Cross-posted from Poverty & Policy Written by Kathryn Baer

As you local readers probably know, the DC Council passed a budget for the upcoming fiscal year last week. Some changes in what the Mayor had proposed for programs that serve low-income residents.

The DC Fiscal Policy Institute’s overview of the budget confirms what I’d expected. Mostly, a bit more here, a bit more there. No more for some critical priorities. And less for at least one. (The one large, new investment it cites — for new family shelters — isn’t part of the budget proper.)

I suppose we’ll be told that the Council did its best with what it had to work with. I don’t know because I don’t know nearly enough about the funding needs and prospective impacts of every program and service the budget covers.

But I do know that the Council could have had more revenues to work with. It had only to postpone — or better yet, repeal — the tax cuts prior legislation has made automatic whenever revenues rise above the estimate used for the latest budget.

The triggers have already reduced otherwise available revenues by many millions of dollars — dollars the Council could have used to shore up under-funded programs.

So much water under the bridge. And as the Chairman, who likes those triggers says, the revenues lost from cuts not yet triggered couldn’t have been used for the new budget. But the Council could have had them to spend as early as next fiscal year — and thereafter.

All tax cuts are not created equal, of course. Some on the pending list will benefit residents who’ve got enough income to owe taxes, but not a lot.

The second cut on that list, however, is a higher threshold for the estate tax. The most recent revenue forecast indicates that it will lock in soon, DCFPI’s latest account of the trigger impacts says.

So henceforth, no assets a deceased resident leaves to heirs will be taxable until they’re worth $2 million — twice the current minimum.

As things stand now, this will be the first of two estate tax cuts. The second — and considerably larger — will raise the threshold to the same minimum as applies to the federal estate tax, currently $5.45 million.

Why the District should embrace a regressive measure gained in a crisis by Congressional Republicans who could never be elected here baffles me.

True, the Tax Revision Commission recommended parity with the federal threshold, including the ongoing upward adjustments for inflation. But the Council could have taken a pass, just as it has on the revenue-raisers in the Commission’s package.

The District will forfeit $18.8 million next fiscal year alone, according to DCFPI’s estimate. And for what?

Not so that more money can pass to charities tax free. Bequests to them are already exempt. Not so that surviving spouses will have more to live on, since what passes directly to them will also still reduce the value of what counts toward the threshold.

Not even necessarily what other heirs wind up with, since a will-maker can give them as much as $14,000* each or the equivalent every year while still alive — again reducing the value of what’s potentially taxable afterwards.

The estate tax giveaway won’t just make larger investments in programs that reduce hardships for poor and near-poor residents unnecessarily difficult. It will increase income inequality in the District by giving the rich more, as well as denying the poor supports and services that help close the income gap from the bottom.

And the gap will grow from one generation to the next in part because of the way the taxable value of assets is determined. Essentially, it’s set at their value when the person bequeathing them dies.

So heirs pay capital gains taxes when they sell the assets for more, but no tax on how much the assets’ value increased between the time they were purchased and the time inherited.

And, of course, heirs don’t have to sell them. They can pass them along to their heirs, compounding the revenue loss — and wealth at the top of the income scale.

The estate tax then is a way of partly recouping the loss and, at the same time, averting a rollback to the inordinate wealth concentration of the Robber Baron days.

The higher the threshold, the less an already-shaky control on income inequality can do. And the gap between the richest and poorest District households is already . . . → Read More: Not Enough Money for Low-Income DC Residents, But Tax Cut for Wealthy Unchanged