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(Washington Post) — The D.C. government, grappling with budget shortfalls since 2008, was hit with another projected gap of $175 million for fiscal 2011 – an estimate that presents an immediate challenge for D.C. Council Chairman Vincent C. Gray, the presumptive next mayor.

Sales and income tax collections have dropped dramatically, accounting for about $100 million. Chief Financial Officer Natwar M. Gandhi said that more than half of the city’s sales tax revenue is generated by tourism, an industry that has seen an estimated decline of $52 million. Income tax revenue has declined by $69 million, he said, partly as a result of a drop in capital gains tax collections. Some of the brunt has been offset by increases in property and property transfer taxes, attributed to several large commercial sales last year.

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