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By Chris Kain
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The DC chief financial officer’s latest revenue forecast shows an uptick in the economic outlook for the DC government over the next four years since his last estimates in June, based in part on an improved outlook for corporate earnings and capital gains from financial markets.
The report came with warnings of continued uncertainty locally and nationally — including the risk of a prolonged government shutdown placing a “significant strain on the economy.” The economic projections were also offset to a large extent by the predicted impact of the federal government’s One Big Beautiful Bill Act, including the exclusion of certain types of tipped wages and overtime from taxable income as well as other provisions that will reduce business income taxes. Changes enacted in the District’s Fiscal Year 2026 Budget Support Act also affected the CFO’s revised revenue estimates — negatively in FY 2025, but favorably in the subsequent years.
CFO Glen Lee is now projecting the District will collect $10.77 billion in local revenues in FY 2026, an increase of $135.9 million over his June estimate. That figure accounts for a $289.3 million upward revision in the economic outlook, but also a $171.6 million hit from the federal tax changes — many of which flow automatically to DC’s tax code.
Beyond that, Lee projects year-to-year increases of 2.4%, 3.4% and 3.4% in local revenue collections through FY 2029.
In FY 2025, the District saw an extra $208.9 million in tax collections beyond the CFO’s earlier projections, though that was almost entirely offset by the impacts of the local and federal legislative changes. The bottom line was just a $13.6 million increase over the June revenue estimate.
“While strong corporate earnings and stock market growth have led to exceptional increases in revenue, these revenue sources are more volatile and far less connected to the local economy than sales, withholding, and property taxes,” Lee wrote in a memo to the mayor and DC Council. “The shift toward greater reliance on more volatile revenue sources continues a post-pandemic trend that reduces the overall stability and resilience of the District’s revenue streams and economic base.”
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