On February 4, 2026, Republicans in the U.S. House of Representatives voted to repeal a bill passed by the D.C. Council in 2025 that changed the local tax code to help everyday people. Overruling the jurisdiction’s control of its own state tax code would deprive Washington, D.C., of $658 million in revenue, raise child poverty, and throw the tax-filing system into disarray.
It is a long-standing principle in tax law that Congress does not have the power to require localities to adopt the same changes made to federal tax code within their state tax code. This common practice is known as “decoupling.” Some states lack income tax entirely, so they are fully decoupled from the federal income tax system. Other states regularly decouple from specific federal tax changes: In contrast to federal changes to research and development (R&D) deduction under the 2017 Tax Cuts and Jobs Act, Alabama allowed businesses to claim R&D deductions immediately, rather than follow the Section 174 federal requirement that requires expenses to be amortized over five or 15 years based on the state legislature’s assessment of businesses’ needs. Other states, such as Florida, are known as “static conformity” states and frequently decouple from corporate measures. Historically, policymakers have noted that a lack of decoupling has decreased state revenue and sometimes led to state budget cuts later on.
To be clear, the federal code still applies to the taxpayers in these states, so residents of any state that decouples are still receiving the full federal tax cuts as designed by Congress in 2025. But preserving jurisdictional freedom to set state and local tax law is crucial to that jurisdiction’s ability to respond to local economic conditions. States routinely come into and out of conformity with the federal income tax system, and many states are decoupling from elements of the One Big Beautiful Bill Act, which made dramatic, unfunded changes to revenue collection.
Changing tax policy in February would throw the ongoing tax season into disarray.
Changing tax policy in February would throw the ongoing tax season into disarray. Many residents have already filed their taxes, and this potential action from Congress would require the district to suspend filing for several months and extend deadlines into the fall. The district would have to halt filing, change forms and online systems, communicate with third-party tax preparers, and potentially require refiling from those who have already successfully filed their taxes. Errors by taxpayers and the work required by the IRS would likely increase as a result.
D.C. residents pay more in federal income taxes per capita than residents of any other jurisdiction. If the revenue D.C. residents pay into the federal coffers isn’t collected on time because of this change taking effect when tax season is already underway, that could have significant consequences for the federal deficit alongside city finances.
Finally, on the merits, D.C. Council made decoupling choices to reflect its budgetary priorities. The council chose to expand the match that filers receive through the earned income tax credit, which benefits working-class residents, and created a new child tax credit of up to $1,000 per child. These changes were predicted to reduce child poverty by 20 percent and help working-class residents afford an expensive place to live. On top of this $658 million imposition on D.C. taxpayers, Congress also prohibited D.C. from spending $1 billion of its own revenue last year, threatening its budget and credit rating.
Washington, D.C., is already disenfranchised in Congress, without voting congressional representation or senators. Meanwhile, all laws passed by city lawmakers are subject to a 30-day period of review by Congress. Disapproval has only rarely been used in the past 50 years and never for a tax or budget law passed in D.C. since the advent of the Home Rule Act. Ongoing financial interference in the management of D.C. is unnecessary, is fiscally irresponsible, and would interfere with other duties of Congress. Yet Congress has continually interfered in D.C. affairs during the Trump administration. Without full enfranchisement and autonomy, D.C.’s budget will continue to be at the whim of people who are not its taxpayers or representatives. The Senate should not engage in micromanaging D.C. tax and budget affairs.
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