Of three jurisdictions bidding for the privilege to host Northrop Grumman’s new corporate headquarters, only the District of Columbia’s government is saying publicly how many millions of its taxpayers’ money it is willing to shell out: a property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. abatement of $1.9 million a year and $5.5 million to help with relocation costs. The Washington Post’s Anita Kumar had the story.
Virginia is the presumptive front-runner because Northrop Grumman is already the largest private employer in the state, and Virginia has substantially lower personal and corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rates than either Maryland or DC (see tables below).
But Maryland Governor Martin O’Malley isn’t giving up. He rushed back from a visit to snowed-in rural Maryland counties, still wearing camouflage hunting jacket and boots, in time to give a red carpet tour of the State House to Northrop Grumman officials.
The TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Foundation takes a dim view of such bidding wars. States often overpay, granting such generous tax abatements that their already resident taxpayers must pitch in more just so that state “economic development” officials can make headlines rolling out the red carpet for a newcomer. A better approach is to maintain a business-friendly tax and regulatory regime and keep special concessions to a minimum, if possible limited to infrastructure improvements to the chosen site. Virginia should not have to pony up much to win this particular contest.
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Table 1 |
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State |
Tax Rate |
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Virginia |
5.75% |
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Maryland |
7.95%** |
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District of Columbia |
8.50% |
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* A couple with $100,000 in taxable income living in DC or the suburban counties of Virginia and Maryland. |
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Table 2 |
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State |
Tax Rate |
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Virginia |
6.00%* |
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Maryland |
8.25% |
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District of Columbia |
9.975% |
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* Virginia levies a bewildering local gross receipts tax called the BPOL that might vary from 0.03% to 0.31% depending on the category of activities Northrop Grumman is engaged in. |