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D.C. Tech Experts Question LivingSocial Tax Break

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LivingSocial is a tech headliner in D.C., but some wonder whether giving them a tax break was a good idea.
Elvert Barnes (http://www.flickr.com/photos/perspective/5952219647/)
LivingSocial is a tech headliner in D.C., but some wonder whether giving them a tax break was a good idea.

On Tuesday, the District voted to give LivingSocial a big tax break, and in doing so is keeping the successful daily deal company in town. Going to such lengths to favoring a single company has put D.C. at risk of sidelining many others in the local tech community.

Six months ago, Michael Goldstein founded Endeavor, a start-up that provides support to internet companies in D.C. He says giving a $32 million tax break to LivingSocial is unfair to other companies who also need similar incentives. "I think it's a very dangerous thing for the city to play favorites and give certain interests to certain types of companies and not to others," says Goldstein.

Goldstein says a better approach is to have broad incentives that benefit the entire tech community instead of giving special grants to single companies when they ask for them.

DC Fiscal Policy Institute's Ed Lazere says it's not just a matter of sidelining many other startups, but also making sure the city gets it's money's worth. "It would be better if we said to LivingSocial, 'You'll get your $32.5 million if you actually expand to 2,000 employees, as you say you will in the District.'"

He also says this kind of strategy for retaining an industry can create unreasonable demands.

"It does create an expectation among other companies that they can ask for a tax break too... really whether or not they need them."

While the tax break for LivingSocial was approved on Tuesday, a separate measure to allow tax incentives for other tech start-ups has been delayed until September.

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