Earn Less Than $500K? You’ll Pay Less in DC Taxes If you earn less than $500K, the taxes you pay the District will more than likely decline next year. Originally conceived as a unified package, the recommendations of the Tax Commission chaired by former mayor Tony Williams were passed by the Council this time last year. However, due to restrictions imposed by Chief Financial Officer Jeffrey DeWitt at that time, the reductions had to be phased in contingent upon increased District revenues. The initial cuts, affecting the lowest-income residents, were implemented immediately. A second tranche of reductions was set to take effect in February of 2016, but in the budget passed by the Council last month, these reductions were accelerated to September of 2015 instead. What does this mean to the average DC resident? Instead of waiting until tax year 2017 to see the benefits of these cuts, you will instead get to reap additional benefits in tax year 2016. As to the magnitude of the cuts, once the entire reform package is fully implemented, those earning $25-50K will see their income taxes reduced by a third. Those earning $50K-100K will see their taxes reduced by 16%, and those earning $100K-200K will see a 10% reduction. Taxes for those earning $200K-$350K will see a 5% reduction, and those earning $350-500K will pay 2% less. Residents earning over $500K will see a slight increase in their taxes paid. Our neediest residents, those earning under $25K, do not pay local income taxes, and instead receive tax refunds from the District. Those earning $10K-25K will see their refunds double, as will those with a net negative income of more than $10K. Net negative earners of $1K-10K will see their refunds nearly double, and net positive earners of $0-10K will get refunds that are nearly 50% higher. As a result of these tax cuts, the District’s overall tax structure will be the most progressive in the nation. According to the Institute on Taxation and Economic Policy, in the District and no other state in the nation, the poorest 20% of the population will pay a lower effective rate than the top 1%.