Henrico slashes tool tax in bid to draw manufacturers

Henrico County officials are hoping that their plan to slash the county’s machinery and tools tax by 70 percent will bear dividends in the long run, drawing lucrative new manufacturing jobs to the county.

The proposal, included in County Manager John A. Vithoulkas’ proposed budget, would reduce the county machinery and tools tax from $1 per $100 of value to 30 cents per $100. In the short term, that’s expected to cost the county about $1.3 million in lost revenue next year.

“In the long term, this should lead to more manufacturing jobs, which will add more revenue to the county’s coffers,” Vithoulkas said in an email. “We are competing for jobs in the world market now. And we aim to not just compete, but to win.”

Vithoulkas said the low tax, coupled with the county’s stable real estate tax — which hasn’t increased since 1978 — would make the county attractive to manufacturers. Additionally, the county manager recently said he expects the county to be able to go at least a decade without any new stormwater utility tax.

The cut appears poised to pass. It didn’t receive any opposition during last week’s extensive legislative budget hearings. There will also be a public hearing before the county’s Board of Supervisors adopts the budget.

Gary McLaren, executive director of the Henrico Economic Development Authority, said the move is also intended to help the county capitalize on increased activity in the manufacturing sector, including so-called “on-shoring” of manufacturing jobs by returning them to the United States. McLaren’s office has recently made several trips abroad to pitch Henrico County to businesses, McLaren said.

“We’re serious about attracting manufacturing to Henrico County, and I think this is proof of that,” McLaren said.

Brett A. Vassey, president and CEO of the Virginia Manufacturers Association, also praised the proposal.

Vassey called the tax a “throwback” and said it’s one of the biggest impediments to getting companies to expand in or relocate to Virginia.

“It’s a job-killing tax, and I am absolutely just thrilled that the county is considering doing this,” he said.

Manufacturers have to constantly adapt and improve to survive in the industry, he said. But that means new equipment, which can mean high machinery and tools tax bills.

McLaren couldn’t definitively attribute any missed deals to the tax, given the variety of factors companies consider, but said he had heard from prospects that the tax was an area in which Henrico County was not competitive.

Machinery and tools tax rates vary greatly across the state. Fairfax County’s is $4.57 per $100. Chesterfield County’s is $1 per $100. Virginia Beach charges a tenth of a cent per $100.

Virginia Beach’s decision in recent years to drop its machinery and tools tax to almost zero has netted the city a lot of investment, Vassey said.

“Capital is like water, it flows to the lowest point,” he said.

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