D.C. votes down tax breaks for tech companies

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Local,DC,Alan Blinder

The D.C. Council on Wednesday resoundingly rejected a tax incentive designed to keep and lure technology companies to the city, in a decision Mayor Vincent Gray's administration had warned would hamper economic growth.

In an 11-1 vote, lawmakers voted down a plan that would have slashed the District's capital gains tax on select technology investments from 8.95 percent to 3 percent.

At-large Councilman David Catania, the lone vote in support of the tax cut, described the District's current rate as "untenable" and said companies were more likely to head to Virginia, where capital gains taxes are 0 percent for some technology companies.

The executive director of the DC Fiscal Policy Institute, which had hammered Gray's proposal for days, said his group opposed the measure because it didn't see evidence of its necessity.

"Something that would turn D.C.'s tax system upside-down and let very wealthy people pay the very lowest tax rates could only be justified if there was evidence the city would be better off," Ed Lazere said. "Without any clear evidence that this actually would improve the city's tax sector, it was a hard case."

Ward 4 Councilwoman Muriel Bowser said she didn't think high-powered investors merited a reduction.

"We're talking about giving tax breaks to people who knew what the rules are ... and invested anyway," she said.

After the vote, mayoral spokesman Pedro Ribeiro said Gray was "disappointed" in the council's decision.

Wednesday's vote was the climax of a debate that had been simmering for months and had intensified in recent days, forcing the mayor to scramble for sufficient support to win the vote -- backing that was ultimately absent.

Under assault from Lazere's group, Gray had said technology companies were exiting -- or passing over -- the city and depriving it of any income at all.

"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."

Although Gray staked out a position that conservatives have cheered nationwide, he said Wednesday that the issue wasn't partisan.

"I don't characterize it as a Democratic or Republican or anything else," Gray said ahead of the vote. "I characterize it as a sound idea for growing the economy."

The District's chief financial officer, Natwar Gandhi, had offered a mixed assessment of the impact of Gray's proposal, saying that although the city might pick up $1.6 million quickly, there could be "revenue losses" deeper in the future.

ablinder@washingtonexaminer.com

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