“Economic Development” Teams in VA, MD and DC Bid for Northrop Grumman Headquarters

February 15, 2010

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 tax 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 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 Tax 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.

Table 1
Personal Income Tax Rates (State Plus Local) for Middle-Income People in DC Region*, as of January 1, 2010

State

Tax Rate

Virginia

5.75%

Maryland

7.95%**

District of Columbia

8.50%

* A couple with $100,000 in taxable income living in DC or the suburban counties of Virginia and Maryland.
** Maryland is the only state in the region with significant local income taxes: the rates are 3.1% of income in Prince George’s County and 3.2% of income in Montgomery and Howard Counties. http://individuals.marylandtaxes.com/incometax/localtax.asp.
Source: State and local tax forms, and see a 50-state table on the Tax Foundation site.

Table 2
Corporate Income Tax Rates in DC Region, as of January 1, 2010

State

Tax Rate

Virginia

6.00%*

Maryland

8.25%

District of Columbia

9.975%

* 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.
Source: State and local tax forms; and see a 50-state table on the Tax Foundation site.


Topics


Tags


Related Articles