By Chris Kain on Jul 9, 2026 Last updated Jul 10, 2026

With the DC Council poised to hold hearings in the fall on potential tax changes in view of future budget challenges, Ward 1 Councilmember Brianne Nadeauyesterday submitted legislation that would levy a surcharge on passive income such as capital gains for the District’s wealthiest households.

Nadeau had floated the idea during this year’s council deliberations on the budget, but legislators ended up steering clear of any broad tax increases by using one-time revenue sources when restoring some of the cuts proposed by Mayor Muriel Bowser in her final financial plan.

In shepherding a revised budget proposal toward unanimous approval, DC Council Chair Phil Mendelson committed to scheduling a public roundtable in the fall to hear expert opinions on the pros and cons of various changes to DC’s tax system, including their expected impact on the District’s economy and competitiveness.

One likely topic of discussion is a Business Activity Tax, with the council this week having approved a provision that Mendelson inserted in the Fiscal Year 2027 Budget Support Act directing the chief financial officer to prepare a feasibility study. Specifically, the CFO would have to prepare report by Jan. 31, 2027, identifying any legal issues associated with a Business Activity Tax and outline the process that his office would use to estimate revenues from such a tax. Proponents contend that it would correct a loophole that enables major law firms, among others, to avoid existing business taxes; critics warn that it would hamper the District’s economy and business retention efforts at an already challenging time.

Similar arguments already surround Nadeau’s legislation, known as the Wealth Proceeds Tax Amendment Act of 2026. She proposes a 3% surcharge on passive income — such as capital gains, dividends, interest, annuities and other investments — for individuals making more than $400,000 and married couples making over $500,000. The surcharge would apply only to the amount of income above those thresholds, she said.

Nadeau cited preliminary estimates that the tax would yield $200 million in the first year and over $100 million in subsequent years.

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