Should LivingSocial Get a Tax Incentive?

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This week the District Council — when it was not preoccupied by the — held a hearing on the Social E-Commerce Job Creation Tax Incentive Act of 2012.

The act would provide as much as $32.5 million in tax incentives to retain LivingSocial, a daily deals online site, headquartered in the District.

The tax incentives are meant to "encourage [Living Social] to thrive and hire more D.C. residents," said Councilman Michael Brown in a press release.

If 50 percent or more of Living Social's employees hired during each one-year period between 2015 and 2020 are District of Columbia residents, the company could receive as much as $17.5 million in incentives over that time.

Likewise a property tax incentive would provide an additional $15 million spread over time. 

Proponents point to the District's existing tax climate and the hope of creating a tech hub in the DC region as reason enough for the tax incentives.

"Much of the testimony Thursday centered on the District’s unfavorable tax climate for business compared with surrounding jurisdictions, as well as LivingSocial’s role as a rallying point for tech talent," the Washington Business Journal reports.

“The District is known as a government town and this is an opportunity to expand our vibrant economy by encouraging a local tech industry to emerge,” said Brown in a prepared statement.

But there are those who think that LivingSocial might stick around even without the tax breaks and that the money could be better spent elsewhere.

Ken Archer, a Georgetown resident and Greater Greater Washington contributor, recently wrote a post debating the merits of the act.

Archer opines that the tax incentive for LivingSocial could be a good thing, but as it is currently offered, does little to help the District grow into the tech hub it so wants to be.

"The tax break requires LivingSocial to keep jobs in DC, but that's not enough to create a tech hub or any lasting value for DC. To be worthwhile, the tax break needs to push LivingSocial to create new, high-quality software engineering jobs in the District," wrote Archer.

When the tradeoff for that $32.5 million might be a school renovation or affordable housing, Archer wonders if the cost-benefit anaylsis comes out in favor of the District's goals.

Meanwhile LivingSocial executives testified Thursday that the company could "shave tens of millions of dollars off its operating costs by consolidating its offices in a jurisdiction with lower corporate taxes and rental rates than the District" according to the Washington Post.

The legislation has been referred to the Council’s Committee on Finance and Revenue for review next week. It would face a vote by the whole Council before it would go to the Mayor for his signature.

elyssa June 11, 2012 at 02:47 AM
Bribery is never a good thing and that is exactly what this is. http://goo.gl/SqGKF


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