Legislators looking to strengthen the state's competitive edge when vying for new jobs are proposing to scrap the state's corporate income tax.
The idea is being pushed by a small group of businessmen who see it lending a "wow factor" to the state's marketing pitch, creating jobs and encouraging investment.
Del. Harry R. Purkey, R-Virginia Beach and chairman of the House Finance Committee, has submitted legislation that would scrap the tax. Sen. Ryan T. McDougle, R-Hanover, said he'll submit a bill to get rid of the tax effective in January 2012.
It would give Virginia "economic competitiveness that is just really unparalleled," said McDougle, who quotes estimates that revenue from new jobs should exceed the money lost within two years.
But the idea is getting a cool reception from state business organizations, which wonder about the need for the change and the cost to a state facing a potential budget shortfall of $4.2 billion.
Corporations pay a 6 percent income tax in Virginia, which brought in $648 million to the general fund for fiscal 2009. The tax is projected to bring in $662.2 million for 2010, according to the latest estimate.
"It's kind of puzzling, because it does cost money," said Keith D. Cheatham, vice president of government affairs at the Virginia Chamber of Commerce, which hasn't taken a position on the idea.
Gov.-elect Bob McDonnell, who was elected by a hefty margin on a theme of job creation, has been briefed by the supporters, who hope to take his promise not to raise taxes a step further.
"It's an innovative idea and something that we are looking at," said Eric Finkbeiner, director of policy with McDonnell's transition team. "The governor-elect is looking at any number of initiatives on the idea of attracting new jobs and businesses, and if this is something that can be demonstrated to do that, he is very interested."
A member of the transition team said it is working on an independent analysis to see if the proposed benefit is realistic.
Some companies in the Richmond area think the negative publicity could outweigh any benefit from eliminating the tax, said Robert L. Bradham, lobbyist for the Greater Richmond Chamber, which hasn't taken a position.
"The folks would have a hard time to sell it to the Average Joe citizen because it looks like corporate welfare," Bradham said.
Purely from the standpoint of marketing the state to potential business, it could be a helpful tool, said Greg Wingfield, president and chief executive officer of the Greater Richmond Partnership Inc.
"It would be a great addition to our economic-development marketing kit," he said, speaking as an economic-development professional and not on behalf of the partnership, which has not taken a position.
Bob Marcellus, president of the Goochland County-based Richmond Group Fund Co., a hedge-fund manager and global trader, first raised the topic with McDonnell last year and then briefed him during the campaign.
"We advocated if he didn't campaign on it, he should govern on it," said Marcellus, a member of McDonnell's economic-development transition work group.
Contact Olympia Meola at (804) 649-6812 or omeola@timesdispatch.com.
Contact Michael Martz at (804) 649-6964 or mmartz@timesdispatch.com.
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