As a new DC Mayor and DC Council face budget spending pressures and slow revenue growth, one idea that has begun appearing is a Business Activity Tax, or BAT. The Fair Budget Coalition urges the creation of “a Business Activity Tax (BAT) to ensure all businesses pay their fair share of DC’s business taxes,” citing an estimated $500 million in extra revenue at a 2% rate. Likely next Mayor Janeese Lewis George has expressed openness to a BAT, and the D.C. Council has directed the Chief Financial Officer to report on the feasibility of a BAT by January 2027.
The D.C. Fiscal Policy Institute writes that a BAT “would make business taxation fairer and more racially equitable while raising significant revenue for the District.” The D.C. Tax Revision Commission considered a plan to impose a 0.9% BAT (including a 0.5% rate on nonprofits) and use the revenue to reduce other business taxes, but ultimately did not produce a report of recommendations in large part due to opposition to the proposed tax.
No other state imposes a BAT, nor is the concept familiar even to tax experts. Its authors intend it, in part, to sidestep the Bishop court decision but downplay the legal risks of attempting to do so. If the BAT worked as designed, it would reduce other existing business taxes and leave little if any extra revenue for new programs, but some proponents cite it as just such a net revenue source. Whether or not the BAT is viable in the District of Columbia, policymakers should revisit D.C.’s uniquely confusing mix of business taxes.
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