Taxes are going up, but the two branches disagree over which levies to increase — and how much. Ms. Bowser (D) would raise the paid family leave tax that businesses pay, add an 80-cent per night fee on hotel rooms and increase the sales tax (gradually, from 6 percent now to 7 percent by fiscal 2027). In total, revenue would rise $447 million next year under the mayor’s proposal. The council would raise more — $550 million in new revenue next year — via both a higher paid family leave tax and higher property taxes on homes worth $2.5 million or above. In fact, the council’s budget closes the vast majority of the budget shortfall via higher taxes.

That’s unwise. Raising so many taxes, in lieu of spending cuts, signals to businesses and residents that legislators are unable to focus on what truly matters. It’s also a warning sign of more taxes and fees to come if budget holes persist. As business leaders consider whether to keep their business in the city or relocate to Maryland or Virginia, they will factor in the city’s public safety and finances.

The council eliminated the mayor’s proposed hotel fee, arguing it would hurt D.C.’s ability to compete for conferences and events. A similar logic should apply to the council’s own proposed tripling of the family leave payroll tax, from the current level of 0.26 percent of wages paid to an employee to 0.75 percent. (Ms. Bowser is proposing 0.62 percent.) This tax is supposed to fund employees’ time off work to care for a baby or a sick family member, but it will soon be used for general city expenses. In contrast, the council’s property tax increase would be relatively modest and targeted at the most expensive homes.

As for spending, it’s encouraging that the mayor and council agreed on more money for the police and for converting unused offices to other uses, as well as for strategically transforming public spaces and empty storefronts. Education also receives a bump, though the mayor and council continue to spar over how much should go to the central office vs. schools. In that case, the council is right to emphasize funding teachers and classroom needs.

The other reality in the District is a vast income and wealth inequality that is especially pronounced between White and Black households. Ms. Bowser proposed steep cuts to critical programs for those less well-off, including housing assistance for struggling families, the Access to Justice program that provides civil legal assistance to low-income residents, and the Early Childhood Educator Pay Equity Fund that subsidizes pay for child-care workers. The council mostly restores these, but then goes a step further by creating a new Child Tax Credit (CTC) of $420 per child to provide more money to low- and middle-income families with kids and a Baby Bonds program to invest $1,000 per year per low-income child. It would be better to fund Baby Bonds through a private foundation than public dollars, and this is not the right time to do a CTC for married couples earning up to $240,000 a year.

Chief Financial Officer Glen Lee has to sign off on whatever the mayor and council adopt. Residents and Congress are not going to be comfortable if he does not. We are glad to see the mayor and council working closely with Mr. Lee as the June 12 budget vote approaches. The District has to replenish its reserves, but not necessarily in 2025. There’s a smart compromise in the works to ensure the city will have adequate liquidity to pay all bills on time by allowing the CFO to temporarily tap into different trust funds, if needed. This is a common tactic used by other state and local governments and works well as long as a good accounting and audit systems are in place.

As the council makes its final tweaks, there has to be a reality check on taxes and spending. Scaling back is hard. But making tough choices now is better than losing business to Virginia and Maryland.