RICHMOND, Va. — Republican Ken Cuccinelli on Tuesday proposed slashing Virginia income taxes, including a one-third reduction in corporate tax rates, to cultivate business expansion and job growth.
The conservative attorney general, relishing a respite from weeks of questions about his ties to troubled tobacco and food-supplements maker Star Scientific and its chief executive, said in his first policy news conference that he’d offset state revenue losses by eliminating a broad range of exemptions and other incentives for businesses and individuals.
Tuesday’s news conference at the flagship store of a chain of frozen yogurt parlors coincided with the third day of Democratic rival Terry McAuliffe’s official launch of a candidacy he declared six months ago.
McAuliffe campaigned Tuesday in Roanoke and Danville. Like Cuccinelli, McAuliffe sought to seize the driving issue of jobs and reviving the economy and shift the focus off nagging questions of his own about a struggling electric-car venture he headed for the past three years.
Cuccinelli said the premise of his economic policy would be eliminating income tax breaks woven into Virginia law for decades largely at the behest of business and instead offering lower overall taxes as an incentive for businesses to expand or relocate into Virginia.
“My focus is going to be on much more across-the-board — I don’t want to say incentives — but better economic environment, lower taxes overall for everybody rather than trying to cherry-pick a few folks to come in or to expand,” Cuccinelli said.
He proposes a 13 percent reduction of the individual income tax rate from 5.75 percent to 5 percent of state-taxable income of $17,001 or more during a four-year span starting in 2014. He also proposed slashing the corporate income tax rate from 6 percent to 4 percent, a 33 percent reduction.
Cuccinelli estimated the gross revenue lost before collections recouped from unspecified loophole and exemption eliminations would total to $1.4 billion based on 2012 state general revenues.
Individual income taxes account for about two-thirds of Virginia’s general revenues which fund such core services as health care, education and public safety. Corporate income tax accounts for about 5 percent.
“As governor, I’ll line up all the special interests and let them carve-outs and loopholes one at a time, and if they can’t, it’ll be goodbye loophole,” Cuccinelli said.
Democrats quickly denounced the plan as ideologically driven and fiscally reckless.
“Cuccinelli’s proposal would lead to a budget crisis that could undermine education, force localities to dramatically raise property taxes, and threaten the Commonwealth’s bond rating,” said Evan Feinman, director of policy for McAuliffe’s campaign.
Former Republican Del. Vincent F. Callahan, who chaired the budget-writing House Appropriations Committee for several years, said “Cuccinelli is proposing to reduce taxes, but is silent as to where will the needed revenue come from. Reducing taxes would have a huge negative impact on state services, including, but not limited to, education and safety services.”
Callahan endorsed McAuliffe earlier this year.
Cuccinelli’s proposals also target three fonts of revenue important to city and county governments but widely loathed by businesses.
Cuccinelli proposes a Small Business Tax Relief Commission to begin as early as December examining ways to eliminate the machine and tool tax, the merchants capital tax and the levy business interests have tried since the 1990s to kill, the business profession and occupational license tax on a business’s gross receipts.
Local governments, with no ability to raise rates on any tax other than property taxes, have been successful in staving off elimination of the taxes by warning of inevitably higher tax rates on real estate. Cuccinelli said the commission would first have to devise a way to prevent revenue losses for cities and counties before eliminating the taxes.
The Democratic mayor of Hampton, Molly Ward, said the proposal would “result in additional stress on municipal budgets for police, fire and schools that our communities cannot afford.”
For his news conference, Cuccinelli chose the flagship shop of the Sweet Frog frozen yogurt stores in Richmond’s tony Carytown area. Company chief operating officer Vance Spilman said his company said tax policy directly affects the bottom line of his privately held company operates in 18 states, two foreign countries, directly employing 400 people and with another 1,600 employed by local franchise owners. The company, founded in 2009 in suburban Richmond, reported 2012 sales of $30 million.
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