this discussion can lead

to informed decisions for the fiscal year 28 budget. Our responsibility is to put the district on strong financial footing and make it possible for working people to build a life here and stay. I am

ready to listen and work with my colleagues, our witnesses and our residents to move that work forward. That is what putting people first requires and that's what I look forward to doing alongside my

colleagues as we look at the future and our fiscal year 28 budget. Thank you. Thank you Councilmember. Councilmember Allen. Thank you very much Mr. Chairman. Very glad to be here. This comes on the

heels of our FY27 budget cycle and as we prepare for our FY28 budget cycle. I'm very glad we're having this hearing though because for years we've not had a standalone finance and revenue committee.

We've not had hearings or even a public discussion about proposals leaving us only to have to look at solutions within the budget context. Then being told well but wait we need to have hearings on

this you can't do it during the budget leaving us with a cynical loop that has not been able to advance the conversations in a responsible way that we need to. Years of growth and increased revenue

are now more difficult to come by. That's true for our government. That's true for our residents and working families. That is true for our local businesses and our entrepreneurs. Inflation, tariffs,

global events have made things much more expensive. And on top of that a hostile federal administration has eliminated 45,000 jobs from the district and our region and mortgage rates have now crossed

over 7% making it more difficult to afford a home or to invest. Despite these headwinds our economy has actually been remarkably strong and resilient. CFO informs at the close of the fiscal year that

we ended up with 200 million dollars more than expected but it also remains vulnerable moving forward. I do think we have to be clear. We will need to increase revenue in the district and we will also

need to find savings to control spending. Both are necessary and each come with trade offs and revenue growth doesn't have to come from new taxes alone. Revenue growth also comes from growing our city

with population and with businesses but none of it will work in isolation. It all has to work together. As we look for ways to make sure the district government has the resources it needs to continue

to support programs that are vital and important to district residents and small businesses we must do so in a way that's fair, equitable and keeps the district competitive. With the seven proposals

that are before us today all of them are certainly viable in different ways but which should move forward and in what shape is the real question. Each of them comes with trade offs. For example, the

proposal to increase the sales tax from six to seven percent on October 1st, 2027 gives me pause. I'm concerned about moving forward at this stage because a sales tax by its nature is regressive but

further as the region continues to debate long term funding solutions for Metro. DC moving forward with our own sales tax increases the risk of us falling out of sync with our regional partners and

becoming less competitive. Now a bright spot in the CFO's September 30th revenue estimate was income tax growth from non-withholding sources. The CFO attributes this to a strong equity in stock market

though will not recognize out your growth because of the volatile nature of it. Those who are accumulating vast amounts of passive income income that you earn because the stock market is doing well

are doing quite well. I think a tax on that passive income should be something seriously worth considering though. Is that something that potentially fixes our long term structural problems in the

financial plan? Maybe, maybe not. That's why we have a hearing while we look at it. There's also the business activity tax which I think in principle seems like a very good idea. It's been something

that has been studied by the tax revision commission and while this most recent tax revision commission was not able to arrive at a consensus, there was agreement around pursuing a business activity

tax if it was accompanied with repeals of some of the more onerous taxes that affect our small and local businesses. In my view, if we're going to move forward to the business activity tax, then

repeal of some of those onerous taxes needs to come along with it. It was part of the commission's consideration so it was left out of the proposal that was presented for today's hearing. There's a

lot more to say about proposals that I've mentioned and those that I did not, but I look forward to getting into the details with our invited witnesses today. I'll close by coming back to this, Mr.

Chairman. This may be the first hearing on revenue the council has had since we had a standalone committee on finance and revenue. It has been years. We should be talking about it much more often,

both in good times and in bad. Thank you, Mr. Chair. Thank you, customer Allen. That's going to conclude the opening statements. I don't think I missed anybody. So I'm going to call the first panel,

and while they're coming up, I'm going to make a few other remarks. Anthony Williams, who is former mayor of the District of Columbia and currently CEO and Executive Director at the Federal City

Council of the District of Columbia. Yesham Sayin, who is Executive Director at the D.C. Policy Center. Greg McCarthy, who is a former commissioner on the Tax Revision Commission. Nick Johnson, who is

a senior fellow at the Institute for Taxation and Economic Policy. And Erica Williams, who is Executive Director of the D.C. Fiscal Policy Institute. Each of you was on the Tax Revision Commission,

which is why we grouped you all together. And so this is going to be an opportunity for members to ask some questions about thinking of the commission or of you all individually, as well as, of

course, other questions. I do want to note one of the things I've struggled with with this hearing is time. We have -- it's 10 minutes for these folks, right? So each of the witnesses has been told

you have eight minutes for testimony, which is much longer than we usually give witnesses. But then again, we really want to get in-depth on this. So with the five of you at eight minutes, that's 40

minutes, assuming that there's no in-between time. Members, I hope, have in-depth questions. And if each member has a 10-minute round, which is what I'm going to propose, and that's two hours of

members. So we will spend approximately three hours with this panel alone, and we have three others to follow. So if members do not have questions, that is fine, or rather, if you don't have a full 10

minutes of questions, that's fine as well. I also want to note, just so that there's no confusion, we attached to the -- I want to say the hearing notice. We referenced in the hearing notice with a

link, attachments, referencing, I think it was three bills, and then drafts of other proposals. None of these should be understood to be that I am proposing all of these tax increases, rather all of

these drafts or bills are referenced so that there's something around which folks can talk. And that doesn't mean to limit the testimony, either at today's hearing or anyone who wants to comment

afterwards, to limit it to those seven proposals, or the specifics of those proposals, it was really meant to provide a framework around which people could testify. So with that, Mayor Williams,

you're first. Thank you for being here. Mr. Chairman, members of the committee, thank you for the opportunity to testify on a very important issue facing our city. You know, the history of cities

throws us some uncomfortable, but I think instructive cautionary tales. Too often, leaders assume the future will be a continuation of the present, especially when times are good. They assume that

because we're rich today, we're likely to still be rich tomorrow. Then they take a gamble in the future, they can only fathom as brighter, but it's a risky bet. History is littered with stories of

once-rich cities and nations that became poorer. At the turn of the 20th century, Pittsburgh had the highest concentration of millionaires per capita in the world. In the 1950s, Detroit may have had

the highest and broadest levels of prosperity in the world. Yet, how quickly Pittsburgh and Detroit fell, becoming symbols of the deepest depths of urban decay and blight. Now, this is not to say that

the district is on the same track, but a future of ever more riches is by no means certain. So I advise don't get trapped in an optimism bias. Don't assume that what was true last decade will be true

in the next. I remember, personally, the dark days in the 1990s in the district. Now, you're going to say it's an old time. We're talking about hard times. Well, they were hard times. And I would urge

council members, the incoming administration, to refer back to that time when this city was not on an upward trajectory. And we could come back to those days. The vantage point today doesn't look

great. Over the past year, the district's real GDP fell 2.6 percent. Doge cuts struck 45,600 jobs from our economy. In August, unemployment reached 5.7, the highest in the nation. DC leaders would be

wise to play it safe when we know the city's economy is on shaky ground. They should budget for a future where robust economic growth is not guaranteed. They should run the government, and this has

been referred to by numerous councilmen, in a way that treats every driver of economic growth and every taxpayer as a critical cherished asset. Without a healthy tax base, cities and city services

crumble. Again, I refer you to the aforementioned cities. Now, we can run in narrow circles pinpointing the minutiae of elasticity multipliers, how sensitive different segments of taxpayers are to

tiny incremental changes in taxes. We can refer to anecdotal evidence one way or the other of mobility of capital. But I would urge us not to lose sight of the relevant big picture. Economic growth is

always the best way over the long term to increase and provide significant tax revenue. The district's experience is a case in point. According to analysis done by Mayor Bowser's budget team, between

2010 and 2025, local revenues grew by 120%, of which 85% of that total was due to economic growth. Only 15% came from tax increases. So I would urge city leaders to carry forward policies that operate

under the same assumption and pay for services without expanding economic base as opposed to incremental ad hoc increases in rates. The kind of incremental tax increases and changes being discussed

today, to me, send all the wrong signals to taxpayers that the city needs to drive growth. I understand there's a balance between making the city affordable for people who live here, but that

affordability has two sides, affordable to the people, providing the revenue, affordable to the people who live and need those critical services. Now, taken together, the tax proposals, in my mind,

target a small group of valuable taxpayers, high earners and investors, professional services firms and their out-of-state owners, businesses and nonprofits with activity in the district and owners of

commercial property. They already shoulder a disproportionate share of the city's tax burden. They have a lot of options to relocate regionally and nationally. So in my mind, now is not the time to

test out new tax regimes or layer on more taxes on the Golden Goose and hope for the best. We need every taxpayer here to stay. I ask you not to risk giving them a reason to leave. Frankly, we need

more taxpayers to move here. Don't give them a reason to choose somewhere else. Give them certainty that the future tax regime will be reasonable, measured and without surprises. And let me talk about

settled expectations. And let me pause and explain how the tax proposals being considered today by the Council today are different from what the Tax revision Commission considered. We operate under

the assumption that any final recommendation would be revenue neutral. The business activity tax was on the table as a simpler, broader way to tax businesses and only with equal offsetting cuts to

other more onerous business taxes. It was always part of a package of reforms. Installing the BAT as a standalone tax raiser was never part of the discussion. The BAT package was not endorsed in large

part. And this gets to one of the Council members were talking about the implosion of the Commission. It's hard to have a tax commission in difficult economic times. This is more of a story, but if I

could continue. It was not endorsed in large part because of the perilous nature of the post-pandemic downtown commercial economy, a critical component of the tax base. In my humble opinion, it wasn't

worth the risk of damaging long-term economic and tax revenue potential to a critical part of our economy. The downtown commercial economy may be in an even more perilous state today. Again, I say

don't risk it with a bat. But DC leaders, and this has been mentioned by numerous Councilmen, do have to make tough decisions and soon about how to make the math pencil out this budget session before

any substantial economic bounce will kick in. I understand that the new administration would also like to add new social spending programs, likely directed at critical social services. City leaders

should protect and nurture our cherished economic engine while reaching for true oversight and reductions on the spending side. For decades, as the DC economy exploded and with generous federal

pandemic era relief, the Council and the Mayor continuously matched luxurious tax windfalls with new spending priorities and programs. Now that the windfalls are coming to an end, a responsible fiscal

steward would match sources and uses, would match spending to the tax revenue reality. Now the Council twice approved legislation to seat an expenditure commission. The likely new Mayor has pledged to

zero in on government efficiency. I call on everyone to make good on those commitments before considering any tax increase. I asked the Council to spend at least six months going through a checklist

on the spending side. Look at program impacts. Look at program evaluation. Look at cost effectiveness and economize where needed. Get a firm grip on spending that is growing out of control, whether it

be Metro or Medicaid. Just because something is important and just because it's urgent doesn't mean it should be satisfied at any rate. So I would urge the Council, the next administration, to take a

broad approach to our revenue prices and look at both sources and uses as we do so. Thank you. Thank you, Mayor Williams. Yes, from Salem. Thank you. It's really difficult to follow Mayor Williams.

Good morning, Chairman Mendelssohn and the members of this committee. My name is Yashim Sayin and I'm the executive director of the DC Policy Center. We're an independent non-partisan think tank

advancing policies for a growing, vibrant and compelling economy in the District of Columbia. I have submitted a very long testimony, which I'm not going to go through. I'm going to keep my comments

high level, but all the data analyses and information that's necessary to support my claims are in my testimony. Sorry if I refer you to that. Today I will speak to three of the taxes that is a part

of this hearing, but I want to start with a framing, which I hope this Council will find useful and the next administration will find useful while evaluating the tax proposals. So here's what I want

to start with. The district's expenditure curve is much steeper than its economic growth curve and its revenue curve. What does that mean? It means that you can raise taxes this year. Next year you're

going to find yourself again facing a gap. And this city has experienced this. We have raised income taxes to pay for pay equity funds, only to come back year after year to find out some unknown cost

driver has eased up that fiscal capacity. We've done the same thing with housing supports. So there are really two ways to fix it. One is then the back of the expenditure curve. It's very hard work,

but it can be done. It's under the control of the incoming administration and it's under the control of this Council. And Mary Williams already mentioned it. I think thinking about the expenditure

commission or some other format that spends time to understand where are dollars that deliver the highest benefits, what works, what doesn't work. And that way changes the slope of that expenditure

curve. The second thing we can do is increase the slope of the economic growth curve. That's much harder. It's harder for any government elected official or any government entity to do. A lot of it

depends on the market conditions. But I want to offer you the thought that increasing taxes at a time where the economy is really weak is not going to help you improve that economic growth curve or

expenditure curve. So I hope you find this frame helpful, thinking about the revenue as in razors as well as what the city can do on the expenditure side. So with that, let me talk to the business

activity tax. As mentioned, this has been one of the proposals in the tax revision commission. We consider that at the time I was supportive of looking deeper into it because it came as a package. It

also simplified business taxes elsewhere, and it broadened the tax base to include agents or companies that were not at the time paying as much as they could into the district. That's partnerships

where one of the partners is a non-resident, hospitals, universities, nonprofits, so on and so forth. So there are two reasons why I don't support this anymore. First of all, since then, we have

started diverting funds from the paid family leave. Paid family leave is paid for by a payroll tax. A payroll tax is not a business activity tax, but it's pretty close in the sense that payroll is a

large share of that tax base. And every year between 2027 and 2030, we're going to raise $430 million on average after paying for the benefits for the paid family leave. And we are diverting it to pay

for some unknown expenditures, just to support the general fund, right? So to give you a perspective, when we were discussing the business activity tax, we were looking at a revenue somewhere between

$275 and $500 million. There you go. You have $430 million right there. It's already happening. So the argument that these entities are not paying is no longer true or as true because anyone and

everyone who employs someone in the District of Columbia is paying that tax. So that's one reason. The second reason I'm really nervous about this tax is when we discussed this, employment was still

growing in the District of Columbia. Resident employment was growing at one and a half to 1.6%. Payrolls were growing at about 1.7%. Right now, we've lost 47,000 jobs in the last two years. Resident

employment is declining by one and a half percent. And for the first time I can ever remember, including the Great Recession, nominal wages earned in the District is declining. So we're going to use a

tax that largely falls on payrolls when our goal has to be increasing employment and increasing wages earned in the District of Columbia. It's a disincentive to hire at this point. So those are the

two reasons I do no longer support the business activity tax. Let me turn to the proposal to switch to some assessment system that will, in the long run, bring us to some sort of land value tax. Now,

if this is an idea, that's a longstanding idea, it is lots of intellectual strength, but I have some concerns about it. The bill we're looking at will require the CFO to use the highest and best value

of land and value land separately from improvement. So what is the highest and best use? It has to be something that's physically possible. You can actually build on it. It has to be legally

permissible. That fits the zoning, historic district, covenants, you know, whatever legal requirements are there. It has to be financially feasible. When the Tax Division Commission considered this,

talked about we just didn't know what to do with buildings underwater. So let me start with the financially feasible. Let's say a downtown office building that's not worth as much now. That land could

be, its highest and best use could be a residential building, right? And the owner of the lots goes to a bank and asks to finance. I also think that other features like what is physically possible

requires a ton of information. You know, is there any environmental remediation? What's the lot size like? Those are not things that the CFO has access to. I have a little table in one of the

appendices in my testimony that kind of walks through what is needed if it's helpful, so that's difficult. I don't think that a land value tax can be really helpful in parts of the city that are

single-family residential. If we up-zone and think about some sort of land value tax, we can intensify those increased housing, so that might be something to look at. Last very quickly, net investment

income tax. I worry about this because it's a very small number of taxpayers carrying 200 million dollars of tax revenue and large dependents on how the stock market performs. There's a lot in my

testimony but I will leave this committee with the following question. I would urge you to ask the CFO how much of that tax would be paid by the top 100 taxpayers, no names necessary, just the

numbers. Top 500, top 1000 and what happens if the stock market goes on by 10%, 5%. Thank you and I'm happy to take any questions. Thank you. Mr. McCarthy. Good morning Councilmember Mendelssohn and

others. I'm Gregory McCarthy. I bring to the table a lot of current and past affiliations. Probably no future affiliations based on my remarks today, but all those affiliations are unrelated to the

content of my remarks, except the fact that I was indeed a member of the most recent tax provision commission. I'm on a panel with four distinguished economists and financial experts so I'll let them

focus on that. I'm going to focus really on some broad policy choices that I think the council has. I commend you for having the hearing as this topic is ripe for a robust and transparent discussion.

Undoubtedly the dialogue will be sometimes uncomfortable and awkward but that's okay because so is the financial moment that we face in our city. I offer several summary points for your consideration.

Our current tax system, in my estimation, falls short on fairness, threats and resilience, a strategically targeted business activity tax is one remedy at your disposal and as the mayor said an

expenditure commission would add credibility and trust to a situation when you do find it necessary to raise taxes. Unfortunately there is mistrust and doubt among good people with opposing views on

all these topics. It probably won't get said today but I'll put it out there. There are good people who think that the council imprudently creates entitlements and programs that the city can't afford

and they go back and tax or gouge the same people to pay for it and there are other people that think that those very people cynically manipulate tax loopholes and other things to make a lot of money

in the district and not pay their fair share. Though I don't think those are true but nevertheless that is the sense of where we are in perspectives and hopefully this hearing can actually help narrow

that. On the topic of taxes the general discussion will generally go to who's going to pay more or not and how will they react but given that we're at a natural inflection point in our city's economic

destiny a better premise for you today is what should the city's tax structure be or said differently if you were designing it from scratch what would it look like and I would humbly argue that if you

were doing that it probably wouldn't look like a lot of what we have today. Any tax system first and foremost needs to generate revenue to cover the government's expenses and also provide incentives

for both individuals and nonprofit organizations and corporations to survive but the basic pillars should be fairness, breadth, and resilience and again I think the current system falls short. Due to

limitations imposed by the federal government we have individuals and businesses in the city with identical revenue profiles who pay radically different taxes that's not fair. More than half the

income in the city is not taxable and the same is true for almost 40% of our land that's not broad and our long-standing reliance on the traditional office economy including commuters and the spin-off

on federal spending has resulted in a double shock to the district over the last few years as COVID, telework, and doge had dramatically changed our landscape and this lack of fairness and breadth and

resilience has resulted in personal and and corporate tax burdens on those that do pay something that's too high. It's hard to imagine that anyone actually subject to regular DC taxes you would argue

doesn't pay enough and one tool at your disposal is a so-called business activity tax and I say so called because the way it's not a very apt name it sounds like a bad habit that you're trying to tax

to prevent and actually it's not the case. I think a more apt name will be something that actually gets to what you're trying to achieve with it so something like an alternative minimum tax or

something and it's important to note that the tax is not a blunt tool and there are ways of structuring it with relatively narrow purposes that don't inflict an undue burden or unintended

consequences. The bat most discussed at the Tax Provision Commission was basically a value-added tax derived from a subtraction method meaning gross receipts minus intermediate purchases, capital

purchases, rent, and royalties. The basic premise is that profitable businesses in the city ought to contribute to the city's operating cost. The threshold of the tax can be raised or lowered to

capture fewer or more businesses. It can be zeroed out against businesses who pay the franchise tax or the unincorporated business tax or even businesses that file you either of those taxes such that

high revenue low margin businesses are not affected. In other words it can be structured such that no one who files corporate taxes pays more than they do now and I would take a little bit of

exception with my former boss the distinguished mayor to say I would distinguish between raising taxes on people who've been paying a lot of taxes for years versus people who haven't. I think that's

an important distinction to make and of course you can set the rate so low as to minimize the impact on anyone to pay it. A goal could also be that as our city economy stabilizes and out your

financial forecasts are optimistic tax rates on businesses could be lowered or other managers adopted to reduce the burden on DC businesses and the council would earn goodwill by launching the

proposed expenditure Commission that Mayor Williams said so the more widespread confidence that district programs are both effective and not duplicative and everyone would be well served to take a

pledge. These decisions made today rest alone with the DC's elected leadership. No one should go to Capitol Hill and argue that anything you do or the mayor does be overturned. Everyone should make

that commitment. Again thank you for having a public dialogue on this important topic and hopefully beginning a process whereby residents and businesses can share in both the responsibilities and

benefits of our prosperity. Thank you. Thank you Mr. McCarthy, Nick Johnson. Good morning Chairman Mendelssohn, members of the council. Thanks so much for holding this important hearing. I'm Nick

Johnson. I'm a senior fellow focusing on state and local tax at the Institute on Taxation and Economic Policy which is a nationwide nonprofit research organization. From 2022 to 2024 I was research

director for the DC Tax Provision Commission. The district's present need for additional revenues results from our current economic circumstances. Federal layoffs, tariffs, budget cuts have caused a

regional recession. Since 2024 the district has lost 30,000 jobs. Our neighboring jurisdictions have lost 45,000 jobs and these economic losses are reducing tax revenues across the region at a time of

rising cost of services. OCFO predicts that the local economy will not return to its pre-dose or pre-pandemic growth rate until 2030. Because state and local governments must balance their budgets

even as costs rise they commonly seek new revenue during recessions to reduce the depth of cuts to education, health care, public safety, infrastructure, and other services. Looking around the region

the city of Alexandria, Arlington, Montgomery, Prince George's counties all raised taxes or fees this year and several may do so again next year. In raising revenues improved progressivity that is a

higher effective tax rate for higher income households should be a goal. Research shows that tax progressivity is associated with better outcomes for children and workers, stronger overall economic

growth, and it makes a place attractive for businesses and households of all income levels, including the very wealthy. People want to live and work and conduct business in places that invest in the

community and that treat everyone fairly. In recent years the district has moved to make its overall tax system less regressive but despite this progress it's still the case that the wealthiest 5%

here pay taxes at a lower effective rate than most other income groups. A truly progressive tax system, one where the highest income groups pay at the highest effective rates remains within the

district's reach. Such a tax system would be good for DC families and for the DC economy by making living here more affordable while also raising revenue to fund services and infrastructure. Several

of the options put forward by the Council for this hearing would be progressive in their distributional impact. These include increased income tax rates, rubber brackets, a net investment income tax,

a pieta terra tax, and a business activity tax. A sales tax increase would be clearly regressive. Other proposals are less clear in their distributional impact. My written testimony provides more

information on the benefits of tax progressivity and the pros and cons of the specific tax measures put forward today. It also identifies some additional revenue options that the Council may wish to

consider. In addition to increasing progressivity the Council should address existing flaws or gaps in the current system that treat similarly situated households or business entities differently.

