By Pat Mullins
Let me say this before I get started: I like North Carolina. Everyone knows how much I love ACC basketball.
But our neighbors to south have all but declared war on us, and they’re probably the most serious threat in the Commonwealth’s fight to keep and recruit employers. Over the summer, Republicans there enacted major tax reform to make their code more business and family friendly. Then earlier this month, they launched an effort to completely roll back the state’s income tax.
One need look no further than Governor Rick Perry’s recent job-poaching trip to Maryland for proof that Virginia is in permanent competition with our neighbors for jobs. If we aren’t the most business friendly place to locate a business, they’ll go elsewhere. It’s as simple as that.
Ken Cuccinelli’s tax plan has three fundamental features aimed at doing just that: make Virginia more competitive, make our tax code fairer, and keep a lid on new state government spending.
Under Ken’s plan, income tax rates would be reduced for individuals and businesses. The business rate would go down to 4 percent, lower than North Carolina’s new rate. Individuals would see the 5.75 percent rate lowered to 5 percent.
But the real elegance of the Cuccinelli plan is how it pays for the tax reduction: by cleaning out Virginia’s overstuffed closet full of tax credits and preferences.
Why do we need to clean out the tax credit closet? Just look across the Potomac. Congress has a bad habit of hoarding tax credits. At one point last year, Congress was considering tax breaks for wooden arrow manufacturers. Maybe I’m uninformed, but it seems unlikely that wooden arrows are a pressing national concern.
Virginia’s own tax credit closet is getting pretty full these days. Some of these credits are still useful, like a Swiss army knife. They do a lot of good, and they don’t take up a lot of space (or in this case, money). They’re just as useful now as they day they were written into the code.
But for every Swiss army knife, there’s also a neon-orange polyester leisure suit. It might have been a good idea at one time, not so much today.
Cleaning out the leisure suits makes room in the closet (or budget) for things we really need — like a tax structure that will keep Virginia more competitive than North Carolina and other states.
The third component of Ken’s plan is simple, too: put a cap on how much government spending can grow. His proposal would limit that growth to the rate of inflation plus the rate of population growth. Capping spending makes sure that Richmond doesn’t go crazy and start stuffing the budget closet full of budget-busting items again.
That’s the heart of Ken Cuccinelli’s tax plan: it keeps Virginia economically competitive, and it does it in a way that makes taxation more efficient, fair, and economically competitive.
And before anyone hyperventilates about “paying” for the rate reductions, Ken has said from day one that if the General Assembly doesn’t find enough tax credit reductions to offset the lower tax rates, we don’t get the lower tax rates.
Let’s compare Ken’s plan with Terry McAuliffe’s plan, which is thin, to say the least. He’s mentioned making some changes to the BPOL tax and the Machinery and Tools tax. Hardly anyone thinks those taxes don’t need some changes, but those are local taxes. Even if they were completely repealed, Virginia would still be at a disadvantage to North Carolina.
The sad truth is that Terry has no plan to keep Virginia competitive with surrounding states. He told the Northern Virginia Technology Council’s PAC that his economic development strategy largely consisted of taking people out for drinks. That might work in Washington’s “favor factory,” but in Virginia, it takes more than just knowing the right people to get ahead.
Ken Cuccinelli has a plan to keep Virginia competitive, make our tax code more efficient, limit spending growth, all while protecting core services like education, law enforcement, and transportation. Terry doesn’t even realize we’re in a competition.
Like I said last week, it’s not a tough choice to make.
Pat Mullins is chairman of the Republican Party of Virginia
