I don't think DC's tax reform is an exact model for the US
DC is the nation's only "city-state."
By that I mean that DC is a fully urbanized place (no rural or exurban land), a city with close to complete taxing power, including income taxes--with the huge exception that the city can't tax nonresident income, which among other effects means, unlike every other jurisdiction in the US, DC can't assess nonresident income tax on professional athletes (which is one way cities and states collect additional monies after subsidizing sports facilities).
Last week, the New York Times columnist James Stewart suggested ("For tax reform lessons, Congress needn't look far") that DC would be a great example for Congress to consider as a model for how to go about "tax reform" -- although tax "reform" if by reform you mean improvement seems to be off the table in favor of a tax cut for the rich.
From the article:
... in 2014 the council cut corporate and business taxes, reduced individual rates for everyone earning less than $1 million and broadened the tax base by eliminating many loopholes.Tax cuts were simultaneous with significant growth. The problem with the argument is that DC's economy and population have been growing significantly over the past ten years. It's easy to "cut" taxes when your economy is growing.
In the ensuing years, economic growth and tax receipts have surged, enabling the city to accelerate cuts that were being phased in. The legislation was not revenue neutral, in the sense that broadening the tax base offset the reduction in rates. It was a tax cut. But in a development that would surely warm the hearts of pro-growth Republicans, the economic lift was so strong that tax receipts increased, and last year hit a record.
In the last nine years--despite the 2008 Great Recession--DC's population has grown by slightly more than 110,000 people ("D.C. population reaches four-decade high," Washington Post), an increase in population of almost 20% over the base number of 570,000 residents in 2007.
New condominium and apartment buildings continue to open and plans for large mixed use developments continue apace.
Income tax and property tax revenues were already increasing at an increasing rate. Most of the new residents, excepting children, are paying out plenty in terms of income and sales taxes, and property taxes for home owners.
It's easy or at least comparatively easy to cut income taxes when the number of earners is growing and it's easy to cut property taxes when the number and size of buildings is growing, along with property values and assessments.
Plus, DC's property tax base is insulated somewhat by the inclusion of a hefty tranche of highly valued commercial property, primarily but not limited to Downtown DC. DC's commercial property is highly valued in part as a safe place to park money from overseas, generated in countries with lower economic returns and/or more unstable economies.
Expanding the range of sales taxes had limited impact on revenue. Complementing tax cuts by expanding somewhat the range of goods and services being taxed is likely a minimal proportion of the total revenue mix compared to the large increase in the number of people paying income taxes and rising property tax revenue from residential and commercial property.
Kansas as a lesson. Although DC's economy is much stronger than that of Kansas, which has been wrecked by Governor Brownback's application of classic Republican supply-side tax cuts, which decimated state and local government funding, especially for schools because there was no increase in "animal spirits" and tax revenue in response ("Why Sam Brownback's tax cuts failed to make Kansas thrive," Bloomberg View; "The Kansas tax cut experiment," Brookings Institution), many of us worry about the tax cuts because of potential threats to the local economy that are out of the hands of the local government.
The economic winds buffeting DC are not favorable, and this will continue through the entire Trump Administration. First, local employment and commercial building activity is very much susceptible to the vagaries of federal government policy, which these days is focused on reducing government spending, not increase it--except for the military. This has a disproportionate effect on the regional economy of Washington ("Uncertainty in Washington is hurting D.C.'s job market, economists say, Post).
For example, a neighbor down the street works for a unit of the Labor Department, where next year's budget proposal calls for the unit to be downsized by 80% and hundreds of people will be fired. Extend that example across most government agencies and you can see a tremendous negative impact on the local economy.
And the increase in military spending won't impact DC that much, because most of the local beneficiaries would be located outside of DC, in Maryland somewhat and Virginia especially.
Second, the commercial office sector is slowing anyway as federal agencies move out of DC proper, law firms merge and contract, and as more companies reduce the amount of space per worker, leading to reduced need for commercial office space.
-- "Implications of a Trump/McConnell/Ryan Administration on DC's commercial real estate market," 2016
-- "Why Mayor Bowser is right to be leery of systematic lowering of taxes," 2015
Third, because the city's population is growing there is a greater demand for civic amenities, infrastructure expansions and improvements, and clamoring for various social programs such as an increased amount of services for the homeless and expansion of the amount of affordable housing.
-- "Town-City Management: We are all asset managers now," 2015
But this comes as the city's debt financing cap is close to being exhausted.
Conclusion. Fortunately the city is in a much different place than Kansas. The city is much smaller, urban, with fewer economic responsibilities. But imagine the impact on risk management, predictability, and perception if there is a federal government shutdown, or Congress refuses, if only for awhile, to not raise the debt cap, and long term plans by the Republicans to shrink the federal government with its catastrophic effect on the local economy?
Then it's not out of the question to make the assessment that these tax cuts were foolish, that the city failed to plan for severe exogenous economic shocks that were foreseeable.