Doing so can make the tax system not just fairer but also more resilient by broadening the tax base. And with that in mind I turn now to the proposed business activity tax. This idea was first put

forward by the 1998 Tax revision Commission. Value-added taxes like the BAT are used widely around the world and in the US have been implemented in New Hampshire, Michigan, and in a somewhat different

form in Texas. A BAT meets commonly held standards for sound tax policy. First it would advance tax fairness, it would expand the range of businesses paying entity-level taxes because it would

include, for example, big law firms and lobbying firms with non-DC owners that are currently exempt under Bishop versus District of Columbia. The BAT would also reach prosperous large corporations

where the owners and top executives are making a lot of money and relying in part on DC public services to do so but are minimizing the taxable income that they report. Meanwhile, businesses that

already pay substantial tax to the district would be able to credit BAT payments against their existing liability thereby avoiding an increase. Very small businesses should be exempt. Second, a

business activity tax would promote revenue adequacy and stability. In a report I co-wrote with the DC Fiscal Policy Institute last year, we estimated a 2% BAT could raise over 500 million dollars per

year and once implemented it would be more stable than the corporate franchise tax because its broader tax base does not depend solely on taxable profits. OCFO reported just last month that despite

record earnings, large multinational corporations paid much less corporate franchise tax in the last fiscal year because increased tax write-offs for things like large AI capital investments are

reducing taxable profits. Whatever the economic merits of those corporate actions, the result is less revenue for DC schools and services. A BAT would be less vulnerable to such tax avoidance. Third,

a business activity tax would have positive economic impact on the district. A BAT would benefit the DC economy because it would raise revenue for local services from businesses owned elsewhere but

operating here. Economists widely admire value-added taxes because they are economically neutral and spread obligations broadly at relatively low rates. Contrary to some assertions, a BAT is unlikely

to drive businesses from the district. That's because it taxes economic presence as measured by local sales rather than physical operations. As is already the case with our existing business franchise

taxes, an entity doing business here will be liable for the tax no matter where those desks are located. The Tax Division Commission two years ago explored a BAT as a mechanism to reduce other

business taxes and our DC FBI report suggested using some of its revenue to reduce those business payroll taxes. If it works as intended, the BAT could eventually support business tax cuts but given

current economic circumstances, the district would be wise to wait to repeal or reduce existing revenue sources until we know whether the BAT raises what we expect. Finally, a BAT would be relatively

straightforward to comply with and administer as a new tax the BAT will take a little time to develop and implement and the district has already started by commissioning a feasibility report.

Experience in Michigan, New Hampshire, and Texas suggest that once enacted, compliance and administration will be relatively straightforward because it relies largely on existing tax definitions,

calculations, and common accounting terms. I appreciate the opportunity to speak with you today. Thank you Mr. Johnson. Erica Williams. Chairman Mendelssohn, members of the committee, thanks for the

opportunity to testify today on DC's revenue needs and the proposals before us. I'll speak to just a couple of them and the rest are in my testimony. We have a little something on each of them. With

mass federal layoffs that won't be reversed soon, persistent remote work, rising costs to maintain services, and a current year budget balanced with hundreds of millions in one-time funds, as well as

the underlying limits on our taxing authority as a district, it's imperative that we look to revenue raisers that set us up for a more resilient future. If DC Council fails to do so, thousands of

residents will lose access to critical services and programs, exacerbating child poverty, racial disparities, and the economic downturn that we're currently in. So I'll sort of pick up where my

colleagues left off and start with why DC should adopt a business activity tax. A BAT would improve adequacy and fairness and increase our resilience. A BAT offers the district a way to close a

federally imposed loophole that allows some firms owned by non-residents but operating in DC to not pay into our DC's franchise taxes or income taxes. This is part of a broader limit on our ability to

tax the income of non-residents, right, that every other jurisdiction with an income tax has as a matter of course. The Home Rule Act unjustly prevented us from doing so to protect commuters from

predominantly white suburbs at the time from having to invest in a predominantly black DC. Over 50% of income earned in DC is earned by non-residents and we've estimated this cost DC over 3 billion

annually in foregone income tax revenue. That means that there's a great deal of revenue capacity in our economy that we're prevented from tapping into and a BAT would help us recoup a slice of that

revenue capacity by increasing the number of businesses contributing to DC's business tax base, making our business taxes more fair and the overall tax system in DC more resilient. Real world

experience shows us that a BAT would be simple and stable. It's not a new idea as Nick mentioned. Many countries levy BAT a value-added tax. New Hampshire's had a BAT for the plat past more than 30

years and when we talked to as a commission the New Hampshire Revenue Department and other stakeholders we were told that it's been a stable steady source of revenue even through economic downturns.

We were also told that it's been simple and non-onerous to administer and comply with and basically non-controversial. It was adopted in New Hampshire because some businesses, very large corporations,

were footing the bill, the tax bill, and while others were not asked to contribute and I this is not dissimilar to our situation here. Moreover New Hampshire implemented a BAT right after its

adoption. A BAT's transparent and it's economically neutral. The BAT we proposed would equal gross receipts minus rent purchases, royalties, capital investments. We have the $200,000 exemption for

very small businesses and we would we propose taxing at a low rate of 2%. This is different than the proposal set before you. Any businesses already paying tax to DC would get a dollar-for-dollar

credit against those tax bills for their BAT payment. The intention of which is that businesses already meaningfully contributing to our business taxes wouldn't pay more. We of course would want the

CFO's team to work to determine whether any other hold harmless provisions were necessary to ensure that we accomplish that intention but that is the intent. DCFPI, as Nick mentioned, proposed the BAT

could be paired with a reduction in the payroll tax on businesses back to the pre 2025 levels which would allow us to give a net tax cut for many DC businesses. We also proposed that a BAT that BAT

revenue could be used to invest in expanding child care affordability which is a business friendly public investment that ensures a reliable workforce and has proven returns to the economy. The BAT

before us has some flaws you know it includes nonprofits that's something we don't support at DCFPI. Of course we discussed this as a commission and I definitely find it compelling that we may want

greater contributions from some nonprofits in DC. We have a lot of nonprofits some are very large and are substantially business-like but the Commission also acknowledged that nonprofits many of us do

not have the same kinds of receipts as businesses especially those whose work is funded through donations and foundation grants and government contracts. Adding nonprofits to BAT as has been done in

the bill for consideration is not particularly transparent either. Some nonprofits like Trade Association seem to be exempt while service providing organizations are not and furthermore the Tax

Commission proposed taxing nonprofits at a lower rate than businesses but that's not the case in the proposal set before you so we'd urge you to explore separately the question of additional taxes on

nonprofits. We also would like to see a wealth proceeds tax advance that would make our tax code more equitable and fair and offer us a counter cyclical revenue boost it's also simple to administer.

So the wealth proceeds tax is based on the federal net investment income tax which was created in 2013 to support implementation at the federal level of the Affordable Care Act of Obama Care. Congress

recognized that most wage earning households with little to no wealth pay payroll taxes on all of their income but high-income wealthy households pay federal payroll taxes on just a fraction of their

earned income and none on their passive income derived from wealth. At the federal level their passive income is also privileged relative to earn income. Councilmember Nadeau's bill offers us a

modified version of the NIT for DC that would apply a local surcharge on passive income but with higher income thresholds of four hundred thousand and five hundred for single households and five

hundred thousand for married couple households. We understand from the CFO's office that that would raise nearly two hundred million in its first year. Ninety eight percent of the revenue from this

tax would come from households with incomes over one million dollars and the remainder from those between five hundred to five hundred thousand to a million. These same households are getting five

hundred and sixty eight million dollars in tax cuts annually through the One Big Beautiful Bill Act at the cost of cuts to Medicaid and SNAP dollars that would otherwise be serving DC's communities.

The wealth proceeds tax can help us recoup some of that money for public investment in vulnerable and working-class people in DC. While taxes on passive income like capital gains tend to have bigger

ups and downs than other taxes like a bat they can be counter cyclical meaning that during a typical recession they sometimes grow while other things are declining and that can be helpful as would be

the case right now in DC. Finally a wealth proceeds tax would be simple to administer since it is based on an existing federal tax. We wouldn't be the only place to have it. Minnesota has one and so

we'd like to see this advanced. I will finish by saying we would urge the council to reject a sales tax increase given the way it's going to hit our lowest income household. If you're going to

consider personal income tax changes and want to reduce the tax the effective tax rate for the middle we would suggest considering a robust child tax credit rather than a rate cut and we would also

ask that you resist across the board property tax increases that tend to be regressive. I'll end my testimony there there's more in my written testimony and happy to answer any questions. Thank you so

let's try let's try a 10-minute round. Mayor Williams first of all I saw you shaking your head do you want to articulate what you were shaking your head about? A couple of things I mean you know I'm

not arguing with other members of the Commission but the bat on its own terms New Hampshire let's take New Hampshire for example we spent a lot of time on the bat an allies about the fairness of the

bat and all this New Hampshire yes it's a bat it has no income tax you know you're saying Texas has a bat the taxes are materially substantially lower now you can argue that's good or bad or right or

wrong but that's something to you know take into consideration you know the other thing is that I think that and this is where there is a disagreement we had we did work on the Commission we had some

folks report to us on this whole notion of mobility of capital are people responsive to tax rates and the conclusion was that they aren't really and I disagree with that so I would say I disagree with

that because I think they are and my the point I would really make is even if the evidence isn't conclusive that people are responsive to higher tax rates even if there's a warning you ought to take

that you know it's a red light flashing you ought to take that into consideration and finally the reason I'm shaking my head is you know the thing I used to go around saying is we're a badly driven

car on a bad road we're overloaded and underpowered we're underpowered because of federal limitations but we're also underpowered because people can move we're also underpowered because we live in a

region all people have to do is move across the river we're overloaded because I think we were in the car we're trying to go down the road we want more gas for the car we're not even sure where we're

going in the car we do a lot of things in our programs and we this is my point we really need to sit down and ask ourselves what are we really accomplishing right there are a lot of programs we do as

a city through my time where you could argue we're really not making a material impacts we ought to just do the whole thing differently let alone do it more efficiently we're a city that's very

responsive to economic growth you know and a lot of your wards like I'm looking at Councilman Allen and the you know right we're very responsive to economic growth this is a tool that we have as a

city that a lot of cities don't have the other thing that we have is a tool and I think it's all part I'm just saying come to the people with a package I don't know if it's three to one reductions

efficiencies and taxes or two to one but it's a package it's not just oh yeah let's just have some more taxes Oh AI it's a huge force multiplier I'm not talking about people losing their jobs I'm

talking about leveraging productivity to achieve more in our government over a five ten year period this is a great opportunity the new mayor and the council have I don't even we don't even know what

the ramifications of proper deployment of AI can be to achieve more better government I'm you know again you know we're workforce friendly way it's just achieving more productivity thank you for that

I want to remind everyone about time I appreciate your answer we've used up 40% of my time here and I have seven more questions so quickly and I'm going to ask this of you Mayor Williams the

Commission considered two other proposals the wealth proceeds tax and the land value taxation they didn't make it to your mark very quickly why not because I beg on this on I think what we're really

concerned about is coming forward with a systemic comprehensive approach to our budget and fiscal reality which in extremists and I want to get in trouble it has to look at the sources side but it

must necessarily in our view first look at the expenditure side mr. Johnson so you did a lot of the staff work for the Commission a couple of things one is is the business activity tax vulnerable to a

legal challenge it's sort of is getting around Bishop I think you'll have other witnesses also who will speak speak to this question it's an important it's an important question our analysis is in the

end was it is not now that's not to say that it won't be challenged legally but it is not an income tax and the Home Rule Act is very clear and the Bishop decision are very clear what they are what

they oppose is an income tax that is passed through so you think a high likelihood that a challenge would not succeed I think a high likelihood the challenge would not succeed so let me ask you this

you your testimony was very much supportive of a business activity tax but is that for a business activity tax or business activity tax that offsets I didn't phrase that well business activity tax on

top of what we're doing or business activity tax that offset some of the other tax burden on businesses I think a business activity tax in and of itself would be a really good addition to the business

to the DC's business tax structure now it's not it's up to you to figure out sort of at the on the tax revision Commission we were sort of playing in a revenue neutral sandbox and this is a really

good way to ascertain setting aside how much revenue the district needs what are the structural merits of a given proposal so there is a good addition other testimony that this is just that if we do

that a business activity tax on top of that all we're doing is adding to an already high burden arguably not competitive burden on businesses in the city principally a business act right but a

business activity tax is not going to a tax is not principally going to affect the businesses that are already paying the most of the district because it would be accompanied by a dollar for dollar

credit that those businesses could apply to their corporate franchise tax their UB tax or for pass-through entities to the personal income tax for for residents so a business activity tax is leveling

out the amount of tax that is being paid so this is sort of what Erica Williams was saying is that it would complement meaning that it would sort of dovetail in with existing taxes exactly I think and

Gregory maybe described it as an alternative as an alternative tax and that is one way to say it so if you're not paying substantial business taxes already if you're not already being substantial

franchise tax then you're gonna be liable for business activity tax okay but what about businesses that have a very thin margin or have a negative margin I think it's a you know we don't have a whole

lot of data on exactly what this is going to look like and so the hopefully the feasibility study will give us more information like grocery stores I know have a very thin margin if I remember

correctly it's like one cent profit on every dollar sale and they will grocery stores will be able to subtract from their gross receipts this is why it's different from a gross receipts tax a grocery

seat a grocery store would be able to tax subtract from their liability the cost of good souls all the purchases they make from other other businesses all the inventory what about a sports team that

has a negative and mr. McCarthy you're excluded from this but my understanding is that a lot of major league sports teams basically lose money every year the profit is either in the prestige of owning

a major league team or the fact that it increases in value and when it gets sold like the commanders for six billion dollars if there's a lot of profit so on a year-to-year basis to have a negative

margin well I don't think you could argue that if they are making money if they are increasing in in value and they are doing that at the same time they are relying on DC services it's not

inappropriate for them to be paying something in a business entity tax so that's philosophically they should pay but as a matter of dollars if they have a negative profit margin they don't have the

dollars to pay the tax unless they go back to their investors yeah I think it's possible that they would they would have to pay a tax but I I'm not I'm not sure they would have that much trouble

squeezing this into their into their accounts it's a pretty low rate tax tax light in my minute left so I don't know if miss Williams you talked about tax light in your oral statement I know it's in

your written statement you are quite clear that there is no to text like some myth that's my language not yours on the other hand we will get some testimony that says that the research has

consistently shown that tax rates play a major role in residency decisions of taxpayers and I will add to my question I think there's a lot of research if not all of it is looking at states or its

national research and the district's somewhat unique because Arlington County is just across a bridge yeah well I will say we can look at what even just what happened after the 2021 home and hearts

amendment and the tax increase that was put in place there we had a 1.8 percentage point increase on the in the top on the top rate that was mostly paid by millionaire households and we have seen in

the tax data no discernible evidence that there's been out migration of people from $200,000 up but especially in the high income ranges the millionaire plus income range and in fact we've seen those

tax filer groups grow since yeah but that could be because of inflation did a guy who's earning a number of tax filers has also been growing so we've we've we've had an increase in tax filers and

consistent increases in high income tax part of the argument is that one shouldn't just look at what the increment is so we raised taxes I think you said 1.75 percent didn't see out migration that's

what I think you said but if we did it again let's say we do at 1.75 percent we've actually raised a 3.5 yeah I think that what we've seen in the literature and I mean people will will always come

with their own research but the the most extensive research on millionaire migration in particular shows that they are the least likely to move actually Yesham did a study when she was at ORA she

could probably speak to it looking at tax changes in the district and what kinds of weather it induced any migration and found that it did not and that high-income folks were the least likely to move

I don't mean to put you on the spot yeah you know the danger but you know I'm the point being that that the research really shows us that high-income folks are the least likely to move that they are

less sensitive and that when they do it's a really really small fraction so the revenue you raise will outweigh the movement of maybe the handful of people that might move so the danger of mentioning

somebody's name is it then they want to say something I'll let her say that's why I never mentioned my colleagues by name oh first actually we are losing tax fathers so that number has been going down

so one thing that's that the pandemic has been really sort of like an inflection point Nicholas Bloom at Stanford's Booth School with some of his colleagues have studied payroll data and they looked

at people who earn more than $250,000 or more more every year prior to the pandemic about six percent of these folks lived within 50 miles of where they lived after the pandemic that number tripled to

15 percent so the point is the sensitivity of folks to tax rates and then when they move they invariably move to low tax state now there are lots of confounding factors you know you don't choose a

place just for tax rates you choose it for quality of life and all kinds of reasons but what we are seeing from the from the more recent research is people are however little they were sensitive to

tax rates before they're a little bit more sensitive right now because we just live in a different world thank you Councilmember Felder thank you all thank you mr. chairman mayor Williams and your

testimony you talked about how rich cities can become poor you talked about how you remember the dark days in the district if you I'm a firm believer that history repeats itself if you go back to the

late 90s early 2000s when the district had high unemployment rates when people were leaving the cities when it wasn't attractive for businesses to even open up shop here and then fast forward to today

similar to the early 2000s late 90s my question to you is how did you grow our economy down it really was about sending a message to people who live here people who invest here that things are at a

minimum not going to get any worse which sounds kind of trivial but is important but over time we're going to get to a better and people believe in that that the government the key parts of government

will begin working restore respect for DC people are going to want to live in DC and it's like negative things compound but positive things compound and that's what I'm seeing here as part of an

overall package the council can send administration can send a powerful signal that will trigger in this city economic growth a lot of cities aren't like this but we're a city I think that's very

prone to susceptible to the right signals to grow the economy in an inclusive way and I'm pretty sure you heard the different revenue raisers or tax proposals that's on the table and just I'll just

repeat them just in the event that you may need to hear them so there's a new business activity tax a new wealth proceeds tax a transition to a land value tax the sales tax increase a real property

tax increase and a income tax increase oh and a peer-to-peer tax my question to you is what do you think is missing from this list of either revenue raisers or tax increases from your perspective that

can grow our economy and balance our budget shortfalls I think the council can take the opportunity with the change in administration along with the administration said a message to the world that no

look we've made a lot of progress in settling the expectations that I talked about progress and Tofa progress on the rental act progress across a number of dimensions but there's much more work to

done and we're about creating it you know it's about the social compact everybody's coming to the table and giving giving up something in order to purchase in order to achieve greater public good I'm

not trying to skirt your question but I I just sound like a broken record I think it should be part of a context in what taxes or revenue raisers that you've heard today from your perspective would

damage the long-term economic volatility of the district I think in my opinion with the reputation we have out in the investment world and I think the record is clear on that I would be I would have a

lot of trepidation about embarking on things like the bat for example I'd have a lot of a trepidation about embarking on anything that goes to a land or property valuation where the commercial

property which is really propped up residential property over the years has been hammered and all you get are complaints and I'm not criticizing the CFO because I was there once but all you get are

complaints about the assessment process so why would we want to go into that why would we want to exacerbate you know that whole that whole area right now and within your testimony you talked about

giving folks a reason to leave could you speak to you with some proposals from from a revenue raiser or tax perspective that will cause either a business to close its doors or a resident to say you

know what I'm gonna go somewhere where I think my money can stretch longer I think that there are taxpayers of the district who've lived here for all these years there are part of I know there can

always be improvements or part of a very progressive tax system they've been paying over the years a very high rate you have to ask your question ask a question what does it take to make up the

present value it's been sit for someone who's been sitting here they don't require a lot of services because they are high income they've been it's like the windmill they're just churning out power

year after year what's the present value if they leave and you're losing that five million a year ten million a year it starts adding up I'll give you another example you know of a signal so for

example the estate taxes say we raised 50 million dollars on the estate tax we have one of the highest estate taxes you know in the United States now I'm not saying our our model should be come to DC

and die but we shouldn't but we shouldn't for but we shouldn't force people to leave you know is there managing their their last affairs I mean we could say look hey everybody we're going to reduce

our estate tax by 25% you're only making 50 million a year for for a budget this size that's the signal that you can send thank you for that and I know you trying to figure out how do I come back from

that business activity taxes right you see that whether it is the current policies that the district has in terms of parking turning places where business where customers can park so designated bus

lanes or the bureaucracy to navigate the process he and permitting steps in the district how do you think that by incorporating a new business tax activity tax how do you think that will impact

businesses ability to stay in the district or willingness to stay in the district the reason why I withdrew my support for the bat was because we had been hammered by you know post COVID we were then

anticipating a new administration you know we're gonna get hammered even more by the new administration and I filled were commercial property over all these years was such a core part of our revenue

engine that to undermine a key part of that right of the office tax base or law firms I don't I didn't think that now was the time to do that have you're saying yeah I was backing up because I was

worried about the impact on law firms and the economy that's exactly right yeah I'm gonna take the chairman's advice and now use the entire 10 minutes because I want my other colleagues to ask their

question but just one final question for you mayor Wilkins you mentioned AI in the role that it plays in our workforce you mentioned I mean I talked about the timeline from the 2000s to now do you see

our city the from a revenue standpoint do you see us growing when you incorporate how AI can impact our workforce from a budgetary standpoint and do you feel as though do you feel as though we need to

be better stewards of the resources we have or do you feel like it's a combination between eliminating waste coming up with new tax and revenue proposals and factoring the future role that AI is on

the workforce yeah I'm saying people want to see everyone coming to the table to improve public good the public realm everyone at the table capital at the table labor at the table I'm gonna sound like

a you know economist but everybody at the table to contribute to improvement in public good so for example to really achieve maximum benefit from productivity from AI labor clearly has to be at a

table you know we respect we want good jobs good wages we're not trying to have people lose their jobs but us all come to the table and realize a huge impact that AI can have in getting more mileage

out of our government that's all come to the table and and our witness where we're not making any headway over 25 years and I'm not saying we're not making any headway let's all go to Vegas no I'm

saying we're not making any headway and redeploy the funds productively thank you mr. Williams mr. chairman thank you for the 19 seconds remember Truman thank you very much I don't expect to leave 19

seconds so thank you very much to witnesses for coming today one of the things mr. McCarthy said who has had many affiliations but does not expect to have any in the future was what would you do if

you were starting with a clean slate on this and one of the criteria that I focus on is the fairness of the distribution of the tax burden on all of our residents and I don't know whether or not I'm

gonna focus this question on the saying and and Mayor Williams but there have been studies of what's the difference in the tax burden at different tax levels this is the Institute for Tax and Economic

