Terry McAuliffe Backs Corporate Tax Cut
Speaking to reporters at the annual Associated Press day, McAuliffe said his tax package is necessary “in order to build the new Virginia economy" and to help "make the commonwealth competitive in the global market."
"My tax cut and credit proposals ensure that the commonwealth will attract more businesses, create jobs and promote economic development,” McAuliffe said.
The announcement comes as Old Dominion's economy has slowed to a crawl. Virginia saw zero-percent growth in statewide gross domestic product in 2014, according to the Bureau of Economic Analysis
McAuliffe proposes to drop Virginia's corporate income tax from its current rate of 6 percent to 5.75 percent, effective Jan. 1, 2017.
The governor, a longtime Democratic Party operative and friend of Bill and Hillary Clinton, noted in his remarks that North Carolina has reduced its corporate income tax rate from 6.9 percent to 5 percent and will drop the rate to 4 percent at the beginning of 2016.
McAuliffe also seeks to create a new research and development tax credit aimed at benefiting businesses with more than $5 million in annual research spending. He proposes to raise the annual cap on the state's existing research and development tax for all businesses from $6 million to $7 million.
McAuliffe also wants to increase the annual cap on Virginia’s Angel Investor tax credit, from $5 million to $9 million, and proposes to target $2 million for bioscience projects.
The tax proposals are an early look at McAuliffe's first two-year budget, which he will formally unveil Dec. 17.
Republicans had mixed reactions to the proposal.
"It would be premature to comment without the context of the full budget," Del. Chris Jones (R-Suffolk), chairman of the House Appropriations Committee, said in a press release. "Everything within the budget is a puzzle piece, and until we have all the pieces there is not much to say."
Jones said the House would not entertain any new spending initiatives, particularly on Medicaid expansion, which the GOP-dominated General Assembly has twice rejected.
"The House position on that issue is very clear," Jones said. "The Governor and the legislature have worked productively on the budget in the past when we have set Medicaid expansion aside, and it is my hope we can continue to do that."
McAuliffe's tax cut ideas got a more enthusiastic response from Del. Ben Cline (R-Amherest), a member of the House Finance Committee.
"We've got to stay competitive on taxes," Cline told AMI Newswire. "This proposed corporate tax cut may represent the first time (while) I've been in office that a governor has backed a general tax cut. Usually, taxes are going the other way — up."
"Tax cuts spur economic growth," Cline said. "The governor is speaking from the Republican talking points, and I believe any time anyone from either party starts talking about tax cuts, it's a good thing."
Cline said he would be pushing for a his own package of tax reductions in the 2016 General Assembly session, including a reduction in Virginia's personal income-tax rate.
Virginia's top personal income-tax rate is set at 5.75 percent on taxable income of $17,001 and higher. Cline said reducing this rate is especially good for small business owners, whose business income is often taxed at the top personal rate.
"One of the best things we can do to spur economic growth is to help small businesses reduce their tax burden," Cline said. "And reducing the personal rate is one of the things I'll be looking to my colleagues for support on in the next session."