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D.C. lawmakers gave final approval on Tuesday to the city's $10.6 billion spending plan, which includes a package of broad cuts to income and business taxes but expands sales taxes to some new services such as health clubs.
The package is expected to annually save taxpayers an estimated $143 million, but the manner in which it was approved and will be funded has worried Democratic Mayor Vincent C. Gray. The mayor will now have to decide whether he will sign or veto the bill.
"He has serious concerns and all options are on the table," spokesman Pedro Ribeiro said Tuesday.
Fitness enthusiasts, who crowded the D.C. Council chambers during the hearing on the taxes, were disappointed with the outcome. Although the fitness tax was only one of six different services that would be taxed under the new law, it drew fierce opposition from gym members and others who worried it would hurt local businesses and present a hurdle for those trying to live a healthy lifestyle.
D.C. Council member David A. Catania, offered an amendment to exempt health clubs from being subject to the District's 5.75 percent sales tax, but the council defeated the measure in a 9-4 vote. The tax is expected to generate about $5 million for the District.
The city's chief financial officer raised concerns over the council's proposed budget, saying that it violated the city's debt cap and severely limited spending abilities in future fiscal years.
D.C. Council chairman Phil Mendelson, who introduced the package of tax proposals into the fiscal 2015 budget plan, was able to address the deficiencies noted by CFO Jeffrey DeWitt and amend the plan on Tuesday. Among the changes was to create a series of "triggers," or revenue benchmarks that would have to be met before portions of the spending plan would kick in. Some tax cuts, such as a drop in the income tax rate from 8.5 percent to 7 percent for individuals making between $40,000 and $60,000, would take effect on Jan. 1 regardless. Further reductions in the income tax rate would kick in only if revenue estimates increase by enough to cover the plan.
Mr. Gray was skeptical that those triggers could be met.
"It seems likely that these tax cut triggers are so convoluted that none of the tax relief being proposed through this approach will ever take effect," Mr. Gray wrote in a letter to Mr. Mendelson on Tuesday.
Mr. Gray also opposed the fitness tax, which both D.C. Council members who are vying for his seat also opposed.
Mr. Catania, at-large independent and candidate for mayor, pledged after the council's vote that if elected he would repeal the tax.
"To the extent we collect a few dollars today and discourage those from participating in healthy activities, we are looking at deferred and increased healthcare costs in the long run - those that we all pay," he said in defense of his defeated amendment.
Muriel Bowser, the Democratic nominee for mayor, was one of three other council members who voted with Mr. Catania to block the tax. Other council members who voted against the tax were Jack Evans, Ward 2 Democrat, and outgoing member Jim Graham, Ward 1 Democrat.