Its plan broadens the tax base, lowers business tax rates, makes business taxes more equitable and lowers commercial real property tax rates. In addition, the proposed plan provides a foundation for a simpler, more predictable, stabler revenue system, making D.C. more competitive for jobs and residents. The proposed system taxes business activity value, which is common to all businesses operating in the District. These elements represent the business enterprise's outlays for the use of capital and labor in the District, i.e., the value added. Business enterprises with gross receipts below a minimum amount will be tax-exempt.
Businesses are the intermediary through which they can be taxed.
There are several ways to tax businesses. The District's current system is based on net income, or profits. Some states tax gross receipts of sales of goods and services. Taxing value added is the best way to make taxes proportional to the benefits derived from the District. For example, under the current profit-based system, large firms that place significant demands on city services often pay little in corporate income taxes.