Business franchise taxes include a tax on corporations’ profits, based largely on the federal corporate income tax, and a separate tax on unincorporated businesses. These two taxes are the city's fifth and sixth largest tax revenue sources. The business franchise tax has been an increasing source of tax revenue.
The individual income tax (IIT, sometimes known as personal income tax) is the city's largest single revenue source. It is also the fastest-growing and most progressive major revenue source.
Since the last DC Tax Revision Commission in 2012-2013, the District has enacted significant tax changes. Here is an overview of what changed in our tax system.
The two main components of the property tax—the real commercial property tax and real residential property tax—are the city's second and fourth largest single revenue sources. Revenue from both taxes have been stable or rising for most of the last two decades as a share of total DC taxes, but have declined as a share of total tax revenue in recent years.
The sales tax is one of the city's three most important tax revenue sources, but its relative importance as a revenue source has declined somewhat. Among DC residents, it affects lowest-income households the most. A significant share of the tax is also paid by visitors to the District.
The District of Columbia, like the federal government and many states, includes in its tax code provisions that reduce taxes and raise incomes for lower-income families and individuals.
Excise taxes are a relatively small revenue source for the District of Columbia, and generally declining compared to other taxes.