Photo by michael starghill

The D.C. Council member who oversees the District’s tax code called Mayor Vince Gray’s proposal to rewrite some high-tech incentives as a way of keeping daily-deals company LivingSocial based in Washington a “good start.”

Jack Evans (D-Ward 2), who chairs the the Finance and Revenue Committee, called LivingSocial “exactly the type of startup business we want to keep here and the type we generally lose if we don’t do something.”

Evans said that he has not yet been presented with legislation that will aim to change the taxes paid by tech companies’ founding investors from a personal income rate of as much as 8.95 percent to a capital-gains rate of 3 percent. But he said that he has been in contact with Victor Hoskins, the deputy mayor for planning and economic development, who negotiated the proposal with LivingSocial.

Under the mayor’s proposal, which was first reported by the Post’s Jonathan O’Connell and Thomas Heath, LivingSocial stands to see its tax burden lowered by as much as $32.5 million over a five-year period beginning in 2015. LivingSocial is owned by its founding employees, including chief executive Tim O’Shaughnessy; several venture capital firms and the online retail giant Amazon, which owns one-third of the company.

In return for the rewritten tax rules, LivingSocial would agree that at least 50 percent of its new hires are District residents and would participate in the Summer Youth Employment Program.

Evans was also quick to point out that all six of the company’s offices—which collectively house 952 employees out of a worldwide payroll of about 6,000—are located in his ward.

“We get jobs,” Evans said. “We get workers living in the city who pay taxes here. A place like LivingSocial has a lot of young people who do take advantages of all the things [in the city].”

Besides just staying in the District as it doubles its local staff to nearly 2,000 in the coming years, LivingSocial is also looking for much larger office space where it can consolidate its workforce. Evans, who has long advocated for lowering the tax rates paid by businesses in D.C., suggested something of a fierce competition with the District’s neighbors to keep LivingSocial based here.

“The district’s structure is terrible and [businesses] leave to Virginia,” Evans said. He said that O’Shaughnessy told him that both Gov. Bob McDonnell and U.S. Sen. Mark Warner had pitched LivingSocial on relocating to Northern Virginia, where the income tax rate for business is 6 percent, compared with the District’s level of 9.975 percent.

“My whole philosophy continues to be to be competitive with Northern Virginia,” Evans said. That strategy, however, requires a longer view, something he said that his Council colleagues don’t always understand. “Although we will lose money in the short run, we will make money in the long run. That is a concept I’m constantly explaining to my colleagues.”

But luckily for Evans, he’s only competing with Virginia. “Maryland, thank God, is off the charts,” when it comes to business taxes, he said. Maryland’s corporate tax rate is actually 8.25 percent. The District’s is the second-highest in the country, topped only by Pennsylvania’s rate of 9.999 percent.

As for LivingSocial staying in Ward 2, assuming the tax-break rewrite gets through the Council (Evans said he’d like to see it done before the July recess), that’s another matter. The company has said it’s looking for at least 350,000 square feet, which won’t exactly go for a song in the city with the highest commercial rents in the country.

“They just have to decide where they want to be,” Evans said. “Do they want to be in the Central Business District or further out? There’s just a whole array of places. We can always help on real estate deals.” He mentioned the CoStar Group, which received $6.1 million in 2010 to move from Bethesda to a glassy new headquarters at 1331 L Street NW.