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Vincent Gray defends tech plan after rocky start

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Photo - D.C. Mayor Vincent Gray (Examiner file photo)
D.C. Mayor Vincent Gray (Examiner file photo)
Local,DC,Alan Blinder

Every now and then, D.C. Mayor Vincent Gray, a liberal Democrat in a city full of them, sounds like a Republican.

"Three percent of something is better than 8.95 percent of nothing," Gray said in September as he rallied support for a package of tax breaks for technology companies. "We're trying to attract revenue that we're not getting now."

And when the mayor recently rolled out a plan to create 100,000 jobs in the District within five years, it included 11 ideas -- including tax breaks and the development of a city-sponsored venture capital program -- to lure technology companies to Washington. Gray said the efforts would lead to 20,000 technology jobs.

But the D.C. Council has in recent months resisted approving more tax breaks for technology companies, even as it has backed abatements for other industries.

And last week, LivingSocial, which the Gray administration championed as "D.C.'s flagship technology company," announced it was cutting 400 jobs -- including 160 in the District.

LivingSocial's personnel troubles punctuated what had been a gathering storm for Gray: an occasionally rebellious legislative branch and a sector that has historically experienced wild fluctuations in its financial success.

But Gray is unbowed.

"We're just as fervently committed to technology as we have always been," Gray said. "We, of course, continue to support LivingSocial. We think they have a great and innovative idea."

Should LivingSocial, which lost $565 million in the third quarter, remain solvent and keep a large presence in the District, a $32.5 million package of tax incentives will begin to take effect in several years. But Gray said LivingSocial's recent travails shouldn't give lawmakers cause for concern on other tax breaks.

"You look at the LivingSocial deal, and they only really get the benefits [if] they perform," Gray said. "The incentives are based on the hiring of people and other things that show them to be a thriving, growing company. If they aren't, they don't get the benefits."

Critics, however, contend that tax breaks are unnecessary.

"Tax incentives tend to be a costly and blunt instrument that don't work very well," said Ed Lazere, the executive director of the DC Fiscal Policy Institute. "A more targeted approach that focuses on what's really needed to keep companies nurtured and happy ... seems to be what a city can do to build onto its natural advantages."

Lazere also cautioned that Gray's economic plan, even if executed to perfection, might have limited effects.

"In the end, there isn't much that any politician -- from mayor to president -- can do to guarantee what's going to develop when and where," he said.

ablinder@washingtonexaminer.com

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