In the complicated and competitive world of business climate rankings, tax policy plays a big role. And while Virginia ranks in the middle of the pack accordint to a new Business Tax Climate analysis, the Commonwealth is losing ground in some areas.
The Tax Foundation’s annual State Business Tax Climate Index ranks Virginia 22nd, right at the middle of the pack in terms of how the state tax system is structured. Jared Walczak is a senior policy analyst with the Center for State Tax Policy at the Tax Foundation. “Virginia is middle of the pack, and I think that for a long time Virginia policymakers have felt that we just need to be better than Maryland.”
He says Virginia would have a higher rank if not for the reliance, he says over reliance, on the business professional occupational license tax, known as the BPOL tax.
“The BPOL dates back to the colonial era and became a major tax to pay off the debt from the War of 1812," Walczak said. "So Virginia is a little out of date in still keeping this as a major component of its local tax system.”
One area where Virginia is losing ground — corporate taxes. Virginia slipped from seventh place to tenth place for two reasons. Other states are reducing their corporate income taxes while Virginia’s remains unchanged.
And other states are reducing their reliance on incentives. Walczak says incentives are problematic because governments shouldn’t be in the business of picking winners and losers.