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Dionne Bussey-Reeder, co-owner of Dionne’s Good Food, located in Southeast, D.C.’s Sycamore & Oak retail village in Congress Heights, wants to help her fellow District residents live a productive, prosperous life by offering employment that will open doors of opportunity.
However, when Bussey-Reeder, 53, was asked to comment on the latest move by the D.C. Council to raise the payroll tax that funds the city’s paid family leave program from 0.26% to 0.75%, a 188% increase, she threw up her hands in angst.
“I always felt our city council lacked a real understanding of what D.C. small businesses go through,” she said. “The increase in the payroll tax hurts the employee. Because of this we may have to look at cutbacks in our business.”
District businesses and non-profit organizations are assessed family leave payroll taxes. In order for someone to be a beneficiary of the program they must be employed in the District.
The Bump in Payroll Taxes
As a part of the council’s $21 billion fiscal year 2024-2025 budget, the payroll tax increase was put in to help balance the District’s budget, as is required by law. D.C. Mayor Muriel Bowser initially proposed the increase but wanted lawmakers to support going from 0.26% to 0.62%.
The council decided to go further and voted on June 12 to increase the tax from the mayor’s 0.62% to 0.75%. The increase won’t go to the family leave program but to the District government’s general fund.
This is the first time since the passage of the Universal Paid Leave Law in 2016 that its payroll tax funds would go into an unrelated fund.
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Estimates from the District’s Office of the Chief Financial Officer state the new tax could generate about $425 million in new revenue in 2025. Plus, the .075% rate could bring in $76 million more in revenue than Bowser’s proposal.
Essentially, the increase in the payroll tax means employers will be required to pay an additional $49 on every $10,000 in wages paid to employees.
Bowser sent a letter to the council indicating she doesn’t support the increase.
“I remain greatly concerned that taken as a whole, the council’s proposed budget and fiscal policy sets up our residents and businesses for even larger cuts to services and programs or additional tax hikes next year.”
At the time of press, the mayor had not indicated whether she will sign the budget. Technically, the tax increase went into effect on July 1, which means the first payment will be due Oct. 1, the start of the new fiscal year.
Business Leaders Express Reservations
Angela Franco, president and CEO of the District of Columbia Chamber of Commerce expressed her concerns about the tax.
“If we’re looking to attract businesses to stay or move to downtown D.C., instead of going to Virginia or Maryland, then we need to make it a prudent business decision to do so,” said Franco in a statement. “Increasing payroll taxes will make it harder for businesses to make that decision.”
Corey Arnez Griffin is the chairman of the board of the Greater Washington Black Chamber of Commerce. Griffin said the payroll tax increase should be utilized for the program it was intended for.
“It looks like it is going to be a slush fund for other operations of the government,” said Griffin, speaking specifically on the increase that will go to the general fund instead of the family leave program.
Griffin, 53, agrees with Franco that the increase will not help the perception that the District is not friendly to businesses.
“The tax is a pretty substantial hike,” he said. “The council doesn’t know what it means to do business in D.C. This increase will impact small Black businesses. It will increase the cost of doing business in D.C. and this has happened while property taxes and rent are going up.”
Linda M. Greene, president of Anacostia Organics, a cannabis dispensary located in Ward 8, said the payroll tax increase puts an extra burden on small businesses like hers.
“This will hurt the small business owner in D.C.,” said Greene, 72. “This will make it hard to grow and provide benefits for our employees.”
Greene said large employers like corporations, law firms and real estate/development companies may be able to absorb the costs with little trouble “but small businesses cannot compete with those large businesses.”
“They should make an exception for small businesses,” she said.
Wanda Henderson is the owner of Wanda’s on 7th Street in Northwest, a hairstyling establishment. She also has business concerns in Ward 8.
Henderson said the payroll tax increase doesn’t affect her as much as other businesses because her barbers and beauticians are independent contractors. Nevertheless, she said that might change in the future.
“I am opening up a beauty and barber school in Ward 8,” Henderson, 68, said. “I will have to employ people. I will then have to pay that tax. I will have students that will pay tuition and that will help but I will still have to pay that tax.”
Bussey-Reeder said the tax increase could not have come at a worse time.
“A year and a half ago, I paid $60 for a case of chicken,” she said. “Now I am paying $140 a case. I didn’t increase my prices for my customers. Plus, I start my employees at $18.50 an hour, above the city’s minimum wage. We must put value on people, we can’t just throw them away. This tax increase doesn’t help at all.”
Source: Washington Informer