Policy and what it shows is a peak in the tax burden at the 107 thousand to 148 thousand level at that point it's a twelve point four percent tax burden taking all of our taxes into account and then

you see it go down to twelve point one at 150 to 400 and then down to ten point nine at four hundred to a million and then back to 11 for over a million have you done an analysis like this does your

analysis differ from this or is this what our tax burden looks like today in the District of Columbia um I think tax burden studies are really important but I would not really focus that put that much

sort of like half a percentage point here or there because you can repeat the same study and the tax base could look slightly different and the burdens look slightly different I think the way to read

those studies and that are you know tax regime is a progressive one and and higher income folks pay a higher share of of that and the burdens may not look exactly the same across tax brackets but I

guarantee you if you were to change the tax regime so the burdens look exactly the same or look exactly the same way you want it to look next year you'll come back and it looks slightly different

because income definitions change and about like a number of different things change no I I hear you on that but I mean we have to do the best we can to do an estimate and one can focus just on income

taxes and say oh the income taxes are highest at this at this level but it's the way in which the overall tax system I think a bunch of you have talked about that and so it does seem like the best

information we have is that the overall tax burden at the highest incomes is slightly lower than the tax burden at the middle incomes and that's a data point that I think we need to take I hear you

now because when you said I said I needed a total of the income taxes I think a better source for that analysis is the CFO's tax burden studies and I encourage you to ask the CFO to replicate that for

higher income tax levels they truly look at the tax burdens they're the ones who administer taxes and that's not at $250,000 I do the responses we don't really know the answer to that because we are

not I hear you on that and I actually have asked the CFO and will again today ask the CFO to replicate that at higher incomes because at the levels below 250,000 that's not where the discussion is and

the discussion is at the higher incomes but to the the CFO studies what they show is that the district is a low tax jurisdiction at lower incomes up to $150,000 decisively lower at at some of those

levels and it's essentially a tie at 250,000 so we need the data on the higher incomes but there is a a perception out there that the district is a high-tax jurisdiction and it is false at the up to

$250,000 do you dispute that I think the perception is that the district is a high tax jurisdiction because of income taxes our property tax rates are much lower than the surrounding jurisdictions I

think there has been a small adjustment to that with like a higher tax rate for high valued homes in the district so that's been probably that's gonna change in the next tax burden study if it doesn't

change already we don't have the car tax that Virginia has and a number a number of things but again this is the tax burden studies they do look at individuals they're not corporations or businesses

that's a much harder thing to do we had that study done once and it showed that the main burden on businesses is the commercial property taxes which is you know really we are the only jurisdiction in

the region that has a split rate for commercial and and with pleasure all right well with you I'm gonna stick on this for a second and then I'm gonna want to ask mr. Johnson to talk about how the

different tax proposals impact this I tap chart but on business taxes and you talked about the bat relative to the paid family leave tax and I actually sent a letter to the tax revision saying we

should do the bat and replace the paid family leave tax or bring it back to where it was but does the paid family leave tax apply to partnership distributions yes it does so anyone who employs an

employee pays it it's a payroll tax but is a partnership distribution payroll are you sure of this it's the payroll tax if you have a law firm with a hundred lawyers and two partners let's say its

annual income is two two million twenty eight million dollars I don't know how much low firms make but let's say it's annual payroll is twenty million dollars including everyone who works in the firm

and the salary of the partner not to take home income the salary of the partner that's not not not the profit that they take out at the end of each year yeah and that is now lower by the amount of tax

that's paid I hear you on that but that profit is not captured by the paid family leave tax it is captured by the bat tax so if you think of taxes as a spectrum on the one hand you have a gross

receipts tax we don't care how much the cost of the company pays has it's just the money that comes through the door and if you think of the other spectrum as a profit tax which only is there when

there's a profit a bat and a payroll tax are really close to each other in terms of what it's taxing no I hear you on that it's not taxing the profit it's take home incomes it's that's why it's not

subject the bishop I hear you but what it leaves behind I mean I do think that the bat captures those profit distributions whereas the paid family leave tax doesn't and part of the argument for the

bat is it broadens the tax base such that rates can be lower for everyone and I'm just trying to narrow in on in that scenario does it does the bat capture something that the paid family leave does I

don't believe so but I think you just said that it did that it covered the salaries but not the profit distributions but we'll we'll dig more deeply we can't talk about that but I think they're

conceptually very close and the neither of those are going out to profits because they count on their commutative taxes tax restrictions okay mr. Johnson I had I held up a chart that on tax burdens

can you talk about what how the different proposals change this table which is the one table that we have at this point of data on the way back burdens apply what's the impact from the different

proposals on the table it's a little bit we've not been able to exactly replicate the analysis on the same tax base to Yesham's point there are changes year to year in the underlying sort of

distribution of income but I would say that our analysis is that the the net investment income tax wealth proceeds tax would increase taxes by about 6/10 of 1% of income for the top 1% those with

average income of about 4.7 million dollars by a much smaller percentage amount for the next 4% and essentially not affect anyone who's not in the top 5% so if you're picturing those two bars at the

end they would go they would go up they would come closer to the middle income tax rates and nobody else in the income spectrum be affected by the wealth proceeds tax and there's additional

information I written testimony about the other all right wonderful thank you very much I mean Mayor Williams I'm just gonna comment for 30 seconds I hear you on economic growth is the critical thing

that we have to have but when you came in as mayor you did a lot of different things but one of the big things you did was radically increase investment in schools and we saw improvement in schools

that already started them and economic growth without economic growth isn't going to happen just but in this my opinion just based on what tax rates are it is going to depend on what the services are

that we're able to provide in order to keep families we now face a situation where a very large number of our upper middle class families are leaving the district as their kids approach middle school

and that's where we're bleeding taxpayers so if we if we couldn't preserve the kinds of services that we deliver without raising income taxes or some form of taxes would you say still don't raise

revenue or would you say no in order to get the economic growth that you want and retain families we need to raise revenue is there a place where you could support that I'm saying that over the period

of time I quoted what was it 15 years 85 percent of the investment in the budget came from economic growth so that period you're talking about all that investment was coming from economic growth

government efficiencies relief of some of our burden from the federal government because that was a 1997 revitalization act I'm just saying we should try to repeat that our first order businesses get

the you know start bringing back up the economic engine overall and as part of an overall package you can look at you know tax increases but I think they really for all the reasons I mentioned I want

to keep going over it should be part of a comprehensive plan thank you very much customer Parker thank you I will just start by naming two biases I come to this conversation with one is that we have

long-standing wealth inequality in this country and in the city and so when I hear let's do nothing or let's maintain the status quo what I hear under that that is let's maintain the inequality that

is baked in also I hear and agree with the need for an expenditure Commission or something where we very seriously grapple with the ways in which this city spends money part of the challenge is it's

hard for us to look at bills programs that we have championed and or put forth and so I just would say it may be worth us looking at a neutral body that can look more neutrally at the government

spending to propose recommendations with that I wanted to come miss saying you mentioned the district's growth curves and our spending curves some would argue why should we not look at spending as it

relates to GDP and what would be your response to that because the argument there is our spending has been more level if you look at it as it relates to GDP in my testimony I have data on this so let

me find it I looked at growth in expenditures from 2019 through 27 for GDP I could only look through 2025 because more recent annual GDP data are not yet available I believe both in the case of GDP

and personal income expenditures have outpaced and expenditures have outpaced GDP as a much faster rate than personal income growth and a personal income growth rate is closer to expenditure growth

rate because of capital gains but would you agree that GDP is the better metric to look at our spending against um this goes back to the point that mr. McCarthy made about what should our tax regime

look like when you have an economy that's largely reliant on office activity you design a tax regime around it when you have an economy that cannot tax income instead of non-residents you design a tax

regime around it you know so we've designed a tax regime that pretty much reflects the economic growth trajectory of from from say early 2000s all the way to 2019 what has changed wanting that change

is the commercial part property is no longer a source of revenue and then the other thing that has changed is that we've seen this divergence between withholding and not withholding growth anyways the

point is the point is it's a different economy I hope this is a fair summation but what I take from the testimony is that it seems as though the panel is endorsing various forms of the proposals that

we have except for mayor Williams and the same if that is fair and so I would direct this question to you too in in particular, respectfully, are there-- which of the-- I think we have a lot of

proposals before us which you say are the most sustainable. Not that you're endorsing it. But if you had to hold your nose and the Council moved forward, which proposal or proposals do you think are

most sustainable? Which proposals are before us today? That's, you know, I'm not trying to, you know, void the question, but I keep saying, you know, whatever we do, it has to be part of a

comprehensive plan. I'll give you an example. I get that. I get that. And I agree with you. I'm just mindful of time. And I do have a host of questions on the bat. If you're not willing to answer,

that's fine. But I genuinely want to know, even though you're opposed to any revenue increases, where there are some that you think would do less harm. Maybe I'll put it that way. I would say that the

net investment income tax reflects kind of like the sort of the trouble with all of this. It is taxing the strong parts of our economy right now, which is the capital gains growth. It's also the

extreme volatile part of the economy. So you pick your poison. I think the business activity tax, a general broadening of the base is a really good idea. I think the issue with that is we've already

done it in some ways. Fair enough. Fair enough. Thank you for that. I didn't mean it to be a trick question promise. I wanted to come to the business activity tax. And so a lot of you talked about

that. I know Miss Williams, you talked about an exemption at two hundred thousand. Can you just say a little bit more? Why that figure? And how did we come to that? And Mr. Johnson, if you wanted to

weigh in there as well. I'll let him weigh on how we came to that number. But the idea was that we wanted to make sure that the very smallest businesses in the district get a little more protection to

that exemption. And if you have gross receipts under that, then you're not filing the bat at all. If you're over that, you still get that as a subtraction from your gross receipts so that your

business activity is smaller and the base that you're applying the rate to is smaller. So it's a benefit. And it's it's part of the set of parameters alongside that dollar for dollar credit that help

us to make sure that businesses that are already making meaningful contributions to these business taxes aren't paying more that it's complimentary. Yeah, I don't particularly want to. There's nothing

magic about the two hundred thousand dollar level. And I think as you get more data from OCFO on how different businesses may be affected, you may want to tweak that or look at that because it's a

trade off between. How big are you driving the exemptions and what are your how much revenue do you want to want to make the exemption too big? Then you're kind of defeating the purpose of the of the

tax, of broadening out the revenue burden, but make it too small. And then you're probably catching some business that you don't want to catch. Fair enough. And Mr. Johnson, and sorry if I missed

this, are you in agreement that we should exclude nonprofits from the bat proposal? Our original proposal actually at one point we were we were thinking about how should nonprofits pay. This was

before the payroll tax was instituted. We actually suggested at one point using payroll for nonprofits as a as a proxy for business activity and taxing it. Thereby the paper that Erica and I co-wrote,

which I think makes makes sense, suggested that we use business activity tax proceeds to reduce payroll tax for those businesses that are subject to for for profit businesses leave the payroll place

payroll tax in place as it is now for nonprofits. So we would not extend the business activity tax explicitly to nonprofits, partly because they are now paying the payroll tax. Got it. And I just

would say there I think is a merit conversation to have about larger nonprofits like hospitals. And there are other ways that we can have them contribute meaningfully to the city through pilots or

other things. Mr. McCarthy, I know you said you could get behind a bat if narrowly constructed. Do you think the proposal before us is narrowly constructed enough or what would you propose different?

Thank you for the question. I was beginning to feel like a potted plant. So in fact, yes, I would say, look, that lies in the eye of the beholder. I think the point you're making is that the bat is

not a blunt instrument and that the council, if and when it does consider it, can tweak all these various things to make it have the precise outcomes that you want and that you can target it in such a

way that it achieves what you want and excludes what you want and includes what you want. So I think it's a middle ground proposal that we had is the 1.4% that raises 500 million or something. I think

it's about 200 million. You could look at the amount of money you want to raise and then adjust it accordingly or you could say these are the policies that we believe in and just know that it would

raise that amount of money. Again, the point you're making is that this is a highly sophisticated tool that you can adjust to get where you want to go. Understood. And in my last minute, I wanted to

talk about the wealth tax and Mr. Johnson estimates suggest that that would bring in about 200 million per year. What portion of this do you think would be from households and which portion would come

from things like trust or its states, if you all have that type of analysis? I'm not sure. We'll have to get back to you on that. I think it's our estimates are that a 3% wealth proceeds tax would

probably raise around $130 million a year. The 200 million, I think, reflects if you did it retroactively to the beginning of a given fiscal year, you would essentially catch two years worth of

revenue and then it would revert to a more steady state around 125. But I'll get back to you on the trust question. Okay. Thank you all for your testimony. You were going to add something. Would it

even it's an income tax or wouldn't apply to trust? Yeah, I don't think it would. And I mean, so it's the main base is capital gains. And then there's also things like dividends, annuities, interest

and rents, royalties and like business income that is not active business income. So there's that's the mix of things that would be potentially taxed under a wealth proceeds tax. So I'm not not sure

about how trust attaches to the income tax return. Yeah. Yes. Thank you. Thank you. Customer bonds. Thank you, Chairman. And thank you all very much for the information you share with us today. I'm

very curious as to who is not paying a tax in the district when we think about the business taxes. Are there entities that consider themselves corporations enterprises that are not paying a tax to the

district government now that are here? None. Is that just a question for any of us? Yeah. Oh, yes. Yes, it is. I'm sorry to the panel. So so what we've been talking about is the set of businesses that

don't pay into DC's primary business taxes. So they're not paying franchise tax. They're not paying through the personal income tax because their owners live outside of the district. We are exempt

from taxing them. So it's not to say that no one, you know, I think everybody pays some kind of tax in DC. I asked that question because a few years ago we wanted to exempt the seniors a certain

income low income level from paying property taxes. And the word I got was that, oh, no, in Washington, D.C., everyone should pay taxes. So I was very curious as we are talking a lot this morning

about the business taxes and how we can derive more income from the businesses. I wondered if there was a category of businesses that do not pay now the category I'm thinking particularly about our

let's say our universities that have housing and for and I'm just wondering if there is a way for us to look at the district more holistically and say, well, if everyone's going to pay taxes, if the

little senior who has a set income has to pay tax, you know, property tax, then it seems to me that a big corporation or a big nonprofit, be it 501c3 or 527, that they also need to pay into this

because they're occupying the space and the pleasure of being in the district. I just wondered if anyone has any comments on that on the panel. I mean, we did explore taxation of nonprofits, to your

point, as a commission and we talked about a lot of different things we did talk about payments in lieu of taxes and what could be negotiated that way. We talked about property tax exemptions that,

you know, a lot of large nonprofits like the universities and hospitals benefit from and is there something that could be tweaked there. I think these are things that could be explored. I will tell

you there's a lot of resistance to them. We heard from those those same groups. But I think, you know, this is also certainly could be on the table but we do know that there's a lot of firms that are

operating in the district and making a great profit off of the economy here, and that are not paying into our primary business taxes so that's why we took a look at the bat. There are also large

corporations that get to use a lot of strategies to try to minimize the tax they pay and so we should be thinking about that and the bat actually could be a tool to help us increase the tax

contribution of some of those as well. And so then, yes, your mic, your mic. Okay, I think it's important to put a perspective how much impact payments in lieu of taxes pilots might have. I remember

we had a couple of presentations from a fellow who came down from Massachusetts and spoke to us very enthusiastically about what they did with the universities and hospitals there he talked about how

laborious it was and these are individual consensual agreements with each of these institutions, and then we asked him at the end, how much did the state of Massachusetts raise among all those taxes

among all those hospitals and universities and it was 30 million 40 million, it was not so at the end of the day, it's not a silver bullet that we might think it is. Yeah, I was just very curious

because that's one of the concerns that has been expressed in our office you know you're going to talk about taxes is everyone paying taxes. And so I wanted to ask about that. I wanted to also just if

you would talk a minute about how workforce factors in the growth of the economy that we are saying we need to put more emphasis on, as opposed to, perhaps, more taxes. From the person that said, it's

reduction of the budget costs, making sure that the balance is there, as opposed to finding more revenue as the avenue for growth so just curious. I'll just add, you know, Mayor Williams spoke very

persuasively about the importance of growth in the economy and certainly nobody would dispute that. We don't know the way we really earn money is certainly the workforce but as residents, right. And

so residents come when there are neighborhoods that are worth living in, when childcare is accessible and affordable, and those middle income families earning between 100 and $200,000 when they come

and they stay and they have a neighborhood that works for them that redounds to our tax benefit. So, look at these taxes as investments at retaining those people. I'm very familiar with the Navy Yard

neighborhood. I believe it was the fastest growing neighborhood in DC during the last seven years. During COVID, it actually grew because people came to telework from there, because it was such a

desirable place to be. So as our economy shifts from offices and discourse and entertainment and neighborhood focus when we try to populate Southwest DC with 10s of thousands of new residents, they're

going to have to want to live there with services and a city that feels good. And so workers are great, but we actually, you know, per capita probably make more money when we have residents so you've

got to make sure these investments go to make residents want to stay as well. And I hear you when you. I would just say there's the mayor. Yeah, I would just say there are two ways to look at

inequality and even Thomas picketing in his book 20 years ago or so talks about this one area of inequality we've been talking about on taxation and fairness of taxation progressivity of taxation. But

another way to address inequality, and this is my point, the console and the new administration can really dig into this is what I'm saying is that despite vast amount of expenditures over 20 years,

we're just flat line on a lot of things that are core inequality, like unemployment, poverty level, you know, the impact for the amount of spend is not great, and it needs to be improved. There are

two ways to deal with inequality and their intention or imbalance, or if you look at it. Thank you for that last comment. It makes me wonder if we're also if we're going to be honest about where we

are as a community. Are we saying if we start with zero as a budget. Do we put 10 10 billion into workforce development, our individuals, our people, would there be jobs in the community for such an

enterprise. And I see you Mr Johnson I get it you're wondering, this is a little, little strange. But what I am really saying is, do we, do we, do we have this opportunity. Please. I do not work at

Fort Myers, sir. Okay, please. Thank you. Do I get a half a minute. Thank you. Okay. All right. Wow. What I'm trying to what I'm trying to understand. Are we as a community at a point where we're

really willing to acknowledge that in order to build a balanced budget, a budget that's going to address the needs of our community, and to help our community grow. Are we willing to take chunks of

the billion dollars that we currently see raising and putting it to the real needs. That's what I'm saying. Now, I know that everything we say that we spend money on the $22 billion is important. I'm

not discounting that, but we do have to have some trade offs, because if we cannot grow this economy, the money cannot come from households that are already paying more than their fair share. And I

know we're looking for opportunities to get money from those entities that we believe are not paying their fair share. But in order to do that, we've got to build a society that people want to live in

and I hear. I hear the mayor speaking about we want to make sure it's a community people want to live in. You're the man that bought us 100,000 new residents. We have them here. But how do we sustain

it? How do we make sure we have trash pickup? How do we make sure we have the utilities flowing and, of course, the streets and the roadways, the services that we need? We do that with our employees.

And how do we have that kind of employment base? That's what I'm concerned with. We're not just going to live here. People want to be an active part. And when we talk about taxes, we're talking about

what is raised in a household, a family, in order to make this any part of the economy. So I just wondered if we're looking at workforce as a part of this. A long way of saying that. Workforce, I

think, again, it's an expenditure item or package, but it's also getting at inequality, which improves the expenditure profile because you're lifting people from property, from poverty, excuse me,

into the world of work. You're really you're efficiently lifting people out of poverty is a good spend. But if you have areas like back in my day, remember they had the was it the special way of

transportation? We could have basically given every family like a couple million dollars a year for limousine service for what we were paying and not getting. You know, and how many of these temples

do we have around? We're, you know, we go for veneration at the temple of this, the temple of that, but nobody wants to mess with the temple. Oh, there you go. Thank you very much. I give back my

minute. Okay, I guess I'm next. Thank you guys so much for being here. And I think the conversation amongst you five as a representation of the TRC is very interesting in terms of how you were not

able to necessarily come to agreements because frankly, you're not even agreeing on some of the baseline data. But that's neither here nor there. I want to start with Yesha. I got the testimony that

you, when you pointed out around the paid family leave tax, and I kind of feel like when we have specific taxes for specific purposes, they should be for said specific purpose. And the PFL tax has

become way more than what it was intended to be. And so, in some ways, it feels like we can't continue to keep the PFL at its same high level, and also layer on, on top of business activity tax like I

feel like we got we got to pick one. Do you agree with that, or at least make adjustments to one or the other. It'll be a tough I think the point I want to make with that first I agree with your first

command. When you raise money to do something and then turn around and spending somewhere else, you're eroding public trust. I think the next revenue proposal far more difficult as you just just made

that point. The point I wanted to make is that what we were looking at at the business during the tax revision commission is when this payroll tax wasn't functioning the way it is functioning right

now. The argument that there are large entities not at all paying into the system was truer than than it is today. That's the entire point I want wanted to make. You could always say, well, you know,

we'll raise the will no longer call it paid family leave. We'll just call it payroll tax and we'll use it whichever way. This is all going to be up to you. But the only point I wanted to make is that

there's already something like that that's existing. But also a lot of this falls on employment activity, a payroll tax, definitely a business activity tax, not fully, but largely. And we're living in

a moment right now where our fundamentals and employment is really weak. So you're taxing something weak. I hear you on that. And I think it kind of goes a little bit to what Mayor Williams was

talking about at the top of his comments about taxes being reasonable measured and also without surprises. And I would say the number of businesses who I've spoken to one of their chief complaints

about the district is that every year is a new regulation every year is a different tax. And if we could just get stability for a certain period of time that could at least help us plan what's coming

what's happening what's not going to change going forward. I think that's the same question around for hospitals and universities because minus the federal government they are our largest employer.

