Staff Editorial: Tax incentives were the right tool to lure Yelp to D.C.

Yelp has leased space in Terrell Place, a recently updated historic building at 575 7th St. NW. (rendering courtesy of Terrell Place)

The District’s flourishing economy just got another welcome boost: last week’s announcement that Yelp will open an East Coast headquarters here in D.C. with an estimated 500 new employees. Notably, at least half of the new positions will be targeted for D.C. residents.

Yelp — a website and mobile app where users submit reviews and other information about local businesses — is based in San Francisco and also has five other offices in the U.S. and Europe. The company will open a 52,000-square-foot Penn Quarter office later this year.

A news release from Mayor Muriel Bowser’s office says that Yelp chose to locate here due to “the city’s thriving technology community, talented workforce, and its proximity to other East Coast cities.” The release doesn’t mention another top reason: The District waived the first five years of Yelp’s D.C. corporate taxes, among other tax incentives worth millions of dollars, according to a Washington Post report.

We don’t think this tax deal is anything to hide. On the contrary, the District’s tech incentive program — available to a host of businesses, not just Yelp — is a valuable tool for diversifying the local economy. Further, the District expects to rake in as much as $20 million in taxes from Yelp during its 12-year lease in the city, even after the incentives are subtracted, according to the Post.

When an incentive waives future taxes rather than providing cash upfront, the District is well-protected. Even if Yelp underperforms in local hiring and tax revenue — as in the infamous LivingSocial case — it will still be a welcome boost to D.C.’s economy and reputation.