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Gray tries to prop up tech tax breaks

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Local,DC,Alan Blinder

Under assault for what a think tank described as an effort "to reform the basic rules of math," D.C. Mayor Vincent Gray on Monday sought to bolster support for a package of tax breaks for technology companies as the D.C. Council prepares to consider the proposal Wednesday.

"I am absolutely convinced that at the end of the day, we will have more dollars coming into the city," Gray said at an event on K Street. "The legislation won't cost the District any money."

Gray is seeking to reduce the District's capital gains tax on investments in "qualified high technology companies" to 3 percent from 8.95 percent. City officials have argued that reducing the rate is necessary to compete with Virginia, which does not tax capital gains on select technology ventures, and Maryland, which taxes at a maximum rate of 5.5 percent.

Gray also wants to revise laws governing business franchise taxes to make them more accommodating to the technology companies.

Without the incentives, Gray has repeatedly said, D.C. is at risk for losing revenues from the technology companies altogether if they choose to bypass the District.

"Three percent of something is better than 8.95 percent of nothing," Gray said. "We're trying to attract revenue that we're not getting now."

Barbara Lang, the president and CEO of the D.C. Chamber of Commerce, told reporters she thought Gray's measure was a sound investment.

"You have to spend a little money to help make a lot of money," she said. "It provides an incentive for people to invest in small technology companies."

But the D.C. Fiscal Policy Institute has assailed Gray's proposal.

"Usually when you perform subtraction, there is less than when you started," Ed Lazere, the organization's executive director, wrote. "When taxes are cut, for example, that reduces the amount of money available for important public assets like schools, parks and transportation."

Natwar Gandhi, the District's chief financial officer, offered a mixed report in a fiscal impact statement.

Gandhi, known to be conservative in his estimates, said that although the city might gain about $1.6 million in revenue through the 2016 fiscal year, there could be "revenue losses" deeper into the future.

The D.C. Council will consider the measure on Wednesday. Asked if he had sufficient legislative support to win the vote, Gray replied, "We have to believe we can."

ablinder@washingtonexaminer.com

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