And so they are our largest employer who also are facing a significant amount of uncertainty on the federal side when it comes to revenues there. So they're freaking out at the idea that a business

activity tax would also include them as well. In some ways, we would actually be paying ourselves back, because at least for the hospitals who are serve significant Medicaid populations there, it

would be using taxpayer dollars to pay back taxpayer dollars in some ways, or not. Have we thought about that in terms of what are some of the downstream impacts we should be thinking about

specifically when it comes to hospitals and universities, if they're included in this. Sure. I appreciate the point. I think this sort of like another way to think about this is now every tax we're

proposing is taxing something that's fundamentally weaker than it was two, three, four years ago. That's the point I was trying to make sort of your growth curve versus your expenditure curve. This is

every tax decision is harder today than it was three years ago because the tax base is weaker today than it was three years ago. I want to ask some questions about the wealth proceeds bill. Did the

TRC consider this? No, we talked about capital gains taxes and this is, you know, the biggest portion of passive income in the wealth proceeds taxes capital gains. Okay. It wasn't something we

actually discussed them. Okay. I'm wondering if later on the witness list, there'll be some folks who can speak about this. I'm interested in what happened in Minnesota. So Minnesota did a wealth

proceeds tax. They had a very high estimate for what they thought they would receive in terms of revenue. And then I think they collected about thirty seven million less than what they anticipated.

And what are some of those lessons that we can learn there? I'm not sure if any of for Nick, the work that you guys have done have looked at this. So the wealth proceeds tax is largely on capital

gains. And so it is related to what happens in what happens in the stock market. If you implement it in a year and you're sort of assuming based on a high stock market year and you get less, you're

going to get somewhat less revenue. We've adjusted our estimates a bit for that. You know, what I think they haven't seen in Minnesota is any kind of huge amounts of tax migration or tax tax flight.

It has pretty much been integrated into the system. Yeah, well, a whole great deal of fuss. And in the years when people are realizing a lot of capital gains, it's raising a lot of revenue. It's going

to raise somewhat less revenue in years when people are raising some less capital gains. I think that's where, you know, a state like Minnesota that does multi-year budgeting or District of Columbia

that does multi-year budgeting is in a better place because you can a little bit take that into into account. I think, though, your comment about tax migration in Minnesota is a little bit different

than tax migration in a jurisdiction like ours. Right. I feel like our like to think of us like a tri-state area. But when you have a situation where living in Fairfax and you can easily still access

the district, I feel like that's a little bit different than being in St. Paul and moving to a neighboring jurisdiction. Right. But it's not that different from, say, Boston being close to New

Hampshire or New York being close to Pennsylvania, New Jersey or Connecticut or Philadelphia being across the river from New Jersey. I mean, there's not that there are other places where where people

can move from place to place. And so it is useful to look at a fair amount of detailed research that shows that in response to changes in tax rates, the number of people who migrate is not zero, but

it is it is quite small. Yeah. And it's also not in a silo. Right. So in our situation where you would have if we were to do a changing something in terms of taxes, you also have folks who are losing

jobs because of changing in terms of employment and federal employment. Like that's how do how we how do you isolate that is about tax and not about other compounding factors. I mean, there are there

are economists who spend their entire careers trying to do exactly what you're saying. And I'm not saying it's I'm not saying it all. It's it's easy and economists will differ to some extent on the

exact degree or elasticity. But they all do tend to tend, you know, the actual experience of places when you do it in good times, at bad times, at different kinds of states, different kinds of tax

increases tend to tend to sort of narrow down around this sort of. There is an effect, but it's really quite small and it comes nowhere near to negating the overall revenue gain. OK, I want to ask

really quickly about property tax proposals specifically when it comes to commercial real estate. You know, surprisingly, sometimes when we have businesses that close, there's a lot of fanfare in

terms of the reason around why they did it. And in some cases, there are any number of reasons. But I have been most surprised about sometimes the rents that some of our businesses are paying. I think

one of the ones that was like really illuminating was Miss Pixies. Everybody remembers Miss Pixies that used to be on 14th Street when Miss Pixies moved from 14th Street. And the owner talked about

the amount of rent that they were paying for that first floor retail space. It was like, wow, no wonder you were charged in twenty dollars for an old magnet. Like you have to you have to generate a

fair amount of income just to sort of break even just on the rents piece. How much of a commercial property tax increase can landlords typically pass along to their business tenants? It entirely

depends on the way that they structured their leases. For most leases, especially office leases, we have triple net leases that are the common way of doing business, which means that the entity that's

leasing the space is responsible for all property taxes, insurance, and one more thing, the third fire.com number. So any time we change property taxes, it immediately affects the tenant. For retail,

it's just like more case by case basis. So small businesses and storefronts would be vulnerable to a change in commercial? For sure, they will. Okay. And really quickly on assessed values. So I also

hear from this as well from commercial property owners is that they are being taxed on an assessment that is not accurate, reflective of what is actually going on in the market, in part because our

assessments lag. So how should we take that into account in terms of thinking about the impact going forward. For DSS values, there are two things that really matter. So there's about 20,000

properties that we use as SSS income producing properties. And this is the group that you hear this complaint most of the time. Everything else is sales comparables, and they generally the OTR does

generally well on sales comparables. So there are two things that matter really. One is the income and expense statements, which are two years backwards looking. And the other is the cap rate and a

small change in the cap rate caused a huge change in the value. So I'll leave you with this. A cap rate is basically an interest rate, which is your real interest, your nominal interest rate plus

some, some number for risk. In the district, the cap rates were below inflation for years, for the two, three years. So it's confusing to people. Thank you. Thank you, Mr. Chairman. Councilmember

Silverman. Thank you. I recently hired a chief of staff who was formerly the chief of staff for the mayor of Manchester, New Hampshire. So I have in my office a subject matter expert on New

Hampshire's bat, which I believe they call a bet. But to keep it simple, my understanding is that their bet is split between a lower payroll tax rate and a higher tax rate on profits with a credit for

those who pay a corporate income tax. So Ms. San and my ward three councilmember and at large colleague talked about how this intersects with our paid leave tax. So you say the paid leave tax at its

current rate, which I'm going to note is like three times what the CFO recommends to pay for paid leave benefits is in some ways a bet. But not exactly as New Hampshire has structured theirs, as I

said, because theirs also gets at the businesses who make money in their city. And we're talking like the law firm partnerships and so forth, but don't pay taxes in our city. So in terms of fairness,

to get back to our potted plant, Mr. McCarthy's point, why not lower the paid leave tax to what the CFO says is necessary to pay the benefits and then put a bat in place? Mayor Williams or Ms. San,

why is that not fair? You can't do it. I would like to see how the distribution changes. I don't think it's going to change that much is my point. I put that into non-economist language for us. OK,

sure. So if you were to replace 25 cents on the $100 for the paid family, and then you institute a bat, that's the equivalent of it. So you're shifting the burdens from a company that has nothing but

payroll spending towards companies that spend a little bit on the payroll and a little bit on something else. So a restaurant may actually end up paying a little bit more. So that's what I mean by

distribution. We would not know until we see the analysis, but it will be fair to some and not fair to others. That's all I'm saying. Mayor Williams. Yeah, I know it's just kind of feeling alone up

here, but I would not support it because I'm worried about the impact of the bat itself on a lot of different planes. I know that we did our research on the legality of it, but I think that that's a

political risk. There's an implementation risk or burden or duration to deal with, and I'm still worried about the impact that it would have on the commercial office economy in D.C. I'm sorry. OK, so

to just plain language it again, so it looks like you and Mr. Johnson have a disagreement about whether there would be a legal challenge here. And then help me interpret with the second thing you

said. You just think businesses will leave the city if a bat is put in place. I think we're just making it harder for some firms that are a key component of commercial office economy to stay in D.C. I

think that's a risk not worth taking. Well, let's get at something you said before about A.I. And I think both you and Mr. McCarthy mentioned how data center investment has impacted taxes paid to the

city by some of our companies, and I believe the CFO put this in his recent report. Let me quote him. I said, despite strong corporate earnings, district corporate tax receipts continue to fall as

businesses make extensive use of accelerated deductions tied to large capital investments. I imagine this is like data centers, basically. So wouldn't the bat get at that? Again, this was your point

about A.I., Maryland. So we have these people writing off their corporate investments. That's what the bat is designed to get at. Oh, Ms. Sand, yes. Remember combined reporting. Yes, I do. So the

reason we are seeing the impact on our corporate income taxes, all this impact of investment decisions way outside of the city by companies that have some nexus in the district, is combined reporting.

Oh, because they're moving their nexus, is what you're saying? No, because we when times are good, combined reporting brings us booms and benefits that happened elsewhere in the country. And times are

bad because we're using a triple sales factor to allocate their sort of like, you know, earnings to the district, their proportions. So now whatever decisions they're making that are reducing their

profits elsewhere, we're importing that to combine reporting. So the bat has nothing to do with that because the bat is actually activity in the district. And then so this is the reason you have it

combined reporting, which was a great idea back then, but no longer now. OK, I have five minutes left, so I'm going to shift. So our residential property tax rate is the lowest in the region by far.

So why not raise it because we have schedule age and the senior property tax discount sort of to offset the equity concerns. And I'll just front load my questions. So also help me understand the land

value assessment proposal, because I thought when I opened my my property tax assessment, there's an assessment on my house. And then there's this assessment on the land. So help me understand what

would be different here. Those numbers would actually mean something right now. They don't mean anything. What do you mean? I believe I'm taxed based on those numbers. The district is legally required

to separate the land value from assessment value. But the focus is on the total assessment value. So some point 25 years ago, somebody took the total assessment value and split it into two. So the

assessors focus on the total value. And I use whatever historic splits is. And I think Yomi from will be here to talk about. You can ask him to verify this later. But that's a historic split that is

not derived from separate valuation of the land and building. We focus on the full value. There was a case which I cite in my testimony that verified this. And then we use a historic number to split

those numbers into two. And I think that's another dump. So you're saying that those split numbers are a fairy tale? Yes. And that the combined number is the real number. But how can they be a fairy

tale if you are supportive of the combined number? Because the combined number is what OTR focuses on. The allocation is a historic one, which was at some point correct. There is no reason for OTR to

put any effort to find the right split. So they find they use whatever split they've used. It's not their focus. OK. I'll pursue this maybe another round. Why not raise the residential property tax

rate? Because we get a tax riot. You can always raise it. But it's very difficult. Well, we're going to have to do something courageous in the next budget. Whether it be income, sales, or property

taxes. It's got to be something. So Ms. Williams, you want to-- Yeah, I was just going to say, I mean, our recommendation is to not do the across the board. But to think about-- and we put an

alternative proposal in our testimony. But to think about building on the progressivity that we adopted in our property tax a couple of years back. So we set a new rate for value over $2.5 million.

But only raise that by-- it's like $1 for every $100 of value. OK. So it's not-- we didn't raise it very much. We could probably do something in between $1.5 and $2.5 million of value. A higher rate

there and raise that top rate to bring in some addition. So I do think we can get something out of the property tax, the residential property tax, and correct for some of the imbalance between the

commercial and residential. Across the board, that's going to be more harmful to folks at the low income end. And since this is a-- and then I want to hear from you, Mr. Johnson, but since this is a

panel of the Tax Revision Commission. So my understanding is you were likely to move forward with the bat. Did you consider a property tax increase? We did. We had a property tax increase there as

well. And what was that? I think it was $1 or $1.10 per 100-- On $2 million and above or something like that, value over $2 million. So it was a high value property tax increase. It was a high value

property tax. Yep. Mr. Johnson? Yeah. I just want to point out also the schedule age property tax circuit breaker is capped in value. Yeah. OK. So if you increase the broad rate, you would have to do

something about that as well. OK. Very good. Any other comments? I would just say this is, as my colleague said, a political issue. But if you're going to do something outrageous, why would you start

with the people that have been here paying taxes all along? Because they have a-- are you talking about the property tax? Yeah. Because they have an incredible value in their house. They have wealth

in their house. That's true. But these are the neighbors we want to keep and retain. They've got-- their house may be getting up in value. Their child care costs are $10,000 a kid. So they may not be

actually realizing it. But I wouldn't start with them. If you look at where-- that's not a fairness issue as much as anything else. That's not where we have a fairness problem. OK. Thank you very

much. Thank you, Councilmember Silverman. Councilmember Landau. Thank you, Mr. Chairman. Thanks, everyone, for your testimony. Ms. Sane, following up on Councilmember Silverman's question, why

shouldn't we strive for accuracy in the split between land and improvements on our tax assessments? So I think of this as a two-part question. There are about 20,000 or so properties that are right

now as income generating properties, especially buildings on large land. So one way to do it would be to look at comparable sales of vacant land. In the District of Columbia, there are 315 vacant lots

that are greater than 25,000 square feet. In the last two years, 22 of them sold. So looking at the comparable sales to do this is not going to be very informative. So that leaves the assessors with a

more theoretical think of I'm going to look at the highest and best use, and then I'll subtract some cost of construction that will give me the land value. I have put -- I'm not going to take a lot of

your time. I've put in my testimony everything that OTR will need to do this correctly, and it's a big risk. It's a big list. OK. But they -- I mean, OTR already separates out the value of land and

improvements on tax assessments, yes? But that's my point. That separation is arbitrary and has nothing to do with the real value of land or real value of building. I think we agree on that. It is

arbitrary. So you mentioned that a land value tax could be useful specifically for single-family properties. Is that something that could be approximated by adjusting class -- adjusting rates for

Class 1B properties now that we have that new classification? I think -- so it depends on your purpose. If your goal is to raise more revenue, you can't do it, you know, land value tax, more taxes,

whatever. But if the goal is to actually increase density and build more housing, you need to do two things. First, you need to make -- a land value tax will actually incentivize people to build

because at the margin what you're building is at a lower tax. But if your zoning is restrictive, all you have is a stick and no carrots, so you have to pair that with a zoning increase. We published a

piece on this in 2019 showing lot by lot how much room you have in the city and whether land value tax will hit you -- like hit the right spot. And then sometimes you have zoning, but then you have

historic districts. So -- Okay. Thank you for that. Okay. Coming to the bat for a second. Is the reason that you've abandoned support for a bat because you're saying the equivalent revenue is now

raised by the payroll tax or because you no longer believe that tax structure for its own merits? I believe that right now a payroll tax -- again, a bat largely hits payrolls and we're not

experiencing a really weak employment picture. So this is really not the right time to incentivize employment. Got it. Are you familiar with the inspector general's audit report from this August that

recommended the following, enhance commercial valuation methodologies to improve assessment accuracy, equity and consistency and incorporate more robust market trend analysis and time adjustment

techniques into valuation and ratio study activities? Yes, I have reviewed this. Okay. What do you make of it? I think a very important thing that the CFO's office can do is make it very transparent

how the assessors come up with cap rates. I believe that if they were to take the published cap rates of five large brokerage companies, mix them together and arrive at the cap rate, that would be far

more transparent and far more correct than what's happening right now. Okay. Thank you. I appreciate your brevity as well. Mr. Williams, at what point do we need to stop trying to claw back commercial

property tax value, values to stabilize our revenues and instead seek to rebalance the tax burden? It feels to me like we're chasing the economy that your administration benefited from, but one that

no longer exists. I think, you know, I've talked about this with a number of you. I think we are in a different set of circumstances and we need a new approach to a whole number of different things. I

don't have any prior to authorship on anything that's done back in the past. What I'm saying though is common among new administration all the way back to my administration, back through Mayor Berry.

And even further back, one thing that I do believe is -- and this isn't just chasing a dream -- is I think D.C. is very susceptible to the right signal, stimuli, triggering economic growth. And I

could give you neighborhood by neighborhood where there was incredible responsiveness to the right signals in economic incentives from NOMA, the Southwest Waterfront to Capital Riverfront or whatever

they call it. You all change your name, right? Capital Riverfront, all that. I mean, I just think we're a lucky city in that we -- with the right signals, we can enjoy that present value of enormous

growth. I do believe that. Yeah. >> So you testified that we should all look broader to attract economic growth. Do you mean -- do you believe programs like universal childcare support is good for

economic growth and in migration? >> I think, you know, we're -- I personally believe that social good is generated by -- I'll put it this way. We were giving a tribute to Congresswoman Norton the

other day, and I know Congressman Bonds remembers this back in the day. I would always go around saying I wouldn't be where I am but for a civil rights movement, loving parents, and effective

government. I believe in effective government. I'm just saying the best way to achieve it over time is to a growing inclusive economy. >> If you were still mayor, what would you cut in the FY28

budget? >> If I were still mayor, I would do what I hope the new administration will do, and I would bring all the parties together with this grand bargain that I'm talking about. You know, we need a

new way. We need a new agenda. I need everybody at the table contributing at the table in terms of effectiveness of our programs, program evaluation, you know, looking at -- maybe there are 15, 20

cost centers in the government that we should monitor the way a business would monitor cost centers. Like people would say, oh, I was over at the airport the other day and I was in line. These people

are ignorant. They don't know what they're doing. No, they know exactly how long you should wait in line, right, because that's a cost center that they're monitoring. We need that in our government,

right? What are the right signals that achieve growth? What are the productivity initiatives? And then as part of this overall package, then let's look at some incremental revenue raisers. That's what

I'm saying. >> Thank you. Mr. Johnson, while you were the executive director of the tax revision commission, did the bat get much pushback from the business community? >> At that time, as I think

Yashem and Tony said, there was quite a bit of support from the business community for the idea that we needed a broader tax base, a different way of taxing businesses. So the DC Chamber of Commerce

came out in support of the business activity tax with qualifications. And the qualifier was it needs to be part of an overall reform to the business tax system. I think what I heard, I had lots of

conversations. We heard publicly from representatives of the business community. I had a lot of conversations with accountants and lawyers and others. And the clear theme was, yes, we understand the

problem you're trying to solve, the problem that we have large business entities doing business in the district that are not paying their fair share, a problem that was created by the federal

government but that is on us to solve. And the sense was the business activity tax is a reasonable way to solve the problem. It's actually better than the payroll tax because the payroll tax is taxing

people who are working here. The business activity is taxing the business entities that are doing business here based in part on their overall payroll, which may extend outside of the district and

then apportion it to the district based on the business that they're doing here. So the DC Chamber of Commerce sent a letter to the commission shortly after the payroll tax was passed and said the

payroll tax is not the solution. The business activity tax is more likely to be the solution. >> Makes sense to me. Mr. McCarthy. >> Councilmember Nadeau, I think it's important to put in perspective

exactly what we meant at the time about the one for one business tax relief that would come in the wake of a bat. Yes, we did stipulate the best way to do it was to have a one for one dollar relief in

business tax for the bat. But the relief in the business tax was not going to go dollar for dollar to the people paying the bat. In fact, it was going to be disproportionately going to other people,

mostly small and local businesses. So we did not think that the people paying the bat were going to be zeroed out with net no cost. >> Right. While I have you, how do you think the city's revenue

impacts childcare and education investments in the short and long term? >> Well, look, we know, especially for middle income families, it used to be, you know, where will my kids go to pre-K? But we

solved that problem as a city. Now they go -- and I hear many families having their first kids saying, I'm staying because there's pre-K. So imagine if we had that same opportunity for zero to three.

So I think it's an indispensable economic development tool. I think business leaders will tell you the biggest impediment they have to a stable workforce is mothers who have unstable childcare

situations. And that causes absenteeism. That's not good for anybody. So I think the business community is coming around to looking at childcare, not as a cost that other people get, but an investment

in me and my business future. And once we get to that point, I think that's going to be a win-win situation. >> Thank you so much, Ms. Williams. I'm sorry I ran out of time. Maybe we'll come back

later. Thank you. >> Thank you, Councilmember Mitchell. Councilmember Tranwhite. >> Yes, thank you, Chairman. I guess I'll start here. Early on in the conversation there has been extensive talk about

keeping people here and growing the people here, which ultimately has an impact on the growing economy. I just remember a lot of conversation probably about seven or eight years ago about getting DC's

population to a million people. And it seemed like at some point we were going towards 700,000. The 2016 Census Bureau reported that 681,170 people lived in the district. And I think that number one

went up a little bit more. I looked at this year, coming to this year, we were at 600,987,733 people. And now we had 693,733 people as of July 2076. So it's lucky it went up, then came back down a

little bit. And I'm just concerned about, you know, what are we doing as a district to keep people here because that ultimately affects our revenue. Mayor Williams, have you been speaking to your

thoughts about keeping residents here? Because I look at -- and I'm going to say this as a caveat. I look at Navy Yard. We built this huge living space, and that's just one of many because that's in

what someone speaks to that. Well, 90% of it is. And a lot of these buildings were populated with a lot of high-income earners, and we're seeing a migration of those people leaving. How do we keep

people here that are moving here, business residents that are from here, but also grow the economy there in spaces like Navy Yard? If you can speak to that, because I know you were influential in some

of that. Yeah, I think it comes back to the stable, you know, settled expectations. People want to live in a neighborhood with amenities and quality of service and expect things that, you know, aren't

going to change, you know, every other day, certainly for the worse. And for -- you know, and for -- this gets to my point about inequality, the two ways to address inequality, one at the high end and

talk about who's paying what. But more profoundly, and I think pervasively, it's looking at how we deploy government resources to really effectively, you know, walking the walk, put people into the

world of work, into productive jobs, and improving the economy at the same time. And that is -- that's still, you know, what's the word, story to be told. Yeah, and what do you contribute to the

decrease or the decline in the population now? I heard you talk about city services and economic increases as far as jobs. Anything else you can point to as indicators? Didn't quite get that. I said,

is anything else you can point to as indicators of why we haven't -- you know, we've been talking about getting to a million people, you kind of stayed around $700,000, but now there's on a slight

decline. Anything you see that contributes to that in a long -- in a long way. I mean, if you're looking at, you know, for example, I'm talking -- I keep talking about program evaluation. You would

ask yourself -- and again, I'm -- you know, I share -- I accept my part of the blame. I'm not trying to point fingers, but you say, well, you know, where -- how are we -- are we making headway on

truancy? Are we making headway on middle schools? Are we making headway on high schools? I talk to a lot of families. When their kids are at a certain age, they can't afford to sit in a private

school. Can't get them into a charter school. They've got to leave the neighborhood. That's an important consideration. So how do we address that? Councilmember White, do you mind if I tag on? I don't

mind. Go ahead. Okay, thank you. We've gone almost two hours and ten minutes. I don't think we've actually uttered the word affordability. And if you want to talk about why people are leaving, they

can't afford to stay here. And so if I'm a business and none of my employees can live within ten miles of my business, I might decamper Virginia and go to Chantilly. So if we can look at affordability

issues as well, it's expensive to live here. But education is part of the affordability. Yeah, we can cut his mic on time. I think housing affordability is -- But if I'm already living in the

neighborhood and I have to leave because the education isn't there for my kids, that's affordability. Let me ask this point, too, because I know we had extensive meetings and conversations about

downtown not growing to the level we need to be. I know Mayor Bowser implemented, you know, turning some of the buildings into the apartment buildings, doing a revitalization of downtown, all these

different themes and concepts we pour money into. Do you think that's the right answer? Is it working? What's your analysis of that to keep our downtown environment? It also impacts our tax increase.

