On Friday I received the latest update from Newt Gingrich in my e-mail box. Even though I don’t always agree with him as to tactics – and his Presidential campaign in 2012 went nowhere but to Salisbury University – the one thing you cannot take away from him is the 1994 Contract With America, signifying a Republican resurgence in the post-Reagan era. And you have to respect him for thinking years or decades forward, such as he did in this case.
His piece on Friday looked at the economic prowess of states which did not collect an income tax in comparison to those that did. It even cited some of the same Art Laffer data that unsuccessful gubernatorial candidate Charles Lollar used in his pitch to eliminate Maryland’s state income tax.
But the part which intrigued me came toward the end, when he wrote about the effort by Vince Haley, a State Senate candidate, to eventually eliminate Virginia’s state income tax. Certainly it doesn’t have a great chance of success in the near term with a Democratic governor, but one has to ask what the effects would be if the commonwealth made it all the way down that path – and how would it affect us?
For nearly four years, a significant part of the time of my outside job has been spent on the Eastern Shore of Virginia. I’ve been over most of that strip from Chincoteague to Cape Charles for some task or other, but if you just pay attention to the drive along U.S. 13 you can see that the ESV is not the wealthiest area, nor are many ingredients for prosperity present. Compared to Virginia’s 4% population growth as a whole, the two counties which make up the Eastern Shore are leaking population, with Northampton County (the more southern of the two, closer to the Norfolk region) dropping by 2 percent and Accomack County (closer to Maryland) holding almost steady, with an estimated decline of less than 20 people in a county of just over 33,000.
By way of comparison, the two combined are less than half the population of Wicomico County, and there are good reasons for that: their geographic isolation at the end of the Delmarva Peninsula and a lack of job opportunities outside of the Wallops Island NASA station. Locally, their slogan is “You’ll Love Our Nature” and that is one thing the area can boast given its coastlines on Chesapeake Bay and the Atlantic Ocean are often less than 20 miles apart and meet at its southern tip.
Elected officials of all stripes are trying to increase business at the Wallops Island complex as they see the potential of unmanned space flights from the facility, with the prospect of good-paying ancillary jobs the spaceport creates. But the benefit of not having an income tax would likely be an influx of well-to-do retirees and others with the disposable income residents of the ESV currently lack. It may even be a better attraction than coastal Delaware and its lack of a sales tax, since those outlets are a relatively easy drive away from the northern reaches of Virginia’s slice of the peninsula.
Those who try to promote the area probably realize that prospects for certain types of businesses wouldn’t be very good because the ESV lacks some of the infrastructure necessary for manufacturing. But if the area becomes advantageous in a financial sense thanks to an elimination of the income tax, it can become a playground of sorts for affluent retirees who would like to slow down and enjoy a more rural lifestyle, allowing the remainder of the residents to share in that wealth. On the other hand I can also understand where many ESV residents may object to eliminating the state income tax, especially if they receive Virginia’s version of the Earned Income Tax Credit they call the CLI.
If all this came to pass, though, Maryland would be left in the middle, suffering from having a sales tax-free state siphoning off its retail industry and an income tax-free state choking off its wealth. (Don’t forget that an income tax-free Virginia may have devastating effects on the capital region of Maryland, too.) Of course, we can work to eliminate both those issues but it would take a larger sea change in philosophy than Annapolis has the stomach for.
It may not be the golden ticket to prosperity, but given the slow decline of our Delmarva neighbors to the south a drastic measure like eliminating their income tax may be the only way to resuscitate the area.