D.C. Council members kick off fall session

D.C. Council members kicked off their fall session Wednesday by rejecting a tax cut for some investors but approving a bill that allows city schools to keep classroom pets and another that forces the Department of Motor Vehicles, which had been automatically revoking the licenses of some drivers caught speeding in Virginia, to show restraint.

After a two-month summer recess, council members also introduced more than a dozen bills for consideration before Christmas. Council members offered legislation to authorize driverless cars in the District, study the potential for casino gambling in the city, require that only healthful food be served at city parks and recreational centers, and return face-to-face visitation to city jails.

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But much of the meeting was spent on the debate over whether the District needs to do more to entice start-up technology and Internet companies to locate in the city. In a setback for Mayor Vincent C. Gray (D), the council rebelled against his proposal for a targeted capital gains tax cut for residents who invest in city-based technology start-ups.

Investors in the District are subject to an 8.95 percent capital gains tax. Gray sought to lower the rate to 3 percent on the returns of city residents’ investments in city-based technology firms, which he argued would boost the tax base and might create thousands of jobs.

But a strong majority of the council opposed the tax cut and asked whether it amounted to a giveaway to the wealthiest residents. The debate mirrored a broader national discussion playing out in the presidential race about how best to create jobs and balance the federal budget.

Council member David A. Catania (I-At Large), a supporter of the tax cut, noted that Maryland’s capital gains tax rate is 5.5 percent and that Virginia lawmakers approved legislation a few years ago that sets the rate at zero on investments in some Virginia-based technology companies.

“The reality is many people who invest in high-tech companies lose, only some win,” Catania said.

“It may feel good to continue a 9 percent tax on these individuals who can simply move across the river so they pay nothing, but I want to tell you what a hollow victory that is.”

Council member Muriel Bowser (D-Ward 4) countered that Gray’s proposal could set a precedent. “What we don’t want to do is give gifts of tax relief to some and not anything for others,” Bowser said.

To avoid the defeat of the bill that contained the capital gains proposal, another supporter, council member Jack Evans (D-Ward 2), moved an amendment to take it out of the legislation. The amended bill, which passed unanimously, expands existing city-recognized technology corridors to all commercial neighborhoods and eliminates the franchise tax for some start-up companies for five years.

Gray said the council missed an opportunity to make the city less reliant on federal spending.

“We have to find a way to be more self-sustaining, and this is a way for us to do it,” said Gray, who often speaks of District-based LivingSocial, an online marketing firm, as a model for future growth.