Anybody want to chime in on that? You know, we're a big believer that the new administration, the council, together creating a development corporation that can more -- most expertly and efficiently,

you know, make the investments we're talking about, deploy the resources we're talking about, would be a huge boost to downtown economic development. But do you think what we've done so far is working

as far as converting these buildings to apartment buildings or the whole philosophy about it? I think the -- you know, as I was saying earlier, I think the council's already taken steps in sending the

right signals. I know it's been difficult, public policy, sending a message to the world, improvements in the rental act. And Tofa, I mentioned, there are others that are sending important signals. We

need to build on that now. And I think a development corporation could do that. I'd welcome other thoughts, but that's my view. All right. I want to jump around a little bit. Ms. Williams? Yes. I hear

your support of the business activity tax. I guess I want to ask, what would be your elevator speech to working class families like families in Ward 8 that keep the economy going, frontline workers?

What are the pros and cons that you think of as released to the business activity tax? I mean, I think the pros are that it's an issue of fairness. We have lots of people and families and businesses

that are paying into our tax system that are supporting services. And then we have some that have gotten to opt out that aren't contributing what they should be and compared to other businesses just

like them where they're resident owned. So I would say it's a fundamental issue of fairness. And one that can help to bring in more revenue to make our budget more stable, our revenues more stable.

And that's good for all of us because it means we can sustain the services that all of our communities need. You know, I think we're looking -- we're facing down cuts to health care, to paid leave, to

childcare, to all kinds of things that are critical for families and that do address affordability and that also address inequality and that also help our economy grow. And, you know, we need to be

making sure that everybody's pulling their weight in that. I guess. And I was going to want to ask about this. You recommend a child tax credit over a sale tax increase. Can you expand on that and

impact that? Yeah. I mean, our recommendation is to forego the sales tax increase. That would be our first position. But that if council decides to keep that on the books, if the next mayor and

council decide to keep that on the books, that it be paired with the boost to the EITC that we had in our decoupling legislation and the robust child tax credit that was included in that as well, that

we bring that back online so that we make sure we're offsetting that increase in sales tax for folks with low and moderate incomes who would be hit hardest. Got it. I want to jump to Nick Johnson real

quick. What's your support of the business activity tax? Can you point to a city that was similarly situated economically like DC is and seceded with the economic approach? If you have an example of

that. Sorry, an example of a place with a similar economy to the district. Yeah. Well, I mean, I think I've been working on state and local tax policy for decades and there are tons of examples I

would say, you know, you can look at New York right, right now you can look at Boston you can look at Seattle. These are places that are facing economic challenges and that are exploring a variety of

options to make their tax systems more fair to capture sources of revenue that are not currently captured. DC is in a unique situation. DC faces very unique challenges and so the business activity tax

is a good match for our challenges. That's not to say other cities are doing that, but other cities, you know, New York is adapting a pieta terror tax in response to its unique economic challenges. So

maybe that's the best parallel you can think of. All right, I'm over time, so I'll try again in my second round. Thank you, Councilmember White. Councilmember Lewis charge. Thank you chairman for

mighty tax revision commission. I now understand how fun those meetings were. Joyful. I can tell. Okay, I want to start with the bat and then just talk about some of the broader implications and

thoughts. Erica you support you support the bat but recommend a different design from the chairman's draft. What changes are essential in your opinion to protect small businesses and community

organizations while collecting meaningful new revenue. Yeah, thank you. I think the biggest pieces or differences from what I can tell him this might just be drafting issues in the legislative

language but we want to make sure that $200,000 exemption is actually an exemption. It's not just sort of a sort of the way it's worded in there. It's more like a cut off or if you're above 200,000

then you pay the bat. We want to make sure that's an exemption that can be subtracted from gross receipts for all businesses. The other thing is making sure that we've got the dollar for dollar credit

in there right I think right now there's a credit of the bat against the franchise tax and the franchise tax credit against that anyway. So that needs to be sorted out. We want to make sure we have a

dollar for dollar credit that equals the bat owed. Yeah, it can be paid against the franchise tax or income taxes. So those are really critical. I think we want to also see what the feasibility

analysis from the CFO tells us and tweak some of those parameters to make sure that folks aren't paying and then the final thing is to remove nonprofits I think it doesn't make sense right now and we

can explore that but we should do it separately. I think you know for simplicity sake for transparency sake make sure we know what our goals are with taxing nonprofits before we wrap them into

something like the bat. Yeah. The one thing I think people are not understanding is that dollar for dollar credit which offsets a lot of the concerns that I'm hearing from people. Could you explain

sort of how those work for credits for businesses already paying the franchise tax and when could their combined tax bill their combined tax bill still increase. I want people to understand that this

is a very important tool that really offsets some of the concerns we're hearing by and large concerning the bat. So right. So the idea is that say you owe your you end up owing $10,000 in business

activity tax that will get credited against what you owe in franchise tax. We aimed for a rate that that and an exemption that would make it so that folks who are already paying into the system are

going to basically have their franchise tax wiped out by the bat credit. So it is you're not adding a new tax you are complementing the tax system. So businesses that are currently paying aren't

paying more you do we will need to look at the data and make sure about the parameters but that is the idea. In some cases we have businesses that get to use really aggressive methods for minimizing

what their profits look like and they may be paying like the minimum corporate tax even though they have soaring profits in real life. And so the bat may help us to collect more revenue from those

kinds of businesses that are able to minimize their tax liability within the corporate tax franchise tax but that really do have an ability to pay more to our communities. Okay, I hope people

understood that because I think it's so critical in in across the board of why this can be an effective tool and really goes to fairness. Greg, what did the commission learn from New Hampshire's

experience with a similar tax that should inform our decision here and what evidence do you hear about business investment employment and revenue stability. Thank you for that question. I think Nick

or Mayor Williams alluded to the fact that they're somewhat different in so far as New Hampshire does not have a state income tax, and the cross border migration of businesses is less acute there than

it would be here, but it's worth noting. It was instituted by a conservative Republican governor in 1993, in part because his state was low on money, and he looked at his tax system and said, the

burdens that I see across businesses is not fair, and this is a way to make it more fair. Indeed, I think it was a large corporation that actually sued the state to that effect to say, it's not fair

how the tax burden is happening. It was done incrementally. They didn't start off with the full rate right away. And they have two major lessons I think that would bear for us is one, business

activity is actually increased statewide. In fact, the proportion of people paying the business for profit tax, which is the equivalent of their franchise tax, has actually gone up. So more businesses

are actually doing well and not paying the bat because they're doing so well. Furthermore, they noticed that during times of national economic downturn, their resiliency was much more markedly better

than in previous times, that the breadth of the taxes across more people was a bigger cushion during down times. So, you know, 30 years plus later, they like it. It's not going anywhere. We spoke to

tax experts and business experts and people from the state legislature, both Democrat and Republican. And they view it as something that at a time, maybe a few people were upset about, but it's now

just the normal course of business, something that adds broadness and resiliency to their economy. Thank you for that. And I think that's important because when we talk about what the political

ramifications could be, that this is something that has gotten bipartisan support and it's been seen as a fairness tool in a tax system as we look at it. Greg, for a firm that might be considering

moving from D.C. to Northern Virginia with their loud data centers, what would actually change on its bottom line once we account for taxes and for taxes and the cost of moving? Sure. Well, first of

all, no one should be cavalier about any corporation thinking of doing that. I would hope who's never mayor next could have his or her administration sit down with these people before they leave and

say, let's talk. And I think any conversation about a bat is always going to go better when you can say, look, we're going to clean up the licensing process. And you're not going to have to have a

full-time person to get your basic business license or a clean hand certificate or hire a permit expediter because we're going to fix those other parts. We're going to address the rats around your

establishment and we're going to address the public safety problems that you may have. And so there are things you can do to make the bat a little bit more easy to take. But in the case of somebody

going to Virginia in that unfortunate event, I don't think it's exactly clear there would be a demonstrably less tax burden. First of all, Virginia State authorizes localities in Northern Virginia to

have something called a business professional and occupational license fee. And I think it's up to 0.6%, which I think Falls Church imposes. So that fee would actually apply to all their -- it's

basically a bat that they would actually walk into. And it's also important to note that to the extent that they have business that remains in the city, clients in the city, the bat that the city

would impose would still apply to that line of work. So the net reduction might actually not be that much at all. >> Yeah. Thank you for that. Mayor Williams, you recommended at least a six-month

period of reviewing district spending before considering tax increases. What reoccurring savings have you identified that could be realistically available for fiscal year '28? And I know in your

testimony, I think you specifically identified Metro and Medicaid. What changes would you recommend and who would be affected as we realize our way to some savings as it relates to efficiency, which

we both agree are necessary? >> Yeah, I believe that, you know, incremental tax increases ought to be evaluated, you know, with a tax economic analysis, but they ought to be part of an overall

comprehensive package as the district moves forward. And I think we are a target-rich environment. I think the new administration, which we have a big role in, and the council, I think, should

immediately, in panel, start working on it now, the expenditure commission we've been talking about to do this evaluation, to do this efficiency analysis. You know, I sound like a broken record. We

already have, we started 20 years ago with metrics, performance metrics for government. And what I'm talking about in layman's terms is associating our costs with the metrics that we're already doing.

So we know we have metrics for picking up the trash. Are we picking up the trash effectively? What does it cost us to pick up trash with other comparable jurisdictions? And then manage to that, have

productive discussions with labor around real metrics. I suppose it just kind of general, I don't know, whatever it is I talked about and subsequent mayors talk about. >> I know one of the things

we've talked about in this conversation, Erica, is, you know, we've heard calls to hold off. But that decision has consequences, too. I believe in your testimony, we identified more than 660 million

in one-time funding supporting the budget that will not be available in fiscal year 28. What services are we at risk of losing and who would bear the cost if we do not replace that one-time funding?

>> Yeah, there's a lot, there's a lot on the line in the FY28 budget. I think you all know that, you know, we are facing cuts to health care. Up until recently, we've been number two in the country

for health care coverage, and that's really good for workers, economy, the economy. More broadly, we're at risk of losing our first of its kind in the nation pay equity fund, which has a big return on

investment, it turns out, and has helped us to grow our child care workforce, has helped us to make sure workers are getting paid what they deserve based on their credentials. Given our kids really

good quality care, we are at risk of losing funds for our schools, funds for out-of-school time. We're at risk of losing investments we've made in environmental justice and climate programs. We are at

risk of losing a lot. And there's the things that we know we would want to do, right, like make child care affordable, like tackle the child poverty problem with the child tax credit, other things

that are now being put off because we don't have the revenue system, the stable revenue system we need to get it done. >> Thank you. Thank you, Chairman. >> Thank you, Council Member. Council Member

Allen. >> Thank you, Mr. Chair. The risk of going so late in the lineup is that all the great questions have been asked. But don't worry, I still have some. All right. I appreciate everybody. And kind

of as I think several of my colleagues have echoed, it's been a healthy conversation. It's also showed the trade-offs and the tensions that naturally exist. And I think, Mr. McCarthy, you said it

might be uncomfortable at times. That's okay. So I appreciate everybody kind of coming into that. One of the spaces that I feel like has not really been talked about at all over the last couple hours

is the nexus between viewing what we invest in in our city and what our return is. I have said this many times. I'm not somebody who supports taxes for the sake of taxes. But I do like a return on

investment. So in Ward 6, I've been the Council Member and have championed and fought for tax abatements, tax subsidy. Think about the neighborhoods that exist in Ward 6, Navy Yard, Southwest,

Waterfront, NOMA, Mount Vernon Triangle. I have helped move investments in development that had a return on investment in new residents, new tax revenue, new businesses, new jobs that come in. When I

look at our pay equity fund, Mathematica did an analysis. When we raised modestly taxes on some of our highest income earners, we were able to help fund our pay equity fund to make sure that early

childcare workers could have a raise. It directly led to 1,500 to 2,200 additional childcare slots. And FY24 is a 21 percent return on investment. We spent about $76 million. We got back $93 million

in economic activity. I don't think we're linking the need to help find revenue sources to what those investments turn back into in terms of economic activity and supporting our residents. I do agree

with some of the comments I made earlier as well about the last few years we have seen trust erode from taxpayers because the thing that people said we were going to need revenue for then just gets

swept up. The mayor's last several budgets have been more than happy to take the revenue that was generated by things that were opposed, but then more than happy to spend it on other things rather

than repeal the thing that they said they opposed in the first place. That really gets cynical, I think, for taxpayers, for businesses, and for residents, not least of which us too. Mr. McCarthy, you

started in one of your earlier answers, and I want to help pull the thread a little bit more. If I want to be a place that is attractive for businesses to locate, either to retain or to move into the

district, I need to invest in child care. The savings that families can have with universal pre-K3 and pre-K4 is tens of thousands of dollars for working families. Child care for a family with two

kids can be about $47,000 per year. Go move to Virginia and Maryland because you're not going to get that. That is a savings you get here. It's a benefit. It keeps people here. It induces people to

move here. When we look at zero to three in universal child care, it will induce people to both stay as well as move here and for businesses to locate here. Can you talk more about the link between

how we choose to make an investment? So revenue that we may need to raise to then help reinvest back into what makes us a competitive marketplace to retain families, to add families, add residents, as

well as businesses. You kind of went down that thread about businesses wanting to locate where their workers are and choosing somewhere else if nobody can afford to live here. Well, look, it's not an

either/or thing. We like businesses and residents to stay, right? But when you look at a business, if most of their residents live in the suburbs, all that income is being taxed elsewhere. And a lot

of times they may telecommute. If they're a government worker, they're going to a federal cafeteria and not paying taxes. Compare that to the office building that was transformed into residences. And

those are people coming in paying taxes. Even if they live in the suburbs, they're paying taxes to us. But we know there are certain elements that make a family want to stay. And it used to be that we

knew, well, when they get to middle school, it was Alistair for all, right? They're going to leave. Well, it's actually earlier than that now. And it's not even anecdotal. We know that people are

staying because we have universal pre-K. And I've heard from many people, again, in the $100,000 to $200,000 range, that they're spending basically college tuition to have two kids if they can find a

slot. And so I don't think there's a formula to talk about it, but we can look at their tax returns and say they filed here, they're staying here. And we know what that would be if they went to

Maryland or Virginia. So I don't think there's an equation to put in, but we just intuitively know that's what a strong neighborhood has. Agreed. And when this council passed that modest tax increase

on high-income households or earners, we were able to fund the pay equity fund. Again, generating millions of dollars of economic activity, of the overall net plus. We heard you're going to create tax

flight. People are going to leave the district. We have more millionaires now than we did when that was passed. The cost for somebody, or ORA, ran the numbers. For somebody earning $300,000 a year, it

added $31 per month to their tax bill. The cost of the moving van is a heck of a lot more than that. I do not believe people will uproot their connections to church, to family, to school, to their

neighbors over $31. But I do believe it's our responsibility to help demonstrate what an investment, what that return looks like. And when I show people that their childcare is more accessible and

more affordable, when I show people that there is an economic return, I think that's really important. And that's on us. We've got to do a better job of helping tell that story if we're going to come

back and say, "Here's some of the ways we think we need to raise revenue." I did want to ask Ms. Williams and maybe Mr. Johnson, one of my colleagues talked about land value tax. I just want to take a

second on that because I hadn't had a whole lot of time of a conversation here. My house is about a seven-minute walk to Union Station. I've got a great elementary school a block and a half away. I've

got a great middle school about a block and a half away. I've got four grocery stores I can walk to. I've got great parks. I'm living the dream. If I take that house and I move it somewhere else, I

don't have proximity to all those things. The idea about a land value tax is that the city's investment in the schools, in the parks, in transit, which we spend a lot of money on, the land that my

house sits on is more valuable than a land that does not have close proximity to those things. Therefore, that property tax should reflect that. The land value tax is one of the ways you help reflect

that to better account for the true value of the land, which I think would also include all the different investments the city has made around it. Am I following that correctly? Yeah, that's right. A

big part of the argument for land value tax is that you are essentially recapturing a lot of the public. The public has made tremendous investments in certain parts of the city because of where you're

located. So it is entirely fair and appropriate and actually smart strategy to recapture some of that revenue. And then ideally put it back into more investments that will benefit greater swaths of

the city. And how would you respond, though, to folks who say, listen, borrowing costs have gone up. Interest rates are, whatever they are now, 7.75%. We are going to make it. It's harder currently in

this economic climate to be able to purchase at home. And this is just the wrong time to look at a land value tax or to think about property tax in any different way. I do think we need to be very

careful around that. So does the economic moment matter as much when we think about a land value tax or is that a different consideration? Well, there's two ways to think about land value tax. You can

think about sort of a revenue neutral land value tax where overall folks are paying less property tax on the value of the property of the built property. As an offset to the higher taxes that they may

be paying on the value of the land. And that changes sort of the equations around which neighborhoods pay more. If you use it as a revenue raiser, then it becomes essentially a property tax increase.

And yeah, you do have to think about the impact on affordability. One thing I will note, though, is that when you raise a property tax, it's a little counterintuitive. When you raise a property tax

that gets capitalized then into the value of the house and it can actually be offset by making homes more affordable. So the home buyer that comes in may actually end up paying less for the house

because that higher property tax has been capitalized into the price of the house. So I think worrying about property taxes is a different question than thinking about housing affordability. Thanks.

And then one last question as my seconds are ticking down. I spent hundreds of millions of dollars on our metro system every single year. If I have a commercial property on top of a metro station, is

it more valuable because of its proximity to transit than a property that's a mile away from transit? Sure. But that was our public investment that made that happen? Yeah, absolutely. Thank you very

much. There's not going to be a second round, but I don't agree with your answer on the land value, and I probably shouldn't go there, but the theory behind land value is that you're taxing the land

at its highest and best value. That's the theory behind it. So our current real property, assuming that it is assessed properly, reflects that, let's say, Council Member Allen's house is worth more

than mine because of its location. Stop it. Stop it. Stop it. And so the value is already reflected in our current assessments. What land value would get is that the vacant lot next to me actually has

a greater value if it's developed, and the land value tax approach captures that because it says we're going to tax you based on the value of what the land could be. And whoever's owning it is like,

well, it doesn't do me any good to have it vacant. I'm going to improve it because the improvements are relatively speaking free, at least in terms of taxes. Land value taxation is about capturing

highest and best use of value of the land. Mr. Chairman, that's not what your answer was to Mr. Allen. I recall when we talked about this, and I think you're right, I remember Council Member Nadeau

sent a very compelling letter to us about it. The other factor was we wanted to promote people to develop and add housing units on their land. And there were problems with zoning and the comp plan

that would mitigate that in certain places. But it was about also expanding the housing supply by not penalizing people for improving their properties and adding units. And I think that's kind of

where you're going, right? It's not penalizing improvements. Right, exactly. All right, I've managed to prolong this. Thank you all very much. And I think I had predicted we were going to spend about

three hours with you all. I hope you had a good time. The second panel, which could be just as long, because again, I think we gave more time for them to testify. And then there'll be one 10-minute

round for members. Michael Mazarov, Independent Researcher on State Tax Policy. Dr. Darien Shansky, who is Martin Luther King, Jr., Professor of Law at UC Davis School of Law. I'm guessing he's

online. Dr. John E. Anderson, who is Baird Family Professor of Economics at the University of Nebraska, Lincoln, who's virtual. Lars Duset, I think it's pronounced Duset. I believe he's virtual. He is

Co-founder and President of Research and Development at the Center for Land Economics. Joe Bishop Henchman, who is Executive Vice President at the National Taxpayers Union Foundation. And Catherine

Lofhead, who is Vice President of State Tax Policy at the Tax Foundation. So that's six folks, three online, three in person. I especially like people who are in person, so thank you. Mr. Mazarov,

you're first. Thank you, Chairman Mendelssohn, members of the Council. Thank you for the invitation to testify today. I'm Michael Mazarov. I retired from full-time work as a state tax policy analyst

at the DC-based Center on Budget and Policy Priorities in June 2024. I'm still a consultant with the center, and I'm also on the board of Mr. Johnson's organization ITEP, but I'm not representing

either organization today. And since I'm the person, I think, who put the BAT back on the agenda of the Tax Review Commission, that's what the focus of my testimony will be today. The proposed BAT is

a form of value added tax. It's not a gross receipts tax, and it's radically different from a gross receipts tax. In contrast to the transaction by transaction VATS that substitute for national sales

taxes in many countries, the proposed BAT is a so-called operational VAT. It's calculated, complied with, and enforced very much like a state business income or profits tax. As proposed here, you

start with the businesses nationwide gross receipts, subtract certain allowed nationwide expenses, apportion the remaining tax base to the district, using objective measures of the businesses activity

here, and then multiply the post apportionment tax base by the tax rate or rates. From a calculation standpoint, the only significant difference between a BAT and an income tax is the scope of the

allowed deductions. Under a BAT, only purchases from unrelated firms are allowed as a deduction, meaning that employee compensation isn't deducted. That reflects the fact that the work of employees

creates a substantial portion of the value that's created within the business, which is what you're trying to tax. Because from an administration standpoint, a BAT is not very different from an income

tax, the three states that have enacted some version of one in recent years haven't needed much time to get them up and running. The New Hampshire Business Enterprise tax was signed into law in July

1, 1993, and it took effect the very same day. The BAT half of the Michigan business tax, which was a two-part BAT and business profits tax that's since been repealed, was signed into law in July 2007

and took effect six months later. And the Texas margins tax, which is sort of a hybrid of a BAT and a tax on gross receipt that allows the deduction of only some purchases from independent firms, was

enacted in May 2006 and took effect a year and a half later. But while a BAT is administered very much like a business income tax, it's not an income tax from an economic standpoint. It's a tax on the

value added within the firm, and a firm can have a BAT liability in a year in which it's not actually profitable. This is appropriate and reasonable. We tax businesses so that they underwrite the cost

of public services from which they benefit, like police and fire protection and the court systems that enable them to adjudicate their disputes with suppliers and regulators. They don't stop

benefiting from those services in years in which they happen to be unprofitable. That said, we can and should take steps in drafting a BAT to hold harmless as much as possible, low profit, not yet

profitable, or temporarily unprofitable small businesses. One goal of the BAT feasibility study underway at the Office of the Chief Financial Officer should be to generate more information about the

levels across the board exemption and the tax rates that could balance the achievement of this goal with the revenue objectives for the tax. Other presenters have already stated the reasons they

believe a BAT should be added to the district's tax structure, so I'll just restate them quickly. First, the BAT is one way of ensuring that unincorporated businesses with sales or operations in the

district that are owned by non-residents contribute to the district services from which they benefit. By enacting the unincorporated business franchise tax, the Council has already decided and ensured

that unincorporated district restaurants, dry cleaners, and printing businesses with substantial capital owned by non-residents pay some tax to the district. It is profoundly unfair that the often

very highly profitable law, accounting, political consulting, and other professional services firms that have clients in DC but are owned by non-residents can't be held to the same standard because of

the Bishop decision. A BAT is the best way to rectify this injustice. Second, a BAT can serve as it does in New Hampshire and did for a few years in Michigan as a backstop to the corporate franchise

tax. If a large corporation manages to substantially reduce or even eliminate its corporate franchise tax liability by, for example, engaging in aggressive international profit shifting, it will still

have some amount of BAT liability. So in essence, the BAT can function as a corporate minimum tax for large corporations. And finally, a BAT will be a less volatile source of revenue for the district

because its base is much broader. Because a business income tax is imposed on the often narrow wedge between total receipts and total expenses, a slight reduction in receipts or slight increase in

expenses can have a large negative effect on net income, the base of the income tax. Because only some expenses are deductible in calculating the BAT, its revenue yield is likely to be much less

variable. One of the chief objections to enactment of a BAT is the claim that it will lead law consulting and other professional firms with offices in the district but protected from district taxation

by the Bishop decision to move to Virginia or Maryland. This is highly unlikely for a very simple reason. If the tax statute is drafted property, leaving will not enable these firms to escape the tax.

