What attracts businesses to a city?
Time and again, business leaders say the best incentives are having a pool of well-trained workers, good transportation infrastructure and a vibrant, supportive community. That’s what executives at Siemens told the Washington Post recently. And what about tax cuts?
It’s not a factor. “You don’t hire people just because there’s a tax credit there,” the president of Siemens U.S. told the Post.
This is very important to keep in mind next week, when the DC Council votes on a bill that would allow some wealthy investors to pay the lowest income tax rate in the District. The legislation would lower taxes on investment income from DC tech companies to just 3 percent, lower than even the rate paid by residents who earn the minimum wage. At a time when our city is growing, this tax cut would take the District in the wrong direction, substantially lowering our resources for years to come.
Diversifying our local economy is a good thing, and we agree that we should encourage the tech sector to grow and flourish. And it is. Recently DC was named the fifth best city in the country for tech start-ups. DC has also attracted millions of dollars in investments from executives at tech giants Amazon, Google, and Twitter. This is happening not because investors expect lower tax rates when they cash out, but because they believe in the entrepreneurs in the District and that their investments will pay off.
DC’s great quality of life and huge number of young college-educated residents have made this a profitable place for start-up companies. Mayor Gray’s continued focus on school reform, innovative transportation alternatives and aggressive workforce development efforts are the kinds of things the city should be doing to strengthen our business climate’not slashing taxes that make it harder to fund these important programs.
Warren Buffett, the billionaire graduate of DC’s Alice Deal and Wilson High Schools, said that he disagrees with federal tax preferences for investment income that let him pay a lower tax rate than his secretary. So why might DC allow a few Warren Buffetts of DC to pay lower tax rates than hard-working DC residents?
Apparently, because a few of them asked. According to a memo from the Gray Administration, several wealthy DC residents are planning to cash out their DC tech investments soon and have threatened to leave the city if their taxes aren’t lowered. It makes no sense for the District to respond to such threats by allowing these tech millionaires to in essence set their own tax rate. Beyond that, such a drastic change in tax policy could be justified only if it were going to benefit all DC residents and businesses, through job creation or an improved economy. But evidence from economists, policy analysts, and tax experts simply does not show that tax cuts like these encourage investment.
Meanwhile, the rest of the city would pay the price. According to DC Chief Financial Officer Natwar Gandhi, this tax cut could create “substantial” revenue losses for the District, reducing resources for the services we have all come to appreciate: Renovated high schools like Woodson, world-class neighborhood libraries like the ones in Petworth and Tenleytown, and clean streets and parks.
Please contact DC Council Chairman Phil Mendelson, your ward council lmember, and At-Large members Michael Brown, David Catania, and Vincent Orange and tell them you want them to vote NO on Bill 19-764.
