A recent Washington Business Journal Article touched on the relationship between the economy and rising commercial vacancy rates in DC. This is a problem and it has a number of possible causes. But one of them is high taxes. As we have written about before, the DC market costs far more than others in the region. D.C. charges over $11,000 a year in property taxes for a 1,000 square foot downtown office.  In Crystal City, about the same distance from the capital as downtown, Arlington County demands less than $3,000.  If the DC government were to lower these property taxes in offices, the vacancy rate would come down at least a little and, just as importantly, the demand for these spaces would increase.  Ultimately, an increased demand on office space would have the effect of also decreasing something called “the capitalization rate” (the ratio of annual net operating income produced by a building divided by its value).  And decreases in capitalization rates ultimately spur on commercial real estate development. Property tax rate cuts alone won’t solve D.C.’s problems. But they can be a start. If DC wants this economy to pick back up, it can take steps such as lowering its property taxes; which will not only have the effect of attracting more businesses to DC, but also will help spur development.

Recent articles have highlighted various problems and possible solutions for DC’s transportation system.  A sound transit infrastructure is one of the key elements in building a solid economy.  Almost all of the current proposals focus on changes within the Washington Metropolitan Area Transit Authority (WMATA).  But these proposed changes may be misguided.  As pointed out in a CATO Journal paper, perhaps one of the most important elements in improving local transportation infrastructure is deregulation.  One possible way to implement deregulation of our city’s transportation system is to issue “travel subsidized fare cards” to passengers at highly discounted rates.  Passengers could then use these fare cards at either private transportation resources or current city-sponsored transportation resources (including rail, bus, or any other entities which were willing to pay for the software necessary to read these cards and also face oversight of WMATA).  At the same time, the city should also be open to innovative private sector transportation approaches (such as Bus Rapid Transit Systems). With this “travel subsidized fare card” system, the city would still be supporting transit infrastructure, but the users would determine the ultimate makeup of that infrastructure, while at the same time introducing competitive forces into this market.  Moreover, such a system would place the power to decide which routes and providers received subsidies with the users, rather than with bureaucrats or politicians