RICHMOND — Progressives and conservatives agree on few things in Virginia politics, but both have placed ending the tax credits, which cost the commonwealth billions of dollars in lost revenue, high on their agenda for 2012.

Del. David Englin, (D-Alexandria), wants to shine a light on tax loopholes that allow companies to keep money that could be stuffed into state coffers.

Englin’s proposal would “allow the General Assembly, and legislators and citizens to go back and look and see how much money we’re losing from these tax giveaways, and whether we need to take them off the books or continue them,” he said Thursday during a news conference with liberal lawmakers of the Progressive Caucus.

For the conservatives, Del. Ben Cline, (R-Rockbridge), has proposed adding sunset provisions to all new tax credit deals being floated for Virginia businesses and asking the State Tax Commissioner to annually report the estimated revenue loss of each tax credit scheduled to expire in the next two years.

Englin said enhancing transparency for tax credits is “one area of overlap” between the Progressive Caucus, of which he is a member, and the Conservative Caucus, which Cline co-chairs.

“The vast majority of our agenda will be working against many of their initiatives,” Englin said, but “this is one area where I think liberals and conservatives can find common ground.”
The state’s November unemployment rate, calculated by the U.S. Bureau of Labor Statistics, was 6.2 percent, and GOP leaders in the General Assembly and Republican Gov. Bob McDonnell are working to carve out fresh tax loopholes to attract new employers.

The state’s unemployment rate is relatively low when compared with its neighbors. West Virginia’s unemployment rate for November was 7.8 percent; North Carolina’s at 10 percent; and Maryland’s at 6.9 percent. The national unemployment rate for December was 8.5 percent.

Still, McDonnell said Thursday, tax reform is needed to bolster the overall jobs outlook.

“What I think is we need an updated tax code that will make Virginia more competitive and have our system be more fair and equitable to all concerned, and do things to promote jobs,” he said. “I’ve got a lot of new tax credits and policies that I put in this year, in the budget, and also in legislation to try to make it easier to create jobs.”

As part of his 2012 agenda, McDonnell has proposed tax credits for small-business investors. Those who invest in small businesses with less than $10 million in annual revenue and fewer than 250 employees would be eligible for tax credits.

Passing the tax credit is a priority in the Senate, where Republicans are tied with Democrats at 20. But the GOP enjoys majority control of most issues thanks to Lt. Gov. Bill Bolling’s tie-breaking vote power. Bolling is a Republican.

House Republicans, who hold a 67-32 majority, also are pushing for more tax breaks as a way to spur economic growth.

“Helping job creators in Virginia secure the capital investments they need in order to create jobs is a critical piece of the puzzle,” said Del. Terry Kilgore, (R-Scott), who proposed extending the Major Business Facility Tax Credit through December 2014.

The tax credit applies to both regional and national companies based in Virginia that create 50 full-time jobs. After surpassing 50 workers, companies earn a $1,000 tax deduction for each new employee.

Englin said ending those tax handouts and taking a closer look at how much they cost the state should be a basic part of responsible fiscal management.

Virginia law shields the names of businesses and individuals who receive the tax credits. Although the Virginia Department of Taxation keeps records about which corporations and individuals are receiving the tax preferences, state code forbids officials from releasing the data to the public or the media.

But a November 2011 study by the Joint Legislative Audit and Review Commission, an oversight body for the General Assembly, followed the money and its impact.

In 2008, the study showed, taxpayers unwittingly handed out $12.5 billion in tax incentives to special interests — an amount nearly equal to the $14.3 billion in revenue collected that year.

Virginia U.S. Sen. Mark Warner, a Democrat, visited the state Thursday and weighed in on the issue for Virginia Statehouse News.

“One of the things we’re looking at on the federal level is trying to make our tax code simpler, trying to basically eliminate tax expenditures — you can do that and then actually really lower rates,” he said.

“I’m not sure what the request has been here at the state level, but anything that’s going to make your tax code simpler, I think in the long run, makes good sense.”

Cline’s bill, H.B. 246, is before the House Finance Committee. Read it: http://lis.virginia.gov/cgi-bin/legp604.exe?121+ful+HB246

The small business investor tax credit, S.B. 344, is before the Senate Finance Committee. Read it: http://lis.virginia.gov/cgi-bin/legp604.exe?121+ful+SB344
Read JLARC’s report on the impact of Virginia tax preferences: http://jlarc.state.va.us/meetings/November11/TaxPref.pdf