Virginia’s Joint Legislative Review and Audit Review Commission (or JLARC), has issued a draft report on the state’s corporate income tax system and found that it’s not really all that much of a burden, raises lots of money, and proposals to get rid of it aren’t exactly wise. Surprising that a government agency would come to such a conclusion? No.
But buried within the report – on page 110, to be precise – is a true gem that captures the essence of the debate over the corporate tax:
Whether the societal benefits of potential higher employment and economic growth outweigh likely revenue losses is a policy choice.
Precisely. And how Virginia’s politicians answer that question will tell us a great deal about how serious they are about shrinking government and letting the economy grow.
Proponents of axing the corporate income tax say it’s a real no-brainer; it will spur economic growth and employment – two items Governor McDonnell and his team have doggedly pursued since taking office earlier this year.
But the path McDonnell & Co. has chosen is lined with subsidies – the small “deals” Lt. Gov. Bill Bolling is proud to pursue. Even the conservative editorial page at the Richmond Times-Dispatch has noticed the taxpayer money flowing to private companies, so much so that the paper warns, “an endless train of unnecessary expenditures like this one [meaning the $300,000 given to Capital One] could earn him the nickname Stimulus Bob.”
Eliminating the corporate tax would mean no need for subsidies. Even more, it could rescue the Governor from earning a rather unflattering nickname. Perhaps McDonnell can take his cue from Texas Gov. Rick Perry, who dashed off an invitation to Washington CEO’s when that state’s voters were deciding whether to impose an income tax (Texas has no such tax and Washington voters defeated the measure on election day). If Virginia dropped its corporate income tax, McDonnell could pick up his pen and start poaching firms in 42 other states.
But this brings us back to the original statement in the JLARC report. Let’s re-frame it this way:
“Is government’s purpose to foster private sector growth, or defend its bottom line?”
An old criticism on Richmond pols is that once they are elected, they spend more time and effort looking after the state’s interests rather than those of taxpayers. And in the case of the corporate tax, that state first streak is already showing:
Del. Jimmie Massie, R-Henrico, a pro-business legislator who asked for the JLARC study in 2009, said afterward that “we probably don’t need to eliminate the tax, but it could use some adjustments.”
Columnist Robert Novak used to say that Republicans were put on this earth to cut taxes. Not tinker with them. Not rationalize, streamline, re-jigger or massage them, but cut them.
Hmmm. Have all of Richmond’s tax-cutting Republicans moved to Austin?
