Monday, October 25, 2004

The Taxman Cometh

Today's Washington Post has an article about the Business tax plan that aims to collect $24MM/year for stadium construction. As with 99 percent of all tax issues, it looks at it as a matter of fairness.

In the case of a draft bill, the criticism seems to be right:

Under Williams's proposal, which all sides said is likely to be a starting point for the eventual plan, businesses with less than $3 million in annual revenue would pay no tax. That means about 31,000 of the District's 33,000 enterprises would be exempt, according to data from the D.C. Office of Tax and Revenue. Green said that the level under which there would be no tax might be raised, as long as other changes are also made that would ensure that the tax bring in $24 million.

The mayor's proposed tax would be capped, so any D.C. company with more than $16 million in revenue would pay the same: $28,200. The largest companies, like Pepco, generally consider a $28,200 tax to be inconsequential. Green said he would be open to having higher brackets to collect more from large companies.

Under the current draft, the companies that are most squeezed are mid-size enterprises -- those with annual sales of $3 million to $20 million. Especially hard hit are those with low profit margins.

By taxing revenues, these low-profit-margin companies are being unfairly squeezed--particularly with the cap in place. But, the article also notes the large presence of law firms and consultants in this area that could hide any profits by increasing pay to their partners.

It's a fine line to balance and with the many competing voices--both for and against--it's not going to be easy legislation to craft or to get approved. The fight is far from over.