Even if these kinds of firms remove their offices from the district, they are still going to be sending personnel into DC to lobby lawmakers or regulators, litigate cases in DC courts, offer

accounting or IT consulting services to federal agencies, design new buildings that will be located in the district, draft comments on proposed regulations on behalf of trade associations located in

the district, and so forth. These activities will empower the district to impose BAT on these companies, even if located in Virginia or Maryland. Moreover, if the BAT is a portion solely on the basis

of the location of receipts, and if the statute is drafted to say that these firms' receipts are sourced to the district, if the benefit of the service to the client is received in the district, then

leaving the district will have little to no effect on the BAT liability of these firms. They would still be subject to it, and the amount they would owe would be substantially the same. These kinds of

businesses have a reason to have their offices in DC. They need to make it easy for their clients to come to them and to spend as little time getting to their clients or these federal agencies that

they lobby as possible. They're not going to leave out of peak at being expected to pay a fair share of tax to the district for the first time. Finally, the additional and more stable revenues that a

BAT will generate, as others have discussed, will have a positive impact on the district's economic competitiveness by enabling it to preserve and improve education, housing, childcare, public safety,

infrastructure, and other services that make DC a desirable place for people to live and raise a family. And for businesses to invest. Thank you again for the opportunity to speak to you today, and

I'd be happy to answer any questions. Thank you very much. Dr. Shamsky, who I believe is online. I am. Can you hear me okay? Yes, we can hear you. Okay, terrific. So I'm going to try to be brief

because so many of my comments have already been addressed. So I am a professor at UC Davis in California. I specialize in state and local tax policy and law. In terms of a few points that I want to

emphasize. One is that this is a broad policy matter. The states and cities and city non-states like DC, unfortunately, suffer under fiscal asymmetry. That is to say, even before the recent rounds of

cuts, they are being asked to do more for their citizens than they are provided the revenue power to do. And so I think it is commendable and advisable for the district to look to reduce expenditures,

but there's no way to cut your way out of this problem. The good news is that there are a lot of really high value on expenditures available, really good investments that are worth on the tax

investment, a point that was made in the previous panel. Additional conceptual point that I want to make that I don't think has been made yet is that at least in general, having a plurality of

different taxes doesn't necessarily mean you have too many taxes. Traditional tax theory would say if you are taxing different tax bases at low rates, that can be very efficient because after all,

people won't do very much to avoid a 1% tax, but they might do a lot more to avoid a 4% tax. So if you have for 1% taxes on different tax bases on different modes of behavior, it could actually be a

much more efficient than otherwise. And so simply listing DC taxes doesn't tell you very much. You have to think about the different bases and the different ways they interact with each other. There's

been some further discussion about mobility, and I just want to emphasize a point again made in the previous panel that, yes, there has been an increase in mobility, but to a significant degree, that

actually means it's even more important to use your tax dollars to provide amenities people want, both at the business level and the residential level. And there is common sense, anecdotal evidence,

but also research evidence that this is true. So you want to continue to provide services that people want, and that will make you more competitive. As to the specific proposals, the business activity

tax, as Michael Masroff just explained, is a subtraction method value-added tax. It is a kind of tax that is justified on its own as a good idea because the government is enabling these businesses to

create this value, and so a small tax on that value just makes sense, and it would be justified, period. Now, as a law professor, I just want to emphasize there's been some discussion of the Bishop

decision. This is not a tax on income. It is a tax on a different base based on the value added, and therefore it should be highly resistant to any arguments based on the Bishop decision that it is

not permitted under federal law to provide guarantees. But I can say the Texas, which really no fan of income tax is, passed its version of a business added tax, and of course immediately was

challenged, and thus this ground has been really an income tax, and the Texas Supreme Court said it was not. So I'm telling you that you could be very confident as to the survivability and resiliency

of this tax. I'm not just making that up. I'd also point out, in terms of structure, there's a lot to think about in terms of its interaction with other taxes. We've heard about credits, heard about

exemption levels. Lots of these things make sense. I think it's worth further study in order to make sure they're set just right, both in terms of policy goals and legal goals, but these are totally

soluble problems. A few things about the NIT, the Lend Value Tax, and something completely different. So as for the NIT, I just want to emphasize that as a policy matter, we should remember that the

high income taxpayers will be subject to this tax, for the most part will pay a much higher federal tax to the extent they have, for instance, capital gains. And so when people talk about mobility,

they're saying somebody has already decided to trigger this tax and pay the much higher federal tax, and somehow this little additional DC surcharge is going to spur mobility, and that doesn't make a

lot of sense in terms of common sense or the literature. As for Lend Value Taxes, I want to note that other people are going to have more rather details. Clearly a good idea. The fact that it would be

not perfect in this person's instantiation is not an argument for not doing it. It's an argument for getting started. And so I want to emphasize that, and I also want to emphasize there are other Lend

Value Concepts that could be considered. So, for instance, you could impose a tax on the available development window, so you up-zone an area, certain number of units can be added, and you could put a

tax on those units, and that is a kind of cousin of a Lend Value Tax that encourages people to develop property. The final thing I wanted to talk about because part of the call was what other ideas

are out there. I do want to put one more plug, as I think I did a few years ago, the Tax Revision Commission, for some form of digital ad tax or digital extraction tax. I'll give you the basic

argument and wrap it up. Washington, D.C. does a pretty good job at taxing consumption pretty comprehensively, but there are big gaps, but there are significant gaps still. There are particular

related to so-called free services. So if you buy a book of maps, you pay the sales tax. If you download a book of maps, you pay the sales tax. I understand how it works in D.C., which is the right

answer. But if you get free Google Maps, which of course is what everybody does, you don't pay anything. But it's really the same consumption. It should be part of the tax base. One way to do that

would be in the aggregate to tax the receipts of these digital, or non-digital, but these programmatic ads on the other side. And it's just a good idea. A related idea would be to say these big

businesses are extracting data from residents of the district, often undercompensating them for that data. And just like we have severance taxes, when big companies take stuff valuable resources out

of a jurisdiction, we essentially could have a severance tax on this data. I know that Maryland had a First in the Nation version, cousin, of these kinds of proposals. And I know very well that it was

struck down by the Maryland Tax Court. I would just make a couple of points about that. That decision is very poor. It's being appealed. And other states, like Utah and Illinois, have passed versions

of the tax that even opponents of the tax concede are much more robust. If it's something a district is interested in, it should pursue it. It should perhaps budget the money prudently, considering

the inevitable legal challenges. But again, being prudent about future legal challenges and budgets, budgeting is not the same as application. If it's a good idea, then you should work on it, and you

should do it, and budget accordingly. And I will stop with 30 seconds left. Thank you so much. I'm happy to answer any questions. Thank you, Dr. Shansky. Dr. Anderson? Yes, here I am. It's a pleasure

to be with you. Thank you for the invitation. I'm an academic economist specializing in public finance and tax policy, having done quite a bit of work related to property taxation in particular. So

I'm here to provide technical advice regarding the split rate property tax or a land value tax. I've got experience advising governments around the world, having previously been the deputy treasurer

of the state of Michigan and having served in Washington, D.C., with the President's Council of Economic Advisors. So I've actually lived in D.C. during my time there as well. For the purposes of this

topic, I was the organizer and a co-author of a major study done several years ago, where we simulated the effects of a split rate property tax or a land value tax for the city of Detroit. That study

was published by the Lincoln Institute of Land Policy in Cambridge, Massachusetts, with whom I am affiliated as well. So the basic idea of a split rate property tax is to change the way properties tax

away from the conventional method, where the tax applies both to the value of the land and the value of the structures equally at the same rate. This has been dubbed by a Nobel Prize-winning economist

as the combination of the best possible tax and the worst possible tax. The best tax, of course, being the tax on land, which when you tax it goes nowhere, and the tax on structures being the worst

possible tax because you discourage both development and redevelopment and improvement of structures through that form of taxation. So the idea of a split rate tax is to tax the land at a higher rate

and structures at a lower rate as compared to a conventional property tax. A land value tax would be a tax on the value of land alone. Now, you can configure a land value tax in combination with a

conventional property tax. Indeed, in the Detroit case, the idea for implementation was to lower the existing property tax, which applies to both structures and land, and then add a land value tax in

particular to increase the tax on land. The benefits of split rate or land value taxation include both improvements in efficiency and equity. Efficiency, because you remove the distortions that are

involved with regard to the timing of development, as well as the structural intensity of development. So the efficiency gains are quite clear. You get property improvements and development timing

changes with less tax-induced distortion of development in both regards, both the timing of development and the capital intensity of development. So previous research indicates that taxing land can

actually promote economic growth. You also get equity gains as well. You get increased fairness in the property tax system. Our simulations for the city of Detroit, for example, had approximately 97%

of all residential property owners benefiting with lower property taxes overall with the proposal to go to a five to one split rate taxation where land is taxed at five times the rate that applies to

structures. So our Detroit evidence indicated that a transition to a land value tax can actually also reduce tax-related foreclosures of properties. So we were able to estimate the impact on

foreclosures, which were quite common in Detroit, and our estimates indicated that the foreclosures would be reduced with the split rate tax that we had recommended to them. Also, as part of our

background research, looked at the Pennsylvania communities that have experience with split rate taxes, and we found that the adoption of split rate taxation produced in those communities a

significant increase in the number of business establishments in those communities. And the Pennsylvania experience also revealed a significant increase in overall property values. Now you would

expect with a higher tax on land, that that tax would be capitalized in lower land values, which is indeed appropriate. But on the other hand, the lower tax on structures increases the value of those

structures. And in the aggregate, our estimates for the Pennsylvania communities indicated that overall property values increased with the adoption of a split rate tax. Now one of the challenges in

implementing a split rate tax or a land value tax is you have to have accurate estimates of land value. And so this is where assessors may be concerned over the actual practical implementation. There

are actually three different ways in which you can try to get accurate land values or potential ways to improve assessments of land value. First of all, you can look at vacant land sales. And to the

extent that you've got data on vacant land sales, that gives you an indication of what the land is worth. Now, what's the problem is that there are often very few vacant vacant land sales to rely on.

And they need another method. A second method that's been used by researchers is to analyze teardowns where a person buys a property with an existing structure on it, only to tear down the structure

and build a larger, more complex structure on that parcel of land. And what is paid for that parcel plus the cost of demolition gives you an accurate idea of what the land is actually worth. The third

possibility is an idea I'm borrowing from the finance literature and some research I'm currently doing with Sid Moore at Michigan State University, where we're looking at an option value method of

estimating land values, looking at structures nearby subject property to see the extent to which redevelopment at a higher use, more intensive use can be feasible. And by estimating that option value,

we're getting insight on the value of land and there again we're using data we have from the city of Detroit, and getting more accurate estimates of land value, then, then we've had previously

reported to us. So with that, I need to stop and I'll be glad to answer questions later on. Thank you, Dr. Anderson. Lars Doucet, Mr. Doucet. I'm just tapping the things here. Okay. Yes. Can you hear

me. Yes. Can you hear me. Okay. Thank you for being with me. I'm at the International Association for assessing officers conference right now. So forgive me if it's a little loud with the Wi Fi drops

out. But having said that I am Lars Doucet. Thank you very much for inviting me. I'm Lars Doucet. I'm the president of research and development at the Center for Land Economics. We're a nonprofit

nonpartisan think tank based in DC that works to center land and economic policy. I study property assessments and mass appraisal. That's why I'm here at the international conference. I work with

county assessors across the country. Previously, I co founded a mass appraisal startup that worked with dozens of different jurisdictions. I now do that same sort of work, but in a nonprofit context.

I maintain open source mass appraisal software. I've just been on a couple panels at the conference today with assessors from Philly OPA and Lee County, Florida's property appraisers office. And I'm

here to talk about the revenue stabilization and land value assessment Amendment Act. I think both parts to this bill are steps in the right direction. I love the idea that we should allow property

taxes to be paid quarterly. I think this puts them on even footing with things like income tax. And I think it helps to avoid the kind of artificial lump sum bill. It helps people also plan their

finances better on the second part set standards for how land is assessed. I think this is really important. You know, there's a saying in real estate location, location, location are the three most

important things in real estate. And location is what we mean by land value. It's the part of what makes property valuable. And the I double AO considers it best practice to maintain good land values

for every parcel. And this is even the case in built out neighborhoods where buyers almost always purchase land and building together. And just to give an extreme example of this, there's been a large

contingent here from Seoul, South Korea, which is as built up as it gets. And they value all the land in that entire entire country down to the parcel. And they do it in five months flat. So land

value assessment standards exist. We just need to implement them. We don't need to go to Korea to get some exotic method. There's plenty of assessors I can introduce you to in Virginia, North

Carolina, who do really good land assessments. And DC already splits land from improvements. The district has just never subjected those land values to particular scrutiny. And we're not implementing

a land value tax today. This bill is just setting some basic standards for land value assessments. I think if the city is going to write down a number, the city is going to want to know that that

number is good, especially because you know there's the question of appeals. Land values basically represent the the locational premium of that location. There's three approaches to value. We don't

have time to go into all of them today, but the sales comparison approach, the income approach, and the cost approach. The cost approach and the income approach both fundamentally read any appraisal

manual requires an opinion of site value, a land value. Because if you estimate the replacement cost, you know what it actually sells for represents the value of having this building in this location,

which is the land premium. And I think that's just important if whether or not you have a land value tax you want to make sure your values are defensible and explainable. When you put together a fully

adjusted comp grid, you need to be able to defend the locational premium that one property has because of its neighborhood. Assessors already create things called land tables or land schedules, which

encode these locational premiums. And we just want to make sure we subject them to some common sense tests and have a couple opinions on the bill in that regard to just kind of punch up the language a

bit. So, I would recommend to the law, I think we should let the assessors sort of decide what methods exactly they want to use if we're going to enumerate sources of evidence, we want to make sure

that's inclusive of things like teardown sales, land residuals from new construction. That means that whenever there's new construction, depreciation is very easy to estimate. You can take the

observed sale price and remove the estimated construction cost to get a good opinion of land value of that site. And, you know, we, I don't think we should over rely on vacant land sales alone.

Whenever a sales ratio study is too thin we shouldn't take that as evidence against the assessor, we shouldn't tie the assessor's hands behind their back. In the bill where it says similarly situated

that's slightly ambiguous, and I want to do point out that, although it is a very good common sense test to make sure that similar land in a similar location with similar zoning has the same value. We

did a report on this in Baltimore, and it's a very common sense test you just walk down the neighborhood and be like, whatever land value and putting down is it the same for properties that are

basically this, you know, regardless of what's built on them, but you do want to take into account property if you have a triangular parcel or parcel with a huge slope on it, you know land tables will

include adjustments for that so you don't want to tie the assessor's hand and forbid that and that's just some basic common sense stuff, and we'd be happy to work with the council or the office on

refining the bill for the CFO's office, but I think this is a good bill and it's good, it's a good government reform that DC needs. Some standard land valuation tests, I think are valuable whether you

have a land value tax or not. For instance, if you want to do an abatement on new construction. You need to know what the construction is worth. And, you know, there's three lines on any property bill

land value improvement bill and land value total value and improvement value. You also if you want to do land value capture, such as all of the Asian railroads fund themselves through land value

capture, just when the government builds a new amenity such as a transit station the land value goes up, and they recapture that that requires that you have a good understanding of value. And there's

there's plenty of national domestic and international examples we can draw from here, plenty of best practices. I did notice the former appraiser submitted some written testimony I heard about, and I

saw that there was a fiscal note that this would be a large increase. I do want to mention that there's more free and open source software solutions than ever before, and that if a land value line is

already written, I would be curious just about, I would just want to see a line item breakdown from any fiscal note, because I'm very familiar with these software systems. I'm familiar with a cost I

build them myself, I build open source and free ones myself, for instance, the one I'm currently collaborating with, with Lee County, Florida, to implement. So I don't think that any of the things are

recommending today are necessarily exotic or crazy. There are jurisdictions I can point you to that know how to do these things. And lastly, the topic of Pennsylvania counties in Pittsburgh that had

experience with split rate. I believe had a split rate land value tax for 88 years. Now we need to acknowledge why they lost that split rate tax and opponents will bring this up. It's because they got

sloppy with the assessments, not because the assessments were too hard, but because they just didn't do them often enough. They went for years and years and years without updating them. And then they

implemented the policy at the same time that they implemented the new valuations. We're trying to do the opposite of that, regardless of whether city council in the future decides to do an LBT. You

should just make sure that you put a little additional scrutiny on that land value item. Now, before it becomes a live item with any tax consequence. And I just think that's fundamental good

governance. And as I've said before, I think that's something you want, regardless of whether you go to a land value tax. If you just keep a conventional property tax, you want the location, location,

location to be right. And there's a common sense test that you can implement. And that I've submitted in my written testimony and to staff. And I'm free to make myself available. I will have to run

after this. So I hope I'll be able to make questions, but I might be on a train when it happens. It's a little crazy here at the conference. Thank you very much for inviting me and I'll give my time

back now. We'll try to stick around for a few minutes, because at least I have some questions for you. Joe Bishop Henchman. Chairman Mendelssohn and members of the council, thank you for the

opportunity to testify today. If you have some questions, keep going. My name is Joe Bishop Henchman, and I'm executive vice president of the National Taxpayers Union Foundation, where I help states

design better tax codes and engage in litigation against illegal tax actions. And to use based in DC and Ward 6, and I live in Ward 5, where I also serve as an ANC. We've submitted 50 pages of

material, which I'm not going to read. Our submission is, however, light on rhetoric and heavy on facts. And I want to use my speaking time to emphasize six of those facts. First, we are number one on

progressivity. ITEP was on the last panel, I don't know if this was mentioned, but they put out a report every year ranking the states on progressive tax systems, and DC is number one. We can always

do more, just as we can always do more to be competitive and do more to make taxes simpler to comply with. But it is a fact that right now, we are number one. Number two, on the income tax, again, we

are number one. The census tracks state and local income tax collections per capita, and DC raises more than anywhere else, even New York. in New York. IIT Wealth Proceeds proposal, which would be an

additional income tax, would shadow an existing federal tax, so compliance would be easy, but it's important to note only Minnesota does it, and also it's important not to think of it as a 2% tax.

Together with all the other taxes on income that we have, it will be a 12.75% tax, DC tax on this income. Virginia taxes it at 5.75%. So that difference, 12.75 versus 5.75, is what people are talking

about when they say you might see some out-migration. This income is also very volatile, which is a conflict with the need for stable additional revenue. California has done thorough studies on this

because they rely very heavily on capital gains revenue in their system. If you are going to do the net, use the money for one-time capital needs, not recurring programs. Three, migration. According

to IRS data, DC is in an out-migration situation. More people moving out than moving in. On average, every three hours and 24 minutes. So since we started this morning, two people have moved out more

than they've moved in. We calculate at NTU the total revenue impact for DC's budget on this out-migration to be a $179 million a year hit. Now yes, it's not just taxes causing this. In fact, I have an

article in the Harvard Journal of Legislation going over all of the evidence on this. Its housing, its affordability, its jobs, its crime, its services, its services in relation to the taxes paid, all

of that's important. But as far as facts go, the IRS data also shows the out-migration rate is more severe for DC for those who make $200,000 or more a year. And that's before any of these proposals

now being considered. Four, there are two taxes where we collect less than the average state. And those are the sales tax and the property tax. These are tried and true, broad-based taxes that most

people pay. If we truly care about the programs we want to keep and we truly want everyone to chip in to sustain them, these are obvious choices. I chuckled when one of the BAT supporters on the last

panel talked about how we need to do a BAT and then made sure to mention that per organization should be carved out from it. That's the kind of thing people hate about politics. If everyone should

pay, that means everyone. I'll note Nick Johnson in his testimony has some property tax adjustment ideas in his other tax section that you really should look at and consider, equalizing the assessment

cap and pilots, some good ideas there. Ignore them on digital taxes because as Professor Shansky just mentioned, the Maryland digital taxmen thrown out in court and now they have to refund five years

of collection, so you don't want to do that. Five, on the land value tax, essentially every economist and tax expert is going to say that this is a good idea. It's true, not a lot of places do it. I

think Detroit maybe, and as I mentioned, Pittsburgh does it for a long time, but they don't anymore. What you will want to nail down is how to do the valuation. There is a land value assessment on our

property tax bills now, but as was mentioned on the last panel, and I think Council Member Nadeau mentioned, it's just an arbitrary 30%. It's actually worse than what Yesem said. It's not based on

anything. It's just a flat 30%. It's not a real calculation of the land's value. There are six major ways to do land value assessment appraisals, actually now seven, because Anderson told me one I

hadn't heard of before, or she talked about one I hadn't heard before. They're all confusing, and more problematically, they will all produce different results. So anyone who's been involved in

property tax appraisal appeals knows that this is not an easy process, and also even a revenue neutral land value tax will mean very different tax burdens for different properties. A poker game is

revenue neutral as a whole, but that still results in different outcomes for different people. So for example, commercial property will probably pay less, and large lot family homes will pay more.

