RICHMOND, Va. — Tax incentives for selected businesses are driving Virginia deeper into debt, and House Speaker Bill Howell says he’s committed to curbing the special breaks.
“Virginia needs a tax code that encourages growth, and that means making it simpler and more transparent,” Howell, R-Falmouth, said recently. “We can eliminate those incentives and lower the overall tax burden on Virginia’s families and businesses.”
Despite imposing income taxes, property taxes, sales taxes, car taxes, higher gas taxes and a host of other levies, Virginia faces a projected revenue shortfall of $2.4 billion over the next three years.
State officials said $346 million more will have to be found in fiscal year 2015 and an additional $536 million will be needed in fiscal 2016.
Meanwhile, Gov. Terry McAuliffe, like his predecessors, is funneling millions in tax dollars to selected companies from an “Opportunity Fund.” The latest $5 million state expenditures went to firms based in California and China.
After less than a year in office, McAuliffe told the Washington Post he’s run through $68 million in an effort to kick-start Virginia’s stagnating economy.
Two dozen other corporate subsidy programs, including Clean Energy Manufacturing Incentive Grants and Green Job Creation Tax Credits, hand hundreds of millions more to businesses each year.
Howell takes a dim view of the idea.
“Tax incentives have a role to play, but there has to be accountability to make sure those incentives are working. That is why the General Assembly passed legislation to sunset all new tax incentives,” Howell said.
Because corporate incentives tilt the playing field in favor of state-subsidized “winners,” Virginia’s tax climate has turned chillier for business overall.
The Tax Foundation rates Virginia business tax load 27th in the nation, down from 23rd in 2012. Even worse, the state ranked 39th in individual taxes.
Mike Thompson, president of the Thomas Jefferson Institute for Public Policy, said, “Virginia’s competitiveness is falling.”
“I have always felt what is needed is a group of serious folks — economists and others — to totally discard the current tax system and build one for today’s economy,” he said.