When discussing taxes, a trade association’s anticipated position might be to call for reductions (along with cuts in fees and regulations). Without a doubt, we firmly believe the District should resist further burdening an already taxed public. District spending should also be scrutinized for efficiency and redundancies. But we equally assert that reductions cannot be proposed solely for the sake of doing so and threaten the performance of essential services, especially those supporting public safety. Additionally, we are always mindful that regulations are never apolitical or ahistorical, but they can be recrafted to advance equity and inclusion, and our call for much needed reform to Clean Hands law reflects that.

Tax policy shapes both economic efficiencies and decision making. We believe effective tax policies encourage individuals and businesses to add value to the community as opposed to limiting or abandoning their participation. Under that lens we offer the following recommendations.

Reform Clean Hands Law

DC Council passed the first Clean Hands mandate more than 25 years ago specifically to deter littering, illegal dumping, and delinquent tax filings by denying licenses to individuals cited for but who had not paid these fines. Over time, as the District expanded its revenue channels, the breadth of what was subject to Clean Hands also broadened. Today individuals and businesses who owe as little as $100 for a wide range of debts – including parking tickets or an outstanding water bill – can be denied an extensive list of city services needed to conduct basic business, including obtaining an occupational license, starting a business, renewing a business license, and qualifying for grants and technical assistance. 

We do not disagree with the District’s right to collect debts; but the scope of Clean Hands requirements have grown far beyond its original purposes to promote public health and safety and to collect delinquent taxes. Clean Hands law instead is punitive and deters activities the District rightly seeks to foster, including entrepreneurship and business ownership, and denies these pursuits without a hearing or due process. More importantly current Clean Hands law disproportionately affects communities of color by failing to recognize historic inequities, such as limited access to higher education and employment opportunities, that lead to financial hardship and outstanding debt. 

A proposal to modernize Clean Hands law to be fairer and more equitable was previously proposed in a DC Council legislative session, but only severely scaled back policy was passed. However, Clean Hands Certification remains a tool to shut out communities of color from everything from professional licensing to small business ownership, and we continue to call for the need for reform. 

Bring District Meals Tax in Line with Region to Boost Competitiveness

Make Every Day More Affordable.

At 10 percent, DC has the highest meals tax in the region — four points above the District's own general sales tax. Dining out isn't a luxury that should be taxed at a higher rate. It's a working parent picking up dinner, a shift worker eating between jobs, a family with no time to cook. Currently, the District taxes that necessity like a splurge.

Diners are responding the way anyone would. In a summer survey of DC diners, more than half (52%) said higher prices have them eating at home more often, and nearly a third (32%) are dining in Maryland and Virginia more often. Meanwhile, more than one-third of RAMW member restaurants report sales and traffic declines year over year — averaging more than 25% below 2022. A diminished downtown workforce, inflation, and the end of the tipped wage all play a part. The meals tax is the one piece the Council can fix this year.

The Meals Tax Relief Amendment Act (B26-0775), introduced by At-Large Councilmember Doni Crawford and co-sponsored by Councilmember Brooke Pinto, does exactly that: it brings the tax on prepared food and beverages in line with the District's general sales tax — 6 percent through September 2027, then holding parity at 7 percent. For the average DC household, that's roughly $246 back every year, and it's the most progressive way to deliver it. Lower-income families spend a larger share of their budgets on taxable everyday purchases, so a flat 10 percent hits them hardest.

Every dollar of that relief is a dollar more likely to be spent at a DC restaurant instead of one across the river. RAMW urges the Council to pass B26-0775 and end the District's status as a regional outlier. 