Six, the bat. First, someone on the last panel said Michigan has this. They don't know if they repealed it a decade ago. I think Michael mentioned that after only four years of having it. New

Hampshire does have a similar bet, but at a half point, not 1.4 points or two points has been talked about here. And also they don't have a sales tax or an income tax at all. I thought about bringing

a Jenga tower today as a prop to illustrate how tall and apparently strong and very precarious an idea that this is. It's a tax designed not to violate the bishop decision, but while taxing the

dollars that Bishop said DC can't tax. So if you pull out one tile, the whole thing falls down. It's a tax on all businesses, but everyone will say, don't tax my business. It's a kaboom. It's a tax on

gross receipts, minus rent, minus purchases, minus capital investment, minus royalties. But if you pull out any of those, kaboom. It's a tax that credits against the franchise tax and the UBT. But if

you pull out those tiles, kaboom. It will produce revenue that could revert the payroll tax to 0.26 or generate money for new programs. But can you use the same dollar twice? Kaboom. Kaboom is a legal

challenge or a flashpoint risk with other states or with Congress or the impact of a bat on top of rather than replacing the franchise tax and the commercial property tax and the UBT and the TPP and

the ballpark stadium fee and the payroll tax. So be very careful. These elements are not optional. It's all or nothing. Councilmember Silverman invited other ideas beyond those in front of you today.

I have quite a few in my written submission, but I'll mention four now. The income tax brackets are not inflation adjusted and they should be. The vacancy tax only applies if the whole building is

vacant, but instead should apply to vacant ground floor spaces. The child tax credit is a proven anti-poverty tool. And DC has a goofy marriage penalty in its income tax that requires married filers

to fill out an extra form to avoid accidentally paying tax twice. No other state does this and it does trick people. The Tax Revision Commission estimated it cost $30 million to fix it. That's $30

million that people are accidentally being tricked into paying because of how it's structured and how the tax forms are confusing. So if you're going to raise taxes, please use some of the money to

fix that. I will conclude with something I said to the Tax Revision Commission. Be cautious about proposals that no or few other states have adopted. Tried and true methods of taxation are tried and

true for a reason. People always email me, probably email you too, thinking they've discovered new ways of raising lots of revenue without any negative consequences. Alas, those silver bullets don't

exist. Those ideas may not be practical for very good reasons. Administrative, legal, economic. Ask about every proposal. How many other U.S. states are doing this right now? And if the answer is

zero, that's one signal that might not be a good idea. Thank you. >> Thank you, Mr. Bishop-Penschman. Is it Lawhead? >> Lawhead. >> Lawhead. >> Thank you. Good afternoon, Chairman Mendelson and

members of the committee. Thank you for the opportunity to testify today. My name is Kathryn Lawhead. I am the Vice President of State Tax Policy at the Tax Foundation, which is a DC-based, nonprofit,

nonpartisan tax policy research organization. I will focus my remarks today on the proposed business activity tax, wealth proceeds tax, and peer-to-peer tax. Before evaluating these proposals, though,

it's important to keep in mind the uniquely competitive footprint DC finds itself in. Given the district's small geographic footprint, any tax change that makes DC less attractive can easily push

economic activity across the border into neighboring states. This is especially true given federal and state laws that achieve functional income tax reciprocity across DC, Maryland, and Virginia,

including the federal law prohibiting DC from taxing the income of non-residents, which means workers can benefit from lower income tax rates by moving to Virginia or Maryland even while maintaining

their jobs in DC. I'll start by discussing the business activity tax, which is a 1.4% subtraction method value-added tax that would use single-sales factor apportionment. The BAT would be calculated

by taking a business in nationwide grocery seats with subtractions for intermediate and capital purchases, rent and royalties paid, and the first $200,000 of activity. And then that business activity

would be a portion to DC based on the business's share of sales into DC as a share of sales nationwide. For businesses that pay DC's 8.25% corporate franchise tax or unincorporated business franchise

tax, BAT liability would be credited against franchise tax liability, with the goal being that this would offset or at least typically reduce BAT liability for business owners who both live in and do

business in DC. The BAT is intended to generate revenue from non-resident professionals who work in DC, and it would do that but at a cost. For those taxpayers, it would be a cost because their BAT

liability could not be credited against the income taxes they pay to other states. But businesses in the district would face a challenge of their own. Their local suppliers would also pay the BAT,

which would show up in the cost of their inputs. But because this BAT, unlike BAT's internationally, uses a corporate apportionment regime, the purchasing DC businesses can only deduct costs

proportional to their sales into DC. This also means higher costs for out-of-state businesses purchasing from DC suppliers. What is intended to be a tax on non-resident professionals therefore becomes

one that puts DC-based businesses at a disadvantage to the extent that they can't fully offset the tax against their existing DC tax liability. It's also a tax increase on businesses at a time when

DC's business climate is already less competitive than it could be. And since BAT-style taxes do not exist in most states, the BAT would interact uncomfortably with the tax systems that are in place

in other states. And since the BAT would be layered on top of the business franchise tax, this would make DC's taxes some more complex, including for the businesses that would owe no additional tax

liability under the BAT. Furthermore, since DC residents would be able to claim their BAT liability as a credit against business franchise tax liability but non-residents would not, this tax would

arguably discriminate against non-residents, raising potential commerce clause and use process clause issues. Finally, the BAT would apply not just to for-profit businesses but also to non-profit

organizations that bring valuable philanthropic and job opportunities to the district. This would raise the cost to non-profits of operating in DC compared to other states, and that could encourage

DC-based non-profits to consider relocating to Virginia or Maryland. The next proposal I'll mention is the wealth proceeds tax, which is an income tax that would be structured much like the Federal

Net Investment Income Tax, or NIT. This tax would be levied on DC residents who have DC-modified AGI exceeding $400,000 for single filers and $500,000 for joint filers. Like the Federal Net, the 3% DC

tax would apply to either the taxpayer's net investment income or the amount by which their total modified federal adjusted gross income, including from investment income, exceeds those DC thresholds

whichever is less. Investment income is already subject to DC's ordinary income tax rates, which top out at 10.75%. So under this proposal, DC's combined top marginal rate on investment income would

rise to 13.75%, which would make it the highest such rate in the country. This would create a strong incentive for DC residents with income above those thresholds to move outside of the district.

Affected taxpayers could avoid the tax simply by moving a few miles down the road, all while keeping the same job and maintaining the same level of involvement in the community. And for those who

would otherwise consider moving to DC, this tax could give them one more reason to choose Maryland or Virginia instead. When higher income individuals leave DC or avoid moving to DC in the first

place, they would take not just this additional CER tax revenue, but also their ordinary income tax revenue along with them. And this could also have implications for property and sales tax

collections in the district. Minnesota is the only state that imposes a state-level net that applies only to net investment income over $1 million, though, and the rate is substantially lower at 1%.

Maryland recently implemented a 2% CER tax on the capital gains income of those with federal AGI exceeding $350,000, but that tax has a narrower base than DC's proposed tax. And even in Maryland,

counties that levy the maximum local income tax rate, the maximum combined state and local rate on investment income in Maryland would be 11.8%, which would still be nearly 2 percentage points lower

than the 13.75% rate being proposed here. Finally, I'll comment briefly on the proposed Pied-à-Tere tax. Under this proposal, second homeowners would face a tax rate of $2 for every $100 in assessed

value above $2.558 million. This would be a steep tax hike compared to the 85% per $100 in assessed value paid by homeowners on their primary residence. While raising property taxes on second

homeowners may sound politically easier than raising taxes on full-year DC residents, there is not a sound economic justification for imposing higher taxes on second homeowners. Under the benefit

principle of public finance, individuals who pay taxes in the area should benefit from the public services received in that area. But under a Pied-à-Tere tax, this would shift a disproportionate share

of DC's tax burden onto a very narrow segment of the tax base comprised of individuals who as a group demand less of DC's schools, roads, water and sewer services, and other amenities than full-year

residents do. For those who are in the market for a second home specifically in the DC area, purchasing a few miles away in Virginia or Maryland could suddenly become a lot more appealing, providing

easy access to DC without the additional tax liability. In summary, these three proposals would make DC less attractive as a place to live, work, and own a business. Each of these proposed taxes risks

shifting valuable economic activity outside city limits, which would further hurt DC at a time when the local economy is already struggling. Instead of implementing economically harmful new taxes that

risk exacerbating out-migration, policymakers should look for ways to make the district's tax code more competitive in a manner that promotes long-term economic growth, which in turn promotes more

revenue growth. Thank you again for the opportunity to testify, and I'm happy to take any questions. >> Thank you, Ms. LaHead. So we'll have a 10-minute round for questions. I could start in a lot of

places, but I think I'm going to start with the land value tax. So a few questions to either Dr. Anderson or Mr. Doucette. And where do I begin here? I think I'm struck by this, and that is, as I

understand it, the land value tax comes from Henry George over 100 years ago, maybe at this point 140 years ago. I think it's a great idea in theory. We see a handful at most of small Pennsylvania, if

I say cities, I think they're like population of 20,000 or 30,000 who have it after a century. It says to me that there are challenges here. So let me see. One of the primary hypotheses under girding

land value taxation is that taxing the land rather than the improvements on the land will incentivize development. What kind of robust evidence do we have in support of this hypothesis? Mr. Anderson,

Mr. Doucette? >> Sure. I'll take it if that's okay. So the first question was, to the extent why do we -- you know, if it's such a great idea, why don't we see more implementation? And the first

answer to that implementation of it, Battenwürttemberg in Germany, which is where Stuttgart is, passed the land value tax in 2025, January 1st, and it just resisted a legal challenge. Secondly,

Louisville, Kentucky, and Louisville, Kentucky is moving to implement a land value tax right now. They just enabled it in the past legislative session, I believe. Virginia just enabled a couple more

cities who have been asking to do it as well. So I think we're seeing increased momentum for it on the back of the ongoing housing crisis. I'll defer to my economist friend here for more of the

empirical evidence. But besides the Pennsylvania studies that we've seen, I think one of the most striking examples is if you think, you know, if A is good, is negative A bad? And one of the most

striking examples of that is Hawaii actually had an anti-land value tax. They did a split rate tax where they taxed buildings at a higher rate than land and basically subsidized land and punished

buildings. And they got exactly the opposite effects that you expect of a land value tax. So I think that's a particularly interesting scenario. And I think a lot of cases, otherwise, I think the

property tax itself is pretty good evidence for the land value tax itself. Because as my economist friend just said, that it's a good tax and a bad tax and one, the building component of a land value

tax is equivalent to a development impact fee, which any economist would tell you is very bad for development. So the fact that the property tax is so good, despite the fact that it has this bad

penalty built into it, gives you an indication of how good it would be if you removed it. And I'll defer the rest of the empirical side to my economist friend here. So before Dr. Anderson speaks, my

sense of it is that the theory is great, but that the implementation is where the problem is, and Pittsburgh would be an example of that. It requires a precision in valuing land, reflecting all of the

various policies that we put in place controlling land. And if we can get it right, can we sustain it? So Dr. Anderson, since I've added that, what do you want to say? Yeah, so it's been documented

that the problem in Pittsburgh was, as Lars pointed out in his testimony, vastly outdated assessments across the board. And that was the primary issue that led to the elimination of the split rate tax

and going to a conventional property tax. So I wouldn't infer from that experience that it's a fundamental flaw of the split rate tax. I would also point out that there are plenty of international

examples of split rate taxes being implemented as well. I do work at a think tank in Taipei, for example, and the entire island of Taiwan is based on a split rate property taxation. And so there are

plenty of international examples of where it's been implemented and been working for quite a few years, decades for that matter. So there's international experience as well. So I think, you know, in

theory, it's a great idea. In your intro, you mentioned Henry George. And of course, his idea was to go to an absolute extreme where the land value tax was the single tax, the only tax. And of course,

given modern governments and the array of services being provided by modern governments, that's considered not feasible at this point. But the fundamental idea does go back to Henry George, and the

concept is still relevant, even though making that the only tax is not feasible. I can't jump in because I've used up half of my time. If one of the benefits, if not the most important benefit of the

land value tax is to incentivize development, what is the usefulness in a city that is already largely built out? I think I will add, because I'm using up all my time here, where we have, so for

commercial property right now, we largely value based on the economic benefit, economic potential, income expense. If you have a vacant building, all we're doing, and right now we have a 25% vacancy

rate, all we're doing is making it much more difficult for these property owners who have the land that's potentially very valuable, that supports a 10-story office building, but is vacant. If I can

answer that one, I will say that a lot of American cities that feel built out actually aren't, if you actually quantify it, we have a free site called civicmapper.org, where we've actually quantified

the number of vacant parking lots in the middle of many American downtowns. I'm not sure if we have DC on it yet, but it would be easy to add that. And there's actually quite, you'll find a lot of

cities that seem built out actually are not. And then you have to remember that it's the carrot in a stick, is that yes, we're increasing the holding cost of land, but at the same time we're massively

reducing the tax burden of the building. We're removing that embedded development impact fee. And the literature shows that when you impose a $200,000 development impact fee on an apartment or

whatever it is, it makes that apartment building not pencil. If you capitalize out the recurring value of the building tax, it's equivalent to that large upfront fee, sometimes as much as 40% of the

entire value of the development. And so it's both of those things at once. It's not just really, yeah, let's make it harder for people to hold this property. It's also, let's make it easier for them

to build. I'm running out of time. Let me, Mr. Mazarov, you heard testimony criticizing the business activity tax. How do you respond? Yeah, well, I'll have to, I'll have to say the testimony went by

very quickly. And so I need to, I need to absorb a little bit. I didn't go back and read Ms. LaHood's testimony and absorb a little bit what she said. I mean, I think, you know, fundamentally, well,

one of the, one of the issues that she raised, I think was disadvantage for out of state businesses because they could not credit their DC bat against their out of state corporate tax liability. I

mean, I, I don't think that's a foregone conclusion. I think that's up to the other jurisdictions. That's, that's not, that's not on the district. But second, those, you know, given the fact that both

Virginia and Maryland have single sales factor apportionment for their corporate income taxes, they're not subject to any really any corporate income tax in the district on their district activity. So

again, I may not be doing her comments justice because they went by me so quickly, but I will, I will look at them and in supplemental testimony, I'll respond to her criticisms. All right, that would

be great. Oh, thank you. Mr. Hanchman, I'm trying to look for, and I can't find it, but I think it was Erica Williams testified that the issue of out migration is overstated and that there is research

that says that, in fact, it doesn't happen. I can't find what she cited, but you, I think in your testimony, at least something that you, yeah, in your, what you submitted, you had NTUS research

consistently shows that tax rates play a major role in residency decisions of taxpayers and higher income taxpayers in particular. So I don't know that I want you to so much justify what you said, but

criticize what she said, and I can't find what she said. It's a disagreement among the experts and in the literature. And I mean, as I said, in my statement, I mean, I can nobody thinks tax is the

only thing that affect location decisions. And I would think nobody would think taxes have no effect on location decisions. The answer is in the middle. And the debate is how much in the middle. And I

would add to that, that not everybody's the same. Some people are more motivated by tax decisions than others. And a lot of them are the people who would probably pay some of the proposals. If I find

the reference, I'll come back to it. But let me go to colleagues, Councilmember Freeman. Thank you very much, Chairman Mendelsohn. I'm going to, I'm going to stick with the land value tax and going to

invite folks who are proponents of the land value tax to disabuse me of what gives me reticence about it. And what gives me reticence about it is where we are today in the District of Columbia. So the

way I understand it is the land value tax. The goal would be to tax the land at its highest and best use. And right now we are about to do a new comprehensive plan and future land use map and it is

going to very substantially increase densities. And so my takeaway is in those places where the densities are increased very substantially, that the taxes on those properties as they sit today would

go up very significantly. And if that were to happen, there are places where I have worked for years to bring development, but it's not happening. And right now in the area I represent, I have three

major projects that aren't moving forward because financing is impossible because of other things that are happening in the DC economy. So we might jack up property taxes on properties that are low

density that should be high density. I want them to be high density, but in this economic environment, they're not going to be for a while. And in the interim, those higher taxes would be passed on to

the small businesses that are on that location. And that worries me a lot. If we could incentivize major development and it translated into major development, I'm for it. But if it doesn't translate

to no fault of the owners of that property, but because of economic conditions, then we're punishing small businesses. Help me understand why I'm wrong. I think you have some great points there. I

think the best way to understand what a land value tax is, is that under a conventional property tax, you will also see those value jumps, because it's a tax on the value of land and the value of

building. A land value tax can also be thought of as a universal building exemption, that you're just going to have the same property tax base before, but you're going to exempt the value of any

buildings, including the value of any future buildings. And I think that's the piece of the puzzle that's most important. As for a place that's struggling with development, I'm sure my colleague here

can talk about the city of Detroit, for which that is foremost on the mind of everyone is, you know, how do we get development and in places where that has been depressed or properties have not been

able to pencil. You know, a distressed location like that and why it was considering land value tax and so excited about it, I think would be a very relevant case study. Yeah, I agree with Lars. And

the issue of density is exactly the issue being addressed, right? So if you've got properties where the density could potentially be higher, you know, the land, the split rate property tax would

encourage the redevelopment at higher density. By not penalizing that improvement of the structures. And so it's consistent with what you've suggested is the policy direction in which the district is

moving in allowing for higher densities. That's exactly the option value approach I was talking about as well, that assessors can use in order to get more accurate estimates of land value. And just a

side note that when we talk about highest and best value, highest and best use, we're talking about market values, right? That's the old language we use. It really means we're relying on market

values, not some other artificial values for land or structures. But I think the way in which we do it now is based largely on what's the existing market in that area based on the rents that are made,

earned by the businesses and by the properties in that area. So this, my understanding is the whole idea of it is to, I hear you, lower the barrier to developing, but that and that creates an

incentive, but it also creates a penalty for not developing. And the question is, is that fair in a context where it might not be possible to move forward with the development in that context? I'll

ask one more question on this area, because also in our land use planning, we have significant inclusionary zoning requirements, and often you hear folks say given those inclusionary zoning

requirements, this project won't pencil out. To what extent do those kinds of things, Mr. Just said, figure into the valuation that assessors come up with? Well, so when we say high-smith use, we mean

actual market value, right? And so those inclusionary zoning requirements are essentially development impact fees, and they lower the value of the land, because the land's potential is lower if, you

know, if I have this property and I want to build 10 units, but I also have to pay this fee or do this other thing, I'm going to bid less on that site. And so you should see that already priced into

the market when you're evaluating these things. The main thing with highest and best use is just if you have 10 restaurants in a commercial district and one lemonade stand, basically you would want to

value the site value of the lemonade stand at the value of the restaurants nearby if, you know, assuming they were all had the same zoning. Zoning developers tend to already be aware of zoning and the

price they pay and the rents they achieve are pretty aware of zoning. You'll notice that if you up zone, then the market will respond pretty quickly to that value. So mostly a good assessor who's

already following all their standards for conventional property taxes should already be aware of where the market is and what the market forces are. The big rule about property valuation is that

everything is already latent in the prices and everything is already correlated to location. So it's good to know if like this parcel is zoned this way or this one isn't, but generally speaking, these

things are kind of already reflected in market values. The other thing about the distributional effects, I say you're absolutely right. Measure price cut once. We do at the Center for Land Economics

all the time. You can go on our website and see reports. We've done this for other cities. This is one of the reasons we want you to measure the land values now so you can decide whether it's worth it

to change the policy later because most people don't realize how concentrated those land values are in very narrow places. Over half of the city's entire land value would be concentrated in one tiny

little place or right around transit stations and most of that is captured by your wealthiest individuals. And if you push, okay, I'll leave it there. Thank you very much. I do want to turn to Mr.

