Income tax, corporate; eliminates State tax for taxable years on and after January 1, 2010. (HB119)

Introduced By

Del. Bob Purkey (R-Virginia Beach) with support from co-patrons Del. Mark Cole (R-Fredericksburg), Del. Todd Gilbert (R-Woodstock), Sen. Bill Carrico (R-Grayson), Sen. Ryan McDougle (R-Mechanicsville), and Sen. Mark Obenshain (R-Harrisonburg)

Progress

Introduced
Passed Committee
Passed House
Passed Senate
Signed by Governor
Became Law

Description

Corporate income tax.  Eliminates Virginia's corporate income tax for taxable years beginning on and after January 1, 2010. Read the Bill »

Outcome

Bill Has Failed

History

DateAction
01/05/2010Committee
01/05/2010Prefiled and ordered printed; offered 01/13/10 10101115D
01/05/2010Referred to Committee on Finance
01/19/2010Assigned Finance sub: #2
01/26/2010Impact statement from TAX (HB119)
02/02/2010Fiscal impact review from JLARC (HB119)
02/10/2010Committee substitute printed 10104651D-H1
02/10/2010Reported from Finance with substitute (14-Y 2-N) (see vote tally)
02/10/2010Referred to Committee on Appropriations
02/14/2010Impact statement from TAX (HB119H1)
02/16/2010Left in Appropriations

Comments

Waldo Jaquith writes:

I'm confused. Isn't this the source of a lot or revenue for the state? Del. Purkey isn't also proposing a cut in spending or an increase in revenue, that I can find. So...uh...he's just cutting taxes and letting other people figure out how to deal with the fallout?

Karen Miner Hurd writes:

Actually, there is almost a 1:1 ratio between corporate income tax and wages. The a 1% increase in the corporate income = 1% DECREASE in wages. (Wages are sometimes the only cost a business has to work with after everything else has been cut. Wages are the last to go up, and the last to go down). In Switaerland (of all places) where the income tax was cut, revenues INCREASED beyond projections and workers had to be imported to meet the demand caused by new business.

This is an excellent bill.

David Wright writes:

This bill is desperately needed here in Virginia to attract companies that would otherwise take their economy-growing job-expanding business to more tax friendly states like Texas or worse, overseas.

Giving businesses a reason to come to Virginia and then allowing them to prosper and provide job opportunties to the families that need them is exponentially more important than the spending agenda of the Assembly. In the long term, revenues lost through the VA state corp income tax (which many states dont even have) would more than be made up through the growth-fueled increases in corp sales taxes, property taxes, and the personal income taxes of the Virginians actually getting a chance to go to work, not to mention the cost savings from having less unemployed for the state to deal with. Thank you Del. Purkey and on behalf of Virginian workers and their families, best of luck with this effort.

Waldo Jaquith writes:

I'm confused. It's my understanding that Virginia has one of the lowest corporate income tax rates in the nation, among states that have corporate income taxes. (Just three states lack corporate income taxes.) Virginia is consistently rated as the #1 most business-friendly state in the nation. So how will this make any difference?

Virginia Interfaith Center for Public Policy writes:

You are correct Waldo. In our current economic crisis when Virginia's low and moderate income residents need help, this bill only gives away tax money to the corporations at same time that we are pondering deep and painful cuts to public safety, education and health care.

David Wright writes:

I'm confused. If Virginia is the #1 most business-friendly state in the country then why does it rank 32nd in annual GDP growth rate over the last three years according to the Department of Commerce? (Oh yeah, and those five states with no corp income tax? They rank #1, #3, #8, #11 and #18 in GDP growth…and ALL of the top eight GDP growers have a lower corp tax rate for small businesses than Virginia. But shucks, that's just a coincidence, right?)

The reason some states do have higher marginal rates on corporate earnings is because they can afford to- those states generally have other draws that make them competitive such as much greater access to consumer and capital markets, better infrastructure, higher skilled labor pools, more favorable incorporation / liability / antitrust laws, and in some very key cases fewer environmental and resource development restrictions. Many states also offset their higher income tax with more favorable sales / payroll tax assessments.

But the difference this bill would make is much greater than just making the business environment of Virginia more competitive with other states (or with the increasingly attractive low-cost foreign option which has cost Virginia a LOT of manufacturing jobs these last five years.) Having the government take less money away from the private sector would mean there is simply more money available for companies to put towards capital spending, developing new products, opening new production lines, reaching new markets and opening new facilities- all of which means MORE hiring of workers and MORE revenue from having an expanded tax base. This is a concept that left-wing groups like the Virginia "Interfaith Center" will never be able to acknowledge let alone understand, but it doesn't mean it's any less true- it's been proven to work since JFK put it to work the 60s. (Seriously, I love how you guys think of lowering tax rates as somehow "GIVING" money to evil corporations instead of "TAKING LESS"…. good grief.)

