CFE Backs Congressional Action to Stop D.C.’s Tax Relief Sabotage

Elite liberal Democrats who run Washington, D.C. are deliberately blocking tax relief for their own workers and small businesses, not because the policy is wrong, but because the politics offend them. Their target is the 2025 Working Families Tax Cut. Their motivation is opposition to congressional Republicans and President Trump. And their chosen weapon is a local tax law that raises taxes on their own people by refusing to follow federal reforms.

That is why the Center for a Free Economy supports the U.S. House’s passage of H.J. Res. 142, approved on February 5 by a 215–210 vote. The resolution would overturn the District’s “D.C. Income and Franchise Tax Conformity and Revision Temporary Amendment Act of 2025.” It now moves to the U.S. Senate for consideration.

This fight is not about local control. It is about political retaliation. D.C.’s leadership is using the tax code to deny residents the benefits of federal tax relief simply because they dislike who enacted it.

A Political Snub That Raises Taxes

The District of Columbia chose to decouple from key federal tax provisions designed to reward work, encourage investment, and simplify filing. These were not technical adjustments. They were deliberate decisions to say no to tax relief.

Instead of allowing residents and businesses to benefit from the same rules that apply elsewhere in the country, the D.C. Council chose to impose a higher local tax burden. The result is a tax code that is more expensive, more complex, and less competitive.

Business Taxes That Punish Growth

D.C.’s law makes it harder and more costly to invest.

The District decouples from immediate expensing for research and experimental expenditures under Internal Revenue Code Section 174. Businesses are required to capitalize and amortize these costs over five years, raising the cost of innovation and discouraging research-driven activity.

The District also refuses to conform to federal bonus depreciation, denying businesses the ability to fully deduct major capital investments. In addition, D.C. amends conformity for the business interest deduction under Section 163(j), tightening limits on how financing costs can be deducted.

These changes hit small businesses, startups, and growing firms the hardest. They raise the cost of expanding, hiring, and competing in the nation’s capital.

Tax Relief Denied to Working Families

The District’s law also blocks federal tax relief aimed squarely at workers.

D.C. decouples from deductions for tips and overtime pay, ensuring that service workers and hourly employees face higher local taxes than they would under federal rules. It also decouples from deductions for personal car loan interest and the non-itemizers charitable deduction.

At the same time, personal exemptions are repealed and the standard deduction is amended in ways that increase tax liability for many filers. These are choices that raise taxes on work, saving, and giving.

Credit Changes That Reshape, Not Expand, Relief

The District did not simply follow federal policy on tax credits. It rewrote them.

Rather than conforming to the Working Families Tax Cut as enacted by Congress, D.C. selectively altered major family-focused credits in ways that reflect local policy preferences rather than federal reform goals.

The law restores and amends the Child Tax Credit under District rules, reduces the Child and Dependent Care Credit, and accelerates the District’s Earned Income Credit to reach 100 percent of the federal Earned Income Credit more quickly. These are not technical updates. They are deliberate redesigns that move the District away from federal tax policy rather than toward it.

This approach underscores the broader problem. Instead of allowing residents to benefit from a unified, pro-growth federal tax framework, D.C. officials chose to pick winners and losers by rewriting credits while simultaneously raising taxes elsewhere in the code.

The result is not tax relief. It is a more politicized, less neutral tax system layered on top of higher costs for work, saving, and investment.

Why Congress Is Right to Act

Congress created the framework that allows the District to align its tax code with federal law. When D.C. leaders weaponize decoupling to undermine national tax reforms, Congress has both the authority and the responsibility to intervene.

H.J. Res. 142 would prevent the District from selectively denying tax relief for ideological reasons. It would ensure that workers and businesses in Washington, D.C. are not punished because local officials want to score political points.

CFE Takeaway

Washington, D.C.’s leadership chose politics over families, small businesses, and economic growth. The District should not be allowed to raise taxes on its own residents out of partisan spite.

The Center for a Free Economy supports H.J. Res. 142 and urges the U.S. Senate to pass it.