The D.C. Council, led by Chairman Phil Mendelson, has proposed significant changes to the district's tax code to separate it from federal tax cuts enacted under former President Donald Trump. This proposal aims to save the district approximately $463.6 million over the financial plan period.
In 2025, the district approved emergency legislation allowing for the decoupling of its tax code from federal provisions, which financial officials estimate will save nearly $100 million by the end of fiscal 2025 and around $660 million by the end of fiscal 2029. Mendelson's recommendations expand on Mayor Muriel Bowser's earlier proposals, allowing the council to recognize additional revenue from the decoupling for fiscal year 2026, estimated at $273.8 million.
The proposal also seeks to extend the decoupling of certain tax provisions related to standard deductions and business expenses through 2029 or 2027. Mendelson noted that the decoupling plan is a significant source of restored budget funding, which includes $150 million from reserves and $40 million from closing a tax loophole.
While the proposal does not eliminate all federal tax cuts, it maintains certain popular cuts. Mendelson has stated he will oppose any amendments that propose tax increases and is considering holding a hearing on revenue ideas in the fall. The council is scheduled to discuss these proposals on Tuesday, with a vote expected on June 23.
