A Virginia Republican lawmaker wants to do away with the state's corporate income tax to attract more companies to the Old Dominion, already designated as one of the best states for business.
Sen. Steve Martin, R-Chesterfield, has introduced legislation that would eliminate the state's 6 percent corporate income tax starting in 2014, which would make Virginia the sixth state without one. Martin said businesses would flock to the commonwealth to set up shop and take advantage of a tax-friendly environment.
"Companies would want to come here and create jobs," Martin said. "The fact is that businesses that pay taxes are really drawing their money from increasing the prices on goods and services or profits so there are lower income taxes or they're able to hire fewer people."
Corporate income taxes make up about 5 percent of state revenues, the third largest chunk after the individual income and sales taxes, and totaled about $860 million last year. That's expected to grow to $907 million by fiscal year 2014.
Martin also filed a bill last week that would eliminate the sales and use tax on gold, silver, platinum and palladium bullion and currency.
Democrats, who frequently rail against loopholes in the tax code, are likely to line up strongly against a plan to completely abolish taxes.
"Unless he has another source of revenue, it's fiscally irresponsible at a time when we need an increase in revenues," said Sen. Don McEachin, D-Henrico.
Martin said the boost in employment from the policy will mean more income and sales tax collections because people will earn and spend more. He also predicted goods would be cheaper.
"I think it will more than pay for itself," Martin said.
McEachin scoffed at that notion. "It's not going to have the trickle down effect he hopes for," he said.
Nevada, South Dakota, Texas, Washington and Wyoming don't impose a corporate income tax. Texas was ranked by CNBC as the top state to do business, surpassing Virginia, which was third this year after a first-place finish in 2011. South Dakota and Wyoming also cracked the top 10.
Maryland has a corporate income tax of 8.25 percent and the District's is about 10 percent.
Gov. Bob McDonnell, a Republican, has not put forward legislation to repeal the corporate income tax, spokesman Paul Logan said, but "the governor is committed to ensuring a tax and regulatory climate in Virginia that encourages and rewards private-sector job creation and entrepreneurship."