Mazaroff and the bat. So part of the discussion with the previous panel is the difference between a bat and a payroll tax and to whom it applies. And I wonder if you can help us unpack that because

part of it seems to me that the bat covers profits, including partnership profits that are distributed to the partners, whereas the payroll tax does not necessarily cover that. But what's the

difference in coverage between the bat and the payroll tax? It's sort of a, you know, I mean, the bat covers all value added by the business. So, yes, it includes the value of payroll, it includes the

employees, and it includes the value of the services provided by the owners. If they're providing services, it covers the value of location rents, you know, it provides the value of intangible

property developed by the business. So it certainly includes payroll, but value is created within the firm by capital and the expertise of the owners as well. But we have gross receipts minus certain

things and profits are not one of the things that are subtracted, is that correct? Right, right. And so in a partnership context, profits that are distributed to the partners, are they subtracted in

the calculation of what the bat applies to or are they not? They're not because they're compensation just like compensation of the employees is not subtracted. So that's what I'm trying to get at, I

mean, if one of the witnesses earlier said it's six and one half a dozen of the other, and I don't think it's six and one half a dozen of the other as between a bat and a payroll tax. And what I'm

looking for from you is what is a bat, what would a bat in the district cover that the payroll tax doesn't cover? How would it broaden our tax base compared to the payroll tax? Well, I don't know the

details of the payroll tax. I mean, if, as was said, guaranteed payments to partners, for example, are not subject to the payroll tax, effectively the value of the compensation of partners is included

in the base of the bat. All right, thank you very much. Thank you, Council Member Froman, Council Member Parker. Thank you. Part of the challenge in these hearings is that we hear conflicting

testimonies. And yes, people have their own perspectives, but the facts seem to be a bit in conflict, let me say that. So for instance, we've heard testimony in this panel and we heard it earlier that

implementing a bat will drive business out of D.C. Businesses will opt. Well, let me, the businesses that are doing business in D.C. but that are not headquartered in D.C., perhaps they would do less

business in D.C. In fact, Ms. Loghead, that was part of your testimony, but Mr. Mazarov, I thought your testimony addressed this kind of perfectly. And I'm going to read it again just in case people

missed this. If the bat is apportioned solely on the basis of the location of sales, which is what is being proposed consistent with how the franchise tax is apportioned, and if the statute is drafted

to say that these firm's receipts are sourced to the district, if the benefit of the service to the client is received in the district, again, consistent with the franchise tax, then leaving the

district will have little to no effect on the bat liability. And all that to say that this idea that implementing a bat will force people to relocate will have zero to little effect. Did I get your

testimony correct? And why do we still hear the threats and concerns around tax flight? Well, you've got you've got my testimony correct. I read it. You read it. And I, you know, I think sort of going

back to, you know, something that Mayor Williams said before, is this notion that, you know, that sort of signaling business friendliness is a major sort of driver of businesses decisions about where

they locate. And enacting any new tax on business is perceived as a signal of an anti-business motivation. And therefore, that in and of itself has a negative impact. And I don't think that's how

businesses make decisions. I think they make decisions on hard calculations of, you know, what their what their taxes are and what services they're getting in exchange for those what services are

getting exchanged for the taxes they pay. And, you know, in this in this case, as I as I pointed out, they they don't, you know, they will not if the tax is properly drafted, they won't escape the tax

by moving. And and they realize that. And so they they're they're objecting to it sort of based on business climate kind of art arguments. But in terms of their the actual effect of the tax, they

don't benefit. I just think that's important to underscore because we continue to hear the threat of tax flight. And I take it to heart in some respects, like I think property value taxes very much

can drive someone to relocate. But I just wanted to underscore that point there to follow up questions. Mr. Mazarov on the nonprofit exemption that we talked about in a previous panel, I believe you

were silent and your testimony on that. Do you have a view on it? I mean, there are some nonprofits that operate like businesses and and it may be appropriate to include them in a business activity

tax. But there are a lot of nonprofits that don't they have very different income streams. They in particular, they have requirements that a substantial share of their receipts be held in reserve. And

so it is something it is something that should be further discussed. But but but I certainly wouldn't I'm not prepared to take a position either way to say all nonprofits should be subject to the bat

or none. Understood. That is helpful. I wanted to come to the land value tax. And admittedly, I am still trying to fully grasp this. If Mr. Doucet, if you're still there, he's not there. OK, well, Mr.

Bishop Henchman, if you're willing to take a stab at this. Part of the testimony I believe I heard was that by implementing a land value tax, we could advance equity because we would, in fact, lower

property taxes for some residents in the city. And I'm assuming that is because in effect, like the chairman's home, we would be raising the valuation on the land while we lower property taxes. Can

you just help me better understand that trade off and how this might lead to a lowering of property taxes for some of our residents? Sure. Pretend there's a hypothetical empty lot. Pretend it's

hypothetically at North Capital in Florida and the owner doesn't want to build on it. And it's it's vacant. Right now he's paying the vacancy tax, but it's based on the current market rate of an empty

lot as opposed to the highest and best use of land. So if we were to instead tax it at that rate, he would be paying a lot more. And maybe we wouldn't wouldn't collect anything because it would

motivate him to build the development that he's hypothetically promised for a long time to build. Or maybe he would, you know, sell it. Somebody else would do it. And then you'd use that revenue

theoretically to equalize the overall rate and thus reduce it for develop property. And an important thing to note, and especially if I could jump in, I'm going to let you keep going. I just want to

make sure I'm understanding. So it's not that by happen chance, people's property tax rates lower. We would have to, through statute, lower the property. And that's exactly what I was going to say and

respond to something. Councilman Freeman was was kind of going down. This is a dial and like the dial at 10 is Henry George's. This is the only tax and this is the only thing people pay. There's dials

along the way there where we could have 10 percent of the of the tax based on land and 90 percent based on improvement. Or, you know, 30, 70, which is theoretically what we supposedly do now, you

could up the vacancy tax. There's a lot of ways to kind of get at this incentive without necessarily turning the dial all the way to 10. OK, and I'm going to ask another question and give some time

back, hopefully. How with the land value tax, how do we ensure consistency across property types, neighborhoods? It just seems real loose to me and it's not that we shouldn't pursue it. I wrote down

that Stu Gart is trying it and Louisville is going to try it. I'm going to do some reading and try to get back to you on that. OK, anybody else? Mr. Shansky, he's online. He talked about how it was a

good tax. You want to ask him? Mr. Shansky, if you wouldn't mind. Sure, I'd be happy to. So I'm not a property tax expert. I'm not an assessment expert. But the question is, is it a good policy? Which

it is. The further question is, has technology advanced to make it a better policy than it would have ever been until recently? Yes, as well. So the question I think facing the council is, should you

start? I'm trying to figure out and doing better at valuing land so you can get all the benefits of a land value taxation regime that you're not currently getting. And so I don't have a magic bullet,

but you're absolutely right. There needs to be a way to make sure that each neighborhood is treated fairly. But that is why we're going to use one would use the most advanced techniques. And there'd

be some kind of appeal procedure and different concepts, or at least related, is property taxes. I believe this district has these right has circuit breakers and circuit breakers could also be applied

to allow people who get big increases in their property taxes. Because of land value taxation, first of all, to defer their payments and even to appeal those increases. And so the idea that we just

have to do it automatically one way and now suddenly people have big bills that doesn't have to be how it works. And it shouldn't be how it works. But that shouldn't stop you from doing the right

thing because you really have a lot of you're leaving a lot on the table if you don't. I hear you loud and clear. I welcome follow up conversations with any of you on this one in particular. But thank

you for your testimony. Thank you, Councilmember Parker. Councilmember Henderson. Thank you. Mr. Shansky, I want to pick up there. I know you're not the land value expert, but something that Mr.

Doucette said earlier around measure the land values now. And one of the things that have been thinking about in terms of right like any type of tax proposal. Yes, there it is an estimate and there is

an inherent risk that the estimate won't materialize on the other end. But it feels like for a land value tax, there's a lot of data points unknown at this particular stage. So is this is this like

study first, evaluate and then move type of situation? It's a great question. One issue that has come up related to this is this question of look what everybody else is doing. I just want to quote a

great passage from Charles McClure, a very eminent tax economist who in these context will often say things like, imagine most basketball teams were competing with their shoelaces tied and then you're

the only team that doesn't do that. Just because everybody is doing something foolish or not doing something smart doesn't mean you shouldn't do it. But in this context, I think absolutely the first

step should be to study, I think further in terms of implementing. It should be implemented incremental. There should be safeguards against circuit breakers, an appeal process. There isn't, I don't

think anybody's discovered a magic way to do it instantaneously and correctly. But there have been big steps at doing it much better. And we're very parochial and there's no question that they're

actually international models that do a much better job than we currently do, as well as other things that aren't strictly speaking changing the property tax. So if you have better assessments on land

that has been increased in value because of their proximity to transportation, that is a form of land value taxation. So there are other things that are more familiar in the American context that we

could use as well. So again, the time to start is now because the district has urgent needs. Thank you. I want to switch to the business activity tax. Mr. Bishop Henchman, in your written testimony

that was very thorough in page numbers, it included a comparison of major business taxes between D.C., Maryland and Virginia. So again, I feel like, you know, sure, I can compare myself to Pittsburgh

or Louisville, but really I need to focus in on our particular region. And it did show that the district is a more, quote unquote, costly place to do business if you're just looking at it from a peer

numbers standpoint. That's not even taking into effect the regulatory regime or the fact that embarrassingly, so somebody has to hire an expediter to be able to get a permit through. When we talk

about the bishop decision and our limitations on commuter income, it feels like you alluded to the fact that you disagree that this would not be a violation of the bishop decision. You want to say

more on that? If it is designed correctly. So like people keep asking me, do you support about you oppose about it? I think if it is designed correctly, it can achieve the goals that are laid out to

it. So I think a lot of the hesitancy that the business community had on it is fears that this thing, which has four main pieces and 16 sub pieces, will not follow that recipe and will end up with it

layered on top. Like it's already been said today, carve this out. Oh, let's put the tax in, but let's postpone the tax cuts, the offsets for a year or two. Like these are already chipping away at

what is a very elegant design that can fall apart very easily. You wanted to add something? Yeah, I was saying, I mean, I don't get that. You know, I don't know what piece. I mean, apart from the

nonprofit issue, I mean, I personally, I'm totally open to the possibility of the bat. Being, you know, being set at a somewhat higher rate than it otherwise would to replace entirely the UBT, for

example, or or replace a part of the payroll tax. Well, you're talking about a replacement in terms. So that would be a package, which I think Mayor Williams was sort of talking about, as opposed to

keeping everything as it currently is and layering a bat on top of that. Right. But what I'm saying is that given the risk of a legal challenge and given the risk, given the fact that we are talking

about imposing a tax for the first time on business, on out of state businesses about which we had the district has very little information as to what their bat base would be, immediately replacing

those other enacting the bat and replacing those using it to replace those other revenue sources would be a significant risk. You would be at risk of having, you know, you're I mean, I don't think

ultimately I think the bat will stand legally from what I've read from legal experts. But you're you're certainly at risk out of it. And, you know, you're imposing this on out of state lawyers. One of

them is going to, you know, one of them is going to challenge the tax. So so I think it behooves the district to enact the bat, gets get a few years of experience, see how any litigation transpires.

And then at that point, when you have you have good information about what the base of this tax is and what it's raising in terms of revenue, you can think about using it using part of the right

revenue to replace other taxes or or increasing the rate if you have a certain revenue net net income goal for the tax doing that. I hear you. But this actually brings me back, brings us back to a

challenge that we actually face this year with our current CFO, which is he was concerned about the risk of legal challenge. And so they wouldn't allow us to use that revenue because there was a

question of, OK, what if somebody does sue us? What if they are successful and we have to pay that money back? Right. So I think then I'm thinking of it from a concerned part of their inherent risk in

the what does this do to the business climate? And then I don't even get the benefit of the revenue. This is what I did in private practice was evaluate risk. Companies would ask for letters of like,

all right, we have this legal challenge to something we're doing. What's the likelihood we'll prevail 50 percent, more than 80 percent, whatever, and they have to discount their financials by that

amount. You know, I don't know. Maybe that's a practice that DC needs to do with with some of these things that may be more difficult. Let me ask this question. I raised this earlier with the other

panel. What do we do about hospitals and universities which beyond the federal government are number one employers? You know, I think I don't have an answer to that. I think I think that is that is

that is that is an element of getting additional information from, you know, in from the feasibility study as to what the potential base would be and what the tradeoffs would be. And, you know, the

point you made about earlier about imposing a tax that then you're going to pay through Medicaid is, you know, is a is a very valid and important point. So if the tradeoff at the end of the day is

paying down the payroll tax rate back down to point two six or whatever it is, nonprofits pay that. I mean, I work for a nonprofit. I mean, despite my grumpiness about it, I mean, it would be in my

best interest that the bat doesn't apply to nonprofits. But there's not really most experts when they look at it between a for profit hospital and a nonprofit hospital. There's not a lot of difference

in how they actually operate. And so how do you justify a differential tracks treatment just based on that? So that's why I would say sweep it all in if you're going to do it. Okay. Let me ask one

last question, just in terms of Miss Loghead, because I don't want you to feel like a potted plant, as Gregory McCarthy said earlier. Um, the pea added hair tax, I feel like, okay, in a place like New

York, all right, place like LA. Okay. The memo cites a 2020 estimate of roughly 4500 ghost dwellings. Do we have any good data right now of like how many units we're talking about here? Oh, your mic

is not on. I haven't seen it, but I'm not saying it doesn't exist. It's perhaps out there, but I haven't seen it. Okay. All right. I'll give back my 25 seconds. Thank you, Mr. Chairman. Thank you.

Thank you, customer, Henderson, customer Nadeau. Thank you, Chairman. Wait, I thought Silverman was ahead of me. You're next. Okay. All right. Well, I am prepared to go. I just, you know, all right.

Thank you, Chairman. Okay, Mr. Bishop henchman, you stated in your testimony that DC business taxes ranked 10th highest nationally at $11,100 per employee. Is that correct? Yes, that's from the

Council on State Taxation that does a study with E&Y. Okay. So you say it's driven heavily by a massive $1.5 billion commercial property tax rate. That's a big part of it. Yeah. You also say that

downtown office vacancy rates have surged to 22% and property values have dropped due to structural shifts in remote work, right? I think that's what everybody's interpretation of that is. Yeah. Okay.

So given that, isn't it misleading then to frame the per employee figure you cite, which is heavily inflated by pandemic era office vacancies as a tax burden and deliberate legislative over taxation

of local business activity? It's the comparison that they use and it's it's comparing to different states. So, you know, to the extent that it's misleading for DC, it's misleading equally for all

jurisdictions. Well, shouldn't we get to the bottom of that if we're going to be deciding tax policy on it? Well, they do the study every year. So as it comes out, we'll continue to update it. But I

think it's it's still true regardless of what the percentage is that DC has a high business tax burden. All right. Thank you. Mr. Mazarov, in your written testimony, you claim that the bat can

function as a corporate minimum tax for large corporations. Can you explain what that means and why it would be beneficial for DC's revenue stream? Well, I mean, effectively, effectively, the proposal

on the table to allow the bat to be credited against the corporate income tax means that corporate franchise tax is is that the companies will pay the higher of the two. And so if if a corporation

manages to zero out its tax liability by taking advantage of tax incentives or engaging in, you know, international profit shifting or, you know, other tax avoidance techniques, then the bat will be

because the bat is not based on profitability. It will ensure that that corporation will pay some tax to the district. So effectively, it serves as an as an A.M.T. And that's that's exactly what the

how the New Hampshire tax functions. I mean, New Hampshire has a corporate income tax and they also have a value added tax. Thank you. Do you have any suggestions with respect to designing a bat that

would support our low profit, high value added businesses? Well, I mean, key key to that is the level of exemption that is in the bill. And and again, we need better information about the, you know,

the range of businesses, their profit margins, the how they would be affected by various levels of the exemption. That's what the feasibility study is intended to do preliminarily. And and again, I

think you're only really going to get very accurate information if you actually have the tax in effect for a couple of years. So the exemption is key. But there are other things you can do, like New

Hampshire, for example, for a number of years in the transition period to the bet allowed there to be a partial credit against the bet of net operating losses of companies. If they had no else for a

significant number of years preceding that, that otherwise they they would have lost the benefit of in because the bat would have been higher. It allowed them to credit some of those NOLs against the

bet. Another thing New Hampshire does now, I think, as a replacement for that is that they allow a carry forward of the difference between the bet between the value added tax and the corporate

corporate income tax for a number of years. So that if a business temporarily is low profit, they don't they don't use they don't lose all the value of that of that credit over time. So those are a

couple of examples. But to be to be worked out in the development of this legislation. Helpful. Thank you very much. In your written testimony, you examine research on tax migration and the propensity

of millionaires to live on the lower income tax side of a state border. What does that suggest for the potential of DC high wealth taxpayers of moving to Maryland or Virginia after a wealth proceeds

tax. [BLANK_AUDIO] As Joe said, there is great disagreement. I mean, there is agreement that taxes have some effect on migration and there is agreement that it's not the only factor that affects

migration and where the difference is, is the extent of that, you know, where we are in between those two extremes. And I think Joe's testimony or someone's testimony said that taxes are a major

driver of interstate migration and location decisions. And I think the consensus of the research is that it's a very minor effect, not a non-existent effect, but a minor enough effect that when states

enact tax increases, a tiny proportion of the revenue gain is offset by any migration effect. And the sort of the gold study standard of this issue that was done, you know, now 10 years ago that had

access to every millionaire tax return in the country over 10 years found that with respect to the debate here, even not looking at migration, but looking at location, location of rich people along

borders, again, found minimal impact of interstate differences on where people located on a border. Thank you for that. Dr. Shansky, you're one of the leading academics behind California's 2026

Billionaire Tax Act. Is that correct? Yes. Okay. And the Billionaire Tax Act is a one-time 5% wealth excise tax on the worldwide net worth of California residents, trusts, or applicable taxpayers with

assets exceeding a billion dollars. Is that right? That's a mouthful. Yes. So that's roughly 200 to 250 billionaires? Yes. Okay. So how much revenue is it estimated to raise? A hundred billion. Over

how long? It's a one-time 5% tax. Billionaires have about $2 trillion, so it's about $100 billion. They can pay over five years, so it would likely be $20 billion a year for five years. And the

opposition to this proposition has been tax flight, which some say may trigger billionaire migration out of California. Is that right? That's true. That is what they say. All right. So are the

billionaires packing up their suitcases and assets and uprooting their lives? No. I mean, the way we've researched the literature, the way we understand it, and I think the way common sense academic

research would say is that the great thing about being a billionaire is you get to live where you want. The other great thing about being a billionaire is you get to hire lawyers to do all sorts of

things on paper to get the tax result that you want. So the structure of the tax is low rate, relatively few exemptions. And so that's why they're spending so much money to defeat it, including with

sort of misleading arguments because they can't play around with loopholes. Exactly, exactly. And the way to California tax residents rules work is that the measuring date was January 1st, 2026. And

the billionaires at this point, you know, they it's too late. And California residents lost it says they were residents when the tax would have been applied to them. Smart. Lessons learned, I think,

for sure. Yes, we'll see. Thank you very much. Thank you, Mr. Chairman. Thank you, Councilmember Nadeau, Councilmember Pinto. Thank you, Mr. Chairman. I don't have questions for this panel, but really

appreciate all of you being here in this discussion. Thank you. Councilmember Lewis charge. Thank you, Chairman. Thank you to this panel. I don't have any further questions that haven't been answered

already. Thank you. Councilmember Allen. Councilmember Silverman. Thank you, Mr. Chairman. And good afternoon to our panel. It's a pleasure to see you, especially Michael Maseroff and Joe Bishop

Henchman. Great to see you both. So many of the proposals before us today are aimed at the most affluent, you know, the 1%, whether it be homes over 2.5 million in the property tax, the pietta tax,

investment income, or higher income tax on those making over half a million dollars. So if the Council decided to do all of these, I think it's a very fair argument that that's a lot more than the

fair share of the tax burden. So if we had to choose one of these or a subset of one of these, what in your estimation would be the fair way to tax those who are the most affluent in DC? Well, again,

I'm not sure I agree with the initial premise of the statement. I mean, maybe all of them taken together. But if, you know, if the notion is that if what you're saying is that, you know, we can't do

both the NIT and the BAT because we're going to be, you know, overtaxing the wealthy and stimulating flight. I mean, again, the primary, you know, one of the primary objectives of the BAT is to tax

out of state businesses. And so, you know, and to structure it to the greatest extent possible, you know, not to impose it on high income people, business owners in the district. Mr. Mesra, I focus my

last round on the BAT, so I'm pretty much focused on the other six proposals now. Yes, I'm sorry, I should have made that clear. So, you know, if we had to choose among taxing, you know, whether it be

second homes, investment in income, making a higher tax rate, like maybe the second homes is in the second category, but we're trying to tax wealth here. So, what is, in your opinion, would be the

best way to do that. That is fair to district residents, let's say, in the 1%. Well, again, I'm not an expert on the wealth proceeds tax, but nonetheless, I would say that would be the top priority

because we have a situation now in both the district and at the federal level that we tax passive income at a lower rate than we do work from wages and income from wages, and that's not fair. Any

other members of the panel? I think I would agree, actually. The net, it exists federally. So, people know how to comply with it. It does exist in Minnesota. My caveat that I said earlier was that

because that revenue is volatile, I would be reluctant to suggest using it for one time rather than for recurring revenue. Right, okay. Any other comments? Oh, sorry. Mr. Shansky. This will be my last

comment because unfortunately I have to go. I completely agree that this would be the best choice. I would just point out and Joe pointed this out in terms of California that is particularly reliant

on the volatile source of revenue, namely this kind of income capital gains, and the way California solved it is by putting it in a reserve fund. There are ways the answer is not don't have a

progressive tax because it's volatile. The answer is prudently deal with the volatility. So, I would sign on to the net and sign on to prudent management of that revenue. I'm happy to answer any

further questions and thank you for this opportunity. Great, thank you very much. I can add something on this. So, it's important to keep in mind that D.C. already has among the highest taxes on high

earners in the country, but D.C. is always already a very affluent area compared to many other areas of the country. So, when you are thinking about broad-based taxes in D.C. like the property tax and

sales tax, a lot of that burden does fall on the affluent here. So, of the proposals that are before us today, I think a modest increase to the property tax could be worth considering. Okay, very

good. Let me move to the land value tax. So, I understand, I think from this panel, that it's a best practice if it works well, in that it accurately values neighborhoods. And I think somebody in

their testimony, I'm not sure who, called it a golden goose. But in other testimony that's been submitted, I think at least by Ms. Sayan in the last panel, there were concerns about the ability of our

Office of Tax and Revenue to actually implement the proposed land valuation. It looks like you're shaking your head, Mr. Bishop Henchman. So, can you walk us through, perhaps, what are the challenges?

If this is such a best practice and a golden goose and, you know, would be fairer for our tax system, then what challenges do we face in implementing reliable land assessments needed to administer

this? How do you calculate the value of land? It seems like a simple question, but it's a difficult one. And there's the Lincoln and Super Land Policy's research has been cited a couple times. They

are the gold standard, researching the golden goose. Sales comparison is the method that I think everybody who owns a home certainly is familiar with. But it's really hard because there's not a lot of

vacant lands that are vacant lots that are sold on a regular basis to produce a comparison, a similar level of comparison. And so, there's a lot of these other kind of formulaic methods of doing

valuation, and there you run into trouble. And as far as OTR, I mean, they always get my assessment way too high every year. I don't know about you, but, you know, we do have a process for appealing

that. Which is challenging it on the process, essentially. The Council spends a lot of money funding the Office, handling those appeals. Okay, got it. From our other two panel, you were focused on the

bat, Mr. Maseroff, Ms. Lillard. Any comments on land valuation? Okay. Well, Mr. Bishop Henchman, then I might have to come back to you again.