The $463.6 million gamble

Council Chairman Phil Mendelson has submitted a budget proposal that expands on the mayor's plan to decouple DC's tax code from federal tax cuts,restoring over $400 million and funding key projects like Metro upgrades and childcare subsidies while avoiding tax hikes.

Mendelson's recommendations cut deeper and further decouple the federal tax cut proposals from the D.C. tax code, adding $463.6 million across the Financial Plan.

This extension is the largest source of the council's over $400 million in restored budget funding that Mayor Muriel Bowser had cut from her plan in April.

An echo of Sydney's 2024 institutional buy-up

The move builds upon actions taken in late 2025 after President Trump signed his One Big Beautiful Bill Act, which instituted sweeping tax cuts.

At that period, the district approved legislation allowing D.C. authorities to "decouple" the districts tax code from the federal tax code.

The original decoupling was projected to save the district's government nearly $100 million by the end of fiscal 2025 and nearly $660 million by the end of fiscal 2029.

Who is the unnamed buyer?

Mendelson's proposal extends the decoupling either through fiscal 2029 or 2027, leaving some federal tax cuts in place, including overtime,tips, seniors, or vehicle loans.

He stated, "Going forward, all of those will be the benefit of the federal cuts on a local level," referring to those particular tax benefits from Trump's OBBBA.

What auditors flagged in the May filing?

Mendelson is also using $150 million from reserves and $40 million generated by closing a tax loophole to help fill budget gaps.

The council's budget negotiations will right now proceed with these substantial changes to the Mayor's original proposal, setting the stage for further debate over district spending and tax policy alignment with federal law.

Broader context: An echo of Sydney's 2024 institutional buy-up

The move is part of a broader trend of cities decoupling their tax codes from federal tax cuts, with Sydney's 2024 institutional buy-up being a notable example.

This trend is driven by the need for cities to maintain their own tax policies and revenue streams, particularly in the face of federal tax cuts that can have unintended consequences on local economies.

Open questions: Who is the unnamed buyer?

One key question remains: who will benefit from the restored revenue and how will it be allocated?

Mendelson highlights several priorities, inluding allocating $300 million for the Stadium-Armory Metro Station near RFK Stadium in light of plans for a new facility, restoring and expanding paid family and medical leave despite Bowser's proposed pause, and eliminating Bowsers proposed waitlist for the childcare subsidy program.