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Posted at 11:05 AM ET, 11/15/2010

A business-friendlier Virginia, no matter the cost?

By Peter Galuszka

The Old Dominion usually ranks in the top four in the usual business media listings of the most business-friendly, tax-easy, anti-labor-union states. Yet, some politicians are so conservative that they want to squeeze even more blood from a rock.

One idea that has been floated in the right wing of the General Assembly is eliminating the state's corporate income tax to make Virginia even more attractive to business, if that's humanly possible.

Not so fast, reports the Joint Legislative Audit and Review Commission, the state's version of the federal GAO, and economists at the University of Virginia. Scrubbing the corporate income tax might generate 12,785 jobs and $220 million over five years. But it also would cost the state about $3.6 billion in revenue.

To get back to the current level, the state would have to come up with 160,000 new jobs, a tall order for even the best, speed-dialing economic development official.

The study was requested by Del. Harry "Bob" Purkey (R-Virginia Beach), who is chairman of the House Finance Committee.

There are similarities between proposals to ditch the corporate income tax and privatize the state's ABC stores. In both cases, doing so would cost the revenue-squeezed state lots of tax money.

Another oddity about the corporate income tax is that only about one-third of the state's businesses pay it, and they tend to be large, if not multinational, companies with deep pockets. State corporate taxes are generally the last things on CEOs minds as they look for places to locate. And Virginia has so much federal defense money, not to mention the Pentagon, CIA and military bases galore, that there are other more serious incentives to being here.

But that doesn't stop the conservatives. As The Virginian-Pilot points out, they just love dumping taxes so that hard-pressed localities will have to make up the difference. So, we're not really talking about an Adam Smith-style free market. We're talking shell game.

After all, one of the reasons companies have traditionally picked Virginia in the past has to do with its good road and fine public university systems, both of which are now hurting because of state budget cuts.

Funny thing about Republicans. They always want to have their cake and eat it, too. So much for the taxpayer.

Peter Galuszka blogs at Bacon's Rebellion. The Local Blog Network is a group of bloggers from around the D.C. region who have agreed to make regular contributions to All Opinions Are Local.

By Peter Galuszka  | November 15, 2010; 11:05 AM ET
Categories:  Va. Politics, Virginia, development, economy, energy, environment, military, taxes, traffic, transportation  
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