Reductions in the after-tax cost of capital, which stem in part from the lower taxes on capital gains, have stimulated housing construction and purchases. Taxes from these activities also fill the coffers of the District and other governments. It is just these kinds of positive economic effects that the Council can expect from its proposed tax cuts. This analysis also showed that employment would rise by 112,600, with the District reversing its downward drift and gaining 24 percent of this increase. Perhaps the most telling result of all from this analysis of the Norton plan was our finding that nearly all of the revenue decrease came back to the District over a ten-year period in the form of new taxes from new jobs and higher wages.
Tax policy stands at the center of our effort to get public policy right for economic growth.
Tax policy mirrors our view of the role of government in everyday life and parallels the level of spending and the diversion of resources to the state. It reflects as well our opinions about the social worth of achievement and financial prudence and shapes our practice of the principle of equality before the law and equal access to due process. Tax policy matters, whether it is in faraway places or the District of Columbia. Tax policy changes that provide credits or deductions for some and not for others, however, have little effect on the overall level of economic growth, even though they may achieve greater equity in tax law. In fact, it is commonplace for economists to give low economic growth scores to tax policy proposals that reduce the tax burden on targeted classes of taxpayers.