Mayor Vincent Gray this week appealed directly to his predecessor, Anthony Williams, in support of a proposed capital gains break for technology investment, a month after the D.C. Council kicked the measure over to a tax review panel chaired by the former mayor.
In an Oct. 16 letter to Williams, Gray repeated his oft-stated justification for carving out a 3 percent capital gains rate for technology investors and entrepreneurs, who under the current tax code pay a rate as high as nearly 9 percent on returns from those investment.
Williams and the rest of the District of Columbia Tax Revision Commission are tasked with undertaking a nine-month review of the city’s tax policy.
When the council, generally leery of Gray’s proposed cap gains reduction, sent the measure down to the tax commission, their decision seemed synonymous with “killing the bill.” But if Gray sees it that way, he isn’t showing it.
In the letter, the mayor repackages the argument he made in the run-up to September’s vote: Creating a separate capital gains rate for certain technology investors will prevent them from fleeing to surrounding jurisdictions to take advantage of a more favorable tax climate. Keeping those newly-gotten returns within D.C.’s boundaries, according to the mayor, will give the city’s tech startups greater access to capital.
The District, Gray argues, won’t lose tax revenue. “Critics of this provision have argued that the city will lose revenue in the future if it is adopted, this view assumes technology investors will remain in the city and pay the current capital gains rate – which history suggests will not be the case.
“Now that the District has become home to a growing number of successful technology startups, I am particularly concerned that we could soon lose our best entrepreneurs and investors to neighboring jurisdictions that offer lower taxes,” the mayor wrote.
A full copy of Gray’s letter is available here.