McDonnell lures companies as governors move into national spotlight
Virginia Gov. Bob McDonnell has been poaching jobs from Maryland in recent months, intensifying the longtime rivalry between the neighboring states while he and Maryland Gov. Martin O'Malley seek to boost their national profiles.
McDonnell's latest victory came Monday, when the chairman of the Republican Governors Association lured 625 Bechtel Corp. jobs to Reston from Frederick, Md.
McDonnell announced the move just weeks after O'Malley, chairman of the Democratic Governors Association, promised Bechtel $9.5 million in taxpayer money to keep 1,250 jobs in Frederick.
"McDonnell hasn't been shy about what he is attempting to do," O'Malley spokeswoman Raquel Guillory told The Washington Examiner.
|A tale of two tax climates|
|State||Corporate income tax||Personal income tax||Local income tax||Personal property tax|
|Maryland||8.25 percent||Ranges: 2 percent to 6.25 percent||Ranges: 1.2 percent to 3.2 percent||None|
|Virginia||6.0 percent||Ranges: 2 percent to 5.75 percent||None||$4.57 per $100 of assessed value on vehicles and $4.75 per $100 of assessed value on business property|
O'Malley is still licking his wounds after defense giant Northrop Grumman chose Fairfax County over Montgomery County to move its headquarters. Maryland offered the company incentives adding up to $22.5 million -- nearly twice as much as Virginia offered. But across the Potomac, McDonnell boasted lower corporate and personal income tax rates, as well as fewer regulatory burdens.
"Maryland, with some of their tax and regulatory policies, [has] been less friendly to business," McDonnell said in a radio interview. "You see, Martin O'Malley doesn't think states ought to compete with one another."
To the contrary, the sole task of the Maryland Department of Business and Economic Development is to bring jobs to the state.
"We all compete for jobs, for companies," Guillory said. "In Maryland, we not only look nearby [for jobs] but we also look afar, because we have to ... be more creative than some other governors."
Virginia consistently ranks higher than Maryland in surveys examining states' business friendliness. The commonwealth's corporate tax rate, at 6 percent, is 2.25 percentage points lower than Maryland's.
An even larger gap exists between the states' personal income tax rates, with Maryland's rate approaching 10 percent when the local "piggyback" tax is included, compared with Virginia's top rate of 5.75 percent.
Virginia does, however, levy a personal property tax on vehicles and business property -- which includes items such as office furniture -- that does not exist in Maryland.
"Maryland started down this path a couple years ago of not understanding what it takes to run a successful business," said Kathleen Snyder, president and chief executive officer of the Maryland Chamber of Commerce. "The state does well against Virginia in some great areas, such as quality of life and environmental regulations, but it seriously lags Virginia in taxes and workplace regulations."
Maryland officials sprung into action last month after McDonnell began courting Bethesda-based Lockheed Martin, the largest defense contractor in the nation and one of Maryland's top employers. Virginia officials contacted the company after the Montgomery County Council proposed a non-binding resolution urging Congress to cut war spending.
"We absolutely checked in with [the company] right after that ... and there were subsequent meetings and phone calls to ensure the company feels valued in Maryland," said Karen Glenn Hood, spokeswoman for Maryland's Department of Business and Economic Development. She said Lockheed Martin assured the state it has no plans of moving.
The states' relationship has turned particularly prickly since McDonnell took office in 2010 and the two governors rose to party leadership positions -- giving them ample opportunity to square off in the national spotlight.
O'Malley says McDonnell's recent victories are unrelated to Maryland's business climate, but are rooted in Northern Virginia's proximity to the Pentagon and to two airports. He has criticized McDonnell for running a publicity show in touting his victories over Maryland.
"We don't believe celebrating a onetime overattainment is really helpful to the public discussion and the honest adult discussion about the challenges that loom ahead," O'Malley said in August.
But O'Malley isn't turning a deaf ear to McDonnell's criticisms. He has started a 60-day review period for state agencies to identify regulatory burdens that stifle job creation and is looking at ways to simplify the state's tax code, Guillory said.