WASHINGTON, D.C.—Councilmember Brianne K. Nadeau, D-Ward 1, will introduce a Wealth Proceeds Tax as permanent legislation to be considered in the fall. Nadeau, who has been pursuing the surtax on unearned income for high-income taxpayers, said Monday that she would pursue the tax as part of the expected September Council hearing on taxes and revenues.
“We held an important discussion this morning about a contingency list and that reflects the fact that the Mayor balanced the budget on the backs of our most vulnerable residents,” she said. “The Council has identified one-time funding to address many – though not all – of the gaps, but our version still asks nothing of people who can afford more, while cutting critical services to those who cannot afford to lose them.”
Nadeau had been expected to introduce the Wealth Proceeds Tax in the FY27 budget. It is structured as a 3% surtax on passive income – capital gains and some other investments that require no work by the investor – for individuals making more than $400,000 per year or couples filing jointly making more than $500,000 per year. It would apply only to the portion of wealth proceeds above these thresholds. It is nearly identical to the existing federal Net Investment Income Tax, with the significant exception of the higher thresholds and lower tax rate. (See IRS FAQs on the NIIT.)
Nadeau’s proposed tax would likely raise close to $200 million in the first year and over $100 million in subsequent years, according to an informal, conservative estimate by the Office of Revenue Analysis generated this week.
By using one-time money in the budget, Nadeau said, the Council is approving a budget that will be harder to sustain next year. Unlike Mayor Muriel Bowser, who says the solution is to cut funding for critical social safety net programs, Nadeau says the answer is creating additional revenue sources and asking wealthy residents to contribute a little more.
“My proposal for a wealth proceeds tax would ensure our human services programs are funded at an adequate level, and would help the next Mayor, who will face a significant structural debt with the budget we are passing now with one-time revenue,” Nadeau said.
She added: “I reject the notion that the only way to balance a budget is by removing food assistance for people who can’t afford to feed their children healthy meals, by denying groups of people access to health care, by telling some families that their children can’t get quality childcare because we had to remove them from eligibility.”
Nadeau said she plans to introduce the legislation before the Council recesses in mid-July.
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