An announcement by GOP candidate for governor Ed Gillespie has jump-started a long overdue discussion about tax reform in Virginia. His “Cutting Taxes for All Virginians Plan” includes a reduction in income taxes across the board and the elimination of the antiquated tax on business gross receipts, paid for with economic growth.

The plan is a good first step that will make Virginia more competitive regionally while responsibly limiting government growth in the future. Virginia imposes a tax on all income, with a top marginal rate of 5.75 percent on everything earned above $17,000. Gillespie’s plan would reduce income taxes by 10 percent across the board, with reductions in each of the four tax brackets. A typical family of four would see an annual savings of $1,300. Virginians haven’t experienced corporate or income tax cuts since 1972.

In a bubble, this might not mean much. But in recent years, taxpayers in bordering states Tennessee and North Carolina – two states where the overall tax burden is lower – have made strides to leapfrog Virginia as an appealing place to live, start and grow a business. The top rate in North Carolina is 5.49 percent with the first $17,000 in earnings exempt from taxes. Tennessee does not tax earnings at all. They’re not letting their feet off the accelerator either in North Carolina, where on the same day that Gillespie rolled out his tax plan, Republican leadership in the Tar Heel State proposed lowering their top income tax rate to 5.35 percent and proposed that the corporate tax rate should fall to 2.5 percent next year, down from a current rate of 3 percent. Again, compare this to Virginia’s current top rate of 5.75 percent and corporate rate of 6 percent.

While Gillespie’s plan does not currently include a corporate rate reduction, it does completely eliminate the outdated Business Professional and Occupational Licensing (BPOL) Tax. “The best part about this tax plan might not even be the across the board income tax rate cut. It might be the phase-out of the local gross receipts tax known as ‘BPOL,’ says Ryan Ellis, a Forbes contributor and IRS enrolled agent. “It’s probably the most unfair tax levied in Virginia, as it taxes small businesses based on revenue, not profits.” In Virginia, a business may owe taxes even if it loses money in a given year. The tax is biased against new businesses in particular that often show losses in the first few years. Eliminating this tax would go a long way in simplifying the state tax code and making the state a more appealing place to grow and start a business.

Opponents of tax simplicity or reductions will argue that reducing the amount of money we take from taxpayers will harm their favorite spending priority – education, transportation, you pick. That’s the genius of Gillespie’s tax plan; it relies on future economic and revenue growth instead of currently collected tax revenues to pay for itself. The plan also suggests offsetting rate reduction through code simplicity and the elimination of tax preferences, in a revenue neutral way. When they enact historic tax reform in Washington this year, states are likely to experience much higher than average economic growth as a result, which will mean more money for the state of Virginia.

Revenue triggers will ensure that while priorities like education get a fair cut, taxpayers, and not government bureaucracy, benefit from economic growth. Gillespie’s inclusion of revenue triggers in his tax plan is not only innovative; it’s extremely timely. One of Gillespie’s opponents is not without good ideas himself. Though less specific, Corey Stewart suggests his own tax plan will reduce the tax burden on working Virginians by 17.4 percent and move the state budget towards zero-based budgeting, two recommendations that stand to greatly benefit taxpayers in the Commonwealth.

Republican Senator Frank Wagner has no plan for tax reductions, which comes as little surprise given his support for tax increases on everything from hotels to online purchases to gasoline and general sales.

Democrats Tom Perriello and Ralph Northam have also offered nothing in the form of tax relief for Virginians, with Perriello going so far as to suggest in response to Gillespie’s plan that he actually believes the state needed tax hikes. 45 years is too long. It’s time Virginia gets serious about spending restraint, tax reductions and tax reform. Gillespie’s tax plan is a great start.

Paul Blair is the strategic initiatives director at Americans for Tax Reform. He grew up in Virginia Beach and now lives in Washington, D.C. You can follow him on Twitter @gopaulblair or email him at pblair@atr.org.

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