Washington, D.C., Council Chairman Phil Mendelson returned his budget recommendations on Monday with a proposal that cuts deeper into separating the district’s local taxes from President Donald Trump‘s nationwide tax cuts.
In late 2025, after Trump signed his One Big Beautiful Bill Act’s sweeping tax cuts into law, the district approved emergency legislation allowing D.C. authorities to “decouple” the district’s tax code from the federal tax code. The district’s financial officials estimated that the move would save the district’s government nearly $100 million by the end of fiscal 2025 and nearly $660 million by the end of fiscal 2029.
When Mayor Muriel Bowser unveiled her fiscal 2027 budget proposal in April, she codified the decoupling changes for 2025 and decoupled certain provisions for fiscal years 2026 and 2027. However, Mendelson’s recommendations cut deeper and further decouple the federal tax cut proposals from the D.C. tax code.
“The Committee expands the Mayor’s proposal in two ways. First, the Committee includes language that will allow the Council to recognize the decoupling revenue for FY 2026, revenue created by the original December 2025 legislation but that was not included in the February 2026 revenue estimates or the Mayor’s budget proposal,” Mendelson wrote in the budget report. He estimates that this first expansion added $273.8 million in revenue for fiscal 2026.
The second expansion of the decoupling relates to the OBBBA’s provisions on standard deductions, limitations on charitable contributions, increases in the amount of deductible business interest expenses, increases in business depreciation, and the expensing of domestic research, per Mendelson’s proposal. As Bowser only temporarily decoupled these provisions, he proposed extending the decoupling either through 2029 or 2027.
“Together, all of the Committee’s decoupling proposals add $463.6 million across the Financial Plan,” Mendelson wrote in the budget report.
Mendelson said the tax plan decoupling extension is the largest source of the council’s over $400 million in restored budget funding that Bowser had cut from her plan in April. He is also using $150 million in reserves and $40 million from closing a tax loophole.
However, the council chairman’s recommendations do not entirely strip the federal tax cuts from the D.C. tax code; it leaves some popular cuts in place. Mendelson clarified at a press conference on Monday that the decoupling in the fiscal 2027 budget “does not affect overtime, tips, seniors, or car loans.”
“Going forward, all of those will be the benefit of the federal cuts on a local level,” Mendelson said, referring to the above popular tax cuts from Trump’s OBBBA.
Mendelson avoided proposing a tax increase and said he would oppose any council amendment that would add one. He said he is thinking of holding a “hearing on revenue ideas” in September or October to receive expert opinions on the idea of tax increases instead.
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In terms of what Mendelson proposes the D.C. government uses its budget and the restored revenue for, he highlights allocating $300 million for the Stadium-Armory Metro Station near RFK Stadium in light of the plans for the new facility, restoring and expanding paid family and medical leave despite Bowser’s proposed pause, and eliminating Bowser’s proposed waitlist for the childcare subsidy program.
The D.C. Council will meet on Tuesday to discuss Mendelson’s proposals, with the next vote scheduled for June 23.