The point is, if you think that state tax rates don’t affect unemployment and the decisions that businesses of all sizes make in determining when and where to relocate, establish or grow a workplace, then you are not only confused- you're wrong. And your wrongness has the potential to hurt a lot of poor and middle-class people who are more interested right now in jobs and long-term opportunity than wasteful government spending and temporary free handouts.

Waldo Jaquith writes:

If Virginia is the #1 most business-friendly state in the country then why does it rank 32nd in annual GDP growth rate over the last three years according to the Department of Commerce? (Oh yeah, and those five states with no corp income tax? They rank #1, #3, #8, #11 and #18 in GDP growth…and ALL of the top eight GDP growers have a lower corp tax rate for small businesses than Virginia. But shucks, that's just a coincidence, right?)

You confuse correlation with causation. The state with the highest GDP growth is North Dakota; South Dakota also did very well. Haven't we just proven that states with "Dakota" have better economies? Maybe we should change our name.

Waldo Jaquith writes:

You know, I'm really just continuing this business of missing the forest for the trees, which is no good. The problem here is that none of us really know what the effect of this will be, because that's the job of economists. What would be helpful to everybody is some links to some published, peer-reviewed, economics papers that provide hard data that reducing the corporate income tax results in greater tax revenue. The fact that it's counter-intuitive doesn't mean that it's impossible that it's true. But the inverse is also true: the fact that it seems clever (to those inclined to oppose corporate taxes) doesn't mean that it's correct.

I certainly hope that Del. Purkey has the hard data to support this bill. If so, I hope he'll share it with folks here.

Larry Gross writes:

How about a trade? In exchange for reducing/eliminating the tax, any corporation that takes advantage is automatically barred from making donations to Delegates and Senators.

let's see which corporations value tax relief more than they do influence.

Waldo Jaquith writes:

A newly released study by IBM has found that Virginia is the second-hottest destination in North America for business investments. That's based on IBM's database of 80,000 investment deals since 2003. We lost out to Ontario.

Why do we need to eliminate the corporate income tax again? We can see that "to be more competitive" isn't an answer.

robert legge writes:

Thanks to today's Supreme Court decision that lets corps. spend gazillions on campaign finance, they are going to need a lot more money. This measure is a good way for them to get it.

David Wright writes:

"But the difference this bill would make is much greater than just making the business environment of Virginia more competitive with other states (or with the increasingly attractive low-cost foreign option which has cost Virginia a LOT of manufacturing jobs these last five years.) Having the government take less money away from the private sector would mean there is simply more money available for companies to put towards capital spending, developing new products, opening new production lines, reaching new markets and opening new facilities- all of which means MORE hiring of workers and MORE revenue from having an expanded tax base."

Also, that looks like an interesting study but kind of a weird approach thats not especially relevant to decisions made as a result of the corporate income tax. They are looking at a simple count of "investment deals"- but I couldnt find how they define that. A much better measure would be inflow of total production capital ($ per capita) or even better, payroll expenditures ($ per capita). There is a BIG difference between an inflow of investment such as the purchase of undeveloped forestland or the purchasing of a percentage interest in an investment capital LP (not affected by corp income tax) and the movement of a coporate headquarters to the state, or the decision to keep, open or expand a production facility for companies already in state (both of which ARE affected by the corp tax rate). They both seem to be counted the same in this study but really, which do you think is more relevant to people's ability to get a job in VA?

And like I said, it's not strictly about being competitive with other states. It's about encouraging growth by influencing the decisions that businesses make from both outside AND inside the state. If companies are getting a better return on capital (which they will if they are assessed lower corp income taxes) then they will invest more capital- and that means more jobs, period. If you think this isnt a priority or that the Commonwealth doesnt need more jobs for its citizens, I beg to differ.

Paul Kositizka writes:

I'm from the old school of thinking about this. You can't tax a corporation. You merely pass it on to the customers in higher prices - in most instances. Better to get the business in VA and then figure out another way to skin the cat...

Waldo Jaquith writes:

I'm from the old school of thinking about this. You can't tax a person. You merely pass it on to the businesses in lower spending money - in most instances. Better to get the people in VA and then figure out another way to skin the cat...

dawnsirish writes:

I do believe that Virginia has made some very good processions to companies who move operations here such as millions in tax free benefits, hundreds of thousands to build access roads to get to the business, etc. The company must abide by a few requirement such as: guarantee to hire a certain number of employees by a certain amount of time, that they remain in location for a certain number of years, etc.

There have been several business' that have moved to Virginia in the last 10 years that did not follow through with these requirements. Does anyone remember John Dear coming and leaving James City County well under the five years they agreed to stay here and they did not hire all the employees they promised they would. Yet, they only had to pay back a small portion of what state of Virginia gave them to move here in the first place.

The citizens of Virginia are getting screwed without any of the fun that is associated with getting screwed!