Julian Walker
The Virginian-Pilot
©
RICHMOND
Even though the idea germinated on his own transition team, Gov.-elect Bob McDonnell backed away Wednesday from a proposal to abolish Virginia's corporate income tax.
The idea has merit, but "that's not part of my recommendations," McDonnell said during an afternoon visit to the Central Virginia Foodbank in downtown Richmond.
It's true he favors a low-tax environment, the incoming governor said, but Virginia's dire financial situation makes it difficult to afford eliminating an entire source of revenue.
"I think the question in this tough downturn in the budget is, can we justify that we will have reaped the benefits in terms of new businesses coming to Virginia, new tax revenues, in short order," he said.
Working with the General Assembly, McDonnell has to offset a massive revenue shortfall and come up with a balanced budget. To do that, lawmakers probably will have to find another $2 billion in spending cuts.
So giving up $648 million in revenue - which is how much the corporate income tax generated for the state in 2009 - would only increase the difficulty of the job.
The state's tax rate is 6 percent on eligible corporate income. That places Virginia in the bottom third of the states in corporate tax rates.
Three states - Nevada, South Dakota and Wyoming - do not tax corporate income. Iowa has the highest rate, at 12 percent.
The tax will account for an estimated 5 percent of Virginia's general-fund revenue in the upcoming two-year budget cycle.
Abolishing the tax was among dozens of ideas considered by the incoming governor's transition team, according to McDonnell policy director Eric Finkbeiner.
"We're looking at it from a job-creation standpoint and a fiscal-impact standpoint," he said, adding that just because it's being evaluated doesn't mean it will gain support from McDonnell's team in the end.
The proposal is the brainchild of Bob Marcellus, a Richmond hedge-fund manager who served on the transition team's economic development work group.
He broached the idea over lunch with McDonnell about a year ago, Marcellus said Wednesday.
"It's a great idea," he said. "This is the biggest job-killing tax out there."
He has met with key lawmakers, including Del. Bob Purkey, R-Virginia Beach, chairman of the House Finance Committee, who seized on the idea and introduced a bill to eliminate the tax.
"The jobs created will compensate for the loss of income," Purkey said Wednesday. "We're not going to get out of this economic hole we're in without new jobs."
Del. Lynwood Lewis, D-Accomac, another Finance Committee member, isn't convinc ed.
"I don't hear an outcry from the business community for this," Lewis said. "This is a year when every dollar counts."
Even if the proposal passes the Republican-controlled House, Senate Majority Leader Richard Saslaw, D-Fairfax, said it has no chance of passing the Democrat-controlled Senate.
In his opinion, the primary beneficiaries of the measure would be a few big companies, Saslaw said.
Bill Sizemore, (804) 697-1560, bill.sizemore@pilotonline.com
Julian Walker, (804) 697-1564,julian.walker@pilotonline.com
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End corporate tax, now!
These companies are suffering. Production is up, labor costs are down, but there still just isn't enough profit for that trip to Disneyland.
Alright boys, you're spending to much time around that water cooler. Let's get back to work, the ceo needs a new pair of alligator shoes.
spend a day in Richmond before you pass judgement
I have to laugh reading all the comments. While I appreciate a healthy debate,and opinions of where to cut and where not to cut. How many of you have actually gone and spent a day in Richmond ? How many of you have sat in on some of the special committee meetings ? Before you make tax cut suggestions I suggest you see for yourself.
Here's an example of thousands of tax dollars spent. Judicial Review Committee " re-appointment hearings". An all day affair. AND YES you paid for the judges time to drive to Richmond and sit around for their " interview". Most judges spent 5 minutes in front of the Assembly. The two questions to determine if they should be re-appointed ?
Why should do you want to stay on the bench ? and Can you tell me the difference between the legislative and judicial branch ? YOUR TAX PAYER DOLLARS AT WORK FOLKS !!
What kinda Commonwealth is this anyway?
Especially if we can extract the last penny from the common people.
How is a mega, multinational, tax-dodging corporation supposed to survive?
Foiled again.
Signed,
Rob DaPour,II
Taxes/Budget
When are people going to realize that in order to have services one must pay for them? So when your services are cut just remember you asked for them to be cut in some way. Somebody has to pay the firefighters, garbage collecters, fix our roads etc. Get the point?
AND, if corporations arn't going to be taxed then the rest of us shouldn't be either. LOL about that!!
One of two things
The new governor's unwillingness to take action when he has the ability to tells me one of two things; either he believes Gov Kaine had it right, or two, McDonnell does not have the fortitude and integrity to truly lead because he would rather have something to blame on the other party than truly try and improve the Commonwealth, even if it meant risking his political neck. If it is the first, McDonnell should have the integrity to say so and if it is the second, he should quit now and save us the turmoil of an indecisive and vengeful state government.
A Pity
If we eliminated the VA Corporate Income Tax and BPOL tax, and other states did not follow suit, there would be so many corporate headquarters seeking to locate in VA that commercial real estate would be scarcer than Whooping Canes and you would have to hide under a rock to avoid a high paying job with good benefits.
Kind of disappointing to see Bob getting short sighted so quickly. I guess that's part of the price we pay for one term governors. If it doesn't work in 3 years, it doesn't get done. Long term, repealing these taxes could have made Virginia recession proof.
Just wait!
I can't wait until the necessary budget cuts start touching all the people who believe there's so much waste in government. The cuts are going to touch you or someone in your family and all of a sudden you're going to be the one screaming about the injustice of it all.
When the already overwhelmed DMV starts only being opened 3 days a week. When schools are forced to discontinue sports. When you start getting sick because there aren't enough inspectors to check the food supply. When you've got to get your car's wheels aligned AGAIN because of pot holes in the road that aren't repaired. You're going to realize that a dollar spent on community mental health saves ten dollars in later incarceration, and that a dollar spent on early childhood education saves seven in later remedial education.
Every dollar in the state budget touches someone. Every dollar is there because some significant number of citizens asked for it. Just wait. Those "wasteful spending" cuts maybe your babies.
"mcdonnell wont"
Little Bobby McD will find he "wont" be able to do much of anything when he is faced with a $2 Billion deficit. He wants to create jobs! Isn't that a novel idea? Good luck with all that!!
"This is the biggest job-killing tax out there."
And Bob McD wants to keep it.
Maybe later
This is another reason McDonnell has a tough job ahead of him. I don't doubt he'd LIKE to remove corporate income tax, but then there's the question of where will the loss of that money come from in the short term? He's got to work to cut back on government expenditures to make up for the current serious shortfall and he realizes now is not the time to eliminate this tax. When the state is in better shape with a surplus of money coming in, THEN the corporate income tax can be removed.