- The Washington Times - Friday, November 17, 2000

Venture into any quadrant in the nation's capital and it appears as though a renaissance is sweeping across the city after more than a decade of disinvestments.

Long overdue road and bridge repairs, new office buildings, and new housing construction are occurring at a maddening pace, and plans for more of the same are really good news.

D.C. officials announced earlier this fall that Giant Food and K-Mart will replace a public works facility near New York Avenue, and just this week city officials touted plans to enhance the downtown area with more housing and entertainment. Again, that is good news.

Of course, there is discouraging news as well.

According to the Small Business Survival Committee, which is based here in Washington, the District of Columbia maintains a most inhospitable environment for small businesses, entrepreneurs and investors.

That fact is based on the committee's Small Business Survival Index 2000, which considers 16 indicators, including personal income, the top capital gains tax rate on individuals, top corporate income tax rate, property taxes, sales and death taxes, unemployment tax rate, health insurance tax rate, electric utilities tax rate, workers compensation costs, crime rate, right-to-work status, government bureaucrats, tax limitation status, Internet access tax and gas taxes.

"The District ranks among the very worst when it comes to personal and corporate income taxes, and dead last for capital gains taxes, electric utilities taxes, the crime rate, and the number of government bureaucrats as a share of the population," the committee's chief economist, Raymond J. Keating, wrote in an article that recently appeared in The Washington Times. He also said the nation's capital must "implement substantive tax relief, deregulation and reduce the size and scope of government."

Those two sentences pretty much articulate the city's dilemma past, present; but let us hope not the future.

Consider what is at stake. Nearly 300,000 residents moved out of the nation's capital beginning in the 1970s because of high taxes, high crime, poor schools and poor services. D.C. officials have done much to turn that around, and they estimate that between now and the year 2005 60,000 to 70,000 new residents will move into the city, essentially replacing those who left in the 1990s.

The demand for new upscale and affordable housing will be great; the demand on essential services will be greater and the temptation to maintain the status quo on tax burdens and a fat bureaucracy will be even greater.

To their credit, city officials employed various means to change the quality of life for people who live here, including lowering the crime rate and improving schools. Nothing radical, mind you, although it has been obvious for years that is precisely what is needed. There also have been huge cuts in the city work force. What has not happened, however, is a drastic change in how the bureaucracy works and by how much it taxes its residents and businesses.

This is evidenced with every planned or proposed major development project. For example, private businesses want to invest more than $4.5 billion into dozens of projects; this entails changes in D.C. laws and regulations. What remains to be seen is whether the legislature is willing to go along and whether agencies that write contracts have the capacity to pull off the best deals for taxpayers.

Yet another example of how the city stumbles over itself lies in Southeast, where a developer wants to lure a supermarket and other retailers to a former federal munitions and firing range site called Camp Simms. Three mayors and three city councils ago officials promised to develop the 25-acre tract, yet there it sits, barren in the midst of $100,000 and $140,000 new single-family homes. Some city officials want low-income housing over there. Residents want retail development and have the expendable income to sustain such development. The situation is really a no-brainer. Residents should have their way.

The city needs more of those very folks, not less. Yet officials sometimes seem to forget that the city's ornery government, with its high taxes and bloated bureaucracy, gets in the way of change.

The D.C. Council occasionally seems to appreciate the vital importance of tax cuts. This year it is is considering a modest cut in certain sales taxes. Last year it proposed small across-the-board tax cuts, including a reduction in the top personal income and capital gains tax rates from 9.5 percent to 6.5 percent, and a reduction in the corporate income tax rate from 9.975 percent to 6.5 percent, to be phased in over three years.

The mayor and his No. 1 ally, Alice Rivlin, chairman of the control board and a former vice chairman of the Federal Reserve Board, said no. Smaller cuts phased in over a longer period now stand in their stead. The real kicker here is that even after full implementation, the District of Columbia will still stand among the highest among all states.

Mayor Williams and the Council would do well to revisit tax relief in the upcoming FY 2002 budget discussions as the plans for targeted neighborhoods in Southeast and Northeast take shape. Taxes, especially those cited in in the Small Business Survival Index, are weighed by not only big-box retailers, but dry-cleaners, book stores, flower shops and boutiques. Those businesses, which employ small work forces, can hardly afford to set up shop in a city with exorbitant unemployment and worker's compensation rates.

As Mr. Keating pointed, "It is worth noting that out of the top dozen best-ranking states on the Small Business Survival Index, nine do not impose a general personal income tax, 10 levy no capital gains tax and four do not inflict a corporate income tax."

If the mayor and the Council want to pave the way to a true and lasting renaissance, they need to move the District in a similar direction.

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