North Carolina dominates Virginia in economic outlook report

By Kathryn Watson | Watchdog.org, Virginia Bureau

ALEXANDRIA, Va. — Virginia lawmakers don’t like to bring it up, but their neighbor to the south is outdoing the Old Dominion — at least, when it comes to economic prospects.

It’s hard to have a conversation with a state lawmaker about business or the economy without him or her mentioning the state’s top ranking in Forbes’ 2013 best states for business. It’s much less likely that lawmaker will bring up how North Carolina’s recently decreased tax burden, coupled with Virginia’s recent tax increases, means Virginia is getting overshadowed.

It’s a contrast that could become even more apparent in the future, if the economic outlook of the American Legislative Exchange Council’s 2014 Rich States, Poor States report is right.

While major tax reforms bumped North Carolina up 16 spots to sixth in the economic outlook ranking, last year’s major transportation tax increase from the Legislature under former Gov. Bob McDonnell bumped Virginia from fifth place to 11th. It’s a dramatic swap for the two rival states, and the worst economic outlook Virginia has had since 2008, when the limited-government, free-markets-oriented ALEC began tracking states’ prospects.

While rankings like Forbes’ factor in things like weather and quality of life — things nobody can control — ALEC’s Rich States, Poor States report focuses strictly on tax policy.

“Our index focuses a bit more on areas that legislators control,” said Jonathan Williams, ALEC’s director of tax and fiscal policy. “We wanted to make sure we come up with an index that actually can change.”

Researchers examined 15 different indicators to come up with the scores, considering everything from a state’s right-to-work laws to personal income tax rates.

Besides the transportation tax hike that means billions more in taxes for Virginians, other things that pulled the commonwealth’s score down include its high top corporate marginal income tax rate, higher-than-average number of public employees per 1,000 residents and its lack of tax expenditure limits.

— Kathryn Watson is an investigative reporter for Watchdog.org, and can be reached at kwatson@watchdog.org.