After months of intense courtship, it wasn’t Maryland or the District of Columbia, but their rival across the river that finally got the nod of approval from defense contractor Northrop Grumman, ranked 61st on the Fortune 500. The storied company — maker of the B-2 stealth bomber, F-14 Tomcat Navy fighter and many other storied military aircraft — recently announced its decision to move its corporate headquarters from Los Angeles to Northern Virginia. This is a big win for the commonwealth, as Northrop employs more than 122,000 people worldwide, generated more than $32 billion in revenue last year, ranks as the fourth-largest defense contractor, and is the nation’s largest shipbuilder. The two spurned suitors have nobody but themselves to blame for their loss to Virginia.
Northrop Chief Executive Officer Wes Bush cited “facility considerations, proximity to our customers and overall economics” to explain why Virginia was successful in wooing the company despite the fact District officials offered a $25 million tax break and Maryland a $22 million sweetener. Virginia’s puny-by-comparison economic incentive package was valued at a mere $14 million. The crucial difference is that Virginia is a better place to do business. Forbes magazine rates the state as the most business-friendly in the nation. With a 6 percent corporate tax rate, it costs less to run a business in Virginia than either the District (9 percent) or Maryland (8.25 percent).
Virginia’s superior business rating is no fluke. It results from official policies that over the years have sent strong welcome signals to companies like Northrop and that contrast mightily with years of anti-business policies across the Potomac. For example, Virginia Gov. Bob McDonnell backed up his 2009 campaign promise to protect taxpayers by trimming $2 billion from his state budget without a corresponding tax increase. In contrast, Maryland Gov. Martin O’Malley’s “millionaire’s tax” convinced thousands of wealthy taxpayers to flee. And while state officials tout their comparatively low unemployment rate, the reality is that most of Maryland’s new jobs are revenue-consuming government positions, not revenue-producing jobs in the private sector.
Maryland and D.C. are too much like California, where absurdly high levels of government spending, taxation and regulation have decimated what was once the world’s fifth-largest economy. When a company like Northrop decides to pack up and leave California, it’s not going to move to a jurisdiction with similar systemic problems.
It’s not like the losers here weren’t warned: A Jan. 2, 2008, Examiner editorial said “Maryland’s future economic outlook is much bleaker than Virginia’s” for all the reasons repeated above. Northrop’s decision is the latest demonstration that government policies, especially taxes, do indeed have consequences.
