Letter: Help Virginia compete, adopt competitive tax reforms
This letter was sent by Loudoun Chamber President & CEO Tony Howard to a select group of Virginia Senators and Delegates who are negotiating the final budget package for consideration by the General Assembly and approval by the Governor. Learn how to get involved with the Public Policy committee here.
Date: Friday, February 17, 2023
Dear Virginia General Assembly Budget Conferees:
Yet again, Virginia received word this week that the Commonwealth is continuing to lose economic ground to our nearest competitor states in the Southeast.
While states like Georgia, North and South Carolina and Texas continue to far outpace Virginia in metrics such as new resident migration, commercial investment and job growth, a new study by the Census Bureau finds these states creating far more new businesses than Virginia. Of the Old Dominion’s ten closest southeast state competitors, eight are in the top 10 for new business application growth in 2022. Virginia is in the middle of the pack.
Therefore, we urge you to act with all haste to improve Virginia’s business climate and adopt the tax reforms proposed by Governor Youngkin, which include:
- Reducing the business income tax rate from 6% to 5%, which would save Virginia businesses $300 million annually.
- Creating a deduction for qualified business income of 10% for small businesses, which would save Virginia small businesses more than $160 million in FY 2024 and more than $110 million in FY 2025.
- Increasing the business interest expense deduction (Section 163(j)) from 30% to 50%, which would save businesses more than $10 million in FY 2024 and more than $20 million annually beginning in FY 2025.
- Increasing the standard deduction and lowering the individual tax rate to 5.5%, which benefits all Virginians.
- Eliminating the age requirement on veteran retirement income tax, which recognizes the sacrifices made by Virginia’s large military community and would help Virginia retain more of our veteran population leaving for other states.
These proposed tax changes would spur economic growth and allow the Commonwealth to better compete with other states in attracting and retaining business and talent.
In 2021, North Carolina reduced their corporate tax rate with a goal to phase the corporate income tax out completely by 2030. Additionally, North Carolinians are keeping more of their hard-earned money with their reduced individual income tax rate. People and businesses are moving to North Carolina in response to these changes.
Between July 1, 2021, and June 30, 2022, Virginia gained about 26,000 residents. In contrast, North Carolina added more than 133,000 residents. Likewise, Virginia had 40.1% more business applications in 2022 compared to 2019, while North Carolina saw 57.6% more business applications in 2022 compared to 2019. These differences are significant and will continue to grow unless Virginia is able to make the necessary changes to compete with states such as North Carolina.
When deciding where to locate their businesses, corporations seek out states that have lower state corporate tax rates and strong talent pipelines. As long as Virginia’s corporate tax rate remains higher than our surrounding and competing states, the Commonwealth may lose out on transformational economic development projects that benefit all Virginians.
I respectfully request that you include these tax savings for corporations and individuals so Virginia can remain a top state for business.
Tony Howard, CCE, IOM
President & CEO, Loudoun Chamber of Commerce