Conduct a Limited-Time Amnesty

The benefits of tax amnesty initiatives, a short period when individuals and businesses can pay outstanding taxes without interest or penalties, are well-documented. Amnesty programs reduce the administrative costs of collecting fees and fines (allowing more resources to focus on large and more complex cases of tax evasion) and bring taxpayers into voluntary compliance with the law. Amnesty programs also generate substantial revenues for local government otherwise likely unrealized, including: 

• In 2016, a tax amnesty program in Philadelphia collected more than $40 million in revenue during a two-month period.
• Indianapolis' 2015 tax amnesty program raised $92 million, exceeding expectations and providing the city with much-needed funds to address a budget shortfall and support essential services. 
• In 2009, a Los Angeles tax amnesty program generated more than $18 million in revenue, which was critical to closing the city's budget gap during an economic downturn.

Incorporate Dynamic Scoring

Current fiscal impact statements for proposed legislation fall short in accounting for the full range of a new law’s potential outcomes, in particular for generating new revenue when reducing fees and fines. Incorporating dynamic scoring into fiscal impact statements increases their comprehensiveness by considering real-world dynamics and behavioral changes by taxpayers, ultimately making for better decision making by policy makers. 

Dynamic scoring is especially important for policies such as the Business and Entrepreneurship Support to Thrive (BEST) Act. The law, passed last year by DC Council but not funded, would modernize the District’s business start-up and licensing process, lower fees, and reform a system of excessive late fees that in some cases cost more than twice the original license. The legislation’s fiscal impact statement addressed only how much revenue could be lost by lowering fees; it failed to contemplate what new revenue could be generated by lowering barriers, in particular the legislation’s potential to bring into the fold enterprises currently operating without licensing because they are deterred by costs and bureaucracy.

Empower the Taxpayer Advocate

Entrust Office of the Taxpayer Advocate to go beyond public education and outreach to enact solutions by empowering staff to resolve administrative errors, eliminate penalties, and enter into Offers in Compromise with fewer hurdles. Charging the Taxpayer Advocate with more authority to resolve problems serves both District residents and government by further ensuring fairness and protection for the most vulnerable taxpayers and reducing compliance and litigation costs.

Commission an Expenditures Review Committee 

A review of District tax revenues is incomplete without a parallel examination of how District funds are spent. An Expenditures Review Commission would help to ensure accountability and reinforce credibility in how public funds are utilized. Additionally an expenditures audit likely would identify wasteful spending and redundant programs as well as areas for potential fraud or mismanagement. 

Exempt Gift Cards from Unclaimed Property Law

The District’s Revised Uniform Unclaimed Property Act of 2021 requires businesses to remit the value of gift cards and certificates to the Office of Unclaimed Property after five years of inactivity. The intent is consumer protection — but in practice, the law creates a significant compliance burden that produces almost no benefit for the consumers it’s meant to protect. 

The administrative cost falls hardest on small and local operators. Restaurants must dig through years of records to identify balances that have gone dormant, then document and report them. Businesses with limited administrative staff either absorb that time themselves or pay outside accountants and attorneys to do so — a cost many mom-and-pop shops cannot easily bear. 

The numbers show why this program doesn’t work as designed. Over the past six years, the District has collected more than $7.1 million in dormant gift card balances and returned only $373,000 to consumers — roughly 5%. That recovery rate has stayed in the single digits every year since 2020, largely because restaurants don’t collect a purchaser’s name or contact information at the time of sale. 

Nineteen states, including neighboring Maryland, already exempt gift cards and certificates from unclaimed property law. RAMW also supports exempting gift cards and gift certificates from unclaimed property law, aligning the District with the growing number of jurisdictions that recognize this isn’t meaningful consumer protection — it’s an operational tax on small businesses with negligible upside for the people it’s supposed to help. 

Index the District’s Tax Brackets to Account for Inflation

As incomes rise with inflation without corresponding adjustments to tax brackets, individuals can find themselves moving into a higher bracket even when their purchasing power has not increased. The burden often falls disproportionately on modest earners who may receive annual cost of living pay increases and on small business owners who pay their taxes on a pass-through basis. The federal government adopted indexing more than 40 years ago, and a growing number of states have also begun indexing.