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D.C. Council gives early support to LivingSocial tax breaks

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Local,DC,Jacob Demmit

The D.C. Councilpreliminarily approveda bill Tuesday that would grant technology companies millionsof dollarsin tax credits for hiring D.C. residents.

The legislation,which had unanimous support,is meant to encourage D.C.-based LivingSocial to keep its headquarters in the city, with up to $32.5 million in tax breaks.

Supporters say the economic development package will bolster the city's technology industry by encouraging the digital coupon company to hire local, tech-savvy employees. But others say the bill would inappropriately give LivingSocial half the incentive money even if it didn't hire a single local employee.

The bill passed its first vote Tuesday with little resistance and is expected to receive similar support when it goes before the council again next month.

"The intent of the bill is good," said Kwame Boadi, an analyst for the DC Fiscal Policy Institute. "But from the standpoint of good governance, intent is not sufficient."

To qualify, companies such as LivingSocial would have to meet criteria like maintaining a certain amount of employees and office space in the city. They also would have to hire 50 employees each year, though workers hired in 2010 count as new employees.

The size of the tax break depends on the percentage of new hires that are D.C. residents.

The problem, according to Boadi, is that the lowest tier has no floor. It would offer a $16.5 million tax breakannuallyif a company hires less than 40 percent District residents.

"Not only is it unusual, but it goes against the logic of incentivizing local employment," Boadi said. "Why would you give any subsidy below a certain amount?"

But several council members said the city needs to offer tax incentives to stay competitive with surrounding areas.

"LivingSocial is a company started here in the District," Ward 2 Councilman Jack Evans said. "As it gets larger, we want to keep it here in the District and not have one of our neighboring jurisdictions encourage it to move. ... This incentive package is just the thing they needed to stay here and grow and prosper."

And when LivingSocial prospers, Ward 6 Councilman Tommy Wells said the city prospers.

"The corporation got the tax break, but we get a huge benefit through the workers," he said.

jdemmitt@washingtonexaminer.com

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