RICHMOND, VA (WWBT) - The General Assembly is considering a bill that would give manufacturers a tax break for three years. It's meant to attract new business to the state and help existing companies to grow. But can localities afford to give up the money?
At Colortree and Graphics Innovations, machine tool taxes on the equipment used to print, fold and cut their products total $80,000 a year. Counties and cities collect machine tool taxes based on the equipment's value.
Colortree's Pat Patterson says it's disincentive to grow. "We buy more heavy equipment we pay more tax. So one of things it does to us is that when we are looking at adding equipment, adding used equipment to keep our costs down."
Delegate Harry Purkey and the Virginia Manufacturers Association want to remove every localities' machine tool taxes for three years. Said the VMA's Brett Vassey, "That would incentivize a billion dollars in capital investment into the commonwealth from our industries. Both for existing companies to retool and new companies to locate."
"We are seeing that we are very uncompetitive nationally and globally when it comes to taxes," said Delegate Purkey. "If we don't do it, the jobs are gone."
The City of Virginia Beach just decided to phase out its machine tool tax to attract more businesses. And Henrico County is asking to cut its machine tool tax to lure defense contractors.
The machine tool tax usually adds up to a few million dollars for each locality. To put that in perspective, hotel and restaurant taxes add up to tens of millions. But cutting it, in these hard times, would be still be a big loss for localities to consider.
Vassey says they can make up the loss through business growth. "What we're trying to encourage local governments to do is embrace this limited approach and grow their local businesses and grow by new investments. Then drive all the income from the other taxes they get, they get sale taxes, property taxes, business taxes."
Delegate Purkey has proposed cutting the machine tool tax last year and it did not pass. We'll keep you updated on the bill's progress this year.