Spending cuts and tax increases for some businesses offset the proposed tax cuts.
The D.C. Council gave initial approval to a sweeping package of tax cuts for District residents. The tax cuts — a last minute addition to this year's budget — would first affect low and middle income residents and later expand to those making up to $1 million a year.
As part of the plan, a new middle-income tax bracket would be created for residents making between $40,000 and $60,000 per year. They would be taxed at a rate of 7 percent in 2015 and 6.5 percent in 2016. Under the current tax code, anyone making between $40,000 and $350,000 pays 8.5 percent.
The city would also lower the tax rates for businesses, an attempt to level the playing field with neighboring Virginia and Maryland.
To pay for the tax cuts, the city would shift hundreds of millions of dollars out of funding for the proposed streetcar system. The move angered Council member Tommy Wells (D-Ward 6), a longtime advocate for streetcars in D.C. The former mayoral candidate was one of two members to vote against the budget.
Revenue would also be raised by taxing gym memberships, yoga classes, car washes — and even bowling and billiards.
The most controversial part of the budget included the plan to reduce welfare payments for residents who have been on assistance for more than 60 months.
Council member Jim Graham (D-Ward 1) tried unsuccessfully to convince his colleagues to delay the cuts.
"Why would this council cut their benefits by 42 percent at a time when we are so flush with cash in this city, we've got a billion dollars plus in the savings account, I mean I just can't be a part of this, this don't make no sense to me at all," he said.
The council will take another vote on the spending plan before sending it to Congress for approval.