It looks like Virginia finally won the Northrop Grumman Sweepstakes. According to State Tax Today(subscription required), on Monday, Northrop Grumman announced that it would be moving its corporate headquarters to northern Virginia. Maryland, Virginia, and the District of Columbia were immersed in an aggressive regional competition to lure the corporation’s headquarters into their respective jurisdictions. In regards to the reason Virginia was chosen, Wes Bush, CEO and president of Northrop Grumman remarked, “Our final decision was driven largely by facility considerations, proximity to our customers, and overall economics.”
Virginia will become home to Northrop Grumman’s corporate headquarters (and the 300 jobs that come with it) in part due to a yet-to-be-finalized incentive package from the Virginia Economic Development Partnership. (Currently a $12-14 million package—in comparison to DC’s offered 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. break package of $25 million) We often argue such incentives are ineffective at sustained economic development overall. These types of incentives are also unfair to resident businesses that have to stand by and watch as the state’s economic development office rolls out the red carpet of tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the IRS, preventing them from having to pay income tax. s for newcomers.
On the flip side of the coin, it is likely that DC and Maryland lost out partly because of their regionally uncompetitive corporate and individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. rates. In specific regards to Maryland, businesses and their CEOs undoubtedly consider the state’s abnormally high rates, especially the millionaire’s tax rate, when deciding where to locate their business and homes. As we have frequently noted, regional competition does matter and Maryland continues to find that out the hard way.
In addition to showing millionaires the door, Maryland is continuing to direct corporations south.
More on the District of Columbia here.
More on the Maryland here.
More on the Virginia here.Share