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

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.