Tax policy is the best lever a local government has for fostering faster economic growth. Council Chairman Phil Mendelson yanked on ours pretty hard.
Chairman Mendelson engineered an 11-2 vote in favor of a set of strategically vital business and individual income tax rate reductions.
The immediate benefit is economic stimulus. Thousands of DC residents will have more money in their paychecks for use at local businesses — more money to spend, save, or invest.
While the actual amounts of the cuts are not huge ($165 million) in the context of a $10 billion budget, they are gigantic symbolically. Half the DC population perpetually manages its spending and investment with an expectation that a tax increase is always right around the corner.
This move puts that fear to bed for the foreseeable future. It also provides the policy certainty on tax issues that businesses use to plan for future growth and investment. Decisions such as opening a new restaurant that might have remained on hold can now move forward.
The confidence a rate reduction instills in consumers, business owners and investors will be reflected in everything from consumer spending to business attraction and investment to hiring.
We should move quickly to capitalize. Maryland has been raising taxes for years. Virginia is not as favorable a tax climate as it appears on paper. Let the word go forth that the District is cutting taxes while its neighbors are raising them. The District just became an even more attractive place to live, work and play. Let’s put some billboards up on the B-W Parkway.
Chairman Mendelson easily wins the award for the most pro-growth maneuver by a DC government official in recent memory. He should be commended for a bold move that will accelerate growth and benefit District residents for years to come.
We should also thank former Mayor Williams and his Tax Revision Commission’s work that led to these policy changes. Mayor Gray should also be congratulated. These changes would not have been possible without his decision to form the Commission in the first place.