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It’s tough to find a coherent theme in Mayor Vince Gray‘s tax policy. Last year, he pushed for an increase on the marginal income tax rates of higher earners over the objections of critics like Ward 2 Councilmember Jack Evans, who said the District’s taxes are already too high and even higher taxes would encourage rich folks to move to Virginia, the land of lower taxes.
“How long will we allow ourselves to remain the least competitive jurisdiction, while at the same time repeatedly asking District residents for more?” Evans said of Gray’s proposed income tax increase at the time
Gray didn’t sound much different today, when he went to a venture capital tech company’s office to press the Council to approve reducing the tax rate on capital gains taxes for investors in the District’s tech industry from 8.95 percent to 3 percent.
“We all know that 3 percent of something is much better than 8.95 percent of nothing—and nothing is what we’ll have if we don’t keep growing tech firms in the District,” says Gray in a statement.
The statement from the mayor’s office also says that legislation would “discourage the many entrepreneurs who have started and grown successful technology firms in D.C. in recent years from relocating to Virginia or Maryland because those jurisdictions currently offer lower capital-gains-tax rates.”
The council already approved the first part of the mayor’s “Technology Sector Enhancement Act of 2012,” which gave online coupon company LivingSocial a $32.5 million tax break. The CFO’s office can’t put a figure on how much the capital gains reduction might mean for city revenues and notes that “most venture capital investments in technology companies are made by firms that are outside of the District.”
So why the special treatment for rich techies over rich people in general? Hizzoner has rightly noticed that D.C.’s tech scene is booming and is trying to do what he can to foster that growth. Nothing wrong with that, but Gray’s singular emphasis on making the District more business-friendly for tech firms seems unfair. Take a way the words “tech” and “technology” from the mayor’s statements above and they still hold true (or untrue, if that’s what you’re predisposed to believe). And why should some lucky tech geek or angel investor pay a lower tax rate than some schlub making only $40,000 a year?
Also note that Virginia-based tech investors currently pay 0 percent on capital gains and have significantly lower income taxes as well. Perhaps a better idea would be a comprehensive look at the city’s jacked tax codes for all businesses, not just the tech industry—-which, look at that, the city’s already doing.